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Brussels, 21 March 2012
Meeting of the Ad Hoc Liaison Committee, 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.
Based on reports and recommendations from the parties, the UN, the World Bank, the IMF and the Quartet Representative to this meeting in Brussels, the donors reconfirmed their assessment of the state readiness of the Palestinian Authority regarding the institutions studied, and focused their further discussions on the Palestinian Authority’s fiscal sustainability and economic viability.
After three consecutive years of progress in the quality and functioning of the institutions, high levels of growth, improved living conditions and security in the West Bank, and revival of hope for the people, the Palestinian Authority experienced a slow-down in 2011. The economy grew at a slower rate, which can be attributed to falling donor support combined with the uncertainty caused by the Palestinian Authority’s fiscal crisis, as well as insufficient easing of Israeli restrictions.
At the beginning of 2012, the Palestinian Authority experienced a severe fiscal crisis, which threatens to become protracted given the recent and projected declines in donor assistance. The Palestinian Authority is making a concerted effort to strengthen its fiscal position, including taking steps to raise domestic revenues and control expenditures. However, these efforts will not be successful unless they are supported by actions of the Government of Israel and the donors.
Donors recognized that the Palestinian Authority simply cannot succeed in reducing the projected recurrent deficit to the currently expected levels of aid through solely its own actions. Therefore, in the short-term, it is imperative that additional donor funding be identified and transferred immediately to reverse the crisis before it becomes totally unmanageable.
Ultimately, sustainable economic growth and an end to the fiscal crisis will require greater realization of the Palestinian private sector’s potential. This can be achieved both by (1) relaxing Israeli restrictions on access to land, water, a range of raw materials, and export markets, and by (2) improvements by the Palestinian Authority in its business environment and ability to attract needed investment. Donors also expressed their concern about access to economic activity in the Area C, which constitutes the major land area for the Palestinians, and emphasised that greater economic potential will be achieved when access is assured.
The AHLC expressed concern for the situation in the Gaza Strip and reiterated its full commitment to the UN Security Council resolution 1860, including for the need for security for all civil populations. It welcomed that sustained recovery and high levels of growth in Gaza translate into higher employment and improved living conditions – even if the figures indicate, in part, the low base from which the growth started. A lasting recovery in Gaza will require a further increase in exports and private sector imports of investment inputs, as well as lifting restrictions on the legitimate passage of people.
On this basis the AHLC: