PROGRESS IN PEACE PROCESS IMPROVING PALESTINIAN ECONOMY DONORS TOLD AT TOKYO MEETING

Press Release
PAL/1871

PROGRESS IN PEACE PROCESS IMPROVING PALESTINIAN ECONOMY DONORS TOLD AT TOKYO MEETING

TOYKO, 14 October (Office of Special Coordinator) -- Recent progress on the peace front is reinforcing improvements in the Palestinian economy, donors were told by the United Nations Special Coordinator for the Middle East Peace Process, Terje-Rod Larsen.

Mr. Larsen's statement was issued prior to the Ad Hoc Liaison Committee meeting in Tokyo today, which is being chaired by the Foreign Ministers of Japan and Norway, and is composed of the Palestinian Authority, Israel, major donors including the United States, European Union, Japan, Norway, Canada, as well as Russia and regional parties such as Egypt, Jordan, Tunisia and Saudi Arabia.

Mr. Larsen declared that, for the first time since early 1996, there was encouraging news in both the political and the economic aspects of the peace process. On the one hand, the Sharm el-Sheikh agreement and its implementation "are allowing people to believe once again that a comprehensive and lasting peace will be achieved". On the other hand, the Palestinian economy is growing at about 4 per cent and employment opportunities are increasing.

Mr. Larsen commented that the Palestinian Authority had been "very successful" in establishing the basic institutions of the public sector, delivering public services and initiating a planning process to identify priorities for development assistance. Today's Liaison Committee agenda also indicated how successful the parties had been in resolving differences, including some related to increasing Palestinian access to external markets. Furthermore, it reflected the responsiveness of donors to changing developments in the peace process and in the Palestinian economy.

Unfortunately, Mr. Larsen continued, the news was far from being all good. "The Palestinian economy remains perched on a weak foundation that is still under construction." The increase in jobs could be attributed to two factors: Israeli demand for Palestinian labour and employment in the public sector. "In the longer run, neither of these trends is a viable long-term engine for economic growth."

What is needed, said Mr. Larsen, is large-scale private investment. To achieve this, there is a need to overcome the political and economic uncertainties, combined with the lack of basic infrastructure and developed governance structures. Bolstering investor confidence was, therefore, a principal goal.

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Mr. Larsen said that the donor community, as represented in the Liaison Committee, was in a position to play a continuing positive role in the future. He proposed that, over the next 12 months, the Liaison Committee should focus its attention on three areas: increasing public investment by both donors and the Palestinian Authority; enhancing Palestinian access to international markets for trade and investment purposes and regional markets for increasing job opportunities; and supporting the Palestinian Authority's efforts to further improve governance structures and public resource management. "Public investment are the bricks, while market access and governance are the mortar -- both are needed to construct the edifice which we all want to see, a strong and sustainable Palestinian economy", he said.

Commenting on the declining level of disbursements (under $250 million for the whole of 1999 to date), Mr. Larsen reminded donors that annual disbursements should be running at $600 million if they were to keep their November 1998 promise to the Palestinian people to provide around $3 billion in aid over the coming five years.

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