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JERUSALEM, September 17, 2007 – The World Bank released today its report to the Ad-Hoc Liaison Committee (AHLC), the first major conference of donors to the Palestinian Authority (PA) since 2005, to be held in New York on September 24. The report, a product of two months of intensive consultations with a wide spectrum of Palestinian, Israeli and international officials and agencies, warns against partial and unilateral solutions to the Palestinian economic crisis, calling instead for comprehensive and parallel policies, which address the fundamental preconditions for economic recovery.
While acknowledging Israel’s legitimate security concerns and the difficulties resulting from the political turmoil of the past 18 months, the report states that existing polices are hollowing out the Palestinian economy of any productive capacity, noting that it is increasingly being driven by government and private consumption from remittances and donor aid and that investment has dropped to exceedingly low levels. This is illustrated by the fact that despite the flows of large amounts of external aid -- some $10 billion since the establishment of the PA, including nearly $450 million in the first half of 2007 -- per capita GDP has dropped by a third since 1999, while public sector employment has grown by 60% during the same period.
The report explains the inability of external aid to affect economic recovery as resulting from a combination of fragmented donor policies, inconsistent and unsustainable PA economic policies and increasing Israeli restrictions on Palestinian movement tied to settlement activity. It asserts that reversal of the current decline is only possible if all of these root causes are tackled in parallel. Therefore, the report calls on (1) donors to provide harmonized support aligned with PA policies and priorities; (2) the PA to restore law and order, articulate a viable national policy agenda and implement practical plans for a return to a path of fiscal sustainability; (3) Israel to cooperate to enable Palestinian recovery and development, including restoring Palestinian movement and access as a first step towards stability, rather than a consequence of it, while addressing the impact of settlement activity on this issue. In addition, the report emphasizes that effective polices must address the West Bank and Gaza as one entity, warning of the impact of the latter’s continued isolation.
"The mood in the international community has changed,” said David Craig, World Bank Country Director for the West Bank and Gaza. “We are all looking for a new partnership between the PA, Israel and the donors that will kick-start Palestinian economic growth. Growth will create real private sector jobs for Palestinians. Jobs will get families back out of poverty and despair. Donors will then be able to switch their support from food aid to investment in the real sectors. This is the kind of support that the PA needs in order to create a secure environment, one in which peace can be built for both Israelis and Palestinians."
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