The World BankThe World Bankin thein the

West Bank and GazaWest Bank and Gaza

www.worldbank.org/pswww.worldbank.org/ps

The World Bank Group Is . . .The World Bank Group Is . . .

The The largest source of capitallargest source of capital for the developing world: almost $500 for the developing world: almost $500 billion in loans since established in 1944. billion in loans since established in 1944.

Full service global institutionFull service global institution: loans, grants, investments, guarantees, : loans, grants, investments, guarantees, 22, knowledge services., knowledge services.

It works in It works in more than 100 developing economiesmore than 100 developing economies.. Human capitalHuman capital: 10,500 staff from 195 countries.: 10,500 staff from 195 countries. Primary focus: Primary focus: helping the poorest people and the poorest countrieshelping the poorest people and the poorest countries. .

Five Five InstitutionsInstitutions in the Group… in the Group…

Int’l Bank for Reconstruction and Development Int’l Bank for Reconstruction and Development International Development Association International Development Association

International Finance CorporationInternational Finance Corporation

Multilateral Investment Guarantee AgencyMultilateral Investment Guarantee Agency

Int’l Center for Settlement of InvestmentInt’l Center for Settlement of Investment DisputesDisputes

Who Who OwnsOwns the Bank? the Bank?

Members are shareholders who have ultimate decision Members are shareholders who have ultimate decision making power. making power.

Governors meet yearly, decide key policy issues, Governors meet yearly, decide key policy issues, usually finance or planning ministersusually finance or planning ministers

Governors’ powers delegated to 24 Executive Governors’ powers delegated to 24 Executive Directors: appointed or elected, meet weeklyDirectors: appointed or elected, meet weekly

President: 5 year term, chairs Board and oversees President: 5 year term, chairs Board and oversees managementmanagement

Who Who RunsRuns the Bank? the Bank?

O ffice o f the P res ident

Executive D irectors

Board of Governors

184 Member Countries appoint their Governors.

The governors delegate specific duties to Executive Directors.

The president of the World Bank reports to the Board of Executive Directors.

Bank’s Main ProductsBank’s Main Products

Grants: From IBRD Income or Through Donor Trust Funds

Loans Investment Loans: to create physical and social infrastructure.

Adjustment Loans: quick disbursing assistance to support reforms in a sector or economy as a whole.

Guarantees: promotes private financing by covering risks that the private sector is not ready to absorb.

Other Non-lending Products: learning, capacity building, sector studies, policy advisory services, etc.

Priorities TodayPriorities Today

Improve delivery of basic education and health Improve delivery of basic education and health services. services.

Provide social protection for those left behind by Provide social protection for those left behind by economic change.economic change.

Rural development.Rural development. Protect the environment.Protect the environment. Support and encourage private business development. Support and encourage private business development. Promote reforms to create a stable economic Promote reforms to create a stable economic

environment.environment.

We also help countries and people emerge We also help countries and people emerge from Conflictfrom Conflict

The Bank works in over 40 conflict-affected The Bank works in over 40 conflict-affected countries, supporting international efforts to assist countries, supporting international efforts to assist war-ravaged populations.war-ravaged populations.

West Bank and Gaza: No different than anywhere West Bank and Gaza: No different than anywhere else- economic growth and opportunities must else- economic growth and opportunities must

underpin a peace process.underpin a peace process.

Economic SituationEconomic Situation Real GDP per capita to decline by 8-9% in 2006Real GDP per capita to decline by 8-9% in 2006

a reversal of a 3-year recovery from the impact of the a reversal of a 3-year recovery from the impact of the intifadaintifada. . GDP per capita at US$1,000 and real GDP per capita 33 percent GDP per capita at US$1,000 and real GDP per capita 33 percent lower than in 1999. lower than in 1999.

The Bank’s “Worst Case” scenario of March 2006 assumed GDP per capita would go The Bank’s “Worst Case” scenario of March 2006 assumed GDP per capita would go down by 27% in 2007 due to: (i) reducing aid; (ii) less Palestinian cross-border trade; down by 27% in 2007 due to: (i) reducing aid; (ii) less Palestinian cross-border trade; (iii) restricting Palestinian labor flows to Israel; and (iv) suspension of clearance (iii) restricting Palestinian labor flows to Israel; and (iv) suspension of clearance revenues.revenues.

While some measures, (e.g. the suspension of tax revenues) have materialized, others While some measures, (e.g. the suspension of tax revenues) have materialized, others have not. Donor aid increased in 2006 compared to earlier years.have not. Donor aid increased in 2006 compared to earlier years.

GDP per Capita, USD

800

900

1000

1100

1200

1300

1400

1500

2000 2001 2002 2003 2004 2005 2006

Economic Situation (cont…)Economic Situation (cont…) Increased aid has sustained the economy.Increased aid has sustained the economy. Since the Hamas PA of March 2006, donors cut aid Since the Hamas PA of March 2006, donors cut aid

to the PA, but increased assistance to the PA, but increased assistance outsideoutside of the PA. of the PA. The President’s Office received US$262 mn in the first 9 months of 2006 (most from The President’s Office received US$262 mn in the first 9 months of 2006 (most from

Arabs). Arabs). US$114 mn from the EC Temporary International Mechanism. US$114 mn from the EC Temporary International Mechanism. US$197 mn in budget support through the PA (most before March 06).US$197 mn in budget support through the PA (most before March 06). US$55 mn in financing of non-salary expenditures through the World Bank.US$55 mn in financing of non-salary expenditures through the World Bank.

IMF estimates that US$573 mn provided in budget support during first 9 months of 2006, with IMF estimates that US$573 mn provided in budget support during first 9 months of 2006, with at least US$60 mn expected in the last quarter of 2006. This compares to US$349 mn during the at least US$60 mn expected in the last quarter of 2006. This compares to US$349 mn during the same period of 2005- an increase of 90%-the highest level of budget support ever to the PA. same period of 2005- an increase of 90%-the highest level of budget support ever to the PA.

Budget support, US$/month

0

10

20

30

40

50

60

2000 2001 2002 2003 2004 2005 2006

Emergency/humanitarian assistance has Emergency/humanitarian assistance has increased in 2006, while development aid increased in 2006, while development aid has declined. has declined.

The Bank estimates that US$100 mn in The Bank estimates that US$100 mn in extra donor support raises Palestinian GDP extra donor support raises Palestinian GDP by 2-3 percent – the increase in budget by 2-3 percent – the increase in budget support could have prevented a further fall support could have prevented a further fall in GDP by 5 percent.in GDP by 5 percent.

10

Economic Situation (cont…)Economic Situation (cont…) Israel’s withholding of PA revenues has created liquidity problems.Israel’s withholding of PA revenues has created liquidity problems. An already An already

unsustainable position has worsened significantly- PA customs and VAT revenues are 2/3 of unsustainable position has worsened significantly- PA customs and VAT revenues are 2/3 of the PA’s revenues. the PA’s revenues.

The IMF estimates that resources available to the PA (including the Presidency) were US$0.5 The IMF estimates that resources available to the PA (including the Presidency) were US$0.5 bn during the 6 months after new government compared to US$1.2 bn for the same period last bn during the 6 months after new government compared to US$1.2 bn for the same period last year- a decline of 60%. year- a decline of 60%.

Public sector staff have not received salary payments since mid-March, but lower-paid Public sector staff have not received salary payments since mid-March, but lower-paid employees have received irregular payments from PO and TIM.employees have received irregular payments from PO and TIM.

Other public expenditures have been curtailed. Other public expenditures have been curtailed. The current movement and access restrictions have also lowered the Palestinian tax

revenue base. Even upon their release by Israel, future PA revenues will be less than before.

Economic Situation (cont…)Economic Situation (cont…)

Impact of seizure of clearance revenues

The two-fold increase in The two-fold increase in donor assistance has not donor assistance has not offset the impacts of the offset the impacts of the Israeli seizure of $360 in Israeli seizure of $360 in PA revenues.PA revenues.

Donors have used bypass Donors have used bypass mechanisms for mechanisms for channeling assistance, thus channeling assistance, thus raising the costs and raising the costs and reducing efficiency of aid reducing efficiency of aid expenditures.expenditures.

IMF, 2006.

Economic Situation (cont…)Economic Situation (cont…)

Closures continue to stifle Palestinian exports.Closures continue to stifle Palestinian exports. The The Bank’s Investment Climate Assessment (ICA) finds that Bank’s Investment Climate Assessment (ICA) finds that 60% of businesses report instability and transportation 60% of businesses report instability and transportation issues are the most important impediments. issues are the most important impediments.

The number of trucks carrying exports from Gaza The number of trucks carrying exports from Gaza dropped 40% from already low levels of early 2005, and dropped 40% from already low levels of early 2005, and remain far from the targets set in the November 15, 2005 remain far from the targets set in the November 15, 2005 Agreement on Movement and AccessAgreement on Movement and Access. .

Internal impediments have also impacted the economy.Internal impediments have also impacted the economy.

Movement restrictions reduced the number of Movement restrictions reduced the number of Palestinians working in Israel from 2005 to 2006-Palestinians working in Israel from 2005 to 2006- fromfrom 40,000 in 2005 to 25,000 in the first 6 months of 40,000 in 2005 to 25,000 in the first 6 months of 2006. 2006.

Virtually no Palestinians from Gaza work in Israel Virtually no Palestinians from Gaza work in Israel anymore. anymore.

Export to Israel, USD

200

300

400

500

2000 2001 2002 2003 2004 2005 2006

Workers in Israel

20,000

40,000

60,000

80,000

100,000

2000 2001 2002 2003 2004 2005 2006

Economic Situation (cont…)Economic Situation (cont…)

Employment declined in Gaza, but held steady in the Employment declined in Gaza, but held steady in the West Bank.West Bank. J Jobs in Gaza declined 6.4% in 06. At obs in Gaza declined 6.4% in 06. At 157,900, the number of jobs in Gaza fell to levels of 6 157,900, the number of jobs in Gaza fell to levels of 6 years ago, during the years ago, during the intifadaintifada.. The unemployment rate The unemployment rate (ILO definition) in Gaza reached 36.3%. (ILO definition) in Gaza reached 36.3%.

The unemployment rate in the West Bank was 19.1 The unemployment rate in the West Bank was 19.1 percent in first half of 2006, but recent figures show a percent in first half of 2006, but recent figures show a further contraction in the 3further contraction in the 3 rdrd quarter of 2006. quarter of 2006.

In addition to unemployment, Underemployment In addition to unemployment, Underemployment has increased.has increased. In Q3-2006 the share reached 11.6%, In Q3-2006 the share reached 11.6%, up from 7.3% of Q4-2004. up from 7.3% of Q4-2004.

The current situation will likely lead to more job-losses, The current situation will likely lead to more job-losses, although the olive-harvest was good this year, leading to although the olive-harvest was good this year, leading to some temporary job creation. some temporary job creation.

Employment (1,000)

300

350

400

450

500

199920002001 20022003 200420052006

100

125

150

175

200

West Bank gaza (R. Axis)

Share of under-employed in total employment

0%

5%

10%

15%

1999 2000 2001 2002 2003 2004 2005 2006

Progress with the Nov 15 AMAProgress with the Nov 15 AMA

UN OCHA, 2006.UN OCHA, 2006.

Economic Situation (cont…)Economic Situation (cont…) The result of the current situation is a fragmented Palestinian economy, with few if any export potentialThe result of the current situation is a fragmented Palestinian economy, with few if any export potential. . In addition, internal trade is not possible due to internal restrictions, cutting businesses off from key cities of Jerusalem, Nablus, Hebron, etc.In addition, internal trade is not possible due to internal restrictions, cutting businesses off from key cities of Jerusalem, Nablus, Hebron, etc. Below is a comparison of the 2 economies, and their impacts on human development. While economic indicators can be different, the security indicators have been shared by both.Below is a comparison of the 2 economies, and their impacts on human development. While economic indicators can be different, the security indicators have been shared by both.

AMA milestones must be met, starting with a Trade Corridor through Al-Rafah to reach Gulf and European Markets, AND increased exports through the Jordan valley. Internal closures must be AMA milestones must be met, starting with a Trade Corridor through Al-Rafah to reach Gulf and European Markets, AND increased exports through the Jordan valley. Internal closures must be addressed.addressed.

Work of General Dayton and EU BAM are steps in the right direction.Work of General Dayton and EU BAM are steps in the right direction.

ISRAELI INDICATORS PALESTINIAN INDICATORS

Life expectancy: 77 years (men), 82 years (women) (UN)

Main exports: Computer software, military equipment, chemicals, agricultural products

GNI per capita: US $18,620 (World Bank, 2006)

Life expectancy: 71 years (men), 74 years (women) (UN)

Main exports: Citrus, Olives

GNI per capita: US $1,120 (World Bank, 2006)

Operations in West Bank & GazaOperations in West Bank & Gaza The West Bank and Gaza cannot apply for membership in the Bank/IMF and is not eligible for The West Bank and Gaza cannot apply for membership in the Bank/IMF and is not eligible for

financing available to Member states. financing available to Member states. To overcome this, the To overcome this, the Trust Fund for Gaza and West BankTrust Fund for Gaza and West Bank (TFGWB) was established in 1993. (TFGWB) was established in 1993.

The TFGWB has been replenished 5 times from the Bank’s surplus income. The TFGWB has been replenished 5 times from the Bank’s surplus income.

The Bank has committed over US$500 million to 34 projects and disbursed $433 million. The The Bank has committed over US$500 million to 34 projects and disbursed $433 million. The Bank has also administered $860 mn in donor funds. Including parallel financing, the Bank has Bank has also administered $860 mn in donor funds. Including parallel financing, the Bank has attracted almost US$1.4 billion- almost 20% of all donor disbursements since 1994.attracted almost US$1.4 billion- almost 20% of all donor disbursements since 1994.

Bank assistance has moved through 3 stages: Infrastructure Rehabilitation after Oslo, towards Bank assistance has moved through 3 stages: Infrastructure Rehabilitation after Oslo, towards institutional development. Now focusing on a balance between Emergency Assistance and institutional development. Now focusing on a balance between Emergency Assistance and longer-term development. But current environment pushing us back into emergency assistance, longer-term development. But current environment pushing us back into emergency assistance, with little longer-term development impact. with little longer-term development impact.

The rationale for the Bank’s engagement: The rationale for the Bank’s engagement: we help create the economic backbone of the peace process.we help create the economic backbone of the peace process. we help shape the donor community’s response.we help shape the donor community’s response. We have leveraged $2.8 in donor funds for each $1 of TFGWB resourcesWe have leveraged $2.8 in donor funds for each $1 of TFGWB resources. .

Current PortfolioCurrent Portfolio There are currently 10 projects worth US$108 million:There are currently 10 projects worth US$108 million:

Electricity Sector Management Project, Solid Waste and Environmental Management Electricity Sector Management Project, Solid Waste and Environmental Management Project, Integrated Community Development Project, Emergency Water Project, Social Project, Integrated Community Development Project, Emergency Water Project, Social Safety Net Reform Project, North Gaza Emergency Sewage Treatment Project, Land Safety Net Reform Project, North Gaza Emergency Sewage Treatment Project, Land Administration Project, Tertiary Education Project, Gaza II Emergency Water Project, and Administration Project, Tertiary Education Project, Gaza II Emergency Water Project, and Avian Flu Project.Avian Flu Project.

A $55 million multi-donor Emergency Services Support Program, was set up under the A $55 million multi-donor Emergency Services Support Program, was set up under the framework of the Quartet’s Temporary International Mechanism to halt the deterioration of framework of the Quartet’s Temporary International Mechanism to halt the deterioration of service delivery from the PA’s fiscal crisis. ESSP finances non-salary recurrent expenditures in service delivery from the PA’s fiscal crisis. ESSP finances non-salary recurrent expenditures in social and infrastructure sectors.social and infrastructure sectors.

Three new projects (totaling $25 million) will go for Board approval on December 14:Three new projects (totaling $25 million) will go for Board approval on December 14:

The Emergency Municipal Support & Rehabilitation Project (EMSRP-2), US$10 million The Emergency Municipal Support & Rehabilitation Project (EMSRP-2), US$10 million for delivery of municipal services (solid waste, maintenance of local roads etc.) for delivery of municipal services (solid waste, maintenance of local roads etc.)

The 3The 3rdrd Palestinian NGO Project (PNGO-3) (US$10 million) for social service delivery Palestinian NGO Project (PNGO-3) (US$10 million) for social service delivery (health, education, agriculture) by NGO’s and the establishment of an NGO Development (health, education, agriculture) by NGO’s and the establishment of an NGO Development Center to facilitate donor support for the NGO sector. Center to facilitate donor support for the NGO sector.

The Community Development Project (US$5 million) for labor-intensive small-scale The Community Development Project (US$5 million) for labor-intensive small-scale infrastructure investments in poor communities.infrastructure investments in poor communities.

History of the Bank’s PortfolioHistory of the Bank’s Portfolio

Strategic Objective Projects Commitment(US$ million)

Status

1994-1996:

Rehabilitation of infrastructure

- Emergency Rehabilitation Project I- Emergency Rehabilitation Project II- Education and Health Rehabilitation Project

30.0 (Credit)20.0 (Credit)20.0 (Credit)

CompletedCompletedCompleted

1997-2000:

Capacity building at national, local, and sectoral levels

- Community Development Project I- Community Development Project II- Municipal Development Project I- Municipal Development Project II- Palestinian NGO Project I- Bethlehem 2000 Project- Legal Development Project- Health System Development Project- Palestinian Professional Expatriate Project

10.0 (Credit)8.0 (Credit)40.0 (Credit)7.5 (Credit)10.0 (Grant)25.0 (Credit)2.8 (Credit)7.9 (Credit)3.0 (Credit)

Completed CompletedCompletedCompletedCompletedCompletedCompletedCompletedCompleted

Regulatory and institutional reform

- Gaza Water and Sanitation Services Project- Solid Waste and Environmental Management Project- Electricity Sector Investment Management Project- Southern Area Water and Sanitation Improvement Project

31.0 (Credit) 9.5 (Credit)15.0 (Credit) 21.0 (Credit)

CompletedCompleted

OngoingCompleted

Private sector development - Micro-Enterprise Project- Gaza Industrial Estate Project- Palestinian Housing Project- Palestinian Investment Guarantee Fund (MIGA)

2.2 (Credit)10.0 (Credit)17.4 (Credit)10.0 (Credit)

CompletedCompletedCompleted

Ongoing

19

History of the Bank’s Portfolio (cont.)History of the Bank’s Portfolio (cont.)

Strategic Objective Projects Commitment(US$ million)

Status

2001-present

Institution building - Education Action Program- Palestinian NGO Project II- Integrated Community Support Project- Land Administration Project- Tertiary Education Project- Social Safety Net Project

7.0 (Credit)8.0 (Grant) 10.0 (Credit)3.0 (Grant) 10.0 (Grant) 10.0 (Grant)

CompletedCompleted

OngoingOngoingOngoingOngoing

Emergency response: job creation and service delivery

- Emergency Response Program- Emergency Services Support Project I- Emergency Services Support Project II- Emergency Services Support Project Supplemental - Avian Influenza Project

12.0 (Grant) 20.0 (Credit)25.0 (Grant)15.0 (Grant)10.0 (Grant)

CompletedCompletedCompletedCompleted

Ongoing

Emergency response and institution-building

- Public Financial Management Reform Structural Adjustment Operation - Emergency Municipal Services Rehabilitation Project- Emergency Water Project- Gaza II Emergency Water Project- North Gaza Emergency Sewage Treatment Project

20.0 (Grant)20.0 (Grant)12.5 (Grant)20.0 (Grant) 7.8 (Grant)

CompletedCompleted

OngoingOngoingOngoing

Analysis and Policy AdviceAnalysis and Policy Advice Focusing on both the Public and Private Sectors:Focusing on both the Public and Private Sectors: Country Economic Memorandum, Movement and Access Policy Notes and Updates, Country Economic Memorandum, Movement and Access Policy Notes and Updates,

Investment Climate Assessment, Energy Policy Note, Water and Sanitation Sector Investment Climate Assessment, Energy Policy Note, Water and Sanitation Sector Study, Education Sector Analysis, NGO Study, Transport Study, Public Expenditure Study, Education Sector Analysis, NGO Study, Transport Study, Public Expenditure Review, Analysis of Institutional Impact of Fiscal Crisis, Olive Oil Industry Study, Review, Analysis of Institutional Impact of Fiscal Crisis, Olive Oil Industry Study, Rafah Trade Corridors Study, Country Financial Accountability and Procurement Rafah Trade Corridors Study, Country Financial Accountability and Procurement Assessments, etc.Assessments, etc.

The Bank co-chairs with the PA the Economic Strategy Donor Group, and Chairs the The Bank co-chairs with the PA the Economic Strategy Donor Group, and Chairs the Private Sector Working Group with donors and private sector representatives.Private Sector Working Group with donors and private sector representatives.

Through its previous Public Financial Management Reform Trust Fund ($293 million, Through its previous Public Financial Management Reform Trust Fund ($293 million, closed in early 06), the Bank worked with the PA to identify financial and fiscal closed in early 06), the Bank worked with the PA to identify financial and fiscal reforms as a basis for budget support by donors. Despite the fiscal crisis, these reforms reforms as a basis for budget support by donors. Despite the fiscal crisis, these reforms continue to be a viable basis for future reforms by the PA.continue to be a viable basis for future reforms by the PA.

Implementation: Making it Implementation: Making it HappenHappen

Simple and flexible project design, based on the volatile environment.Simple and flexible project design, based on the volatile environment.

All projects are grounded in deep analytical work, and based on the recipient’s All projects are grounded in deep analytical work, and based on the recipient’s readiness for implementation.readiness for implementation.

Two Country Offices in Al-Ram and Gaza- over 40 dedicated staff (the majority Two Country Offices in Al-Ram and Gaza- over 40 dedicated staff (the majority

of whom are local staff).of whom are local staff).

Reliance on the technical abilities and local knowledge of local institutions- Reliance on the technical abilities and local knowledge of local institutions- technical staff at ministries, NGOs and local partners (e.g., Municipal technical staff at ministries, NGOs and local partners (e.g., Municipal Development Lending Fund, Welfare Association, Ministries). The Bank Development Lending Fund, Welfare Association, Ministries). The Bank finances projects, it does not implement them.finances projects, it does not implement them.

Strong coordination with other international partners, as well as Israelis to Strong coordination with other international partners, as well as Israelis to ensure aid coordination, and unhindered implementation.ensure aid coordination, and unhindered implementation.

For more Information:

www.worldbank.org/ps