UN Seminar on Prospects for Palestinian Economic Development and Middle East Peace Process (Cairo) – Press release

EXPERT PANEL EXAMINES PALESTINIAN DEVELOPMENT ACTIVITIES AND STRATEGIES

Committee Chairman Appeals for Assistance to Bethlehem 2000 Project

(Received from a UN Information Officer.)

CAIRO, 20 June — Expert panelists at the United Nations Seminar on Prospects for Palestinian Economic Development and the Middle East Process this afternoon called attention to problems faced by the Palestinian Authority as it attempts to rejuvenate its economy and plan a development strategy.

In a panel on "Palestinian development objectives and strategies", Director- General of the Palestinian Economic Council for Development and Reconstruction of the Palestinian Authority, Mohammed Shtayyeh, said that the Palestinian infrastructure was destroyed over the past 32 years and Israel had extended its control over it, including water resources, telecommunications and the road system. In rehabilitating the infrastructure, the Palestinian Authority had concentrated on, among other things, unifying its legal base for the West Bank and Gaza, creating jobs for Palestinians who have returned from the Israeli labour market and encouraging the private sector.

The Deputy Director-General for International Relations, Ministry of Economy and Trade of the Palestinian Authority, Saad Al-Khatib, told participants that social security mechanisms must be created for the unemployed and the aged or disadvantaged and a social pension system, an insurance system and other public or private means of addressing poverty was essential to sustained development.

Raja Khalidi, Coordinator, Assistance to the Palestinian People, Division on Globalization and Development Strategies, United Nations Conference on Trade and Development, described a "macroeconomic simulation framework", part of a research project on prospects for sustained development of the Palestinian economy.

Following the panel presentation, the Chairman of the Committee on the Exercise of the Inalienable Rights of the Palestinian People, Ibra Deguene Ka, reported on the Bethlehem 2000 project and called on all Member States to spare no effort to assist the Palestinian Authority in restoring religious and historical sites and upgrading the city's infrastructure.

The Seminar will meet again tomorrow morning at 10 a.m. to hear a panel presentation on "Israeli-Palestinian economic relations during the interim period: expectations and reality".

Panel II

MOHAMMED SHTAYYEH, Director-General of the Palestinian Economic Council for Development and Reconstruction of the Palestinian Authority: Israel has extended its control over the Palestinian infrastructure, including water, and telecommunications. The road system has been redesigned so as to incorporate the West Bank into Israel. It has incorporated a policy of colonialization and Palestinian peasants have found themselves landless and trying to find employment in Israel. The Palestinian economy has been made hostage to Israel. The development plan put together by the Palestine Liberation Organization (PLO) was based on an end to the Israeli occupation with an interim tract and a final status track.

The Palestinian infrastructure was totally destroyed during the last 32 years. Not one new school has been built in that time. The new State will need 415 new schools at a cost of $850,000 each. The roads have deteriorated and need to be rehabilitated. At the same time there is a confrontation between the Palestinian infrastructure and the Jewish settlement infrastructure. The infrastructure that served the settlements is totally at the expense of the Palestinians, particularly with regard to land and water. There are 184 villages in the West Bank and Gaza that have no water and more than 20 per cent of the people do not enjoy a constant electricity supply. Many Palestinians live on less than $2 a day. It became impossible for Palestinians to move between the West Bank and the Gaza Strip. Employment fluctuates on an overnight basis, depending on when the Israelis choose to close the borders.

The Palestinian Authority has concentrated on rehabilitating the infrastructure — particularly in the areas of water, schools and housing. It has also decided to unify the legal base for the West Bank and the Gaza Strip. A third strategy has been to create jobs for Palestinians who have returned from the Israeli labour market. Another important strategy is to narrow the gap between the economy of the West Bank and that of Gaza. Special attention has been focused on encouraging the private sector and on privatization in the sectors where the Government has enjoyed a monopoly. The Authority was working on good governance to create a transparent government. Institution-building was crucial. The question was how to restructure the relationship between the Palestinian and the Israeli economies. Palestinians were 32 years behind the rest of the region. It cannot walk but it must jump to catch up. Economics could not be divorced from politics and the final outcome of the political negotiations was not certain as regards control over water and the geographical continuity between the West Bank and Gaza. Will donor countries continue to support the future Palestinian State? The Palestinian Authority has made mistakes but it has begun to correct those mistakes.

SAAD AL-KHATIB, Deputy Director-General for International Relations, Ministry of Economy and Trade, Palestinian Authority: The Palestinian Authority established the Higher Council for Development Objectives to identify development objectives and to put in place a strategy for development. Lower unemployment rates and rising per capita income as well as the rise in bank deposits and lending are first indicators of an improvement since 1995/1996. However, unemployment, while down recently, remains at twice the level of 1993. The low participation and high dependency rates remain serious problems. The recent gains are primarily from the public sector hiring and increased employment in Israel, both of which are not sustainable.

The incidence of poverty is prevalent. Trade statistics show a continuing deficit. Private sector job creation has improved over the past year but the much-needed private sector response and investment has not yet materialized.

As the Palestinian Authority moves past the years of rehabilitation, its vision is no longer towards the implementation of infrastructure or technical projects but more towards the execution of development programmes. The Palestinian public sector must incorporate basic principles to ensure fiscal stability; provide basic social services, establish social security mechanisms and create an environment fitting for private sector growth.

The economic policy framework presented by the Palestinian Authority has set forth a Palestinian government where finances are under control of several mechanisms including the adoption of a full yearly budget in a timely manner, the integration of the relevant development budgets, consolidation of governmental accounts, transparency in governmental investment, privatization where possible and consolidation of the civil service hiring procedures and wages programme. Another pillar in the development programme is the creation of an efficient system for social services, primarily for education and health. The Palestinian Authority has undertaken many programmes to improve service delivery in this field and more work is to be done. Social security mechanisms must be created for the unemployed and the aged or disadvantaged and a social pension system, insurance system and other public or private means of addressing poverty are essential for sustained development. The creation of an environment for private sector development was another main pillar in the Palestinian economy. The Palestinian Authority has undertaken to formulate the financial laws to meet international standards where applicable. They are either in final draft or undergoing approval by the Palestinian Legislative Council. Issues for private-sector development include the drafting of new laws, the development of private-sector dialogue, which would affect public sector policies, and the creation of alternative trade partners.

RAJA KHALIDI, Coordinator, Assistance to the Palestinian People, Division on Globalization and Development Strategies, United Nations Conference on Trade and Development (UNCTAD): The UNCTAD secretariat has studied the future Palestinian economy and has drawn optimistic conclusions. In 1990, the secretariat began work on a research project on prospects for sustained development of the Palestinian economy. This included the design of a computerized quantitative framework which charted the historical relationship between key macroeconomic aggregates and projected alternative plans for the development of the Palestinian economy over the period 1990-2010. The original version of the quantitative framework proved to be a robust and largely accurate tool for charting broad future trends that the future Palestinian economy could be expected to follow.

A new version of the framework, redesigned as a "macroeconomic simulation framework" has recently been completed. For the macroeconomic simulation framework, the resident population is assumed to grow in line with forecasts projected in the original quantitative framework except for one major development. The quantitative framework assumed that Palestinian expatriate population would begin to return to the Palestinian territory following a five-year interim period. Their incorporation into the macroeconomic simulation framework increases the potential output and labour market gap and thus raises the challenge of productively absorbing them. Three alternative sets of projections are presented in the macroeconomic simulation framework, though all face the same challenge: how to reverse or reduce major gaps while productively absorbing 1 million returnees from 2000 to 2010. One scenario reflects a continuation of current economic trends into the projection period. No effort is undertaken to address structural imbalances, with disastrous long-term social and economic implications. Alternative scenario I focuses on extra investment in export industries and selected import substitution industries to boost savings, investment and growth drawing on currently available financial resources. Alternative scenario II features a more intensive investment and export drive, with support of significant flows of net external financial transfers.

The key goals that the macroeconomic simulation framework attempts to achieve by the year 2010 are to attain a high and sustained rate of economic growth; a significant reduction in the overall share of private consumption out of the gross domestic product (GDP); gradually bring government consumption down from the current high levels and share of GDP established in the 1990s; maintain a strong investment rate of around 30 per cent with more significant government investment; and exports to regain historically strong levels. Other policy goals include a major reduction in the share of imports out of GDP, a reduced trade gap and a current account balance, attaining a savings/investment surplus and a significant reduction in the reliance on net factor income from labour in Israel. Policy goals also include sustainable if not insignificant unemployment rates; sustained growth in living standards and productive, phased absorption of 1 million Palestinian returnees.

The challenge is great, the policies and strategies to reach these goals are complex and call for a concerted Palestinian and international effort, but if the building of other new States, including Israel, provide any lessons, it is that with the will, vision and available resources, it can be done.

International Assistance to Bethlehem 2000 Project

IBRA DEGUENE KA, Chairman of the Committee on the Exercise of the Inalienable Rights of the Palestinian People: The commemoration of the two thousandth anniversary of the birth of Jesus Christ, and the celebration of the new millennium in the Palestinian city of Bethlehem began at Christmas 1999 and will last to Easter 2001. The Palestinian Authority, in anticipation of large numbers of pilgrims that had been expected to arrive in Bethlehem, in 1997, launched the Bethlehem 2000 Project to welcome the millions of tourists and pilgrims who wish to commemorate in Bethlehem a unique event in the holy land. To promote the rich historical past of the city and to boost the tourism industry, the Palestinian Authority has organized a series of specific projects.

The Bethlehem 2000 Project was originally conceived as a way of restoring the religious and historical sites of the city and of upgrading the city's infrastructure. The restoration of these sites and the enhancing of the infrastructure facilities has been a real challenge for the Palestinian leadership. Also, years of conflict have had a negative impact not only on the socio-economic situation of the inhabitants of Bethlehem, but also on the condition of the sites and of the city's buildings and public services.

For two years in a row, the General Assembly has supported the Project and called for the international community's increased assistance to and engagement in this initiative. In 1999, the Committee implemented activities aimed at heightening awareness of the Bethlehem 2000 Project and mobilizing international support for and assistance to it. The convening of the Bethlehem 2000 International Conference in Rome in February 1999 was the highlight of the

Committee's programme of activities. A delegation of the Committee was received by the President of Italy and had an audience with His Holiness Pope John Paul II.

United Nations system entities, such as United Nations Development Programme (UNDP), United Nations Educational, Scientific and Cultural Organization (UNESCO), the World Bank and others have assisted the Bethlehem 2000 Project. They have focused on rehabilitating the infrastructure and developing the tourist industry in close cooperation with the municipality of Bethlehem. The European Commission, non-governmental organizations, donor countries and individuals have made substantial contributions.

Much work is yet to be done in the city and in other Palestinian municipalities throughout the West Bank and the Gaza Strip in the years to come but the Palestinian people cannot cope with this enormous task by themselves. The help of the international community, donor assistance, in particular, is vital to the sustainability of the Palestinian economy and to efforts aimed at improving the economic and social conditions of the Palestinian people. The Committee calls on the donor countries and the entire international community to spare no efforts in assisting the Palestinian people in this important undertaking.

On behalf of the Committee, he asked the donor community to spare no effort. It is hoped that all Member States will give wholehearted support to the draft resolution that the Committee would submit to the fifty-fifth session of the General Assembly. It was hoped that pilgrims would continue to flock to the holy land and forge bonds with the Palestinian people.

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