_S ZAI C! T D A LU Z A Quarterly Publication of the V E rT S I BA NK West Bank and Gaza Office A N D G A ZA November 2001 UPDATE - mThe World Bank Group One Year of Intifada At the signing of the Oslo Declaration, it was well- million as of the end of November 2001 (damage to undcerstood that peace would only take root if there were houses and fumishings; public infrastructure; commercial significant, sustained improvements in the economy of properties and plants; and to agricultural land, including the West Bank and Gaza (WBG). Since October 1993, trees, wells, and irrigation systems). Far more significant, clonor pledges have resultecd in US$5.5 billion in thoughi, are Gross National Income losses, whiclh will commitments and almost US$4 billion in disbursements likely amount to US$2.4 billion in real terms by the encl to the WBG. At US$175 per person, aid to WBG of 2001. Average per capita income is below what it was represents one of the highest levels of per capita official wlhen the Oslo accords were signed in 1993. development assistance anywhere in the worldl. Today, Per Capita Income and closures the value of this enormous collective effort is threatened by the breakdlown in the peace process. 105 180 The Palestinian economic recovery that began in 1998 r 2 100 _ 160 . recovery in 0~~~~~~-a 91T5 140 came to an abrupt halt with the start of the Intifada in 2 90 s120 September 2000, and the subsequent imposition of tight C8 100 _ o E 80 -- closure. The econoiy has been decimatec over the past 75 -60 year. Once again, thoughl, donors have demonstrated J 40 65 20 the impoirtance they attach to a resolution of the Israeli- 60. . . . . .0 Palestinian conflict through the efforts they have made r 8~ c a to sustain the Palestinian economy and its governance structures. A Real income per capita -_--Annual Closure days Sonrce: World Bank staff estinates and UNSCO. Ihe Problem Note:I1ncome is measured by Grro.sNational Income. A onoual cl(tosote dla)i The Palestinian economy is in severe recession. Per capita include weekends and holy days, data for 2001 cover on/V iliti- real income declined by 12 percent for 2000 as a whole, JutLe and will likely decline a further 18 percent this year. The bhe Palestinian Rled Crescent Society reported 600 leath)s adt 26,000 share of the population living below the poverty line (of injuries during theflint 11 months of the In il/ada IJS$2 per person per day) is currently estimated at 40- 45percent of the Palestinian population. While the human losses (death and injury) are beyond economic Recent Fconomic Developments 5 estimation, raw physical damage from the conflict is --l--k Group Opertions -.- I- estimated at somewhere between US$165 and US$175 ---nk G-oup N-ws-- 29 New Bank Iut bliCutionS 23 The proximate cause of the Palestinian economic crisis totaled US$525 million. In the first 10 montlhs of the is Israel's closure of the Palestinian territories. Palestinian Intifada, US$442 million was disbursed, and by the encd workers are no longer given permits to work in isiael of 2001 disbursements are expected to exceecl US$800 and the settlements, and the flow of goods into and million for the calendar year. The composition of these from the Palestinian areas has been severely interruLptecd. disbursements has changed drastically, however, with Military checkpoints exist on all main and most over 75 percent devoted to budget support and secondaiy roads within the West Bank and Gaza, emergency relief, and with large capital projects hampering internal communication. Periodically, all (highways, industrial estates, and the port) delayecd traffic from and within the territories is shut down, and incdefinitely. In effect, long-term investment has had to many communities have experiencecl prolonged periocls be sacrificed to short-term consumption. of isolation. These closures have raisedl costs and cr-ippled the business envir-onment. Estimated Donor Assistance The Palestinian economic decline has been driven by (USD millions) unemiiployment. During the last quarter of 2000, some 100,000 IPalestinians lost their jobs in Israel and the 1000 1 settlements, while another 76,000 were put out of woirk 800 inside the Palestinian territories as demand collapsecl andc businesses were forced to lay off workers. 600 Unemployment climbed from 9 pei-cent to 28 percent 400 '_ of the Palestinian workforce in December 2000. 200 The Palestinian Authority (PA) is effectively bankrupt, 200 since tax revenues have clwindled to a quarter of 0 d! _9 2001 previous levels. Monthly buclget neecls under the 1998 1999 2001 "austerity budget" prormiulgated in March 2001 total some U Commitments * Disbursement US$90 million, but revenue collected by the PA now amounts to less than US$20 million per month. Since Source: MoPIC, UNSCO Ctnd stqff estimnates. April, thouglh, Arab League donors have helped stave off fiscal collapse by contributing up to US$45 million A full collapse of the economy anc government has a month in budget support (through the Islamic been averted. After three months of sharp cleterioration Development Bank), while the European Union is now in the last quarter of 2000, the economic situation provicling another US$9 million per month2. The stabilized as up to 55,000 workers from the West Bank remaining deficit has been managed by borrowing fiom managed to fincd work again (without permits) in Israel cormmiercial Inks, delaying the paynlent of bills, cutting aind the settlements. Meanwhile, houselholds reduced salaries and squeezing operating costs3. Uncler normal their expenditures, and infort.zl self-help networks circumstances, about two-thirds of Palestinian revenue emerged. PA service ministries and local governments comes from customs and VAT collected by Israel on tightened their belts. the Palestinian Authority's behalf. In the past, these taxes As of end 2001, US$800m is expected to be disbursecl, were remitted to the P'A on a regular basis, but no such of which US$638m, or 79 percent, would be from the payments have been made by Israel since December IDB (US$450m) and the European Commission 2000. Total revenues withheld by Israel are estimated (US$188m). as of end-October 2001 at approximately US$260 million. Inevitably, the fabric of public institutions is badly frayed under this type of fiscal pressure. Despite the difficulties of continuing work under these 2 7bTal budgetcommitments throughbthe end qf200lfrjmdontor%-amno,nlI conclitions, in aggregate terms clonor funding has to US$575 million: US$405 millionfmm Arab Iea.gue mombhern thbnm,qh the IDB, US$115 millionfrom the EU anid one-time contributions ?1t/US$,30 increased by some 25 percent in terms of disbursements, millionfromn SaudiArabia, US$15 millionf/rm the UA.7 anl US$10 million and 40 percent in terms of commitments, as comparecd from Nonvav. with pre-Intifada levels. In 1999, donor disbursements - iv the end of2001, PA anears to commerialsunpplier- ar expected to total a dangerouslv biq'b US$400 ,nillion. No.V'imber 2001 2 Critically, the donors (often working tlrough NGOs) from the Palestinian Authority would neecl to be injected timely and generous emergency assistance. The released, and regular revenue clearances resumecl. unprecedentecd quantity of budget support has lhelped For its part, the Palestinian Authority will neecd to sustain a minimum level of demand ancl has prevented maintain strong budget discipline in 2002 ancd refrain the disintegration of government structures. Donor fromii non-essential expenditure, as well as work fuLthel contributions to UNRWA have also been key, as has on prioritizing emergency support needs thlotgll a the implementation of numerous small-scale workfare unified 2002 emergency plan. Indications are that the programs for the newly unemployecd (widt the Worlcl PA also believes it im)portant to recommit itself to the Bank and UNDP as major players)4. Without the medium-term institutional ancd policy agencda dtat has commitment of the donors, and in particular the Arab been largely in suspense since the beginning of the League states5, all semblance of a functioning economy Intifada. This agenda has two main planks - internal woulcl have disappeared by now. reform (which includes creating a professional civil But economic collapse remains a real prospect. In the service based on merit and transparency, eradicating past three months, closure has once again tightened. If abuse of official position, and fostering the emergence dte confrontation persists at recent levels ancd if the of democratic institutions), ancd the creattion of a climate closure is tightened further, donor and community conducive to private sector development (by efforts will not suffice, and economic disintegration will clismantling the PA's quasi-moniopolies, cutting accelerate. Soon there would be litde left of the private unnecessaiy procedures, passing and implemiieniting key sector othel than subsistence agriculture, petty trade economic legislation6 and establishing a legal and workshop manufacturing. Public seivices would environment in which contracts can be enforced). soon begin to break down, with a-ash accumulating, Thlie donors could do well to focus their continuecl frequent power ancl water cuts, intermittent drug emergency support/recoveryefforts on seven packages supplies in hospitals and a shortage of textbooks and of assistance; taken together, these packages wotIld writing paper in schools. Notably vulllerable are the provide a solid basis for an eventual resumption of municipalities, which have received little emergency growth: support and are in many cases in debt to Israeli utility companies. Poverty is cleepening, particularly in isolated * Budlger Support. This must 7e continued for at least comnmunities. Serious health anci environmnent problems another year. The IMF has estimated needSs at UJS$872 commnites.Serousliead-iandenvi-oiiiet pobliii imillion under a "status quo" scenar-io (this wouldI fall to are emeerging, and helplessness, deprivation ancd hatred millio n a 'statq scenaro tis wolenlt are increasing. ~~~~~US$552 million if Israel resumed regular- revenue transfers to the PA). Under a "lifting of closure" recovery A political solution woulcl alter this prospect scenario, the Bank has estimated that budget support ftindalaentally, and a rapid recovery of the Palestinian needs for 2002 would still total some US$360-390 million. economy wouldl accompany a liftirng of closure. That said, Worlcl Bank projections inclicate that recoveiy to d asic the key istancespor for pre-Intifada per capita income levels would take at least deliveind fhe keydinstitutiesponsle for two years - and this assumes that private investor diverig o the isuneeded agndcis include the confidence can be restored. Ministries of Health, Education and Social Affairs, anc the municipalities. An Emergency Services Support 'he waty Ahbe-ad Program is under design, and would provide some $80- 100 inillion during the first six months of 2002. The aim Israel, the PA and the donors will all need toplay their of the ESSP is to address the severe shortages of druLgs, part if there is to be a recovery. Any robust recovery of the Palestinian economy assumes that the Israeli labor market wouldl be re-opened to Palestinians, that the system of internal checkpoints emend ofP2001, about uS o millionjoildav sb would be clismantledl and border restrictions eased. 5 Whichbarevrepons.ibleforsomeS percenitofthe esti,nated disbu,st7leowts These actions would lower the costs of doing business for 2001, and stimulate a recoveiy of Plalestinian private enterprise. ' Stuch as the Capilal Mllarkets Authoritv/Securities Leau), te Secured F'ina,zchuk (leavOkkO' Lawv (both u?f which should result in q,reautr post- In addition, the tix revenues that have been withheldl crisis inves'men flows), and the hIncomne 7ax Law. .[Novemnber 2001 3 school materials, ancl spare parts/fuel for water, learning. A notional allocation of US$20 million is electricity ancd solid waste collection systems. The World proposed. Bank will commit US$20 million to the ESSP, and about Under a "status quo" scenario, the amounts required to US$40 million has been pledged by the UK, the EU finance such an emergency programil would total some and the US. US$1.3 billion, or US$0.9 billion were Israel to a Job Creation. Emiiergency job creation programs neecl recotmmence revenue transfers. Under a scenario of to be sustainecl - both small-scale labor intensive political ''rapprochement/lifting of closure", US$0.85- construLction projects, as well as income-generation 0.9 billion would be needed. activities. Several implementation channels exist and Donors nmust also re-dedicate themllselves to the miiecdiumll- can be expanded. At least another US$100 million in term development agenda. Most major infrastructure commitments would be needed in 2002. work has stalled. Whereas in 1999 donors commllittedl El UNRWA. The refugee population in WBG remains US$405 million to developmental infrastuLctuLr-e and heavily dependent on UNRWA for basic social seivices technical assistance, only some US$215 million is likely and welfare paymernts. UNRWA's Third (Intifada) to be similarly committed in 2002. Those clonors who Emergency Appeal is still short by some US$55 million, have been most effective in implemiienting fielcl and an additional US$100 million in Intifacla-related programs during the Intifada are by and large those emergency funding for 2002 would appear justified. least dependent on expatriate management and O Infrastructure and Lancd Rehabilitation. Donor teclhnical assistance, and those whose programs work reconstruLction and rehabilitation funding of somewhere closely with local commulnities. The exigencies of the between US$35 million and US$80 million woulcl be operating environment offer an opportunity here, since justifiecl to restore the areas clamagecl by armed conflict, decentralized programis, if well-supportecl and with the pruLdlent amount a function of the extent to monitored, can result in better poverty targeting, higlher- which armed conflict hias subsided. These various wor-ks local content, and the strengthening of accountability. can be packaged by area shoulcd individual donors prefer this. U Re-engaging the P'rivate Sector. Thus far a neglected but essential area, three programs could now be put in place. Due to the fiscal crisis the PA has not been able to process VAT refuncls to suppliers, and this could be addressed through a concessional loan of approximately US$25 million to the PA. Emergency assistance to private enterprises couldl inclucle support for commercial bank restlrLuCturing of loans, ancl grants to support the fixecd costs of businesses, to enable them to survive this period of low demand. A notional sum of US$25 million might he programmed for this. In addition, and assuming that armed conflict ceases, a Private Sector Emergency Recovery Funcl is under design by the International Finance Corporation (this Fund, which could provide grants to repair damaged assets, concessional working capital loans and the purchase of non-perfomiing loans from commercial banks, is tentatively sized at US$100 million). * Student Scholarships. These could be provided to pupils and students unable to pay school/university fees, as a way of suppoiting their continuation in study and sustaining the financial viability of institutions of !Voetnder 2001 4 Recenit Economiiic Developments Comppared to previous periods of closuLres, the measuLres implemented during the last 12 months have been ci Economic Output extraordinary harmful to economic activity in the Palestinian territories. The reasonl is that not onily has it The Intifacla is now approximately one year old, aIndl been exceedingly difficult for Palestinian workers to the economic upswing whiclh chiaracterizedf the access their usual workplaces in Israel, but mobility Palestinian economy cluring 1998 ancl 1999 a by-gone withiin the West Bank and Gaza has also been era. The severe clisriptions of economilic life caulsed bDy significantly liampered. As a conseCluence, workers have levels of confiontation unprecedentecl in the post-Oslo faced difficulties in reaching their workplace, alnd period, and in particular -the imposed restrictions on the proclucers have seen efficiency decline. UNSCO miovement of goods and people, have significantly characterizes periods when no main roads are accessible reduced living standards among the Palestinianl to Palestinian traffic, and when many seconclary roads population. The Worlcl Bank estimates that average are closed by physical barriers as "severe internal incomes measured as Gross National Income (GNI) per closure", and estimates that in the West Bank severe capita, in 2001 will be 30 percent lower than it was in internal closure was in place during 54 percent of the 1994, see Figure 1., the first year after the signing of the time friom October 1, 2000 to June 30, 2001. In Gaza Oslo accords. severe internal closures were in place cLur-ing 7 percenIt Figure 1. Real GNI and GDP per Capita of the time. 1994 = 100 Available indicators suggest that the economy 110- 105 experienced a sharp set-back in the months immecliately 100 following the outbreak of the Intifala, but thalt the 95 dr ciramatic drop in economic activity subseqlueltly h.as 90 \been somewhat abated . The World B3ank estimates 85 _- 80 o that for the year 2000 as a whole, real GDP decliniecl by 75 - 6-7 percent as a result of the extremely poor perforima nce 70 in the last quarter of 2000. In 2001, real GDI' couldc 65 clecline an aciditionally 12 percent. The estimated decline 60 Lo co - co X a) o v in GNI coulcl be even larger, approximately 15 percenit 0) aw 0) al aw a) o o 0 °in 2001, as worker remittances are expected to be ---GDP UGNI recluced by more than 40 percent comparlecl to the Soitrce:,~ WVorldi Bank Stall Eat s.alreaildy low levels of 2000. Accounting for annual1 population growthi of approximately 4 percent, the Throughout the perioc, GNI -- which inclucles wor-ker decline in GNI and GDP per capita would be even larger, remittances fiom abroad -- has been more volatile than see Table 1., which reports estimatedc macro-trencds for Gross Domestic lProduction (GDP) because worker the Palestinian telTitories over the last five years. remilittances have been highly sensitive to access (whiich o Private Investment and Consumption recurrently has been tightened by Israeli authorities) to jobs in Israel and Israeli settlements for Palestinian Pitenivestments,hav unvoue suffered workers. Since 1994. there as been a clear inverse extensively during the crisis, as investor confidence has relationship between the extent of closures, i.e., clays t ndarblo andiavailb fundstdrie dsup. Oie when access to the Israeli labor market was shut of only indirect indicators for investment trenpds exist. One and the estimated average annual income of the catorest of c emen imot -Can estia Palestinian population - years with relatively few closure Ponent rn activities nopred within clays have been associated with highl average Incomes tePlsiintriois-wihdopdb oeta cland avie v.-)eersa. sociateci widi I-ligi average incoiies 60 percent during the last quarter of 2000, accorciinig to aind vice vers;a. the Israeli company which is the monopoly supplier- of Accorcling to UNSCO, the crossing point between Gaza cement to the Palestinian territories. Other- inclicators andl Israel has been closed for more than 120 working include the number of newly registered companies clays, from October 2000 to June 2001, equivalent to 61 which dropped 80 percent cluring the same periocl. percent of all working clays during that periocl. November 2001 .5 Table 1. Summary of West Bank and Gaza Macro Trecds, 1997-2001. 1997 1998 1999 2000 2001 Gross National income (GNI), US$ M Current Plrices 4,565 5,058 5,086 5,089 4,609 Goss Domestic Product (GDP), US$ MI Current Plices 3,959 4,230 4,288 4,360 4,093 Real Annual Change: GNI Pler Capita 1.8% 7.7% 2.2% -11.7% -18.7% GDP Per Capita -1.1% 3.9% 3.0% -10.3% -15.7%Yo Private ConsuLm1ption Z4.0% 9.0%Yo 6. 1% -6.7% -14.0o Public Consumption 10.0% 7.0% 9.7% 15.5% -5.0% Total Fixed Investment 7.7% 8.4% 16.1% -19.1% -29.8% Export 4.0% 6.6% 3.3% -7.4% -7.6% Import 8.0% 7.4% 9.2% -10.9% -19.4% Other Items: Poverty, Share Of Population Below Poverty Line 25% 23% 21%YD 33% 46% NIS/US$, Aninual Average 3.47 3.81 4.14 4.08 4.08 CPI, Annual Change 7.6% 5.6% 5.5% 2.7% 4.2%o. Annual Closure Days 57 15 7 52 123 1) Population, Mid-Year (1,000) 2,628 2,731 2,842 2,966 3,o96 1) Until End-june, 2001. Note. Al Data t kxctles Eastjenisalein. Soumr"cs Worcl B3ank Staif fstimates, Palestinian Centrcal Bu reau of Statistics, UNSCO. Moreover, the confrontations have resulted in destriction a stunning 75 percent, see Figure 2. Estimnates basecl on of some of the existing capital stock. Finally, the crisis has impactecl a numLber of on-going investment projects, e.g., it has been reported that Britislh Gas, which has a Q100 Figure 2. Indicators for Imports concession to explore gas off the coast of Gaza has 100- 1 halted operations. The Worlcl Bank estirnates that total 90 - investmnent cleclined by approximiiately 19 percent in 2000 70 andc could decline by another 30 percent in 2001. 60 - 50- Declining employnmenit and income levels have inevitably 40 depressed private cOInsumnptioni. Althiougl1 houselholcis 30 - have responded to the crisis by running clown savings, 20- it has also been necessaly to cut back on consumption 10 0- - in particular of non-essential items. Using the World 2000 2000 2000 2000 2001 Bank's model of the Palestinian economy, whichi Qi Q2 Q3 Q4 01 explicitly distinguishes between essential andc non- Clerance Revenue -U-ICBS -i-Truckloads essential consumption, it is estimated that real private Source.s: Palestinlian Minlistry (/ 1-mance. UA'SC0, andlvrlIne! Cezntrl consumnption cleclined almost 7 percent in 2000 ancd could further clecline by 14 percenit in 2001. 1uireau u/Statistics. * Foreign Trade Various sources indicate that trade in goocis andc seivices VAT invoices collected by the Palestinian Central Bureau between the l'alestinian territories, Israel, and the rest of Statistics, ancd tracde data r eleased by the Israeli Central of the worlIc have cdropped significantly cLuring the Bureau of Statistics (ICBS) show a somewhat smaller Intifacla, particularly imports. The number of truckloaCds clecline. According to these figures, there was a clecline passing throughl comumercial crossing (either into Gaza, in imports of 40-50 percent during the first three nmontils or across the Allenby Bridge to the West Bank), ciroppecd of the Intifacla. NoXtavtber 2001 6 Since the beginning of 2001, the level of imports has teiritories. Finally, truckloads are perhaps better indicaitors stabilizecl to a level of 40-60 percent below the pre- of changes in trade volumes, while the two other indicators crisis level. In particular, the most recent figules for measure changes in tie value of trade. truckloads collectecd by UNSCO show that an average Nevertheless, based on the above indicators, it seems of 6,000 trucks per month entered into the West Bank safe to conclude that the relative decline in imports hals ancl Gaza duLing the second ClUarter of 2001, comparecd b3een larger than that of exports. As imports initially to 14,000 prior to the crisis. were imluch larger than exports, the observed trenicls For the last quallter of 2000, the indicators show a similar imply that the absolute decline in imports was pattern for exports: The number of trucks leaving the approximately four times as large as the cdeclinie in Palestinian telTitories cieclined sharply - approximately exports. The strong decline in imports reilects both the 60 percent - while estirnates based on VAT invoices andcl crop in domestic demand due to lower incomes in the ICBS data slhow a more modest decline of 15-20 percent, Palestinian economy and the increased difficulties in see Figure 3. The most recent figules, covering the getting goods fron abroacl into the Palestinian ter-ritor-ies. The demand for Palestinian goods abroad have not been Q3, 2000 affectecd significantly by the crisis per se, but increased 100 Figure 3. Indicators for Exports transportation costs and reducecl efficiency in procduction 160- have uncloubtedly reduced Palestinian plodCucers 140 - K competitiveness. 120-- *, 100 - ,> - Recognizing this pattern, the World Bank estimates that for the year 2000 as a whole, export volunmes cleclinecd 7 60 -'A \ percent compared to 1999, while import volumIles 60 - cieclined approximately 11 percent. For 2001, is it 40- estimated that exports will decline another 8 percelnt, 20 - while imports could cirop approximately 20 percent. 0 2000 2000 2000 2000 2001 a Fiscal Accounts Q1 Q2 Q3 Q4 Q1 The fiscal situation of the Palestinian Authority (I'A) -Clerance Revenue ICBS -hTruckloads sharply deteriorated cluring the crises, as revenues Sources: Paleslinian Cenztr al Bureau (?ISIatistics, UANSCO tacd 1srael PluLnged. Fiscal revenues are intrinsically linkecd to leitral Burautuf (IStatitics. economic activity, as approximately 80 percent of current revenues are derived from inclirect taxes. Moreover, since December 2000, the Israeli autlhorities have cle first half of 2001 show a mixed picture, although the facto suspendced the transfer of revenue cleariances. overall impression is one of stabilization: estimaltes Finally, the efficiency of P1alestinian tax collectioni has basecd on VAT invoices inclicate that expoits picked up fallen cduring the crisis. in die first qLiartei of 2001, whiile die ICBS estima1tes that Montily tax collection by the Palestinian Authority has exports continuecd to clecline during the same period, averaged approximately US$22 million, during the Data for truckloads leaving the West Bank ancd Gaza second quarter of 2001, compared to about US$33 million shiow a strong recovery in the first quarter of 2001, cidiring the third quarter of 2000, see Table 2. Monthily followed by yet a set-back in the seconcd qujarter of clearance revenues used to be approximately US$55 2001. The latter figures are somewhat puzzling when million. compared to figures for the number of closure days, which indicate that there were more closures in the first The Palestinian Authority has squeezed current quarter of 2001 than in the seconcl. expenditures by 15 percent compared to the level before the Intifada, by cutting back on non-wage expenclitures. It should be notecl that die three indicators are not diecdy thNon-wage expenditures used to amount to US$54 million comparable: e.g., the truckloads only capture trade in Nondh, expenitureento amount ed goos; heVATinvics co nt aptre rae i agicltual per mionth, but have in recent mionthis only amounted goodxs; the VATinvoices do not capture trade in agricultural to US$34 million - a decline of almost 40 percent. Thle products, which are exemilpt from VAT, while the ICBS to wage expenditureslhae not be eiificantl cIiL Onl esiI't-cebtenIralai h aedii A's wage expenclitur-es lhave not been significalntly dlata only estimate trace between Israel and the Palestinian affected. Mandatory emergency employee contributiolIs Novemnber 2001 7 _Vll _ on public expenditures, both at the centr.al and municipal Table 2. Imlpact of the Crisis on PA Fiscal Accounts. level, would significantly reduce the level of public Thircl Quarter Seconcd Quarter services, including such areas as health, education, and 2000 2001 waste collection. This will in turn also have a --- US$ M Per Month --- considerable negative impact in the longer terml, as Total CLrrent Revenues 88 22 humilan capital and the environment are degraded. - Domestic 33 22 On the other hand, it is questionable how mucIh longer - Clearance' 55 0 the PA can continue to accumulate arrears. Until now, Current Expenditures 107 90 most suppliers to the PA have acceptecd long delays in Wages 53 57 payments on the grounds that the P'A normally is an -Non-Wage 54 3z important buyer for many businesses, and that the Current Budget 1Deficit 19 68 witiheld clearance revenue is seen as "collateral" whiich BuCIget Support 0 48 eventually will secure the payment for the goocis. It Mleniloninduin lteii: shoulc be noted however, that the estimated outstanding Stock of Arrears, US$ M, N.A. 22 stock of arrears exceeds the estimated withhield clearance End-july 2001 revenue by more than 50 percent. It shouldc also be l) 7here has been tZo trann.Le-r oJ Clearance Revenues sinice Decemlbe noted, however, that the stock of witlhheld revenue aiindc 2000. 2) 77e Slockl ojfAnry e.vchlides 7echnicld MWae Anvars (cabagtal US$¢46 Af a.qf enl-JfIune 2001). Soarces: Alinis4vt' (/ linantce n,l(( ,/ the stock of expenditure arrears have nOt been S lql.OEimiwaes. acctImulated over the same periocl. More specifically, the PA was already in arrears prior to the outbreak of have effectively recluced wage expenclitures, but have the crisis. Moreover, the pace of accumulation of at the same time been off-set by an increase in the expenditule arrears has been lower than the p.ice of number of PA employees. A total of approximately 6,000 accumulation of withhelcd revenue. pei-sons have been acided to the PA payroll cluring the first nine onths of th Intifada.Trends in public investments during the Intifaida are Clifficult to gauge. Public investments are alnmost entirely The P'A faces a considerable financing gap, eqtlivalent donior-financecl, and data from MOPIC on doior- to approximately US$68 million per montlh as lonig as disbuisements indicate that dIonor-finariced capital the Israeli authorities nlaintain the decision not to transfer expenditures declinecl by 20 percent in 2000. No data the Clearance Revenues accrued to the PA. INIF ptIS for 2001 have been macIe available, but as a number of the estimate of total withileld revenue clearance at clonors hiave shifted their disbursemenits towards US$178 million by end-June 2001. The finaincinig gap emergency response programs, public investments may has so far been filled partly by budget suppoIt frolim a have cleclined even further. numilber of Arab states, the EU and some bilater-al clonors H Labor Markets in the amount of approximately US$48 million per month Cltring the seconcl quarter of 2001, anid partly by the As noted above, there was an strong, immediate negative acctImulation of arrears, estimatecd at approximately impact on the labor market following the outbreak of US$280 millioni by end-July 2001. In recent months, the Intifada. In particular, the number of Palestinians accumulation of expenditure arrears has been very higlh, working in Israel and Israeli settlements plumimleted -- in the order of US$20 million per month for the second during the first three months of the Intifada, some 100,000 quarter of 2001. jobs of a total of 120,000 were destroyed, see Figule 4. The !situation subsequently im-provecl somewhat, witlh For the period July-December 2001, Arab donors have T committed a toa fUS20mlapproximately 55,000 workers commuting daily during committed a total of US$250 million - equiivalent to tefOXtadscn ure f 01 tl h ubl US$42.5 per month - and the EU another US$42 million the first and second quarter of 2001. Still, the number equivalenit to US$7 million per month. Even with t. ' of Palestinians working in Israel is less than half its pre- .. . ~~crisis level. Moreover, the improvement has only contintied support, the PA must find additional financing, beneited work ers the WestBank,and lt)t orker or~~~~ f.c eve fu'hrepniuecus repnir benefited workers from the West Bank, anicl not workers orface evenUfurther. expeniture plcusts, or endaIitu from Gaza. For Gazans, employment opportUnities in arreerarse acumation. ThisOplaces the Phand in a highly Israel have virtually ceasecl to exist, dtie to the effective vtilner-able situation: On the one hand It IS extremiely enocm tofov etrsriin.Byotat,t dlifficult to cut expenditures.. And any fuL-tiher sqtieeze enforcem ent of movement restrictions. By COntraSt, it Novemiber 2001 8 appears that a considerable number of Palestinians fromi The cirop in employment implies that currently on the West Bank have been able to circumvent Israeli average each working person has to provide for 6.4 checkpoints both within the West Bank and along the persons (including himself), compared to 4.8 persons Green Line. in September 2000. The adverse impact on employmilent was larger in Gaza than in the West Bank, reflecting the p1r0s0o0ns Figure 4. Employment in Israel alimiost total isolation of the Gazan economy imposed 140 - by the Israeli author-ities. 120 \ . - The official Unemployment Rate stood at 24 percenit 100 - in the secondc quarter of 2001, whiichi is slightly lower 80 - than the previous quarter, but still significantly higlher- 60 -dani thanthe 10 percent reportecl in the thi-cl (luarter of 2000, 40 /6 2 I see Figure 6. 20 o . . . . . \+ + i , Figure 6. Unemployment Rate 0) ~ °) $) CD C 35%- c..J CO ~ 'IT C') v (NI C c 3 ci c) ci c c) 30% - -F--WBG -U-WB -G X .25% Soi-cexs: Palestinian Central 1Bnrecat qfStatistics xanl World Bank 20% 4. ,Staffn LFttinptes. 15% 10% Also, the employment level within the West Bank ancl 5% Gaza has stabilized according to the latest figures 0% o; 5 O. released by the Palestinian Central Bureau of Statistics. (N C C O - T After cleclining more than 25 percent during the first a c% three months of the Intifacla, domestic employment + WB -G G WBG r ecoverecd slightly in the seconcd quarter of 2000. Still, Sources: Palestinian central Bureau of Stat istics and World Bank employment within the Palestinian territories is Staff _Wtirnates. approximately lower by 66,000 workers than immecliately pqio e to the outbreak of the Intifada, see Figure . For various reasons, the official Unemployment Rate may not properly capture the impact of the crisis, see the June 2001 issue of the West Bank ancl Gaza Updclate. p1rs0o0ns Figure 5. Employment within WBG Notably, the official Unemploymilent Rlate will 500 - underestimate the negative impact if a significant 450 _ _ , . proportion of those who lose their- jobs simply give up 400_ _ -_ _ _ looking for another job. Aciding these C'discouraged' 350 - _M -4M ,M workers to the number of unemployed resulted in an 250 - Unemiploynient Rate of 33 percent in June 2001. 200 - The Labor Force Participation Rate, i.e., the share of 100 ' -A ^ j i persons aged 15 years anci above who are either 50 - employecl or looking for a job, continuecl its clecline -- 0 a in the seconcl quarter of 2001, it cdropped to 38.4 percenlt, 0) 0 0) C) NO ) C N see Figuire 7., the lowest figure ever reportedl by the C\J m 04~( C) see a a a 0 a a a a 0 Palestinian Central Bureau of Statistics. -~WBG UWB -*G WParticular in Gaza, the Labor Force Participation Rate SouIrces.: Palestinian centtal B1ureau of Statistics and Wzorlid Banik has diminishecl: currently only approximately 1/3 of Staif iistimates. the working age populaltion is engaged in the labor Novrember 2(0)1 9 Figure 7. Labor Force Participation Rate September 2000 = Figure 8. Overall Consumer Price Index 50% - 103 - 48%- 102.5- . / 46% -_2_-___ 42% 101.5 - A 40% 100.5 38% __ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ 36% ._ ___99_5______ 32%1 985 30% 98 0) 0Y) 0 0 0 0 0) 0) , 0C0 0 0 0 0 0000 au 0 o 9 0 o 9 . . . . 9 a a a a a a a a , m ,,,CY a t X> 1 WB -B-G -B-WBG Sources: Palestinian Gentral Bureau ofStatbsics ancd WVorld Bank SotorceU. Palestinian Central Butnau /f Statictics. Stqif Eti,nates. market. This is low even when comparecd to other Micddle In particular, the cost of transport increasecl substantially Eastern economies, wiere labor force participation is during the initial months of the Intifada -- between among the lowest in the world. Poor prospects of finicling November and December 2000, increaises of alillost 10 a job is a main cause for the low labor force participation percent were reported, see Figure 9. in Gaza -- manly cease job-seeking ictivities, eithier Inicreasing transport cost is a direct reflectioni of the because they learn that there is no clemand for their clifficulties of getting around in the Palestinian territories. labor, or because the mobility restrictions prevent them fr-omi-i getting to the potential workplace. September Figure 9. Consumer Prices of o Prices 2000= Selected Items Overall inflation rates in the Palestinian Economy remain 110 subdIued. Since the beginning of the Intifacla, the ConSumel- Price Index (CPI) has increased by 105 approximately 2 percent in the West Bank ancI has been virtuLally unchiangecl in Gaza, see Figure 8. This indicates tlhat there has been a concurrent decline in both demand 100 InId SLIpply in the Palestinian economy. The cliffelenlce between the trends in the West Bank anid in Gaza may 95 inclicate that the West Bank has been more affected in a o o o o supply - Clue to relatively larger increases in -° > ° ° 75 tranlisportation costs - than Gaza, where demand factors < ') Z 0 Li 2 < - (lower incomiies and consumer demand) has been more ---- Food Transport A Overall CPI dominant Swrce: Palestinian Central Bureau of Statictics. The New Israeli Shekel (NIS) has been depreciating vis- a-vis the US$ during the Intifada, from a level of NIS4.05/ Not only have travel times increased greatly - a sutvey US$ in September 2000 to NIS4.30/US$ in September carried out recentlygby dthe World Bank suggests th t 2001. Thlis m1ay h1ave fulelled inflation throuigh increasedi tralvel times have roughly doublecd dur-ing th1e starit of 200. hi my lav fiele inlaio ti-LIgl nceaec the Initifada - but the weal, and tear of trlansport prices of imported goocs, but this effect has been muted eqintif - but the wearIan tr of taspor delnei ipr drngtesaepei- equipment is also increasing, because trucks anid busses by the clecline in illIpOll CiLli- often are foicecd to ulsed clirt tracks to circuml1venit I-lowever, the impression of overall price stability masks clheckpoints and trenchies in the roads. significant price changes in specific comimioclity groups. Noivemnber 2l)00 10 Bank Group nlmanagemient capacity in selectecl contribution of approximately $3.5 institutions, condcucting design and million for an Emeigency Job C-eaitioll Operations feasibility studies, and for attempting Project. Both projects will provicle innovative projects and technologies -- financing for labor intensive activities which might otherwise be too) microprojects implemlienltecl at the small or unconventional to be funded community level throughi Local A. Mulli-Donor Fund efficiently through indiviclual projects. Government Units ancl under the overall Administ ration RegrettLble events over the past few management of the Minlistry of Local montils highilighit the need for a vehicle Governmient. 1 Technical Assistance rntst Ftind that ellables donols to mobilize ancl (TA7F). As of September 2001, the TATF chann111el funds rapidly and withi has receivecd donor contributions of flexibility to the Palestinian people in B. Investment Projects US$24.07 million (including interest response to the emergency situation. money earned), of whicih a total of BuIt the PEACE Facility can also be used As of September 2001, the Worild Bank US$23.0 million has been disbursed to to chiamnel ftinds for specific investiment Group has 26 projects incler the Palestinian Authority. The objectives projecLs, techinical assistance, or capacity implementation, three completed of the TATF are: (a) to assist in building building, as agreed with the relevant projects, and four projects uLicler- Palestinian institutions and to enhance Palestinian couniterpart agency. Othier preparation through the Worlcl Bank, the Palestinian capacity for self- featuires have been added to improve g government; (b) to facilitate the on the Hoist Funcl, namely by World Bank Ongoing Projects implemilentationi of investments in the establishing separate clonor accounts that Palestillian authorities; (c) to assist the enable each clonior to imionitor and tnick 0 Educationand HealthRehabiitation Palestinian authorities in the clesign of tlheir- specific contriiLbtions. The samiie Project (IHRP). (US$20 million creclit integrated policies and progminis; (d) to partnership feature of the Holst remains, fro the Worl Bank; us$20 illio assess the feasibility of proposed hioxveve-, providing clonors withi a grant froil S!;audi Arabia; three grants physical investmnents for the longer term; comimiilon platforn for joint or collective totaling US$8.65 million fromii Italy; aldI and (e) to encourage the growth of the efforts targeting a wide range of US$0.40 million grant from AUStralial.) private sector. Out of 69 activities and (levelopimient neecis. Thlis Facility will The IDA Fundc is 100% committell aCl projects, 64 have been already serve foLu- jrposeS, but, in general, the disbursed; the Saucli Grant is 87% comlipletecl. funcds will he lhancdlecl in the samne coimmitted aiid 80%/u disbursed; the Italian The value of currently finning activities milaniner- regardless of the use: (a) Grants are 65% committecl and 47% under the TATF is about US$1.5 million, financinig for technical assistance disbursed; anicl the Australian Grant is activities; (b) finaincing of projects 100% comimillitted and clisbursed. The The Worlcl Bank and PECDAR jointly WitloLIt Bank involvemilenit (c) co- Project is being implemilentecd thl-ougi administer the TATF which will be financing with Bank projects and; (d) PECDAR, the Ministry of H-Iealth, and the closing on December 31, 2001. unanticipated neecds. inistry of Education M PailestiniianEconomicAsssistanceand The new institutional arrangements Health Component: Undel thle ID)A C ooperation Expansion (PEACE) introduced under the PEACE Facility are Fund in Gaza, all of the planned ten (10) Facilitv, more responsive to and in line withi the clinics have been btiilt, furnished, and The PFACE Facility, a new multi-donor present roles of the Ministry of Finance ter sofhtware dprogram si comi pleted.k successor to the Holst Fund, was (MOF) and the Ministeny of Planning and Une thenSaudi Gransion for Raficiian established in Febrary 2001 as a vehicle International Cooperation (MOPIC) with Honeicl, thes eension for f aidi to enhaiznce donor partnership, respect to financial and fiscal Hopial hasibeent bist,afllyd funihed emphasizing transparency and management and public investment and esuipmefnt installed The while . ~~planning. cntuto fYtaHsia si accountability, wile ensuring progress. In Gaza, three clinics and one effectiveness througIl carefully designed A grant from the Government of Canada community hospital have been built, institLItional and implementation in the amount of five million Canadian fully furnished, and ecluipment installed. arranigements. The PEACE Facility was Dollars for an Employment for Social The construction of the Ministry of set up in response to the need expressed Development Project was the first Health's department building is by a nutmber of clonors for a ImIultilater-al contribution made to the PEACE Facility, progressing well. Under the Italian Grant Or -linhrella facility to support targeted An agreement was also signecd widt the in Gaza, the Ministry has approved the activities, such as btiilding financial D)anish Governmient in AtIgust for a final version of the Pilot Master Plan lol- Nolvlember 2001 11 Al Nasser Hospital in Khan Younis. The 12,000 people); (ii) build NIOH's capacity Implementaition Unit (PIU) for Project rehabilitation works for the existing to plan and clesign PHC clinics; and (iii) Coordination and Management (US$ 0.88 hospital, the existing sewage systen, replace approximately 40 substandard million). This component will provicle and the construction of a corridor link PI-IC facilities, inclucling ecluipment and support to the Project Implementation betveen the existing and the new fuiniture, witli clinics that meet the Unit (PIU) througil the provision of hospital is ulicler design. qullity standards, consultants' services, office computers, Education Component: Uncler the Component 2: Establishing Healtli software, eClUipmient, ancl fUrlnitUre, to IDA Fulid in Gaza, 11 new schools and Management Infonmatioll System (HMIS) Project and ete sprvyin Of its the extensions for 11 existing schools (US$ 1.34 million). This componelit will ePecution. have been built and fully furnished, establish the foundation for a Undcel the Saudi Grant in the West Bank, copmlirelhenisive Health Management The Project is being implemented by all of the planned 8 schools have been Infonintioni System in WBG. It is designecd MOH, and expected to be completed built and fully furnished. Three new to yield operational benefits for clinicians by December 31, 2002. schools are ready for tender-ing. In Gaza, and aciministrators, while providing 5 schools have been built and fully essential dlata faor decision making by a MPunicitpal D.1frastructure lDeSelop- furnisied. In the West Bank under the healti planners, policy makers, and service ment Pronect (IDY W . (UkS$40 mUillion first Italian Grant, all ol the planned 6 providers. This component will establish crelit from the World Bank; US$1.96 schools have been built and fuilly a Health Information Center (HIC) that million from Greece; and EURO3.G7 funllishleCl and undcer the secondl grant, wouldC support thie dlevelopment and miiillion fromii Italy.) The project is constructioin of I school and 4 maintenance of the Management planned to be closing at the end of year communlity centers were complete and Information System (MIIS) functions of 2001; lhovevel-, it mia-ly be extendledl by 5 schiools ancl 1 comImlunity center are MOH, and provile technical assistance for another year mainly due to the cUrrellt progressing well. Furniture, books, and the clevelopmilent of a basic clinical crisis. This Project aims at rehailitfating laboratory edquipmilent have been inforiation systemil and a unified healtl high priority municipal infiastructure supplied. Uncler the Australian Grant, insurance inforniationsysteml. The clinic-al networks andl systels in tile West Balnk strengthening of policy-making, infoination system will also provide the and Gaza (WBG) through woring planning, and research capacity within monitorinig tool for the activities of the directly with five selected municipalities the Minisu-y of Education, establishment Quality Improvemelit Program (QIP) Jenin); the Ministry of Local Government of a school mapping database, and a supported in Component 3 (ILG); the Ministry Of Public Works malintenance scheduling systema for thle Component 3: Improving the Quality (MoPW); the Palestinian Water Authlority Niniiist-y have all beeni completed. andEfficiency of Care (US$ 0.87 milliol). (PWA); and PECDAR. Focus is on a PHealth SyStem Development Project This component xv\ill acidress the priority initiating institutional reform and (HSDPV. (US$7.9 million credit from problemii areas identified by the MOH capacity builcling at the local governimient the Worcl B3ank.) The clevelopment with respect to the quality and efficiency level. So far, 91% of available fuLidinig objectives of the Project are to eniance of health care in WBG. This component has been comimiitted to somlie 293 the management capacity of the Minisuy will support the followving activities: (i) physical sub-projects, includinig 210 of Healdt (MOH) and improve access to institutionalization of the process of micro-projects. A total of 261 physical high-quality and affordable primary prioritizing and developing quality sub-projects have been completed. healdi care (PHC) services, especially standards and quality improvement US$1 million was taken from the Project in rural ancd underservecl areas. The programs in the health system; (ii) for the preparation work for Betdelehe Project components are application of quality standards and 2000. So far, more tian 220 km of roads guidelines in selected priority and 100 km of water anid sewage HealthpCae Nwk (Upg 5.76 million), interventions; (iii) rationalization of pipelines have been constrictecl. Also, HealthisCar component aimS to76impriove t prescribing patterns and use; (iv) upgrading of three neighborhiood areas Tlaity cofnprimntary s heatho seprovies te strengthiening of MOH's capacity to in Gaza City have been completed. All forialiy the drisadvantagyled ulatlio svintes improve the quality and cost- odier components with the Ministry of effectiveness of services contracted out Local Govemment and tie five selectecl WBG. Th1-iis comnponenit will support the by MOH; and (v) enhancement of municipalities for capacity building are followvinig activities: (i) develop the MOH's capacity to monitor and evaluate currendy active. However, due to tle functional standards for Level LI PHC ihealthi service quality and efficiency. current crisis in the West Bank and Gaza, facilities (small clinics that can serve the basic needs for approximately 8,000 to Componenit 4: SuIpport to Project thie capacity building componenrt is basicme-oving slowly As a response from the iVsn'emnb*er 2001l 12 Worlcl Bank to the current economic The Project will also provide support to into the managemilent contract, essential crisis in the West Bank and Gaza, the die Ministry of Public Works to establish to fund goods, equipment, wvorks .anld Bank has reallocated US$2 millioni from a ioacl maintenance management system services required for improving services the International Development for the first time in the Palestinian and attainment of performance targets; Assosiation (IDA) loan towarcl labor Authority. In addition, it will continue ancl (c) the provision of technical intensive projects. most of these to provide support to the Ministry of assistance to strengthen die Palestinian projects are completed. Three-year Local Goverinimlenit for an accounting Water Authiority (PWA), to SUpport investment plans have been completed system anid institutionall refonm and xvill implementation and monitorilig of the for Hebron andc Gaza municipalities, extend the capacity building covmponent Project, and to provide independent are uncler implementation for Rafah of MIDP Ito six acclitionial municipalities auditors to monitor the Operator's municipality, and under RFP preparation in WBG including: Jabalia, Khan Younis tecinical and financial perfonriance. The for Jenin and Nablus muinicipalities. in Gaza, Tulkaremi, Jericho, Tarquinia, implementing agency is the PWA. Somiie Diagnostic stuclies in Rafah and Jenin and Al Ramii in the West Bank. This of die main achievements after fotir years muniicipatlities lhave been completed. A subcomponent will provide support to of implementation of the Project as revelLie management information improve municipal investmienit and aticlited hy an independent auditor are: system for miunicipalities in the WB3G development programming. over 1,200 km of pipe have been wvas axvardecl and is in the SUb-Components Progress: The surveyed for leaks and over 16,000 illegal implementatioll stage. A Geographic Mlinistry Of Public Works (MPW) hias connections icdentifiecd; over 22,000 Information System (GIS) is currently prepared clesign ainici tender documents service connections l'ave been replaced, being developped at Gaza, Heblon and for thiree r-oacd rehabilitation projects over 20,000 meters repaired, :ind a total Nablus municipalities. A state-of-the-art (estimated cost is $2.10im from the IDA of over 30,000 meters replaced; computeLr center iicl netxvork has been ftiid) NIPW has completed the Unaccounted For Water (UFW) has been completed for Gaza, Jenin, Nablus and implementation of one out of thiree reduced from around 48/ to 30M/; Rafah ILulnicipalities. An electlicity Stidy regional roads financed by IDA. reliable disinfectant (96% of vatcr was completecl for Hebron area and is (US$0.5m out of US$2.1 in). The contract samples have positive chlorinie residual). in die stage of requesting proposals for for Plhase I of the second sub-project The existing management contr.act has Nablus. has been receritly awarded in the been extended dirough June 2002. The F Second Alunicipal Infrastructure amount of US$0.75i. MPW has also Credit is ftilly committed an1d Project (IvDP Il). (US$26 million total tenclerecl the Road Maintenance clisbursements as of August 31, 2001, ProjeCt cost, US$7.5 millioni creclit fromii Management System Program as part of wvere US$24.91 million. The closinig date the W\orld Bank, US$5.0 million grant the Capacity Btlilcling Component. Bid of the Project is December 31, 2001, but fiom Saudi Arabia. Italy is currently evaltiaion is cur-rently undergoing. is expected to be extended to itine 30 considering contributing a suLIm Of Contract award is expected in imiid- 2002. A supplemental credit of US$6.0 US$7.2m - of wvhich US$4m for roads November 2001. In response to thle m1lillion to finance the increased costs for and US$3.2m for water). This Pr-oject current crisis in the West Bank and Gaza, implemilenting the rehabilitationi program was approved by the World Bank Boaid US$1.0 million; has been reallocated from under this Prolect xvas approved on onJulle 20d, 2000 and cleclared effective the project buLCIget to employmilent November 1, 2001. on December 19th, 2000 and Closing is generation projects. These funcs will be * SoutbernArea Waterand Sanitation expected in August 2004. Commitments: usecl primarily to rehabilitate small Improvement Pro/ect (SAWSIP). (US$21 Twvo sub-projects stand at US$1L93m. stretchies of roads, open agricultural million from the World Bank and Disbursements: Two sub-projects stind roads, and for roacl maintenance. EURO30 million in parallel financing at US$0.82. The main objective of MIDP U Gaza Water and Sanitation Services from FIB). Tlle Project consists of: (a) 11 is to iimprove infrastructure services Proect (GWSSP.) (US$25 million credit the provision of an international (roads, water, and drainage), including fiom the World Bank; US$50 million in Operator [General des Eaux, Khatib & higi priority sections oftdie regional road parallel financing from EIB/EU.) The Alami (GEKA)] under a four-year network and rehabilitation of village and Project consists of: (a) the provision of performance based management munLicipal water networks in WBG. an intemational Operator [Lyonnaise des contract to implement a service Ministiy of Public Works, Ministry of Eaux, Kliatib & Alami (LEKA)] under a improvement program for the Local Government, and the Palestinian four-year management contract to Governorates of Betlelem ancl Flebron Water Atithority are the implementing implement a service improvement in the West Bank; (b) the provision of agenicies for this Project. program; (b) the provision of operating operating investment funds for the investment funcis for the Operator built Operator built into the manaigement ,Vovember 2001 13 contract, to finance essential operations andl sewage networks. Most of the funds has not been consumminated. The cUrrent and maintenance expenditures not financed by the World Bank and OPEC crisis is seriously affecting tie ability covered by the revenues collected and Fund have been coimmittec. A mid-tenn of current participants in thle program whliic are recluirecl to achieve the yearly review carried oul by tie World Bank to continue their work effectively but l)erforimianice targets in the management in Fehrulily of 2001, has confirmiecl ditt they have shown extraordinary fortitude contract; (c) the provision of funds (by the project objectives are being and courage to keep workilig despite EIB) to finanice design, implemilentation adequately met evell inder the current these difficulties. an-d superZVision of capital improvemenrs sociopolitical crisis on the ground. stich ats system rehabilitaltion and imprIovemasent of water supply service Legal Development Project (LDP). PEPP Project Expatriate Profiles iiiiroviint f wtersuipply ser-vices, Y bu.k transmission mains, distribution (US$5.5 million from tihe Worlcl Bank; US$15 million cofinancing from Saudi Dr. Nebal Sliaath is a Palestinian systemLs reStruLlctur-ing ancirehabilitation Arabia and parallel financing of US$1 expatriate who, has been workinig at the as well as an investimenit in rural water supply; and (d) the provision of technical millioni for legislative cirafting from the Palestinian Ministry of Health since a,isSistance to SUpport strenlgthening the- Unitecl Kingdom.) The Plroject is a start December 2000 under the auspices of instittitional capacity of PWA and WSSA to a long-termi process of assisting the thie PEPP program1. The PEPP program to suippor-t implemnentationi andc~ PA to moderinize and harmonize existing is financed by the Palestinian Authority, legislation, to give rise to a legal the Govermiment of tie Netherlands and monitoring of t Ie Project and providle .fe r eqU..te to support a the World Bank. Dr. Shaath is thie independenlt auditors to monitor the frewk eqtcosupta Otcteperator's technicalsand financiaor tlle iimoclern market economy, and to Orthopedic Surgeon at the European encourage the growth of the private Gaza Hospital. His main responsibility perfonnaince. The implementing agency g sector. The Project also supports the is upgrading the existing Orthopedic is the PWA. An inclependent audit of the Operator's First Ye-ar Performance training of judges ancl court personnel Surgery Centers, with special emphasis inidicatedi satisfactory performiiance. in ordter to increase the efficiency ancd on Hand Surgery, Arthoscopy and Joint transparency of the juclicial process. Replacement. This also includes the on- Project imipleimentation continLies to be s satisfactory. H-lowever-, it hias slowed The Project is well underway. As part going development and training of iinior of the overall programil of legal Orthopedic .Surgeons a well as down since Septeiilber 2000 becaLuse ofi'salsin nliinio-n w clevelopment in W13G construction of estalishing ancI monitoring two the dleterio)rating political situaltion. Dislbtirsements, as of August 31, 2001 two coutiLotiLses is plannecl-one each additional centers in the West Bank for ire a epproxim isately US$7 3 m00illion in the West Bank andc in Gaza, to be Orthopedic Surgery in order to reCIdIce areapreseningabtit35y o the7 Creit.lio fuindled by the Kinigdlom of Saudi Arabia. reliance on overseas treatment whiich is repi-esenting about 35%oOf tie Creclit. very expensive. In his first few montis, The closing date of the Project is set for X Palestinian Evpatriate Plrofessional Dr. Shaath has collaboratecd with the June 30, 2003. Program (PEP.P). (US$3 million credit hospital directors and local couLnterparits 13 7heSecond ComunttlitvDDevelopmerit fromi the Worldl Bank and US$0.3 nillion to identify the basic neecds and Protject (CDPII). The CDP 11 is financecl fromii the Nethierlands.) The PEPP opportunities for improvements in by the WorlD ThDk (US$8 million), with Su11Ports the recruitimient of expatriate existing departments of Orthopedic parall-iWel financing from the OPEC Fund l;Palestinians to key mianagement and Surgery. He is now in the process of (U.S$8 million) and EIB (EURO 10 senior techinical positions in PA recomimlending measures to upgrade the million) Theiproject as Iade effective instittitions as an institution-building structure and functions of the existing in Julle 1999 anjd to-clate hmas undler mleLsUIre. Since the program started in departmen.s of Orthopedics in Gaza and imp leentation nicroprojects targeting late 1997, 17 per-sonis have been West Bank, inclucing staffing. rehnbilitation of infrastructure in small successftilly recruited for positions at 11 villages and munllicipalities in West Bank ministries andl agencies of the Palestinian ancl Gaza. As of Augtist, 2001, 163 Authority, incling: the Ministries of * Palestinian NGO Pr-o/ect. (US$10 projects hlave been contracted ancl 98 Finance, I-e Palt, Highe Education, millioni grant from the World Bank, have been completed. A total of US$10.4 Housing, the Palestine Broadcasting US$2.5 million in co-financing by Saudi n;illion has been disbursed to the C( orati Palestine Monetary Arabia ancl US$2 million by Italy. This projects by the implementing agencies. AtitIlOlity, and thie Bethileletm 2000 P'roject is managed by the liroject The menu of projects includes Coiiiiiiittee Qualified Mersons alave Management Organization (PhltO); rehabilitation and upgrading of: roads, been idlenitifiecl for positionis at the Welfare Association Consortium. schools, comll11utillity c nters, Ministries of Agricultul-e and Education, school s,liDilit 1 co mmunil i ty cenl Xv l te rs,I the Insuraince Controller's Office and the T he Grants Program: Despite clifficult rehabilitation of cliniics andl waiter SuIpplY State InfonillaLtion seivice but recruiumennt Circuminstances and severe restrictionis on A'oveLntber 2001 1 -I movemenit, the P'MO has remained fully inclucling those financed with the eligible to obtain guarantees, provided operational utilizinig more its satellite accrued Italian interest) managecd to that investnenit is brougilt in fiom outside offices for accessing projects across the reach 106,874 poor ancd marginalized. WBG. The Fundc currently has the country. Of the 39 projects approved in This number is well above the targeted capacity to issue guarantees for up to Cycle 1, 37 have been completed ancd 50,000 beneficiaries set in the Project US$5 million per project. If a project US$ 1,794,616 (98.14% of total funds) has Appraisal Document. The beneficiaries requires more insurance capacity, whenl been fully disbursed. For Cycle 11, 35 sc) far can be disaggregated as follows: requestecl by the project sponsor(s), projects were approvecl, 21 of which 14% women, 6% men, 60% children, 15% MIGA will explore the possibility of have been completed ancd US$ 2,941,272 youth, 2% eldlerly and 3% disabled. As obtaining coinsuranice with public and (91.64% of total funcis allocated) has to the natule of the beneficiaries, most private unclerwriters, includCinlg been disbursed. For Cycle III projects, of the categories can be classified as coinsurance undcer MIGA's Cooperative of'a total of US$ 2,259,940, US$ 1,611,923, marginalized. Underwriting lProgram. During FY99, Or 66.92% has been disbursed. Cycle III MIGA issuecd its first Contract of projects have been most affected by the presei0t the fi s of wo ilpotat Guarnantee on behalf of the T'rust Fund emergency situation and several of the p t f for a project in the tourism indlustry. recipienits reqLuestecl that their grant reseachi works that were fundecl unider However, this contract has been agreemenits be amended to extencl their the Bank's Palestinian NGO Project - i) cancellecd in FY01. The Trust FuLInd contracts beyoid the originial (late. An NGO Sector Mapping, whlich provicdes remains open for applications. Sinice the most compr-elhensive database on inception of the Fund, Over 20 For Block Grants, of' a total of US$ NGOs in the West Bank and Gaza, and applications have been received for 2,950,386 allocated to sub-projects, US$ ii) The Role of NGOs in Buildin, Civil a U 2,942,272. or 91.64% olf total budgeted Society, wvhicih provicles considerable WBGms infrstrc tu, mnufactiu inn, rea allocated for block grants, hacd been inisighit inito lhow NGOs see their future estate, services, ancl tourism sectors. The disbursed. Of a total of 195 suIb-grants role in builIinig Palestinian civil society. interest of seekinig iivestimient gua,lrantees approvedl, a total of 115 (5897%) hlave The two research projects were from the Trust Funcl continues to he been completecl. All Block Grant uncdertakeni by two reputable research st Managers, with the exception of one, centers, the Palestinian Economic managed to allocate all their budgets to Research Institute (MAS) and Bisan U Bethlehem 2000 Proqect (B2000). sub-projects, albeit with delays due to Research andl Development Center, IUS$25 million crecdit from Worlcl Bank, the present circumstances. respectively. US$1 million grant from Norway and US$1.76 million grant fromi Italv, In total, the PMO has obligated 100% of In view of thle suIccess of the current EUSO1.73 million from A ftriao The lyA the originial granits budget which is US$ Project, the continuecl need for NGO Fund is 85% commif itteci and 89%] D 10,848,258. From this US$ 9,610,341 or sUpport to the clisenfranicihised, and the isiursed the Norwegiani Fundc is 100a % 87.38%H/ has been disbursed. OppOlrtunities for enilancinig the commiiittedi anci 100% disbursed; and the Acdclitional Funcis from the Italians: The contribution of Palestinian NGOs Italian Funcl is 100%0/ committecl ancd 100% PMO ilals r-eceiveCI .n jdditiolliI us$ troug additional technical support andc lisbursed; the Austrian Funcd is 70%/o 430,479 whiichi represenits interest Inancingt tecond Peie to cY comimlited ancd 36% clisbuisecd. l'he' accumulated On the Italian Trust Funcl. Ilroject - PNGO II. Minisr of l Gove nt, the The additional fundicing allowed for the Ministry of Local Government, the approval of foul new projects andc budget * MIGA Investment Guarantee Fund. Ministry of Tourism ancl Antiquities, anicl increases for two ongoing projects. (Total of US$20 million, whicih consists the Ministry of Culture are implementiig of US$10 million through a credit from this Project. Impact on Beneficiaries to clate: Although a formal Impact Assessment is not the World Bank, approximately US$5 Celebrations Support: The B2000 recluired before July 2001, inforation illion fro EIB and US$5 million from Project Authority was effectively avail;ablefouly 2001 inoreatio Japan.) This Fund, which is administered consolidated under the leaclership of Dr. oitoling systemsinicatethat 30-40% by MIA, provides guarantees in the Nabil Kassis ancd has performecd very ixioitoingsysemsindiatetha 3040% form of insuraInce against political risk of the 55 projects that have been . . well. The infrastructure ancd celebration for private investments in WBG. Under completecl uncier the Development Grant components were particularly well scheme have potential for longer-term the tenns of the Func, investors who are executed, and the Accounts Departimrent nationalls of, or compamies incorporated sdIstainlability and giowtil. The Ss projects nional of, or com nies iorpoare has clone a very goocd job of record that were completedl in addition to those .ineatMia membentr or Who are keeping, control ancl reporting. However, that are well underwaly (43 projects, P the sponsorship, marketing, tOUriSIm Novemnber 2001 15 development and private sector i Electric Sector Investment and sent out to a long-list of firms withiin the clepartment were never effectively staffed Mancagemnent Project (ESIMP). (US$15 coming few weeks. ancl not Imlucl was achieved in these million fromil the World Bank, US$38 areas. Until the recent closures, efforts million from EIB, US$35 million from Rehabilitation and closure Of were unclerway to consoliclate these Italy, andc US$3 million financed by u controlled opean cumrp sites has beeng achievements by: (1) institutionalizing beneficiaries.) The objectives of this a first priority and is currently being key elements of the events programii oni US$91 imiillion project are to rehabilitate adclressecl by the JSC-PIU. While over an annual basis; (2) mobilizing the the power distribution systems in the 54 open dumps will be rehabilitatecland private sector to consolidate ancl buildl central and southiern West Bank and to closecl in tihe coming six to eiglit moitihs, on the improvements that have been aicllress the institutiolnal structure for only six large clump sites are expected mace; and (3) embarking on a' realistic longer-terim sector management. The to be rehabilitatec and maintained to marketing program in coorcliniationi with Executive Directors of the World Bank receive waste until the new lancfill site the Ministi-y of ToLurism. approvecl the Project on August 31, 1999 in Zahrat Al-Fanjan is macle operational tmid- to late- 2002. So far 4 dcump sites and the Trust Funcl Creclit Agreement have been completely rehabilitated or Infgrastructu/re Progre.cs: (1) Rtoadis: (FA ttetm fte hv encmltl e.bltllo (TFCA) was signied at thie time of the the plannecl IDA components are now Bank/IMF Anniual Meetings. Despite tie closed. Twelve will be procuredl in the 100fnoae Cipete. Tae i comploete cTh present ulrest, tie implementation of the coming couple of weeks. main activities (JDECo and PEA The JSC-PIU is in the process of Shephercis Fielcis Roads, co-financed by components) is progressing satisfactorily. improving access roads (10 kin) to the Norway, iluclucling aindiscapinig works, Effectiveness conclitions are yet to be temporary dump sites as port of tis are coinpletem The IDA balance cdmlpletedl for the HEI'Co and SELCo Project. substitution efc ofinly o luetotherdonor components. A supervision mission will substitution effect of otlier cloinors (as tke place in beginning of September Public awareness will be an important oted above) somie of Nvlhich were usecl 2001, in particular to follow-up oni the componienit of the SWFMIP. The JSC-PIU forJob Creatioll Sub-projects; (2) Water: effectiveniess coniclitionis of SELCo and is currenitly entering into a contract to the components here (oll IDA) are 100% HEPCo respectively. About US$4.23 procluce materials related to public coimplete; (3) Cultural Heritage: three of millioni of the US$15 million has been awareness. the foul sub-projects are complete. The fourth one, co-financecl by Austria, is i tENA is in the process of developing undler implementation. E Solid Wcaste and Environmental an environmental awareness strategy Manaqmenie)ctProIect (SW7EMP). (US$9.5 utilizinig the expertise of specialized local Ac-'v 1B2000 Business Plan: A revisecl million fiom the World Bank; US$3.25 non govenmilental organizationis (NGOs); Businiess Plan has been prepared whichi imiillioin grant fromii the EU; US$1.25 a short list of local NGOs have beeni should have proviclecl the basis for the miillioni is aniticipatedi fromii the PA). This iclentifiecd through screening "expressionis B2000 Project A ethocity.s work for the lProject was approved b) the World Banik of interest", and tendering will take place reiialiideroftie Ilroject Tis plan tieeds Board on October 10, 2000 and was in the coing two weeks; m:ijor revisionis in thie light of thie curtrenit declared effective on December 11, 2000. m'lie European Inivestment Bank (EIB) has c*-isis. The Project's o)bjective is to finance approved the financinig of componients Municipal Capacity Building: interventions in solid waste collection, related to solid waste management, Discussions are now ongoing with tranisfer, and disposal of waste for the including purchase of ecluipment ieedecd Bethlehem area municipalities to help District of Jenin. The Project will also for primary and seconclary collection of them establish the necessary working assist in institutional-building within thle solid waste and costs for operations and groups in orcler to develop the three- Ministry of Environmental Affairs maintenance. The JSC in cooperation year investment program. Request for (MEnA). The Project feasibility studies with MLG is currently preparing the Plroposal to hire a consultant to develop and conceptuIal design for the solicd waste work-plan ancl tencdering documents to the program is in the final stage of compolnenlt are complete. purchase these equipment. preparation. The Jenin Joinit Service Council for Solid C FmergencyResporse ProgJram (FP). Cultural Heritage Reform: It was Waste Management (JSC) Project (US$11.61 million Grant from the World agreed througil cliscussions with the Implementation Unit (PIU) is currently Bank): The overall objective of the ERIP Boriowevr that this cornponent would be preparing the neecded documents to is to alleviate hardships to thousancds of implerimented by the B2000 Project procure the assignment for detailecd families through the provision of Authority with managerial assistance clesign of thie Zahrat Finjan Sanitary temporary employmeit for unskillec anlcd fiom UNESCO. Lanclfill. Request for Proposals will he semni-skillecdlaborers. Local sLIpplielsanld N'oIeniher 2()01 16 contractors woulcl also henefit through held in the Worid Bank office in El-Ram departments; the second supports specific the increasec clemand for materials and on September 24, 2001. More than 50 investments in education. The l roject is works. The implementing agencies persons from the local authorities, designecl to compliment efforts being inclucle: (1) the Ministry of Local ministries of Local Government, Planning macle by the Mlinistry ancd the Donor Governimenit (MLG); (2) The local and Public Works and govrnorates, Community to make the best use of government units (LGUs) ancd NGOs and private sector, NG Os, Welfare available funding for the education sector. (3) PECDAIR. Thle MLG has the sole association, Donors andcl the World Bank responsibility of selection of projects and participated in this workshiop. The proje component tre: IPECDAR has the overall accounting, workshop cliscussecl issues related to Component 1: Strengtlenl Capacity of monitorinig and reporting responsibility. information sharing, experience in MOE (US$ 1.76 million). The LGUs ancd NGOs implement their implemenitation, improving the quality sub-projects directly. The Project was of targeting poverty ancd lesson1s learned Sub-Component 1.1 Policy planning anldc approvedl by the World B3ank Board ancl to improve the delivery of the program. financing (S$ 1.47 million) Ibis sub- declared effective on December 6, 2000 From the workshop, it was learned that: cot mponent would support the and was closed on August 31, 2001. A 1) Twhe employment generation program preParation and evaluation of Annua responsibility matrix was approvecl by shall be flexible, 2) localize the work Work Plans and Bucigets (AWI B) t PECDAR, MIG and the Bank. About 210 throughl using local contractors and local oper -oni. the priorities of the Five- micro-projects were iclentifiecd by the materials as m1Us.h as possible; 3) thle Year plan The actties un ler this LGUs and enclorsecd by the MLG. Thiity- program hlelpecd in buildilng capacity t compoSent includle putting in place il1 twvo NGO's were selected by the Welfar e the local level; 4) some sectors hiave EMIS inclucing school mapping facilities Association to implemilent labor- iitensive better payoffs regarding employment, and extending tis to all District offies, projects. Several workslhops were SuICh1 the agriculture sector; 5) there is a compLIterizing the MOE financial concluctecd in thie West Bank anidl Gaza need to balance between clevelopment management systemii, buildling a two stoiy to explain dte mechanism of the program andl emilploymiient objectives; 6) tlhe NGOs vertical extension to the MOE's aniex, to the LGUs, MLG and IPECDAR. An have a key role to play ancl they were provicling training, scholarships anci auditor was conitracted by the Bank, onie able to target women; ancd 7) local workshops for MOE staff and local technical consulting firm was authorities are in bad need for assistance stakeholdlers (in management, planning, contracted by l ECDAR in Gaza and in seivice delivery to avoid a possible econiomic ancl finianical analysis), and another four in the West Bank to monitor collapse of the service system clelivery, providing technical asistance to support the progress andcl provicle assistanice to l &Ication Actio nrlect (US$7 local govef worke.it ulicts to Imprave million fro/ the Vorld Bank.) The Sub-Component 1.2: SuppOrt for project uality of wok. A local firn was also Palestinian iiSty Of EdICation (MOE) implementation (US$ 0.28 million) contracten by flECmAI to prodjcce a has re.lestecl project suppor to reinforce through covering the costs associated cocumientay fili on de Project. otal the work already IIertaken in the witl improved maniagemiient of finalncial coilitent llOW starcls at US$11.61 clevelop1net of ta Five Yer Pn anddie and procuremienit systems to impleient million, or 100% of the available funding. development of a Five Yer eduatian thecy This commitment has been- m-iadcle to Truist Fund Credit-fundedl activities, aLd1 some 242 micro-projects in Gaza anid the stiategy. The Education Action Project thFe iring of external expertise to. spport West Bank inCILuding thie NGO micro aims to strengthen the capacity of the MOE sta projects. All sub-projects are conplet cl Ministry of EciLication to manage the Component 2: Targeted Interventions in t Ae West Bank an- c Gaza US$11.41 eclucaitioni system more effectively (US$ 5.88 million) This componient miillioni has been disbursecd to sub- thiroughi improving policy-making, would support the implementationi of projects and more than 210,000 man- planning and budgeting at central and activities in die Five-Year Plan and AWPB days have been generated in the West clistrict levels. The project would also preparecl under sub-component I.I. Bank ancl Gaza. Canazda (US$3.2 millioni sopport the implemenitation of activities Activities would include sub-compontents equivalent), Denmark (US $ 3.7 millioni in tatrgeted clomoinis inicluclecl in agreecl for general and vocational eCLucaltion. eqluivalent), Islamic Development Bank annual departmental workplans derived (US$7 miiillioni) and Unitedl Kingdlomn (US from the Five-Year Education Plan (2001- Sub-Component 2.1 General Education 2005). The Project has two (US$ 3.13 million). This sub-componienit contributedion ethpoam. Ohve complimilentary componenLs, plus support includles die extension of a program for contributedl to the prograim. Othier dloniors hiave expr-essedl inter-est in for the Plroject Management Uniit. The school improvement dtrough staff review conitr-ibutinig. A workslhop on first comiiponient provides support for ancd school development programm employment generation program was strategies that assist policy making, (including a fund for training); and the planning, and budgeting across Ministry clevelopmiient of professional stanclard.s NVov'eniber 2001 17 for headmasters. exchanige, enhanced PA/NGO clialogue All available funding has beenl committecl andc joint programming ancd improved to 77 sub-projects in the road, water, Sdub-comonentS 2.25 Vocaio nal. This sub- capacity of networ-ks to represent their wastewater, and school sectors Edlucation (US$ 2.75 milion). This sub)- COIStitLienieS. (including 42 labor-intensive componient incluCIes supporting the MOE croprojects). All SUb-projects have to develop and pilot the curriculum and An Emergency Grants Program that will been completed. The Project, closecd on materials for the secondary vocational rapidly disburse grants to emergency- stream, and establishinig pilot units for type projects witlh shorterc durations and PECDAR i wasrlimptiem e itle thr vocational seconclaiy classrooms and a clirect focus on alleviating hardship. municipalities in the West Bank and workshiops attachiedi to existing general The new project will have a new Gaza. Approximately 123 km of ro(adls secondlary schiools. governaiice structure, giving wider anicl about 110 km of water antci sewage The Plroject will be car-iecl out by the owenershiip to the NGOs through its pipelines have been conIstIucted. An Ministry of Education over a three year expanclecd Supervisory Board. The imnplementation completion report for period (2001-2004), and is expectecd to Supervisory Board, whose members will the Project has been completecl. become effective September 2001. inclucde the five NGO networks, five 0 Community Development Protect repr-eseiitatives of civil society, thiree * Palestinian NGO II Pro/ect. (Total representatives of civil soit,thre (CDP I. (US$10 million fromil the Woricl On*Jn 01 represen1tatives of thae Welfare Association Bn. hscmuiyifatutr bucdget US$ 15 million) On2Jue200 Consortium, andI, as observers, the Bank.) Ihis cogrmunity infraSstiCtire the Board of the Woricl Banik approved c inistries of Planning (MOPIC) and of 1997,iandoa ofram was staoter 25 an US$ 8 million grant for financinig a NGO Affairs will have the ultimate infrastutresof poune 2000c ovee 250 seconcl phase of the Palestinian NGO authority to approve grants to NGOs, it co ete. Thicroprojects have been project. The new project builds on thie will play a key role in defininga f completed. The Project hofs bee first phase andc is aimed at strenigdieniing . . . t.e successful in attracting co-financing of the capacity of NGOs to deliver intertior,nd for sping therse t nearly US$13 million. The Canadian ancl sustainable services to the poor aI s nd . i wl oversee The World Bank-financed components have marginalizecl, wlle supporting the overall Wmle ment ciation of th npojt. The. been completecl andc the Project has been professionaland strategic developimient of Welfare Association.. C . closecl. The OP'EC-funcled projects are consisting of the Welfare Association, as the Palestinian NGO sector. Moving away I expectecl to be closed by the endl of the from beinig a source of funclinig for a large the ad .rties Aid Fudtionc ill calendar year. number of NGO projects, the new l'roject i lieiritte poject throug the will place increased emphasis on impact existing structure of the Project Closed Multi-Donor Fund Management Organization (the PIvO). Administration being suppoltecl. It is, therefore, clesignecl The project is expectec to start its to fundl a fewer number of projects in a .ctivities in October of this year. on Aolst 1,n0. The Holst Fas ncl closeci selectecd number of priority sectors/ on August 31 2001 after seven years of regions. The l'roject will have foul operation. Twenty seven dlonors comilponients: World Bank Completed Projects inclucding the World Bank contributed .le Partnership GasUS$ 291 million to the Fundc. About US$ Tflie Partnership Grants Programlthat will * Emnergenicy Reehabilitation ProJject 213 million was usecd to finance the award grants to consortia of NGOs (IRPI). (US$30 million from the World creation and operation of Palestinian consistinig of strong "leadc NGOs ancl Bank ancl US$63.5 million in co-financing institutions - namely, the Mlinistries of smaller NGOs whio in partnership will by Saucli Arabia, Denmark, Switzerland, Health and Education. About US$64 implement sub-projects that are imiter- anclKuwait) TheProject,implementecl million has gone towardIs funcling link ecl by a common objective, with a by PECDAI, financecl a total of 140 Employment Generation Progranis stionig component of capacity building infrastructure projects, built 418 targeting areas severely affecteP by ancl networking. classrooms, paved 260 km of roads in bordler closuires and the current cities ancd villages, constructed sociopolitical crisis. As ofAugust 31, over Developmilent Grants Progr-am that will approximately 410 km of water supply 1100 labor intensive microprojects have award grants to NGOs or projects that halve pipelines, 80 km of sewer lines and storm been impleriented and its estimatedc that demonstrated success (luring PNGO 1. water lines, and five water reservoirs. oven illion andays eimatelt over 3 million labor days of employment Sector Support Program that will work * Second Emergency Rehabilitation has been generated. A final report is with existing networks to promote Project (ERP 11). (US$20 million from being preparecl and will be sent to all strategic thinking on the role of the the Worldc Bank andl US$3.5 million in the Holst Fund donors. sector, sector learning andc informiation- co-financing by the Italian Government.) .zVfwe,ber 2001 18 Suspended Project. GWSSP. The development objectives of agricultural components; (c) technical this project are: (a) to clevelop a assistance to local governmenit Ulnits in InstitDP tioaT l Development Project sustainable institutional structure of the integratecl development planniniig; and on hold pending coipletion of water and wastewater sector in Gaza (d) introcluctioni of informationi CliSCLSSionS on the Public Management by SuppOrtilng the functional technology in communiities thirougi Review and Comiipr-ehienlsi've establishment of a Coastal Miunicipalities provision of community centers withi Devielopwiei-it Francl ork witlp te I Water Utility (CMWU) under the hardware and software facilities. Project Palestinian Authority. When the crisis oiwnership of the local goverinimlenits appraisal started in August 2001. eruptecl in West Bank ancl Gaza in representing those COmmunities, as well U Second Health Svste,ns Development September 2000, the Country as by enhacig Pan deepening the Prject (HSDP II. (US$18 million credit Management Unit cletermineci that it invlementvof the oprvatesectorthrough form the World Bank; total project cost WOtildnot be appropriate to begin a competitively bid operating contract, US$52 million.) The Project objectives and strenigthiening the regulatory ancd are to improve the quality, access and l)rep~Iratic~n of the project, given the institutional capacity of the Plalestinian cost-effectiveniess of essential secondary Uniprenictat.Tue nature of the local Water Authiority (PWA); anld (b) to and tertiary care healthi seivices for the envirorillient h dLS, a thecision was mfre continue improving the water ancl population resicding in northiern Gaza andc san11itation services by rehabilitation, northemWestBankregions ThelProject the Bank's project pipeline andl to Walit cmoet r upgrading and expansion of the existing components are: unltil sucIh time as prioject preparation can systems and facilities. Project preparation C.omponent 1: Replacement and recommence, hais been clelayecd because of the Upgrading of Twwo Hospital Systemils (US$ dleterior-atinig poltical situation. The 48 imiillioni) World Bank Projects Under reqUeSt for pre-qualification for Sub-Comnponient 1.1 (US$23 million): This Preparation prospective international operators was component wil finance the preparation ipleted.~ ~ ~ ~ ~ omonn Four operatorths/jointati U Financial Institutional Development coiOll1etc I Four operators/joint of a regional hospital rationalization plan, Protecl (PDP). (US$7 million from the ventures were pre-ltialified. Like the and hospital master plans for the four Woricl Bank.) This Plroject aims to assist GWSSP, this IProject is part of a larger MIOH hospitals in Gaza City. Ihe plans with the clevelopment of the legal, parallel capitil program to improve water will provicle a long-terimi strategy f'or institutional, andc regulatoiy framework and sanitation seivices in Gaza. The upgracling and rationalizing the public for more efficient financial Project inlclUdes substantial investments hospital system in Gaza. In addition, the interimiecliation. The Project seeks to in the establishment of a buIlk water componelit will support the preparation expand the pool of assets that can be supply netwvork connecting thie various of a cletailecd medical brief and the clesign used as collateral, thereby improving m..uniicipatlities in Gaza, in the sewerage and construction of a meclical building access to creclit for small- and mecliumil- nietwork, anid in wastewater treatment whicih will replace the existing size businesses. It wouldl also support pzlants. These inivestmeintes, totaling about substaniclarcl Lung and Oncology 13uilcling, measuLres to moclerize ancd expand land US$340 imiillioni for 2000-2005, will be Dialysis Unit and Mecdical Building at Shifa suivey and registration, particularly in finiancccl by soft loans ancl grants from Hospital in Gaza City. lhe new medical central urban areas where property EIB, USAID, and IhFW. bUilding wil be accomuiiociateci within Ltie values are high. Banks operating in WBG U The Integrated Community existing hospital site. and the l'MlA have pledged nearly US$1.5 Development Project. (US$10 million Sub-Component 1.2 (US$25 million): 11is million in equity in the Banking Sector from the World Bank and co-financing component will finance the preparation Ser-vices Coimpany to provide electronic b tircoos.TeoealPoet cmoetwl iac h rprto banking services. Negotiations anr y other donors). The overall Project of a regional hospital rationalization plan prsentationof the project to the World objective is to implement an integrated for tihe northiern West Bank region peseaton of e ect e ori community development project in poor covering the districts of Nablus, Tulkarem, Bank's Boar of Executive Directors is i and marginalized areas of the West Bank Jenin and Qalqilya. In addition, a hospital stalled waiting for a return to peaceful and Gaza. This objective would be master plan, medical brief ancl detailed pursued through identificationi of target lesign and construction of a new Watani * ProposedGaza WaterandSanitation aireas, and the development and Hospital (internal medicine, pecliatrics, Services Project (GWSSP II). (US$25 implementation of a multi-sectoral oncology, and dialysis) to replace the million from the World Bank). The program whiicih would include tecinical substandard Watani HospiLal in Nablus. project is a follow-up to thie ongoing assistance. The Project will include the A new site will be selected and evaluatedl following proposecl components: (a) for the new hospital, since the culr-ent communiity infrastrUcture upgrading; (Ib) hospital is located on a site whiichi has nlo reitUiral resouLces management, iltCiClilng .November 200( 19 roo1m for ftirther expansion. and Housing Corporation (CMHC) is the September 2000, some 34 firms 11adi technical partner for the PMHC and leased space at the GIF, filling all space Compiilionent 2: Capacity Builing(U$ continues to provicle PMHC with macde available uncler Phase 1 of these, 4 million) tecinical assistance anci capacity building about 30 firms were operating, and 'I'his component will build upon the support. The borrower has also around 1,200 people were employedl at experience of the first Health System requestecl that a portion of the Bank loan the GIE. The number of firms operating, Development Plroject tc) extencl the be applied to the Housing Assistance and the number of people clevelopimienit of an integratecl information Fulid whiichi has been clesignecd to working at the GIE has fluctuated and management systems to improve the provide targetecd assistance to low- and considerably based on evolutioll in the procluctivity anci quality of health care moclerate-income househiolds for the closureand security situations since services in the targeted liospitals. purchase of a primary residence. October 2000. More infonnation on fininis lRestructuLilng of the Project to operating at the GIE can1 be found at Sub-Component 2.1oul Imrovtion Hospital accommodate this request has been on 'www.piedco.coni'. Mangeent hrouh Infrmaton Sstem holdl for mole thanl one year dlue to the and Quality Improvemenit Programris (US$2 lcurren tuatioa t U Microenterprise Prolect. (US$5 million), million from the Worlcl Bank; US$7.5 E- Gazca Irndustrid PEstate (GIlE). [US$10 million each from the IFC ancl the Sub-Cormponent 2.2 Strengdtening Hospital millioni from the World Bank for off-site participating banks; US$3 million from Insurance Acdlrrnistration (US$1 million) infrastiucture and inistitutional the Netherlanicis). The Project has Subl-Componient 2.3 Project clevelopment, US$9 millioni in equity initiatec a program to finance ManagemetSIpolleI-t 2.3$1 1 PrliBiolect (US$1rnillion) ancl loanis (US$8 million), icrtiatel a the WBG to fiouli te MaLnalgemlenit Support (US$1 mlillion), iand up to US$7 million in syncdicated microenterprises in the WBG through th The project will be implemented by the loanis from IFC to the developer/ banking system in order to: (a) promote Miniistry of Health. Fxpectecl Appraisal operator. FIB and USAID parallel employmenit through private sectol Date is December 2001. financing, and the P'A long-term lease of development; (b) achieve commercial the lancl, amnount to a further US$65.5 viability ancl sustainrability for rlmillion.] The GIE, on a 50 hectare site microenterprise lendilig; ancd (c) build World Bank and [FC Joint Projects at Al-Mlunltarl in the northeast of Gaza ca pacity in both the participating banks E Housingflro/ect. US$25millioncreclit (adjacent to the Israeli border), is the first ancl the microenterprises by provicdiiig from the Wlorld 3anik, up to US$4 million ligely export-orientecd inclustrial estate technical assistance. As of September in eduity from FC.") T'he largest established to generate sustainable l emiploymilenit ancl stimulate industrial 30 2001 over 1,106 projects for component of this Project supportecl the development in Gaza. The Project is approximamtely US$12.4 million were creation anicl initial operations of the expectecl to attract foreign and local approvecl, of whiichi disbursements of Palestine Mortgage andc Housing investmiient, anci to facilitate jointventures approximately US$11.8 million have Corporation (PMHC) which was between Palestinians aic othiers. The GIE been made to 1,031 projects. The clesignecl to facilitate the flow of private is managed and operated by Palestine disbursed loans were estimated to have capital into the housing sector in WBG. Industrial Estate Development and created over 1,400 new full- and part- Thle WolId 1lBank loan was cleclared Maniagement Company (PIEDCO), z' time jobs. Thle resicdent advisors, effective in Marchl 1998 after which, private sector company. Regulatory financedundertieDutchTrust Fund for oversight, as well as offsite infrastructure, private investors, includcling IFC, decidecl is provided by the Palestinian Inidustrial technical assistance to the three to provicle equity to IlMIHC. Estate ancl Free Zone Authority (PIEFZA). participating banks, were forcecl to PIMHC commiieniced operations in The GIE is being developed in three depart about three monthis early in September 2000 and has accumulatec a phases; I'hase 11 construction was October 2000, due to the prevailing unclerway by September 2000, but due circunmstances. Since the crisis began in moclest portfolio over the past year. to the crisis WBG in late September 2000, the Althiougi, tihe presenit situation has situation construction ceased, except for pipeline for new lending hias declinedl significantly slowed clown PMHC's finishing work on structures that were sharply, and focus has shifted to oper-ations both affiliates, the Liquidlity linear completion. PIEDCO management managing the cuiTent portfolio which has Facility (LF) providing long-tenn funds has decideci to postpone further witnessecd an increase in arrears. for lending by bainks and other primai-y fnortglgen bybnkers inWBG and other e dclevelopment until the political ancd mortgage ledrseconomic situation improves. Potential Mortgage Insurance Fund (MIF) investors have also become scarce in proviclinig partial risk coverage for receiit iiionths clue to the general prilil;lly ~ ~ ~ reen monthsr clue toe thee genra primary lendclers have been able to situation uncler whiicih closure has at comiimenice operations. Canada Mortgage times been applied to the GIE. I'rior tc) .-Vtoveniber 2001 20 noticeably, and most WBG companies are facimg licquiclity and severc Disbursemeris Utder WoiYd Bank Projects (In US $ Million) - As of Septenmber 30, 2001 operational diffiCutltieS dLUe to the Current AllocateC Amou nts Disbursed Total internal border closure. IProjects TFGWB Joint TFGV1B Joint Disbursed EHR1' 20.00 29.10 20.00 20.27 40.27 Mainstream Projects MIDP 40.00 5.41 35.21 3.53 38.74 Gaza 25.00 24.80 24.80 U Arab Palestine Ino)esttnent lBank. WVater/San. The Arab I'alestine Investment Bank Microent. 5.00 2.55 2.55 (Al'IB) was established in 1996 by Arab Bank, DEG, Enterprise Investment Housing 25.00 0.99 0.99 Company and IFC. As Of JUly 31, 2001 .egal 5.50 15.00 2.27 2.27 APIB approved 27 loan.s worth US$12.6 I'EPP 3.00 0.32 1.24 0.32 1.56 million, andc hlCad an outstanding portfolio NGO 10.00 4.60 10.00 4.24 14.24 of US$9.1 millioni. Due to thie ongoing GIE 10.0( 3.49 3.49 crisis, the pipeline for newv lenclinig has B3eth. 2000 25.00 3.61 22.03 2.76 24.79 significantly decreased, andc focus has CDP 11 8.00 6.13 6.13 shifted to managing the existing portfolio. SAWSIP 21.00 6.91 6.91 ESIMP 15.00 3.89 3.89 U Peace Technology Fund. The Peace Health 7.90 0.80 Technology Fund was set up witil a Health 7.90 0 0.6 committecl capital of US$63.2 millioni to Soicl \Ie 7.50 5.000.65provide equity capital for procluctive Solid Waste 9.50 1.10 investments in the WBG. Pr ior to ERI' 12.00 September 2000, PTF investeC US$11.0 EAI' 7.00 _ _million in three projects, but becaluse NGO 11 8.00 of the ongoing crisis all pipeline Completed Projects investimients have been put on holl. ERI' 1 30.00 71.24 30.00 63.48 93.48 MIGA Iund 10.00 10.00 10.00 1 Palestine Tourism Ipioestment ERI' 11 20.00 3.57 20.00 3.53 23.53 Company Ltd. (PTIC). IThe 250-keys CD1' I 10.00 2.81 10.00 2.73 12.73 Bedilehem Intercontinental Hotel Piroject, CDII I 10.00 2.81 10.00 2.73 12.73 ~~~~~with an estimatedl project cost of U5$52 Total 334.40 140.65 212.05 100.86 312.90 Multi-Donor Trust Funds . million, became fully operational in Multi-Donor Total F"nds September 2000. It was the f irst Donor Total international stanclard hotel in the West Allocation Disbursed Bank. IFC invested US$1.35 millioni in rhe Holst lI nd 285.28 285.22 equity and US$8 million in long-term TATF 22.77 22.98 loans. EIB providecd about EURO12 Peace Facility 3.17 imillioni in a parallel loan. Botd IFC and Total 311.22 308.19 ElB loans have been fully dlisbursedl. U.S S r iltion (?/tl hSawdifiindvJr the Legal Developnent Pm/redjct arn to dale unallocated. Because of the ongoing cr-isis in the 7hesejfrquw (olnoit icltie parallel acd IKFCinancing. WBG, tourism was one of the hardest hit sectors, ancl the complex was forcecd to cease all openrtions in late March 2001. The complex remains closed. IFC Projects supported projects in the US$0.25-5 millioni range, seven projects were Extended Reach Projects IFC Portfolio approved for US$7.42 million, out of whichi US$4.47 million has been l Arab Concrete Procts Company. InclIclilng the joint-projects above, disbursedl. The Extenclecl Reach This Project enablecd Aral) Conicr-ete tLicner the Mainstrearm Plrogrami, eight Initiative was tliscontinuecl in 2000. Ilroclucts Company to utilize tiully its projects worth US$75.78 million have All IFC financed projects have been procluction capacity of ready-mix been applroved to date. Under the affected by the onigoinig political crisis, conicrete, aLic expand its distribUtion Extended RZcach Initiative, which Most blsiness activity has been reduced capacity. IFC proviclecd a long-term :lomn Anovember 2001 *21 of US$0.8 million out of a total project rFC Technical Assistance BANK GROUP NEWS cost of US$2.6 millionl. Due to the crisis IFC's technical assistance efforts were and mobility problems of labor and raw aimed at supporting the Palestinian U Health and Education Bank sigifiicrilt drop in operaitional levels, Authority's efforts to further broaden Mission to West Bank and Gaza signif3ceaint clim in operational level, t ancl deepen the Palestinian financial (WBG): August 3-18, 2001. completcertaindtill,es it 1-ias coine to a sector. IFC has also worked closely with the Palestinian Authority and tie private The mission, composed of staff fiom O Jericho MoteLs Company. Developecl sector to encourage the emergence of Headquarter and WBG CouLitry Office, on 31,000 m2 of lancl, theJericho Resort new instruments ancl players in the had the following objectives: (a) to Village consists of a 60-room hotel, 48 financial sector ancl capital markets review implementation progress of the buntgalows, and recreational facilities. At through the development of framework Health System lDevelopment Project a total cost of US$8.1 million, IFC provided laws and institutions. IFC was involved and Education & Health Rehlihilitation a 10.5-year US$1.17 million loan and the witlh the preparation of draft laws for Project; (b) to revise the scope and financing plan includecl long-term loans lnsurance, Securities, Capital Markets design of the Second Health System from two local banks and one other AutIlority, Mutual Funcis, Mortgage, Tax Development Project based on the latest international leininig institutioni. The andI Competition. situation; (c) to assist MOH in complex opened for commercial conducting policy forum workshops to operations in late 1998. However, due to prepare a Comprehensive Palestinian the ongoing crisis, the Project was foiceci Strategy for Physical Rehabilitationi and to cease operations in early October 2000. Mental Health and; (d) to identify 'Thie complex remrains closed. components for the proposedl Emergency Support to Social Services M AI-A amn Printing Press. This Progr-amil to support the urgenit neecds Project assisted Al-Ayyam, onie of the of the health care providers in WBG. largest private sector companies in the WBG, to upgrade its priniting line, e Community Development and refinance its short-terimi debt, and Environmental projects mission to perform construction improvements. WBG: August 6-31, 2001. IFC providecd a loan of US$1.8 millioni, The team, conmposed of staff from wvhich was fully disbursed. Al Ayam's Headquarter and WVBG CountiLy Office, commercial printing and aclvertising undertook a supervisioni and pre- activities have been significantly appraisal mission. affectecl by the ongoinig crisis. El Ar-ab Pales~~tiniiantStoraigeCo mpinv. 1) Solid Waste and Environmental Tlhe Plroject consisteci of establishing'a Management Project) in jenin and Toubas Govemiorattes. colC storage Facility in Gaza witlh a Tunde Gofititcndtss capacity to store about 5,000 tons of UnderCliffiCLltsociopoliticA C<11ditiOlIS, perishable food proclucts. The storage the project still continues to shiow imietliod inIcIlIclecl both freezing, as well progress. Three uncontrollecI dumpsites Is, clitiliiig tO preserve the products for were closed while three other are being long periods of time. The Project also prepared in order to absorb the waste involvecd tiading in fruits and vegetables, for the coming three years unltil the mainly for resale in the off-season. IFC main landfill is ready. provicled a loan of US$0.2 million out 2) Supervision of the Community of a total project cost of US$5.9 million. Development Project (H0. Thle Project started operations in September 1999. However, the border The mission reviewed the progress of closures in Gaza, and the ongoing crisis, the project andl despite the currenlt have significantly reduced the Project's crisis, the project Was going well anidn volume of operations, anIc in some of benefittothePalestinianpopulation instances, operations were brouglht to 3) Preparation for the Integrated a complete stol). Community Development Project. ,Vn'eniber 2(X01 22 The pre-appraisal mission initiated Staff News B The World Bank Annual Report preparatory assessments that focus on 2001 five areas: community participation, Economist Claus Astrup has left the Free download: institutional strenigthlening, agricultural World Bank Office in the West Bank institutional stenvironmenint assessntul and Gaza. Mr. Astrup will nevertheless "lwww.worldbank.org/annualreport/" initelvenitionis, enivironiment assessment cniLet otiuet h ol ancl Information and Communication continue to contribute to the World Volume I : Year in Review Technology needs asse.ssments. The Bank's work in the West Bank and Gaza projectis ected to be presented to from the Bank's headquarters in Volume 2 : Financial Statemenits ancd the Board in January 2002. Washington. He can be reached by Appendixex phone at + 001 202 458 4652 or by email IN Supervision Mission on the at CASTRUP@worldbank.org. In Fiscsil Year 2001 the Woconl Brik Electric Sector Investment and Management Project: August 29- New Batnk Publications fight poverty. Major priorities incluclecl: September 6, 2001. Helping the poorest countries prepare The mission reviewedl the overall * World Development Report poverty recluction strategies, aclvancing progress of die Project Implementation 2002: Building Institutions for Markets their eligibility for significant debt relief; Plan, inclucling physical implementation, undertakes the complex issue of the Heightened collaboration Witi globa procurement, disbursements, the basic institutions needed for markets to Hegtned clo rainwtheglobal Palestinian Energy Authority technical function properly. This year's World development goals; assistance component, as well as the Development Report goes beyond a progress to launch the new distribution simple examination of inistitutional New efforts in the fight against HIV/ companies, Southern Electric Company structure and explores the functions of AIDS in particular; anicl Hebron ElectL-ic Power Company. institutions. Recognizing that one size cloes not fit all, the report asks what clo Creation of a new Strategic Framilework, E Water and Wastewater Sector all institutions which support markets clo? laying out the guiding principles for Bank Working Group Meeting. assistance at the country and global levels Despite the current emergency IInstitutions channel information, define for the next three years. -. andl enforce property rights, and conditions, the water issue remains r t Linder focus as donors are still increase or prevent competition. World Bank Technical Papers: comIllitteCl to SUppOrt such an Understanding tie functions that current U 424: Farm Debt in the CIS : A Multi- institutionis ancl their proposed Country Study of the Major Causes and imbortant 30resetorOnOctavesfro PA, 2001 replaceiments would provide is the first Proposed Solutions. step. Once you have identifiecl the institutiols, clonors and other .. . . a 494: From Tralsitioii to FU stakeholclers convenecl at the Unitecl missing nstitutional functons you can Accession : The Bulgarian Labor Market Nations Speciall Coordinator's office to tthen buld effective institutions by cluring the 1990s. Nations~ ~ ~ ~ ~ ~~flown Specie Coorinaor officeplto attencl the Water ancl Wastewater Sector following some basic principles Working Group Meeting. During the A clesign that complements institutions, * 495: Managing Catastrophic Disaster meeting, delegates were updated on humran capabilities, and available Risks Using Alternative Risk Financinig issues related to the development technologies; innovations that identify ancl Poolecd Insurance Structures. environment, the National Water Plan institutional successes, ancl weaknesses, * 509: Kosovo : Econiomic and Social and the Palestinian Water Authority's by experimenting with, and recognizing Reforms for Peace and Reconciliation (PWA) funding coordination program. local conditions, and differences, ranging Such program will help create a new from social norms, to geography; a V 510: The TB and HIV/AIDS clynamic tool for coordination between connection of communities of market Epidemics in the Russian Federation clonors and the PWA. It wdl also help players, by opening information flows, U 513: The Current Regulatory integrate the efforts of the PWA in the and trade; and, the promotion of Framework Governing Businless in planning process according to the competition among jurisdictions, finns Bilagaria. sectoral needs ancl the visions and and indivicluals. interests of cdonors. Furthers in U 514: European Integration and meetinig addlressed in particular the The careful analyses in the report links Income Convergence : Lessons for project management obstacles tinder theoiy witi pertinent evidence. Building Central and Eastem European CoLitties. Institutions for Markets contains selected World Development Indicators t iot'eniber 2001 231 Contact Numbers West Bank Office Numbers: Information Technology Switchboard 02 - 2366500 Abdallah Nasr Fax 02 - 2366543 02 - 2366527 Count,y Director Mission Coordination Nigel Roberts Fifi Antar 02 - 2366506 02 - 2366507 Extemal Affairs & Aid Coordination Accounting Ma'moon Sbeih Samira Hemsi 02 - 2366511 02 - 2366503 Economic Department Public Information Center Sebastien Dessus Mary Koussa 02 - 2366549 02 - 2366529 Infrastructure Development Gaza Office; Gaza Office Coordinator Majed El-Bayaa Husam Abu Dagga 08 - 2824746 Administrator West Bank Office Samira Hillis Ibrahim Dajani Tel. 08-2823422, 08-2824746 Fax. 08-2824296 02- 2366553 Projects Disbursments International Finance Corporation Adel Odeh 02-2366517 02 - 2366515 Country Coordinator Tamara Lansky West Batizk arol Gitzn Update editormi t e,t7a Ma'moon Sbeih - Editor Mary Koussa Sebastien Dessus Claus Astiup Raiii Khouiy With special thanks to Mary Saba For further information contact: Ma'moon Sbeilh Tel. (972) 2 2366511 email: msbeih@worldbank.org 7Ye 'West Bank and Gaza Update' can also bejbund on the Internet at: http.//wwuv. worldbank. org ANowendier 20011 24