Humanitarian update (April 2006) – Can business relieve the suffering? – OCHA report

Since the election of Hamas and the withdrawal of donor funding from the Palestinian Authority (PA), the private sector has emerged as a likely recipient of foreign aid. Along with an increase in humanitarian assistance via the UN and NGOs, businesses and financial institutions have been identified as a possible alternative channel to alleviate humanitarian suffering of the Palestinian people.

This Special Focus discusses whether investing in the private sector could or should fill the current humanitarian void.

Funding the private sector to create jobs and services

In identifying businesses and financial institutions as a possible funding mechanism, a number of donors have expressed confidence in the ability of the private sector to create new jobs to replace those lost by the PA’s funding crisis¹. Several donors are also optimistic that private businesses will bridge the current gap in services previously run by the PA.

However, the capacity of the private sector to replace the PA as a service provider in any meaningful way is extremely limited. Only 12% of schools, 39% of hospitals and 12% of primary health clinics are run privately.² Whether or not it is desirable to rely on the private sector as the major service provider also remains questionable. Nevertheless, the prohibitively high cost of accessing private services puts them beyond the means of a population increasingly short of jobs and in need of financial help. And many of those who previously were able to afford private sector services are now resorting to government-run services, adding to the pressure on resources.

Most Gazan workers who lost employment in Israel have failed to find alternative work in the local economy. Gaza's local private sector – which already provides 56% of all jobs – is too small to absorb new workers. And wages, which are already considered to be low, would fall further still with any increase in labour supply.³

The average daily wage in the oPt private sector has remained constant since 2000 at around NIS66, compared with the average daily income in the public sector which increased from NIS60 to NIS73 between 2000 and 2005.

Full report: