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ISRAEL-OPT: Palestinian economy to be dependent on aid "in medium term" - World Bank

JERUSALEM, 16 December 2007 (IRIN) - The Palestinian economy will be dependent on aid in the near future, regardless of the 17 December donor conference in Paris, a World Bank report released on 13 December said.

"Even under the most optimistic scenarios significant aid will continue to be required for the medium-term," the Bank wrote.

However, if donors give the full amount the Palestinians requested - about US$5.6 billion over three years - and the Israeli closure policies end, then the Palestinian economy has the potential to reach double digit growth "and positively impact poverty levels".

"Even with full funding but no relaxation in the closure regime, growth will be slightly negative... If the required aid also fails to materialise, income will decline even more, and the already high and growing poverty levels will rise dramatically," said the report, entitled Investing in Palestinian Economic Reform and Development.

For now, Israel said it needs the checkpoints and closures for security reasons, at least until the Palestinian Authority (PA) can take full control over security in Palestinian cities.

Praise for Palestinian reform plan

The report largely praised the PA’s Palestinian Reform and Development Plan (PRDP) for 2008-10, designed under Palestinian Acting Prime Minister Salam Fayyad to be presented to donors, as it had the potential to bring financial sustainability.

Also, the Bank noted favourably, the plan takes the Gaza Strip, now controlled by Hamas, into account and considers it an integral part of the Palestinian territories and economy. However, while humanitarian aid to Gaza has "mitigated the impact of the closures on Gaza's population" the private sector there was collapsing, it said.

The Bank insisted that Gaza should not be "confined to humanitarian assistance alone".

Overall, the PA is asking for $1.644 billion towards development projects, and the rest would be spent mostly on salaries over three years. For instance, in 2008 the PA will ask for $1.361 billion for budget support and $427 million for finance development.

The World Bank noted that while the new reform plan would reduce the wage bill by five percent of gross domestic product (GDP), this was far from the full reform needed, even given the weak private sector.

The Paris pledging conference comes a few weeks after Israeli and Palestinian leaders met in Annapolis, in the US, for what was described as the launch of the first serious peace talks in seven years.

In the meantime, projects have started which will bring the greatest benefits once the Palestinian state is founded. For example, the Europeans and the UN Conference on Trade and Development (UNCTAD), in late November, launched a new programme with the PA to implement a technologically advanced customs system for the PA’s border crossing points.

EU aid

Until there is a Palestine, the European Union, the largest donor to the occupied Palestinian territories, is investing in the Palestinian private sector, through various projects, and is supporting ties to the Israeli business community, while keeping up humanitarian and community service programmes in Gaza, the West Bank and East Jerusalem.

"Paris is about how we can support the Palestinian economy and strengthen the administrative capacity of the PA. This is parallel to the political track of Annapolis," a senior EU official in Jerusalem told IRIN, adding that Europe was committed to a successful conference.

Meanwhile, Quartet Representative Tony Blair's team announced, after a meeting between Blair, Fayyad and Israeli Defence Minister Ehud Barak, that it had managed to secure all the Israeli clearances for the North Gaza Emergency Sewage Treatment project, to prevent a humanitarian disaster; other development plans were also progressing.



Copyright © IRIN 2007
This material comes to you via IRIN, the humanitarian news and analysis service of the UN Office for the Coordination of Humanitarian Affairs. The opinions expressed do not necessarily reflect those of the United Nations or its Member States.
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