EU — Remarks after the donor coordination group for the Palestine Territories

Remarks by EU High Rep­re­sen­ta­tive Cather­ine Ash­ton after the donor coor­di­na­tion group for the Pales­tine Ter­ri­to­ries
Cather­ine Ash­ton, High Rep­re­sen­ta­tive of the Euro­pean Union for For­eign Affairs and Secu­ri­ty Pol­i­cy and Vice-Pres­i­dent of the Com­mis­sion, made today the fol­low­ing remarks after the donor coor­di­na­tion group for the Pales­tine Ter­ri­to­ries, the Ad-Hoc Liai­son Com­mit­tee (AHLC):

“It has been a great priv­i­lege to host today’s meet­ing of the Ad Hoc Liai­son Com­mit­tee. I’d like to pay trib­ute to Jonas Støre, who has done an excel­lent job in dri­ving this process and as Chair of today’s discussions.

It’s been a very fruit­ful ses­sion, and I’d like to thank every­one for their pos­i­tive con­tri­bu­tions. While this meet­ing is a donor coor­di­na­tion meet­ing for the Occu­pied Pales­tin­ian Ter­ri­to­ry it is tak­ing place at a very impor­tant moment for the region.

I believe that in this con­text it is more impor­tant then ever to con­tin­ue to work towards a solu­tion to the Israeli-Pales­tin­ian con­flict and to build a demo­c­ra­t­ic Pales­tin­ian state to exist side-by-side with Israel in peace and security.

The state-build­ing process is cru­cial in this regard.

It has gained renewed momen­tum since 2009 when Prime Min­is­ter Fayyad set out a path for Pales­tin­ian state­hood in a plan that the EU has sup­port­ed both polit­i­cal­ly and finan­cial­ly. The Pales­tin­ian Author­i­ty has made sig­nif­i­cant progress on this state-build­ing agen­da. Today Pales­tin­ian insti­tu­tions com­pare favourably with those in estab­lished states. 

We also wel­come the new Pales­tin­ian nation­al devel­op­ment plan and I pay trib­ute to the work of Prime Min­is­ter Fayyad.

I’m proud to say that the EU has been instru­men­tal in the insti­tu­tion build­ing process. For 2011, we have already ear­marked €300 mil­lion for it.

Yet it’s clear that these achieve­ments can only be sus­tain­able in the event of a polit­i­cal break­through. The inter­na­tion­al com­mu­ni­ty should not let these con­cert­ed efforts go to waste. This oppor­tu­ni­ty should not be missed. We reaf­firm our readi­ness to con­tribute to a nego­ti­at­ed solu­tion with­in the time­line set by the Quartet.”

Attached Chair’s summary 

Meet­ing of the Ad Hoc Liai­son Committee

Brus­sels, 13 April 2011
Chair’s sum­ma­ry
AHLC mem­bers and oth­er major donor coun­tries met in Brus­sels today. The meet­ing was host­ed by the EU High Rep­re­sen­ta­tive Cather­ine Ash­ton. The Chair, Nor­we­gian For­eign Min­is­ter Jonas Gahr Støre, com­mend­ed the par­tic­i­pants, in par­tic­u­lar the Pales­tini­ans and the Israelis, for their spir­it of coop­er­a­tion and their pos­i­tive con­tri­bu­tions to the deliberations.

The AHLC reaf­firmed its long-stand­ing com­mit­ment to the vision of an inde­pen­dent, demo­c­ra­t­ic and sov­er­eign state of Pales­tine liv­ing side by side with Israel in peace and secu­ri­ty, as well as their strong sup­port for nego­ti­a­tions to end the Israeli-Pales­tin­ian con­flict in full com­pli­ance with Road Map obligations.

Over the last two years, the donors have pro­vid­ed assis­tance to the Pales­tin­ian Author­i­ty (PA) in its imple­men­ta­tion of the Pro­gramme for the 13th Gov­ern­ment for com­plet­ing the task of build­ing a viable Pales­tin­ian state, with regard to insti­tu­tion build­ing and the devel­op­ment of a sus­tain­able Pales­tin­ian econ­o­my. In this meet­ing in Brus­sels, the AHLC reviewed progress based on reports and rec­om­men­da­tions from the par­ties, the UN, the World Bank, the IMF and the Quar­tet Rep­re­sen­ta­tive. The donors wel­comed that the eco­nom­ic recov­ery was sus­tained for 2010. Prime Min­is­ter Salam Fayyad stat­ed that the government’s reform agen­da that was launched in 2009 was near com­ple­tion and that state readi­ness has been achieved. PA’s fis­cal per­for­mance was as bud­get­ed for 2010. Sig­nif­i­cant progress was made in mobi­liz­ing domes­tic rev­enue. The meet­ing wel­comed sub­stan­tial improve­ment in the pub­lic finan­cial man­age­ment of the PA, and not­ed that the strong fis­cal per­for­mance had result­ed in a sub­stan­tial reduc­tion in aid depen­den­cy. The growth was esti­mat­ed at 9 per­cent, 8 per­cent for the West Bank and 15 per­cent in Gaza. There was mod­est reduc­tion in unem­ploy­ment. For 2011, the pro­ject­ed need for extra­or­di­nary bud­get assis­tance is US$967 mil­lions or 11 per­cent of the GDP, and implies a fur­ther reduc­tion of the donor depen­den­cy from the lev­el of 28 per­cent in 2008.

Accord­ing to the reports to this meet­ing from the World Bank, the IMF and the UN, the PA is above the thresh­old for a func­tion­ing state in the key sec­tors they stud­ied. In Sep­tem­ber last year, the World Bank report­ed to the AHLC meet­ing that “if the PA main­tains its per­for­mance in insti­tu­tion-build­ing and deliv­ery of pub­lic ser­vices, it is well-posi­tioned for the estab­lish­ment of a state at any point in the near future”. Since then, the PA has con­tin­ued to strength­en its insti­tu­tions, deliv­er­ing pub­lic ser­vices and pro­mot­ing reforms. The World Bank reports that the PA’s achieve­ments in key state func­tions posit­ed by the OECD as strate­gi­cal­ly impor­tant for state-build­ing bode well for the future. The UN con­curs in stat­ing that in the six areas where the UN is most engaged, gov­ern­men­tal func­tions are now suf­fi­cient for a func­tion­ing of a state. The IMF staff reports that it con­sid­ers that the PA is now able to con­duct the sound eco­nom­ic poli­cies expect­ed of a future well-func­tion­ing Pales­tin­ian state. Fur­ther­more, the qual­i­ty, trans­paren­cy and time­li­ness of the data pro­duced today by the Pales­tin­ian Bureau of Sta­tis­tics, Min­istry of Finance, and the Pales­tine Mon­e­tary Author­i­ty com­pare favourably with those of IMF mem­ber coun­tries that main­tain high data man­age­ment and dis­sem­i­na­tion stan­dards. While sig­nif­i­cant work lies ahead, they are sim­i­lar to those fac­ing oth­er mid­dle income countries. 

Chal­lenges remain in cre­at­ing con­di­tions for sus­tain­able and pri­vate sec­tor-led eco­nom­ic growth. The West Bank’s strong per­for­mance since 2008 has been enabled by the PA’s sound eco­nom­ic man­age­ment and reforms sup­port­ed by donor aid, as well as eas­ing of Israeli inter­nal bar­ri­ers. The growth is bound to wane, espe­cial­ly with con­tin­ued fis­cal retrench­ment and declin­ing aid. Exports from the West Bank and Gaza to Israel con­tract­ed sharply dur­ing 2008-09, and imports declined. The recent upticks of trade and mod­est growth in per­mits for traders and work­ers have not com­pen­sat­ed for the reduc­tion of trade with­in the man­u­fac­tur­ing and agri­cul­tur­al sec­tors. Pri­vate sec­tor growth and trade will not be enabled with­out a strong stim­u­lus from fur­ther sub­stan­tial eas­ing of Israeli restric­tions on eco­nom­ic activ­i­ties and fur­ther reforms by the PA. The donors wel­comed the work of the Quar­tet Rep­re­sen­ta­tive and the Gov­ern­ment of Israel (GoI) to facil­i­tate pri­vate sec­tor invest­ment. They also wel­comed the infor­ma­tion in the PA report of a clear increase in for­eign invest­ments in par­tic­u­lar in the West Bank.

The AHLC expressed strong con­cern for the sit­u­a­tion in the Gaza Strip and reit­er­at­ed its full com­mit­ment to the UN Secu­ri­ty Coun­cil res­o­lu­tion 1860, tak­ing into con­sid­er­a­tion the secu­ri­ty con­cern for all civil­ian pop­u­la­tions. It wel­comed the pos­i­tive steps tak­en by GoI in increas­ing the vol­umes of con­sumer goods allowed into Gaza and the readi­ness for inter­na­tion­al efforts in recon­struc­tion. How­ev­er, more is need­ed for a fun­da­men­tal change of the sit­u­a­tion in the Gaza Strip. The surge in Gaza’s out­put in 2010 was main­ly a catch-up from a very low lev­el. Still, the GDP in the Gaza Strip is 20 per­cent low­er than in 2005. Unem­ploy­ment remains at stag­ger­ing 38 per­cent. A last­ing recov­ery will require a removal of the ban on exports and pri­vate sec­tor imports of invest­ment inputs, as well as lift­ing restric­tions on the legit­i­mate pas­sage of peo­ple. In this con­text, the AHLC wel­comes the EU’s com­pre­hen­sive pack­age for Gaza, in close coop­er­a­tion with the PA and the GoI, which focus­es on pri­vate sec­tor sup­port, the improve­ment of the Keren Shalom infra­struc­ture, as well as pro­vi­sion of equip­ment and the train­ing of PA offi­cials. The AHLC also wel­comed the spir­it of coop­er­a­tion of the par­ties on tack­ling the water chal­lenges, par­tic­u­lar­ly in Gaza. 

On this basis the AHLC

  • wel­comes the assess­ment of the World Bank, the IMF, and the UN that the PA is above the thresh­old for a func­tion­ing state in the key sec­tors they stud­ied, and that Pales­tin­ian insti­tu­tions com­pare favourably with those in estab­lished states;
  • calls on donors to con­tribute through­out 2011, and make avail­able suf­fi­cient assis­tance to meet the recur­rent financ­ing require­ments, with due regard to equi­table bur­den shar­ing, and urges the PA to con­tin­ue reform efforts and fis­cal dis­ci­pline as advised by the World Bank and the IMF;
  • while wel­com­ing mea­sures already under­tak­en by GoI, calls on all par­ties to con­tin­ue to facil­i­tate sus­tain­able growth of the Pales­tin­ian econ­o­my – one that is under­pinned by a vibrant pri­vate sec­tor – by tak­ing fur­ther steps to dis­man­tle restric­tions and mea­sures to pro­mote devel­op­ment and trade includ­ing in area C, and adopt a coher­ent trade strat­e­gy and insti­tu­tion of an appro­pri­ate bor­der man­age­ment and cus­toms systems;
  • urged the GOI and the PA to iden­ti­fy and imple­ment mea­sures to fur­ther enhance col­lec­tion of clear­ance rev­enues for the PA, includ­ing increased pres­ence of the PA at crossings;
  • calls for con­tin­ued increase in build­ing mate­r­i­al for infra­struc­ture devel­op­ment and hous­ing in Gaza, as well as a shift for the pri­vate sec­tor to pro­duce and export prod­ucts from Gaza to inter­na­tion­al mar­kets and the West Bank;
  • wel­comes ongo­ing coop­er­a­tion on water issues and calls on the par­ties to estab­lish pro­duc­tion capac­i­ty for medi­um-term water sup­ply to Gaza, and rec­om­mends that plan­ning doc­u­ments be pre­sent­ed to the Paris donor con­fer­ence for the long-term and sus­tain­able pro­duc­tion capac­i­ty of water sup­ply to Gaza;
  • rec­om­mends PA to devel­op long-term trade strate­gies, trade relat­ed insti­tu­tion-build­ing, and, in order to build up and strength­en the frame­work for export-led eco­nom­ic growth, to seek observer­ship to the WTO;
  • calls on all inter­na­tion­al sup­port­ers to make use of the exist­ing land cross­ings to chan­nel their sup­port to Gaza, and abstain from provocations;
  • express­es deep con­cern for the esca­la­tion of vio­lence in and around Gaza, empha­sized that broad­er devel­op­ment efforts in Gaza can­not be achieved unless there is calm and secu­ri­ty for all civil­ian populations;
  • wel­comes the PA Nation­al Devel­op­ment Plan for 2011–2013 and the donor con­fer­ence in Paris sched­uled for June this year, and agrees to recon­vene in New York in Sep­tem­ber 2011 in con­junc­tion with the UN Gen­er­al Assembly.

Coun­cil of the Euro­pean Union 

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