World Bank warns on state of Palestinian economy

MIDDLE EAST:The World Bank reported yesterday that if the economic slide in the Israeli-occupied Palestinian territories is not halted, Palestinians will become dependent on long-term foreign aid.

The decline has not slowed in spite of the rapid transfer of $450 million (€324 million) in aid to the Palestinian Authority since the beginning of this year.

The bank estimates that the authority requires a minimum of $1.62 billion a year in aid, 91 per cent of which goes to meet expenditures on administration, education, health, and security rather than investment.

Therefore, a great deal more funding is necessary if there is to be economic development.

The bank warns that unless the Gaza Strip, where 40 per cent of Palestinians live, is part of a comprehensive development programme, the authority will not be able to effect economic growth.

The bank says the authority must impose law and order, Israel must implement a 2005 agreement providing for movement of people and goods in the West Bank and access to Gaza and donors must base their commit- ment to maintain aid on the authority's enactment of reforms.

The 35-page document, due to be submitted to donor states in New York on September 24th, describes how economic development, initiated after the formation of the authority in 1996, was disrupted by intifada violence and Israeli political and military policies.

The public sector, which grew by 60 per cent between 1999 and 2006, has been forced to absorb labour to provide incomes for 157,000 families.

Unless Israel lifts its siege of Gaza, another 30,000 workers will lose their jobs.

The bank cites a steep drop in gross domestic product as proof of the decline.

After attaining an average income of $1,612 in 1999, the year before the intifada, per capita GDP plunged to $1,100.

The bank is also critical of donors.

"Aid flow . . . has been considerable, but remains fragmented and focused on bilateral arrangements, with donors based on short-term political positions rather than a collective, longer-term view on broader economic and governance fundamentals".