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The  Commission  has  approved  to advance  ECU  15  million  to  support the
Palestinian Authority central budget. The  agreement has been signed  by Vice
President  Marin  and the  General Palestinian  Delegate to  the EU,   Chawki
Armali.

The   agreement  targeted  for  the   recurrent  costs   of  the  Palestinian
universities and community colleges, will  keep over 30,000 students  in full
time study throughout 1996.

This decision  is in fulfilment of  the pledge made by  the Commission at the
meeting of the Ad Hoc Liaison  Committee of donors to the West  Bank and Gaza
Strip, held in Brussels on 12th April.  
     
Due to border restrictions imposed by Israel on Palestinian  labour and trade
following the  terrorist attacks  perpetrated in  Jerusalem and  Tel Aviv  in
February and  March,  income tax  and  customs  revenues to  the  Palestinian
Authority have dried  up.  The Authority  is at present suffering  an intense
liquidity crisis, putting jobs and services under threat.     

The Commission  is  also working  to  advance  the implementation  of  labour
intensive projects  financed by  the Community.   The Commission's  Municipal
Support   Programme,   for   example,  which   will   rebuild   local   level
infrastructure such  as roads and  sewage systems, or  its programme  for the
construction and rehabilitation  of schools throughout the West Bank and Gaza
Strip, will have significant multiplier effects on the local economy.     

These  actions demonstrate  the  Commission's  commitment to  supporting  the
Palestinian Authority  during a period of  financial and  economic crisis, as
it promised at the 12th April meeting.

BACKGROUND

Community assistance  to  the Palestinians  began  in  1971, when  the  first
contribution was made to  the regular budget of the United Nations Relief and
Works Agency  for Palestine refugees (UNRWA).   This  assistance continues to
this day, with triannual  conventions between the EC and  UNRWA governing the
Community  contribution to  the operations  of UNRWA  in  its five  fields of
operation  - the  West  Bank  and Gaza  Strip,  and  also Jordan,  Syria  and
Lebanon,  where  three-fifths  of  the  perhaps   three  million  Palestinian
refugees  still  live  (the  actual number  of  refugees  is  a figure  hotly
disputed by Palestinians and Israelis).

Assistance to the Occupied Territories 1980-93

In 1980  the nine signed the Venice  Declaration, which expressed the support
of the Community for Palestinian self-determination.  Funding then  commenced
for a  variety of NGO  projects, in  various sectors  - health,  agriculture,
education.  From the  time of  the intifada, special  emphasis was placed  on
the  funding  of  projects  through  specifically  Palestinian  institutions,
including the Palestinian credit agencies, the Palestinian Housing  Council -
which the  Commission was  instrumental in  setting up  -and the  Palestinian
Council for Higher Education.

The 1993 pledge 

A conference of donors  was held in October 1993 in Washington, following the
Declaration of  Principles.   Donors  pledged  more than  $2 billion  to  the
development of the Occupied Territories.   The Council pledged that 500  MECU
should be provided out of the  Community budget over the years 1994-98.   For
each  of these  years 50  MECU would  be provided  in grants.   The  European
Investment Bank  would make available  250 MECU in  long term loans over  the
same period, which it has recently started to commit.

A new situation

A  new way  of programming assistance  was to develop  between the Commission
and the new,  Palestinian Authority  (PA) from 1994.   The EC  Representative
took  up  his  posting  in  January  1995,   and  from  the  outset  of   the
establishment  of the PA  in May/June of  that year,  Community assistance to
the West  Bank and  Gaza Strip was  coordinated closely  with the  Authority.
The Commission  had also to  ensure the coordination  of its assistance  with
other donors,  according  to the  broad thrust  provided by  the World  Bank.
This   coordination  is   assured  through   the   international  Local   Aid
Coordination  Committees,  based   in  the  West  Bank  and  Gaza  Strip  and
established in early 1995.

The Commission decided that, given the large number of  donors now operating,
and the increased level of EC assistance, Community assistance would be  most
efficient and effective were it to concentrate on just a few sectors.

.    Given  its already  strong  relationship with  the  PA, and  the central
     importance of  a strong  administration to  successful development,  the
     Commission   would  provide   support  and   technical  assistance   for
     institution  building to  the ministries  and  municipalites, to  assist
     them in  managing services  and in  setting their  strategic and  policy
     goals.  

.    Second,  the Commission  had provided funding  for the  universities and
     community colleges and  for vocational training for some years.  Funding
     would be concentrated  on the support of the education sector, including
     the primary  and secondary levels.   In 1996 the  Commission will commit
     nearly  30 MECU to  the construction of schools  and the  funding of the
     universities.

.    Responding  to urgent  calls  from  the PA  for  the  funding of  labour
     intensive  projects, the  Commission  then  embarked  upon a  series  of
     small-scale  infrastructure  projects  at local  level  -  roads,  sewer
     systems -  through its Municipal Support  Programme.  This is  the third
     main area of Community assistance, and 15 MECU will be committed to  the
     Municipal Support Programme in 1996.

     According  to figures  available to  the World  Bank in Autumn  1995, EU
     assistance,  including  both  the Community  budget  and  the  bilateral
     assistance of  the member states,  amounted to  183 MECU (of  which 70.5
     MECU from  the Community budget),  or 45%  of the  entire donor  effort.
     The next largest  donors in 1995 were Saudi  Arabia (19%), the US (16%),
     and Japan (8%).      

Budget support to the  Palestinian administration  and the Tripartite  Action
Plan

Donors  also have  had to  face the  problem of  the  recurrent costs  of the
Palestinian administration.  From the beginning of its operation,  the PA has
had to  cope with budget deficit.   In June  1994 it was  agreed in principle
that 25% of the commitment of each  donor should be dedicated to meeting this
deficit.   Since  October 1993  some 80  MECU have  been provided  out of the
Community budget (or more  than 35% of its commitments since that date) - for
the universities and community colleges,  the Ministry of Education,  and, to
a limited extent, to the police force.

1996 Ministerial Conference on Economic Assistance to the Palestinians

On  9th  January a  Ministerial  Conference  on  Economic  Assistance to  the
Palestinians was called in  Paris.   Donors were asked  to provide $550m  for
the Core  Investment Programme -  the priority development projects  - of the
Palestinian Authority, as well  as $75m against  the PA's budget deficit  for
1996.

Donors actually  pledged  a  total  of  $1.365  billion  dollars,  more  than
covering the  investment programme  and  the deficit.   At  the same  time  a
revised version  of the  Tripartite Action  Plan was  signed, committing  the
donors and the  Palestinian Authority, and Israel, to cooperate in the social
and economic development of the West Bank and Gaza Strip.   

The European Commission announced at  the Conference a contribution  of $120m
for 1996, that is, a more than 75% increase in  the pledge it originally made
in 1993.   These  funds will go  towards projects  under the Core  Investment
Programme, and meeting the budget deficit  (in fact, the Community will  meet
more than  a quarter  of the  total deficit)  - according  to the  indicative
programme signed by  the Commission and the Palestinian Authority in November
1995.

Out of  the Community   budget  alone,  therefore, and  without counting  the
bilateral pledges of the  individual member states, the EU remains by far the
biggest donor.  The  next largest  donors in 1996  are Saudi Arabia  ($100m),
the World Bank ($90m), the US ($71m), and Japan ($43m).   

          
COMMUNITY ASSISTANCE TO THE WEST BANK AND GAZA STRIP 
(1994-95)

all figures in millions of ecu

                                               1994     1995     TOTAL
                Education                        10.9     26.2     37.1
                Police                             20                20
                Public infrastructure             1.7       15     16.7

                Elections                         1.6     12.9     14.5
                Private sector                      8        3       11
                Detainees/social welfare         10.1      0.5     10.6
                Humanitarian assistance           4.7      5.4     10.1
                Housing                            10                10
                Health                            0.6      8.3      8.9

                Population                          1      4.7      5.7
                Technical assistance                5                 5
                (various sectors)
                Institution building (PA          1.4      2.5      3.9
                ministries and agencies)
                Human rights/democracy            0.3        2      2.3
                projects
                Women                             0.1     0.06     0.16
                TOTAL                            75.4     80.1      156

     Table compiled with information available as at 5th January 1996

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