WEST BANK Special contribution by the International AND GAZA Monetary Fund (IMF) and Office of the UN UPDATE Special Coordinator (UNSCO). The World Bank Group A Quarterly Publication of the West Bank and Gaza Office April-June 2003 World Bank Report on Impact of Intifada “Twenty-Seven Months - Intifada, Closures and Palestinian Economic Crisis: An Assessment” has been prepared as a follow-up to a report published in March 2002 (“Fifteen Months - Intifada, Closures and Palestinian Economic Crisis”). The main objectives of this second Assessment are once again to help donors and the Palestinian Authority (PA) cope with the deep economic crisis in the West Bank and Gaza, as well as to encourage and inform discussion on Palestinian economic issues among the donors, the PA and the Government of Israel. Despite an inevitable preoccupation with short-term emergency issues, the report seeks to preserve a focus on the types of medium-term economic and institutional policies that will return to prominence once the current conflict ceases to dominate the daily lives of Palestinians and Israelis. For copies, contact the World Bank Country Office. Effect of Closures, Curfews on Palestinian Between September 2000 and December 2002, Palestinian exports and imports both contracted by Economy Reviewed about a third. Total investment flows have fallen from about US$1.45 billion in 1999 to some US$130 million Dramatic Decline, Signs of Stabilization in 2002, a decline of about 90 percent.2 Raw physical damage resulting from the conflict jumped from US$305 The World Bank’s Country Office for the West Bank and Gaza has recently completed its assessment of the economic impact of the ongoing Palestinian economic indicators. By the end of 2002, Real Gross 2 In opportunity cost terms this represents US$3.2 billion in foregone National Income (GNI) had shrunk by 36 percent from investment (had investment grown at the same pace as GNI was projected to its December 2000 level. If those not seeking work in the absence of the intifada). (“discouraged workers”) are included, unemployment at the end of 2002 stood at 37 percent of the workforce, after peaking at 45 percent in the Third Quarter.1 With CONTENTS PAGE a 9 percent growth in the population of the West Bank Fiscal and Budgetary Developments 8 and Gaza over the past two years, real per capita Closure in the West Bank and Gaza 10 incomes are now 41 percent lower than in December 2000, and poverty afflicts approximately 60 percent of Recent Economic Developments 11 the population. Bank Group Operations 18 1 Under the more restrictive definition of unemployment (i.e., excluding these Bank Group News 32 “discouraged workers”), the current rate is estimated at 27 percent, after New Bank Publications 32 peaking at 36 percent. final-e-blue.indd 1 7/12/2003, 1:55:46 PM West Bank and Gaza Update million at the end of 2001 to some US$930 million by across borders and within the West Bank and Gaza -- the end of 2002. If account is taken of the additional restrictions which GOI view as essential to protect their wear and tear on equipment and infrastructure, total citizens from violence. Closures take two major forms: damage climbs to about US$1.7 billion. As a result of internal restrictions reinforced by curfews, and external both damage and the fall in investment, the productive closure of the border between Israel and the Palestinian capital stock declined by US$1 billion between 1999 and territories, including limitations on access by Palestinian 2002 (or by 19 percent in real per capita terms). workers to work in Israel and the Israeli settlements. The further sharp contraction of the Palestinian economy in Overall GNI losses reached US$5.2 billion after 27 2002 resulted from the destruction, curfews and tight months of the intifada. Given that GNI amounted to internal closures associated with Operation Defensive US$5.4 billion in 1999, the opportunity cost of the crisis Shield and its aftermath. was equal to almost one full year of Palestinian wealth creation. In March/April 2002, following an escalation of violence, Israeli Defense Force (IDF) operations transformed The Palestinian Authority (PA)’s fiscal position remains many West Bank cities, towns and villages into restricted precarious. As a result of rising unemployment, reduced military zones, with residents under sustained curfew for demand, and the withholding by the Government of days at a time. The movement of goods inside the West Israel (GOI) of taxes collected on the PA’s behalf, Bank has been seriously interrupted by a new “back- monthly revenues fell from some US$91 million in late to-back” system, which requires all non-humanitarian 2000 to just US$18 million by end-2002. A collapse of goods to be off-loaded from incoming trucks and the PA has been averted by emergency budget support re-loaded onto local trucks at eight checkpoints near from donor countries, which averaged US$42 million major West Bank cities. In practice, these restrictions are per month through 2002 – about half of total PA budget applied more rigorously to manufacturers and traders outlays over the period.3 In this context, the recent attempting to move goods out of Palestinian cities than decision by GOI to resume the monthly transfer of the to those bringing goods in from Israel. PA revenues is a very important step. In September 2000, an estimated 128,000 Palestinians The private sector has absorbed much of the shock worked in Israel and the Israeli settlements. With the to the economy. Over a quarter of the pre-intifada outbreak of the intifada, GOI at first cut back heavily private workforce has been laid off4 and real private on the issuance of reduced work permits, but in recent GDP (measured at factor costs) declined by some 35 months has begun to provide considerable numbers percent between 1999 and the end of 2002. Private once again. Some 32,000 were being issued by the agricultural and commercial assets have suffered over end of 2002, though only about a half of these were a half of all physical damage. Commercial bank credit being used, since internal closures make it hard for to the private sector is drying up, and by the end of workers to move through the West Bank and Gaza to 2002 the PA owed private suppliers slightly less than the designated workplace. US$200 million in unpaid bills. Although direct donor assistance to private firms has been negligible, donor The Fourth Quarter of 2002 witnessed a strong recovery disbursements have played a major role in sustaining the in employment. The numbers employed climbed to private sector by stimulating the demand for Palestinian their highest level since the intifada began, giving rise goods and services. to hope that the economy had adjusted to the shock of Operation Defensive Shield. An examination of the The proximate cause of the Palestinian economic 19 percent increase in employment, however, suggests crisis is closure, i.e. restrictions imposed by GOI a need for caution. About a half of the new jobs were on the movement of Palestinian goods and people in agriculture, and reflect strong seasonal demand (particularly for the olive harvest). Another quarter 3 were in construction and seem to be associated with A total of approximately US$1.1 billion by the end of 2002, of which US$800 million came from Arab League countries and US$260 million from a time-bound effort to repair physical damage. When the EU. assessed from the perspective of employment status, 4 Includes those working in Israel. In Q3 of 2002, the private sector provided moreover, a quarter of the “new jobs” take the form of about 42 percent less jobs than in September 2000. unpaid family labor. April-June 2003 2 final-e-blue.indd 2 7/12/2003, 1:55:47 PM West Bank and Gaza Update It would thus be premature to think that an economic donors and NGOs, many now depend on food aid recovery is underway. Until there are signs of a real for their daily survival. Coping with the situation has political rapprochement, the economy, and with it meant selling assets, borrowing from families, neighbors Palestinian longer-term competitive prospects, will and shopkeepers and cutting consumption, including continue to languish. food. Using a poverty line of US$2.1 per day, the World Bank estimated that 21 percent of the Palestinian population Averting Economic Collapse were poor on the eve of the intifada, a number that A year ago, many observers feared that the Palestinian increased to about 60 percent by December 2002. economy was on the brink of collapse. Although Accounting for population growth, the numbers of the battered, the economy still functions. poor have tripled, from 637,000 to just under 2 million. The poor are also getting poorer. In 1998, the average One key reason is that the PA still operates and is still daily consumption of a poor person was equivalent able to deliver basic services. Thanks in large measure to to US$1.47 per day. This has now slipped to US$1.32. donor budget support, 125,000 people receive a regular More than 75 percent of the population of the Gaza Strip monthly salary and provide essential services to the are now poor. The high rate of Palestinian population population. Today the PA employs 26 percent of those growth (4.3 percent per annum) is fuelling the growth still working inside the West Bank and Gaza, and pays in poverty. 40 percent of all domestic wages. These wages were instrumental in supporting the livelihoods of many The crisis has affected different social groups differently. private employees, and made the difference between Adolescents are particularly vulnerable. Of an age to the halting survival of the domestic private sector and understand the economic hardships that their families a far more dramatic eclipse. face, but generally too young and inexperienced to be able to help much, they are particularly susceptible Budget support accounted for 60 percent of an to trauma and to feelings of powerlessness and extraordinary, sustai ned donor effort which disbursed rage. Teachers are reporting an increase in violent US$1,051 million in 2002, after doubling from pre- behavior at school; many adolescents see no sense intifada levels to US$929 million in 2001. Donor support in continuing their education, and drop-out rates in of all forms played an essential part in cushioning the this age group have risen markedly during the intifada impact of the economic shocks of 2002. – although teenagers have a very limited chance of finding employment in the formal labor market. Many of these adolescents may find themselves locked into a Another key is that Palestinian society has displayed great life-long poverty trap, with poor prospects of escaping cohesion and resilience. Despite violence, economic it when the economy recovers. International research hardship and the daily frustrations of living under shows how devastating protracted unemployment can curfew and closure, lending and sharing are widespread be in patriarchal societies, and how this can translate and families for the most part remain functional. Even into domestic violence. A range of social and human with a dearth of formal safety nets, outright destitution rights organizations working at the household level in is still limited -- those who have income generally share the West Bank and Gaza have noted an increase in it with those who do not. The West Bank and Gaza violence against women and children as the crisis has has absorbed levels of unemployment that would have lengthened. torn the social fabric in many other societies. What Can Be Done? Impact on Ordinary Palestinians World Bank analysis shows the limited power of donor The economic crisis has seriously compromised assistance under the conditions pertaining in 2002. Since household welfare. Many families have endured the beginning of the intifada, donors have provided long periods without work or incomes, and despite about US$315 per person per year, an unprecedented the various employment generation efforts of the PA, April-June 2003 3 final-e-blue.indd 3 7/12/2003, 1:55:47 PM West Bank and Gaza Update level of international financial commitment.5 Despite A key difference from a year ago is the PA’s adoption of the importance of these contributions in staving off a serious program of reform. The PA Reform program fiscal disintegration and the disappearance of the PA as aims to weed out corruption by enforcing full fiscal a viable service provider, the economy has contracted accountability, to create a predictable and transparent by almost a half. A doubling of donor disbursements legal environment, and to build a modern, merit- based civil service. The PA’s Ministerial Committee to US$2 billion in 2003 and 2004 – something which on Reform has committed itself wholeheartedly to the there is no reason to believe can happen – would only cause. Considerable progress has been made in some reduce the poverty rate by seven percentage points by areas, in particular the management of the PA’s finances, the end of 2004.6 On the other hand, if internal closures despite strong resistance from entrenched interests. were removed and exports facilitated, GNP could surge Much has been done to repair the credibility of the PA by about 20 percent in 2003 and poverty could fall by in the eyes of the international community. That said, 19 percent by the end of 2004.7 The point is clear: it there is now no way back -- having acknowledged is politics that determine the health of the Palestinian the need to combat corruption and to transform itself economy, and in an adverse political climate all donors into a democratic, modern and accountable instrument have been able to do is slow the rate of economic of statehood, the PA must deliver a successful reform decline. A return to a political process is indispensable program or lose both domestic and international for the resumption of economic and social development legitimacy. in both Israel and the Palestinian territories. Recommendation to the Palestinian Authority Recommendations to the Donors The main service providers – the Ministries of Health The World Bank estimates that donors so far intend to and Education and the municipalities – have struggled commit US$1,175 million and disburse about US$820 to maintain a basic network of public services in an million in 2003. These sums fall short of the US$1,527 environment beset by curfews, closures, periodic million committed and US$1,051 million disbursed in violence and severe fiscal compression. These 2002. institutions have continued to do their job thanks to the commitment of thousands of Palestinians who work Significant shortfalls against needs can be identified in schools, clinics and municipal service departments, in a number of areas. Particular mention should be supported in the field by the UN system (in particular made of UNRWA) and by Palestinian and international NGOs. • Budget Support for the PA – in 2002 a total of At a strategic level, however, the PA has not managed US$508 million was disbursed against the PA budget. to communicate to the public how it is coping with A realistic appraisal of donor intentions suggests that the crisis. Partly as a result of this, the PA’s emergency disbursements of about US$250 million are likely efforts are undervalued by Palestinians. The PA needs to this year, evidencing donor fatigue in this area.8 formulate a clear economic plan, and to use the process The PA has estimated its external budget support of plan preparation to energize a collective social effort requirements for 2003 at US$535 million, even to cope with the crisis. with regular monthly revenue transfers by GOI. Donors are urged to do what they can to support the PA budget in 2003, and thereby to ensure that adequate basic public services can be provided. Donors currently concerned about the fungibility of general budget support should be reassured by GOI’s willingness to resume revenue transfers. 5 Disbursements to WBG in 2001 and 2002 can be compared to other high- profile “post-conflict” cases such as Bosnia (US$5.4 billion over 5 years for a population of c. 5 million, or roughly US$215 per person per year) and, more recently, East Timor (US$350 million over 2 years for a population of about 8 The report details the difficulties associated with the burden-sharing 0.5 million, or roughly US$235 per person per year). formula adopted by the Arab League Summit in Beirut in March 2002, 6 This is in part because closures dampen the ability of foreign assistance as well as the concerns expressed by European parliamentarians that EU to raise real incomes, with most of the funding translating into imports and budget contributions may have been diverted to fund attacks on Israelis. The inflation rather than domestic production. report also points to the fact that GOI has resumed revenue clearances as an important sign to donors of growing Israeli confidence in the way that the PA’s 7 Holding donor disbursements constant at US$1 billion per annum. finances are now managed. April-June 2003 4 final-e-blue.indd 4 7/12/2003, 1:55:47 PM West Bank and Gaza Update • Support for UNRWA’s programs – UNRWA is GOI’s recent decision to resume the transfer of the responsible for basic service provision to 1.5 PA’s monthly clearance revenues is an important and million registered refugees in WBG, or almost half commendable initiative. Five such transfers, averaging of the population, and is entirely dependent on US$31 million per month, have taken place since donor contributions. In 2002, UNRWA disbursed December 2002.11 If these flows continue on a regular US$220 million. At the time of writing, donors have basis and are segregated from day-to-day political committed only US$48 million to UNRWA’s 2003 pressures, they will play a vital part in stabilizing the regular budget of US$344 million9, and US$34.5 Palestinian economy. GOI’s continued repayment of the million to its US$94 million Fifth Emergency Appeal. stock of withheld arrears12 will in addition permit the The need for additional support is urgent. PA to clear its debts to the domestic private sector and the Palestinian pension system, both of which steps are It is clear that donors have not abandoned their medium- very important to its internal credibility. term development programs, and aid indications for 2003 are higher than at any previous point in the The recent increase in the number of permits issued intifada.10 This suggests that donors perceive that there to Palestinians for work in Israel and the settlements is is a real possibility of a political break-though in 2003, also very positive. and that they are gearing themselves up accordingly. If these plans can be realized, they will arrest the worrying Donors need GOI to do more to facilitate the work of decline in donor developmental expenditures. humanitarian agencies, be they donor, UN or NGO. The report describes the intensified relationship between donors and GOI in the context of the Task Force on Project Implementation (TFPI), and remarks on the Recommendations to the Government of Israel collegial working relationships developed between TFPI donors and the Office of the Coordinator for the The actions of the Government of Israel will have greater Occupied Territories (COGAT). But the report also direct bearing on the Palestinian economy in 2003 than points to significant disconnects between commitments the economic policies of the PA or the activities of provided to donors by COGAT and the actions of IDF donors. The sine qua non of economic stability and soldiers on the ground. This not only undermines the recovery is the lifting of closure in its various forms, efficiency of the humanitarian effort, but also exposes and in particular internal closure. As long as Palestinian aid staff to appreciable physical danger. Donors have internal economic space remains as fragmented as it is also pointed out in strong terms the need for the today, and as long as the economy remains subject to IDF to avoid further destruction of donor-financed extreme unpredictability and burdensome transaction infrastructure and project facilities.13 costs, the revival of domestic economic activity will remain a distant prospect, and Palestinian welfare will Donors have also asked GOI to permit freedom continue to decay. of movement for the Palestinian officials and parliamentarians critical to the implementation of Israel’s legitimate right to defend its citizens from attack Palestinian reform, consistent with Israel’s own call for is not at issue, but nor should the specific applications the reform of the PA. In addition, it is important that GOI of closure be seen as beyond discussion. There is room facilitate regular meetings of the Palestinian Legislative for a more open debate on those aspects of closure that Council to enable the passage of critical reform legislation do, or do not, protect Israeli security. The challenge is to and to permit oversight of the reform process. find ways of maintaining Israeli security without stifling the Palestinian economy and impairing the livelihoods of ordinary Palestinians. 9 Of which some 45% is budgeted for the West Bank and Gaza. 10 Commitments to infrastructure and capacity-building work with a medium- term focus fell from US$482 million in 1999 to US$279 million in 2001 11 and to US$197 million in 2002. In 2000, the ratio between development In December (US$29 million), January (US$30 million), February (US$39 and emergency assistance was approximately 7:1 in favor of development million), March (US$31 million) and April (US$25 million). assistance. By 2002, the ratio had shifted to almost 5:1 in favor of emergency 12 Thus far GOI has repaid US$114 million from the withheld stock, of which assistance. Although overall commitments increased by 57 percent in the an estimated US$532 million remains owing to the PA (before any deductions). period, development assistance declined by 70 percent, while emergency 13 assistance increased by a factor of 10. For 2003, however, commitments are The World Bank estimates that some US$150 million in damage to donor- currently estimated at US$548 million, and potential disbursements at US$245 financed infrastructure and project facilities has taken place since September million. 2000. April-June 2003 5 final-e-blue.indd 5 7/12/2003, 1:55:48 PM West Bank and Gaza Update Looking Ahead worked in Israel, mainly in low-skilled construction and agricultural jobs. Net incomes from abroad provided While any short-term recovery will depend on the lifting more than 21 percent of Palestinian GNI, making it one of closures, this will not suffice to put the Palestinian of the most remittance-dependent economies in the economy onto a sustainable growth path. The de facto world. This is why the loss of jobs in Israel in the past customs union with Israel formalized under the Paris two years has had such a strong impact. Put another Protocol makes the Palestinian economy particularly way, the intifada has demonstrated the vulnerability of a vulnerable to closure. In a structural sense, though, development strategy which relied so heavily on labor the long-term growth potential of the Palestinian exports to Israel. economy has been stunted by the upward pressure on domestic Palestinian labor prices created by the wages paid to Palestinian workers in Israel. Domestic wage The shift to a goods-based export policy would take increases have exceeded any underlying growth in time, would be subject to many uncertainties and would productivity, and have undermined Palestinians’ ability require the active cooperation of Israel to succeed; it is to export competitively-priced goods to the rest of the thus part and parcel of a political rapprochement. It is world. Bank analysis shows that a proactive policy of also true that restoring access to the Israeli labor market export development, in which a more open and less would be the quickest way to boost incomes for a large discriminatory trade regime is adopted, should result number of ordinary Palestinians. Realistically, though, in higher incomes by 2010 than a return to previous a return to pre-September 2000 employment levels for levels of employment in Israel. Palestinians in Israel seems unlikely – and would anyway risk perpetuating a high level of Palestinian economic dependence on Israel, hindering the emergence of a Between 1968 and 2000, Palestinians in the West Bank diversified development strategy with much greater and Gaza pursued a development strategy which long-term growth potential. featured the export of labor rather than goods. In June 2000, three months before the current Palestinian intifada began, 21 percent of all employed Palestinians April-June 2003 6 final-e-blue.indd 6 7/12/2003, 1:55:48 PM West Bank and Gaza Update Summary of Macroeconomic Trends and Projections 1998 1999 2000 2001 2002 Gross National Income (GNI), US$ million 5,058 5,056 5,455 4,526 3,768 Gross Domestic Product (GDP), US$ million 4,230 4,198 4,637 4,034 3,396 Net Factor income, US$ million 828 859 817 492 372 Imports, US$ million 3,052 3,250 2,800 1,947 1,581 Exports, US$ million 624 616 596 515 345 Private consumption, US$ million 976 1,185 1,736 1,810 1,757 Public consumption, US$ million 4,014 4,182 4,122 3,447 2,756 Gross domestic investment, US$ million 1,668 1,464 984 209 119 Real annual change: GNI per capita 7.7% 3.9% -7.5% -23.2% -23.4% GDP per capita 3.9% 3.1% -5.3% -19.5% -22.5% Private consumption 9.0% 7.5% -5.6% -15.5% -14.8% Public consumption 7.0% 20.3% 31.0% -2.1% -0.6% Total Fixed investment 8.4% -8.3% -28.3% -76.9% -44.0% Export 6.6% 2.3% -8.8% -13.4% -24.3% Import 7.4% 5.4% -16.2% -29.0% -12.9% Other items Poverty, share of population below poverty line 23.2% 20.1% 30.7% 45.7% 58.6% NIS/US$, annual average 3.81 4.14 4.08 4.21 4.74 CPI, annual change 5.6% 5.5% 2.7% 2.1% 5.7% Annual Closure days 26 16 75 210 Na Population, mid-year (1,000) 2,731 2,842 2,966 3,096 3,231 Note: All data excludes East Jerusalem. Sources: World Bank staff estimates; PCBS; UNSCO. April-June 2003 7 final-e-blue.indd 7 7/12/2003, 1:55:48 PM West Bank and Gaza Update Fiscal and Budgetary Developments by the IMF Resident Representative office in the WBG. The fiscal situation in the West Bank and Gaza estimates for 2003 that economic activity has stabilized, continues to be difficult, although significant positive instead of declining by 7 percent as assumed in the developments have take place since late 2002. In budget. December, the government of Israel (GOI) resumed the regular monthly transfer of tax revenues that it collects Much lower than expected, however, has been the donor on behalf of the Palestinian Authority (PA). Before the budget support and the transfers by Israel from the intifada these “clearance” revenues accounted for nearly accumulated stock of tax revenues. The disappointingly two thirds of total PA revenue. The freezing of these tax low level of donor support partly stems from shortfalls revenues from late 2000 contributed significantly to the of Arab League countries’ assistance that has been much severe budgetary crisis already aggravated by the dire lower than the budget assumption (US$15.4 million vs. economic situation. As a result, substantial payment US$30 million per month), and partly from shortfalls arrears were accumulated. It also resumed repayments of EU budget support ($10 million) which has been from the accumulated tax revenues withheld by GOI discontinued since October 2002. Total external budget since October 2000 at a monthly rate of NIS 100 million, support has averaged US$22.7 million per month, only beginning in January 2003. slightly more than half of the budgets amount of US$44.6 million. On an annual basis, there now appears to The resumption of the tax transfers followed the be a US$250 million gap in external budget support implementation of important steps in Finance Minister as opposed to budget projection. However, on the Salam Fayyad’s ambitious reform program towards more strength of the monthly tax transfer revenue from GOI, transparency and accountability of the PA’s finances. It this budgetary assistance would be reduced by US$60 also enabled the next step on the fiscal reform agenda: million, provided other revenue sources meet budgetary the passage ex-ante, by the Palestinian Legislative expectations. Council, of a fully-funded viable budget for 2003. The budget, published in detail on the Ministry of Finance Withheld tax revenue transferred by the GOI from (MOF) website, is based on a tight expenditure stance the accumulated stock has been steady at a monthly and precludes the accumulation of payment arrears rate of about US$21 million which is about half of the and bank borrowing under the assumption that Israel US$40 million expected in the budget. If this trend continues the monthly transfers of tax revenues and continues, the PA will be faced with a resource gap of that donor financing of the budget continues at a level US$228 million in 2003. The lower rate of withheld tax of US$44.6 million per month. Transfers out of the transfers is partly explained by large amounts frozen by accumulated stock of withheld tax revenues would Israeli courts pending the resolution of Israeli private then be used exclusively to pay off domestic payment claims against the PA. But deductions from the stock arrears and reduce domestic bank debt. of withheld taxes have also been made at the request of the PA to settle bills from Israeli public utilities Budgetary management over the first quarter of 2003 and companies for services provided to Palestinian has been very good in so far as it ended the quarter municipalities. Nevertheless, if the monthly flows of with a small positive balance and repaid substantial donor budget support and Israeli withheld tax transfers arrears to the private sector without incurring any new do not increase, the PA will face a financing gap of about arrears. However, there were large shortfalls in both US$420 million, assuming that domestic tax revenues external financing and transfers from the stock of tax and expenditures are in line with the budget. revenues withheld by Israel. On the positive side, monthly flows of clearance revenues from Israel have To face this situation and not accumulate further arrears, been steady and have averaged US$34 million over the the MOF has cut non-wage expenditure by reducing first three months of 2003 which exceeds the budget its disbursements to line ministries well below the assumption for such flows of US$27 million per month. budgetary appropriations. Non-wage expenditure Domestic tax revenue of US$16 million per month has averaged only US$17.8 compared to US$34.6 million only been lower than the budget expectation of US$17 million because February had a long holiday. Overall, total revenue in the first quarter has been higher than expected, which is consistent with recent PCBS and IMF April-June 2003 8 final-e-blue.indd 8 7/12/2003, 1:55:48 PM West Bank and Gaza Update in the budget. As a result, budget execution generated a last two years. MOF achieved this arrears repayment small surplus for the first quarter of US$0.7 million per at the cost of maintaining a high Treasury indebtedness month (including budget support). This enabled the with commercial banks. But since the banks were MOF to use the transfers of frozen tax revenues by Israel unwilling to extend credit to the private sector the to repay about US$80 million in private sector arrears, deployment of bank resources by MOF shifted bank which will help the private sector recover somewhat intermediation from MOF to the benefit of the private from the liquidity squeeze it has experienced over the sector. Nevertheless, the strict expenditure cuts will Table 1: West Bank and Gaza Fiscal Developments in January-March 2003 (in millions of US dollars) Budget 2002 2003 per month January February March Revenue 44.25 47.27 50.93 54.36 Domestic 17.25 16.91 12.26 19.18 Clearance 27.00 30.36 38.67 35.18 Total Expenditure 88.83 72.65 69.56 76.16 Wage expenditure 52.00 55.39 54.72 54.84 Non-wage expenditure 34.58 17.26 14.84 21.32 PA-finance capital expenditure 2.25 0.00 0.00 0.00 Balance -44.58 -25.38 -18.63 -21.8 External budget support 44.58 17.95 27.36 22.65 Balance including budget support 0.00 -7.43 8.73 0.85 Total other financing 0.00 7.43 -8.72 -0.84 Transfers by Israel from 40.00 21.01 20.79 20.83 accumulated stock of tax revenue Repayment of arrears (-) -34.58 1.56 -47.79 -36.72 Domestic bank financing -5.42 -15.14 18.28 15.05 Exchange rate, NIS US$ 5.00 4.76 4.81 4.80 Ministry of Finance and IMF estimates April-June 2003 9 final-e-blue.indd 9 7/12/2003, 1:55:49 PM West Bank and Gaza Update Closure in the West Bank and Gaza UNSCO Update #2 During the first three months of 2003, Israel continued highly unusual treatment, permitted to cross the area’s to restrict all methods of travel and traffic internally in checkpoints only during the designated 6 hours per day. both the West Bank and Gaza, and externally, between Men and women between the ages of 15 and 35 were the Palestinian Territories and Israel, Egypt and Jordan. not permitted to cross Israeli checkpoints at Mawassy. Travel through the safe passage remained frozen. Israel continued to regulate the pulse and flow of all Palestinian passenger travel continued to be subject to travel and traffic throughout the West Bank. Movement Israeli permit policies for all types of travel. From Gaza, restrictions imposed on the mobility of Palestinian goods travel was prohibited to the West Bank and Israel—with and individuals remained severe throughout Q1-2003. very few exceptions. During in Q1-2003, an average Passenger travel continued to be subject to the use of 7,000 Gazans worked in Israel, Israeli settlements and multiple vehicles and travel on foot in order to traverse industrial zones, a mere 24 percent of the average daily the many physical barriers dispersed throughout the workers in Q3-2000. Furthermore, workers who use West Bank. Erez faced closure of the crossing twenty percent of the time during Q1-2003. At the Rafah border to Egypt, In December 2002, Israeli authorities allowed Palestinian travelers reportedly experienced closures on numerous bus companies to operate a limited number of buses occasions where hundreds of civilians were stranded between designated West Bank urban centers. UNSCO overnight with only the bare minimum of facilities interviews with bus operators suggest that movement available—the border crossing does not accommodate of busses, however, is erratic and subject to significant sleeping and sanitary needs for overnight stays. Gaza delays at checkpoints. Passengers that can afford to do international airport remained completely closed since so, therefore, travel in yellow plated taxis instead, which the second quarter 2001. typically cost a minimum of three times the fare. Palestinian commercial movement remained prohibited In order to travel across checkpoints, West Bank through Erez checkpoint since the October 2000. Israel Palestinians generally require permits if they do not continued to administer the ‘back-to-back’ system at work for international organizations or cannot show Karni and Rafah crossings in Gaza, (and at Allenby that they are humanitarian or relief workers such as bridge to Jordan). In Gaza, imported truckloads doctors and nurses. remained at only 83 percent of their 1997 level; exported truckloads remained at only 78 percent of their 1997 Permits to cross checkpoints are generally issued level. only under limited circumstances, usually for work or business. In Q3-2001, the number of permits issued for Internal movement in Gaza was frequently restricted work in the West Bank remained a mere 25 percent of along the Strip’s main north-south artery (Salah Ad- the number issued in Q3-2000. Permits were mainly din street) at the Abou Holly checkpoint, which was issued to married male workers over 35 years of age closed daily for an average of 11 hours during Q1- and to married females over 25 years of age. 2003. The citizens of Mawasy continued to be subject to April-June 2003 10 final-e-blue.indd 10 7/12/2003, 1:55:49 PM West Bank and Gaza Update Recent Economic Developments As has been reported by the World Bank and others, the primary reason for this very inferior economic Economic Output performance remains internal and external closure. In its March 2002 report, “Fifteen Months – Intifada, Restrictions on the movement of goods and people Closures and Palestinian Economic Crisis” the continue to have a profound negative effect on World Bank described a Palestinian economy under economic activity across all sectors, as it has reduced tremendous external pressures, with closure the main overall productivity of the Palestinian economy through force in its decline. The report pained a picture of a a number of channels. society increasingly deprived of work, and suffering External closures lower workers’ remittances, and rapid impoverishment. Already by December 2001, real consequently entail a negative multiplier effect on Gross Domestic Product (GDP) per capita had declined the demand for domestic goods. The combination by 19.5 percent compared with a year before, and real of internal and external closures has led to a sharp Gross National Income (GNI) per capita by over 23 increase in transaction costs, reducing productivity percent.1 and competitiveness of Palestinian firms, as well as the This decline continued in 2002, as documented by the overall adjustment capacity of the Palestinian economy Bank in its current companion volume, “Twenty-Seven to the decline in demand. In spite of continued high Months”. Real GDP per capita fell an estimated 19 unemployment, prices and wages have not sufficiently percent in 2002, and real GNI per capita by 23 percent. adjusted downwards, which bears a high cost for the Real GNI per capita in 2002 was some 46 percent lower economy and society as a whole, notably in terns of than in 1999, see Figure 1. equity (poverty) and aggregate purchasing power. Despite the strictness of external closure, opportunities for substitution of imports by domestic inputs in the production process by Palestinian suppliers remains modest; indeed, the ratio of imports in GDP has risen from 70 percent in 1998 to 74 percent in 2002. The estimated social cost of the fall in income and demand resulting from the crisis is huge. The World Bank estimates that the share of population in the West Bank and Gaza below the poverty line of US$2.1 a day has nearly tripled during the crisis, from 21 percent on the eve of the Intifada to 33 percent by end-2000 and 59 percent end-2002. Prospects of rapid, sustained economic recovery remain grim. Productive capacities and markets have been lost, some of them permanently. Households, firms and the Palestinian Authority have adopted strategies which have proven to be efficient in coping with the crisis, Source: World Bank Estimates. Date excludes East Jerusalem but many of these are not sustainable in the medium run. Overall GNI losses have reached some US$5.2 billion in Should closure continue, foreign assistance, though 27 months – when one considers that GNI was estimated useful and timely, can help maintain minimum welfare at US$5.4 billion in 1999, the opportunity cost of the but it cannot pretend to foster real economic recovery. crisis represents almost one entire year of Palestinian Only a resolution of the Israeli-Palestinian conflict wealth creation. Cumulative raw physical damage has accompanied by a profound change in the Palestinian jumped in the last year to some US$930 million, and economic environment can encourage that. lost investment to US$3.2 billion.2 1 Gross National Income (total income earned by a country’s residents) is Gross Domestic Product (total income earned within the country) plus net factor income (positive or negative) coming from abroad. In WBG Foreign Trade net factor income is positive and consists mostly of Palestinian workers’ remittances from Israel. Trade traditionally played an important role in the small 2 Lost investment is defined here as the gap between what investment and open Palestinian economy. Throughout the past might have been in the absence of conflict (assuming investments grew five years, imports of final goods, services, equipment at the same pace as projected GNI), and actual investment. and intermediate inputs represented approximately 70 April-June 2003 11 final-e-blue.indd 11 7/12/2003, 1:55:49 PM West Bank and Gaza Update percent of GDP, while exports of goods and services represented less than 20 percent of GDP. Unfortunately trade is badly registered, as most of it takes place between the West Bank and Israel, where no custom stations exist (unlike trade between Gaza and Israel). The Israeli Central Bureau of statistics nevertheless estimates such flows, and we rely on their data to depict the evolution of trade since 1998. This only covers Palestinian trade with Israel, and not with the rest of the world. However, trade with Israel represents the bulk of total Palestinian trade.3 Furthermore, a significant share of imported goods from Israel are actually originating from third countries – “indirect imports”. In addition, it does not appear that these relationships are considerably impacted by exchange rate movements, neither the depreciation of the New Israeli Shekel in early 2002 or its subsequent Source : Israeli Central Bureau of Statistics. appreciation are thought to have significantly altered the composition of Palestinian imports in terms of trading partners. Labor Markets The impact of closures following the outbreak of the Intifada and their progressive tightening through As a result of external closures, nearly 100,000 Palestinian summer 2002 is clearly reflected in the reduction of workers have lost their jobs in Israel since September Palestinian imports from Israel. First quarter 2003 2000. The implied decline in workers remittances again witnessed reduction from the levels seen in the (according to the Israeli Central Bureau of Statistics, second half of 2002; the level in the January-March third quarter 2000 remittances totaled US$328 million; period (US$209 million) was 44 percent that of July- in first quarter 2003, only $79 million – a 76 percent September 2000 (US$478 million), see Figure 2. decline, see Figure 3) is very significant with direct consequence on the income of Palestinian households, Palestinian exports for the first quarter 2003 (US$39 as workers’ remittances from Israel represented some million) are 51 percent the pre-Intifada third quarter 18 percent of their total disposable incomes in 1999. 2000 (US$77 million). (It is thought that the improvement In turn, lower incomes inevitably affected the demand in Palestinian exports registered in the fourth quarter for Palestinian goods and services, and hence labor 2002, when they reached US$62 million, is partly the demand for Palestinian workers producing such goods result of olive and/or olive oil exports resulting from and services within the West Bank and Gaza. the bi-annual harvest.) At least three factors explain the reduction in exports witnessed during the past two years: increased costs in transportation resulting from closure making Palestinian products less competitive; foreign purchasers switching to more reliable alternative sources of supply in the face of production and shipping interruptions; and Palestinian producers switching to service domestic markets. 3 In 1998, imports from and via Israel represented 75 percent of total imports, while exports to Israel represented 96 percent of total exports (Astrup and Dessus, 2001, Trade Options for the Palestinian Economy: Some Orders of Magnitude, MENA Discussion Paper Series, 21, The World Bank). April-June 2003 12 final-e-blue.indd 12 7/12/2003, 1:55:50 PM West Bank and Gaza Update Source : Israeli Central Bureau of Statistics. ratio increased similarly, from 5.9 to 7.5. The negative impact on domestic employment of With population and labor force growing, declines in job losses in Israel is aggravated by the difficulties in Palestinian employment in Israel and Isreali settlements, conducting business within the West Bank and Gaza: and a lack of domestic job creation, unemployment and internal closures and curfews are attended by significant unemployment rates continue to grow dramatically. In transaction costs, disruption in production cycles, losses the West Bank the unemployment rate in first quarter of perishable output, and lower economies of scale. By 2003 climbed to 31.4 percent, its highest level since the fourth quarter 2002, 29,000 of the 249,000 eve-of- the beginning of the Intifada, with 157,000 persons Intifada private sector jobs (excluding unpaid family looking for work. (During the third quarter of 2000, members) had been lost in the West Bank (9 percent), the number of West Bank unemployed was 38,000 and while in Gaza the number of paid private sector jobs the unemployment rate stood at 7.5 percent.) In Gaza, remained stable from third quarter 2000 to fourth quarter first quarter 2003 unemployment stood at 28.6 percent 2002 at 86,000, reflecting the greater deterioration in the (70,000 individuals); prior to the Intifada the rate 15.4 economic environment in the West Bank compared to percent (35,000 persons). (Under International Labor Gaza. Overall in the West Bank and Gaza the number Organization (ILO) standard definitions, a person must of public sector jobs has remained stable, at 115,000 be actively seeking work in order to be considered pre-Intifada and averaging 118,000 during the fourth “unemployed”.) quarter 2002. When the definition of the labor force is broadened to The fourth quarter of 2002 witnessed an increase in the include “discouraged workers” – persons without jobs number of jobs in both the West Bank and Gaza. In who, because of their pessimism regarding the prospect the West Bank this increase was short-lived, however, of actually finding work, have stopped looking – the concentrated in agriculture (related to the olive harvest “relaxed definition” of unemployment shows similar and reversed in the first quarter of 2003) and some trends. In this case, the unemployment rate in the one-off infrastructure repair generating employment in West Bank has increased from 16.9 percent (95,000 construction. In Gaza, the job growth comes off of a individuals) in third quarter 2000 to 40.3 percent particularly poor performance in the third quarter 2002 (232,000) in first quarter 2003; in Gaza, from 26.9 and is also concentrated in agriculture (a similar seasonal percent (71,000 individuals) to 37.3 percent (104,000) pick-up was noticed in the fourth quarter of 2001 and over the same period (see Figure 4). first quarter of 2002, related to citrus harvesting). Like the West Bank in fourth quarter 2002, much of this It should be noted that this is the first time that increase is in unpaid family members working. unemployment rates (either ILO standards or relaxed definition) in the West Bank have exceeded those in With population growing at approximately 4.3 percent the Gaza Strip. per year, dependency ratios – the total population divided by the number of employed persons – have Average real wages in the West Bank and Gaza have increased dramatically. Whereas in the third quarter of evolved differently, reflecting the intensity of the crisis. 2000 each job holder in the West Bank was supporting Through the fourth quarter of 2002, real wages in Gaza 4.3 persons, by the first quarter of 2003 one employed have increased 5.4 percent since third quarter 2000, person was supporting 6.6. In Gaza, the dependency while in the West Bank they have declined 13.3 percent over the same period. Table 1. Number of Palestinian Jobs (thousands) Q-3 Q-4 Q-1 Q-2 Q-3 Q-4 Q-1 Q-2 Q-3 Q-4 Q-1 2000 2000 2001 2001 2001 2001 2002 2002 2002 2002 2003 Workers in West Bank 352 316 292 314 314 316 304 287 288 334 300 Workers in Gaza 163 120 126 127 129 134 138 131 111 150 169 Workers from West 116 40 69 72 60 66 56 30 50 49 43 Bank in Israel Workers from Gaza in 30 3 3 2 3 2 2 2 2 7 6 Israel Total 662 479 490 515 506 518 501 451 452 540 518 Source: PCBS. Note: Israel includes Israeli settlements. West Bank includes East Jerusalem. April-June 2003 13 final-e-blue.indd 13 7/12/2003, 1:55:50 PM West Bank and Gaza Update Prices Consumer prices increased in both the West Bank and Gaza in the five month period January-May 2003, by 2.1 percent in the West Bank and 2.8 percent in Gaza. Although in annual terms these rates are equivalent to 5.1 percent in the West Bank and 6.9 percent in Gaza and are much above the annual inflation rates recorded in 2001 (2.6 percent in the West Bank and minus 1.1 percent in Gaza) and for Gaza, above 2002 as well (West Bank, 6.1 percent; Gaza, 2.2 percent), expected inflation for the remainder of the year is expected to be less for several reasons. Much of this increase witnessed thus far in 2003 is in food prices, which exhibits strong seasonality and Source: PCBS. Data includes East Jerusalem. generally peaks in the second quarter (see Figure 7). Consequently food prices are expected to decline considerably in the third quarter, before picking up again in the fourth. Source: PCBS. Source: World Bank calculations based on PCBS data. Figure shows three-month moving averages, re-based to Third Quarter (July-September) 2000 = 100. Excluding food, the consumer price index in the West Bank has risen by 1.0 percent since December 2002 (2.5 percent annualized); in Gaza, the non-food CPI has fallen since December 2002, by 1.0 percent (minus 2.6 percent annualized) – rates below what were witnessed in previous years. In 2001, non-food prices rose 4.6 percent in the West Bank and fell 0.6 percent in Gaza; in 2002, non-food prices rose 8.7 percent in the West Bank and 3.0 percent in Gaza. When transportation costs are also excluded – transportation prices being most affected by changes in the closure regime – the impact of exchange rate movements on prices is clearly seen. Non-food, non- Source: PCBS. Data for West Bank includes East Jerusalem. transportation prices in the West Bank have increased April-June 2003 14 final-e-blue.indd 14 7/12/2003, 1:55:51 PM West Bank and Gaza Update 0.3 percent (0.7 percent annualized in the period Between the period December 2001 and May 2002 the January-May 2003, and have fallen 1.1 percent (2.6 Shekel lost 15.8 percent of its value with respect to percent annualized) in Gaza. During 2002, non-food, the US dollar. As a result, prices of goods imported non-transportation prices rose 4.6 percent in the West into Israel from overseas – and by extension, into the Bank and 2.9 percent in Gaza. In 2001, these prices West Bank and Gaza – mechanically increased and the rose 2.0 percent in the West Bank and fell 1.8 percent overall consumer price index, measured in shekels, in Gaza (see Figure 8). also increased to the extent that the CPI market basket consists of imported goods or services priced in dollars (such as rents). With an appreciating shekel – the shekel having risen 9.7 percent against the dollar since May 2002 – imports become cheaper, and inflation measured in shekels lessens (so long as importers pass on these reductions to consumers). While exchange rate movements explain the basic trends in consumer prices (particularly in non-food prices where seasonality is also a considerable factor) tightened closure during the period also impacted consumer prices overall. This effect comes through both direct and indirect channels: changes in the transportation component of the consumer price index (which measures transportation prices that increased directly as a result of heightened closure, but also through reflect changes in world petroleum prices and, since petroleum is a dollar-priced import, changes in the Source: World Bank calculations based on PCBS data. Figure shows exchange rate) and indirectly through increased costs three-month moving averages, re-based to Third Quarter (July-September) of shipping for producers and distributors, which are 2000 = 100. in turn passed on as increases in the final price of all goods faced by consumers in the market place. The strong depreciation of the Israeli shekel in the first Thus the tightening of closure associated with the half of 2002 (represented as an upward movement in outbreak of the Intifada in fall 2000 affected both Gaza Figure 9) and its subsequent appreciation (downward and the West Bank, while Israeli military interventions in movement in the figure), particularly in the period since the West Bank in autumn 2001 and spring 2002 explain January 2003 explains to a large extent the acceleration the difference in movement in the transportation price of inflation: during the same period in 2002 and its index in the West Bank and Gaza. In effect, these are subsequent slowing down. negative shocks that raise the level of the transportation price index. Source: World Bank calculations based on PCBS data. Figure shows three-month moving averages, re-based to Third Quarter (July-September) Source: Central Bank of Israel. 2000 = 100. April-June 2003 15 final-e-blue.indd 15 7/12/2003, 1:55:51 PM West Bank and Gaza Update Financial Sector maintained in cash and local bank deposits and a 47.6 percent were in deposits with foreign banks. The decline in overall economic activity in the West Bank and Gaza since the beginning of the Intifada is clearly evident in the total value of checks cleared by banks operating in the West Bank and Gaza Strip, particularly in the periods of increased Israeli military operations. During the first nine months of 2000, i.e., prior to the Intifada, the value of checks presented for clearing averaged US$449 million (US$301 million in the West Bank, $148 million in Gaza) per month. During the twelve months of 2002, monthly values averaged less than half the pre-Intifada levels: US$148 million in the West Bank; $67 million in Gaza; total, US$216 million. April 2003 saw US$153 million cleared in the West Bank and US$78 million in Gaza. For the first four months of 2003, the total value of checks cleared has declined 7.5 percent (13.0 percent in the West Bank, while increasing 7.6 percent in Gaza) relative to the January-April 2002 period. Similarly, the number of checks has also fallen: 20.4 percent overall (23.9 Source: Palestinian Monetary Authority (PMA). percent, West Bank; 4.1 percent, Gaza). Along with this increase in liquid assets is the decline in Bank’s lending activity. Throughout the Intifada, the volume of credit extended to the private sector has continued to decline, reflecting both lower demand on the part of borrowers and greater risk aversion on the part of bankers during a period of economic downturn and political uncertainty. In such a climate, the granting of new credits is scaled back and existing lending and overdraft facilities are rolled-over less automatically. Throughout the Intifada, credit to the resident private sector has fallen (in the first month – October 2000 – by US$91 million, 7.2 percent). By April 2003, private sector credit extended had reached US$768 million, a total decline of US$296 million (27.8 percent decline) from September 2000’s level. Source: Palestinian Monetary Authority (PMA). The Palestinian banking sector continues to try to weather the current economic crisis by maintaining the very conservative investment positions taken over the years. Banks remain very liquid, with placements in the West Bank and Gaza and, more significantly, overseas and have continued to increase their liquidity ratios since September 2000 – by end-April 2003, 17.1 percent of the combined assets of commercial banks operating in the West Bank and Gaza were held in cash or deposits with other Banks; a further 53.7 percent of assets were held as deposits in foreign banks. These represent significant increases in asset allocation compared to September 2000 when 14.3 percent of total assets were Source: Palestinian Monetary Authority (PMA). April-June 2003 16 final-e-blue.indd 16 7/12/2003, 1:55:51 PM West Bank and Gaza Update Expressed as a share of total bank assets, private sector credit has declined from 22.1 percent in September 2000 percent to 17.6 percent end-April. Although it is thought that the quality of bank’s loan portfolios has suffered (non-performing loans have increased and some collateral destroyed as the result of military operations) as well, the low percentage of loans to total assets mitigates solvency concerns thus far for most banks. Just as lending has taken a dramatic downturn, the stock of resident private sector deposits witnessed a considerable decline in the first month of the Intifada followed by continued decreases through the first quarter of 2002. After an increase in the second quarter and general stability through November 2002, deposits fell again in the final month of the year. April 2003 saw a continuation of the modest recovery in residents’ deposits that began in January of this year. Total deposits at end-April stood at US$3.5 billion (US$2.7 billion, West Bank; US$0.8 billion, Gaza). Since September 2000, residents’ deposits have increased 4.5 percent; in Gaza, however, they have fallen 30.1 percent. Source: Palestinian Monetary Authority (PMA). April-June 2003 17 final-e-blue.indd 17 7/12/2003, 1:55:52 PM West Bank and Gaza Update Bank Group • Danish Development International Assistance • Islamic Development Bank (IDB): Operations (DANIDA). Contribution: US$7.0 million Grant. Effectiveness Date: July 3, 2002. Contribution: US$3.53 million Grant. Closing Date: December 31, 2003. A. Multi-Donor Fund Effectiveness Date: November 25, The estimated total employment 2001. is 160-170,000 person-days. 51 Administration Closing Date: December 31, 2002. percent of the funds have been Palestinian Economic disbursed. The funds have been Assistance and Cooperation The DANIDA component was fully committed to 112 sub-projects Expansion (PEACE) Facility. highly successful in achieving its in WBG in the sectors of education, objective of providing temporary health and infrastructure such as The PEACE Facility, a multi-donor employment for unskilled and roads and water and sanitation, successor to the Holst Fund, was semi-skilled laborers in the middle and for local NGOs. 39 projects set up in response to the need area of Gaza Strip. It relieved the have been completed. To-date, expressed by a number of donors severe unemployment pressure by 114,339 person-days have been for a multilateral umbrella facility generating 113,433 person-days generated under the various project to support targeted activities in of employment during the project components. the West Bank and Gaza (WBG), period of 13 months, compared to ranging from technical assistance a planed 50-60,000 person-days. to projects. Using a wage rate of US$ 10 per • Italian Cooperation Objective: The broad objective day, the labor content of the project Contribution: US$9.0 million Grant. of the PEACE Facility is to help was estimated at 32 percent and the Effectiveness Date: December 19, relieve the economic and social cost per person-day US$31.2. This 2002. hardship caused by the current compares favorably with other Closing Date: July 31, 2004. crisis in WBG and the resultant projects funded by the Bank during Israeli border closures. The current the period 2000-2001 and other donors during the period 1989- The Italian Grant to the Emergency PEACE Facility donors have focused 1996 which had costs per person- Employment Generation for Social on projects designed to create short- day ranging between US$47.2 to Development Project (EGSD) term employment opportunities for US$102.6. The total number of finances the implementation of those most affected by the ongoing beneficiaries was almost the total 90 sub-projects in a number of political crisis. population (170,000 people) in the communities in West Bank and Gaza. middle area of Gaza. Priorities are given to communities that are currently facing severe Project Progress: hardship due to the ongoing crisis. • Department of International The project is estimated to generate • Canadian International Development (DFID) Development Agency (CIDA) 200,000 person-days of direct Contribution: US$2.16 million employment over a period of 15 Contribution: US$3.25 million Grant. Grant. months. The project will also finance Effectiveness Date: January 5, a small capacity building component Effectiveness Date: November 14, 2002. 2001. for the Ministry of Health. The Closing Date: October 31, 2003. Grant Agreement was signed by Closing Date: March 31, 2003. The projected total direct the Palestinian Authority (PA) on The estimated total direct employment is 35,000 person-days. December 19, 2002 and the project employment is 80,000 person-days All funds have been committed to is now under implement (42,000 in the West Bank and 38,000 33 sub-projects, and ninety percent in Gaza). The fund has been totally has been disbursed. Twenty eight committed to 47 sub-projects, and sub-projects have been completed. B. Investment Projects it is now fully disbursed by the To date 40,000 person-days have As of February 2003, the World Bank. 46 sub-projects have been been generated. Bank Group has 22 projects under completed, and to date, 70,314 implementation, eight completed person-days have been generated. projects, and four projects under preparation. April-June 2003 18 final-e-blue.indd 18 7/12/2003, 1:55:52 PM West Bank and Gaza Update Ongoing World Bank Projects four clinics, two hospitals (in Dier in targeted domains included in Elbalah, Gaza, and in Yatta, West agreed annual departmental work Education and Health Bank) and the extension of Rafidia plans derived from the Five-Year Rehabilitation Project Hospital in Nablus have been built, Education Plan. This should lead (EHRP). fully furnished, and equipment to improved utilization of funding World Bank: US$20 million; installed. The Ministry of Health’s from the budget and international Saudi Arabia: US$20 million; office building is complete. Under donors. Italy: US$8.65 million; the Italian Grant, 11 schools and The Project has two complementary Australia: US$0.4 million. five community centers for the substantive components. The first Approval Date: July 9, 1995. handicapped have been built and provides assistance to develop World Bank Closing Date: June 30, fully furnished. Construction of one strategies that facilitate planning 2001. school, extension of another, and across the departments and support Saudi Arabia and Italy Closing Date: work on two community centers for the project management unit, December 31, 2003. for the handicapped are progressing whereas the second supports specific Description: The Project consisted well. Equipment, and teaching and investments in education domains of the following components: learning supplies have been provided including a program for school to the schools, and community improvement through staff review, 1. Upgrading of physical centers for the handicapped. Under a school development program, infrastructure. This component the Australian Grant, strengthening the development of professional aimed to: (a) rehabilitate facilities, of policy-making, planning, and standards for headteachers, and replace dangerous structures research capacity within the Ministry support to Vocational Education. and substandard or undersized of Education, establishment of classrooms at 24 elementary schools, a school mapping database, and Latest Developments : Despite and replace or repair broken a maintenance scheduling system the current situation, the Project furniture; (b) construct and furnish for the Ministry have all been has made substantial progress on new schools in underprivileged completed. most of its components since credit areas; and (c) upgrade, expand, effectiveness on November 21, replace, and furnish 10 primary 2001. Work is progressing on the health care facilities. Education Action Project following activities: construction of 2. Improve quality of services. This (EAP). a two-floor extension to the existing component aimed to: (a) initiate World Bank: US$7 million. MOE building in Ramallah, Finishing a Quality Improvement Program Borrower (PA): US$0.63 million. works at the Ministry’s proposed in primary and secondary services Approval Date: July 18, 2001. Curricula Center, preparation of through technical assistance and Closing Date: September 30, 2004. a Financial Management Manual; training; and (b) support a Health selected training for teachers and Description: The Education Action Education Program for schools. supervisors; and preparation of Project (EAP) supports the work 3. Develop institutional capacity. This already undertaken by the Ministry materials for training modules for component aimed to: (a) provide of Education in the development of teachers and supervisors. technical assistance to develop a its Five Year Plan (2001-2005) and Support to Vocational Education five-year plan for the health sector; long-term education strategy. Over includes construction of four (b) conduct a feasibility study on its three-year duration, the project vocational units in Gaza, Jenin, communication links among West will support the implementation Qalqilya and Salfit as well as the Bank and Gaza health facilities to of five-year plan activities through development of vocational education enable the exchange of medical working with specific directorates curriculum and procurement of expertise and enhance the referral (planning, vocational secondary equipment and furniture. system; and (c) provide technical education, training, buildings and As a result of March/April 2002 assistance and training and works) in the planning process. Israeli incursions and reoccupation operational support to the Project The EAP primarily aims to strengthen of the Palestinian towns in the West Coordination Units (PCUs). the capacity of the Ministry of Bank, parts of the EAP’s components Latest developments : The Education (MOE) to manage the has been restructured. A sum of World Bank component has been education system more effectively US$ 350,000 reallocated under the completed and an Implementation through improving policy-making, emergency civil works category is Completion Report (ICR) issued. planning and budgeting at central and used to repair school buildings in Under the Saudi Grant, 13 schools district levels. It would also support the West Bank. have been built and fully furnished; the implementation of activities April-June 2003 19 final-e-blue.indd 19 7/12/2003, 1:55:52 PM West Bank and Gaza Update In addition, as of August 2002 the System; prepare the first version of delayed. Today, all available funds Project Support Team holds now the the Palestinian Data Dictionary; and from both IDA and the cofinanciers responsibility of implementing the print and distribute the first version have been committed. Both IDA procurement and project monitoring of the Palestinian Essential Drug List and the Greek funds have been functions for the Emergency and Formularies. In addition, work fully disbursed. Italian funds are Services Support Project I and II on developing Clinical Protocols and expected to b e fully disbursed in cooperation with the Directorate Guidelines is underway. A distant in the coming few weeks. The General of Financial Affairs. learning module for implementing Implementation Completion Report the project’s training activities on is currently being prepared by the Health Facility Management and Bank and the PA. A first draft was Health System Development Maintenance, Use of Data Dictionary, completed end of January 2003. The Project (HSDP). Essential Drug List and Formularies, final report is expected by end June World Bank: US$7.9 million. Medical Waste Management and 2003. Approval Date: December 9, 1999. Environmental Management. Closing Date: March 31, 2004. Reallocation of remaining funds: In August 2002, in response to the Description : The development Municipal Infrastructure need for immediate assistance to objectives of the Project are to Development Project (MIDPI). repair damage incurred during the enhance the management capacity World Bank: US$40 million. incursions by the Israeli Defense of the Ministry of Health (MOH) Greece: US$1.74 million. Forces in March/April 2002, the and improve access to high-quality Italy: EURO3.67 million. Bank reallocated US$2.5 million and affordable Primary Health Care Approval Date: June 12, 1996. of the remaining balance originally (PHC) services, especially in rural and Closing Date: June 30, 2003. designated to capacity building underserved areas. The Project has towards labor-intensive damage four components. The first supports Description: This Project aims at repair. The funds have been the upgrading of the primary rehabilitating high priority municipal distributed not only among the five health care network by replacing infrastructure networks and systems participating municipalities in this 40 substandard PHC facilities, in WBG by working directly with Project, but also among more than including equipment and furniture, five selected municipalities (Gaza, 25 smaller communities in need of and developing their functional Nablus, Hebron, Rafah and Jenin), assistance. Nearly all of the sub- standards. The second component the Ministry of Local Government projects have been completed. So far, supports the establishment of a (MLG), the Ministry of Public Works more than 220 km of roads and 100 Health Management Information (MoPW), the Palestinian Water km of water and sewage pipelines System. The third component Authority (PWA), and PECDAR. The have been constructed, and the supports improvement of the quality focus is on initiating institutional upgrading of three neighborhood and efficiency of health care. The reform and capacity building at the areas in Gaza City have been fourth component provides support local government level. completed. A similar reallocation to the Project Implementation of funds from the co-financing Unit for Project Coordination and The Capacity Building component which involved MLG and five partners has also been completed Management. with US$0.5 million from the Greek selected municipalities addressed Latest Developments : Due to issues related to developing the Fund and EURO0.2 million from the current situation, some of the municipal planning and financial the Italian Fund. Reallocated funds Project components have been management structures, primarily financed the rehabilitation of much facing delays, especially in the three-year investment plans, a needed infrastructure in the West West Bank. While the five PHC’s in Financial Management Information Bank communities and most of the Gaza are functioning, construction System (FMIS), and a Reformed sub-projects have been completed. of the nine PHC’s for the first phase Management Information System The capacity building component in the West Bank and the Health (RMIS). continues to progress despite the Information Center in Nablus have Latest Developments : The political instability and resultant been delayed. Despite the delays, closing date has been extended for difficulties. To date, only Hebron, the Project has managed to: develop six months due to the escalations Gaza, and Rafah municipalities a Management Information System especially during the second half have successfully completed their for the Treatment Abroad and of 2002. As a result, sub-projects three-year investment plans. Nablus Referral Department and the Health that were due for completion by and Jenin municipalities have Insurance Department; develop the end of December were significantly completed the diagnostic studies, first version of the Clinic Information April-June 2003 20 final-e-blue.indd 20 7/12/2003, 1:55:53 PM West Bank and Gaza Update but have been unable to continue Latest Developments: Commitment Latest Developments: Hydroplan the tendering process for the three- of the reallocated funds continue (Germany) has completed its first year investment plans. A Revenue by MPW. Today, 50 percent of the draft of the detailed design for the Management Information System reallocated US$3.1 million has been sanitary landfill at Zahrat Al-Finjan for 10 Participating Municipalities committed. utilizing these funds, and is currently being reviewed by the (PM) has been implemented. MPW continues to fix damaged PA. The proposed design envisions Troubleshooting and finalization of infrastructure, schools, clinics, a three-phased landfill construction the software is in the final stages. and PA institutions, including the to accommodate municipal solid A Geographic Information System Ministries of Local Government, wastes for around 20 years. While (GIS) has been implemented in Public Works and Housing, Health, current constraints impact project Gaza municipality, but Hebron and and Education. implementation, JSC-PIU continues Nablus municipalities’ bids were The MPW is also progressing to focus on areas where progress can delayed by the incursions. A state- in implementing the physical be made. Closing of uncontrolled of-the-art computer and network infrastructure component of dumpsites continues to take place center was completed in Gaza, the MIDP II. Thus far, US$1.6 and rehabilitation to extend the Jenin, Nablus, Hebron and Rafah. million has been committed and operational life of the regional sites An electricity study was completed implemented for rehabilitation are on-going. To date, 20 dumpsites for the Hebron municipality, but of regional roads situated within have been rehabilitated and closed, was stopped in Nablus due to the the PA’s jurisdiction. The PWA’s and four dumpsites (Jenin, Srouj, inability to complete the study. component of US$0.50 million for Al Mahata and Arabeh) are being water rehabilitation has been fully rehabilitated to act as regional committed and work is in progress. controlled dumpsites during the Second Municipal Infra- interim period. Access roads to these structure Project (MIDP II). The MLG’s capacity building component has been reduced due sites are also being rehabilitated. World Bank: US$7.5 million. Saudi Arabia: US$5.0 million. to current conditions. Concentration (Italy is currently considering will be on rolling out the Revenue Southern Area Water and contributing a sum of US$5.7million, Management Information System Sanitation Improvement Project of which US$2.5million will be (initiated under MIDP I) to cover (SAWSIP). for roads and US$3.2 million for 15 additional municipalities. This World Bank: US$21 million. water). component will be mobilized in the EIB: EURO30 million. Approval date: June 20, 2000. coming few weeks. Approval Date: June 5, 1999. Closing Date: December 31, 2004. Closing Date: December 31, 2004. Description: The main objective of Solid Waste and Description : The Project MIDP II is to improve infrastructure Environmental Management consists of: (a) the provision of services (roads, water, and drainage), Project (SWEMP). an international operator under including high priority sections World Bank: US$9.5 million. a four-year performance based of the regional road network (US$1.25 million is anticipated from management contract to implement and rehabilitation of village and the PA.) a Service Improvement Program for municipal water networks in WBG. Approval Date: October 10, 2000. the Governorates of Bethlehem and The Ministry of Public Works (MPW), Closing Date: December 31, 2005. Hebron in the West Bank; (b) the Ministry of Local Government (MLG), Description : The Project is provision of operating investment and the Palestinian Water Authority financing interventions in solid funds for the operator built into (PWA) are the implementing waste collection, transfer, and the management contract, to agencies for this Project. disposal of waste for the District finance essential operations and The Project will also provide support of Jenin. The Project is managed maintenance expenditures not to the MPW to establish its first Road by the Joint Services Council for covered by the revenues collected Maintenance Management System. Solid Waste Management (JSU) and which are required to achieve In addition, the Project will continue and is being executed through the yearly performance targets in to provide support to the MLG for an a Project Implementation Unit the management contract; (c) the accounting system and institutional (JSC-PIU). The Project is assisting provision of technical assistance reform. The scope of capacity in strengthening capacity building to support strengthening the building in the six municipalities of the Environmental Quality institutional capacity of PWA and in WBG will be reduced and funds Authority. WSSA, to support implementation reallocated to damage repairs. and monitoring of the Project and April-June 2003 21 final-e-blue.indd 21 7/12/2003, 1:55:53 PM West Bank and Gaza Update provide independent auditors to create a legal framework adequate to or the West Bank due to the lack monitor the Operator’s technical support a modern market economy, of qualified doctors, and provide and financial performance. The and to encourage the growth of training to their medical staff in their implementing agency is the PWA; and the private sector. It also supports fields of specialization. (d) the provision of funds (by EIB) to the training of judges and court finance design, implementation, and personnel in order to increase the supervision of capital improvements, efficiency and transparency of the Palestinian NGO Project such as, system rehabilitation and judicial process. (PNGO II). improvement of water supply World Bank: US$8 million. services; bulk transmission mains; Latest Developments : In UK/DFID: US$7.8 million. distribution systems restructuring December 2001, US$2.7 million of Italy: US$2.4 million. and rehabilitation, as well as an the Credit amount was cancelled due Approval Date: June 21, 2001. investment in rural water supply. to slow implementation of certain Closing Date: February 15, 2004. Project components. Implementation Latest Developments: The Project of the remaining components -- Description: The Project is aimed at was recently restructured to reflect harmonization and development strengthening the capacity of NGOs the termination of the management of legislation, and dissemination to deliver sustainable services to contract due to the operator’s of legal information -- continue to the poor and marginalized, while inability to fulfill contractual progress satisfactorily. The Project supporting the overall professional obligations because of the continued is scheduled to close on December and strategic development of the deterioration in the security situation. 31, 2003. Palestinian NGO sector. The Project The Project objectives remain the is being implemented by the Welfare same. An Action Plan was put in Association Consortium, consisting place to restructure the management Palestinian Expatriate of the Welfare Association, the of water and sanitation services in Professional Program British Council, and the Charities the Governorates of Bethlehem (PEPP). Aid Foundation (CAF). and Hebron. The responsibility World Bank: US$3 million. Netherlands: US$0.3 million. The Project has four main for implementing the Action Plan components: will be undertaken by the Project Approval Date: May 22, 1998. Management Unit (PMU) of the Closing Date: December 31, 2004. 1. The Partnership Grants Program PWA and supported by a team of (US$9.5 million) which awards grants Description: The PEPP supports to small NGOs through Partnership experts. The Action Plan focuses on the recruitment of expatriate the establishment of an organization Grant Managers who provide a Palestinians to key management component of capacity building to to carry out the key functions of a and senior technical positions in PA Water and Wastewater Utility. This receipient NGOs as part of a wider institutions as an institution-building sector program they are managing; approach is designed to adapt itself measure. Since the Program started to changing circumstances and to 2. the Development Grants Program in late 1997, 17 persons have been (US$2.5 million) which awards grants operate in the present period of successfully recruited for positions political uncertainty. Disbursements, directly to NGOs or projects that at 11 PA Ministries and Agencies, have demonstrated success during as of May 7, 2003 are approximately including: the Ministries of US$13.1 million, representing about PNGO I and which have a potential Finance, Health, Higher Education, of longer-term self-sustainability; 3. 62 percent of the Credit. Housing, the Palestine Broadcasting the Sector Support Program (US$1.5 Corporation, the Palestine Monetary million) which works with NGO Legal Development Project Authority, and the Bethlehem 2000 networks to (a) promote strategic (LDP). Committee. thinking on the role of the sector; World Bank: US$5.5 million. Latest Developments: The crisis is (b) sector learning and information Saudi Arabia: US$12 million. affecting the program participants’ exchange; (c) enhanced PA/NGO ability to continue their work dialogue and joint programming; Approval Date: June 24 1997. and, (d) improved services by the effectively, but they have shown Closing Date: December 31, 2003. Networks to their constituencies; and extraordinary fortitude and courage to keep working despite the difficulties. 4. an Emergency Grants Program Description : The Project aims (US$2.5 million), which disburses to initiate a long-term process of The Program is currently supporting several medical specialists who are grants to emergency projects with assisting the PA in modernizing and shorter durations and a direct harmonizing existing legislation, to performing operations that would not be otherwise available in Gaza focus on alleviating hardship and April-June 2003 22 final-e-blue.indd 22 7/12/2003, 1:55:53 PM West Bank and Gaza Update generating employment. PNGO II estimated at US$1.3 million and sub-components: (a) infrastructure has a fifth component which is fully it will finance, amongst other rehabilitation works. This sub- financed by the Italian Government activities, the establishment of a component provided support and which aims at establishing Palestinian NGO website and an to the Bethlehem 2000 Project a Center for Women with Difficult electronic information system; the Authority and Area Municipalities Circumstances in Bethlehem. The development of a code of ethics for the rehabilitation of high-priority Centre will initially be managed for the NGO sector; the holding infrastructure and services, namely by NGOs but its ownership will be of an international conference for roads, water and sanitation; and transferred to the Ministry of Social NGOs in the West Bank and Gaza; (b) support for cultural heritage Affairs at the end of the project. promotion for the implementation rehabilitation works. This sub- of the Tax-Exemption Law; training component provides support to the Latest Developments: in fund-raising; promoting private Bethlehem 2000 Project Authority, 1. Partnership Grants: Seven investment in NGO activities; and Area Municipalities and Department Partnership Grants have been the implementation of capacity of Antiquities for the rehabilitation approved under this Project building programs for the NGO of the historic cores of Beit Sahour Component for a total of US$ networks and the Commission for and Beit Jala. 6.3 million, benefiting a total NGO Affairs. 3. Capacity Building Support: of about 70 small NGOs. The 4. Emergency Grants: During 2002/ This component provides Direct recipients of these Grants 2003, the PMO has managed a total capacity building support to - the Partnerhsip Grant Managers, of US$4.0 million for emergency Area Municipalities and Cultural include The Arab Studies Society/ grants. Of this total amount, Heritage Authorities. It includes Youth Development Department/ US$2.3 was allocated from the two sub-components: (a) support ANERA; MA’AN/ Bisan Centre DFID contribution to the PNGO II to Bethlehem Area Municipalities- for Research and Development; project; US$600,000 from CIDA’s -this sub-component provides PARC; Palestinian Medical Relief contribution to the PEACE facility; support to the five Bethlehem Area Societies; the Palestinian Centre for and US$1.1 million from the IDB’s Municipalities for strengthening Microprojects Development (PCMD); contribution to the PEACE facility. their capacity to plan, finance, The Union of Charitable Socities/ The CIDA-financed grants are almost manage, and maintain municipal Centre for Initiative for Europe; fully disbursed; DFID’s and IDB’s are infrastructure and services; and and the Palestinian Hydrology ongoing. The mentioned funds have (b) support cultural heritage Group/Women’s Affairs Technical been used to finance an estimated preservation--this sub-component Committee. The sectoral distribution 60 projects. provides support to the Department of grants approved is as follows: 35% of Antiquities in the Ministry of in the area of agriculture/water; 30% Tourism and to the Ministry of in education and early childhood; Bethlehem 2000 Project Culture for policy and institution 18% in health and the remaining 17% (B2000). reform and development. for youth sub-projects. World Bank: US$25 million. Norway: US$1 million. 4. Overall Project Monitoring and 2. Development Grants: 19 Reporting Support: This component Development Grants, for a total of Italy: US$2.26 million. Austria: US$0.73 million. provides support to MLG program US$3.2 million were approved by monitoring, accounting and the Supervisory Board in December, Approval Date: November 2, 1998. Closing Date: June 30, 2003. reporting, and to environmental 2002. Grant Agreements have been programming and monitoring concluded with the recipient NGOs Description : The Project is activities. and disbursements are expected composed of the following to start shortly. Of the US$3.2 components: Latest Development: million approved, the highest 1. Infrastructure Progress: (a) Roads- percentage finances projects in the 1. Celebration Support: This component provided broad support -package 4, rehabilitation of inner area of rehabilitation for people roads in Bethlehem District is 95% with special needs, followed by to the Bethlehem 2000 Project Authority to prepare for and manage complete; (b) Cultural Heritage- income generating projects, early -works on Rehabilitation of Anatra childhood development, education the Millennium celebrations. neighborhood, in Bethlehem old and rehabilitation of housing for 2. Infrastructure and Cultural city, is progressing well; and (c) the poor. Rehabilitation Works: This Damage Repair--works on damage 3. Sector Support: The total component supports physical repair is 95% complete. budget for this component is rehabilitation works and includes two April-June 2003 23 final-e-blue.indd 23 7/12/2003, 1:55:54 PM West Bank and Gaza Update 2. Building Capacity Support: slowly due to the present situation. monthly disbursements against the (a) Support to Bethlehem Area TA consulting services for SELCo is ESSP budget have averaged US$5.5 Municipalities. Progress is being already in place. The RFP for TA million. As of March 2003, delivery achieved on the following sub- consultants services for HEPCo will against IDA funds stood at 98 components: (i) Three-years be issued in February 2003 and it is percent; Dutch Funds at 40 percent; Investment Plan: the final drafts expected that this TA will be in place EC Funds at 95 percent; and DFID of the diagnostic studies for the in June 2003. Funds at 40 percent. Bethlehem Area Municipalities are In October 2002, a supervision complete, work on developing the mission took place to follow-up on three years investment plans for the Second Emergency Services the start-up of the SELCo and HEPCo Support Project - Phase II Municipalities is progressing well; companies. Another mission for a (ii) Accounting System Reform: (ESSP II) mid-term review is planned for May World Bank: US$25 million. procurement document for the 2003. About US$9.9 million of the purchase of necessary hardware Approval Date: December 17, US$15 million has been disbursed 2002. for the accounting system has been to date. cleared by the Bank. (b) Support Closing Date: December 31, 2004. to cultural heritage preservation. Description: Like ESSP I, ESSP II Progress is being achieved on the Emergency Services Support will support the financing of the following sub-components: (i) Legal Project (ESSP). operating budgets of the social and Institutional Reform: A draft Total Financing: US$ 57.2 million. ministries thereby helping sustain policy framework for the Legislation World Bank: US$20 million. public services delivery to the for the Protection of Palestinian UK/DFID: US$7.8 million. Palestinian population. Unlike ESSP Cultural and Natural Heritage was Netherlands: US$5.9 million. I, ESSP II will not provide budgetary developed by the consultant and EU: US$9.6 million. support to Municipalities since that is under discussion with the B2000 Sweden: US$ 4.7 million; will be done through the Bank’s Project Authority. Finland: US$ 1.2 million; Emergency Municipal Services Denmark: US$2.7 million; Rehabilitation Project. The total Italy: US$ 5.3 million. budget for the ESSP II program has Electric Sector Investment Approval Date: February 28, 2002. and Management Project been estimated at US$84 million, Closing Date: June 30, 2004. covering a budgetary period of (ESIMP). World Bank: US$15 million. Description: The Project aims one year. New pledges were made EIB: US$38 million. at enabling Social Service Delivery for additional financing of ESSP II Italy: US$35 million. Ministries and Municipalities at from DFID and the EC for a total PA: US$3 million. sustaining the provision of basic of US$3 million and US$22 million, Approval Date: August 31, 1999. social services, thereby ameliorating respectively. As of April 2003, Closing Date: June 30, 2004. further deterioration in the standard disbursements stood at 18 percent. of living of the Palestinian Description : The objectives of population. The Project focuses on this US$91 million Project are to The Integrated Community supporting health, education, social Development Project (ICDP). rehabilitate the power distribution welfare, and basic municipal services systems in the central and southern World Bank: US$10 million. (solid waste, water, and electricity Approval Date: May 23, 2002. West Bank, and to address the supply). With its focus on providing institutional structure for longer-term Closing Date: June 30, 2006. operating cost finance, this Project sector management. compliments the financing of the The Project seeks to improve the Latest Development: Despite the national budget that is provided to quality and availability of basic social present unrest, the implementation the PA by the Gulf countries and and economic services in poor and of the main activities (JDECo and the European Commission (EU). marginalized communities of West PEA components) is progressing The Ministry of Finance manages Bank and Gaza. This new Project satisfactorily. The studies for the legal the ESSP, with direct implementation is a continuation of community and regulatory framework and the handled by the Ministries of Health, development interventions financed establishment of the Transmission Education, Social Affairs, and Local through the World Bank under Company have been completed. Government. Community Development Projects Implementation of the HEPCo and I and II. Investments will finance Latest Developments : Between rehabilitation of roads, water supply SELCo components is progressing September 2002 and May 2003, and sanitation systems, schools, April-June 2003 24 final-e-blue.indd 24 7/12/2003, 1:55:54 PM West Bank and Gaza Update clinics, and thereby preserve and efficiency and equity of resource by rehabilitation, upgrading and extend the capital stock of villages transfers to local governments expansion of existing systems and small municipalities. The A two-year Emergency Recovery and facilities. Project preparation Project will also fund interventions Grant will include the following has been delayed because of the in the agricultural sector, including components: (a) Emergency Program deteriorating political situation. rehabilitation of wells, roads, and Assistance (US$67.0 million, of which The request for pre-qualification terraces. Lastly, the Project would US$17.5 million from the World for prospective international pilot new initiatives in Information Bank); (b) Municipal Fund Design operators has been completed and Communication Technology and Management (US$1.5 million, of and four operators/joint ventures (ICT) by financing the establishment which US$1.5 million from the World were pre-qualified. The Request for of Multi-purpose Telecenters Bank; and (c) Technical Assistance Proposals was issued on January 31, and thereby improve access to and Capacity Building (US$1.50 2003, and the deadline for proposals information and training for the poor million, of which US$1.0 million submission is May 20, 2003. This and marginalized. The project was from the World Bank). In light of date is likely to be extended given made effective in August 2002 and the complementary roles performed the current investment climate in the first batch of eight microprojects by the different governmental the region. Like the GWSSP, this are under implementation. Two sites bodies involved in the sector, and Project is part of a larger parallel for the proposed Multi-purpose recognizing the need for coordination capital program to improve water Telecenters - one in Salfit and at the central government level, a and sanitation services in Gaza. another in Gaza city - have been Project Steering Committee (PSC) The Project includes substantial selected and a consultant contract was formed by the Minister of Local investments in the establishment for the their design and operation Government in October, comprised of a bulk water supply network is under preparation. of MLG, MOF, and MOPIC to ensure a connecting the various municipalities coordinated programmatic response in Gaza, in the sewerage network, to emergency assistance needs at the and in wastewater treatment plants. Emergency Municipal These investments, totaling about Services Rehabilitation Project local government level. US$340 million for 2000-2005, will (EMSRP). The project is now under be financed by soft loans and grants Total estimated cost: US$70 implementation. Ten percent of from EIB, USAID, and KfW. million. the funds has been disbursed. World Bank: US$20 million. EU: US$30.5 million. Second Health System Deve- Belgium: US$7.2 million. lopment Project (HSDP II). PA: US$3 million. World Bank Projects Under World Bank: US$10 million. Effectiveness Date: January 22, Preparation 2003. The Project objectives are to Proposed Gaza Water and improve the quality, access, and Expected Closing Date: June 30, Sanitation 2005. cost-effectiveness of essential Services Project (GWSSP II). secondary and tertiary care health The Project objectives are to: (a) World Bank: US$25 million. services for the population residing mitigate further deterioration in the This Project is a follow-up to the in the northern Gaza and West Bank quality and coverage of municipal ongoing GWSSP. The development regions. In the original plan, the services, particularly solid waste objectives of this Project are: (a) Project intended to replace and collection, electricity, water, and to develop a sustainable institutional upgrade two hospital systems: sanitation services; (b) generate structure of the water and wastewater Al Shifa Hospital in Gaza and Al temporary employment opportunities sector in Gaza by supporting the Watani Hospital in Nablus, and to for unemployed workers who have functional establishment of a Coastal also build upon the experience of lost jobs inside Israel, or due to Municipalities Water Utility, as well the First Health System Development the economic contraction in WBG; as by enhancing and deepening the Project to extend the development and (c) introduce a mechanism – a involvement of the private sector of integrated information and Municipal Fund – to link central through an eight-year operating management systems to improve and local government budgetary contract and strengthening the the productivity and quality of planning processes to strengthen regulatory and institutional capacity health care services in the targeted Palestinian emergency response of the Palestinian Water Authority; hospitals. capacity, enhance mobilization of and (b) to continue improving Due to the current political situation, donor assistance, and improve the the water and sanitation services the preparation work for the Second April-June 2003 25 final-e-blue.indd 25 7/12/2003, 1:55:55 PM West Bank and Gaza Update Health System Development Project Bank. The project is scheduled to risk coverage for primary lenders, (HSDP II) has been considerably be appraised and negotiated in May continue to increase their respective delayed. In addition, the amount 2003 and presented to the Board in portfolios. Canada Mortgage and of financing available, both from the June 2003. Housing Corporation is the technical Bank and from co-financing sources, partner for the PMHC providing has been significantly reduced as a technical assistance and capacity result of the crisis. Consequently, Proposed Conditional Cash building support. The Project also the scope of the Project has been Transfer Project (CCTP). includes a component for policy reduced. The following components World Bank: US$10.0 million and institutional development in from the original plan will be The immediate objective is to the sector that is implemented by retained in the revised plan for the mitigate the impact of the social the Ministry of Public Works and HSDP II: (a) a regional Hospital and economic crisis on the most Housing. Rationalization Plan for the Northern vulnerable by protecting and West Bank; (b) hospital master Latest Developments : The promoting the human capital of poor Project was restructured, and the plans for Shifa Hospital in Gaza children in the West Bank and Gaza. City and New Watani Hospital in Closing Date extended two years The long-term objective is to slow to March 31, 2004. As part of this Nablus; (c) a waste management the further loss of human capital, pilot program; (d) a management process, an Action Plan for business irreversible once it has occurred. growth for PMHC was agreed, and information system; and (e) quality These two objectives are to be improvement. monitoring targets set. A review of achieved by adding a conditional PMHC’s progress is currently taking cash transfer scheme to an existing place. The Policy and Institutional Proposed Emergency Water program in the Ministry of Social component was also extended, with Project (EWP). Affairs. In the face of sharply reduced the objective of revisiting housing World Bank: US$12.5 million household incomes, this would be policy and public sector capacity accomplished by supporting the in the context of the newly merged The main objective of the Project is investment of poor families in the Ministry. to help reduce the heavy social and education of their children age 3-18 economic burden on the Palestinian and in the health and nutrition of population in the southern West their children age 0-6. Gaza Industrial Estate Bank. This would be accomplished (GIE). by supporting investments that World Bank: US$10 million. would help alleviate the chronic IFC: US$9 million; US$7 million shortages of safe water supplies; World Bank and IFC Joint syndicated loans. reduce water costs and health risks; Projects EIB, USAID, the PA: US$65.5 and conserve scarce water resources Housing Project. million. by reducing system losses. The World Bank: US$25 million. Approval Date: March 24, 1998. project would include the following IFC: Up to US$4 million in equity Closing Date: June 30, 2004. components: (a) emergency water investment. supply repair and rehabilitation in Description: The GIE is located on Approval Date: April 14, 1998. a 50 hectare site at Al-Muntar in the remote rural areas of the southern Closing Date: March 2004. West Bank; (b) undertake repair northeast of Gaza (adjacent to the and rehabilitation in order to Description : The Project’s Israeli border) and is the first largely maintain water and sanitation major component is the Palestine export-oriented industrial estate service levels in the Gaza Strip at Mortgage and Housing Corporation established to generate sustainable the high levels achieved under the (PMHC) that facilitates the flow of employment and stimulate industrial Gaza Water and Sanitation Project private capital into housing. PMHC development in Gaza. The Project despite the deteriorating economic commenced operations in September has attracted foreign and local and security conditions; and (c) 2000. Although the present situation investment, and has facilitated joint Technical Assistance and Capacity has significantly slowed PMHC’s ventures between Palestinians and Building provided to the Palestinian operations, both affiliates, the other investors. The GIE is managed Water Authority and the recently Liquidity Facility, providing long- and operated by PIEDCO, a private established Coastal Municipal Water term funds for lending by banks sector company; regulatory oversight Utility in the Gaza Strip and to form and other primary mortgage and some offsite infrastructure pilot joint services councils for lenders in WBG; and the Mortgage services are provided by the PIEFZA. smaller towns in the southern West Insurance Fund, providing partial The World Bank and USAID are April-June 2003 26 final-e-blue.indd 26 7/12/2003, 1:55:55 PM West Bank and Gaza Update providing financing for off-site which receive grants under this The Credit closed on December infrastructure and institutional Project; and enhance the working 31, 2002 and is fully disbursed. An development, while IFC and EIB are relationship between the PA and intensive learning implementation financing the developer/operator of the Palestinian NGO sector. The completion report is currently under the Project. Project was implemented by the preparation and will be completed Welfare Association Consortium, by June 30, 2003. Latest Developments: Despite the consisting of the Welfare Association, depressed business environment in the British Council, and the Charities WBG generally, 18 firms continue Aid Foundation (CAF). With all sub- The Second Community to operate at the GIE, with two projects financed under the Grant Development Project (CDP II). new tenant entering the site in having been fully implemented, the World Bank: US$8 million. September 2002. As of December Project is expected to be closed by OPEC Fund: US$8 million. 2002, about 750 workers were end of June, 2003. Approval Date: March 30, 1999. employed at the GIE. Employment Closing Date: October 31 2002. at the GIE has declined to about half of its pre-crisis employment level, Gaza Water and Sanitation The CDP II Project closed on October although many GIE tenants remain Services Project (GWSSP I). 31, 2002. However, the program of in operation and provide vital World Bank: US$31 m. community development projects employment opportunities at a time Approval date: July 5, 1996 in West Bank and Gaza continues of economic contraction. Further Closing date: December 31, 2002 through the recently activated ICDP expansion in the development Project. of the site, however, has been The Project consists of : (a) the Under CDP II over 180 infrastructure postponed. PIEFZA, the regulatory provision of an international projects, such as rehabilitation of agency, is considering ways of Operator [Lyonnaise des Eaux, roads, schools, health centers, and improving the competitiveness Khatib & Alami (LEKA)] under a water supply systems have been of GIE tenant firms by providing four-year management contract to committed, of which 160 have support to upgrade management implement a Service Improvement been completed. The World Bank and production operations through Program; (b) the provision of funds have been fully disbursed. targeted incubation services, operating investment funds for the Projects have targeted poor and particularly focusing on the garment Operator built into the Management marginalized communities, including manufacturing cluster. In addition, Contract, essential to fund goods, refugee camps. The current crisis has offsite infrastructure facilities are equipment, works and services impacted the implementation of CDP being repaired and connections required for improving services II through delays and difficulties established with main utility networks and the attainment of performance within communities to contribute to continue providing services to GIE targets; and (c) the provision of to Project costs. Nevertheless, the tenants. Environmental permitting technical assistance to strengthen Project has continued to make and monitoring capacity is being the PWA, to support implementation progress and has provided much built through a technical assistance and monitoring of the Project, and needed work in villages and small assignment. to provide independent auditors to municipalities. On the co-financing monitor the Operator’s technical side, while OPEC-funded activities are and financial performance. The continuing, the EIB contribution has implementing agency is the PWA. been suspended after disbursement Completed World Bank Projects Some of the main achievements after of about EURO3 million. Palestinian NGO Project six years of implementation of the Implementing Agency: PECDAR. (PNGO I). Project, as audited by an independent World Bank: US$10 million. auditor are: over 1,900 km of pipes Saudi Arabia: US$2.5 million. have been surveyed for leaks and Microenterprise Project Italy: US$2.5 million. over 16,000 illegal connections (MEP). Approval Date: December 1996. identified; over 22,000 service Microenterprise Project (MEP). Closing Date: June 2003. connections have been replaced, World Bank: US$5 million. over 20,000 meters of pipe has been IFC: US$7.5 million. The Project aimed at delivering repaired, and a total of over 30,000 Netherlands: US$3 million. services to the poor and the meters replaced. Recent measures Participating Banks: US$7.5 marginalized in Palestinian society of Unaccounted-For-Water (UFW) million. through NGOs; improving the are around 30%, while reliable Approval date: April 8, 1997. institutional capacity of the NGOs disinfection is maintained at 98%. Closing Date: July 31, 2002. April-June 2003 27 final-e-blue.indd 27 7/12/2003, 1:55:55 PM West Bank and Gaza Update Description: The Project initiated a skilled laborers. The implementing through PECDAR in coordination program to finance microenterprises agencies included PECDAR, the with the WBG municipalities. in the WBG through the Ministry of Local Government Approximately 123 km of roads and banking system in order to: (a) (MLG), Local Government Units about 110 km of water and sewage promote employment through (LGUs) and NGOs. pipelines have been constructed. private sector development; (b) The Project was successful in An Implementation Completion achieve commercial viability and achieving its objectives. More than Report for the Project has been sustainability for microenterprise 246,000 person-days of employment completed. lending; and (c) build capacity in were generated over a period of both the participating banks and eight months. The average labor the microenterprises by providing Community Development content of the Project was about Project (CDP I). technical assistance. 28 percent. World Bank: US$10 million. As of August 29, 2002, this Project A total of 209 sub-projects were OPEC Fund: US$10 million. was officially closed. A total of implemented. Local NGOs Approval Date: May 15, 1997. just under US$2.2 million was implemented a total of 33 sub- Closing Date: December 31,1999. disbursed under the Trust Fund projects. An Implementation Credit in financing a portion of over Completion Report has been About 260 infrastructure 1,100 loans valued at over US$12.7 completed. microprojects (roads, schools, million. The disbursed loans were community centers, sewer lines, estimated to have created over and water reservoirs) were 1,400 new full- and part-time jobs. Emergency Rehabilitation implemented. There was strong A decision was made not to extend Project (ERP I). community participation and the Project’s closing date due to World Bank: US$30 million. ownership, including beneficiary the difficult business environment Saudi Arabia, Denmark, Switzerland, contributions in cash averaging prevailing in WBG today. IFC Kuwait: 10 percent of the Project costs. has cancelled its part of the US$63.5 million. The Project was implemented by undisbursed portion of the MEP. A Approval Date: November 29, PECDAR. Project Implementation Completion 1994. Report has been completed and Closing Date: December 31, 1998. noted that, while the Project Closed Multi-Donor Fund made a substantial contribution The Project (implemented by Administration toward establishing a sustainable, PECDAR) financed a total of 140 market-based financing program infrastructure projects, including Holst Fund. for small and medium enterprises, construction of 418 classrooms, US$291 million from 27 donors. the past two years of economic paving of 260 km of roads, and Approval Date: July 29, 1994. crisis and uncertainty prevented construction of approximately 410 Closing Date: August 31, 2001. full achievement of the Project’s km of water supply pipelines, 80 km of sewer lines and storm water The multi-donor Holst Fund closed development objectives. In view after seven years of operation. of the present circumstances, the lines and five water reservoirs. US$222.5 million was used to balance of the remaining financing finance the creation and operation has been returned to the Trust Fund of Palestinian institutions - namely, Second Emergency for Gaza and the West Bank for the Ministries of Health and Rehabilitation Project (ERP future emergency operations. Education. About US$63.2 million II). World Bank: US$20 million. was allocated towards funding Emergency Response Italy: US$3.7 million. Employment Generation Programs, Program (ESRP). Approval Date: May 10 1997. targeting areas that were severely World Bank: US$11.61 million. Closing Date: June 30, 1999. affected by border closures and Approval and Effective Date: the current sociopolitical crisis. All available funding has been The Holst Fund financed over 1,000 December 6, 2000. committed to 77 sub-projects. All labor-intensive microprojects, and it Closing Date: August 31, 2001. 77 sub-projects in the road, water, is estimated that over three million The overall objective of the ERP wastewater, and school sectors labor-days of employment were was to alleviate economic hardship (including 42 labor-intensive micro generated. The Project Completion through the provision of temporary projects) have been completed. Report is expected to be sent to all employment for unskilled and semi- The Project was implemented 27 donors shortly. April-June 2003 28 final-e-blue.indd 28 7/12/2003, 1:55:55 PM West Bank and Gaza Update Technical Assistance Trust Commitments and Disbursements1 Fund (TATF). Disbursements Under World Bank Projects (In US$ Million) - US$22.97 million Grant from 12 As of May 2003. donors. Approval Date: March 31, 1994. CURRENT Allocated Amounts Disbursed Total Closing Date: December 31, 2001. TFGWB JOINT Disbursed PROJECTS TFGWB JOINT The objectives of the TATF were MIDP 40.00 5.41 40.00 5.12 45.12 to: (a) assist in building Palestinian Housing 17.40 4.55 4.55 institutions and to enhance the Legal 2.79 15.00 2.43 2.43 Palestinian capacity for self- government; (b) facilitate the PEPP 3.00 0.32 1.73 0.32 2.05 implementation of investments in GIE 10.00 4.65 4.65 the Palestinian Authority; (c) assist Beth. 2000 25.00 3.61 23.37 3.41 26.78 the Palestinian Authority in the SAWSIP 21.00 12.47 12.47 design of integrated policies and ESIMP 15.00 9.92 9.92 programs; (d) assess the feasibility of proposed physical investments Health 7.90 5.39 5.39 for the longer term; and (e) MIDP II 7.50 5.00 2.46 2.46 encourage the growth of the private Solid Waste 9.50 2.00 2.00 sector. EAP 7.00 1.15 1.15 About 15 Design or Supervision NGO II 8.00 11.62 2.15 2.31 4.46 Assignments and 64 Technical ESSP 20.00 46.36 19.74 17.83 37.58 Assistance Assignments or Studies, ICDP 10.00 0.50 0.50 including a large number of training activities were completed. A total ESSPII 25.00 3.12 4.63 4.63 of US$23.6 million was disbursed EMSRP 20.00 2.00 2.00 to the PA institutions. The Project COMPLETED PROJECTS Completion Report is expected to ERP I 30.00 63.50 30.00 63.48 93.48 be sent to all 12 donors shortly. MIGA Fund 10.00 10.00 10.00 ERP II 20.00 3.50 20.00 3.70 23.70 CDP I 10.00 2.81 10.00 2.73 12.73 MIGA Operation Microent. 2.19 2.19 2.19 Investment Guarantee Fund ERSP* 12.00 (MIGA). CDP II 8.00 8.00 8.00 World Bank: US$10 million. EHRP 20.00 29.10 20.00 18.16 38.16 The Fund, which is administered Gaza Water/ 31.00 31.00 31.00 by MIGA, provides Guarantees San. in the form of insurance against NGO 10.00 4.60 10.00 4.90 14.90 political risk for private investment TOTAL 402.28 193.95 280.30 121.98 402.28 in WBG. Under the terms of the 1 These figures do not include parallel and IFC financing. Fund, investors who are nationals *The Bank’s US$12 million Grant was channeled through the Holst Fund. of, or companies incorporated in a MIGA member country, or who are Palestinian residents of WBG, Multi-Donor Trust Funds are eligible to obtain Guarantees, provided that the investment is Donor Allocation Total Disbursed brought in from outside WBG. The The Holst Fund 285.72 285.72 Fund currently has the capacity to TATF 22.77 23.60 issue Guarantees for up to US$5 PEACE Facility 25.07 12.61 million per project. If a project TOTAL 333.55 321.92 requires more insurance capacity, requested by the project sponsor(s), MIGA will explore the possibility of April-June 2003 29 final-e-blue.indd 29 7/12/2003, 1:55:56 PM West Bank and Gaza Update obtaining coinsurance with public in Ramallah in 1996 by the Arab Gaza. PTF was expected to invest and private underwriters, including Bank, DEG, Enterprise Investment primarily in small- and medium- coinsurance under MIGA’s Company and IFC. APIB was also sized companies across a broad Cooperative Underwriting Program. the first comprehensive commercial spectrum of high value added During FY99, MIGA issued its first and investment banking institution and/or employment generating Contract of Guarantee on behalf of to be established in the West Bank industries. the Trust Fund for a project in the and Gaza. Its primary focus was Prior to September 2000, PTF tourism industry. However, this intended to be in trade finance (e.g., invested US$11 million in three contract was cancelled in FY01. letters of credits and discounting of projects, but because of the ongoing The Trust Fund remains open for bills), term financing (for industrial crisis, all pipeline investments have applications. Since inception of and commercial projects for been put on hold. the Fund, over 20 applications have expansion, modernization and been received for almost US$400 working capital needs), foreign million in investments in WBG’s exchange and money transfers, • Palestine Tourism infrastructure, manufacturing, real financial advisory services (to Investment Company Ltd. estate, services, and tourism sectors. the local corporate sector and (PTIC). The interest of seeking investment overseas investors) and agency The Project was approved in April guarantees from the Trust Fund arrangements. APIB was expected 1999, and IFC invested US$1.35 continues to be strong. to mobilize wholesale funding from million in equity and US$8 million the domestic and overseas markets. in long-term loans. Further expansion of APIB’s operations was to include money The Project was the first IFC Projects and capital markets activities, international hotel in the West IFC Portfolio treasury management services, Bank. The 250 key hotel was built in portfolio management, and private Bethlehem at an estimated Project Including the three joint-projects cost of US$52 million that included above, IFC has committed US$25.89 banking. the renovation of the famous Jacir million to three projects under the As of December 31, 2002, APIB Palace landmark. EIB provided the Mainstream Program. Under the approved 30 loans worth US$12.7 Project with about EURO12 million Extended Reach Initiative, which million, and had an outstanding in a long-term loan. supported projects in the US$0.25-5 portfolio of US$7.4 million. Due million range, seven projects were to the ongoing crisis, the pipeline The Project became fully committed for US$7.42 million, for new lending has significantly operational under Intercontinental out of which US$4.92 million was decreased, and focus has shifted Hotel Company management in disbursed. The Extended Reach to managing the existing portfolio. September 2000. But due to the Initiative was discontinued in mid- ongoing crisis in the West Bank 2000. and Gaza, tourism was one of the • Peace Technology Fund hardest hit sectors, and the complex All IFC-financed projects have been (PTF). was forced to cease all operations in affected by the ongoing political March 2001. The complex sustained crisis. Most private sector activity The Project was approved in August 1998, with IFC investing up to some physical damage during the has been noticeably reduced, and past year and remains closed. most WBG companies are facing US$12.6 million. liquidity and severe operational The Peace Technology Fund was difficulties due to the internal set up with a committed capital of Extended Reach Projects border closure. US$63.2 million to provide equity • Arab Concrete Products capital for productive investments Company (ACPC). in the West Bank and Gaza. PTF Mainstream Projects was to encourage economic IFC approved the US$0.8 million • Arab Palestine Investment cooperation between Palestinian loan in June 1997. Bank (APIB). and Israeli companies and, if This Project enabled Arab Concrete IFC approved the US$3.74 million appropriate, invest in joint ventures Products Company to fully utilize equity investment in May 1994. between Palestinian companies and its production capacity of ready-mix Israeli or international companies, Arab Palestinian Investment Bank concrete, and expand its distribution thereby encouraging transfer was IFC’s first investment in the West capacity. IFC provided a long-term of technology and employment Bank and Gaza, and was established loan of US$0.8 million out of a total generation in the West Bank and April-June 2003 30 final-e-blue.indd 30 7/12/2003, 1:55:56 PM West Bank and Gaza Update Project cost of US$2.6 million. Due in some instances, operations were to the crisis and mobility problems brought to a complete stop. of labor and raw materials, the Project has witnessed a significant drop in operational levels, and IFC Technical Assistance at certain times, it has come to a IFC’s technical assistance efforts complete standstill. have been aimed at supporting the Palestinian Authority’s efforts to further broaden and deepen • Jericho Motels Company the Palestinian financial sector. (JMC). IFC has also worked closely with IFC approved the US$1.17 million the Palestinian Authority and the loan in August 1998. private sector to encourage the Developed on 31,000 m2 of land, emergence of new instruments the Jericho Resort Village consists and players in the financial sector of a 60-room hotel, 48 bungalows, and capital markets through the and recreational facilities. At a total development of framework laws cost of US$8.1 million, IFC provided and institutions. IFC was involved a 10.5-year, US$1.17 million loan, with the preparation of draft laws and the financing plan included for Insurance, Securities, Capital long-term loans from two local Markets Authority, Mutual Funds, banks and one other international Mortgage, Tax, and Competition. lending institution. The complex, which opened for commercial operations in late 1998, was forced to cease operations in early October 2000 due to the ongoing crisis and closures. However, with the relaxation of the closure on Jericho over the past few months, the hotel reopened most of its premises. • Arab Palestinian Storage Company (APSC). IFC approved the US$0.2 million loan in July 1998. The Project consisted of establishing a cold storage facility in Gaza with a capacity to store about 5,000 tons of perishable food products. The storage method included both freezing, as well as chilling, to preserve the products for long periods of time. The Project also involved trading in fruits and vegetables, mainly for sale in the off-season. IFC provided a loan of US$0.2 million out of a total project cost of US$5.9 million. The Project started operations in September 1999. However, the border closures in Gaza, and the ongoing crisis, have significantly reduced the Project’s volume of operations, and April-June 2003 31 final-e-blue.indd 31 7/12/2003, 1:55:57 PM West Bank and Gaza Update the website of the UN’s Office for • Mission for the Community BANK GROUP NEWS the Co-ordination of Humanitarian Development Project and the • Report on Aid Coordination Affairs (www.reliefweb.int/hic-opt/ Solid Waste and Environmental During the Intifada Period. docs/HEPG/Wallreport.pdf). Management Project A report on Aid Management and The objective of the mission was Coordination during the Intifada • New Appointment for the to discuss the draft ICR for the was commissioned in March/April World Bank Vice President of Community Development Project by the LACC co-chairs (World Bank, Middle East and North Africa II, supervise the implementation Norway and UNSCO). The objective Region. of the on-going SWEMP and of this study was to assess the ICDP projects. A stakeholder effectiveness of co-ordinated PA- Mr. Jean-Louis Sarbib, who has meeting was organized by the donor and inter-donor responses to been MENA Vice President since Yamoun Municipality to provide the Intifada, with a view to review May 2000, was appointed as a the opportunity for beneficiaries the responsiveness, relevance and Senior Vice President and Head of to discuss the outcomes of the the quality of leadership provided by the Human Development Network CDP II. Over 30 participants from the PA, the LACC co-chairs and at the World Bank. A transition the villages and small municipalities other key donors. period will take place until the in Jenin district attended the new appointed Vice-President, Mr. meetings and the overall reaction The first draft of the report was Christiaan Poortman, will assume finalized on April, 27, 2003 and the from the stakeholders was very his responsibilities. positive on the achievements of the full version will be soon available. CDP II. Site visits were conducted • Civil Serivice and Pensions to the Zahrat Al-Fanjan landfill • International Donors Reform Mission site. The draft detailed design for Releasing a New Report: the landfill is being completed. A World Bank mission comprising The other components of the “ The Wall Report”. International Gary Hendricks, Aniruddha donors to the Palestinians released a SWEMP project are progressing Bonnerjee, Jana Orac and Josephine satisfactorily. Site visits were also report detailing the socio-economic Bassinette (TTL) visited West Bank impact of Israel’s construction of undertaken in Gaza and West Bank and Gaza between May 03-May to projects being funded through a separation barrier in the West 17, 2003 to engage in civil service Bank. the ICDP project. The Implementing and pension reform dialogue Agencies (PECDAR, MOLG, DORA The separation barrier is a complex with the PA. The pensions team, and MOA) are already in the series of walls, barriers, trenches, consisting of Gary Hendricks and process of preparing the second and fences commonly referred to as Aniruddha Bonnerjee were visiting batch of ICDP project. “the Wall.” Israel began construction to disseminate the Pensionsreport on it in summer 2002 in the context to stakeholders, establish a working of continuing violence and terror committee on pension reform and attacks on its civilians. The donor engage the Palestinian Authority community commissioned the in pension reform dialogue. World Bank Publications: report because of concern that this Furthermore, there has been • The World Bank Legal construction could harm Palestinian interest and demand among the Review: Law and Justice for livelihoods and the viability of local PA to update the report to include Development economies, and that the Wall might an analysis of the security forces. Sustainable poverty reduction and negatively impact the delivery To the extent that data are made equitable economic development of humanitarian aid and damage available to the team, the mission depend on the solid foundation assistance projects. agreed to conduct such an analysis. of the rule of law. These reforms The report was researched and The mission plans to return mid- are underpinned by legal reform, written by a team of experts summer to engage stakeholders in whether it be to increase efficiency under direction of the Local Aid training and capacity building so as in business transactions, benefit Coordination Committee’s (LACC) to enable them to take decisions from globalization policies, improve Humanitarian and Emergency regarding pension reform. the way governments deliver Policy Group, which includes: essential services, or facilitate access the European Union, Norway, the to a more efficient and effective United States, UNSCO, and the justice system. Internationally, rules World Bank. The report is posted on and frameworks of cooperation April-June 2003 32 final-e-blue.indd 32 7/12/2003, 1:55:57 PM West Bank and Gaza Update are required in order to confront evaluation. Cross-Cutting Issues, international development finance. new global threats, such as such as participation, governance, By putting all development-related communicable diseases, attacks and gender, are also discussed flows in a consistent framework, on the environmental commons, in Volume One. Volume Two the publication will allow destabilizing capital movements, concentrates on Macroeconomic government officials, economists, and money laundering. and Sectoral Approaches. investors, financial consultants, academics, bankers, and the entire development community to better The World Bank Legal Review, the • World Development understand, manage, and promote first in a new annual series, offers Indicators 2003 the key challenges of financing a combination of legal scholarship, This is the World Bank’s premier development. lessons from experience, legal annual compilation of data about developments, and recent reports Global Development Finance 2003, development. The 400-page print I: Analysis and Statistical Appendix on the many ways in which edition allows users to consult 600 the application of law and the is the World Bank’s annual review indicators for 152 economies and of recent trends in and prospects improvement of justice systems 14 country groups in more than 87 promote poverty reduction, for financial flows to developing tables. A current overview of the countries. It also contains the World economic development, and the most recent data available as well as rule of law. This book, produced Bank’s projections of the global important regional data and income outlook in view of the current by the Legal Vice Presidency of group analysis are presented in six the World Bank, is a publication global geopolitical uncertainties. thematic chapters: World View, for policymakers and their legal People, Environment, Economy, advisers, attorneys and other States and Markets, and Global Global Development Finance 2003, professionals involved in the area Links. (Indicator topics : Population II: Summary and Country Tables of international development. & demographics; Poverty & income includes a comprehensive set of distribution ; Exports & Imports; tables with statistical data for 138 • A Sourcebook for Poverty Balance of Payments; External countries that report debt under Reduction Strategies (2-volume Debt ; Transportation; Development the World Bank Debtor Reporting set) Assistance & Aid; Information System, as well as summary data Technology; GDP, GNI, etc. for regions and income groups. A Sourcebook for Poverty Reduction It contains data on total external Strategies is a guide intended to debt stocks and flows, aggregates, help low-income countries with the Reliable quantitative data is essential and key debt ratios, and provides a development and strengthening of for understanding economic and detailed, country-by-country picture their poverty reduction strategies. social development because it of debt. This book has been designed as a provides evidence—evidence to resource for analysis and discourse set policies, monitor progress, and on poverty reduction policies and evaluate results. World Development • Constructing Knowledge programs at the country level. Indicators allows users to monitor Societies: New Challenges for Each chapter adopts a layered progress toward the Millennium Tertiary Education approach, with a short summary Development Goals. These goals, This report describes how tertiary providing overall assistance on agreed to by all member states education contributes to building up issues, a detailed guide providing of the United Nations, establish a country’s capacity for participation approaches to analysis and policy specific, measurable targets for in an increasingly knowledge-based development along with supporting development in the early 21st world economy and investigates materials including country case century. policy options for tertiary education studies, technical notes, and that have the potential to enhance recommendations for further economic growth and reduce reading. • Global Development Finance 2003 (Complete Print Edition): poverty. It examines the following A Sourcebook for Poverty Striving for Stability in Development questions: What is the importance Reduction Strategies is organized Finance of tertiary education for economic into two volumes. Volume One and social development? How focuses on Core Techniques Global Development Finance should developing and transition including poverty measurement 2003 is unique in its depth of countries position themselves to and analysis, and monitoring and coverage of the issues related to take full advantage of the potential April-June 2003 33 final-e-blue.indd 33 7/12/2003, 1:55:57 PM West Bank and Gaza Update contribution of tertiary education? How can the World Bank and other Contact Numbers development agencies assist in this process? West Bank Office Numbers: Health/Education Switchboard 02 - 2366500 Salam Kanaan Fax 02 - 2366543 02 - 2366534 The report draws on ongoing Bank research and analysis on Task Force on Projects the dynamics of knowledge Country Director Implementation economies and on science and Nigel Roberts Stefano Mocci technology development. Using 02 - 2366506 02 - 2366535 this background, it explores how countries can adapt and Social Development/NGOs shape their tertiary education Projects Disbursments Sima Kanaan Adel Odeh systems to confront successfully 02 - 2366536 the combination of new and old 02 - 2366515 challenges in the context of the rising significance for tertiary education Macroeconomics & External Affairs & of internal and international Private Sector Aid Coordination market forces. It examines the John Wetter Ma'moon Sbeih justification for continuing public 02 - 2366522 02 - 2366511 support of tertiary education and the appropriate role of the state Portfolio/Country Program Public Information in support of knowledge-driven Kazuki Itaya Mary Koussa economic growth. Finally, it reviews 02- 2366501 02 - 2366529 the lessons from recent World Bank experience with support of tertiary Gaza Office: Infrastructure Development education, including ways of Coordinator minimizing the negative political Majed El-Bayaa 08 - 2824746 Husam Abu Dagga impact of reforms, and makes Tel. 08-2823422, 08-2824746 recommendations for future Bank Fax. 08-2824296 involvement. Information Technology Abdallah Nasr International Finance Corporation 02 - 2366527 Youssef Habesch 02-2366517 Fax. 02-2366521 West Bank and Gaza Update editorial team Mary Koussa John Wetter Claus Astrup Youssef Habeseh For further information contact: Mary Koussa Tel. (972) 2 2366529 email: mkoussa@worldbank.org The ‘West Bank and Gaza Update’ can also be found on the Internet at: http://www.worldbank.org/we April-June 2003 34 final-e-blue.indd 34 7/12/2003, 1:55:57 PM