Palestinian Economy: Prospects for its Recovery – World Bank report to the Ad Hoc Liaison Cttee

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THE PALESTINIAN ECONOMY

AND THE PROSPECTS FOR ITS RECOVERY

Economic Monitoring Report to the Ad Hoc Liaison Committee

Number 1, December 2005

Foreword – The Context for this Report

The Rationale for Periodic Assessments

o The World Bank presented to the December 8, 2004 meeting of the Ad Hoc Liaison Committee (AHLC) a report (Stagnation or Revival? Israeli Disengagement and Palestinian Economic Prospects) which argued that rapid Palestinian economic revival is essential to sustaining the momentum of a renewed peace process, but that it will only come about if there is

 A drastic improvement in the security environment;

 A dismantling of the various post-September 28, 2000 restrictions on the movement of Palestinian people and goods; and

 Dynamic progress on Palestinian governance reform and institution-building.

o If these preconditions for economic revival emerge, it was argued, a major increase in donor assistance levels could have a transformational effect. In furtherance of this premise the Bank identified an agenda of key measures “which, if implemented, will lay the basis for the economic revival of the West Bank and Gaza” (see Annex 3).  These measures are consistent with the obligations of the Government of Israel and the Palestinian Authority specified under Phase I of the Roadmap. As a corollary to this virtuous sequence, the Bank noted that a quantum increase in donor financing would be hard to justify if meaningful progress in security, closure and reform policy was not made—both because the impact of these resources would be seriously muted, and because the private sector response needed to sustain the impact of the additional spending would not emerge.

o The Bank’s report was endorsed by the December 2004 AHLC Meeting. In its Summary, the AHLC Chair requested the Bank to work with the parties and donors to translate the report’s recommendations into a set of actionable measures, and to monitor progress towards their implementation; this would then help donors form a judgment on the extent to which the preconditions for economic revival are being put in place. At the London Meeting on March 1, 2005 donors and the PA agreed that the first Bank Economic Monitoring Report should be prepared as an input to the next AHLC Meeting.

o Integral to this report is a matrix of Indicators of Economic Revival (Annex 2). These indicators were developed by the Bank with assistance from the European Commission and the United States. They should not be considered a checklist or scorecard, and are not of themselves determinant: they merely help anchor a qualitative analysis of the extent to which the preconditions for robust economic growth are being re-established.

Full report: