A performance-based strategy
By Christiaan J. Poortman
Haaretz, December 12, 2004
The international donors meeting last week in Oslo to discuss the economic implications of Israel's disengagement plan coincides with the emergence of a new Palestinian leadership and the possibility of renewed dialogue between the Israeli government and the Palestinian Authority.
In our report "Stagnation or Revival? Israeli Disengagement and Palestinian Economic Prospects," the World Bank has analyzed what is needed to revive the devastated Palestinian economy and to lay the basis for a new economic relationship between Israel and the PA.
Economic growth and prosperity do not, of course, guarantee tranquility - but stagnation, unemployment and widespread poverty certainly make the search for peace much more difficult. It is not hard to see that a Palestinian economic revival will benefit Israelis as well as Palestinians.
A key ingredient in any such revival will be a sustained flow of foreign assistance. Important as this is, though, it is not the key factor. During the intifada, donors doubled their annual disbursements to almost $1 billion per year, yet personal incomes contracted by almost 40 percent. The lesson here is that money alone will not do the trick - what is far more important is the right policy environment.
This is true for any part of the world, but here the argument has a particular flavor to it, since the immediate reason for today's Palestinian economic crisis is the system of security-related restrictions that Israel has placed on Palestinian movement. It therefore follows that rolling back these restrictions is necessary if the Palestinian economy is to recover. That said, Israel will only do so in the knowledge that its citizens are properly protected and that reviving the Palestinian economy does not mean endangering Israeli lives.
Over the past summer, the World Bank worked very closely with officials of the Israeli government and the PA to explore ways of rescuing the Palestinian economy. The result was a report that identifies practical ways of dismantling today's closure regime without impairing Israel's security. In preparing it, we were helped by Israel's willingness to consider ways of transforming the border terminals into modern, efficient and secure facilities through which the flow of Palestinian cargo can once again be determined by market demand.
Implementing a program that does away with closures and puts the Palestinian economy back on the road to recovery will be very demanding - for the PA and Israel alike. The PA needs to demonstrate a much greater commitment to preventing violence, as well as pressing forward with democratic renewal and with its programs of financial reform. Israel will need to adopt a more comprehensive approach to dismantling closure: Apart from reorganizing the border terminals, this will mean removing the checkpoints and roadblocks scattered throughout the West Bank and reestablishing a regular flow of people and goods between Gaza and the West Bank.
The Oslo meeting concluded that a major additional funding effort is needed, but this can only be justified if both sides first take these critical steps. The meeting also asked the World Bank to establish measures that the donors can use to assess progress. If sufficient steps are taken, then a fundraising conference will be called next year. To insist on performance before making major new financial commitments is quite a departure in the Israeli-Palestinian context, but the history of donor involvement and the disappointments of the past four years teach us that this is the only sensible way to proceed - and the only way in which we can convince donors to put on the table the additional funds that are needed to help the Palestinian economy recover.
The writer is the World Bank vice president for the Middle East and North Africa.
