Commission staff working document - Accompanying the Communication from the Commission to the European Parliament and the Council - Taking stock of the European Neighbourhood Policy (ENP) - Implementation of the European Neighbourhood Policy in 2009: Progress Report on the occupied Palestinian territory {COM(2010) 207 final} {SEC(2010) 513 final} {SEC(2010) 514 final} {SEC(2010) 516 final} {SEC(2010) 517 final} {SEC(2010) 518 final} {SEC(2010) 519 final} {SEC(2010) 520 final} {SEC(2010) 521 final} {SEC(2010) 522 final} {SEC(2010) 523 final} {SEC(2010) 524 final} {SEC(2010) 525 final}
Date: 2010-05-04
Institutions: European Commission
Subjects: European neighbourhood policy, Palestine, democracy, economic integration, energy policy, environmental protection, geographical mobility, human rights, legal system, political cooperation, report, settlement of disputes

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EUROPEAN COMMISSION  

Brussels, 12.5.2010 
SEC(2010) 515 final 

COMMISSION STAFF WORKING DOCUMENT 

Accompanying the 

COMMUNICATION FROM THE COMMISSION  
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 
Taking stock of the European Neighbourhood Policy (ENP) 

Implementation of the European Neighbourhood Policy in 2009: 
Progress Report on the occupied Palestinian territory 

{COM(2010) 207 final} 
{SEC(2010) 513 final} 
{SEC(2010) 514 final} 
{SEC(2010) 516 final} 
{SEC(2010) 517 final} 
{SEC(2010) 518 final} 
{SEC(2010) 519 final} 
{SEC(2010) 520 final} 
{SEC(2010) 521 final} 
{SEC(2010) 522 final} 
{SEC(2010) 523 final} 
{SEC(2010) 524 final} 
{SEC(2010) 525 final} 

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1. 

BACKGROUND AND OVERALL ASSESSMENT 

The  Palestinian  Authority  (PA)  and  the  European  Community  first  established  contractual 
relations in 1997 when the EC and the Palestine Liberation Organisation (PLO), on behalf of 
the PA, concluded an Interim Association Agreement on trade and cooperation. The trade part 
of  the  agreement  cannot  be  fully  implemented  due  to  obstacles  raised  by  Israel,  which 
considers  it  incompatible  with  the  economic  provisions  of  the  Oslo  Agreements  (the  Paris 
Protocol). On the basis of the agreement, the EU-PA ENP Action Plan was approved in May 
2005 for a period of three to five years.  

Meetings  with  the  PA  took  place  at  the  level  of  Ministers,  senior  officials,  the  Joint 
Committee,  and  subcommittees,  three  of  which  were  held  during  2009  and  the  fourth  just 
before the reporting period.  

This  document  reports  on  progress  made  in  the  implementation  of  the  EU-PA  ENP  Action 
Plan  between  1  January  and  31  December  2009,  although  developments  outside  this  period 
are  also  taken  into  consideration  when  deemed  relevant.  It  is  not  a  general  review  of  the 
political  and  economic  situation  in  the  occupied  Palestinian  territory.  In  addition,  for 
information on regional and multilateral sector processes, please refer to the sectoral report. 

The  PA  has  made  increasing  use  of  the  ENP  as  a  means  of  underpinning  its  state-building 
activities and  consolidating  the PA’s political position on its future  international  status.  The 
EU expressed full support for the Government programme "Palestine, Ending the Occupation, 
Establishing  the  State",  adopted  in  August  2009,  which  aims  at  building  strong  state 
institutions within two years, while still giving priority to the institutional reform activities set 
out  in  the  Palestinian  Reform  and  Development  Plan  (PRDP)  (2008-2010).  The  PA  has 
started  work  on  a  new  plan  which  will  replace  the  PRDP,  called  the  Palestinian  National 
Plan 2011-2013 (PNP). The latter is expected to be fully aligned and to translate the political 
vision  of  PM  Fayyad’s  state-building  plan  into  concrete  priorities  for  the  next  three  years. 
This will serve as a basis for a new ENP Action Plan. In summary, throughout the reporting 
period the EU and the PA took further steps towards enhancing political dialogue and reform 
within  the  framework  of  the  ENP,  most  notably  in  the  fields  of  rule  of  law  and  public 
financial management. The first round of subcommittee meetings enabled an implementation 
review of the Action Plan and set out the progress achieved and the way forward. The ability 
of the PA to implement reforms remained limited as a result of the ongoing Israeli occupation. 
The  1995  Oslo  Interim  Agreement  split  the  West  Bank  into  three  Areas  (A,  B  and  C)  with 
different security and administrative arrangements. Area A (mostly the urban areas and their 
surroundings) is under full PA administrative and police control. Area B (rural areas) is under 
administrative  PA  control,  but  under  full  Israeli  security  control.  Area  C,  comprising  more 
than 60% of the West Bank, is under the full control of the Israeli military for both security 
and civilian affairs. Moreover, due to the continuing political divide between the West Bank 
and the Gaza Strip, reforms were limited to institutions in the West Bank, and could not be 
implemented in the Gaza Strip, where the PA de facto has no authority.  

The  overarching  objective  of  EU  policy  towards  the  Palestinians  is  the  creation  of  an 
independent,  democratic,  contiguous  and  viable  Palestinian  state,  living  side  by  side  with 
Israel and its other neighbours in peace and security. The Gaza conflict between 27 December 
2008 and 18 January 2009 had devastating effects on the civilian population in the Gaza Strip 
and destroyed its economic and institutional structures. It also contributed to deeper divisions 
between  the  Palestinian  factions,  and  in  particular  between  Fatah  and  Hamas. Over  1,400 

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Palestinians,  including  more  than  1,000  civilians  were  killed  and  more  than  5,000  were 
wounded.1 In the aftermath of the Israeli military operation, which caused major destruction 
in  the  Gaza  strip,  the  hopes  that  the  international  community  would  be  able  to  reactivate  a 
meaningful peace process faded. The efforts by Egypt to bring about national reconciliation 
between Fatah and Hamas yielded no results, partly due to external influences on the parties. 
This situation prevented the organisation of presidential and legislative elections. 

In 2009, the report of a fact-finding mission led by Judge  Goldstone,  created by the United 
Nations  Human  Rights  Council  (UNHCR)  to  investigate  international  human  rights  and 
humanitarian  law  violations  related  to  the  Gaza  conflict,  contained  strong  criticism  of  the 
actions  taken  both  by  Israeli  Defense  Forces  and  by  Palestinian  militant  groups  during  the 
war.  

Although  Israel  relaxed  some  restrictions  on  movement  and  access  in  the  West  Bank,  other 
Israeli actions in the West Bank continued to be seen as undermining the PA, hampering its 
capacity to implement reforms as well as economic development. Gaza continues to be under 
Israeli  siege  despite  consistent  calls  from  the  international  community  for  full  opening  of 
crossings for both humanitarian and commercial traffic. 

2. 

POLITICAL DIALOGUE AND REFORM 

Development of enhanced political dialogue and reform  

The  PA  continued  to  make  progress  in  the  implementation  of  the  PRDP  2008-10,  most 
notably  in  the  areas  of  security  and  public  financial  management.  Implementation  of  the 
PRDP  in  the  areas  of  economic  and  private  sector  development,  local  governance  -  and, 
crucially,  the  judicial  system  -  proceeded  at  a  slower  pace.  In  the  area  of  private  sector 
development this was partly due to the particular attention given instead to the more urgent 
aspects of institution-building which were seen as having more immediate potential results for 
the  peace  process.  In  the  judicial  sphere,  progress  was  hampered  by  unclear  mandates  and 
competition between the relevant PA bodies, although there were some positive developments 
towards the end of the year.  

Currently, the PA lacks a distinct civil service and public administration reform programme. 
However,  the  formation  of  the  13th  government  resulted  in  the  Ministry  of  Planning  being 
renamed  as  the  Ministry  of  Planning  and  Administrative  Development  (MoPAD),  a  move 
which was supposed to signal a renewed commitment to administrative reform. In parallel, the 
PA intensified its efforts to improve its medium-term planning and budgeting capacities and 
has embarked on preparations for the PNP. In this context, a detailed sector strategy for public 
administration reform will be elaborated. The development of such a strategy will serve as a 
first test for the MoPAD to exercise leadership in this sector. 

Despite significant progress in the transparent operations of the government, the absence of a 
functioning legislature continues to fundamentally impede the accountability of the executive.  

Democracy and Rule of Law 

1 

Controversy exists over the precise number of casualties as well as the number of civilians within those 
figures, but Amnesty International and the UN give credit to these figures.  

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Progress  in  the  area  of  the  rule  of  law  in  the  occupied  Palestinian  territory  continued  to  be 
constrained by the parallel legal systems operating in the West Bank and in the Gaza Strip.  

Promotion  of  democratic  governance  was  hampered  by  the  indefinite  postponement  of 
presidential  and  parliamentary  elections  that  had  been  scheduled  to  take  place  no  later  than 
January 2010.  

There were increasing signs of improvement of the justice sector in the West Bank. In 2009, 
the number of judges was further increased to 190 judges (146 in the West Bank and 44 in the 
Gaza Strip), and 158 prosecutors (98 in the West Bank and 60 in the Gaza Strip). The courts 
started to tackle the case backlog, which reflects the improved security situation; however, it 
will  take  time  to  completely  clear  the  backlog  of  nearly  90  000  cases.  All  newly  appointed 
judges  and  assistant  prosecutors  were  trained  at  the  Palestinian  Judicial  Institute.  Electronic 
case management has been established at all courts and the system is being linked up to the 
prosecution offices and the Office of the Attorney General. A judicial records system has been 
launched  at  the  Ministry  of  Justice.  Various  operational  policies,  procedures  and  manuals 
have  been  established  at  the  High  Judicial  Council  and  the  public  prosecution  in  order  to 
increase  the  effectiveness  of  both  institutions.  In  the  High  Judicial  Council  a  Court 
Administration Department, a Notary Department, a Planning Department and a library were 
established, as well as an Inspection Office which evaluates the performance of both judges 
and prosecutors.  

However,  further  development  of  the  justice  sector  suffered  as  a  result  of  the  unclear 
mandates  of  key  stakeholders  in  the  judicial  sector  and  the  politicisation  of  its  leading 
institutions,  mainly  the  judiciary  (led  by  the  High  Judicial  Council),  public  prosecution  and 
the  Ministry  of  Justice.  The  work  of  the  Palestinian  Legislative  Council  (PLC)  remained 
suspended as a result of the political split between the West Bank and the Gaza Strip and also 
because some members of the PLC are detained in Israeli prisons. This affected progress in 
the adoption of legislation, resulting in a continuing lack of clarity on relations and division of 
competences. The practice of referral to the military court system in the West Bank and the 
Gaza  Strip,  which  runs  contrary  to  the  provisions  of  the  Basic  Law,  also  threatens  to 
undermine the PA's achievements in the civilian justice sector. 

There are now four model courts in the West Bank in the districts of Nablus, Jenin, Jericho, 
and  Bethlehem.  The  expansion  and  rehabilitation  of  courts  in  other  districts  is  also  taking 
place. Automation of courts has continued successfully with European Commission support. 
New computers and computer programmes were distributed to courts to help facilitate better 
adjudication of court cases and enable better review of their status, thereby increasing the effi-
ciency of the courts in case adjudication.  

As a result of these developments, recent public opinion surveys show increased public trust 
in  the  Palestinian  judiciary.  According  to  statistics  from  the  Palestinian  Central  Bureau  of 
Statistics and a survey conducted by the HJC, the public has developed a higher level of trust 
in the judiciary. 

In  the  security  sector,  the  delivery  of  support  in  the  form  of  training,  equipment  and 
infrastructure of the Palestinian civil police continued, as did the efforts in the Ministry of the 
Interior to restructure the sector. Some improvement was noted in the reform of the security 
sector and of the security services, although the development of institutional frameworks and 
organisational  capacities  still  lagged  behind  operational  improvements.  The  new  PA 

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Government  placed  more  emphasis  on  the  need  for  civilian  oversight  and  accountability, 
although at this stage it confined itself to stating its intentions in this direction.  

Projects have started on the centralisation of the budgeting process for security services in the 
Ministry of the Interior (MoI), for the establishment of a central administration in the MoI and 
for  the  elaboration  of  a  central  training  administration.  Work  also  progressed  on  the 
establishment  of  an  internal  inspectorate  for  the  security  services  in  the  MoI  in  order  to 
improve the oversight of the sector. The MoI agreed, in principle, with the establishment of a 
separate Corrections Department outside the Palestinian Civil Police, in order to manage the 
penitentiary  system.  One  obstacle  to  the  establishment  of  such  a  department  is  the  lack  of 
human resources provision by the PA for the management of this key sector. 

The PA continued its efforts to build a professional civil police with the help of the EU ESDP 
mission,  EUPOL  COPPS.  The  PCP  Palestinian  Civil  Police  developed  14  projects  in  the 
framework of the PRDP. The projects replaced the Palestinian Civil Police Development Plan 
2005-2008  which  expired  at  the  end  of  2008.  EUPOL  COPPS  contributed  to  almost  all 
projects, and also helped to seek donor financing for particular actions. Progress was made in 
equipping  and  training  public  order  forces,  preparing  for  the  establishment  of  forensic 
laboratories, building new prisons, developing IT systems for the police, initiating a project to 
rebuild  destroyed  police  stations,  developing  anti-explosive  units,  developing  maintenance 
workshops,  and  conducting  specific  training  courses  on  forensic  evidence,  stolen  vehicles, 
traffic  management,  anti-corruption,  special  police  forces  and  close  protection,  and  the 
judicial  police.  The  European  Commission  provided  direct  support  for  a  number  of  specific 
activities,  which  made  good  progress  in  2009,  including  provision  of  vehicles  and 
communication equipment for the police, construction of the Jericho Police Training Centre, 
construction  of  penitentiary  facilities  in  Nablus,  and  other  construction  for  security  force 
headquarters in both Nablus and Jenin. 

The performance of the PA security services, though not systematically evaluated, seemed to 
improve in terms of maintaining order. However, their human rights record is still in need of 
improvement  (see  next  section).  The  EUPOL  COPPS  mission  contributions  also  address 
human  rights  issues  in  its  training  programmes  for  Palestinian  police  officers.  The  EU  has 
likewise supported human rights training for security forces in 2009 through its "Breaking the 
Silence – say no to torture" project. 

Human Rights and Fundamental Freedoms 

The  situation  of  human  rights  and  fundamental  freedoms  continued  to  suffer  setbacks  as  a 
result of intra-Palestinian conflict and Israeli actions, including incursions in the West Bank 
and  the  continuing  blockade  of  Gaza.  Periods  of  calm  (including  five  consecutive  weeks 
without  fatalities  in  Gaza  in  October/November  2009)  alternated  with  the  resumption  of 
Israeli  Air  Force  attacks  and  Israeli  Defence  Force  incursions  into  Gaza,  notably  in  August 
and December 2009. Since the end of Gaza conflict, rockets and mortar shells were fired from 
Gaza,  and  arms  smuggling  continued  Intra-Palestinian  violence  in  the  Gaza  Strip  remained 
high. Furthermore, deaths linked to violent family disputes and rivalries, to the manipulation 
of  unexploded  devices,  or  resulting  from  tunnel  accidents  were  regularly  recorded  every 
month in Gaza.  

Claims of human rights abuses by PA security services continued to be made throughout the 
reporting  period.  Though  some  of  these  abuses  are  linked  to  the  limitations  imposed  by  the 
occupation,  a  message  of  Palestinian  political  will  to  end  these  practices  has  already  been 

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delivered and instructions prohibiting ill-treatment in detention and investigation centres are 
in place. 

Since October 2009, the Palestinian Independent Commission for Human Rights (ICHR) has 
consistently stressed the importance of security agencies abiding by political instructions and 
in this regard noted the marked decrease in allegations of torture in the West Bank following 
PM Fayyad’s  instructions  in  September 2009. Furthermore, in November 2009,  for  the  first 
time  in  almost  11  months,  ICHR  was  authorised  to  visit  detention  centres  of  the  security 
agencies.  In  contrast,  ICHR  noted  that  the  number  of  complaints  against  the  Gaza  Strip 
security agencies had increased since November 2009. 

At the end of December 2009, about 6 831 Palestinians were detained in Israel. This number 
had  steadily  decreased  throughout  2009  from  7 951  in  January  2009.  The  decreasing  trend 
was also confirmed by the drop in the number of administrative detainees from 564 in January 
2009  to  278  in  December  2009.  In  January  2010  there  were  no  children  in  administrative 
detention. However, at the end of February 2010, there were 41 Palestinian children detained 
under the age of 16. The number of Palestinians arrested by Israeli forces as a result of protest 
activities against the separation barrier seemed to be on the rise.  

As  for  the  number  of  violations  of  the  right  to  proper  legal  procedures  (including  arbitrary 
detentions and arrests on political grounds), the number of complaints recorded by the ICHR 
remained  high,  with  198  complaints  in  the  West  Bank  and  54  complaints  in  the  Gaza  Strip 
despite  a  reduction  since  mid  2009.  While  the  number  of  reports  of  torture  or  ill-treatment 
decreased, there appeared to have been an increase in the cases of unlawful arrest/detention. 

During 2009, fourteen death sentences were issued in the West Bank and in the Gaza Strip, 
of  which  three  were  in  the  West  Bank.  Charges  were  usually  brought  on  the  grounds  of 
espionage,  treason  and  cooperation  with  hostile  parties.  No  improvement  in  the  right  of 
defence  was  noted.  No  executions  took  place  in  2009.  In  Gaza  the  de  facto  government 
continued  to  “adopt”  new  legal  norms,  and  in  December  2009  it  announced  its  intention  to 
introduce the death penalty for drug trafficking, which is reported to be a growing problem in 
the  Gaza  Strip.  The  EU  consistently  expressed  concern  at  this  situation.  The  first  formal 
execution was carried out by Hamas de facto government in Gaza in April 2010, beyond the 
reporting  period.  Developments  will  be  reported  upon  next  year.  Violations  of  media 
freedom,  the  right  of  association  and  peaceful  assembly  were  regularly  reported 
throughout the year. Freedom of association remained weak in the West Bank and the number 
of assaults in the Gaza Strip increased. Several incidents of breaking and entering, explosions 
and burglaries of civil society organisations were reported in the last quarter of 2009. These 
incidents  further  weakened  the  situation  of  civil  society  organisations,  which  were  also 
confronted with direct interference from the Gaza authorities. 

The continued  Israeli blockade of Gaza and the closure of the Gaza Strip crossings, despite 
repeated calls from the international community, continued to have severe consequences for 
the  humanitarian  situation.  The  ban  on  imports  of  building  materials  prevented  the 
reconstruction  of  thousands  of  damaged  homes  inside  the  Gaza  Strip.  The  main  trends 
observed during the reporting period included acceleration in the expansion of settlements on 
the western side of the Barrier. In addition, expansion work was reportedly taking place in 34 
settlements, 16 of which are located east of the Barrier.  

During 2009, the UN Office for the Coordination of Humanitarian Affairs recorded a weekly 
average of eight settler-related incidents affecting Palestinians, with an increase towards the 

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end  of  the  year,  following  the  Israeli  cabinet  announcement  of  a  10-month  freeze  on  new 
residential constructions in West Bank settlements (except in East Jerusalem). 

The overall socio-economic situation of women continued to be difficult during the reporting 
period. A National Committee to combat violence against women was established under the 
leadership  of  the  Ministry  for  Women's  Affairs  (MoWA)  which  includes  twelve  different 
ministries  and  civil  society  organisations,  with  a  view  to  drafting  a  national  strategy  to 
promote  women’s  rights  and  gender  equality  in  all  areas  of  society.  Honour  crimes  were 
regularly  recorded.  In  the  context  of  the  current  socio-economic  crisis,  Palestinian  women, 
although  they  constitute  the  majority  of  university  students,  remained  seriously  under-
represented on the labour market, with the female labour force participation rate in the fourth 
quarter  of  2009  reaching  only  15.1%  (see  also  "Employment  and  Social  Policy").  Female 
unemployment stands at 23.8%. 

However,  the  Palestinian  Authority  has  upheld  its  commitment  and  pursued  its  efforts  to 
improve the participation of women in political life: five women are represented in the June 
2009 Government (including one as Minister for Women’s affairs) out of 23 ministers, and 17 
of  the  132  members  of  the  Legislative  Council  are  women.  Representation  of  women  in 
political  bodies  is  estimated  at  around  15%  for  senior  positions,  and  around  9%  in  the 
judiciary.  In  June  2009,  the  Palestinian  Cabinet  decided  to  introduce  gender-sensitive 
budgeting and to establish gender units in ministries and public institutions. In addition, the 
President  of  the  Palestinian  Authority  signed  on  8  March  2009  a  degree  approving  the 
ratification  of  the  Convention  on  the  Elimination  of  all  Forms  of  Discrimination  against 
Women (CEDAW) without reservations. However, there is no substantial progress to report 
regarding the adoption of the Women’s Bill of Rights.  

Financial Accountability and Sound Management of Public Finances 

In 2009, the PA continued to implement substantial public financial management reforms, 
despite  the  difficult  political  context,  in  line  with  priorities  in  PM  Fayyad’s  state-building 
plan.  The  PA  underlined  its  commitment  to  increase  domestic  revenues,  control  and 
rationalise expenditure (e.g. through the launch of the ‘Al Sieyadeh’ programme), establish a 
research  department,  continue  to  modernise  and  reinforce  the  Ministry  of  Finance, 
computerise the tax procedures, decentralise internal audit, and complete the implementation 
of  a  new  accounting  system.  The  PA  is  also  currently  preparing  a  comprehensive  public 
financial management strategy. 

Progress continued with regard to internal audit, with the support of the EU. The Ministry of 
Planning  and  the  Ministry  of  Finance  further  integrated  their  planning  and  budgeting 
processes  and  a  new  budget  information  system  was  launched.  The  Ministry  of  Finance 
completed the full roll-out of its new accounting system to line ministries in August 2009 - 
earlier  than  initially  expected  -  and  is  now  developing  a  new  procurement  module  for  the 
system.  In  addition,  the  Ministry  of  Finance  developed  a  yearly  cash  plan  and  the  Central 
Treasury Account system was made fully operational. 

The  PA's  supreme  audit  institution,  the  State  Audit  and  Administrative  Control  Bureau 
(SAACB), produced a report of activities for the year 2008 and is currently working on the 
preparation of the 2009 report of activity (due to be published in the first quarter of 2010). In 
the  absence  of  a  functioning  Palestinian  Legislative  Council  (PLC),  annual  reports  are 
delivered  to  the  President,  cabinet  and  legislative  council  secretariat.  The  audit  of  the  PA's 
2008 financial statements is due to take place in 2010. The European Commission prepared a 

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multi-annual  assistance  programme  to  build  the  capacity  of  the  SAACB  in  order  to  begin 
implementation in 2010. 

The  PA  continued  to  make  progress  in  enhancing  the  transparency  of  its  finances. 
Comprehensive  monthly  fiscal  reports  continue  to  be  published  in  a  timely  manner  on  the 
Ministry  of  Finance  website.  These  reports  include  data  on  expenditures  (on  a  cash  or 
commitment basis, broken down by nature and by function), revenues and financing sources. 
However, as regards corruption, the PA still has little to show by way of a comprehensive 
anti-corruption  strategy,  but  it  has  set  up  a  committee  to  prepare  a  comprehensive  anti-
corruption plan.  

3. 

ECONOMIC AND SOCIAL REFORM 

Macroeconomic framework and functioning market economy 

Following  GDP  growth  of  2.3%  in  2008,  preliminary  data  show  the  Palestinian  economy 
expanding  by  around  6.8%  in  2009,  with  the  most  significant  increases  being  seen  in 
construction,  social  services  and  services  industries.  However,  this  represents  only  a  3.7% 
increase  in  GDP  per  capita.  The  economy  benefitted  from  the  partial  relaxation  of  border 
restrictions with Israel and easing of restrictions on internal trade in the West Bank, as well as 
from  improvements  in  the  security  situation  which  have  brought  an  increase  in  commercial 
activity  (see  section  on  trade).  However,  the  overall  growth  pattern  does  not  yet  indicate 
significantly higher output based on private investment in productive sectors. The substantial 
increase in Palestinian imports from Israel and little change in the value of Palestinian exports 
to  Israel  are  also  indicative  of  rising  donor-funded  consumption  rather  than  sustainable 
economic  growth.  The  Palestinian  economy  was  largely  unaffected  by  the  global  economic 
crisis, due to restricted external trade links, heavy dependence on international aid (over one 
third of GDP) and the low economic development base following years of political strife.  

The  more  positive  outlook  is  due  mainly  to  the  economic  performance  of  the  West  Bank, 
where  security  improved,  the  number  of  obstacles  to  movement  was  reduced,  Israel  issued 
several  hundred  new  business  permits  to  Palestinians,  and  the  first  significant  investments 
following the Palestinian Investment Conference of 2009 were launched. Real GDP growth in 
the West Bank is projected to have risen to 7% in 2009 from 5% in 2008, while in Gaza real 
growth is set to have risen to 1% of GDP in 2009 from -5% in 2008, although this reflects a 
continuing  decline  in  per  capita  terms.  Due  to  the  continuing  blockade  of  Gaza,  the  black 
market has expanded, partly operating through a series of tunnels at the Egyptian border. 

The inflationary pressure, which peaked in mid-2008, has gradually subsided, mainly owing 
to  the  decline  in  international  food  and  fuel  prices,  which  fell  to  2%  by  mid-2009,  while 
inflation still remains higher in Gaza due to the supply effect of the blockade. Real incomes 
also rose due to the depreciation of the shekel against the dollar, which accounts for a large 
part of remittances and donor aid, which fell sharply in the first half of the year. The overall 
fiscal  deficit  will  expand  in  2009  to  -29%  of  GDP  from  -23%  of  GDP  in  2008,  while  the 
recurrent  fiscal  balance,  excluding  emergency  spending  in  Gaza,  will  narrow  to  18.5%  of 
GDP  in  2009  from  20%  of  GDP  in  2008.  The  authorities'  strategy  is  to  consolidate  public 
finances  in  order  to  reduce  reliance  on  international  aid  and  to  encourage  private  sector 
growth.  At  the  same  time,  they  aim  to  make  public  expenditure  more  effective  by  shifting 
resources away from wages and subsidies and towards investment. To this end the Palestinian 
Authority has maintained controls on government employment and wages, and substantially 

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reduced utility subsidies. Its response to the war in Gaza at the beginning of the year, coupled 
with  the  ongoing  blockade  imposed  by  Israel  on  normal  commercial  traffic  with  the  Gaza 
Strip, continues to have serious fiscal consequences for the PA. 

The  Palestinian  Authority  took  legislative  measures  in  2009  to  address  credit  shortages  to 
businesses due to the high risks of investing in the local economy. The Palestinian Monetary 
Authority  introduced  a  new  regulation  requiring  banks  to  reduce  their  ratio  of  foreign 
investment/total deposits to 55% (from the current 65%). Partly as a result of the regulation 
and the improved security environment, private sector credit in the West Bank rose by a third 
in the first half of 2009, while in Gaza there was  a fall in private sector credit due to weak 
investment demand. Although private sector activity picked up in 2009 in the West Bank, a 
sustained economic recovery still hinges on the further removal of restrictions on movement 
and access and an enabling political and regulatory environment for investment.  

In real terms, GDP in the occupied Palestinian territory (oPt) is still well below the level of 
ten years ago and the region remains mired in poverty. The overall poverty rate in the oPt is 
57%,  with  an  estimated  80%  of  people  in  Gaza  living  below  the  poverty  line.  The  overall 
social  situation  also  remains  difficult  and  the  war  in  Gaza  in  January  2009  led  to  a  serious 
worsening of the humanitarian situation in the Strip.  

Employment and social policy 

The unemployment rate decreased slightly from 27.9% in the 4th quarter of 2008 to 24.8% in 
the 4th quarter of 2009. It stood at 18.1% in the West Bank and 39.3% in the Gaza Strip in the 
4th  quarter  of  2009.  Still,  according  to  ILO  standards,  the  labour  force  participation  rate 
remained low and stagnated at 41.5% in the 4th quarter of 2009, compared with 41.4% in the 
same period in 2008. The unemployment rate of women is estimated in 2008 at 23.8%. The 
Palestinian Authority continued to work with the International Labour Organisation (ILO) on 
developing an employment strategy and upgrading the labour market information system. 

As  regards  social  dialogue,  the  tripartite  committee  was  established  in  July  2009.  The  ILO 
organised  a  roundtable  discussion  in  October  2009  to  revitalize  the  Palestinian  national 
tripartite committee. 

On  social  protection  and  the  fight  against  poverty,  the  European  Commission  finalised  a 
tender  for  technical  assistance  to  the  Ministry  of  Social  Affairs  in  October  2009  on  the 
implementation of an enhanced social protection system. Since February 2009, the Ministry 
of Social Affairs has been responsible for the development of a poverty-based cash assistance 
scheme.  To  this  end,  it  adopted  in  July  2009  a  poverty-based  targeting  methodology  with  a 
view to setting up a centralised database of poor households. Finally, in December 2009 the 
Ministry of Social Affairs presented its national programme for social protection. 

No progress can be reported on the adoption of an action plan for the reform of the pension 
system  and  on  establishing  the  legal  framework  for  a  new  pension  system.  However,  a 
number of technical consultations took place throughout 2009 on ensuring the sustainability 
of the reform, and the Palestinian Authority is working on a pension reform action plan. The 
development of a sustainable law on retirement as well as the reinforcement of the capacities 
of the Palestinian Pension Agency are key priorities of the two-year governmental programme 
“Palestine, Ending the occupation, establishing the State” adopted in August 2009. 

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Promotion  of  sustainable  development  remains  difficult  and  is  further  complicated  by  the 
constraints imposed by the Israeli military occupation. In Area C of the West Bank, the PA 
has  very  limited  control  over  its  natural  resources  and  agricultural  lands.  Due  to  Israeli 
restrictions, the development of the population is confined to the existing cities and villages 
with too little suitable space for demographic growth, which leads to irrational land use and 
unsound  environmental  management.  In  the  Gaza  strip,  more  than  two  years  of  effective 
blockade  coupled  with  the  widespread  destruction  from  the  Gaza  conflict  have  left  tens  of 
thousands of homes damaged or destroyed and caused further deterioration of already over-
loaded water, sanitation and electricity networks. 

4. 

TRADE-RELATED ISSUES, MARKET AND REGULATORY REFORM 

Bilateral  trade  between  the  EU  and  the  oPt  contracted  slightly  during  the  reporting  period: 
exports from the oPt to the EU slowed down, but less significantly than in the previous year 
(by 9.4% compared to 48.2%), while EU exports decreased by 14.5%. 

Some  progress  was  registered  in  respect  of  obstacles  to  trade  and  economic  development 
related to movement of goods and access to the occupied Palestinian territory. The easing of 
internal movement that began in May 2009 continued until the end of the year. The towns of 
Nablus,  Ramallah,  Qalqilya,  Jericho  and  Jenin  are  more  accessible  than  in  previous  years, 
with  most  checkpoints  physically  still  in  place,  but  with  traffic  flowing  relatively  easily.  In 
Nablus, the gradual removal (or significant easing) of existing checkpoints, road blocks and 
permit  requirements  that  used  to  surround  the  city  means  that  in  terms  of  movement  and 
access the Nablus economy is now more or less in a similar situation to that of other cities in 
the West Bank. One recent improvement in the northern West Bank was the opening of the 
Jalameh  crossing  in  October  on  a  trial  basis  for  vehicles  from  northern  Israel;  this  became 
official  in  November  2009.  As  regards  external  movement,  the  situation  at  the  commercial 
crossing points with Israel remained unchanged in the West Bank, with continuing significant 
delays and high costs for most traders, in particular around Tarqumiya. The Israeli authorities 
are currently working on a pilot project to extend opening hours and to clarify procedures for 
the crossings. Progress was made with respect to the issue of PA-Jordanian trade relations, in 
the form of support from the European Commission for a Trade Corridors Facilitation project, 
which was completed in October 2009. Apart from items regarded as ‘humanitarian’ by Israel, 
legitimate  commercial  trade  between  Gaza  and  the  outside  world  is  essentially  non-existent 
owing to the current Israeli blockade. Israeli obstacles to the implementation of the trade part 
of the Interim Association Agreement create higher costs and delays for EU exporters and PA 
importers.  The  blockade  also  contributes  to  the  diversion  of  direct  EU-PA  trade  to  indirect 
trade (via Israeli importers), which is more costly for Palestinian economic operators. 

During the reporting period work towards establishing a “dispute settlement mechanism” for 
an effective resolution of trade disputes in the framework of the IAA continued. As regards 
the possibility of proceeding with the gradual liberalisation of trade in agricultural and fishery 
products  with  the  EU,  the  European  Commission  stands  ready  to  examine  ways  of  making 
better  use  of  the  current  trade  concession  and  of  entering  negotiations  based  on  the  Rabat 
roadmap  in  due  course.  In  September  2009,  the  PA  submitted  its  application  to  become  an 
observer in WTO and engaged in a process of consultations with other WTO members both in 
Geneva and locally. 

In June 2009, the PA adopted the protocol on Pan-Euro-Mediterranean cumulation of origin 
The  PA  customs,  with  EU  assistance,  has  been  implementing  an  automated  system  for 

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customs  data  "ASYCUDA  World”  to  enhance  its  operational  capacity.  In  addition,  the  PA 
Government in November 2009 adopted the “Al Siyadeh" programme, aimed at introducing a 
single  window  approach  to  border  management  and  a  single  file  approach  to  revenue 
collection,  with  the  all  tax  and  non-tax  revenues  being  unified  under  a  single  revenue 
administration. To this end a steering committee was set up in December 2009.  

Concerning free movement of goods and technical regulations, the PA started the process 
of upgrading the quality infrastructure by finalizing the needs assessment and formulating a 
support programme in January 2009. The needs assessment framework was approved by the 
Palestinian standardisation body. The metrology committee composed of the representatives 
of private and public sectors will review the law on standards and metrology and discuss plans 
to  establish  a  separate  accreditation  body.  The  Palestinian  Authority  has  selected 
pharmaceuticals and construction products as its priority sectors. An EU technical assistance 
project  will  begin  in  2010.  It  will  focus  on  standards  institutions,  testing  laboratories,  and 
training in conformity assessment and certification. 

In the sanitary and phyto-sanitary area, during 2009, TAIEX supported the participation of 
the PA in several events and seminars on veterinary education, animal welfare, animal health 
and food safety issues.  

The  Government  programme  “Palestine:  Ending  the  Occupation,  Establishing  the  State” 
contained  a  number  of  measures  to  improve  the  overall  business  climate.  As  a  result,  the 
Palestinian Authority worked during the reporting period on a new company law designed to 
simplify and reduce the necessary steps for registering a company. A consultative task force 
on company law was set up in December 2009. 

In the field of financial  services, the Palestinian territories were less affected by the global 
economic  and  financial  crisis  (even  though  this  led  to  diminished  remittances  from 
Palestinians working abroad) than by the Gaza crisis, the ramifications of which contributed 
to undermining the public's confidence in the banking system in the Gaza Strip during a large 
part of the year. The lack of foreign currency, which is not allowed in by Israel, leads to an 
increase in the hoarding of foreign currency - thereby creating a vicious circle; such practice 
also indirectly supports black market activities that benefit the de facto authorities. However, 
the  Palestinian  Monetary  Authority  has  continued  to  regulate  the  Palestinian  banking  sector 
and is aiming to gradually implement the Basel II principles for effective banking supervision. 
It  began  implementing  a  corporate  governance  code  in  February  2009.  The  Palestinian 
banking system saw an expansion in the number of bank branches from 190 in late 2008 to 
207 by the end of 2009, which has increased public access to banking services.  

Other Key Areas  

In  the  August  2009  programme  of  the  13th  government,  "Palestine,  Ending  the  Occupation, 
Establishing the State", the PA reaffirms its objective of amending the Tax Law with a view 
to  broadening  the  tax  base,  increasing  income  tax  collection  and  improving  the  business 
environment. In this context, the PA also intends to conduct field visits and surveys in order 
to detect non-registration; closely monitor any request for exemption to be granted under the 
"investment  promotion  law";  coordinate  with  the  general  attorney  and  courts  on  tax  related 
issues; increase tax compliance of low income tax payers and modernize the tax management 
system. No progress was made on the unification of tax administrations in the West Bank and 
Gaza Strip due to the political situation. 

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The  draft  unified  law  on  public  procurement  was  further  reviewed  during  the  reporting 
period, but is currently awaiting approval by the Cabinet.  

In  the  area  of  statistics,  the  PA  cooperated  fully  over  the  reporting  period  in  the  regional 
working  group  bringing  together  representatives  of  the  statistical  offices  of  Egypt,  Israel, 
Jordan  and  the  PA  which  aims  in  particular  at  defining  a  work  programme  to  reduce 
asymmetries in the future. In the framework of the National Strategy for the Development of 
Statistics 2009-2013, the Palestinian Central Bureau for Statistics (PCBS) is closely involved 
in the current Palestinian planning efforts, especially the ongoing development of monitoring 
and  evaluation  systems.  The  PCBS  participated  actively  in  the  MEDSTAT  II  programme, 
which focused on institutional capacity building and ended in September 2009. 

On  enterprise  policy,  the  PA  continued  to  implement  the  Euro-Mediterranean  Charter  for 
Enterprise.  A  bilateral  seminar  on  the  Charter  was  held  in  December  2009.  The  National 
Economic  Policy  Group,  with  representatives  from  both  the  private  and  public  sectors,  was 
created in 2009 in order to institute a national policy framework via consultation. The Private 
Sector  Coordination  Council  continued  to  promote  public-private  dialogue.  However, 
monitoring of the results of the dialogue is limited. The PA consulted the private sector in its 
process  of  drafting  new  economic  laws.  A  consultative  task  force  was  established  in 
December 2009 with a view to revising company law. The PA also started developing tools to 
create  an  enabling  environment  for  Small  and  Medium  Sized  Enterprises  (SMEs)  and  a 
review of the SME framework and the development of a policy framework was launched in 
2009.  

The  Palestinian  Investment  Promotion  Authority  established  contacts  with  stakeholders  to 
build  a  future  comprehensive  strategy  for  entrepreneurship.  The  Annual  Best  Micro- 
Entrepreneur Award for Palestine was instituted in 2009. Plans for 2010 include the launching 
of  the  SME  strategy,  with  the  specific  aim  of  supporting  new  companies  through  business 
incubators, industrial zones and business parks, and the holding of an investment conference 
for SMEs. On skills development, the PA will participate in the higher learning pilot project 
in 2010 which aims to spread entrepreneurship learning across all the faculties.  

5. 

ENERGY, ENVIRONMENT, TRANSPORT, RESEARCH AND DEVELOPMENT 

Due to the political situation, the provision of transport operations is mostly confined to the 
national  territory.  Nevertheless,  the  regulatory  reforms  of  the  past  years  in  the  road  sector 
have  led  to  the  adoption  of  legislation  on  driving  licences,  operating  licences  and 
roadworthiness testing, in line with international standards. In 2009, the Ministry of Transport 
updated  its  transport  agenda,  known  as  the  Strategy  for  Transport  Sector  2010-2012,  and 
recommended measures to improve road management mainly through the establishment of an 
independent  roads  regulator,  the  reduction  of  the  impact  of  road  traffic  on  the  environment 
and  the  introduction  of  a  number  of  road  safety  measures,  including  the  re-education  of 
drivers. In order to pursue this agenda, the Ministry drew up a new regulation for the Higher 
Traffic Safety Council in November 2009 and is currently reviewing its licensing activities for 
private and public transport.  

The  Israeli  Government's  decision  to  re-activate  the  Joint  Transport  Office,  as  a  way  to 
promote  transport  cooperation,  is  still  pending.  Damage  in  the  transport  sector  following 
Israeli attacks in the Gaza Strip is estimated at approximately EUR 160 million. 

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The occupied Palestinian territory remained heavily dependent on Israeli energy imports. In 
2009, the PA adopted the energy action plan 2009-2011. In implementing its energy policy, 
the PA developed plans for sector reform. In 2009, the President approved an electricity law 
which will reform the Palestinian electricity landscape, inter alia by establishing a regulator. 
The law requires the adoption of complementary legislation, which is being drafted. On the 
basis  of  the  Palestinian  electricity  master  plan,  plans  for  new  electricity  generation  capacity 
and interconnection projects were developed both for Gaza and the West Bank. Following the 
completion of feasibility studies, the PA prepared agreements for the construction of a Gaza-
Egypt  link  and  additional  West  Bank-Jordan  electricity  links.  With  a  view  to  implementing 
the latter interconnection, the PA continued work on four electricity substations in the West 
Bank. Rehabilitation of electricity networks in the West Bank continued. 

The  PA  enhanced  its  policy  to  promote  the  use  of  renewable  energy  sources  and  wants  to 
increase its share of electricity generation to 20%. It initiated a pilot wind energy project for 
the Hebron hospital with support from the EU.  

The trilateral energy cooperation between the Palestinian Authority, Israel and the European 
Commission, which was re-launched in 2008, was stalled by the Gaza conflict. The aim is still 
to establish a joint energy office and to facilitate projects of common interest, such as the joint 
Israeli-Palestinian  “Solar  for  Peace”  initiative.  In  2009,  an  EU-funded  study  to  support  the 
“Solar for Peace” project was completed. The European Commission encouraged partners to 
fully re-activate the trilateral cooperation. 

In the field of climate change, a climate adaptation strategy was designed with the support of 
the UNDP. Some steps were taken to promote adaptation measures in the water sector, such 
as  re-use  of  treated  effluent  for  agriculture  purposes  and  construction  of  rain  harvesting 
cisterns. 

The state of the environment in the Gaza Strip remains a source of serious concern. There is 
a  continued  need  for  better  sewage  connection,  wastewater  treatment,  waste  collection  and 
landfills, in both the Gaza Strip and the West Bank.  

In  the  West  Bank,  the  construction  of  environment-related  infrastructure  did  not  always 
progress  due  to  the  non-issuing  of  related  permits  by  the  Israeli  Civil  Administration. 
However some permits were released for wastewater treatment plants in Nablus, Hebron, and 
Jenin.  Some  activities  also  took  place  to  connect  previously  unconnected  rural  areas  to 
drinking water supply. 

In  the  Gaza  Strip,  it  is  impossible  to  proceed  with  the  reconstruction  of  damaged 
infrastructure  or  the  building  of  new  infrastructure  due  to  the  continuing  restrictions  on  the 
import of construction materials. 

The  offices  of  the  Environmental  Quality  Authority  (EQA)  and  the  Palestinian  Water 
Authority  (PWA)  in  Gaza  remained  closed,  although  the  EQA  offices  in  the  West  Bank 
continued to operate.  

Bylaws on the management of waste water and on nature protection are in preparation. The 
EQA  reviewed  the  PA's  national  environmental  strategy  and  finalized  a  first  draft.  Work 
continued  on  preparing  a  national  strategy  for  solid  waste.  The  PWA's  Reform  Action  Plan 
was  approved  by  the  PA's  Council  of  Ministers.  Environment  strategies  and  legislation  still 
need to be updated.  

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Following  an  internal  audit,  the  PWA  issued  a  draft  concept  paper  for  capacity  building. 
Reviving administrative implementation capacity remains a major challenge.  

Representatives of the PA participated in activities as part of the EU Water Initiative and in 
preparing a strategy for water in the Mediterranean (which failed to get approval at the recent 
ministerial meeting of the Union for the Mediterranean).  

Cooperation  and  information  exchange  took  place  between  the  European  Commission  and 
oPt,  including  on  water,  pollution  reduction  in  the  Mediterranean  region  and  environmental 
reporting. 

The EU-PA environment subcommittee met for the first time in April 2009. 

In  the  field  of  civil  protection,  the  PA  took  part  in  a  new  phase  of  activities  of  the  Euro-
Mediterranean  Programme  on  Prevention,  Preparedness  and  Response  to  Natural  and  Man-
made  Disasters,  which  was  launched  in  2009,  continuing  the  process  of  strengthening  civil 
protection activities in the region, enhancing capacities at regional, national and local levels, 
and  promoting  institutional  cooperation.  Hereby,  further  steps  were  taken  to  bring  the  PA 
closer  to  the  European  Civil  Protection  Mechanism,  contributing  at  the  same  time  to  the 
development  of  a  civil  protection  culture  in  the  region  based  on  an  integrated  approach 
covering disaster prevention, preparedness and response. 

In  the  information  society  sector,  the  Ministry  of  Telecommunications  and  Information 
Technology is responsible for enforcing the Telecommunications Law. The proposal to set up 
an  independent  Palestinian  Telecommunications  Regulatory  Authority  to  that  end  was 
expected  to  be  adopted  in  late  2009.  Due  to  the  political  uncertainty  it  is  foreseen  that  this 
would only be approved in 2010. 

For  the  fixed  line  market,  the  Palestine  Telecommunications  Company  (Paltel)  still  holds  a 
monopoly.  Paltel's  internet  and  data  services  are  offered  via  a  number  of  subsidiary 
companies. Local loop unbundling has still to be regulated.  

As  regards  the  wireless  markets,  a  second  Palestinian  mobile  phone  operator  started 
operations in November 2009. The deal to allow a second Palestinian mobile phone operator 
was spelt out in a bilateral agreement between the PA and Israel in 2008. This is one of the 
largest foreign investments in the Palestinian economy, which will inject EUR 500 million in 
investment and EUR 250 million in fiscal revenue for the PA, and create thousands of jobs. In 
order for this project to become fully operational, a further 1 MHz of frequencies needs still to 
be released by the Israeli authorities, so as to increase the spectrum currently available to the 
mobile operator from the present 3.8 MHz to 4.8 MHz. Israel has provided assurances that it 
will  assign  the  full  4.8  Mhz  frequencies  required  for  the  company  to operate  successfully. 
Palestinian consumers also use Israeli operators. 

As  regards  the  audiovisual  sector,  the  Ministry  of  Information  drafted  a  new  broadcasting 
law  which  imposes  certain  restrictions  on  media  freedom.  The  status  of  this  draft  is 
unconfirmed. 

In  the  area  of  research  and  technology,  the  major  challenges  identified  by  the  PA  are  the 
lack of both a national science and technology policy and a system of financing research. The 
existing  research  centres  are  not  centres  of  excellence  and  there  is  a  lack  of  cooperation 
between industries and universities. Scientific research and development is focused mostly on 

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energy  issues  (renewable  resources,  energy  saving  techniques,  etc.).  The  main  Palestinian 
body that is active in this area of research and development is PERC (the Palestinian Energy 
Research  Centre).  In  2009,  the  PA  established  a  contact  point  for  the  7th  Framework 
Programme (FP7). Participation by Palestinian researchers in the calls for interest in FP7 has 
increased, but is still relatively low (43 Palestinian applicants, of which seven are mainlisted) 
- mainly in agriculture, environment and  ICT themes -  for a contribution of about  EUR 0.5 
million. 

An  appropriate  information  strategy  to  facilitate  and  promote  adequate  participation  of 
Palestinian research organisations in the R&D Framework Programmes and joint projects has 
yet be implemented. It is necessary to ensure a policy-driven dialogue in order to determine 
the  particular  priorities  and  the  specific  needs  of  PA.  Palestinian  RTD  centres  are  also 
expected to participate in ERA-WIDE call, for which the deadline is for January 2010.  

6. 

PEOPLE-TO-PEOPLE CONTACTS, EDUCATION AND HEALTH 

The  Ministry  of  Education  and  Higher  Education  has  begun  implementing  the  Education 
Development  Strategic  Plan  (EDSP)  for  the  period  2008-2012,  focusing  on  delivering 
equitable access to education for all, enhancing the quality of education, developing capacity 
in  the  field  of  public  financial  management,  improving  the  cost-effectiveness  of  investment 
programmes and improving the access to and quality of TVET. A consultation process with 
civil society and schools on curricula and textbook reviews began in 2009, while the Ministry 
prepared  an  evaluation  of  subject  performance  in  schools  in  order  to  better  target  quality 
performance  improvements.  With  EU  financial  support  considerable  advances  have  been 
made  in  the  implementation  of  the  national  teacher  education  strategy,  including  the 
identification  of  the  role,  responsibilities  and  composition  of  the  Commission  for  the 
Development of the Teaching Profession (CDTP). The CDTP will provide national leadership 
on  setting  the  standards  of  teaching  and  learning,  enhancing  the  status  of  teachers  and 
encouraging  a  national  sense  of  valuing  and  engaging  in  education.  In  addition,  a  new 
monitoring  and  evaluation  department  was  established  in  the  Ministry  in  2009  to  oversee 
monitoring  activities  at  central,  district  and  school/community  levels  and  to  develop 
performance assessment tools.  

The  EDSP  remains  focused  on  improving  access  to  education  and  enabling  investment  in 
infrastructure  and  equipment  to  meet  the  demands  of  a  growing  school-age  population,  as 
well as on the recruitment of additional teaching staff. While a significant number of reforms 
have  been  introduced  to  address  quality  issues,  implementation  must  remain  focused  on 
resource prioritization and capacity development at all levels.  

Improving  access  to  vocational  education  and  training,  as  well  as  the  quality  of  such 
training at secondary level and tertiary levels, remains a key policy priority under the EDSP, 
alongside that of adapting training provision to the needs of the labour market. The review of 
the  TVET  strategy  has  made  good  progress  since  July.  An  awareness  campaign  to  increase 
student  participation  in  vocational  training  was  launched  by  the  Ministry  in  summer  2009. 
Formal  training  remains  largely  limited  to  the  traditional  fields  of  metalwork  and 
construction,  with  a  consequent  need  to  expand  provision  to  new  professions  in  tourism, 
business administration, health and pre-school education, as well as investment in the training 
of trainers and teachers through the development of in-service training. In order to improve 
work on enhancing employability, upgrading of skills and development of the local economy, 

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and  to  optimize  donor  investment,  there  is  a  need  to  promote  interministerial  coordination 
between the Ministries of labour and education and higher education. 

The  Tempus  programme  continued  to  support  the  development  and  reform  of  higher 
education  with  two  projects  selected  under  the  second  call  for  proposals  for  Tempus  IV. 
Palestinian  students  and  scholars  benefited  from  scholarships  under  Erasmus  Mundus, 
including 56 grants for student and academic mobility. The Ministry of Education and Higher 
Education  organised  a  Tempus  information  day  in  December,  which  included  a  video 
conference link with interested universities from Gaza. In addition, the Ministry identified the 
introduction of the three-cycle system in line with the principles of the Bologna Process as a 
priority for higher education as a way to improve university research capacity. In spite of the 
limitations  on  mobility  imposed  by  the  occupation,  Palestinian  universities  and  higher 
education institutions used Tempus IV to advance inter-university and regional cooperation. 
Palestinian universities are encouraged to participate in the Jean Monnet programme. 

In the area of youth, Palestinian young people and youth organisations continued to benefit 
from the opportunities offered by the Youth in Action Programme, through youth exchanges, 
voluntary service and cooperation activities in non-formal education. Palestinian participation 
in Euro-Med Youth III during the period 2006-8 was given a positive evaluation in July 2009, 
while  the  Ministry  of  Youth  and  Sports  made  a  policy  commitment  to  participate  fully  in 
Euro-Med  Youth  IV.  However,  the  national  youth  policy  remains  weak  and  the  capacity  to 
mobilize structured investment for youth development is hampered by the absence of a youth 
law. 

In  terms  of  cooperation  with  civil  society,  the  European  Union's  Partnership  for  Peace 
Programme (PfP) continued its support for projects that contribute to conflict resolution and 
mutual  understanding  in  several  areas.  In  February  2009,  a  seminar  was  held  for  European, 
Israeli  and  Palestinian  NGOs  in  Ireland  to  enable  them  to  learn  from  peace-building 
experiences before and during the Irish peace process. As in the previous year, the European 
Commission  organised  eight  training  seminars  for  NGOs  to  upgrade  their  capacities  in  the 
field  of  project  cycle  management  and  formulation,  monitoring  and  evaluation,  as  well  as 
communication.  However,  the  political  situation  continues  to  seriously  impede  project 
implementation, principally because of the obstacles to free movement and access. 

In the area of culture, Palestinian organisations participated actively at regional level in the 
new  Euro-Med  Heritage  IV  programme.  However,  the  Israeli  decision  not  to  allow  cultural 
events  to  be  held  in  East  Jerusalem  as  the  designated  Arab  Capital  of  Culture  for  2009  has 
prevented the Palestinians from expressing their identity in the areas in which they live. 

The  PA  continued  to  implement  its  health  reform  agenda,  in  particular  on  the  basis  of  the 
2009  work  plan  under  the  National  Health  Strategic  Plan  2008-2010  and  the  Palestinian 
Reform  and  Development  Plan.  Stakeholder  consultations  started  in  order  to  establish  a 
systematic  process  for  monitoring  progress  with  the  health  reform  agenda.  There  is  no 
progress to be reported yet on the reform of national health insurance law. Managing public 
health remained problematic in 2009, because of the split between the Gaza strip and the West 
Bank, the Gaza crisis and the Israeli restrictions on the import of goods and the movement of 
persons  in  and  out  of  Gaza.  Lack  of  access  to  medicines,  medical  spare  parts,  specialised 
medical  training  and  certain  types  of  specialised  health  care  impacted  heavily  on  the 
availability  of  quality  services  for  Palestinians  in  Gaza.  The  political  and  socio-economic 
situation  in  the  territory  continues  to  impact  on  the  mental  health  of  the  Palestinians.  The 
Palestinian  Authority  took  measures  to  combat  influenza  A  (H1N1),  including  through 

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awareness  campaigns  and  vaccination.  In  October  2009,  the  PA  participated  in  the  newly 
established  EU  enlarged  health  information  committee.  It  continued  participation  in  the 
‘Episouth’  network  on  communicable  diseases  for  the  EU,  Mediterranean  and  Balkan 
countries. 

7. 

FINANCIAL COOPERATION – 2009 KEY FACTS AND FIGURES 

The ENPI allocations for the Occupied Palestinian Territory for 2009 amounted to EUR 352.8 
million.  Due  to  the  continuing  emergency  situation  in  West  Bank  and  Gaza  there  is  no 
National Indicative Programme covering the period 2007-2010. Most assistance is channelled 
through the PEGASE Mechanism, which is geared towards supporting the achievement of key 
policy objectives as outlined in the Palestinian Reform and Development Plan (PRDP), namely 
governance,  social  development,  economic  and  private  sector  development  and  public 
infrastructure. The aim of PEGASE is to enable the Palestinian Authority to become the fully-
fledged  government  of  a  future  Palestinian  state  by  moving  away  from  the  emergency 
assistance provided under the Temporary Implementation Mechanism towards a more strategic 
development  agenda  through  institutional  capacity-building  and  social  and  economic 
development,  in  support  of  the  Government  programme  "Palestine:  Ending  the  Occupation, 
Building the State".  

The EU also provided significant funds to the United Nations Relief and Works Agency for 
Palestine Refugees in the Near East (UNRWA), which is responsible for health, education and 
social service provision to the Palestine refugee population in West Bank and Gaza, as well as 
in  neighbouring  countries.  In  addition  to  providing  EUR  66  million  for  UNRWA's  General 
Budget, this agency allocated EUR 1 million for support to the organisation's internal reform 
plan and EUR 10 million for specific projects aimed at improving the quality of education in 
UNRWA  schools.  Additional  support  to  UNRWA  was  also  provided,  in  particular  to  help 
address  problems  caused  by  the  Gaza  crisis,  including  support  from  the  Instrument  for 
Stability  as  noted  below.  In  total,  UNRWA  in  2009  benefited  from  record  EU  budgetary 
commitments of EUR 169.7 million. 

Implementation of the measures covered by the 2007 and 2008 financial years is underway. 
Progress  is  being  made  in  the  provision  of  infrastructure  facilities  for  the  Palestinian  Civil 
Police and for significant qualitative reforms in the education sector and technical assistance 
to  PA  ministries  which  have  a  vital  role  to  play  in  state-building,  such  as  the  Ministry  of 
Social  Affairs,  the  Ministry  of  Finance  (including  customs),  the  Ministry  of  Planning  and 
Administrative  Development  and  in  the  judicial  sector.  Projects  aimed  at  reinforcing 
Palestinian  schools  and  hospitals  in  East  Jerusalem  are  also  being  implemented,  along  with 
support  for  the  Central  Elections  Commission  and  Palestinian  Central  Bureau  of  Statistics. 
Significant  support  is  provided  to  the  private  sector,  in  particular  through  the  European 
Palestinian Credit Guarantee Fund. 

Direct financial support, provided through the PEGASE mechanism, amounted to EUR 218.6 
million in 2009. Of this overall budget, EUR 150.5 million was allocated to the payment of 
salaries  for  civil  servants  and  pensioners,  EUR  28.5  million  for  social  allowances  to 
vulnerable  Palestinian  families  and  just  under  EUR  40  million  for  fuel  for  the  Gaza  Power 
Plant. In addition, EUR 10.5 million was allocated for projects in the governance and social 
development sector, EUR 18 million for infrastructure and EUR 22 million for assistance to 
re-launch legitimate private sector activity in the Gaza Strip, and EUR 4.5 million to support 
Palestinian  institutions  in  East  Jerusalem.  A  sum  of  EUR  1.5  million  was  also  provided  to 

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support  the  EXACT  Initiative  on  regional  water  use  and  the  Office  of  the  Quartet 
Representative. 

In addition to this bilateral allocation, the occupied Palestinian territory continues to benefit 
from co-operation activities financed under the ENPI multi-country and regional programmes, 
in  particular  the  "Partnership  for  Peace"  initiative  for  civil  society  organisations,  as  well  as 
horizontal thematic programmes, such as the European Instrument for Democracy and Human 
Rights  (EIDHR)  and  the  DCI  programmes:  Non-State  Actors  and  Local  Authorities  in 
Development  (NSA/LA),  Investing  in  People  and  the  Food  Security  programme.  The  latter 
provided  the  oPt  with  EUR  14.48  million  under  its  ‘Linking  Relief  with  Rehabilitation  and 
Development’  component,  divided  between  an  allocation  of  EUR  5  million  for  UNRWA’s 
Social Safety Net Programme and EUR 9.48 million currently being tendered for water and 
sanitation projects. 

Other EU Instruments supplemented the ENPI assistance package, in particular the Instrument 
for Stability and the Food Facility, both of which provided significant sums (EUR 20 million 
and  EUR  39.7  million  respectively),  taking  account  of  the  situation  in  the  Gaza  Strip  in 
particular. The Food Facility allocation was made to UNRWA, covering 2009 and 2010. The 
Palestinian people also benefit from humanitarian assistance (of EUR 19.3 million) provided 
by DG ECHO; (the aid does not go to the PA and also covers refugees in Jordan, Syria and 
Lebanon).  A  pilot  project  for  a  total  of  EUR  1  million  was  approved  in  order  to  provide 
micro-finance for beneficiaries working in the agricultural sector. The oPt is also eligible to 
participate  in  the  Cross-Border  Cooperation  (CBC)  Mediterranean  Sea  basin  programme 
(EUR  173.6  million  for  the  whole  programme  in  the  period  2007-13).  The  priorities  of  the 
programme are: socio-economic development, renewable energy, cultural dialogue and local 
development.  

The EU is the largest single donor to both the PA and UNRWA and it plays a major role as a 
reliable  and  punctual  provider  of  support.  In  2009,  the  European  Commission  Technical 
Assistance  Office  for  the  West  Bank  and  Gaza  Strip  ensured  the  coordination  of  assistance 
activities  with  the  PA  in  particular  at  the  level  of  EU  Member  States  and  has  been 
instrumental in establishing a Vademecum on EU Local Aid Co-operation in the oPt, in active 
partnership  with  Member  States'  representatives  in  situ.  As  a  result  a  detailed  division  of 
labour  has  been  drawn  up  between  the  European  Commission,  the  Member  States  and  the 
Palestinian  Authority  which  takes  account  of  best  practices  adopted  in  the  field  of 
development  co-operation  in  recent  years  with  different  Member  States  and  with  the 
Commission being responsible for co-ordination in specific priority sectors. 

The EU Heads of Cooperation are developing EU sector fiches for the focal sectors which are 
to receive EU financial assistance in the coming years. The proposed focal sectors for the EU 
as  a  whole  are:  security,  justice,  public  financial  management,  local  government,  health, 
education, social protection, private sector development, agriculture, water, energy, refugees, 
Jerusalem  and  budget  support.  Work  is  ongoing  in  close  cooperation  with  the  Ministry  of 
Planning and Administrative Development, which is leading the process of the development 
by  the  PA  of  23  sector  fiches  which  will  inform  the  Palestinian  National  Plan  2011-2013 
(PNP).  

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