Developing the Occupied Territories: an Investment in Peace – Vol. VI – Human resources and social policy – World Bank Report

DEVELOPING THE OCCUPIED TERRITORIES

AN INVESTMENT IN PEACE

Volume VI: Human Resources and Social Policy

The World Bank

Washington, D.C.

September 1993

Copyright (c) 1993

The International Bank for Reconstruction and Development/THE WORLD BANK

1818 H Street, N.W.

Washington, D.C. 20433, U.S.A.

All rights reserved

Manufactured in the United States of America

First printing September 1993

Second printing October 1993

The six-volume series, Developing the Occupied Territories: An Investment in Peace, is published to communicate the results of the Bank's work to the development community with the least possible delay. The typescript of this paper therefore has not been prepared in accordance with the procedures appropriate to formal printed texts, and the World Bank accepts no responsibility for errors.

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ISBN 0-8213-2693-7

ISBN 0-8213-2694-5 (6-vol. set)

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CONTENTS

PREFACE – vii

EXECUTIVE SUMMARY – x

A. Historical Background – x

B. Human Resources – xi

C. Health – xii

D. Education and Training – xv

E. Social Welfare and Relief Programs – xviii

F. Financial Requirements – xx

I. INTRODUCTION AND BACKGROUND – 1

A. Organization of the Report – 3

B. Historical Background – 3

C. The Present Situation – 4

II. OVERVIEW OF THE STOCK OF HUMAN RESOURCES – 5

A. Population Estimates – 5

B. Participation in the Labor Force – 12

C. Unemployment – 12

D. Population Prospects – 15

III. HEALTH CARE – 17

A. Introduction – 17

B. Health Status – 17

C. Health Care Institutions and Finances – 22

D. Uses and Sources of Funds – 25

E. Health Care Facilities and Staff – 27

F. Special Initiatives – 30

G. Sector Problems – 31

H. Recommendations – 33

IV. EDUCATION AND TRAINING – 34

A. Introduction – 34

B. The Institutions of the Education Sector – 34

C. Education Finance – 37

D. Education Resources – 37

E. Education Processes – 40

F. Sector Problems – 42

G. Recommendations – 44

V. SOCIAL WELFARE AND RELIEF PROGRAMS – 46

A. Introduction – 46

B. Institutions and Programs – 46

C. Deficiencies in the Social Insurance System – 49

D. Recommendations – 49

VI. CONCLUSIONS AND RECOMMENDATIONS – 51

REFERENCES – 53

PREFACE

1. At the request of the sponsors and organizers of the Middle East Peace Talks, the World Bank has been supporting the work of the Multilateral Working Group on Economic Development and Regional Cooperation by providing analyses of the key economic issues and developmental challenges facing the Middle East region. At its second meeting in Paris in October 1992, the Working Group requested the Bank to expand its contribution to include, inter alia, an assessment of the development needs and prospects of the economies of the West Bank and the Gaza Strip (commonly referred to as the Occupied Territories). In response to this request, a Bank mission visited the Occupied Territories during the period January 21-February 24, 1993. The mission comprised five teams focusing on the following areas: Private Sector Development, Agriculture, Human Resources, Infrastructure and Macroeconomics. Each team was in the field for about two weeks. The mission was led by Prem Garg who, together with Samir El-Khouri, stayed in the field throughout to provide continuity and guidance to the five teams. The staffing of the five teams was as follows:

Macroeconomics: 

Michael Walton (Team Leader)

Samir El-Khouri (Fiscal Analyst)

Ishac Diwan (Macroeconomist)

Private Sector Development: 

Albert Martinez (Team Leader)

Robert Mertz (Financial Sector Specialist)

Joseph Saba (Legal Specialist)

Dileep Hurry 1/ (Regulatory Environment and Tourism Specialist)

Agriculture: 

Gert van Santen (Team Leader)

Ulrich Kuffner (Water Resource Engineer)

Merle Jensen 1/ (Horticulture Specialist)

Infrastructure:

Alastair McKechnie (Team Leader)

Ulrich Kuffner (Water Resource Engineer)

Lawrence Hannah (Urban Specialist)

Nail Cengiz Yucel (Transport Sector Specialist)

Ted Moore 1/ (Power Engineer)

Human Resources: 

Fredrick Golladay (Team Leader)

Maureen Field 1/ (Education Specialist)

Radwan Ali Shaban 1/ (Human Resource Economist)

2. Mission members travelled extensively in the West Bank and Gaza, visiting municipalities, farms, businesses, industries, academic institutions, refugee camps and NGO-run facilities. Mission members also travelled in Israel, as needed, and paid several visits to Amman. The representatives of the key bilateral and multilateral donors in Jerusalem, Tel Aviv and Amman responsible for the Occupied Territories were kept briefed about the work of the mission. Close contact was also maintained with the field staff of UN agencies.

3. The Bank mission was received warmly by all sides, who took keen interest in the work of the mission and provided superb logistical and counterpart support for the field work. The main counterparts on the Israeli side were the Bank of Israel and the Civil Administration in charge of the Occupied Territories. On the Palestinian side, the main counterparts were the Technical Committees of the Palestinian Team to the Peace Conference, consisting mainly of Palestinians who are members of the bilateral or multilateral peace teams. The Ministry of Planning was the main contact on the Jordanian side. The Bank would like to thank all concerned parties, especially the Israeli, Jordanian and Palestinian hosts, for the excellent support and cooperation that the Bank mission received for this field work.

4. This report is based on the findings of the above mission. The report is in six volumes:

– Volume I provides a summary overview of the key findings and recommendations of the study. After commenting selectively on the current socioeconomic situation in the OT and its evolution over time, it discusses prospects for sustainable development in the future and outlines the priority agenda of policies and programs needed to promote such development.

– Volume II explores the strategic choices at the macro level that will be faced by the OT in the future and the implications for economic relations between the OT and the rest of the region. The study looks at the current situation and its evolution over the past 25 years. The study then examines several policy choices for the future affecting the structure of development in the OT. Finally, it outlines some illustrative scenarios for the future, focussing on the consequences of current developments in the region.

– Volume III reviews the performance of the private sector (including, in particular, the industry and tourism sectors) in the OT. The study assesses the environment in which the private sector operates and its future prospects and makes recommendations for accelerating private sector development in the future.

– Volume IV reviews the evolution and structure of the agricultural sector in the OT; analyzes its current characteristics; assesses OT competitiveness in the immediate and longer term; outlines the main policy options and their implications; and provides a preliminary assessment of sectoral financial and technical assistance (TA) needs.

– Volume V assesses the current situation in the infrastructure sectors (electricity, water supply and sanitation, transport, housing and solid waste services) in the OT; identifies the major issues confronting these sectors; and outlines priorities for TA and investment needs. As local authorities are major institutions in the delivery of public services in these sectors, the study also includes a review of their current situation and makes recommendations for improving the functioning of municipalities.

– Volume VI reviews the current status as regards human resource development; analyzes options for enhancing individual welfare and labor productivity in the OT; and outlines investment and TA priorities for strengthening existing programs and for laying the foundation for later reforms.

5. It is worth highlighting two limitations of this study right at the outset. First, a number of key issues bearing upon the future development of the OT (e.g., the allocation of land and water resources, the disposition of Israeli settlements in the OT, the future status of expatriate Palestinians, the territorial issues surrounding Jerusalem and, most importantly, the nature of the proposed "self-governing" arrangements for the OT) are the subject of ongoing bilateral negotiations between the Israelis and the Palestinians. The resolution of these issues is likely to be based primarily on political and security considerations. As the Bank mission to the OT was a technical mission, with neither the mandate nor the expertise to deal with political or security aspects, this study does not take any positions on issues that are on the agenda for bilateraln egotiations. The focus instead is on policies, institutions and investments – where optimal choices are largely invariant to the eventual political arrangements to be agreed at the bilateral negotiations. Thus, for example, while analysing, where appropriate, the economic links between East Jerusalem and the West Bank and Gaza, the report avoids making any judgements regarding the future status of East Jerusalem.

6. Second, the study has had to cope with very serious data gaps and inconsistencies. Much of the data on the OT are, directly or indirectly, from official Israeli sources. There are, however, serious gaps in the OT data base. A population census has not been carried out in the OT for more than 25 years. As a result, most of the demographic and labor force data are based on extrapolations and on sample surveys, the reliability of which are undermined by problems of nonresponse, especially since the onset of the Intifada (popular uprising) in 1987. Data on East Jerusalem and on Israeli settlements in the OT, both of which are treated as part of Israel by the official Israeli sources, are mostly unavailable. Data available on trade between the OT and Israel and on the profitability and competitiveness of the agricultural, industrial and service enterprises are also very limited. Data on the OT from Palestinian and Israeli nonofficial sources are sparse and selective. Also, Palestinian data, when they exist, are often based on ad hoc surveys that do not lend themselves easily to cross-sectional or longitudinal comparisons. In many instances, data differ between sources, and, even when the same source is used, there are gaps and apparent inconsistencies. Given these data problems, the report uses estimates that appear most plausible in light of the mission's field observations. In cases where the data differences among various sources are particularly sharp (e.g., population, unemployment and social indicators), the report attempts, where possible, to examine the reasons for these differences and to indicate the implications of alternative estimates for the results of the analysis.

7. In view of the limitations on the mission mandate, the data difficulties and the time and resource constraints, this study can only be considered a beginning. The analysis in the study, especially for the longer term, is necessarily incomplete; as, and when, progress is made in the bilateral negotiations, the study will need to be updated and expanded to take account of the agreements reached. Also, notwithstanding the care exercised in locating and interpreting the data from various sources, the empirical underpinnings of this study leave something to be desired, and, therefore, the conclusions of the study should be treated only as indicative of broad trends and priorities. Further, in-depth studies and project feasibility work will be required before the findings of this report could be used to make operational decisions.

8. An earlier draft of this report was discussed with the Israeli, Jordanian and Palestinian authorities by a Bank mission to the region during July 12-26, 1993. Where appropriate, the report has been revised to incorporate the comments received by the mission during the July discussions.

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1/ Bank consultant.

EXECUTIVE SUMMARY

1. The broad purposes of this report are, first, to help define the options for enhancing individual welfare and labor productivity in the Occupied Territories and, second, to contribute to the development of a strategic plan for pursuing these goals in the future. The report focuses on three sectors: health, education and social welfare. It concludes that the development of a coherent policy framework and the creation of effective public sector institutions are prerequisites for improvements in the contributions of these sectors. The report also suggests investments that should be undertaken over the next decade in order to strengthen existing programs and to lay the foundations for the implementation of sectoral

reforms.

2. The published literature on social conditions and needs in the Occupied Territories is very large, but many of the data are highly controversial. Hence, the empirical basis for assessing policy alternatives is unsatisfactory. Nonetheless, the broad outlines of a sound policy are clear. In the case of health, improving access to basic services should be assigned greater priority than either increasing the supply of hospital services or increasing the technical sophistication of care. In contrast, in the education sector, improvements in fundamental areas, such as curriculum development and teacher training, are needed to enable the system to offer quality instruction and, thus, to expand employability and

productivity. A comprehensive, but simple, system of social protection is needed to replace the patchwork of categorical programs that now serve some, but not all, members of the community. In all three areas, the creation of unified, coherent programs is an urgent priority.

A. Historical Background

3. The weaknesses of programs in the social sectors are due primarily to a pervasive lack of coherence in policies and programs. The variety of systems of health, education and social policy that coexist in the Occupied Territories grows out of a remarkably complex history. Following the war of 1948, and the creation of the state of Israel, the West Bank became a part of Jordan and the Gaza Strip came under the control of Egypt. The health and education policies of the two governing countries were then introduced into the territories by Egypt and Jordan. In 1950, the United Nations Relief and Works Agency for Palestinian Refugees in the Near East (UNRWA) was created by the United Nations in order to provide humanitarian assistance and employment opportunities to displaced Palestinians. UNRWA was also assigned the task of providing social services to refugees. Its education programs were made to follow the outlines of the government education systems, but its health programs were allowed to follow different paths. Israel occupied the Gaza Strip and the West Bank in 1967, but retained the policies and structures that were introduced earlier by Egypt and Jordan. Israel has made only minor modifications to sector policies and institutions since that time. The most important of these reforms has been to replace a policy of free government health services with one in which care was to be financed by a government-sponsored health insurance scheme and user fees. Charitable and profit-seeking institutions quickly emerged to compete with the government service. Small changes have also been made in the operation of government health care institutions. The educational policies and practices that Israel took over in 1967 have been left largely unchanged.

4. Expenditures on health, education and social welfare programs are now controlled by five clusters of institutions, none of which is either responsive, or accountable, to the entire community. Access to their services often depend upon the recipient's status, past or current. About 30 percent of the population of the Gaza Strip and the West Bank benefit from the Israeli Government's health insurance plan, and slightly more than 60 percent of school children in the Occupied Territories attended government schools in 1991. Half of the residents of the Occupied Territories are registered refugees and, thus, entitled to the free primary and secondary education, health care and relief services provided by UNRWA. Residents of the larger towns have access to sophisticated health and education services supplied by charitable organizations. People living in poorly served areas have begun to receive basic health and social services from networks of grass roots voluntary organizations that have expanded very rapidly since 1987. Those who can afford to pay have access to high quality private health and education services.

5. Three primary sources of financial support may be identified for these various activities. In 1991, the Civil Administration spent US$125 million on health and education services in the Occupied Territories, with 90 percent of this total allocated to recurrent expenditures. UNRWA spent a total of US$85 million in order to provide health, education and relief services in 1991. Nongovernmental organizations, both charitable and for-profit, added approximately US$185 million.

B. Human Resources

6. The de facto Palestinian population of the Occupied Territories was 1,769,000 at the end of 1992, according to the Israeli Central Bureau of Statistics (CBS). However, independent research suggests that there may be a downward bias in the CBS estimates of 10-15 percent. This suggests that the resident population may have been as much as 2 million people at the end of 1992. The rate of natural population increase has been rising over the period 1968-91, from a low rate of 2.2 percent in 1968 to 4.1 percent in the West Bank and 5.0 percent in Gaza Strip in 1991. A decline in mortality drove the acceleration of population growth initially, but starting in the mid-1980's, the increase seems to have been due to a rise in birth rates. About half of the population is now less than 15 years of age. The share of the population over 35 years of age has declined continuously from 25 percent in 1967, to 18 percent in 1990.

7. About 308,000 persons – 34 percent of the adult population – are members of the labor force. If age cohort-specific participation rates were to remain unchanged, the labor force participation rate for the male population 15 or older years would increase from 72 percent over the period 1986-1991 to 75

percent in the year 2000; the total number of workers would then be about 470,000.

8. The emigration rate from the Occupied Territories has been quite high since 1967. There was a large wave of politically motivated migration immediately following the Israeli occupation, but high rates of migration have continued since, as well. In 1985, about 40 percent of families in the Occupied Territories had one or more family members residing abroad. It is estimated that currently 3,000,000 to 3,500,000 Palestinians live outside of the Occupied Territories. How many of these might return to the Occupied Territories would depend upon a variety of factors including the agreements reached in bilateral negotiations and the perceptions of expatriate Palestinians concerning future economic opportunities in the Occupied Territories.

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