World Bank Report Points Way to Reconstruction of West Bank, Gaza

By Colin MacKinnon

In preparation for a year, the World Bank's report on the West Bank and Gaza is a no-nonsense document. It is probably the most complete survey ever done of economic and legal conditions in the Israeli-occupied territories, where conditions range from poor to dreadful.

Bank experts on agriculture, infrastructure, economics, law, and human resources appear to have poked into all aspects of economic life in the occupied territories. Their report, which recommends some $3 billion in public sector spending, will be the international community's guide for the reconstruction of the Palestinian economy. It is also a record of neglect.

Neglect of Infrastructure

The electrical grid, roads and sewage systems all predate the Israeli occupation in 1967. Since then, Israel has built little that wasn't for the benefit of Israeli settlers and has allowed the old to deteriorate. Here are examples from the Bank report:

Water. Urban water supply in the occupied territories is 60 liters per Palestinian per day, compared with 115 for Tunisia, 137 for Jordan, and 230 for Egypt. According to the Bank, Palestinians actually consume less than their calculated 60 liters because the distribution systems are in such bad shape that 40 to 60 percent of the water is lost. Furthermore, municipalities have to rotate supplies from area to area, which allows polluted water to get into the systems.
Electricity. Electrical consumption is very low, 680 kwh per capita per year. The figure for Egypt is 815 kwh, for Jordan 1,055 kwh. Because of the deteriorated grid, power losses run to 20 percent, and 138 Palestinian villages have no electricity at all or get it from diesel units.
Waste Disposal. No modern sanitary landfills exist in the occupied territories. Refuse is simply dumped outside town and village boundaries. To cut down on the volume, it's often burned, which leads to air pollution. Waste water is mostly allowed to flow into dry stream beds. The waste water plants that do exist seem to be poorly designed and badly operated.
Telephones. The ratio of telephone subscribers to total population in the occupied territories is 1 to 46. It's 1 to 15 in Jordan. Of the 400 or so villages in the West Bank, only 80 had phone service at the end of 1991. Of these, most had only one line, which, typically, was out of service for much of the time.
Schools. Buildings need major repairs. Libraries and laboratories are in poor shape. Textbooks and materials are inadequate. Curricula have to be modernized and teachers trained.

Public services are miserable because public finances are miserable.

Health. Spending on health care is relatively high—seven percent of GNP, which is comparable to European levels—but this figure is deceptive. Most of the funding goes to pay for high-cost, high-tech hospital care for the relatively well off. Hospitals are small and inefficient. Some groups, particularly women and the village poor, are badly served.

As the World Bank notes, public services are miserable because public finances are miserable. From 1970 to 1990 public sector capital spending has been about 3.5 percent of GDP, well below the average for developing countries. (In Jordan it averages 9 percent.) Spending is low because tax revenues are low. Israel takes from the occupied territories more than it spends on them. The World Bank calculates that the Israelis collect 18 percent of GNP in the occupied territories but spend only 16.5 percent there.

A rational program to improve public sector infrastructure, say Bank specialists, would cost just a bit under $3 billion in 1993 dollars over the next 10 years. The World Bank recommends a medium-term investment of $1.35 billion through 1998 with emphasis on immediate problems, particularly waste disposal. The World Bank says an additional $1.6 billion should be spent through the year 2003 on power generation, road networks and airports, depending on what political conditions emerge from peace negotiations. Linking Israel, the occupied territories and neighboring countries in a regional power grid would make great economic sense and isn't out of the realm of possibility.

The report also takes a critical look at Israel's grossly unfair application of law— favorable to Israeli settlers, devastating to Palestinians. As is well known, Palestinians can be deported, have their homes blown up, and have their land confiscated. They have no legal remedy for dealing with these calamities.

Less well known is the trouble Palestinians often have just finding out how the simplest rules of everyday life are applied. Israeli authorities publish booklets every several months in Arabic and Hebrew that seem to contain most of the military orders governing the occupied territories. But the implementing regulations often are not published, even in Hebrew.

Since the military orders tend to be vague, unless you know the regulations, it's often impossible to know how the orders will be implemented. For example, the Civil Administration issues travel cards that permit Palestinians to travel inside Israel. But how do you get a travel card on any given day? Only the Civil Administration knows because the rules aren't published. So if you're a Palestinian and you need a card, you have to go stand in line or warm a bench somewhere to find out how to get one. Sometimes you have to bribe to get the information.

Commercial law is as skewed as the civil version. Thus Israel offers a range of investment incentives and subsidies to Israeli nationals who want to establish businesses in the occupied territories. No incentives, of course, are offered to Palestinians.

On the Positive Side

The World Bank is nevertheless optimistic about what might be accomplished. The Palestinians are highly educated—18 college graduates per 1,000 population. On the West Bank, in particular, they have managed to live by their wits during a quarter-century of adversity.

Some 200,000 Palestinians living in the Gulf states and advanced industrial countries are skilled and often wealthy individuals who can be expected to get involved in the occupied territories' economy. If there is real peace, tourism could be a bonanza. It was the mainstay of the old West Bank economy. Public finances inside the occupied territories are nearly balanced. Moreover, Palestine has no external debt.

Though the Bank's recommended $3 billion infrastructure program has gotten headlines, the Bank sees private investment and Palestinian business acumen as the twin engines that will develop and modernize the occupied territories. New infrastructure and reformed laws, says the World Bank, should be aimed at encouraging local entrepreneurs and attracting private capital. The Bank estimates that the $2.5 billion in needed private funds won't be forthcoming without legal reform and an infrastructure to support investment.

The World Bank also wants to see $X5 million spent on what it calls "technical assistance"—the production of feasibility studies, training of administrators, building data bases and the like.

The World Bank recommends that the Palestinians expand links with Israel because the two economies are so intertwined that separating them is inconceivable. Palestinians should try, for example, to get the Israeli market opened up to agricultural products from the occupied territories. Sales inside Israel would increase occupied territories farm production and cut the bribery and skim-offs that come from illegal trade. Such sales also would lower prices for Israeli consumers. Israel, however, will have to agree to this and almost certainly will not be as accommodating as the Bank would like.

The World Bank also recommends increasing ties to such traditional Arab markets as Jordan and Egypt and to newer markets in Europe and North America. Perhaps the occupied territories can participate in the U.S.-Israel Free Trade Agreement in the context of a customs union with Israel.

The Donors' Conference

On Oct. 1, the U.S. hosted a hastily called donors' conference in Washington, where some $2.1 billion in pledges for near- and medium-term aid to the occupied territories were collected. A lot of this, notably the EC and Scandinavian funding, had already been pledged.

The Europeans were unhappy over the conference (one informed participant said the Scandinavians were "livid") since a meeting previously scheduled for early November in Copenhagen was to have reviewed the World Bank report and a separate report the EC has been preparing for occupied territories funding. To them, the U.S.-sponsored conference looked like grandstanding.

"I don't understand the Americans," said one Bank official. "They don't see that the fact that there were talks in Norway in the first place indicates that none of the parties have any confidence in those [Clinton] people in the U.S. government.

The Americans basically have kept a long distance from this from the beginning, but suddenly it looked successful and the Americans jumped in."

The aid level the U.S. had suggested, $3 billion over 10 years, clearly was lifted from the World Bank report. In any case, pledges of more than $2 billion are in, and there is an international consensus on funding at the Bank-recommended levels.

What happens next depends on negotiations between Palestinians and Israelis, and on what donor nations decide to do. The Palestinians and the international donors are now going to have to ask some tough questions.

How, for example, will the money be allocated? Who will spend it? How much control over it will the Palestinians have? What sort of jurisdictional fights will the Palestinians have with the Israeli settlers? How much obstruction will be tolerated from the latter?

The toughest issue of all, however, will be how to make sure the money is spent productively for all of the residents of the occupied territories.

Colin MacKinnon is chief editor of the Washington-based Middle East Executive Reports.