has played a major role in the Israeli-Palestinian conflict
as it has been used as a means to keep the peace process going. Palestinians
in the West Bank
and Gaza Strip
receive one of the highest levels of aid in the world. Aid has been offered to the Palestinian National Authority
(PNA) and other Palestinian Non-governmental Organizations
(PNGOs) by the international community
, including International Non-governmental Organizations
The entities that provide aid to the Palestinians are categorized into seven groups: the Arab nations
, the European Union
, the United States
, international institutions
of the UN system
), European countries, and other nations.
Before the signing of the Oslo accords
, two were the major sources of international aid for the Israeli-occupied territories
of West Bank and Gaza: the donors of the West
and the Arab states. Most of these programs started or developed during the 1970s, and they were further expanded during the 1980s. Because of the lack of a Palestinian state entity-partner, the majority of the sums were channeled through PNGOs or INGOs. Although the stance of the donors during the pro-Oslo period is regarded by some analysts, such as Rex Brynen, as controversial and linked with phenomena, such as corruption, nationalism and factional rivalries, international aid effectively financed a series of programs in the sectors of agriculture, infrastructure, housing and education.
The Oslo accords, officially signed on September 13, 1993, on the White House lawn, contained substantial provisions on economic matters and international aid: Annex IV of the Declaration of Principles (DoP) discusses regional cooperation and implicitly calls for major international aid efforts to help the Palestinians, Jordan, Israel and the entire region.
On October 1, 1993, the international donor community (nations and institutions) met in Washington to mobilize support for the peace process, and pledged to provide approximately $2.4 billion to the Palestinians over the course of the next five years. The international community's action was
based on the premise that it was imperative to garner all financial resources needed to make the agreement successful, and with a full understanding that in order for the Accords to stand in the face of daily challenges on the ground, ordinary Palestinians needed to perceive positive change in their lives. Therefore, the donors had two major goals: to fuel Palestinian economic growth and to build public
support for negotiations with Israel. According to Scott Lasensky, "throughout the follow-up talks to the
DoP that produced the Gaza-Jericho Agreement (May 1994), the Early Empowerment Agreement (August 1994), the Interim Agreement (September 1995), and the Hebron Accord (January 1997), [...]
economic aid hovered over the process and remained the single most critical external component buttressing the PNA.
Between 1993-1997 the PNA faced serious economic and financial problems. International aid prevented the collapse of the local economy, and contributed to the establishment of the Palestinian administration. Donors' pledges continued to increase regularly (their value had risen to approximately $3,420 million as of the end of October 1997) as a result of the faltering peace process, along with the increase in needs and the consequent increase in the assistance necessary for Palestinians to survive. Reality led, however, to a revision of the donors' priorities: Out of concern that the deteriorating economic conditions could result in a derailment of the peace process, donor support was redirected to finance continued budgetary shortfalls, housing programs and emergency employment creation. According to a more critical approach, international aid in the mid 1990s supported PNA's bureaucracy and belatedly promoted the centralization of political power, but in a way that did not enhance government capacity and harmed the PNGOs. In 1994-1995 problems of underfunding, inefficiency and poor aid coordination marked donors' activity, and led to tensions among the different aid bodies, and between the international community and the PNA. In 1996, the link between development assistance and the success of the peace process was made explicit by the President of the World Bank
, James Wolfensohn
, who stated: "The sense of urgency is clear. Peace will only be assured in that area if you can get jobs for those people."
After 1997, there was a reduction in the use of closure policy by Israel, which led to an employment growth and an expansion of the West Bank and Gaza economy. After the signing of the Wye River Memorandum, a new donors' conference was convened, and over $2 billion was pledged to the PNA for 1999-2003. Nevertheless, overall donor disbursements fell in 1998-2000, and the 1998 disbursements-to-commitments ratio was the lowest since 1994. As for international institutions, they began to play a bigger role in the international funding process, in spite of the decline in the absolute value of these institutions' total commitments. After 1997, the need for donor support for the current budget and employment generation programs receded due to the PA's improved fiscal performance, and attention was focused instead on infrastructures to the detriment of institution building. Donors' activity was also characterized by a decline in support for PNGOs, and by a preference to concessionary loans (instead of grants) with generous grace periods, long repayment periods and low interest rates
The second Intifada
led to one of the deepest recessions the Palestinian economy
experienced in modern history. In those two years, Palestinian real
GDP per capita shrunk by almost 40 percent. The precipitator of this economic crisis was again a multi-faceted system of restrictions on the movement of goods and people designed to protect Israelis
in Israel itself and in the settlements.
One of the many frustrations of the crisis was the erosion of the development effort financed by the international community, since the overwhelming emphasis in donor work was now directed towards mitigating the impact of the economic and social crisis. A collapse of the PNA was averted by emergency budget support from donor countries. Despite a significant increase in donor commitments in 2002 compared with 2001, commitments to infrastructure and capacity-building work with a medium-term focus continued to decline. In 2000, the ratio was approximately 7:1 in
favor of development assistance. By 2002, the ratio had shifted to almost 5:1 in favor of
Yasser Arafat's death in 2004 and Israel's unilateral disengagement from Gaza created new hopes to the donor community. In March 2005, the Quartet on the Middle East underscored the importance of development assistance, and urged the international donors community to support Palestinian institution building, without however ignoring budgetary support. The Quartet also urged Israel and the PNA to fulfill their commitments arising from the Road map for peace, and the international community "to review and energize current donor coordination structures [...] in order to increase their effectiveness." The international community's attempt in late 2005 to promote Palestinian economic recovery reflected a long-standing assumption that economic development is crucial to the peace process and to prevent backsliding into conflict. Although a mild positive growth returned in 2003 and 2005, this fragile recovery stalled as a result of the segmentation of the Gaza Strip, the stiff restrictions on movements of goods and people across the borders with Israel and Egypt, and the completion of the Israeli West Bank barrier. As the World Bank stressed in December 2005, "growth will not persist without good Palestinian governance, sound economic management and a continued relaxation of closure by GOI.
On January 25, 2006, Hamas
won the Palestinian legislative elections
; the Islamist organization assumed power in March 29, 2006, without accepting the terms and conditions set by the Quartet. Hamas' stance resulted in a near cessation of direct relations between most bilateral donors and the PNA, with only some multilateral agencies and a few donors continuing direct contact and project administration. Quartet's decision met the criticism of the Quartet's former envoy, James Wolfensohn, who characterized it "a misguided attempt to starve the Hamas-led Palestinians into submission," and of UN's Middle East former envoy, Alvaro de Soto. Because of the worsening human crisis, the EU
proposed a plan to channel aid directly to the Palestinians, bypassing the Hamas-led PNA; the Quartet approved the proposal, despite the initial US reaction, and the EU set up a "temporary international mechanism" (TIM) to channel the money for an initial three-month period, which was later extended. Oxfam
was one of the main critics of the EU TIM program arguing that "limited direct payments from the European Commission have failed to address this growing crisis.
| Outcome of the Paris Pledging Conference
|Type of Assistance
| Budget Support
| Humantitarian Assistance
| Project-based Aid
| Other Aid
| Amounts being allocated
| Total 2008-2010
The emergence of two rival governments in the West Bank and Gaza in June 2006 presented the international community with the prospect of shouldering a huge aid burden. The World Bank estimated that in 2008 PNA would need $1.2 billion in recurrent budget support, in addition to $300 million in development aid. The formation of the caretaker government in mid-2007 under Fayyad, and the resumption of aid have partially reversed the impacts of the aid boycott. Nevertheless, economic indicators have not changed considerably. For instance, because of the situation in Gaza, real GDP growth was estimated to be about -0,5% in 2007, and 0,8% in 2008.
In December 2007, during the Paris Donor Conference, which followed the Annapolis Conference, the international community pledged over $7.7 billion for 2008–2010 in support of the Palestinian Reform and Development Program (PRDP). Hamas, which was not invited to Paris, called the conference a "declaration of war" on it. In the beginning of 2008, The EU moved from the TIM mechanism to PEGASE, which provides channels for direct support to the PNA's Central Treasury Account in addition to the types of channels used for TIM. The World Bank also launched a trust fund which would provide support in the context of the PNA's 2008–2010 reform policy agenda. However, neither mechanism contains sufficient resources to cover the PNA's entire monthly needs, thus not allowing the PNA to plan expenditures beyond a two-month horizon.
The World Bank assesses that the PA has made significant progress on implementing the reform agenda laid out in the PRDP, and re-establishing law and order; Gaza, however, remains outside of the reforms as Hamas controls security and the most important ministry positions there. After a "Tahdi'ah" (calm) between Israel and Hamas on June 19, 2008, attacks out of Gaza have fallen significantly, but Palestinian inter-factional tension continues in the West Bank and Gaza, with arrests of people and closures of NGOs by
each side, resulting in a deterioration in the ability of civil society organizations to continue cater to vulnerable groups.
According to the Development Assistance Committee
, the main multilateral donors for the 2005–2006 period were UNRWA
and the EU (through the European Commission
); the main bilateral donors were the US, Japan and six European countries (Norway
). Since 1993 the European Commission and the EU member-states combined have been by far the largest aid contributor to the Palestinians. The Arab League states have also been substantial donors, notably through budgetary support to the PNA during the Second Intifada; they have been however criticized for not sufficiently financing the UNRWA and the PNA, and for balking at their pledges. After the 2006 Palestinian elections, the Arab countries tried to contribute to the payment of the Palestinian public servants' wages, bypassing the PNA; at the same time Arab funds were paid directly to Abbas' office for disbursement. During the Paris Conference, 11% of the pledges came from the US and Canada, 53% from Europe and 20% from the Arab countries.
Since 1993, a complex structure for donor coordination has been put in place in an effort to balance competing American and European positions, facilitate agenda-setting, reduce duplication, and foster synergies. The overall monitoring of the donors' activities was assigned to the Ad-Hoc Liaison Committee, which was established in November 1993, operates on the basis of consensus, and aims at promoting the dialogue between the partners of the "triangular partnership", namely the donors, Israel, and the PNA.
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