World Bank: Palestinians will get poorer

Endorses $56.b. in aid over 3 years; warns package won't help unless Israel eases movement.

idf checkpoint 224 88 (photo credit: AP)
idf checkpoint 224 88
(photo credit: AP)
The World Bank on Thursday endorsed a Palestinian reform plan that requires $5.6 billion in international aid over three years, but warned that the money will not stem economic decline in the West Bank and Gaza unless Israel also eases Palestinian movement and trade. The Palestinians will ask for the aid at a conference of donor countries next week in Paris. The World Bank said the plan is "a process around which the Palestinian Authority, Israel and the donor community can coalesce." However, if Israel's closures remain in place, these large sums would at best slow a "downward cycle of crisis and dependence," the report said. By contrast, a considerable easing of Israeli restrictions could help the Palestinian private sector recover and lead to double-digit economic growth, the World Bank said. Israeli defense officials have been reluctant to remove roadblocks and barriers, first set up after the outbreak of Israeli-Palestinian fighting in 2000 to keep attackers from Israel. Security officials say the Palestinian government in the West Bank is still too weak to rein in terrorists effectively. In the development plan, the Palestinian Authority government pledges to cut government spending and reform institutions. About 70 percent of the aid would go to budget support and 30% to development projects, such as boosting tourism. The balance would gradually shift development as the Palestinian government narrows its budget deficit. The plan predicts an annual economic growth of about 5%, provided that Israel gradually eases its restrictions on travel and trade. The Palestinian population grows by almost 4% a year, and such modest economic growth would initially have little effect on per capita income. The World Bank said Palestinian reforms alone will not reverse economic decline. "They must be fully supported by both the large increase in aid and the relaxation of the (Israeli) closure regime ...," the bank wrote. If donors pledge the full amount requested, but Israeli restrictions remain in place, the Palestinian economy would keep shrinking by about 2% a year, it wrote. In the worst scenario - less than full donor support and continued Israeli restrictions - "growth will fall sharply and the already growing poverty levels will rise dramatically," the report said. By contrast, if there is full donor support and considerable easing of movement, it will revive the private sector and "drive growth rates to even double-digit levels," the bank said. Government spokesman Mark Regev said Israel supports the donors' efforts. "We understand that a healthy, successful, prosperous Palestine is in the interest of the state of Israel," he said. "Living next to a failed state, a failed economy, would only be a recipe for further violence." He said Israel has already eased some restrictions and planned to do more. However, he said, militants still pose a danger. "Our ability to move further will be a function of the Palestinian security services taking effective control," he said. The government of Palestinian Authority President Mahmoud Abbas has tried to rein in terrorists, focusing in recent weeks on Nablus. The Palestinian security forces say they've made progress in Nablus, and complained that continued IDF raids are interfering with their efforts. Israeli roadblocks have been making it increasingly difficult for manufacturers to ship goods, even within the West Bank. The West Bank and Gaza are cut off from each other, and Gaza has been largely isolated since June when Hamas seized control by force, and Israel and Egypt responded by virtually halting border traffic. Ninety-five percent of Palestinian trade is with Israel, the bank noted, but shipping goods from the West Bank has become more difficult with the building of Israel's security barrier. Ron Pundak, head of Israel's Peres Center for Peace, said the donors should be cautious, making sure the Palestinians carry out promised reforms and that Israel eases restrictions. "Otherwise, if you are investing in a factory or an agricultural center and the goods cannot move from one place to another, it's a waste of money," he said.