Note: This document may not always reflect the actual appropriations determined by Congress. Final budget allocations for USAID's programs are not determined until after passage of an appropriations bill and preparation of the Operating Year Budget (OYB).
WEST BANK AND GAZA
FY 1998 Economic Support Funds .......... $75,000,000 Introduction
In September 1993, the Palestinian Liberation Organization (PLO) and the Government of Israel signed the "Declaration of Principles on Interim Self-Governing Arrangements" (DOP), which envisioned an initial transfer of authority over the Gaza Strip and Jericho to Palestinians, to be followed by the transfer of authority over the remainder of the West Bank. At that time, the U.S. Government committed to provide $500 million over a 5-year period. Of this total, USAID will administer $375 million; the remainder will be provided through the Overseas Private Investment Corporation (OPIC). In keeping with the DOP, the Palestinian Authority (PA) was established in May 1994, assuming self-governing responsibilities in Gaza and Jericho. Following the signing of the Interim Agreementin September 1995, Palestinian self-rule was extended to six major population centers on the West Bank, with a phased-in extension of authority planned for other areas. Elections were held in the West Bank and Gaza in January 1996 to select a Legislative Council and a Head of the Executive Authority. Final status negotiations between the Palestinians and Israelis began in May 1996. However, after a series of suicide bombings in Israel in early 1996 and the change of government that followed the Israeli elections held in May, such discussions have not progressed beyond their formal opening. Indeed, in recent months, implementation of several aspects of the Interim Agreement has stalled. The U.S. Government, acting within its role as the primary facilitator for the overall Middle East Peace Process, has been actively engaged in defusing tensions and seeking compromises that are acceptable to both parties.The Development Challenge
According to estimates by the Palestinian Bureau of Statistics and the United Nations, the current population in West Bank and Gaza is estimated to be 2.4 million, with approximately 1 million residents in Gaza and 1.4 million residents in the West Bank. Annual population growth rates are estimated at 5%-6%. By mid-1996, formal unemployment stood at 29% (24% in the West Bank and 39% in Gaza), and per capita GNP (which includes wages earned in Israel) was about $1,500 ($1,700 in the West Bank and $1,100 in Gaza), a decline of nearly 40% in real terms since 1992. It is now estimated that the PA's recurrent budget deficit for 1996 will reach $112 million, up from earlier estimates of $75 million. Since this and many macro-economic indicators are extremely sensitive to the level of access of the Palestinian labor force and products to markets in Israel, the frequent and extensive border closures over the last year have been a major factor in a general downturn of the Palestinian economy.While activities financed under the U.S. Government pledge for support to the peace process were only initiated within the last 2 1/2 years, tangible benefits have already resulted from USAID assistance. In the period FY 1996 - FY 1997, results have been achieved and further impact can be expected in each of the Mission's areas of strategic focus. Through this period, accomplishments related to Expanding Economic Opportunities will have included: operations initiated at a pilot industrial estate, which will eventually lead directly to 22,000 new jobs; exports increased by 10% and production by 20% among 150 assisted firms; 1,600 Palestinians trained in vocational and technical skills, resulting in 1,000 new jobs; $10 million in credit delivered to small and microenterprises, resulting in at least 1,500 permanent jobs. Likewise, accomplishments related to Improving Access to and Use of Water Resources will have included: storm and waste water management improved through the cleaning, upgrading and expansion of sewer lines and facilities in Gaza City; through the initial phase of USAID's water resources program in the West Bank, access provided to more than 100,000 residents in 21 villages and small municipalities to safe water, and the water system for the 120,000 residents of Hebron overhauled; through longer-term water initiatives, several monitoring and production wells will be constructed, providing 5 to 6 million cubic meters of water per year, and 50% of transmission lines for the Hebron-Bethlehem and Jenin areas will be completed. Through FY 1997, accomplishments related to promoting More Responsive and Accountable Governance will include: elections for the Palestinian Legislative Council, Head of the Executive Authority, and local councils/mayors held; Palestinian civil society organizations strengthened to play an active role in the decision-making process; and the Legislative Council's and Executive Authority's structures, procedures, and skills developed to permit a more technically sound and transparent legislative process. In addition, FY 1996 - FY 1997 accomplishments associated with the completion of activities designed to address short-term development needs will include: approximately 250,000 person-days of emergency employment generated, primarily in Gaza; 25 schools rehabilitated/constructed and playgrounds/boundary walls at as many as 50 schools improved, directly benefitting approximately 35,000 students; 192 apartments for lower-income Gazans constructed and occupied; more than 650 shelters upgraded in refugee camps; up to 12 kilometers of roads, sidewalks and sewer lines in Gaza City renovated. Six hundred home improvement loans will be provided, and a fund will be capitalized with approximately $4 million of reflows to continue the loan program through a Palestinian entity.
Other Donors
In recognition of the serious problems faced by the new Palestinian Authority and the historic opportunity presented by the peace process, donors pledged $2.4 billion in assistance to Palestinians at the October 1993 Conference to Support the Middle East Peace Process. Of the total donor pledge, approximately $1.3 billion had been made available through late FY 1996 for activities primarily related to infrastructure and housing, public finance, education, institution building and health.FY 1998 Program
Immediately following the signing of the DOP, USAID support focused on the start-up of Palestinian Authority operations, high-priority infrastructure, employment generation, and economic reactivation. Beginning in FY 1996, resources have been concentrated in fewer strategic areas. As such, USAID will assist Palestinians to realize tangible benefits of the peace process by promoting expanded private sector economic opportunities, greater access to limited water resources, and more responsive and accountable governance. In developing this strategy, USAID has balanced the need to ensure the short-term, tangible impact of U.S. Government assistance to Palestinians with the longer-term developmental needs in the West Bank and Gaza. The USAID program, as part of an overall country team approach, addresses crucial U.S. national interests in the Middle East by promoting market-oriented economic development and the emergence of democratic institutions in the West Bank and Gaza. These efforts will help lay the groundwork for long-term economic growth, a sine qua non for the viability of the new Palestinian entity and its peaceful relations with Israel and its neighbors.Agency Goal: Encouraging Broad-based Economic Growth
Between 1967 and 1978, the economy in the West Bank and Gaza achieved relatively high growth rates (8%-10% annually). However, in recent years, employment opportunities have been considerably restricted as Israel's security concerns have led to frequent border closings and reduced commercial activity. Furthermore, the transition to democracy is taking place within the context of complex formulas for the transfer of authority from Israel, and some basic issues affecting the economy have been deferred to the final status talks between the Palestinian Authority and the Government of Israel. Currently, insufficient access to credit, limited markets, low productivity and a deteriorated infrastructure restrict the potential for economic growth, and therefore political and social stability, in the West Bank and Gaza. Donor programs designed to promote private sector development must be responsive to the special circumstances which define the Palestinian economy. These include the predominance of small and microenterprises (90% of businesses have less than 10 employees), the dependance on Israel for access to markets for labor and goods, and the absence of a transparent andcomprehensive legal and regulatory framework. FY 1998 funding will address these obstacles to development through the following:
Strategic Objective 1: Expanded Income Opportunities Agency Goal: Protecting the Environment
Patterns of water allocation and use are critical to determining the quality of life of all Palestinians. Economically and developmentally sound practices with respect to water are essential to sustainable growth. Only 35% of the land in the Gaza Strip and 52% in the West Bank is suitable for cultivation, mineral resources are negligible, and the lack of water is a limitation for both agricultural and industrial development. As a result of USAID activities initiated immediately after the signing of the DOP, water systems and related neighborhood/village infrastructure have been upgraded. However, in response to the recognition within the Interim Agreement that Palestinians require an additional 70 - 80 million cubic meters of water per year, the U.S. Government has played an active role as a member of the Trilateral Committee (with the Israelis and Palestinians) in dealing with the political and technical issues related to water, and USAID has developed a broad program of assistance in the sector. Activities designed to address immediate water needs must be carried out within the context of longer-term master planning that accounts for water from all sources and for all uses as an economic resource, to be developed and exploited in an integrated fashion within a water-scarce region. FY 1998 funding will address these obstacles to development through the following:
Strategic Objective 2:Increased Access to and More Effective Use of Scarce Water Resources Agency Goal: Building Democracy
In January 1996, Palestinians elected an Executive Authority Head and a Legislative Council. Municipal elections have been delayed, but are expected to take place in the first quarter of 1997. These elections, per se, can be considered an accomplishment of the peace process as supported by the USAID program. However, continuing the process of democratic development in the West Bank and Gaza will encourage investment and broad-based economic growth, and facilitate steady progress towards a final settlement between the Palestinians and Israelis. At this point, Palestinians must focus on further transition towards self-rule, including the establishment of democratic checks and balances, and the development of accountable and transparent governance. In order to achieve this, a vibrant civil society with an active role in the decision-making process must emerge, the branches of government must develop technical proficiency, constituency outreach and institutional stability, and appropriate management responsibilities must be divested to entities of local governance. USAID assistance provided in FY 1998 will finance efforts that will focus on the following:
Strategic Objective No. 3: More Responsive and Accountable Governance
Activity Data Sheet
PROGRAM: WEST BANK AND GAZA
TITLE AND NUMBER: Expanded Economic Opportunities, 294-SO01
STATUS: Continuing
PROPOSED OBLIGATION/FUNDING SOURCE: FY 1998 $6,700,000/ESF
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2001
Purpose: To expand economic opportunities for Palestinians in the West Bank and Gaza.
Background: High unemployment and underemployment and declining incomes are among the most difficult obstacles to economic growth, and indeed stability, in the West Bank and Gaza. Increasing economic opportunities will provide perhaps the most tangible evidence that the peace process is leading to improvements in the daily lives of Palestinians. However, economic indicators in the West Bank and Gaza have worsened in recent years, in large part because of border closures and diminishing remittances from abroad. Donor programs have provided some temporary alleviation through emergency employment creation, but approaches that provide longer-term solutions are required.
USAID Role and Achievements to Date: Ongoing USAID activities include technical support to small businesses and the Federation of Palestinian Chambers of Commerce, vocational training, and small business lending. In late FY 1996, activities to provide technical assistance for the establishment of industrial zones and credit for microenterprises were initiated. To date, USAID has helped over 50 firms increase their productivity and access to markets, and strengthened the business skills of more than 1,800 Palestinians. In addition, 200 loans have been provided to small businesses in Gaza, resulting in the creation of 600 permanent jobs. USAID technical assistance has been central to preliminary agreements and actions related to the legal and regulatory framework, institutional arrangements, planning for off-site infrastructure, environmental impact assessment, and security options for the pilot industrial estate in Gaza. Based on this and subsequent USAID assistance, construction at the site will begin in 1997.
Description: USAID activities help: (1) improve the access of small and microenterprises to financial products and services by expanding technical assistance mechanisms and credit; (2) develop new and expanded markets for Palestinian goods and services through market information and technical assistance/construction for industrial zone development; (3) enhance the productivity of Palestinian enterprises through training in entrepreneurial skills and appropriate technologies; and (4) encourage an appropriate policy framework for private sector development.
Host Country and Other Donors: The European Union and the UK have funded programs providing loans to small businesses, but not microenterprises, and the World Bank is commencing a major small business project. The World Bank and USAID are playing a lead role in providing assistance for joint Israeli and Palestinian efforts related to industrial zone development.
Beneficiaries: Primary beneficiaries of the activities will be the majority of Palestinians working in micro, small and medium-sized firms. More specifically, it is estimated that 150,000 microenterprises will be eligible for loans though programs assisted by USAID, either through capitalization of credit funds or technical assistance and training to establish credit for such enterprises through the formal financial sector. Up to 22,000 jobs will be created at the pilot industrial estate which will be partially financed by USAID.
Principal Contractors, Grantees, or Agencies: USAID will implement activities through U.S. firms (currently Development Alternatives International), the United Nations Relief and Works Agency, U.S. NGOs (currently the Save the Children Federation and the YMCA), and the Palestinian private sector.
Major Results Indicators: Indicators of success will include: private sector employment; wages; and private sector revenue or value added.
Activity Data Sheet
PROGRAM: WEST BANK AND GAZA
TITLE AND NUMBER: Greater Access to and More Effective Use of Scarce Water Resources, 294-SO02
STATUS: Continuing
PROPOSED OBLIGATION/FUNDING SOURCE: FY 1998 $58,000,000 ESF
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2001
Purpose: To provide greater access to, and facilitate more effective use of, scarce water resources.
Background: Water supply is a major constraint to sustainable economic growth in the West Bank and Gaza, and a highly political issue within the peace process. The Interim Agreement recognized this situation by establishing a long-term target of increasing annual water supply to Palestinians by 70-80 million cubic meters. The lack of water represents a critical constraint to economic growth, as it relates to household, industrial and agriculture uses. It also has significant, although less immediate, impacts on environmental conditions and health indicators.
USAID Role and Achievements to Date: Beginning in FY 1995, USAID has financed the rehabilitation of the storm water and sewage collection systems in Gaza City through the cleaning/replacement of approximately 50 kilometers of sewer lines and stormwater culverts, renovation of the Sheik Radwan Pump Station, and improvements of a central drainage area. As a result, flooding and sewage overflow has already been reduced in certain neighborhoods. Work is more than 50% completed on water networks in 21 villages in the West Bank and improvements to the water system in Hebron. When completed, approximately 220,000 Palestinians will have improved access to potable water as a result of these activities. Overall water master planning and designs for well development, transmission and distribution lines are underway. Planning for the expansion of the waste/storm water system in Gaza is also in process.
Description: Activities under this objective will assist in: (1) increasing the quantity and quality of water at the village and municipal levels by developing new sources, upgrading and extending water systems, and monitoring water quality; (2) promoting more effective use of available water by reclaiming wastewater and stormwater, and instituting conservation measures and loss prevention programs; and (3) enacting policies for more equitable allocation of water resources at a regional level by establishing water data banks and adopting water resources master plans (to include regional conservation, loss prevention and reuse measures, and the identification of new sources).
Host Country and Other Donors: Significant resources have been committed by the United Nations Development Program, Germany, Norway, the European Union and Italy. USAID assistance will focus on developing new sources of supply and policy formulation related to water resources management, while other donors will construct distribution networks and support institutional development at local levels. The World Bank is expected to take the lead in supporting the privatization of water facilities. USAID will work directly with the Palestinian Water Authority, the Municipality of Gaza and the West Bank Water Department to respond to the provisions of the Interim Agreement. All activities are coordinated through the Joint Water Committee (co-chaired by Israeli and Palestinian water officials).
Beneficiaries: The bulk of the population of the West Bank and Gaza will benefit from increased supplies and improved management of water resources. USAID support for the development of specific wells and transmission/distribution lines will be focused initially in the Bethlehem-Hebron and Jenin areas, and financing for storm/waste water activities is concentrated in Gaza.
Principal Contractors, Grantees, or Agencies: USAID expects to implement activities primarily through U.S. firms (currently Camp, Dresser and McKee, and Metcalf and Eddy are the two prime contractors), with the United Nations Relief and Works Agency (UNRWA), the United Nations Development Program (UNDP), and U.S. non-governmental organizations (currently, the Save the Children Federation and Catholic Relief Services) also playing significant roles.
Major Results Indicators: Indicators of success will include: Palestinians with access to piped, potable water; users consuming a minimum requirement; non-domestic needs met with non-potable sources.
Activity Data Sheet
PROGRAM: WEST BANK AND GAZA
TITLE AND NUMBER: More Responsive and Accountable Governance, 294-SO03
STATUS: Continuing
PROPOSED OBLIGATION/FUNDING SOURCE: FY 1998 $10,300,000/ESF
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2001
Purpose: To facilitate more responsive and accountable governance.
Background: In keeping with the various accords signed by the Israelis and Palestinians, elections were held in January 1996 for a Legislative Council and Head of the Executive Authority for the West Bank and Gaza. Municipal elections were delayed and are now scheduled for early 1997. This series of elections is only a preliminary step in the establishment of open, transparent and effective governance in Palestinian self-rule areas. The Palestinian Authority is now challenged to create a functioning self-government structure that is responsive to the needs and expectations of its people.
USAID Role and Achievements to Date: USAID support, which included voter training, civic fora, election observation, and technical assistance to the Elections Commission, was instrumental in the successful execution of the January 1996 elections. Multi-donor assistance to the Holst Fund, including a final USAID tranche of $10 million scheduled to be provided in FY 1997, has been critical in financing government services in the West Bank and Gaza. Initial assistance related to USAID's longer-term program in this sector was instrumental in drafting the Palestinian Basic Law (the equivalent of the PA's constitution), which remains in process, and equipping the Legislative Council's 16 district offices.
Description: USAID will support civil society's role in policy analysis, advocacy and government oversight. In addition, USAID activities will strengthen the Executive Authority's public policy-making capability and support Legislative Council functions related to executive oversight, legislative drafting and review, and constituency relations. Following the local government elections, USAID expects to design activities to strengthen local governance.
Host Country and Other Donors: The World Bank, the UK and Australia are supporting initiatives related to legal reform and the justice sector, which will be complemented by USAID's support in the areas cited above. The United Nations Development Program and the UK have financed public administration training for the Palestinian Authority, and twenty-five countries including the U.S. have provided resources to the Holst Fund. The European Union is supporting the administrative strengthening of the new Legislative Council, which will help lay the groundwork for and complement USAID interventions related to the legislative process.
Beneficiaries: All Palestinians will benefit from the emergence of open, transparent and effective self-rule mechanisms.
Principal Contractors, Grantees, or Agencies: USAID will implement activities primarily through U.S. contractors and grantees (currently the National Democratic Institute, the International Foundation for Electoral Systems, the International Republican Institute, and Associates in Rural Development). Several of these organizations have or will form partnerships with local institutions. In FY 1997, USAID expects to sign grants with local non-governmental advocacy groups and a contract with a U.S. firm to carry out activities with the Executive Authority.
Major Results Indicators: Indicators of success will include: citizens' confidence in key institutions; quality and quantity of legislative proposals and actions; the number of civic society interventions in policy-making processes; and uniform roles and procedures for legislative and policy-making functions.
WEST BANK AND GAZA
FY 1998 PROGRAM SUMMARY USAID Mission Director: Christopher D. Crowley
Encouraging Economic Growth Stabilizing Population Growth and Protecting Human Health Protecting the Environment Building Democracy
Providing Humani-tarian Assistance
Total
USAID Strategic Objectives
1. Expanded Income Opportunities ESF
$6,700,000
$6,700,000
2. Improved Access to Extremely Limited Water Resources ESF
$58,000,000
$58,000,000
3. Improved Key Democratic Practices and Processes ESF
$10,300,000
$10,300,000
TOTAL ESF
$6,700,000
$58,000,000
$10,300,000
$75,000,000
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