Country Intervention Framework - Palestinian Territories

CIP 2016-2020 CIF 2014-2016

Egypte Palestinian Territories COUNTRY INTERVENTIONpays FRAMEWORK 2016-2020 Cadre d’intervention 2014-2016

Summary

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Key elements for the AFD strategy in Palestinian territories

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1.1.

1.2.

1.3.

1.4.

2.1.

2.2.

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The AFD’S intervention strategy 20

3.1.

3.2.

3.3.

3.4.

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Strategy monitoring methods 28

Summary of the issues Analysis of the development strategy of Palestinian Territories Overview of development aid Guidelines for the French strategy

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Review of the AFD’s past activities, it’s added value 14

Strategic approaches Objectives and activities Cross-functional objectives Partnerships and knowledge creation

LIST OF ACRONYMS

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21 22 25 27

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Table of contents

Quantitative assessment of past activities Qualitative assessment and added value

Summary

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Éléments déterminants pour la stratégie de l’AFD en Territoires palestiniens

Summary

T

wenty years after the signing of the Oslo Accords, the Palestinian Authority (PA) has still not obtained the legitimacy and credibility it seeks. Institutional reforms, supported by the international community, often remain at the law stage and fail to produce any significant changes in people’s daily lives. It is clear that the constraints imposed by the occupation are a decided obstacle to any practical implementation of these reforms: the levying of custom taxes at source by Israel and discretionary reimbursements (sometimes blocked as a retaliatory measure), the restrictions on freedom of movement applied to peoples and goods in Zone C (60% of the West Bank) controlled by Israel, the continued settlement, the de facto integration of East Jerusalem into Israel, the Gaza blockade, and so forth. The suppression of the Second Intifada (2000 – 2003) had a profound impact on Palestine, which still has not regained its ex-ante economic level.

Nevertheless, the extraordinary resilience of the Palestinian society is a key asset for development actions.

In this context, the purpose of this Country Intervention Framework (CIF), in line with French policy, is to "contribute to the creation of a viable Palestinian State based on the borders of 1967, living in peace and security with Israel, and with Jerusalem as capital of both States".1 The AFD will therefore continue to support the PA’s development strategy, endeavouring to consolidate the structures most relevant to real conditions on the ground – public service operators, municipalities, small and medium size enterprises (SMEs) and civil society – to enable basic services to reach communities faster.

Thus, the three specific goals of the CIF are as follows: • strengthen the institutions and operators, and support the drafting and implementation of sectoral policies; • maintain and improve the living conditions of the Palestinian population; • support economic stakeholders in the private sector.

The most desirable political scenario involves maintaining the status quo in negotiations between Israelis and Palestinians.

The following focal sectors are extended: • Water and sanitation: the AFD will seek firstly to continue intervening with the Palestinian Water Authority on institutional and governmental issues, and secondly, to consolidate its partnerships with public service operators (CMWU in Gaza) and Joint Water Councils on the financing of water distribution and sanitation projects.

A professional integration section will be introduced during the course of this CIF, with the aim of extending it to energy and the environment.

• Support for municipalities: given the fragility of the PA, town halls are points of resilience essential to the proper functioning of services for the population. This sector also receives substantial compensation providing an efficient funding mechanism: the Municipal Development Programme. The AFD will continue to support phase 3 of this developmental programme.

In the context of the Union for the Mediterranean’s Urban Projects Finance Initiative (UPFI), more complex projects have been identified which this CIF intends to carry through. In addition, the CIF will enable the integration of potential urban development "governance" projects, such as projects related to intermunicipal links.

1. December 2013 action plan of the French Consul General in Jerusalem, updated in October 2015.

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• The private sector: Palestinian businesses are adapting, despite the severe constraints imposed on them. The AFD will thus try to support this dynamic driven by the private sector. Current projects will be assessed (Bethlehem Industrial Zone, Cluster and PUMP) and second phases, for the "Cluster" project in particular, will be introduced if need be. The AFD will also develop other possible funding tools for this sector (ARIZ, non-sovereign loans and PROPARCO).

• The pursuit of energy efficiency, a "niche" funded by the AFD and the French Global Environment Facility (FGEF), will depend on an assessment to be carried out in 2016.

• Finally, in an effort to concentrate the various sectors, the AFD wants to restrict its interventions in the health sector, and only respond to humanitarian crises. The central pharmacy project for Nablus, due for completion in 2016, is a real success. However, the local agency must prevent the dispersion of its projects into sectors already strongly supported by other funders (USAID for health, in particular).

Across the board, particular attention will be given to strengthening the capacities of contractors. This will result in the more systematic inclusion of technical assistance aspects into projects. In parallel, the AFD wants to continue promoting collaboration opportunities with local communities, civilian society and French NGOs, to make the most of their technical expertise in the various sectors of intervention.

As in the past, the AFD will seek to allocate 25% of its financing to Gaza. When possible, projects in Zone C and in Jerusalem will be proposed.

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In Gaza particularly, the security situation and the burden of administrative procedures with Israel require that priority be given to co-funded projects, as well as participation in Trust Funds or innovative funding.

Beyond the annual funding budget, the AFD will seek to develop leverage effects through the delegation of funds (EU and other member States) and the Green Fund for the "climate" projects, which should cover 50% of the portfolio. Finally, the AFD will continue to maintain a regular strategic dialogue with a dozen French NGOs present in Gaza, the West Bank and East Jerusalem.

The annual total of €12 million in subsidies could be divided up as follows: • a "water" project of €10 to 12 million every other year; • a "municipality" project of €5 to 6 million in the years between; • the rest of the budget to be spread between the private sector, energy efficiency and funding to Gaza.

Non-subsidised funding will be reinforced: • ARIZ: a second portfolio guarantee is to be signed with the Bank of Palestine. Other similar guarantees could be signed with other banks. Leasing companies are already interested; • a non-sovereign loan every 2 to 3 years; • PROPARCO has identified several promising leads. If these produce concrete results, they would balance out loans and subsidy funding in the energy sectors and support for the private sector during the period of this CIF.

Key elements for the AFD strategy in Palestinian Territories

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Palestinian Territories

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Key elements for the AFD strategy in Palestinian Territories

1.1.

Summary of the issues

1.1.1. The geography and demography

of occupied territories Since 1967, the Palestinian Territories (PT) have covered 6,020 km2 of land distributed between the West Bank – including East Jerusalem (5,655 km2) – and the Gaza Strip (365 km2). The Palestinian population of the PT was nearly 4.6 million in 2014,2 divided between the West Bank (2.6 million including some 750,000 refugees from 1948), East Jerusalem (260,000) and the Gaza Strip (1.8 million, including some 1.2 million refugees from 1948).3 We estimate the number of expatriated Palestinians to be around 7.5 million.

In the West Bank, the vast majority of the Palestinian population live in the cities (Zones A and B) and only 287,000 Palestinians live in Zone C,4 which represents 60% of the territory and contains the reserves of land, water and other natural resources essential to economic development. It is also where the Israeli settlements are located.

The settlements are illegal with regard to international law,5 even though part of them are programmed or recognised by the Israeli government.6 A total of some 300,000 settlers live in Zone C, mostly along the Jordan, and some 200,000 are located in the Jerusalem District.7 The density in the West Bank is 500 inhabitants per km2.

2. A survey by the Statistics Authority is scheduled for 2017.

3. The refugees from 1948 living in camps – most of which are set up in urban centres and are managed by the UNRWA, which funds basic services – are not managed by the municipalities in which they are located.

4. Since the Interim Agreement on the West Bank and the Gaza Strip or "Taba Agreement" of 28 September 1995 (see Oslo Accords below), the West Bank has been divided into three zones. Zone A includes the seven Palestinian big cities of the West Bank (Jenin, Qalqiliya, Tulkarem, Nablus, Ramallah, Bethlehem and Hebron), where security and administration are in the hands of the Palestinian Authority. Zone A covers 20 % of the West Bank and includes 55% of its population. In practice, the Israeli army assumes the right to intervene in Zone A. Zone B includes most of the other Palestinian towns, apart from a few villages and refugee camps. The Palestinian Authority is responsible for them legally, and Israel retains primary responsibility for issues of security. Zone B includes 28% of the West Bank territory and 41% of its population. Zone C is under total Israeli control for security and administration. It has the greatest land surface and comprises the majority of fertile land and natural resources (62%). It is also the only zone with territorial continuity with the West Bank, surrounding and dividing Zones A and B. Furthermore, it contains all the roads that lead to the Israeli communities, the buffer zones (near the settlements, the Wall, the roads, the strategic zones and Israel), and nearly the whole of the Jordan Valley, East Jerusalem and the desert. All the borders are located in Zone C, where Israelis always have total control.

5. According to the United Nations, all the Israeli settlements violate Article 49 of the fourth Geneva Convention of 1949, which forbids an occupying power to transfer a portion of its own civilian population to the territory it is occupying.

6. The Mod’il Illit settlement, illegally created in 1996, was promoted to the rank of municipality by the Israeli government in 2008.

7. The overall Israeli population is 8.1 million: 1.6 million Israeli Arabs and 7.5 million Israeli Jews. Jerusalem is home to 800,000 inhabitants, which include 500,000 Israeli Jews and 260,000 Palestinians living in East Jerusalem. According to estimates, the number of Israeli settlers varies between 500,000 and 650,000 in the West Bank and East Jerusalem. Their number has tripled since the Oslo Accords.

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Key elements for the AFD strategy in Palestinian Territories

In Gaza, the entire population live in municipalities and have no access to the territory as a whole. The Israeli armed forces maintain a "buffer zone", with restricted access, which extends up to 1.5 km from the barrier and prevents access to 35% of Gaza’s farmland. In this meagre territory, the density is the highest in the world, with 4,900 inhabitants per km2.

In this context, where population size plays such an important part in the political equilibrium, both the Palestinian and the Israeli population growth rates remain high.8 Since the Oslo Accords,9 the population of Gaza has increased by 83%, and that of the West Bank by 60%,10 while the service quotas supplied by Israel are still those stipulated in the Oslo Accords. In 2015, 51% of the Palestinian population was under 15.

1.1.2. An economic model determined

by the geopolitical context The World Bank classifies the PT among the mediumto-low income countries. In 2014, the per capita income was around US$1,900 (US$2,500 in the West Bank and US$1,000 in Gaza), compared with nearly US$35,000 in Israel. The PT’s GDP, US$13 billion in 2015 (nearly US$300 billion in Israel), is generated by the West Bank (75%) and the Gaza Strip (25%).

The relations between Palestine and Israel are asymmetrical. Palestine provides Israel with a substantial supply of labour, and while Israeli goods and services enter the Palestinian market without restriction, the opposite does not apply. Because of the restrictions imposed on the use of natural resources, energy, water and the confiscation of land, the structural evolution of this economy has led to a domestic production increasingly focused on nonmarket goods with low added value, mainly in the service and building sectors. However, this evolution has been detrimental to the industrial and agricultural sectors, which have now atrophied.11 The establishment of the PA administrations12 has increased the share of the private sector.

8. The Israeli population in 1949 was 800,000 inhabitants. It has increased tenfold since then, largely owing to waves of Jewish immigrants arriving from other countries. Today, the population is growing, mainly due to a birth rate of 3 children per woman on average. While this birth rate is only 2.3 for lay Jewish women, it is 7 in Haredi communities (traditionalist orthodox Jews).

9. Agreements negotiated at Oslo and signed in Washington between Israel and the Palestinian Liberation Organisation on 13 September 1993 (Oslo I). They consisted of a declaration of principle on the interim procedures for the autonomy of the occupied territories applicable, in several stages, over a period of 5 years, after which the final status of these territories was to have come into effect. On 4 May 1994, the Oslo process was complemented by the Jericho-Gaza Agreements investing the National Palestinian Authority with limited powers (Oslo II). Finally, the Interim Agreement concerning the West Bank and the Gaza Strip, or "Taba Agreement", signed in Washington on 28 September 1995, provided for the first elections for the Legislative Palestinian Council. It also implied a negotiated partition of the Palestinian Territories into zones where Israeli and Palestinian control would apply differently while awaiting the successful conclusion of the ongoing negotiations. This attempt at an Israeli-Palestinian peace process, largely supported by the international community, ran into difficulties between 1996 and 1999, when the political stance of various protagonists hardened over crucial themes: the status of Jerusalem, the problem of Palestinian refugees and the fight against terrorism. The most extreme positions emerged over the following years, with the assassination of Yitzhak Rabin in 1995 by an ultra-nationalist Israeli student, and increasing attacks by Hamas and the Palestinian Islamic Jihad Movement. These accords became moribund after the Second Intifada began in September 2000 and Israel re-occupied several regions of the West Bank.

10. The Palestinian birth rate was 6.5 children per woman at the beginning of the 1990s. It steadily decreased after that, and fell considerably from 2000 onwards to around 3.4 children per woman, but has now increased again in the past few years (4.1 children per woman) for reasons that have yet to be clearly analysed. It is now 3.7 in the West Bank and 4.1 in the Gaza Strip.

11. In 1995, the agricultural sector represented nearly 12% of the GDP (13% of employment). In 2014, it was nearly 4%. The industry (mining activities, manufacturing activities, and activities linked with electricity and water supplies) accounted for 21% of the GDP in 1995 (18% of employment), and only 15% in 2014. On the other hand, between these two dates, the service sector’s contribution to the GDP (and to employment) rose from 61% to 75% of the GDP (respectively 50% and 62% of employment) with a substantial public sector (15% of the GDP and 23% of employment).

12. The Palestinian National Authority is the name of the entity that governs the Arab inhabitants of the West Bank and the Gaza Strip in Zones A and B, defined by the Oslo Accords II. It has a president and an assembly elected by universal suffrage, a police force (but no army) and representatives in several countries.

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1 The dynamics of this constricted economy are characterised by under-investment in the public and private sectors, and high consumption, which hampers economic growth.

Given the Palestinian economy’s lack of diversification, a large part of consumer goods and also investments are imported and funded by external income. These mainly include transfers on behalf of the migrants (the diaspora resulting from the waves of migration since 1948), personal transfers (work income, 90% of which is made up of the revenues of Palestinian employees working in Israel, and the remaining 10% of the income of employees of international organisations). Since 1993, they have also included transfers by funders.

On the public finance side, the PA has had a budget since the Oslo Accords. Nearly 40% of the PA’s total expenses goes into the salaries of officials, including those posted in Gaza, and into social aid expenses. This budget is structurally in deficit owing to the economy’s lack of dynamism and low tax revenues.13 In addition, the PA is particularly penalised by the combination of "clearance revenues" and "net lending" systems. These two systems affect the amount of revenue collected and its predictability, in other words the PA’s ability to programme its budget and implement a real economic policy. This is because since the Oslo Accords, the Israelis have been in charge of collecting all taxes and various duties on external trade on the Palestinians’ behalf and paying them out. Every time there is a crisis, the Israelis freeze the payment of these "clearance revenues" as a financial retaliation measure.

But the proportion of these revenues in the PA’s budget has been steadily increasing since 1996 and is now 70%,14

which makes the PA’s budget management more and more vulnerable to political upheavals. When making payments, the Israelis deduct from these revenues outstanding payments on the consumption of electricity (over 90%), water and health services the Palestinian local communities have accumulated with their Israeli suppliers. This "net lending", the amount of which is not controlled by the PA, amounted to 20% of the latter’s outlay in 2014.

Overall, the PA’s outlay15 consists of operating expenditure, and mainly goes on salary and transfer expenses, investments being almost entirely financed by funders.

The financing of the budget deficit essentially depends on the aid contributed to the operating budget by funders.

This aid, amounting to nearly 10% of the GDP (30% to 40% of the budget depending on the year), is now almost considered as genuine revenue. In 2014, for a budget of US$4 billion, the deficit was US$1.6 billion, and budgetary support from funders was US$1.2 billion, resulting in a financing requirement of nearly US$400 million. The PA16 accumulated arrears (including US$100 million with the private sector, and the rest with pension funds), while simultaneously reducing its US$140 million debt to the banking system in 2014. International aid fell significantly in 2015 to US$0.787 billion.

Gaza’s economic growth profile is particularly impacted and reflects the recurring political crises. Gaza’s GDP, which represents nearly 25% of the West Bank’s GDP, has barely increased in real value since 1994. The rate

13. According to the 27 May 2015 World Bank report, only 30% of the fiscal potential is being exploited.

14. This development corroborates the transformation of the Palestinian economy into one based purely on imported consumption.

15. In 2014, of an outlay of US$4 billion (1.6 going to Gaza), the payroll came to US$2.2 billion, the purchase of goods and services to US$650 million (including 150 for the health system), transfers to nearly 800 and net lending to nearly US$300 million.

16. The PA cannot make use of the usual debt instruments. Their debt is made up of debts to funders (26%), debts to local banks (28%) – mainly short term (75%) – and payment arrears (46% of the debt) including 12% to the private sector. Nearly half of the debts to funders was not meant to be repaid. The PA’s internal and external debts came to nearly 44% of the GDP, a level deemed sustainable by the IMF. The level of arrears was around 5% of the GDP.

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Key elements for the AFD strategy in Palestinian Territories

of unemployment has rocketed, affecting 48% of the population in Gaza (60% with young people), and has increased by nearly 11 points after the war of summer 2014. The reconstruction of Gaza is being delayed, for lack of imports of the necessary materials for construction and production.

In the West Bank, the GDP has more than doubled in twenty years, but not enough in relation to demographic growth. The income per capita has risen by only 60%, whereas this rose by over 160% over the same period in the countries around the Mediterranean. Meanwhile, the unemployment rate in the West Bank has now reached 18%: 30.4% with young people between the ages of 18 and 24, and 27.4% with women.

1.2.

1.1.3. Social report In terms of Human Development, out of the 187 countries selected for the 2014 sample, the HDI ranked Palestine 107th. Life expectancy at birth is 73.2 years, similar to countries like Jordan (73.9 years). The child mortality rate between 0 and 1 years old is 19/1000, which is not very high compared to some African countries and close to the rate in France thirty years ago. The literacy rate is 96.4%,17 while 90.4% of children attend primary school and 76.5% attend secondary school. This compares with rates of 102% and 72% respectively for the whole of the Middle East and North Africa. The poverty rate is estimated at 25% on average, 16% in the West Bank and 39% in the Gaza Strip: a considerable increase compared to 2013 (28%). According to the UNRWA, 80% of the population in Gaza depends on international aid.

Analysis of the development strategy of Palestinian Territories

1.2.1. Beyond the political priorities, the problematic emergence of a medium- to long- term development strategy The PA strategy has developed since the Oslo Accords, which were characterised by the relative importance given to the economy and political construction of the Palestinian State.

1.2.1.1. The Oslo Accords and the pre-eminence of politics Throughout the entire Oslo process, the PA prioritised politics over the economy through the voice of Yasser Arafat. Since then, the PA has adopted no clear development strategy regarding specific short-term programmes or projects. However, owing to the urgent requirements and significant under-investment of the "pre-Oslo" period, the PA gave top priority – but with no comprehensive plan – to the necessity of building basic infrastructures, which were financed by funders throughout the 1990s.

For France, this was the period of government protocols18 that financed infrastructures in the water sector via big French companies.

17. Source: Palestinian Central Bureau of Statistics 2014.

18. These protocols could be used fairly flexibly by the Palestinians: a fixed yearly financial budget, to which contracts with French companies could be allocated without formality.

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1 1.2.1.2. After the failure of Oslo: the development strategy under the occupation After the failure of Oslo, the situation changed with the Second Intifada, the political partition of 2006 and the coming to power of the two-person team of Mahmoud Abbas and Salam Fayyad. The priority was to develop the economy by consolidating the competences of the administration and developing the private sector – for at the time, it was thought that economic development would inevitably lead to political recognition of the Palestinian State.

1.2.1.3. After Salam Fayyad: a more realistic position?

After Salam Fayyad’s resignation in April 2013, the new Prime Minister, Rami Hamdallah, appointed in June 2013, proposed a new three-year development plan (NDP) for 2014-2016, whose main guidelines were not much different from those of previous plans. He confirmed the PA’s desire to support the private sector and pursue the creation of an autonomous Palestinian State. The strategy notably included East Jerusalem and Zone C, whose strong economic potential was highlighted.

The strategic lines of this new approach were presented, in partnership with the funders, in a set of documents programmed for the 2008-2010 period, including the PRDP,19 and reasserted in the NDP (2011-2013). The focus was on constructing the different facets of a State, with firstly, governance, and secondly, the modernisation of public services. Public policies were developed in different sectors, particularly water, sanitation, and electricity. This desire for institutional structuring was also applied to the organisation of de-concentration/decentralisation and to a lesser extent to other sectors, such as health. The idea was to simultaneously support the development of the private sector as well. In 2007, the international community officialised its financial support for this strategy. It was decided that 70% of the sums paid by the community of funders would be used for the PA operating budget, and the remaining 30% would finance development projects, including heavy infrastructures. Over those years, and given the restricted territories in which the PA could apply its prerogatives, the PA strategy was mainly rolled out in Zones A and B. However, from 2011 onwards, the spotlight turned on the need to intervene in Zone C and East Jerusalem.

However, if the strategic approaches to economic development remained the same, the PA highlighted the impact of the occupation on both the implementation of these approaches, and, ultimately, its finances. Stating the movement restrictions and various constraints imposed by the Israelis as a major obstacle to the emergence of an autonomous economic system, the PA placed itself in a position of structural financial dependency with regard to international aid. Given that the peace process would be lengthy, the funders were asked for a long-term commitment to support the PA.

The strategy was less clear concerning Gaza owing both to the presence of Hamas, with which the funders refused to cooperate, and Fatah’s lack of communication. Yet the PA still operated there via its budget and the financing of Fatah officials who remained in place.

Today the PA is in discussions with funders about Gaza and its reconstruction. It is basing its approach on the National Early Recovery and Reconstruction Plan for Gaza of October 2014, drawn up jointly with the international community, which assessed requirements and planned which actions should be carried out in the next few years.

Unfortunately, over a year after the events of 2014, this reconstruction had not made much progress.

1.2.2. Development hampered by political and territorial fragmentation Since 1948 and the creation of the State of Israel, the PT have been in an almost constant state of crisis, with periods of high intensity conflict: the Arab War (1948-1949), the Six-Day War (1967), the Yom Kippur War (1973), the First Intifada (1986) and the Second Intifada (2000), the three Gaza wars over the past six years, the latest to date being

19. "Building a Palestinian State. Towards peace and prosperity" presented by Salam Fayyad at the Funders’ Conference for the Palestinian State in Paris, December 2007. The "Palestinian Reform and Development Plan" (PRDP 2008-2010), "Ending the occupation, Establishing the State 2008-2011".

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Key elements for the AFD strategy in Palestinian Territories

in the summer of 2014, and since the autumn of 2015 the series of attacks in all Palestinian and Israeli territories. It consists of a peculiar, asymmetrical war played out differently in four regions: East Jerusalem, West Bank Zones A and B, West Bank Zone C, and Gaza.

The Israeli presence in East Jerusalem and in all the occupied territories since 1967 is an occupation contravening United Nations resolutions. And yet East Jerusalem is de facto located in Israel, i.e. outside Palestinian jurisdiction, and funders can only intervene there to a certain extent.

It is in Zone C, an area totally under Israeli control, where the settlements are found, and where any construction that has not received the prior permission of the occupant is likely to be destroyed. Lastly, Gaza has remained under a blockade which makes any rapid and permanent reconstruction impossible, meaning that only Zones A and B can develop normally. Given these constraints, Palestine has not yet recovered the economic level it had before the Second Intifada.

From the beginning of the conflict, the peace process has come up against five stumbling blocks: • the final definition of the borders of Palestine, and thus those of Israel; • the status of Jerusalem; • the return of refugees; • the settlements; • security.

The roll-out of the Oslo Accords in the field did not meet the Palestinians’ expectations. Exchanges of territory against guarantees in terms of security were limited, and at the end of the 1990s, the Palestinians controlled neither their land or sea borders, nor their subsoil, nor their airspace.

In September 2000, the Second Intifada marked the failure of the Oslo process and led to further Israeli military occupation, the construction of the Wall20 and the accelerated

settlement of the West Bank. Internal dissension among the Palestinians – much of which was due to the attitude of standing up to the occupation – grew still further, and Fatah’s legitimacy was challenged. When the Israelis evacuated the Gaza Strip in 2005, the population rejected Fatah’s policy and Hamas emerged victorious from the local elections in 2005 and the parliamentary elections of 2006. Since then, Fatah and Hamas21 have never succeeded in forming a national unity government. This political and territorial split has considerably affected the economic route of these two territories. In addition, the process for resolving the Israeli-Palestine conflict has been similarly affected, insofar as this division seems to be firmly established.

Since 2006, the Gaza Strip has been a territory governed

by Hamas under Ismail Haniyeh. Hamas, once listed by the international community as a terrorist organisation, cannot be considered as a partner in any international agreement. Though no longer occupied, this territory is still isolated. As a result, in 2006, to preserve their safety, the Israelis imposed a blockade, whose severity varies with the successive periods of war and truce.

In the occupied West Bank, the PA only exercises its prerogatives on discontinuous and limited portions of the territory (currently 20%). The intensification of the Israeli presence over nearly fifteen years has altered the political map of the territories. Even beyond the West Bank/Gaza divide, four Palestines are now emerging on the West Bank, linked to each other by corridors: the North, the South, the Centre and East Jerusalem. This configuration has caused fractures between the local and central powers, and accentuated the complexities of achieving a two-State solution. Recent surveys have shown for the first time that the majority of Palestinians no longer believe in a two-State solution.

20. This consists of a construction on the West Bank that has been being built by Israel since the summer of 2002, with the aim of creating a separation barrier, under the official names of "Geder HaHafrada" in Hebrew (literally "wire fence of separation"), or "security fence". The apparent objective was to protect the Israeli population by physically preventing any "intrusion from Palestinian terrorists" into Israeli territory.

21. After an abortive attempt to form a common government immediately after the election, in June 2007 Hamas launched a military campaign against Fatah, and took control of the Gaza Strip. Mahmoud Abbas then appointed Salam Fayyad to form a government in which Hamas was totally absent. This decision suspended the application of the constitutional regime in place and led to the division of the Authority into two governments. One – the result of the election – dominated by Hamas, ruled in Gaza and was not recognised by the international community; the other, headed by Salam Fayyad, was recognised as the legitimate executive of the Authority but resulted from anti-constitutional measures. Salam Fayyad resigned in April 2013, because of growing discontent against the government.

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1 1.3.

Panorama de l’aide au dÊveloppement

International funders (apart from UNRWA) have been intervening in the PT since the set-up of the Oslo Accords.

While the sectors of intervention have varied very little, the amounts invested and the intervention methods have changed over the past twenty years. Generally speaking, investments in the PT, particularly in infrastructures, are exclusively financed by the funders. Between 1994 and 2000, international aid amounted to around US$500 million per year, and mainly consisted of aid for projects.

The recurrent political crises that began in the early 2000s diverted aid from investment in infrastructures, and the development of capacities, towards emergencies during the Second Intifada and budgetary support designed to compensate for a high deficit, from 2007 onwards.

Since the Paris Conference in 2007, the international community has paid Palestine (the West Bank and Gaza) an average of US$2.5 billion per year, reaching a peak of US$2.8 billion in 2009. In 2014, US$2.6 billion were paid out. This aid is one of the highest per capita (US$650 per inhabitant).

The Cairo Conference in October 2014, following the Gaza War, gave impetus to a fresh financial effort. Unfortunately, reconstruction was slow due to constraints concerning access and the importation of materials and equipment that were never really relaxed. By May 2015, only 26% of commitments had been fulfilled.

All the main funders intervene in the West Bank and Gaza and focus on the governance and water sectors, as do the World Bank, the EU and the KfW. The term "governance" covers support to the administration in general, the sovereign sectors (finance, justice, police, etc.) and the municipalities, together with budgetary aid. The energy sector attracts numerous bodies but no major projects have yet been launched. Very few funders take action in the health sector, apart from USAID which intervenes in all sectors with a health priority.

Generally speaking, there is considerable coordination between the funders in the PT, mainly because of the need to join forces to dialogue with the Israelis. Most of the big infrastructure programmes take the form of co-financing, or even Trust Funds.

Main bilateral funders in the PT in 2013 Country USA European Germany institutions Payments (US$ M)

UK Norway

France

966,26 309,5 117,38 108,63 107,49 66,06

Governance Governance Governance Governance Governance Governance

Security / / Security / /

SME support / / SME support / SME support

Education Education Education Education Education / Sectors of

Health / / Health / / intervention

Water Water Water / Water Water

/ / / / Energy Energy

/ Refugees (UNWRA) / Refugees (UNWRA) / Refugees (UNWRA)

Source: OECD/DAC statistics .

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Key elements for the AFD strategy in Palestinian Territories

The lion’s share of aid from Arab countries comes from Saudi Arabia, which has been paying US$20 million in budgetary aid each month since 2013, and the Qatar

1.4.

foundation, which mainly participates in the construction of buildings and roads in Gaza.

Guidelines for the French strategy

France’s current policy in Palestine is to "contribute to the creation of a viable Palestinian State living in peace and security alongside Israel, on the basis of the 1967 borders and with Jerusalem as the capital of the two States"22 France is represented in the PT by the French Consul-General in Jerusalem, who has the rank of ambassador and acts as such with the PA. The Palestinians recognise that France is a driving force within the European Union. The priority zones in terms of intervention are East Jerusalem, Zone C and Gaza.

The cooperation mechanism of the SCAC consists of a network of five French institutes, including a FrancoGerman one in Ramallah and one in Gaza, an archaeological research institute which is a local outpost of the IFPO (French Institute of the Near East). Decentralised cooperation involves around a hundred French authorities, of which several deal more particularly with water sectorrelated themes, for an annual amount of €1.5 million.

The MAEDI pays around €10 million each year, including €2 million mainly devoted to programmes 185 and 209, and €6 million for refugees (UNWRA).

The Economics Department of the French Embassy is managed by the Public Finance Institute in Ramallah, which it created originally. The Economics Department benefits from a donation protocol, the French Grant,23 which is designed to encourage local SMEs to buy French industrial equipment and materials. A budgetary aid is paid each year – half by the MAEDI and the other half by the MINEFI – which totalled €19 million in 2013, €16 million in 2014 and €16 million again in 2015.

Total French aid came to €44.2 million in 2014 and should be €42 million in 2015.

22. Action plan of the French Consul-General in Jerusalem in December 2013, updated in October 2015.

23. The French Grant in favour of the Palestinian private sector is a donation line of € million reserved for the purchase of French goods and services. This line, used to subsidise commercial loans, was introduced in 2010 to facilitate the productive investment of Palestinian companies; By the end of June 2015, 70% of it had been used. It is due to be renewed.

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Review Bilan desofactivités the AFD’s passées et valeur past activities, ajoutée it’sdeadded l’action value de l’AFD en Guadeloupe

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CIF 2016-2020

2

2

Review of the AFD’s past activities, it’s added value

2.1.

Quantitative assessment of past activities

The AFD has been taking action in the PT since November 1998 and until 2015 financed some fifty projects with grants representing a total of nearly €279 million. The AFD cannot grant sovereign loans to the PA, as it is not officially a State. Its actions are mainly focused on three sectors: water and sanitation, urban development and the private sector, and to a lesser degree on the energy and health sectors. Its projects are designed to support the institutional construction of the PA, and help the most disadvantaged populations in response to the situations of conflict that have arisen since the agency opened.

The volume of the AFD’s activity falls into three periods.

In its launch phase and up to 2007, the AFD only provided grants for two projects per year (on average, €12 million each year on programme 209). Following the Paris Conference of November 2007 and France’s commitment to support the peace process through an increase in its financial involvement (€68 million over 2008-2010), the AFD’s volume of funding activity doubled until 2011 (€22 granted each year on average). 2012 marked the start of a return to the financing levels of the 2000s, with €16 million in 2012, €13 million in 2013 and €10 million in 2014. In line with the commitments made by France at

the Cairo Conference of October 2014, the AFD planned to devote grants of between €10 and €12 million to the PT each year between 2015-17.

To adapt to its lower funding resources, the AFD has gradually diversified its intervention tools. Since 2008 (graph 1), in addition to its project aids, the AFD has been managing delegations of grants: from the French Global Environment Facility (FGEF) in 2008 (€1 million) and 2013 (€1 million) for energy efficiency programmes; and from the European Union in 2012 (€5 million) for the financing of a solid waste management project in Gaza, in 2014 (€14 million) for the construction of the Hebron water treatment plant. A delegation from the Dutch Cooperation (€7.5 million) was formalised in November 2015 as part of a programme for rehabilitating the water systems in Bethlehem. The AFD granted its first nonsovereign loan of €2.5 million in 2014 to Pharmacare, a company operating in the pharmaceutical sector. And lastly, since 2010, the AFD has been distributing the ARIZ tool in the PT, which guarantees loans to private companies of up to 50%. The Bank of Palestine is the principal partner in this programme, with €40 million in project guarantees.

Palestinian Territories

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2 Financial tools and amounts

25 20

Project subsidies excl. delegations

15

Subsidy delegations NGO subsidies

10

Guarantees (sums guaranteed)

5 0

average 2008 2009 1998-2007

Loans 25 2010

2011

2012

2013

2014

2015

20 15

During the 17 years it has been present in the PT, the AFD has mostly financed developmental projects (graph

below) for the sum of €250 million compared with €32 10 million for so-called "emergency" projects.

5

0 Breakdown of long-term developmental projects and projects with immediate effect

Developmental projects 247,59 M€ including study funding 3,3 M€ Projects with short-term effects 31,5 M€

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CIF 2016-2020

Jobs and infrastructures: PECDAR/NGO 21,5 M€ Gaza NGO health sector reconstruction 1,5 M€ Water reconstruction and distribution Multi-donor fund 8,5 M€

Review of the AFD’s past activities, it’s added value

In the second half of 2015, the loan portfolio of projects under way and grants (including delegations) was around €145 million. The three main areas of intervention constitute over 90% of the portfolio: 60% for water and sanitation, 18% for urban and rural development and 14% for the private sector. The contracting for projects financed by the AFD was mainly entrusted to the PA via its various ministries: the Palestine Water Authority (PWA) for the water sector, the Ministry of the Economy (MoNE) to assist the public policy in favour of the private sector, the Ministry of Local Authorities and its executive agency (MDLF: Municipal Development and Lending Fund) for interventions in urban and rural development, the Palestine Energy Authority (PEA) and the Ministry of Health.

Since 2009, the AFD has itself been financing, via its DPO department, French NGOs intervening in partnership with Palestinian Association, where the projects are aimed to

2.2.

strengthen the capacities of players in local civil society.

In the PT, nine NGO projects were under way in January 2016. These projects are being rolled out by eight French engineers and 16 partner Palestinian associations. The AFD’s co-financing involves €6.3 million in grants for a consolidated project amount of €16 million. Beyond co-financing NGO initiatives, this familiarity with the NGO activity and players made it possible, in reaction to the 2014 Gaza crisis, to finance two additional health projects for the rehabilitation and relaunch of primary health structures for the most vulnerable (€1.5 million implemented by Handicap International, Médecins du Monde and their Palestinian partners). Financing to NGOs concerns all the PT (Gaza, the West Bank and East Jerusalem) and covers various sectors of intervention and a wide range of competences in civil society: health (6 projects), education (2) and rural development (3).

Qualitative assessment and added value

2.2.1. The contribution of ex post evaluations Apart from project completion reports, with nearly 50 projects, six ex post evaluations have been carried out to date. The first, in the water sector in 2006, concerned all the projects that had taken over governmental protocols24 in 1998.25 Then two evaluations of projects dating from 2003 and 2006 were designed to respond to emergency situations through the creation of jobs.26 Finally, three evaluations were carried out on the first three projects of the urban development support programme27 (MDSP I, II and III) developed by the AFD over more than ten years (2004-2014).

In the water sector, the evaluations of former projects already highlighted the quality of French aid, the commitment of the AFD teams and their flexibility in this complex context.

Lastly, evaluations of the AFD’s intervention in the urban development sector acclaimed the appropriateness and continuity of its action in this field in liaison with the other funders. The benefits of apprenticeship made it possible to improve the programmes and in particular to move from the individual logic of the MDSP I to the approach of MDSP II and III (V today), with improved coordination between the funders. A new phase of support

24. These protocols were relatively flexible for the Palestinians to use: a financial budget set each year, to which could be allocated, contracts with French companies, without formalities, until the funds were exhausted.

25. February 2006: report by Françoise Duriez.

26. April 2013: Ex post evaluation of two projects undertaken by AFD, “Job creation project in the West Bank & Gaza (CPS3007, 2006) and Community development project in the West Bank (CPS3002, 2003)”. Patricia Huyghebaert, Alicia Tsitsikalis, Didier Nech (BOI), Mélodie Breton (Grassroots), with the support in Palestine of Issa Elshatleh (River Company) , Wessam El-Moamer (Pioneers).

27. Ex post No. 41, September 2011, AFD Municipal Development Project in the PT. Thierry Sénéchal. This evaluation concerns the MDSP 1 project (2004-2007) - April 2015 Ex post evaluation of the first phase of the MDP and AFD’s contribution to the programme (CPS1024 or MDSP II and CPS 1022 (MDSP III), Didier Nech and Patricia Huyghebaert (GRET).

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2 for Palestinian municipalities is currently being studied, for roll-out in 2016. The creation of an investment allocation mechanism for local authorities, based on the division of aid, is totally in line with the goal: supporting the PA’s institutions in view of establishing at a time when the PA is considerably weakened.

As regards achievements, even if investments often met emergency requirements without a long-term aspect being sufficiently considered, all the authorities made good progress in terms of both their budgetary management and their ability to establish strategic investment programmes.

2.2.2. Added value of the AFD As well as the AFD’s flexibility and the quality of the relations it maintains with its Palestinian partners, its action is particularly appreciated when it is carried out in problematic zones where other funders are unwilling to intervene. This is the case in the water sector, for example, for which the AFD has willingly financed projects in the north of the West Bank (Jenine and Tubas), a region that has received little attention from the international commu-

Objectives set

ARIZ needs to reach €5 million per year, , i.e. €25 million in 2015.

An initial non-sovereign loan needs to be concluded.

Set up at least one developmental project in Gaza.

Divide projects between Gaza, East Jerusalem, Zone C and the rest of the West Bank.

Positioning in subsectoral niches.

18

CIF 2016-2020

nity because it is a long way from Jerusalem, in a situation where it is difficult to move around for security reasons.

The AFD’s capacity for innovation is also acclaimed. The inventiveness of the projects it has set up in the energy sector (energy efficiency) and the pilot projects in Beit Zacharia and more recently Zone C are much appreciated by the Palestinians, the other funders and the French part.

2.2.3. Assessment of the previous CIF It took two years to produce a new CIF, banking on a stabilisation of the situation. That said, the 2011-2013 CIF was sufficiently varied and solid to support a two-year extension de facto.

The objective set by the AFD to improve the accessibility and quality of services for the population is still relevant.

This objective is totally in line with the French policy and cooperation scheme. It implies a reinforcement of institutions and infrastructures, which will then foster social cohesion.

The practical objectives were achieved, starting with the diversification of the financial tools.

Actual achievements

The agency guaranteed €40 million at the end of 2015.

This was done in 2014 .

This was the case with the NGEST water treatment plant and a waste collection site in the south, where work was planned to start in 2016.

An initial pilot project was completed in Zone C and the financing agreement for this project should be signed in early 2016. The AFD intervenes in East Jerusalem through the support sector for the private sector, ARIZ and NGOs. Energy efficiency is now on its second project of this type (revolving funds) and provides excellent visibility. However, there should be an evaluation before continuing.

Review of the AFD’s past activities, it’s added value

In addition, it kept to the following three focal sectors: • the water and sanitation sector has been a priority since the agency opened. For many years, it has represented half the projects and half the commitments. The AFD, together with the KfW, is one of the main players recognised in the sector; • support for the private sector is being maintained at a good level despite the question of the Bethlehem Industrial Zone, a presidential project which is suffering from lack of legislation on PPPs and industrial zones; • support for local authorities: the AFD is one of the founders of the MDLF, a Trust Fund dedicated to supporting municipalities. The strategy of the 2011-2013 CIF proved productive, because a sixth contribution to this fund is currently being studied (to be granted in 2016) and two positive evaluations have already taken place.

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The AFD’S Bilan des activités intervention passées et valeur ajoutée de l’action strategy de l’AFD en Guadeloupe

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CIF 2016-2020

3

3

The AFD’S intervention strategy

3.1.

Strategic approaches

Strategic framework for AFD's operations in the PT

OS 1: Strengthen State institutions and support the drafting of sectoral policies Results: • The PA has access to a series of sectoral policies • State institutions are in a position to implement them

Support for public policy drafting (cross-functional activities)

• Water policy •D evelopment of State action in the territory (mechanism for transfer to the local authorities) • Public policy in favour of private initiative •P ublic energy policy (energy efficiency) • Professional training, other

Support for players in the public and private sectors Purpose To act within the French cooperation scheme in line with France’s objective of helping to create a viable Palestinian State living in peace and security alongside Israel

Sectors Water Local authorities Private sector Energy Other

OS 2: Support economic players in the private sector Results: The private sector is well-structured and competitive

OS 3: Maintain and improve living and survival conditions of the Palestinian population Results: • The population have access to basic local services • The Palestinian population is able to cope with adversity

Support for implementing public policies (cross-functional activities/ public operator training) •M inistry and public operators of water service: West Bank Water Department (WBWD), public companies, JSC, local authorities, etc.

• MoLG, executive agencies and local authorities •M inistry of Energy (energy efficiency unit within the PEA) • All public sector players that support the private sector (Ministry, PIEFZA, etc.)

• Professional training, other Support for civil society • DPO activity Financing of private sector players (productive) •C redit guarantee and credit line activities with banks, loans to companies

Investment financing

•W ater and sanitation • Basic local services (waste, roads, etc.)

• I nvestments in the energy sector (energy efficiency in private and public buildings) • Professional training, other Financing of post-crisis reconstruction (Gaza, Zone C, East Jerusalem) via civil society and funders •T he Trust Fund of the World Bank (TFWB), NGOs, the ICRC in Gaza – irrespective of sector: health (psycho-social), accommodation, agriculture, etc.

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3 It is clear that, twenty years after the Oslo Accords, the PA has not yet managed to make the change from a militant organisation to a genuine administrator of a country.

In this context, it is important for the AFD to carry out enlightened action that integrates the characteristics typical of the PT and complies with the principal of "do no harm".28 While the AFD’s action need to be consistent with the PA’s development policy, it is not sufficient to guarantee the conditions for enduring economic and social development.

The intervention strategy developed is also intended to be pragmatic, and aims to: • r einforce the institutions and operators in charge of carrying out the public policies of the three focal sectors retained: water and sanitation, municipal development and the private sector;

3.2.

• ensure that these actions help to improve basic services for populations, and involve resilient players.

In this respect, it continues along the lines of the previous CIF while aiming for an increased sectorial focus (outside the health sector) and the continued diversification of intervention tools (guarantees, non-sovereign loans).

According to France’s action plan, priority will be given to the three zones considered the most fragile: Gaza (three projects planned), and to a lesser extent, Zone C and East Jerusalem.

A development hub was created in 2014, chaired by the Consul General, grouping together the SCAC, the Jerusalem Economic Department (JED) and the AFD. The JED and the AFD are working together to foster French influence, particularly in economic terms.

Objectives and activities

As a result, the specific objectives (SO) retained are as follows.

which it has already capitalised considerably: water and sanitation, support for municipalities and the private sector.

3.2.1. SO 1: To reinforce the institutions and operators and support the drafting and implementation of sectoral policies

Thus if the PA remains the sole institutional interlocutor at central level, other players could also act as a lever to introduce development strategies while observing a long-term vision as regards reinforcing institutions. This consists mainly of municipalities, their technical departments and equipment, which need to have a long life whatever the political situation. It also involves executive agencies such as the MDLF and the PWA, which constitute the operational aspects of the ministries, and private

Considerable efforts have been made during the last fifteen years to introduce an institutional framework that can orient and manage sectoral policies. The results obtained, although very fragile, are worth consolidating in the longterm. For this reason, the AFD is proposing to continue this institutional assistance in the three focal sectors on

28. The AFD’s intervention must contribute to the consolidation and development of the PTs, but also "do no harm", i.e. ensure that the projects implemented do not involuntarily exacerbate conflicts or delicate situations that could lead to acts of violence in the mid-or short-term. The factoring in of potentially negative effects of projects is carried out through the institutionalisation, identification, examination and follow-up of projects, broader consideration of the project’s socio-political environment and its potential impact on divides, a possible source of destruction and violence. Because of the extremely inflammable political and ideological environment, support to NGOs must be implemented with extreme caution.

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CIF 2016-2020

The AFD’S intervention strategy

sector companies, the driving force of the economy. Lastly, it involves civil society organisations, which contribute genuine expertise in responses to emergency crises, and in-depth knowledge of community problems.

already existing as concerns support to municipalities, in the water and sanitation sectors, and even to the private sector. However, it would require additional resources linked with the transfer of this new power.

To do this, the AFD will seek to entrust investment project contracting to the players and institutional operators bets able to respond to populations’ needs. Contracting support will be provided to these players as back-up for carrying out large-scale projects. Lastly, technical assistance technique will be mobilised to make progress in the more across-the-board issues of sectoral reforms (especially in the water sector) and carry out diagnoses enabling future orientations to be defined (master plans, for example). The AFD will seek to include these actions in pilot approaches and strive to create the conditions for their evaluation and perpetuation. A form of assistance is currently being studied in the professional training sector.

This project will aim to boost technical capacities (continuous and basic training) in the trades (at technician level) of water and sanitation, and possibly of energy and the environment at a later stage.

3.2.2. SO 2: To maintain and improve living conditions for the Palestinian population

The transfer of governance power to the AFD could be focused, in Palestine, on intermunicipal links. Though they are resilient players in this political situation, there are too many municipalities in Palestine (134 municipalities, not counting the 200 village councils). To pool the management costs of municipal services, joint service councils have been created over the past few years, with a certain amount of success (as with the waste management sector in Jenine and Hebron). The Belgian Technical Cooperation (BTC) is the leader in this sector and deals directly with the French players in mainland France (the Ministry of Decentralisation, Ministry of the Interior, etc.). The Agency proposes to mount an initial project cofinanced with the BTC. The idea, as regards governance, is not to introduce a new sector but to integrate it with the one

While the PA presents institutional problems to which SO 1 proposes to find solutions, it is also facing chronic insufficiency in terms of financial resources, focused on operating expenses. The AFD will be continuing its support in investments designed to improve the basic infrastructures in the two focal sectors: water and sanitation, and urban infrastructures.

The water sector represents the AFD’s priority focal sector in the PT as it represents half its financing and projects.

For the Palestinians, as for the other funders, the AFD is one of the leaders in the sector, which gives it considerable visibility. However, because of a weak and overloaded contracting authority, the PWA in this instance, the AFD will seek projects to be financed directly with the municipalities or via the public services. After several «blank» years in this sector, the AFD is planning to look into a project in the water sector of €10 million every two years. The first will aim to continue the priority investments in the north of the West Bank, following the master plan currently being drawn up.

The municipality support sector is functioning satisfactorily.

The Ministry of Local Government is a reliable partner. It has oversight of the MDLF, a trust fund that gives entire satisfaction to the funders participating in it. Additional sums will be injected into the fund through the financing of developmental urban projects as part of the UPFI initiative of the UfM ("Jericho" and "Gaza Nord solid waste" project). Estimates in terms of support for municipalities are around €5 million every two years.

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3 With the previous CIF, the increase in the subsidy budget that followed the Paris Conference of 2007 pushed the Agency to initiate projects in the energy and health sectors, and thus outside the three above-mentioned focal sectors.

As regards health, the AFD does not wish to have a proactive positioning in this sector, which is largely dominated

by USAID. The AFD’s intervention will thus be limited to closing the operations currently in progress: a non-sovereign loan to the company Pharmacare (cited in SO 3) and the planned construction of the central pharmacy in Nablus.

The energy sector has looked promising for several years, but no major projects have emerged at this stage. Despite an energy law and considerable support from institutions, notably the EU, the PA still needs to produce a programme that meets the substantial requirements of the population. For the time being, the Agency plans to continue in this sector via its subsidiary PROPARCO, which could cofinance a private energy station in the north of the West Bank with the International Finance Corporation (IFC).

The Agency also finances energy efficiency projects which, until now, have provided excellent visibility. However, they are very complex to set up, and thus very timeconsuming. An assessment will be carried out in 2016 to decide on a possible phase 3.

3.2.3. SO 3: Supporting economic players in the private sector Paradoxically, and in parallel with an administration that is taking a long time to be constructed, the private sector is developing. The reconquest of the local market is one of the AFD’s priorities. Today, only 20% of medical requirements are satisfied by internal production. The inversion of this trend is a major issue for the PA, and a requisite

24

CIF 2016-2020

for the development of a conquest strategy for new niche export markets.

Around 20 major companies and/or holding companies are of an international, competitive level – like the banking sector – and would gain from being increasingly associated with development projects. In this context, effort should be directed towards SMEs. The AFD will attempt to meet the various needs of Palestinian SMEs, in terms of seeking new markets and improving productivity, professional training and access to financing.

One of the projects under way includes that of the Bethlehem Industrial Zone (BIZ), designed to inject fresh energy into SMEs in this geographical sector through the longterm set-up of a business park in the south of the town.

However, this project is an isolated case. A compulsory (political) exercise, it was probably too ambitious with regard to the country’s capacity.

Non-sovereign loans could be developed. To date, only one NSL was signed in 2014 with a Palestinian company producing medicines. A follow-up of the reimbursements and the partner would enable a decision on whether to continue with this type of operation. The main difficulty encountered here was that structures eligible for an NSL are used to obtaining grants and therefore do not see any advantage in incurring debt.

Support for the private sector through the "clusters" approach could also be pursued. One project is currently under way, aiming for the increased competitiveness of local companies via this clusters approach and a more effective dialogue between the public and private sector, consistent with the private sector development strategy

The AFD’S intervention strategy

laid down by the PA, in which the promotion of exports and the development of the local markets are defined as priority goals. A additional pilot upgrading and modernisation programme for Palestinian industries granted in 2014 will be rolled out in 2016-2018. The financing of a possible phase 2 of the clusters approach and the mobilisation of resources through donations will depend on the results of the current evaluation.

3.3.

Lastly, the ARIZ activity has increased considerably over the last years and for the moment needs to continue with controlled growth as concerns the long-standing partner, the Bank of Palestine. A second portfolio guarantee was granted in early 2016. A partnership with a new bank could be signed in 2016. The Guarantees Division is currently looking into the possibility of extending guarantee activities (leasing institution, national support for guarantee funds), which are developing considerably in Palestine.

Cross-functional objectives

3.3.1. Gender equality The situation of women in the PT is very mixed. It is particularly difficult in the isolated areas most affected by the conflict. In these zones, a combination of social, cultural, legal, political and economic factors limit women’s participation in public life, access to employment and decisionmaking.

Generally speaking, the powerful patriarchal culture of rural populations is a major obstacle to gender equality in daily life, through the forms of domination this generates.

Studies also show that the environment of unstable security in the occupied territories, like the restrictions imposed on the movement of Palestinians, only aggravates this situation. 20%29 of women marry before the age of 18, and 2% before the age of 15. However, certain figures are encouraging: 41% of those who own bank accounts and

41.2% of civil servants are women. Lastly, statistics show a higher presence of women than men as secondary school pupils: 55.7% compared with 44.3%.

Women are particularly under-represented in decisionmaking bodies because of an unfavourable legislative system. They are also exposed, particularly in rural zones, to the application of traditional or informal justice, shored up by the patriarchal standards mentioned above. Occurrences of domestic violence are very frequent (particularly because of the general level of stress and promiscuity – due to an inability to freely extend the inhabitable area) and 40% of women claim to have been victims of forms of psychological, physical and sexual abuse. In addition, the active female population was no more than 17% in 2011: the lowest rate of all Arab countries, while the active male population was around 70%. This rate of active

29. Source: Palestinian Central Bureau of Statistics, December 2014.

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25

3 women seems to be rising (30% in 2012) with, in particular, an increase of 32% to 47% of employment in the 1829 age range over the last decade, particularly for those achieving more than 11 years of education. Women’s activity is relatively limited in the agricultural and service sectors (with a slight growth in this sector over the past few years).

3.3.3. The French influence

The AFD – via the financing of local development projects in Zone C – is keen to promote gender equality by ensuring the participation of both men and women at all stages of the planning process (opening a platform for expression to women) so that the actions of this project really reflect the needs of men and women alike. "Gender" approaches are also taken into account by the DPO’s activity in the PT. 47% of women who have undertaken higher studies are unemployed, compared with 16.4% of men.

3.3.4. Territorial breakdown and crisis response capacity

3.3.2. Climate Although the environment does not constitute a focal sector in itself, 43% of projects financed by the AFD in Palestine have a significant impact on populations’ adaptation to climate change and the reduction of greenhouse gas emissions. For example, it might involve rehabilitating a network with a large number of leaks, or assisting the technical services to manage resources more effectively.

The set-up of wastewater treatment plants combined with projects for re-using treated water for irrigation in farming helps to improve populations’ resilience to desertification.

The improvement of solid waste management through methane capture has significantly reduced greenhouse gas emissions. Lastly, energy efficiency projects foster the promotion of new technologies, such as solar heating or the use of LED lighting. The goal of this CIF is, at the very least, to adopt the "group" objective whereby 50% of financial commitments must have a joint benefit in terms of climate.

26

CIF 2016-2020

The focal sectors, particularly as concerns water and sanitation, are areas in which French expertise is recognised internationally. Around 800 French authorities intervene in Palestine, mainly in the water sector, which leads to actions coordinated with AFD’s project, particularly training.

DPO supports ten or so French NGOs.

More generally, the AFD’s approach cannot be simply sector-based or instrumental. Each zone of intervention has its own needs and constraints.

As indicated earlier, East Jerusalem is de facto integrated into Israel, and thus the ALP cannot be a counterparty.

On the other hand, the AFD finances NGOs, guarantees for SMEs (ARIZ), and technical support (Cluster project in the Tourism subsector).

In Zone C, the main problem concerns buildings that are likely to be demolished. Monitoring building permit procedures and destruction notices remains an uncertain exercise and above all a very time-consuming one.

Consequently, the choice was made to delegate to the EU the construction aspect of our first large-scale assistance project in Zone C. This assistance, which began in 2016, will be carried out during the period of the current CIF. Gaza is the most problematic zone of intervention for funders, while its requirements are the most pressing.

Importing equipment and materials takes considerable time because of the blockade. Access requests have to be made in advance (three weeks for a normal passport).

Since the summer of 2014, the security instructions of the Consulate General have changed according to the situation

The AFD’S intervention strategy

on the ground, and it has sometimes been forbidden to spend the night or circulate beyond Gaza City. These constraints make a case for cofinancing for Gaza though without being the top of the list. Lastly, the so-called "emergency" intervention after the war of summer 2014 borrowed appropriate mechanisms (a Trust Fund and the contribution of small sums to French NGOs30). The agency would like to continue to support these NGOs and maintain this rapid response capacity in the event of a crisis. Consideration is currently being given to the idea of setting up a prequalification tool enabling these NGOs to be mobilised rapidly in the event of an emergency.

3.4.

The Crisis and Conflict Unit (CCU) recently produced tools dedicate to vulnerable States and/or weak contractors.

The Jerusalem agency is part of the CCU network and will participate, as far as possible, in testing these instruments. Two CCU missions took place in 2014 and 2016 in the PT. Generally speaking, the Agency endeavours to avoid mounting projects that are too complex so as to facilitate their execution and monitoring. It will also endeavour to anticipate its FTE requirements to ensure that they are in phase with an upscalable working programme.

Partnerships and knowledge creation

The AFD’s main partners (in terms of current financing or delegations of funds) are the European Commission, the World Bank, the KfW, the Netherlands and the BTC (Belgian Development Agency). A rapprochement with the IDB (Islamic Development Bank) has been sought since 2013, which could take shape through financing, in partnership with the WB, for the "solid waste north Gaza" project. Throughout the CIF period, it wishes to continue with coordination, financing and delegation of funds with the EUD and the member States, and with the World Bank. This financing is sought by the AFD in order to diversify its resources and share risks. It is thus a matter of arbitrating between the costs linked with extended deadlines, the advantages obtained from the delegations

and finally, the more ambitious development objectives that should be enabled by this type of project.

The Agency works closely with the SCAC (cultural action and cooperation service) of the French Consulate General in Jerusalem to foster decentralised cooperation in the PT. Several concrete cooperation schemes have already been rolled out which are mainly designed to support the provision of French local authorities’ expertise to Palestinian municipalities, particularly in the water sector (Paris, Grenoble, the Adour Garonne Water Agency, the district councils of départements 93 and 94), but also in the private sector (Rhône Alpes regional council, PACA).

30. The first (The World Bank’s MDTF) was focused on water and the second (Médecins du Monde and Handicap International) rolls out health programs.

Palestinian Territories

27

Strategy Bilan desmonitoring activités passées et valeur ajoutée de l’action methods de l’AFD en Guadeloupe

28

CIF 2016-2020

4

4

Strategy monitoring methods

This CIF is intended to be dynamic, in that the approach initiated with its drafting will need to continue as long as the local situation is volatile. A review halfway through the period is planned in 2017.

• the free circulation of people and goods in the West Bank and Gaza; • the institutional strengthening of the PA and its capacity for absorption.

Depending on how the situation develops, the AFD’s strategy could then be considerably revised. The basic parameters are: • the negotiation of peace between Palestine and Israel; • the reconciliation of Fatah and Hamas;

As regards monitoring the results of the AFD’s intervention in the PT, the AFD will choose the most relevant indicators for its actions from the aggregated French bilateral aid indicators approved by the ICICD of 31 July 2013 (see table below).

No 1 2 3 4 5

6 7 8 9 10 11 12 12 i.

13

Indicator

Number of family farms supported by AFD-financed programmes Areas benefiting from the biodiversity conservation, restoration or sustainable management programme Number of passengers using public transport in the sections financed Number of people connected to the electricity grid or with access to electrification a) Number of children registered at primary and secondary schools a.i.) Number of children completing primary education through AFD-financed programmes b) Number of young people attending professional basic training establishments supported by the AFD Number of inhabitants in disadvantaged districts where the habitat has been improved or made safer Assisted investments in the private sector Number of companies (SMEs) benefiting from support or financing from the AFD New renewable energy facilities installed Number of people gaining long-term access to an improved drinking water source Number of people gaining access to an improved sanitation system Number of external examinations by health professionals per inhabitant per year Number of projects with a nutritional objective (indicator calculated ex-ante) Reduction of greenhouse gas emissions (CO2) (indicator calculated ex-ante)

Field

Agriculture, food safety Biodiversity Transport Sustainable energy Education and training

Local authorities and urban development Financial institutions and private sector support Financial institutions and private sector support Sustainable energy Water and sanitation Water and sanitation Health Health, agriculture and food safety Cross-functional (climate)

Palestinian Territories

29

4 List of Acronyms BIZ BTC CMWU DOE DPO EQA ES EUD FTE GDP HDI ICICD IDB KfW MAEDI MDLF MDSP MDTF MINEFI NDP NGO NSL PA PAT PDRP PT EU PUMP PWA SCAC SO UfM UNRWA UPFI WB

30

CIF 2016-2020

Bethlehem Industrial Zone Belgian Development Agency Coastal Municipalities Water Utility Department of Operations Division of the Partnership with the NGOs Environment Quality Authority Economics Department European Union Delegation Full Time Equivalent Gross Domestic Product Human Development Index Interministerial Committee on International Cooperation and Development Islamic Development Bank Kreditanstalt fĂźr Wiederaufbau Ministry of Foreign Affairs and International Development Municipal Development and Lending Fund Municipal Development Support Programme Multi Donor Trust Fund Ministry of Economy and Finance New Development Plan Non-Governmental Organisation Non-sovereign loan Palestinian Authority Palestinian Autonomous Territories.

Palestinian Reform and Development Plan Palestinian Territories European Union Pilot Upgrading and Modernisation Programme Palestinian Water Authority Cultural Cooperation Action Service Specific Objective Union for the Mediterranean United Relief and Works Agency Urban Projects Finance Initiative World Bank

Notes

Palestinian Territories

31

Notes

32

CIF 2016-2020

Agence Française de Développement (AFD) 5, rue Roland Barthes - 75598 Paris cedex 12 France Tel. + 33 1 53 44 31 31 Agence Française de Développement - Jerusalem Agency 24 Mount Scopus Street, Sheikh Jarra P.O. Box 66717 91190 Jerusalem via Israel Tel. (+972) 540 04 23 /(+972) 581 49 46 Fax (+972) 540 02 27 afdjerusalem@afd.fr http://territoirespalestiniens.afd.fr