During the first half of 2012, Israel continued to implement a series of measures to support the Palestinian economy and help the PA manage the fiscal crisis.

 Address by Dep FM Ayalon to the AHLC meeting


Dep FM Ayalon with E.U. High Representative for Foreign Affairs Ashton (Photo: MFA)

Foreign Minister Espen Barth Eide, Chair of the Ad Hoc Liaison Committee,
Quartet Representative, Mr. Tony Blair,
Under-Secretary General of the United Nations, Mr. Jeffrey Feltman,
Palestinian Authority Minister of Finance, Nabil Kassis
Distinguished Delegates of the Ad Hoc Liaison Committee.

We are happy to be here today and to contribute to the constructive dialogue among donors, aiming at building the foundations for a viable and sustainable Palestinian socio-economic structure based on sound and workable institutions.

While in previous years there were solid economic advances in the Palestinian Authority, bolstered by the commitment and actions of Israel and others, this year the picture is more stark.

Coming out of the first half of 2012, the PA faces a severe fiscal crisis, with high levels of arrears owed to the private sector and suppliers, more than NIS 600 million in debt to the Israel Electric Corporation, and increasing difficulty meeting salary payments. The economic slowdown in the West Bank, to a 5.4% growth rate, poses a major challenge to continued Palestinian Authority financial and institutional stability.

The present fiscal crisis was caused mainly by a shortfall in donor aid. This shortfall in donor aid, especially by Arab countries is substantial, and has a significant negative effect on the PA fiscal budget. According to the IMF, donations from Arab countries decreased by 49% since 2009, totaling $240 million in 2012 (committed) compared to $462 in 2009. Furthermore, in the first half of 2012, Arab countries forwarded only 42% of their donation commitments to the PA, totaling USD 100 million was pledged.

However, this is hardly the only reason for the economic crisis in the Palestinian Authority. There was also overspending in the implementation of the 2011 budget, as demonstrated by the PA’s disbursement for development expenses, for which no funds were available, at the expense of recurrent expenditure. In the first half of 2012, budgetary goals were not met, which from the outset were built upon financing gaps of more than $150 million.

Israel, for its part, continues to cooperate with the Palestinian Authority and the international community in order to provide the necessary conditions for economic and financial stability. During the first half of 2012, Israel continued to implement a series of measures to support the Palestinian economy and help the PA manage the fiscal crisis.

Development of the Gaza Marine gas field will generate revenues that could contribute dramatically to the Palestinian fiscal sustainability. After deliberations between Prime Minister Netanyahu and Mr. Tony Blair, following an approach by the Palestinian Authority, Israel confirmed its intention to engage in a meaningful discussion with the aim of developing the Gaza Marine gas field.

In this context, official letters were submitted and meetings between Israeli representatives and the Palestinian leadership took place. These were followed by initial negotiations between the relevant parties regarding the development of the Gaza Marine gas field. 

On July 31, 2012, Israel’s Minister of Finance, Dr. Yuval Steinitz, and PA Prime Minister, Dr. Salam Fayyad, concluded arrangements for the transfer of goods between Israel and the Palestinian territories and related tax procedures based on actual transfer of goods. The establishment of four joint committees has been agreed upon to ensure speedy implementation including arrangements for information transmission.

In order to assist the Palestinian Authority in the timely payment of salaries on the eve of Ramadan, in July Israel transferred an advance payment of NIS 180 million to the PA. Only last week, Prime Minister Netanyahu ordered the transfer of an additional NIS 250 million advance to the Palestinian Authority from tax revenues collected by Israel.

These actions demonstrate that during times of financial crisis, Israel, rather than any other in the region, takes steps to assist the Palestinian people.

Additionally, in order to help the PA reduce the level of unemployment, since February 2011 Israel has increased the number of working permits for Palestinian employees in Israel by 40%, reaching 41,500 permits. In addition another 5,000 permits have been approved in principle today. At present more than 33,000 Palestinians earn their living in Israel while 24,500 are employed by Israeli employers in the West Bank. This Israeli measure contributes directly to improving the reality for tens of thousands of households in the West Bank.

In the past year and a half, Israel has approved 328 projects in Area C., however the implementation of 53 projects has been suspended due to lack of donor funding. Israel welcomes the international community’s support for approved projects in Area C, and encourages donors specifically to adopt and fund 16 approved projects so far lacking international sponsorship, whose implementation will directly lead to much needed employment growth.

Over the last few months, the preparation of master plans for development in Area C has been progressed in cooperation with the Palestinians, in order to facilitate and accelerate planning procedures for further economic development.

However, Israel cannot tolerate illegal construction in Area C, and calls on the international community not to be dragged into Palestinian political and diplomatic machinations against Israel, and rather to coordinate all their development activities in this area with the appropriate Israeli authorities as per signed agreements.

Israel welcomes international involvement in development projects and activities. I would like to make particular mention of the United States through USAID, the UN for its involvement in infrastructure projects in Gaza, the World Bank, Germany particularly in relation to its environmental work, Holland for its promoting the scanner project at the Allenby Bridge, Canada for capacity building projects, Japan for its work in the Jericho area, and France for its involvement in the industrial park in Bethlehem. Israel will continue to coordinate with Egypt regarding issues such as the transferring of fuel to Gaza and will do all it can to facilitate Jordanian activities such as its hospital in Gaza.

In order to facilitate trade, Israel continues to upgrade the infrastructure of the commercial crossings, reducing the cost of transporting goods from the West Bank into Israel and to Israeli ports. Israel continues to increase the number of permits for businessmen who travel frequently in and out the West Bank to and via Israel. Also an upgraded passenger terminal at the Allenby Bridge commenced operations in September 2012, aiming to improve services offered to Palestinians and visitors to the West Bank. 

Israel continues to reduce the number of checkpoints to enable relatively smooth traffic flow, despite the security risks involved. Additionally, during the month of Ramadan more than one million Palestinian worshipers visited the Al-Aqsa mosque in Jerusalem. 

These measures all relate to the West Bank. However, the threat from Gaza to Israel’s communities in the south of our country continues unabated.

Since June 2007 Hamas, a terrorist organization that refuses to accept the three Quartet principles controls the Gaza Strip. It remains outside the Authority’s reach yet it places a significant financial burden on the PA, accounting for around 50% of the PA’s total expenditures. Perhaps it is time that the Palestinian Authority and international donors discuss the usefulness of such expenditure.

During the first half of 2012, security in southern Israel along the border with Gaza remained under constant threat. Brutal rocket and mortar attacks from Gaza have continued to terrorize over a million Israeli civilians, paralyzing their daily lives.

Since the beginning of 2012, 530 rockets have been fired into Israeli territory. This fire is deliberately aimed at heavily populated areas in Israel, forcing a million Israeli citizens to take refuge in shelters. On frequent occasions the rockets are specifically fired at the times when children are arriving or leaving schools and kindergartens and there have been some near misses on these institutions in recent months, including on the very first day of the school year in Israel. These attacks are more than provocative; they are deadly as we know from past fatalities, and they leave a permanent emotional scar on our children.

The terrorist attack of August 5, 2012, in the area of the Kerem Shalom crossing and the Israel-Egypt border, which targeted civilians living in the vicinity, underlines the severity of the increased security threat in this area, posed by possible cooperation between terrorists in Gaza and Sinai. This unbearable security reality is an alarming reminder of the proliferation of terrorist military capacity in Gaza, which jeopardizes prospects for peace and regional stability.

However, even while under constant attacks, including the terrorist attack a few days ago in which a Israeli soldier was killed and two  were injured, Israel has approved 235 projects led by the international community in Gaza, of which more than 70 have yet to be implemented. Israel has upgraded, at a cost of 20 million dollars the infrastructure and capacity of the Kerem Shalom Crossing to 450 trucks per day, far beyond actual use at the moment. In July 2012, Israel installed a new container scanner at the crossing which should also enable the conditions for a pilot project for exports from Gaza to the West Bank.

Agricultural and textile exports to international markets have been expanded and the export of furniture and date bars from Gaza to the West Bank has been approved and implemented. Since the beginning of 2012, 650,000 tons of aggregates for international projects and private sector pilots have been shipped into Gaza, in addition to 120,000 tons of cement, and 25 tons of iron.

Through the implementation of its policy, Israel supports economic development in the West Bank and humanitarian sustainability in Gaza.

Clearly, sustainable and significant economic growth and financial sustainability will be more achievable, if it is coupled with a viable diplomatic process.

While commending the international community for its crucial financial support, it should also play its part in encouraging the Palestinian leadership to return to the negotiations table, to revive the bilateral track which is the only way to reach a sustainable political solution. 

Furthermore, Palestinian Authority claims that it is making great strides towards good governance are not substantiated by the facts on the ground. Among other examples, if it cannot even collect debts from domestic electric consumers, how can it claim to be ready for statehood?

While Israel continues to play its part in assisting the Palestinian people to build a better future, the Palestinian leadership continues to act negatively.

Since our meeting here last year, the Palestinian leadership has accelerated its diplomatic and legal assault on Israel. The Palestinian decision to request non-Member state status at the General Assembly is yet another example of its preference for international posturing to real and substantive negotiations.

Clearly such actions can only negatively impact Israel’s willingness to cooperate and assist in the work of the Ad Hoc Liaison Committee.

Every year the international community is requested to assist the Palestinian economy while the Palestinian leadership states that they are in desperate need of assistance and investment.

This unprecedented and unique assistance cannot be without accountability. While the Palestinian leadership cries poverty, it is still able to find millions of dollars each and every month to fund convicted terrorists and the families of suicide bombers.

As much as six per cent of the budget of the Palestinian Authority is spent paying stipends to Palestinian terrorists in Israeli jails, including those who perpetrated mass murder, and the families of suicide bombers, some of whom receive no less than $3,000 a month. Surely such stipends, many times the monthly wage of teachers and nurses, incentivizes a new generation of terrorists.

In addition, the budget of the Palestinian Authority contributes to constant incitement against Israel and the glorification of terror and murder.

Almost every day, official Palestinian Authority media glorifies mass murderers and calls on Palestinian children to follow in their footsteps. This is in addition to naming town squares, government compounds, streets, children’s summer camps and sporting tournaments after terrorists who have killed innocent Israeli civilians.

Palestinian officials can no longer claim that they have no funds when they find millions of dollars every month to fund terrorists, murderers and their families. Israel is asking herself more and more how can she be expected to continue contributing and assisting an economy and a budget which is used to support those who killed our citizens and glorify their murderous activities.
The international community can no longer allow the culture of impunity that exists in the Palestinian Authority.

They should make it heard loud and clear that its funds should be contingent on an economy completely clean of terror assistance, its glorification and incitement to hatred.

We hear Palestinian Authority officials constantly claim that they are ready to become a member of the United Nations and its institutions with the help of the international community. Membership in the United Nations should not only be an end result of successful permanent status negotiations, like in  the case of the latest country to join the United Nations – South Sudan, but it is also contingent, according to the Charter of the United Nations, on being "peace loving".

The budget priorities of the Palestinian Authority and its refusal to negotiate peace with Israel amply demonstrate that it is not the case.

The Ad Hoc Liaison Committee has been meeting since 1995. Given the economic situation in the Palestinian Authority 17 years later, perhaps the time has come to discuss necessary changes in this apparatus in order to achieve greater successes in all areas. Beyond dealing with coordinating and trying to ensure budgetary funding, it would be worthwhile to discuss ways in which the AHLC can take a pro-active and leadership role in promoting infrastructure projects for the benefit of Palestinians, particularly in the areas of water and energy.

We all came here today in an effort to assist the Palestinian people. Preventing the appropriation of funds for the terror economy while demanding and ensuring that it develops an economy of peace, prosperity and institution-building is not just in the interests of Israel and the international community, but above all, in the interests of the Palestinian people.

Thank you.