JOINT STAFF WORKING PAPER Implementation of the European Neighbourhood Policy in 2010Country Report: occupied Palestinian territory  JOINT STAFF WORKING PAPER Implementation of the European Neighbourhood Policy in 2010Country Report: occupied Palestinian territory
Date: 2011-05-25
Institutions: European Commission, High Representative of the Union
Subjects: European neighbourhood policy, Palestine, State aid, association agreement, bilateral agreement, democracy, economic reform, human rights, political cooperation, political reform

EUROPEAN COMMISSION 

HIGH REPRESENTATIVE OF THE
EUROPEAN UNION FOR 
FOREIGN AFFAIRS AND 
SECURITY POLICY

Brussels, 25.5.2011 
SEC(2011) 644 final 

JOINT STAFF WORKING PAPER 

Implementation of the European Neighbourhood Policy in 2010 
Country Report: occupied Palestinian territory 

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JOINT STAFF WORKING PAPER 

Implementation of the European Neighbourhood Policy in 2010 
Country Report: occupied Palestinian territory 

1. 

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 European Neighbourhood Policy Action 
Plan (ENP AP) was approved in May 2005 for a period of three to five years. 

This  document  reports  on  the  overall  progress  made  on  the  implementation  of  the  EU-PA 
ENP  AP  between  1  January  and  31  December  2010,  although  developments  outside  this 
period  may  be  considered  where  appropriate.  For  further  information  on  regional  and 
multilateral sector processes, please refer to the sectoral report. 

In  addition  to  a  number  of  high-level  visits  to  both  Brussels  and  the  occupied  Palestinian 
territory  (oPt),  four  subcommittees  and  one  joint  committee  were  held  successfully  in  the 
course  of  2010.  These  meetings  demonstrated  the  PA’s  increased  institutional  and 
coordination capacity. Work has also started on a new Action Plan, which is expected to be 
concluded in 2011. Throughout the reporting period, the EU continued to support the PA with 
a view to contributing to the implementation of the two-state solution. 

The  PA  also  submitted  a  formal  request  to  increase  the  current  number  of  four  sub-
committees. This increase is in line with existing practice in the other ENP partner countries 
and  would  demonstrate  its  increased  institutional  capacity.  The  main  priorities  of  the  new 
Action Plan are consistent with the PA’s statebuilding plan and the new Palestinian National 
Plan (PNP 2011–2013).  

The reformist agenda of the government is producing good results. The PA has made steadfast 
progress in building its capacity to run the future State of Palestine. This was acknowledged 
in the World Bank’s report for the Ad Hoc Liaison Committee (AHLC) meeting in September 
2010, which also highlights the main issues ahead of summer 2011, when the state building 
plan  implementation  should  be  completed.  Reforms  were  limited  to  institutions  in  the  West 
Bank. 

Progress in many areas (governance, public finance management) was achieved in a context 
of  occupation,  where  Israeli  incursions  into  areas  formally  under  the  control  of  the  PA 
continued.  There  has  also  been  some  progress  on  the  rule  of  law.  However,  concerns  about 
human  rights  violations,  in  particular  by  the  security  forces,  have  not  declined  and  further 
efforts are needed to strengthen the judiciary. The late cancellation of the local elections in the 
West Bank in July 2010 casts some doubt on the capacity of the Palestinian political forces to 
compete democratically. The economic and social situation in Gaza remains grim due to the 
blockade.  The  EU  has  proposed  a  comprehensive  package  to  upgrade  the  Kerem  Shalom 

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crossing,  and  intends  to  further  contribute  to  the  eventual  opening  of  all  Gaza  crossings  for 
aid, trade and persons. 

The economy of the oPt continued to grow in 2010 by 9,3 %. In this period, the Palestinian 
Authority, through fiscal performance broadly in line with the 2010 budget, reduced its fiscal 
deficit. There was also progress in the implementation of the structural reforms set out in the 
Palestinian Reform and Development Plan, and reflected in the AP, in particular on improving 
financial  accountability  and  on  sound  management  of  public  finances.  Also,  the  PA  made 
some  progress  in  reducing  dependency  on  international  aid  and  supporting  private  sector 
activity. Further actions are planned for the near future. 

Despite  several  reconciliation  efforts,  no  progress  can  be  reported  towards  bridging  the 
internal split between the governance structure in the West Bank under President Mahmoud 
Abbas  and  the  Hamas-led  de  facto  authority  in  the  Gaza  Strip.  The  latter  imposes  a  strict 
military  regime  and  reports  confirm  a  steady  deterioration  of  humanitarian  indicators  in  the 
Gaza Strip. 

The achievements of the state-building agenda of Prime Minister Salam Fayyad’s government 
need  to  move  ahead  in  parallel  with  progress  in  the  political  process.  The  latter  looks 
increasingly difficult especially in view of renewed settlement construction in the West Bank 
and recent developments in East Jerusalem. 

2. 

POLITICAL DIALOGUE AND REFORM 

Development of enhanced political dialogue and cooperation 

In  September  Middle  East  Peace  Process  (MEPP)  negotiations  between  Israelis  and 
Palestinians were launched, with support of the US, the EU and the Quartet, following a four-
month period of proximity talks. Talks reached an impasse shortly after the decision by the 
Israeli government to end the settlement moratorium on 27 September 2010.  

The implementation of the Palestinian Reform and Development Plan (PRDP) progressed in 
2010. Efforts made in setting up a national monitoring and evaluation mechanism have borne 
initial results. In July 2010, the ministry of planning provided the first monitoring report on 
the  PRDP,  which  used  qualitative  data  in  the  analysis  of  progress  achieved  under  the  Plan. 
The newly-established Anti-Corruption Commission has not yet become visibly operational. 

The  PA  aims  to  continue  with  structural  reforms  to  increase  efficiency  in  the  public  sector, 
reduce dependency on international aid, and support private sector activity. In this respect, a 
number of important reforms are planned, including streamlining social assistance, privatising 
electricity  distribution,  enhancing  the  legal  and  regulatory  framework  for  businesses, 
improving  the  sustainability  of  the  public  pension  system,  and  implementing  civil  service 
reform. 

Democracy and the rule of law 

Despite  the  long-standing  insistence  of  the  international  community  on  the  elaboration  of  a 
system of civilian oversight  over all security services, there is still little evidence of greater 
integration of security services under the umbrella of the ministry of interior. The EU Police 
Mission in the occupied Palestinian territory (EUPOL COPPS), continued to provide training, 
including  training  on  human  rights,  to  help  build  a  professional  civil  police.  The  EU  is 

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investing  substantial  resources  in  reinforcing  the  rule  of  law  through  support  to  the  main 
actors in the justice sector as well as to the civil police. 

In June 2010, the government adopted the Justice and Rule of Law National Sector Strategy 
2011–2013,  which  provides  a  basis  for  the  continuous  strengthening  of  the  three  justice 
sector  institutions:  the  ministry  of  justice  (MoJ),  the  High  Judicial  Council  (HJC)  and  the 
Attorney General’s Office . 

Under  the  auspices  of  the  Office  of  the  President,  these  institutions  worked  with  the 
Palestinian  Bar  Association  and  a  representative  of  the  military  court  system  to  produce  a 
draft joint memorandum of understanding which clarifies their respective mandates. The MoJ 
has been especially active in drafting and reforming legislation. The ongoing and significant 
reform of the Criminal Code involves all relevant institutions. The MoJ also set up a Human 
Rights Unit in the ministry. 

The PA continues to be ruled under the emergency powers conferred on the government by 
President  Abbas.  Legislation  is  adopted  by  Presidential  decree  without  passing  through  the 
Palestinian Legislative Council (PLC). Limited  democratic oversight over the PA is carried 
out  by  civil  society  organisations  and  by  informal  sessions  of  remaining  PLC  members  in 
Ramallah.  The  Hamas  PLC  members  in  the  Gaza  Strip  claim  legitimate  representation  and 
hold  regular  sessions  in  which  laws  are  being  adopted,  further  widening  the  political  and 
institutional divide between West Bank and the Gaza Strip.  

The  decision  to  postpone  local  elections  in  July  2010  met  only  limited  political  resistance 
from the small PLO faction and from civil society organisations.  Nevertheless four electoral 
lists,  with  the  assistance  of  three  human  rights  NGOs,  challenged  the  Cabinet’s  decision  in 
court. In December, the HJC ruled that the Cabinet’s decision was illegal but did not provide 
clear guidance on how and when to organise new elections. The EU continued with financial 
support  for  the  development  of  the  Central  Elections  Commission  and  launched  a  new 
capacity-building programme for the PLC Secretariat, to prepare this fragile institution for an 
effective resumption of parliamentary business.  

Human rights and fundamental freedoms 

The situation of human rights and fundamental freedoms continued to suffer setbacks. 

The  Independent  Commission  for  Human  Rights  (ICHR)  received  numerous  complaints 
related to violations to the right to proper legal process and just procedures in the West Bank 
and  in  Gaza.  Most  of  the  complaints  received  refer  to  actions  by  the  security  services. 
Palestinian human rights organisations report little progress regarding arbitrary detention. The 
ongoing tensions between the two major political factions have resulted in a continued trend 
of arrests on political grounds. In total, 655 complaints were documented by the ICHR over 
political detention in the West Bank and 60 in the Gaza Strip.  

Human rights organisations continue to record steadily complaints of human rights abuses by 
the  security  services  in  the  whole  of  the  oPt,  including  the  West  Bank.  After  the  marked 
decline  in  November  2009,  complaints  about  torture  and  ill-treatment  in  detention  (mainly 
police interrogations and intelligence services) have risen again. Although  the PA claims as 
an achievement the fact of ‘stopping torture in detention centres and taking punitive measures 
against  violators’,  there  is  no  documented  evidence  of  the  punishment  of  violators  in  the 
absence  of  sufficient  transparency  in  the  military  court  system  and  of  disciplinary 

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mechanisms in the security services. The oPt continues to benefit from the European Initiative 
for Democracy and Human Rights support. 

The  United  Nations  Office  of  the  Coordinator  for  Humanitarian  Affairs  (OCHA)  report  on 
protection of civilians indicates that since the beginning of 2010, Israeli forces have injured 
1145  Palestinians  in  the  West  Bank  during  demonstrations  or  clashes,  a  45 %  increase 
compared to the equivalent period in 2009. Israeli forces conducted a weekly average of 90 
search  and  arrest  operations  in  the  West  Bank  (including  East  Jerusalem)  in  2010.  Such 
operations also often resulted in damage to property. 

In 2010, 71 Palestinians (including 24 civilians) were killed and 283 (including 246 civilians) 
were  injured  in  the  context  of  Palestinian-Israeli  conflict  in  the  Gaza  Strip.  The  majority  of 
casualties  occurred  near  the  fence  dividing  Israel  and  the  Gaza  Strip.  Israeli  restrictions  on 
access to areas up to 1500 metres from the fence continue. 17% of the Gaza Strip’s territory is 
within  1500  metres  of  the  fence.  In  2010,  91  Palestinian  workers  have  been  injured  in 
incidents related to restrictions on access to land near the fence. 

Children  have  remained  significant  victims  of  the  conflict.  In  the  first  half  of  2010,  four 
Palestinian  children  lost  their  lives  and  141  were  injured  in  incidents  directly  related  to  the 
conflict; two were killed as a result of internal violence. In addition, one child was killed and 
two were injured as a result of handling of explosives. 

At the end of December 2010, 6252 Palestinians were being detained in Israel. This number 
had  slightly  decreased  throughout  2010  from  6831  in  January  2009.  With  regard  to  the 
practice of administrative detention, the number of Palestinians detainees (those held without 
charge  or  trial)  also  decreased  compared  to  the  previous  reporting  period.  At  the  end  of 
December  2010,  205  Palestinians  were  being  held  in  administrative  detention  in  Israel, 
compared with 278 in December 2009. 

Limitations  on  the  freedom  to  demonstrate  are  still  enforced.  In  2010  Israel  renewed  Order 
101, which severely restricts the right of assembly of persons protesting in the West Bank. At 
the end of June 2010, there were 31 Palestinian human rights defenders from the West Bank 
villages  of  Ni’lin,  Bil’in,  Budrus,  Nabi  Saleh,  Beit  Ummar  and  Al-Ma’sara  held  in  Israeli 
custody. The Office of the European Union Representative, together with EU member states, 
followed  up  and  monitored  the  military  court  cases  against  prominent  Palestinian  human 
rights  defenders  who  had  peacefully  protested  against  the  separation  barrier,  e.g.  Abdallah 
Abu Rahma - the head of the Bil’in Popular Committee against the Wall and Settlements. The 
EU issued a statement in August 2010 expressing concerns over his conviction, as by the EU 
he is considered as a Human Rights Defender committed to non-violent protests against the 
route  of  the  Israeli  separation  barrier  through  his  West  Bank  village  of  Bil’in.’  The  EU 
reiterated  that  it  considered  the  route  of  the  Israeli  separation  barrier,  where  it  is  built  on 
Palestinian land, to be illegal.  

No death sentences were issued in the West Bank during the reporting period. Death penalty 
sentences  have  continued  to  be  issued  in  the  Gaza  Strip.  In  total,  17  death  sentences  were 
issued  by  the  de-facto  Gaza  authorities  for  murder  and  treason  and  three  executions  were 
carried out.  

Demolitions  continued  in  the  West  Bank,  including  East  Jerusalem,  reaching  a  total  of  431 
Palestinian structures demolished in 2010. Most of the demolitions took place in the Jordan 
Valley while 78 structures were demolished in East Jerusalem. The EU has expressed its deep 

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concern  about  this  and  has  urged  the  Israeli  authorities  to  prevent  the  demolition  of 
Palestinian homes and the issuing of eviction orders in East Jerusalem and the rest of the West 
Bank. The EU called on the Israeli authorities to suspend these practices, considering them an 
obstacle to peace, contrary to the Israeli Roadmap obligations and to international law. 

Settler violence against Palestinians and their property continued between July and October 
2010, including vandalism against a mosque in Beit Faijjar village, Bethlehem, on 4 October 
and  against  a  girls’  secondary  school  in  As  Sawiya  village,  Nablus,  on  27  October.  The 
ongoing  impunity  continues  to  favour  settlers.  In  2010,  one  child  was  killed  and  133 
Palestinians were injured in attacks by Israeli settlers. In addition, over 3700 olive trees were 
vandalised during the olive harvest. On the other hand, four Israeli settlers were killed. 

The EU has reminded Israel of its obligations according to international law and international 
humanitarian law vis-à-vis the Palestinian population in the occupied Palestinian territory. 

Respect  for  freedom  of  religion  has  not  improved  and  is  hampered  by  access  restrictions 
imposed  by  the  Israeli  authorities.  The  Israeli  army  imposed  a  general  closure  of  the  West 
Bank during Easter. As a result, many Palestinians of Christian faith wishing to participate in 
the Easter ceremony at the Church of the Holy Sepulchre were not able to do so. Access to 
Haram-al-Sharif (El Aqsa Mosque)/Temple Mount was on many occasions closed or limited 
to men above the age of 50. 

Access and movement in the West Bank has generally improved, with the smallest number of 
obstacles since 2005. The closure of the Gaza Strip continued.  

Financial accountability and sound management of public finances 

In  2010,  the  ministry  of  finance  continued  to  modernise  its  Financial  Management 
Information  System  and  to  adapt  its  financial  regulations  to  ongoing  treasury  reforms, 
including the introduction of a commitment control system. 

In the first half of 2010, the ministry produced a draft Public Financial Management Strategy 
for  2011–13  as  part  of  the  Palestinian  National  Development  Plan.  It  also  continued  to 
improve the transparency of public finances by providing monthly website information on PA 
public  debt  from  June  2010.  In  August,  the  government  approved  an  action  plan  for  the 
reform  of  the  public  pension  systems  as  a  measure  to  ensure  the  PA’s  long-term  financial 
sustainability.  

In  the  area  of  internal  audit,  with  EU  assistance  the  ministry  of  finance  initiated  the  first 
phase of decentralisation while continuing to conduct checks and risk assessments under the 
supervision of its High Level Audit Committee.  

With regard to external audit, the State Audit and Administrative Control Bureau (SAACB) 
finalised its 2008 financial statement in September 2010, while its 2009 statement is due to be 
sent  to  the  President,  Cabinet  and  Legislative  Council  Secretariat  in  early  2011.  Work  also 
continued on preparing for the modernisation of the Audit law.  

On  corruption,  the  2005  law  on  illegal  gains  was  amended  in  June  2010  leading  to  the 
establishment  of  a  new  anti-corruption  commission.  Ongoing  progress  on  internal  audit 
reforms,  the  work  of  the  Audit  Committee  and  the  enhanced  capacity  of  the  SAACB  bode 
well for fraud prevention.  

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3. 

ECONOMIC AND SOCIAL REFORM 

Macroeconomic framework and functioning of the market economy 

In 2010, the GDP of the  oPt rose by 9.3 % compared to 7.4 % in 2009. Growth was due to 
significant  amounts  of  international  donor  assistance,  to  further  relaxation  of  restrictions  on 
movement of goods and access to people in the West Bank and to the lifting of certain import 
controls  in  the  Gaza  Strip.  Public  services,  construction,  agriculture  and  external  trade  all 
expanded, while manufacturing remained subdued (see section on trade).  

The economy of Gaza grew rapidly at the start of the year driven by inflows of humanitarian 
aid,  as  well  as  goods  entering  through  tunnels  at  the  Egyptian  border.  A  large  amount  of 
donor  aid  continued  to  be  channelled  into  small  scale  infrastructure  projects,  including  the 
construction and rehabilitation of roads, water networks, sewage systems, schools and clinics, 
and residential housing. Disbursements from the EU-financed Gaza Private Sector Recovery 
Programme, implemented in co-operation with the PA (EUR 22 million committed in 2009) 
began  in  2010.  The  aim  of  this  programme  is  to  provide  support  to  re-launching  legitimate 
private  sector  businesses  which  had  been  destroyed  or  damaged  by  "Operation  Cast  Lead". 
These actions are of short impact on the population in Gaza. Long term interventions that are 
currently hampered by access restriction to Gaza are urgently needed particularly in the water 
sector to avoid a disaster to happen in the near future.  

While these factors helped boost private sector activity, the economies of both the West Bank 
and Gaza remain severely constrained. Real GDP is more than 10 % below the level of 1999 
in the West Bank and at least 40 % below that level in Gaza. The revival in economic activity 
has therefore come from a low base and is still held back by current restrictions. For example, 
in  the  West  Bank,  agriculture  is  hindered  by  sanctions  on  products,  such  as  fertilisers, 
considered  to  pose  a  threat  to  security,  and  access  to  land.  Consequently,  while  agricultural 
output has risen, it still only accounts for around 5.5 % of GDP, compared to 13 % in 1994.  

Inflation rose slightly in 2010 to 3.7% compared to 2.8% in 2009 due to sharp rises in food 
prices toward the end of 2010 and despite tighter monetary policy in Israel and the relaxation 
of  some  import  restrictions  in  the  Gaza  Strip.  FAO  has  estimated  that  96%  of  staple  food 
items  are  imported,  in  addition  to  other  food  commodities  used  for  production;  hence  the 
economy is highly exposed to shifts in international food prices, which have returned to the 
levels of 2008. In the West Bank, unemployment fell to 15 % of the total labour force while in 
the  Gaza  Strip  it  remains  at  around  40 %.  Fiscal  performance  was  broadly  in  line  with  the 
2010  budget.  The  recurrent  fiscal  deficit  narrowed  to  16 %  of  GDP  in  2010  from  26 %  in 
2009. This was the result of continued progress by the Palestinian Authority on the PRDP for 
2008–10,  which  aims  at  increasing  revenue,  reducing  expenditure  and  restoring  fiscal 
sustainability.  The  improved  tax  collection  has  partly  supported  the  increase  of  the  gross 
revenue. Current expenditure, including the public sector wage bill and net lending, fell over 
the same period. However, due to lower than expected international aid, the PA was obliged 
to  borrow  from  domestic  banks  and  accumulate  arrears  on  existing  loans.  The  PA  plans  to 
progressively consolidate public finances in order to reduce reliance on international aid and 
encourage private sector growth. At the same time, the PA aims to make public expenditure 
more effective by shifting resources away from wages and subsidies and toward investment. 
A comprehensive public pension reform action plan for 2010–12 was adopted in July 2010.  

Employment and social policy 

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The  unemployment  rate  decreased  from  25 %  in  2009  to  24 %  in  2010  (20 %  in  the  West 
Bank  and  40.5 %  in  the  Gaza  Strip)  —  note  that  International  Labour  Organisation  (ILO) 
standard  unemployment  figures  do  not  take  into  account  workers  discouraged  from  seeking 
jobs. The labour force participation rate remained very low and fell from 41.6 % in the third 
quarter of 2009 to 40.5 % in the fourth quarter of 2010. The PA continued to work with the 
ILO on an employment programme and on promoting the inclusion of women in the labour 
market. The ILO also supported specific job creation and skills development programmes in 
Gaza. 

As  regards  social  dialogue,  in  February  2010  the  Tripartite  Labour  Policies  Committee 
launched  a  declaration  outlining  its  vision,  plan  of  action  and  institutional  framework.  The 
declaration focuses on improving industrial relations and promoting effective and transparent 
governance  of  the  labour  market  through  social  dialogue.  The  planned  measures  include 
revision of labour agreements in line with Arab and international standards, enhancement of 
the labour administration and inspection and reform of labour legislation. 

The standard of living in the oPt is exceptionally low in comparison to other partner countries, 
with  an  overall  poverty  rate  of  55 %;  an  estimated  80 %  of  people  living  below  the  poverty 
line in the Gaza Strip. To increase social protection and advance the fight against poverty, 
the  ministry  of  social  affairs  finalised  its  first  ‘Social  Protection  Sector  Strategy’.  The 
ministry is now developing a business strategy, on the basis of which an Action Plan 2011–
2013 will be drawn up.  

In June 2010, the PA launched the Cash Transfer Programme (CTP), as part of the Palestinian 
National  Programme  for  Social  Protection.  The  CTP  targets  families  below  the  extreme 
poverty line. The CTP is now well established in the West Bank and in November 2010 the 
Gaza Strip announced its wish to be covered by it. The Gaza Strip beneficiaries are expected 
to be fully included in the new system in the first half of 2011. The EU, apart from providing 
the majority of the funds for social security payments, has also actively supported the reform 
of the social security system in co-operation with the ministry. 

From  July  to  December  2010,  the  EU  contributed  EUR  16  million  to  two  rounds  of  the 
Vulnerable Palestinian Families programme payments as part of the CTP. An average of over 
50 000 extremely poor households from the West Bank and the Gaza Strip benefited from the 
CTP.  

In August 2010, the Council of Ministers approved an action plan for the reform of the public 
pension  system.  The  plan  includes  the  consolidation  of  the  pensions’  administration  of  all 
four schemes within the Pensions Authority, the elimination of early retirement, and a gradual 
increase in the retirement age.  

4. 

TRADE-RELATED ISSUES, MARKET AND REGULATORY REFORM 

After  two  years  of  contraction,  bilateral  trade  between  the  EU  and  the  oPt  increased  during 
the reporting period: exports from the oPt to the EU increased by 43.7 % while EU exports to 
the  oPt  increased  by  56.8 %.  The  oPt  trade  with  the  EU  and  other  partners  in  the  region 
remains very limited.  

The  ninth  Union  for  the  Mediterranean  Trade  Ministerial  Meeting,  which  took  place  in 
Brussels in November 2010, endorsed a package of measures to facilitate trade in Palestinian 

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products with other Euro-Mediterranean partners in line with the EUROMED Trade Roadmap 
for 2010 and beyond. In December 2010, the EU and the PA initialled a draft agreement on 
further  liberalisation  of  trade  in  agricultural  products,  processed  agricultural  and  fish  and 
fishery  products.  Further  market  opening  on  the  EU  side  is  expected  to  support  the 
development of the economy of the West Bank and the Gaza Strip.  

During the reporting period, the ministry of agriculture worked on the implementation of the 
Agricultural  Sector  Strategy  and  on  the  formulation  of  the  relevant  Action  Plan  aiming, 
among  other  things,  at  setting  up  sustainable  agriculture,  capable  of  achieving  both  food 
security and competitiveness in the local and foreign markets.  

Access  and  movement  in  the  West  Bank  generally  improved.  The  restrictions  on  trade  in 
goods  and  in  access  between  urban  areas  were  eased  in  the  West  Bank  (but  not  with  East 
Jerusalem). This helped support internal trade. Over 10 % of obstacles to movement of goods 
and persons, such as check points, were removed, leaving an estimated 500 obstacles in place 
in the West Bank. Despite the easing of the Gaza Strip blockade in June 2010, imports of raw 
materials and capital goods continue to be heavily restricted and the ban on exports continues 
to depress the economy. 

The PA customs, with EU assistance, completed the implementation of the third phase of the 
automated system for customs data ‘ASYCUDA World’. As a result, the latest version of the 
system was rolled  out,  new  customs  procedures (including a direct trader  input mechanism) 
were  launched,  and  customs  staff,  employees  of  line  ministries  and  users  from  the  private 
sector,  were  trained.  The  ‘Al  Siyadeh’  programme,  which  aims  at  modernising  the 
administrations  responsible  for  revenue  collection  and  border  management,  is  under 
implementation.  The  PA  set  up  a  customs  prosecution  department  and  worked  on  the 
establishment of customs courts, with a view to better enforcing customs revenue collection. 
As far as legislation is concerned, in spite of several attempts with the help of donor states, 
there  is  still  no  approved  Palestinian  customs  code.  All  activities  in  the  area  of  customs, 
including actions to obtain WCO membership, are undertaken by the PA as part of its state-
building  process.  Regarding  the  strengthening  of  cooperation  to  combat  irregularities  and 
fraud  in customs, the PA  participated in the  ‘SIROCCO’  joint  operation  carried  out  in  June 
2010. SIROCCO is a joint customs operation, coordinated by the European Commission Anti-
Fraud Office (OLAF) and carried out by the customs administration of the EU and 11 partner 
countries from the southern rim of the Mediterranean1. 

No progress can be reported on the unification of tax administrations of the West Bank and 
the  Gaza  strip  due  to  the  political  situation.  In  December  2010,  the  IMF  recommended  the 
elaboration  of  a  medium-term  strategy  with  a  view  to  laying  the  foundations  of  a  modern 
revenue administration. Increased enforcement efforts, combined with economic growth, led 
to improved performance in terms of domestic tax revenue collection.  

Concerning  free  movement  of  goods  and  technical  regulations,  there  is  no  progress  to 
report.  

The  PA  and  the  EU  stepped  up  dialogue  on  sanitary  and  phyto-sanitary  (SPS)  issues.  A 
TAIEX SPS assessment mission visited the oPt to prepare a gap analysis on legislation and 

1 

SIROCCO focused on deep sea containers loaded in China or the United Arab Emirates and arriving in 
countries  of  the  Union  for  the  Mediterranean.  Around  40  million  cigarettes,  1243  kg  of  hand-rolled 
tobacco, 7038 litres of alcohol and 8 million other counterfeits were seized during the operation. 

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institutional  capacity.  The  PA  is  upgrading  its  SPS  legislation  and  expressed  interest  in 
gradual  approximation  with  EU  standards  with  a  view  to  developing  a  ‘farm  to  fork’ 
approach. In 2010, the PA adopted a law on animal health. 

Improvements  in  the  areas  of  starting  a  business  and  enforcing  contracts  contributed  to  a 
better  business  climate.  The  Company  Law  and  the  Consumer  Protection  Law  are  still 
awaiting adoption, and there is still no legal regime for competition.  

No progress is to be reported in the areas of accounting and auditing. 

In the field of financial services, the banking sector has been largely unaffected by the global 
economic crisis due to limited exposure to global financial markets and conservative lending 
practices.  However,  the  sector  has  built  up  substantial  credit  exposure  to  the  PA  and  its 
employees.  This  makes  it  particularly  sensitive  to  public  finances.  The  banking  sector  also 
continued to face an ongoing problem of excess liquidity as Israeli banks do not accept cash 
deposits from  banks in the West Bank. In 2010, the  Palestinian Monetary Authority (PMA) 
continued to implement Basel II standards, including guidelines on the disclosure of financial 
information and regulations governing mergers. 

Progress  was  recorded  in  the  enforcement  of  the  ‘fair  lending  regulations’  and  in  the 
implementation of the new payment system. In August 2010, the PMA adopted regulations on 
mergers  and  acquisitions  procedures.  The  PMA  credit  scoring  system  became  fully 
operational in July 2010, as part of the online credit registry, and the system contributed to the 
growth  recorded  in  private  sector  deposits.  The  president  signed  the  new  banking  law  in 
November 2010.  

Other key areas  

The PA drafted a revised law on public procurement that will unify procurement procedures 
in  PA  ministries  and  agencies.  It  will  replace  all  the  previous  laws  and  acts  governing  PA 
procurement on its entry into force, planned for 2011. 

The  Palestinian  Central  Bureau  of  Statistics  (PCBS)  completed  phase  one  of  its  ‘Metadata 
System’ and a special website was launched to serve that purpose. A special team was formed 
to  revise,  further  develop,  document,  and  disseminate  metadata.  So  far,  the  PCBS  has 
documented  more  than  20  surveys  on  the  new  system,  which  uses  the  Accelerated 
Data Programme. The first ever agriculture census was implemented in the oPt, partly funded 
by the EU. The PCBS continued to benefit from EU assistance including through the recently 
launched MEDSTAT III programme.  

With a view to ensuring an appropriate legal framework for a modern statistics system based 
on  impartiality,  reliability,  transparency  and  confidentiality  of  data,  the  PCBS  carried  out  a 
Special  Data  Dissemination  Standard  (SDDS)  exercise  in  order  to  check  its  ability  to  meet 
SDDS requirements in terms of periodicity and timeliness. In September 2010 the PCBS also 
received the ‘ISO 9001’ certificate for 2008.  

The  PA  continued  to  strengthen  public  finance  management  through  several  actions,  in 
particular  enhancements  to  the  financial  management  information  system,  including  the 
introduction of a commitment control system and a budget preparation module accessible to 
all government departments.  

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On  enterprise  policy,  the  PA  continued  the  implementation  of  the  Euro-Mediterranean 
Charter for Enterprise and its participation in industrial cooperation activities. The European 
Palestinian  Credit  Guarantee  Fund  implemented  the  largest  private  sector  recovery 
programme  in  the  Gaza  Strip.  The  ministry  of  national  economy  presented  a  new  SME 
strategy during the first meeting of the Private Sector Development & Trade Sector Working 
Group in July 2010.  

5. 

ENERGY, ENVIRONMENT, TRANSPORT, RESEARCH AND DEVELOPMENT 

Due to the political situation, transport operators’ activities remained mostly limited to the 
national  territory.  Nevertheless,  the  transport  sector  contributes  directly  to  8 %  of  GDP.  In 
2010,  the  ministry  of  transport  introduced  a  new  regulation  on  the  Higher  Traffic  Safety 
Council. The Palestinian Traffic Law and related regulations were completed. The ministry is 
involved in the ‘national spatial plan project’, preparing road and transport master plans, and 
it  is  completing  studies  to  merge  the  current  90  public  transport  companies  into  four 
companies  and  redistribute  the  bus  routes.  Active  Palestinian  participation  in  the  technical 
dialogue  on  transport  through  EUROMED  structures  and  its  involvement  in  setting  up  the 
future Trans-Mediterranean transport network are important.  

The  oPt  remained  heavily  dependent  on  energy  imports  from  Israel.  Energy  reforms 
continued  on  the  basis  of  the  energy  action  plan  2009–2011.  The  Palestinian  Energy 
Authority launched an Energy Sector Strategy for 2011–2013. In February 2010, on the basis 
of  the  2009  Electricity  Law,  the  PA  set  up  the  Electricity  Regulatory  Council  under  the 
Palestinian Energy and Natural Resources Authority. It drafted implementing legislation for 
the electricity law on, for example, tariffs and the promotion of the use of renewable energy 
sources.  

The  PA  continued  to  transfer  electricity  supply  services  from  municipalities  to  newly 
established regional distribution companies. It began a feasibility study on the construction of 
a  power  plant  in  the  Northern  West  Bank.  It  pursued  the  upgrade  and  reconstruction  of 
electricity networks on the West Bank and in Gaza. More than 99 % of Palestinians now have 
access to electricity although it remains a challenge to electrify villages between settlements. 
The PA pursued the installation of pre-paid electricity meters in the West Bank and started a 
pilot project in the Gaza Strip.  

The  PA  continued  the  implementation  of  an  energy  efficiency  programme  and  remained 
committed to developing the use of renewable energy, also in trilateral cooperation with the 
EU and Israel. In 2010, with EU support, the PA began preparations for the electrification of 
50 isolated West Bank villages through the development of photovoltaic solar  projects. The 
PA  also  continued  to  work  on  a  pilot  wind  energy  project  for  the  Hebron  hospital  and 
finalised a feasibility study on a 10 MW solar plant in Jericho.  

The EU remains committed to re-activating trilateral energy cooperation with the Palestinian 
Authority  and  Israel,  which  is  stalled  due  to  the  regional  conflict.  The  aim  remains 
establishing  a  joint  energy  office  and  facilitating  the  development  of  projects  of  common 
interest, such as the joint ‘Solar for Peace’ initiative.  

In the field of climate change, the Council of Ministers approved the setting-up of a National 
Committee on Climate Change.  

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The state of the environment in the Gaza Strip remains a serious concern. Works on the first 
phase of the Northern Gaza wastewater treatment plant were concluded and preparations for 
the second phase are under way. In the West Bank, preparations for the construction of waste-
water treatment plants and landfills continued.  

The EQA plans to review and update the environmental law and other related bylaws. Draft 
bylaws  were  prepared  on  waste  management,  hunting,  nature  reserves  and  stone  quarries. 
Environmental  standards  are  being  developed  or  updated  on  the  use  and  disposal  of  treated 
sludge,  the  treatment  of  industrial  wastewater,  ambient  air  quality  and  gas  emissions  from 
heavy duty vehicles. The EQA developed an Environment Sector Strategy for 2011–2013 and 
updated  the  emergency  plan  on  nature  protection.  The  Council  of  Ministers  adopted  a 
National Solid Waste Management Strategy and a Wastewater Strategy for 2011–2013.  

A  major  challenge  is  to  revive  administrative  implementation  capacity.  There  is  a  need  for 
coordination between relevant authorities with regard to the management and the use of fresh 
water resources. 

Representatives of the PA participated in activities under the Horizon 2020 Initiative and the 
EU Water Initiative. Cooperation and information exchange took place between the European 
Commission  and  the  PA,  including  on  water,  waste  management,  de-pollution  and 
management of environmental information. 

In the field of civil protection, representatives of the PA were actively involved in the Euro- 
Mediterranean  Programme  for  Prevention,  Preparedness  and  Response  to  natural  and  man-
made Disasters, which has reached mid-term implementation.  

issued 

Concerning information society issues, the Ministry of Telecommunications and Information 
‘The  Palestinian  National  Authority  Statement  of  National 
Technology 
Telecommunications Policy’ in April  2010. The difficult  situation  with  Israel  does  not  allow 
the oPt authorities to manage spectrum — the rights to use frequencies to operate in the oPT 
are granted by the Israeli authorities — and available frequencies are apparently insufficient to 
cope  with  market  developments  (two  active operators,  with  total  penetration  reaching  80 %). 
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 yet to be regulated.  

Concerning  audiovisual  issues,  the  ministry  of  information  submitted  a  new  draft  of  the 
broadcasting  law  to  the  Cabinet  in  March  2010.  This  draft  addressed  concerns  expressed 
about an earlier version of the law which imposed certain restrictions on media freedom. 

In  the  area  of  research  and  technology,  participation  by  Palestinian  researchers  in  Seventh 
Framework  Programme  (FP7)  up  to  March  2011  has  substantially  improved  (82  Palestinian 
applicants, of which 11 are main listed) — mainly in agriculture, the environment and socio-
economic humanities — accessing about EUR 1 million. 

6. 

 PEOPLE-TO-PEOPLE CONTACTS, EDUCATION AND HEALTH 

In  March  2010,  the  ministries  of  education  and  higher  education  adopted  the  Education 
Development Strategic Plan as the new Education Strategy for 2011–13 with renewed focus 
on  equitable  access,  quality,  planning  and  management,  special  needs  and  education  in 
Jerusalem.  Draft  strategies  on  early  childhood  and  adult  education  were  also  prepared. 

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Education accounts for over 30 % of PA expenditure with plans for rapid expansion, though 
investment  remains  heavily  dependent  on  donor  support.  In  October  2010,  staff  and  board 
members  of  the  Commission  for  the  Development  of  the  Teaching  Profession  were 
designated. Adoption of the national teaching professional standards and teacher licensing can 
only  proceed  when  the  Commission  has  been  set  up.  The  ministry  defined  and  tested  core 
standards in pilot classrooms as of September 2010 alongside a draft teacher code of conduct. 
In the area of higher education, the EU/World Bank Tertiary Education project concluded in 
December  2010  with  good  results  in  terms  of  programme  development  and  institutional 
management  as  well  as  on  improving  competitiveness  and  developing  partnerships  with 
industry.  

Improving  the  quality  and  labour-market  relevance  of  vocational  training  and  education 
remains  a  priority  under  the  Education  Strategy.  The  ministries  of  education  and  higher 
education  and  of  labour  adopted  a  revised  Technical  Education  and  Vocational  Training 
strategy in November 2010 to establish a coherent national system based on technical skills 
development  for  employment.  The  EU  undertook  to  support  its  implementation  through  a 
three-year  sector  support  programme.  It  will  foster  local  development  through  reinforced 
partnerships  between  public  training  institutions  and  the  private  sector  while  anticipating 
labour  market  training  demand.  Both  ministries  demonstrated  strong  commitment  to  the 
Torino Process spearheaded by the European Training Foundation in particular on the study 
on  linking  education  and  business.  In  this  context,  the  development  of  entrepreneurial 
learning and the development of quality assurance systems were identified for future work. 

The  Tempus  programme  continued  to  support  reform  of  higher  education  and  greater 
cooperation with EU universities with three projects selected under the third Tempus IV call 
for proposals. No Palestinian students or scholars benefited from scholarships under Erasmus 
Mundus  Action  1  in  2010  but  student  and  academic  mobility  was  enhanced  through  the 
expected award of 37 grants for the academic year 2010–11 under Action 2. Greater effort is 
required  to  ensure  Palestinian  participation  in all  actions.  For  the  first  time,  in  2010  a Jean 
Monnet  module  on  European  integration  and  a  project  for  a  conference  on  the  EU  and  the 
Middle East were awarded to An-Najah National University. 

The  ministry  of  youth  and  sport  published  its  Cross-Sector  National  Strategy  for  Youth 
2011–13 in November incorporating joint policy plans in areas such as education, health, the 
environment,  culture,  sports  and  recreation.  Its  implementation  demands  continuing  multi-
stakeholder  involvement.  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.  In 
November  2010,  the  ministry  confirmed  Palestinian  participation  in  Euro-Med  Youth  IV, 
officially launching the programme and capacity building activities in December.  

In the area of culture, Palestinian organisations continued active participation in the regional 
Euromed Heritage IV. In addition, three Palestinian cultural organisations were selected under 
the call for proposals of the 2010 ENP Special Action under the Culture Programme.  

In  terms  of  cooperation  with  civil  society,  the  European  Union’s  Partnership  for  Peace 
Programme  continued  support  for  projects  contributing  to  conflict  resolution  and  mutual 
understanding  in  areas  such  as  science  education,  protection  of  shared  cultural  heritage  and 
peace  education.  However,  the  political  situation  continues  to  seriously  impede  project 
implementation, principally due to obstacles to free movement and access. 

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In  March  2010,  the  PA  adopted  a  new  health  strategy  covering  2011–2013.  Its  priorities 
include:  governance,  human  resources,  healthy  lifestyle,  access  to  quality  health  services, 
financing,  aid  effectiveness,  public-private  partnerships  and  cross-sectoral  cooperation.  The 
EU continued to substantially support the Palestinian health sector. The PA built or expanded 
primary  health  clinics  and,  in  August  2010,  opened  the  Ramallah  medical  complex.  The 
political situation in the region (e.g. the split between the Gaza Strip and the West Bank, the 
situation  in  East  Jerusalem,  Israeli  restrictions  on  the  movement  of  persons  and  goods) 
continues  to  have  a  negative  impact  on  the  physical  and  mental  health  of  Palestinians.  The 
health  situation  in  Gaza,  particularly,  is  deteriorating.  In  March  2010,  in  the  context  of  last 
year’s influenza A (H1N1) epidemic, the EU and the PA established communication channels 
for the exchange of epidemiological information in the event of a public health emergency of 
international  concern.  The  PA  pursued  participation  in  the  ‘Episouth’  network  on 
communicable diseases for the EU, Mediterranean and Balkan countries. 

The  EU  has  increased  the  annual  allocations  it  provides  to  support  Palestinian  health, 
education and economic-development institutions in East Jerusalem. 

7. 

 FINANCIAL COOPERATION — 2010 KEY FACTS AND FIGURES 

Cooperation framework 

Due  to  the  continuing  emergency  situation  in  the  West  Bank  and  Gaza  there  is  no  National 
Indicative  Programme  (NIP)  under  the  European  Neighbourhood  and  Partnership  Instrument 
(ENPI)  covering  the  period  2011–2013.  Funding  committed  under  the  bilateral  allocation  of 
the ENPI to the occupied Palestinian territory for 2010 came to EUR 377.9 million.  

Implementation 

Most of the assistance is channelled through the ‘Mécanisme Palestino-Européen de Gestion 
de  l’Aide  Socio-Economique’  (PEGASE)  which  is  geared  to  supporting  the  achievement  of 
key  policy  objectives  as  outlined  in  the  Palestinian  Reform  and  Development  Plan  (PRDP) 
covering  the  years  2007–2010  and  the  Palestinian  National  Plan  (2011–2013)  soon  to  be 
adopted.  PEGASE  provides  significant  direct  financial  support  to  the  PA  to  pay  the  salaries 
and  pensions  of  essential  service  providers,  both  in  Gaza  and  the  West  Bank,  in  particular 
doctors,  nurses  and  schoolteachers.  PEGASE  is  also  intended  to  help  the  PA  become  the 
cornerstone  of  the  future  Palestinian  State  by  moving  away  from  the  emergency  assistance 
provided  under  the  previous  Temporary  Implementation  Mechanism  and  focusing  more  on 
institutional  capacity-building  and  social  and  economic  development.  To  this  end,  the  EU  is 
investing substantial resources in reinforcing the rule of law through support to the main actors 
in  the  justice  sector  and  to  the  civil  police.  It  has  also  actively  supported  the  reform  of  the 
social security system. 

The EU also provides significant funding to the United Nations Relief and Works Agency for 
Palestine  Refugees  in  the  Near  East  (UNRWA)  responsible  for  the  provision  of  health, 
education and social services to the Palestine refugee population in West Bank and Gaza, and 
in the neighbouring countries. UNRWA benefited in 2010 from a total of EUR 102.7 million 
from ENPI and other EU instruments. 

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The  implementation  of  the  measures  covered  by  the  2009  and  2010  financial  years  is  under 
way. Progress is being made in the provision of infrastructure facilities for various Palestinian 
institutions and of technical assistance to PA ministries which have a vital role to play in state-
building,  notably  the  ministry  of  social  affairs,  ministry  of  finance  and  ministry  of  planning 
and  administrative  development.  Projects  aimed  at  reinforcing  Palestinian  schools  and 
hospitals in East Jerusalem are also being implemented. 

In  addition  to  this  bilateral  allocation,  the  occupied  Palestinian  territory  continues  to  benefit 
from cooperation activities financed under the ENPI multi-country and regional programmes, 
in particular the ‘Partnership for Peace’ initiative for civil society organisations.  

Other  EU  instruments  supplement  the  ENPI  assistance  package.  The  oPT  benefited  from 
cooperation activities financed under horizontal instruments such as the European Instrument 
for  Democracy  and  Human  Rights  (EIDHR-  oPt  continues  to  benefit  from  its  country-bases 
support  strategy,  with  an  allocation  of  EUR  1.2  million)  and  the  Development  Cooperation 
Instrument  (DCI)  thematic  programmes:  Non-State  Actors  and  Local  Authorities  in 
Development (NSA-LA), Investing in People and Food Security. These thematic lines have the 
additional  advantage  of  permitting  the  EU  to  intervene  directly  in  support  of  civil  society 
organizations in the Gaza Strip. The Food Facility provided EUR 39.7 million for the period 
January 2009 to June 2011, taking account in particular of the difficult situation in the Gaza 
Strip. The occupied Palestinian territory also benefited from humanitarian assistance provided 
by the European Commission (EUR 51 million in 2010, of which EUR 14 million is allocated 
to UNRWA). Overall the total allocation for the Palestinian refugees in the oPt and Lebanon 
in  2010  amounts  to  EUR  58  million  and  the  total  allocation  to  UNRWA  equals  EUR  16.5 
million. 

Donor coordination 

The  EU  is  the  largest  donor  to  the  PA  and  UNRWA  and  plays  a  major  role  as  a  reliable, 
predictable and punctual provider of support. Under a specific EU lead donor group and with 
the support of the European Commission as secretariat and facilitator, 12 EU sector strategies 
have  been  developed  in  cooperation  with  the  PA  in  the  following  sectors:  Security  (UK), 
Justice  (COM),  Public  Finance  Management  (COM),  Education  (France),  Health  (Italy), 
Private Sector Development (COM), Agriculture (Spain), Water and Waste Water (Germany), 
Electricity  (COM),  Jerusalem  (COM),  Municipal  Development  and  Local  Government 
(Denmark)  and  Refugees  (COM).  This  represents  significant  progress  towards  the  Paris 
Declaration  aid  effectiveness  principles,  and  will  soon  allow  coordinated  programming 
between the EU, its member states and the PA.  

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