Last week Israeli prime minister Benjamin Netanyahu let it be known that he was prepared to consider a Palestinian state within temporary borders as an interim measure in the long, slow trek towards an Israeli-Palestinian accord. It was reported that he – and one assumes he has the backing of his coalition partners in this – considers such an interim step a possible way to unfreeze the stalled political process, created because of the Palestinian leadership's refusal to resume talks on a final settlement. Is such a state anywhere near reality?
It was in August 2009 that the Palestinian Authority's prime minister, Salam Fayyad, announced his plan to create a de facto Palestinian state in two years.
“We have decided to be proactive," he announced, "to expedite the end of the occupation by working very hard to build positive facts on the ground, consistent with having our state emerge as a fact that cannot be ignored. This is our agenda, and we want to pursue it doggedly.”
His blueprint included making the Palestinian economy less dependent on Israel, unifying the legal system and downsizing the government. The plan also involved building infrastructure, harnessing natural energy sources and water, and improving housing, education, and agriculture.
How far has he got?
Ten days ago the World Bank published a progress report on economic and financial development within the Palestinian body politic. It pointed to steady progress in implementing Fayyad's reform programme and building the institutions required by a future state. The PA, it said, has strengthened its public financial management systems, improved service delivery, and made significant security and fiscal reforms. The picture was not entirely rosy, however. Although Gross Domestic Product (GDP) grew in 2009 by about 6.8 percent, the report warned that most of the growth is in the West Bank; Gaza continues to experience falling per capita GDP. Moreover the World Bank noted that the growth so far has been dependent on large inflows of donor assistance.
In 2009 the PA’s recurrent budget deficit rose by $300 million to nearly $1.6 billion. The World Bank says, and the PA acknowledges, that donor assistance on this level is unsustainable. Accordingly the 2010 budget commits the PA to reducing its recurrent deficit to about $1.2 billion, while also increasing development expenditures to $670 million. Community development projects are a central part of the PA’s strategy. The PA reports that it has already completed 1,000 of these demand-driven projects since the launch of the plan last August, and it aims to complete another 1,000 by the end of 2010.
These projects include building schools, improving water supplies and sanitation, and notably updating and improving the electricity supply (a new electricity regulator is operational). These schemes have so far been limited to the West Bank's Areas* "A" and "B", namely those under Palestinian civil control. Fayyad plans to extend them shortly to Area "C", which is under Israeli security and civil control and includes Jerusalem. A pre-requisite to doing this would be substantial progress in peace negotiations. This would provide the conditions for the necessary cooperation on the part of Israel, the Palestinians and the international community.
Of course the major obstacle that Salam Fayyad faces is the implacable opposition of Hamas, which seized control of the Gaza Strip in June 2007, brought down the wrath of Israel on its head by its indiscriminate firing of rockets on Israeli citizens, and now suffers from restricted access to trade and other interchanges through the blockade of its borders imposed by both Israel and Egypt.
Apparently undeterred, Salam Fayyad is planning to rebuild the Gaza Strip. His proposals to make good the destruction left by the conflict were presented at the Sharm El-Sheikh conference for rebuilding Gaza in March 2009. Donor countries pledged $4.7 billion, though it is still necessary to find a way of implementing these pledges that would preclude the de facto Hamas government in Gaza from using the money in ways other than those intended. Meanwhile, the Fayyad government spends $1.5 billion annually in the form of salaries to Palestinian Authority employees who were appointed in Gaza prior to the Hamas coup, paid through banks in the West Bank. It also provides for other services and operational expenses, including the Electric Power Company.
The World Bank report concludes that the PA seems well on the way to creating "a Palestinian state that can deliver services and economic prosperity to its population". But, it cautions, this is no time for complacency. A great deal more action is required from all the parties involved – it names the Palestinians, Israel and the international community – if a future state is to come into being with genuinely solid underpinnings.
*Note on West Bank Areas A, B and C
The 1993 Oslo Accords declared the final status of the West Bank to be subject to a forthcoming settlement between Israel and the Palestinian leadership. Following these interim accords, Israel withdrew its military rule from some parts of the West Bank, which was divided into three areas:
Area A, controlled and administerd by the PA, comprises 17% of the West Bank and contains 55% of the West Bank Palestinian population.
Area B is controlled by Israel but administered by the PA. It comprises 24% of the West Bank and contains 41% of the West Bank Palestinians.
Area C, controlled and administered by Israel, comprises 59% of the West Bank and contains only 4% of the West Bank Palestinian population.
Area A comprises Palestinian towns and some rural areas away from Israeli population centres. Area B adds other populated rural areas, many closer to the centre of the West Bank. Area C contains all the Israeli settlements, roads used to access the settlements, buffer zones, the Jordan Valley, East Jerusalem, and the Judean Desert.