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PublicationEconomic Monitoring Report to the Ad Hoc Liaison Committee(Washington, DC, 2015-09-30) World BankPalestinians are getting poorer on average for the third year in a row. As evidenced in previous World Bank reports, the competitiveness of the Palestinian economy has been progressively eroding since the signing of the Oslo accords, in particular its industry and agriculture. Even though donor aid had increased government-funded services and fueled consumption-driven growth during 2007 to 2011, this growth model has proved unsustainable. Donor support has significantly declined in recent years and, in any case, aid cannot sustainably make up for inadequate private investment. Thus, growth has started to slow since 2012 and the Palestinian economy contracted in 2014 following the Gaza war. In early 2015, GDP was still lower than it was a year ago. Due to population growth, real GDP per capita has been shrinking since 2013. Unemployment remains high, particularly amongst Gaza’s youth where it exceeds 60 percent, and 25 percent of Palestinians currently live in poverty. Against the backdrop of weak economic growth, reduced donor aid, and temporary suspension of revenue payments by the Government of Israel (GoI), the Palestinian Authority’s reform efforts have not been able to prevent another year with a financing gap. The persistence of this situation could potentially lead to political and social unrest. In short, the status quo is not sustainable and downside risks of further conflict and social unrest are high. PublicationLearning in the Face of Adversity: The UNRWA Education Program for Palestine Refugees(Washington, DC, 2014-10) Abdul-Hamid, Husein; Patrinos, Harry Anthony; Diaz Varela, AndreaThe goal of this study is to provide a better understanding of how a school system can operate efficiently under adversity. The results of this work will be useful in identifying relevant policies in the Middle East and North Africa region. Palestine refugees are achieving higher-than-average learning outcomes in spite of the adverse circumstances they live under. Their education system the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) operates one of the largest non-governmental school systems in the Middle East. It manages nearly 700 schools, has hired 17,000 staff, educates more than 500,000 refugee students each year, and operates in five areas, including the West Bank, Gaza, Jordan, Lebanon, and Syria. This study examines three: West Bank, Gaza, and Jordan. Contrary to what might be expected from a resource-constrained administration serving refugee students who continually face a multitude of adversities, UNRWA students outperform public schools in the three regions the West Bank, Gaza, and Jordan by a year's worth of learning. This study was undertaken to better understand the reasons for success at UNRWA schools and their positive variation from comparable public schools. Econometric techniques were used to analyze international (TIMSS and Programme for International Student Assessment, or PISA) and national learning achievement data. Pedagogical practices and classroom time-on-task were observed using structured methods (Stallings model). Systems Approach for Better Education Results (SABER) tools were used to better understand the policies and implementation strategies for school and teacher management and for monitoring and evaluation. Additionally, qualitative data were collected and analyzed in line with an education resilience conceptual framework to better uncover factors that help students develop the skills to learn despite the adversities they face. PublicationWest Bank and Gaza Investment Climate Assessment : Fragmentation and Uncertainty(Washington, DC, 2014-01) World Bank GroupThis Investment Climate Assessment (ICA) seeks to evaluate the conditions under which the Palestinian private sector currently operates in the West Bank (including East Jerusalem) and the Gaza strip. This assessment is both an update and expansion on a similar assessment undertaken by the World Bank in 2006. As such, it provides both a snapshot of the investment climate in 2013, as well as a longitudinal view of what has changed in the intervening seven years and, just as importantly, what has not. Where relevant, it also compares indicators of the Palestinian investment climate with those of other countries in the region and beyond. The objective of this assessment is to provide the Palestinian business community, the Palestinian Authority (PA), and the international development community with an empirical analysis of the investment climate under which Palestinian businesses operate. The report describes the key constraints on business and investment and identifies reform priorities for those aspects of the investment climate and constraints which are within the PA's control, as well as some policy recommendations for areas outside of the PA's control, but within the domain of development partner assistance agendas and/or Israeli policies. This analysis is intended to inform Palestinian policy-maker actions to improve the business environment. It can also help inform the actions of other concerned parties, including the international development community, regional actors, and the Government of Israel regarding policies that affect Palestinian economic growth and sustainability. PublicationWest Bank and Gaza : Public Expenditure and Financial Accountability(Washington, DC, 2013-06-17) World Bank; European Union; Assistance Technique France; U.N. Development ProgrammeThe purpose of the Public Expenditure and Financial Accountability (PEFA) assessment is to review the performance of the Palestinian Authority's (PA's) Public Financial Management (PFM) framework. The assessment examines progress since an informal PEFA assessment in 2007 and provides a baseline for supporting the PA in refining, where necessary, the current PFM reform strategy. The assessment has been undertaken following the PEFA performance measurement framework methodology as revised in January 2011. The assessment builds on previous reports by the World Bank and the International Monetary Fund (IMF) on various aspects of the PA's PFM system. The assessment is based on publicly available documents and supplementary information provided by the PA and other stakeholders. These include annual budget documents, annual fiscal outturn reports, and specific reports produced by various stakeholders. The scope of the assessment includes the Public Financial Management of the central government, the subnational government (municipalities and community villages), and the autonomous public entities which are all under the umbrella of the Palestinian investment fund. The PA was established in 1994 following the 1993 Oslo agreement, with responsibility for the West Bank and Gaza (WBG) under Palestinian control. The PA has adopted a PFM model which broadly follows the Anglophone model, but in the years following its establishment, authority has increasingly become concentrated in the executive branch and the role of parliament has been reduced. The current PEFA assessment outlines a strong link between the various reforms that require a more integrated technical assistance approach. Many of these reforms are to be implemented together with other interconnected reforms in order to produce effective results. This underscores the challenging context, in which these reforms have to be implemented, but also the opportunity to create synergy and impetus between, and ownership of, the various components of the reform agenda. PublicationFiscal Crisis, Economic Prospects: The Imperative for Economic Cohesion in the Palestinian Territories, Economic Monitoring Report to the Ad Hoc Liaison Committee(World Bank, Washington, DC, 2012-09-23) World BankEconomic growth in West Bank and Gaza (WB&G) slowed in the first quarter (Q1) of 2012. The real growth rate is estimated to have reached 5.6 percent, more than three percentage points lower than the Q1 2011 growth figure and almost one percent lower than the growth forecast contained in the Palestinian Authority's (PA's) budget. This decline is attributed to a major slowdown in Gaza, where real growth decreased from 21.3 percent to 6 percent on a year-on-year basis. The slowdown in Gaza during Q1 of 2012 was mainly attributed to a major decline in the agriculture and fishing sector, which offset much of the growth witnessed in other sectors. This sector shrank by 43 percent in Q1 2012 due to frequent power outages resulting from the lack of fuel in Gaza. Nevertheless, other sectors in Gaza expanded and the highest growth levels were witnessed in the construction, and hotels and restaurants sectors. In the West Bank, growth in Q1 2012 was broadly unchanged from its 2011 level. Most of the growth was from an expansion of services, which contributed around 2.2 percentage points of the 5.4 percent total growth in Q1 2012. The recent slowdown in economic growth is also reflected in higher unemployment levels. Overall unemployment in WB&G was 20.9 percent in the second quarter of 2012 compared to 18.7 percent during the same period in 2011. A serious concern in WB&G is the high level of youth unemployment that is accompanied by low youth participation in the labor force. PublicationWest Bank and Gaza - Improving Governance and Reducing Corruption(World Bank, 2011-05-18) World BankIn the past decade, the Palestinian Authority (PA) has worked to strengthen economic governance and combat corruption, both essential to sustained economic growth and improved delivery of public services. This report finds the PA has made significant progress in its public institutions, establishing a strong governance environment in many critical areas. But it also identifies areas where reforms are underway but incomplete or, in some areas, not yet under consideration. Major reforms have been put in place to strengthen the PA's public financial management (PFM) systems and better manage its equity holdings, two crucial components in the public finance sector. In other important areas, such as public procurement, public sector employment, regulation of the private sector, and the work of anti-corruption institutions, reforms are underway but have not been fully implemented. This analysis relies on an understanding of the relationship between good economic governance, public service delivery, and corruption. Studies show a direct correlation between weak governance systems and the quality of public service delivery. Weak governance systems, in turn, provide an opportunity for corruption. The report does not attempt to investigate specific corruption activities or quantify the economic costs of corruption in West Bank and Gaza. Its purpose is to provide a comprehensive look at the current state of economic governance in the PA. It is the first report to comprehensively assess governance reforms, ascertain citizens' and officials' actual experiences with corruption in the delivery of public services, identify institutional strengths, and highlight systematic governance weaknesses which could lead to corruption. PublicationWest Bank and Gaza - Municipal Finance and Service Provision(World Bank, 2010-01-26) World BankThe main general objective of this study is to promote a deeper understanding of municipal finance in the West Bank and Gaza, including identification of the key issues that local governments currently face. The paper discusses the policy implications associated with its main findings as potential policy options for future decision making on local government reforms. As such, this study aims at facilitating the process for a future policy dialogue between the World Bank and the Palestinian Authority (PA) or Ministry of Local Government (MoLG). Furthermore, it is expected that the identification of the main issues, together with their policy implications, may assist the PA or MoLG in the selection of the key areas that could potentially benefit from the World Bank's technical assistance. In particular, this study attempts to: (i) clarify the actual role that municipalities play in the provision of local services; (ii) evaluate the current assignment of municipal revenue sources and determine their adequacy to cover current expenditure functions, including an analysis of whether there are unfunded mandates, and if so, identify the main contributing factors; and (iii) determine the balance between expenditures and revenues aiming primarily to assess whether the current revenue sources cover the estimated costs of the municipal services that are being provided, and draw the corresponding conclusions on the current municipal fiscal situation. Furthermore, this Economic and Sector Work (ESW) highlights the nature and magnitude of current fiscal imbalances across municipalities in the West Bank and Gaza. PublicationWest Bank and Gaza - Investment Climate Assessment : Unlocking the Potential of the Private Sector(Washington, DC, 2007-03) World BankIt is the purpose of this Investment Climate Assessment (ICA) to look at what hinders the move of the Palestinians to new markets and what can be done to encourage it. The ICA reveals that shrinking market access and the lack of free movement are the main constraints to growth for Palestinian enterprises. Relative to other countries in the region, the Palestinian investment climate is good: petty corruption is low, the bureaucracy is relatively efficient and financial markets are well developed. Despite this, Palestinian enterprises have not invested enough to maintain their international competitiveness. However, the report points out that the growing settlements and movement restrictions imposed by Israeli authorities for security reasons overshadow all other elements of the investment climate. The restrictions close off markets, raise transaction costs and prevent producers from guaranteeing delivery dates. The closures also serve to keep firms small and prevent them from attaining minimum efficient scale. The ICA policy recommendations fall into three broad categories: movement and access, the investment climate, and enterprise capabilities. For the Palestinian private sector to fulfill its potential and create the jobs required by the rapidly expanding population, all three of these areas must be addressed. However, re-establishing free movement and access, while maintaining Israeli security, is the sine qua non for a viable Palestinian economy. Without a concerted political effort to re-open markets and lower transaction costs the Palestinian private sector is bound to fail. PublicationDisengagement, the Palestinian Economy and the Settlements(Washington, DC, 2004-06-23) World BankThis report stresses that the deep economic crisis in the West Bank and Gaza threatens to impoverish and alienate a generation of young Palestinians. Moreover, today's economic crisis has been caused by restrictions on the movement of Palestinian people and goods, or 'closures', which the Government of Israel (GOI) regards as essential to protecting Israeli citizens from attacks by militants. Without a major reform of the closure regime, however, the Palestinian economy will not revive and Israel's security gains may not be sustainable. The report adds that Israel's Disengagement Plan of June 6 will have very little impact on the Palestinian economy and Palestinian livelihoods, since it only proposes a limited easing of closure. An easing of closures alone, though, will not attract investors back to the Palestinian economy. The review opines that with a freeing-up of the constraints on economic activity and committed Palestinian reform, an additional major donor effort would make a difference - it would enable the Palestinian economy to turn the corner. However, the alternative to this is stark. At the wrong end of the spectrum of possible outcomes is a Palestinian economy with unemployment levels of over 35 percent by 2006, and with poverty afflicting upwards of 55 and 70 percent in Gaza. The study points out that as for the settlement assets that Israel will leave behind, those in Gaza have considerable economic value, and in time can make a significant contribution - provided that Gaza's borders are opened for trade. Prospects for economic recovery will be enhanced if the US and the EU give adequate preference to Palestinian products to help boost exports. PublicationTwenty-Seven Months - Intifada, Closures, and Palestinian Economic Crisis : An Assessment(World Bank, 2003-05) World Bank"Twenty-Seven Months - Intifada, Closures and Palestinian Economic Crisis: An Assessment" was prepared as a follow-up to a report published in March 2002 ("Fifteen Months - Intifada, Closures and Palestinian Economic Crisis" report no. 24931). The main objectives of this second Assessment are once again to help donors and the Palestinian Authority (PA) cope with the deep economic crisis in the West Bank and Gaza, as well as to encourage and inform discussion on Palestinian economic issues among the donors, the PA and the Government of Israel. Despite an inevitable preoccupation with short-term emergency issues, the report seeks to preserve a focus on the types of medium-term economic and institutional policies that will return to prominence once the current conflict ceases to dominate the daily lives of Palestinians and Israelis. While any short-term recovery will depend on the lifting of closures, this will not suffice to put the Palestinian economy onto a sustainable growth path. The de facto customs union with Israel formalized under the Paris Protocol makes the Palestinian economy particularly vulnerable to closure. In a structural sense, though, the long-term growth potential of the Palestinian economy has been stunted by the upward pressure on domestic Palestinian labor prices created by the wages paid to Palestinian workers in Israel. Domestic wage increases have exceeded any underlying growth in productivity, and have undermined Palestinians' ability to export competitively-priced goods to the rest of the world. Bank analysis shows that a proactive policy of export development, in which a more open and less discriminatory trade regime is adopted, should result in higher incomes by 2010 than a return to previous levels of employment in Israel. Between 1968 and 2000, Palestinians in the West Bank and Gaza pursued a development strategy which featured the export of labor rather than goods. In June 2000, three months before the current Palestinian intifada began, 21 percent of all employed Palestinians worked in Israel, mainly in low-skilled construction and agricultural jobs. Net incomes from abroad provided more than 21 percent of Palestinian GNI, making it one of the most remittance-dependent economies in the world. This is why the loss of jobs in Israel in the past two years has had such a strong impact. Put another way, the intifada has demonstrated the vulnerability of a development strategy which relied so heavily on labor exports to Israel. The shift to a goods-based export policy would take time, would be subject to many uncertainties and would require the active cooperation of Israel to succeed; it is thus part and parcel of a political rapprochement. It is also true that restoring access to the Israeli labor market would be the quickest way to boost incomes for a large number of ordinary Palestinians. Realistically, though, a return to pre-September 2000 employment levels for Palestinians in Israel seems unlikely - and would anyway risk perpetuating a high level of Palestinian economic dependence on Israel, hindering the emergence of a diversified development strategy with much greater long-term growth potential.