JOINT STAFF WORKING DOCUMENT Implementation of the European Neighbourhood Policy in the occupied Palestinian territory Progress in 2011 and recommendations for action Accompanying the document JOINT COMMUNICATION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Delivering on a new European Neighbourhood Policy
Date: 2012-05-15
Institutions: European Commission, High Representative of the Union
Subjects: European neighbourhood policy, Palestine, democratisation, economic reform, educational reform, female work, human rights, judicial reform, market economy, social-security benefit

EUROPEAN COMMISSION 

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

Brussels, 15.5.2012  
SWD(2012) 120 final 

JOINT STAFF WORKING DOCUMENT 

Implementation of the European Neighbourhood Policy in the occupied Palestinian 
territory 
Progress in 2011 and recommendations for action 

Accompanying the document 

JOINT COMMUNICATION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, 
THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE 
COMMITTEE OF THE REGIONS 

Delivering on a new European Neighbourhood Policy 

{JOIN(2012) 14 final} 
{SWD(2012) 110 final} 
{SWD(2012) 111 final} 
{SWD(2012) 112 final} 
{SWD(2012) 113 final} 
{SWD(2012) 114 final} 
{SWD(2012) 115 final} 
{SWD(2012) 116 final} 
{SWD(2012) 117 final} 
{SWD(2012) 118 final} 
{SWD(2012) 119 final} 
{SWD(2012) 121 final} 
{SWD(2012) 122 final} 
{SWD(2012) 123 final} 
{SWD(2012) 124 final} 

EN 

   EN 

 
 
 
 
  
 
 
 
1. 

OVERALL ASSESSMENT AND RECOMMENDATIONS 

This  document  reports  on  overall  progress  made  on  the  implementation  of  the  EU-
Palestinian  Authority  ENP  Action  Plan  between  1  January  and  31  December  2011, 
although developments outside this period are also considered when deemed relevant.  
It  is  not  a  general  overview  of  the  political  and  economic  situation  in  the  occupied 
Palestinian  territory.  For  information  on  regional  and  multilateral  sector  processes 
readers should also refer to the report on the Partnership for Democracy and Shared 
Prosperity  progress  report.  A  new  Action  Plan,  currently  being  negotiated  by  the 
parties, should be agreed in 2012. 

Overall, the Palestinian Authority (PA) has made good progress in implementing the 
Action Plan in the areas within its control.  However, the occupation and the internal 
Palestinian  division  have  continued  to  have  a  serious  impact  on  the  PA’s  ability  to 
serve the public effectively and to pursue economic development. 

In  the  West  Bank,  the  PA’s  capacity  to  impose  the  rule  of  law  has  become  more 
effective,  with  steady  progress  registered  in  justice  sector  reform.  However,  the 
human rights situation remains a matter of concern, particularly in the Gaza Strip, but 
also in the West Bank.  Human rights violations by individuals in the security services 
need to be seriously addressed.  There has been no progress towards re-establishing a 
participatory democratic process, despite the capacity which the PA has demonstrated 
in the past to hold elections in line with international standards. Moreover, despite the 
much-heralded  reconciliation  agreement  signed  between  Fatah  and  Hamas  in  May 
2011  which  should  have  led  to  new  elections,  the  agreement  has  not  yet  been 
implemented.  Under  the  leadership  of  Prime  Minister  Fayyad,  the  government 
continues to rule in a caretaker capacity in the West Bank, while a de-facto authority 
continues to rule in the Gaza Strip. 

Despite these challenges, the PA has continued to register notable achievements in its 
state-building  agenda.    Its  readiness  for  statehood  was  underlined  both  at  the  spring 
meeting  of  the  Ad  Hoc  Liaison  Committee  (AHLC)  hosted  by  the  High 
Representative in Brussels and at the subsequent meeting held in September in New 
York.  This progress risks being jeopardised as a result of the widening gap between 
the progress witnessed in the PA’s state-building efforts and the lack of progress on 
the political track, namely continued deadlock in the peace process throughout 2011 
and  the  continuing  internal  Palestinian  division.  On  23  September  2011,  President 
Abbas  submitted,  on  behalf  of  the  Palestinian  people,  an  application  of  the  state  of 
Palestine for admission to membership in the United Nations. 

The economy of the occupied Palestinian territory (oPt) grew by 9.5% in the first half 
of 2011 although there was a sharp contrast between the Gaza Strip which registered a 
growth of about 20%, as it began to recover as a result of the slight loosening of the 
Israeli  blockade  in  2010,  and  the  West  Bank,  which  slowed  to  5.7%.  Total 
unemployment  fell  and  inflation  remained  moderate  and  relatively  stable.  The 
economy is threatened by the PA’s mounting fiscal crisis following a major shortfall 
in  donor  disbursements  and  insufficient  easing  of  Israeli  restrictions.  This  has  also 
impeded  progress  towards  the  Action  Plan  goal  of  strengthening  the  PA’s 
administrative capacity in the area of economic reform. 

2 

 
In  the  area  of  public  finance  management,  the  new  law  on  public  procurement  was 
adopted.  The  creation  of  a  macro-fiscal  unit  has  boosted  the  Ministry  of  Finance’s 
fiscal reporting and forecasting capacities. However, the PA’s efforts to contain total 
expenditures  could  not  offset  the  effect  of  lower  than  expected  revenues.    The  EU 
continued to be the PA’s most reliable and important partner, contributing essentially 
to the stabilisation of the precarious fiscal situation and, ultimately, to the stabilisation 
of the social situation in both the West Bank and the Gaza Strip.  In 2011, the EU also 
granted duty-free and quota-free access to the EU market for Palestinian agricultural 
products, processed agricultural products, fish and fishery products. 

In the social sectors, the PA’s poverty-based cash transfer programme was fully rolled 
out in the Gaza Strip with the support of EU technical assistance.  The PA maintained 
its high commitment to the education sector and progress was registered in the health 
sector.  Nevertheless, both sectors face serious challenges in the Gaza Strip mainly as 
a result of the ongoing closure. The PA progressed well in the energy sector, adopting 
a strategy and implementing electricity sector reform. 

On the basis of this year’s report and with a view to sustained implementation of the 
ENP Action Plan in 2012, the Palestinian Authority is invited to: 

•  Pursue the implementation of the reconciliation agreement signed on 3 May 2011 

based on a commitment to the two-state solution. 

•  Hold  genuine,  transparent  local  and  national  elections  in  the  oPt  in  line  with 

international standards. 

•  Reform  and  develop  the  Palestinian  security  sector,  institutionalising  democratic 
to  civilian  oversight  and 
control,  promoting  an  environment  conducive 
accountability  for  individuals  suspected  of  abuses,  and  ensuring  that  all  security 
sector agencies fully respect human rights, in particular for all detainees. 

•  Adopt a unified penal code which adheres to international human rights standards, 
including  the  formal  abolition  of  the  death  penalty  and  strengthens  legal 
guarantees for all fundamental freedoms. 

•  Clarify  the  responsibilities  of  the  three  main  judicial  institutions  namely  the 
Ministry  of  Justice,  the  Office  of  the  Attorney  General  and  the  High  Judicial 
Council. 

•  Adopt  and  implement  the  new  regulatory  framework  for  public  procurement, 
the  relevant  by-laws  and 

the  adoption  and  harmonization  of 

including 
procurement-related regulations. 

• 

Implement a Public Expenditure and Financial Accountability (PEFA) assessment 
in  2012  and  continue  improving  public  finance  management,  in  particular  by 
developing  and  upgrading  the  State  Audit  and  Administrative  Control  Bureau 
(SAACB) as an independent external audit institution in line with the International 
Organisation of Supreme Audit Institutions standards. 

•  Develop costing models and ensure appropriate allocation of the national budget 
to  cover  the  cost  of  providing  a  set  of  basic  social  protection  interventions, 
including the development and implementation of contributory schemes. 

•  Sign  and  ratify  the  regional  Convention  on  pan-Euro-Mediterranean  Rules  of 

Origin. 

3 

 
• 

Implement  the  energy  strategy  including  further  progress  on  electricity  sector 
reform particularly through further reductions in net lending.  

Governance, including reform of the security and justice systems, is a focal sector of 
EU  co-operation  with  the  Palestinian  Authority.  There  are  a  number  of  projects 
underway and in the pipeline which are intended to assist the PA in making progress 
towards accomplishing the recommendations.  

2. 

POLITICAL DIALOGUE AND REFORM 

Towards deep and sustainable democracy 

More  than  four  years  of  emergency  rule  and  the  continuing  split  between  the  West 
Bank and the Gaza Strip continue to take their toll on democratic institutions.  The EU 
has continued to support the operational capacity of the Central Elections Commission 
(CEC)  and  the  Palestinian  Legislative  Council  (PLC).  Nonetheless  the  holding  of 
presidential,  legislative  and  local  elections  across  the  entire  occupied  Palestinian 
territory  (oPt)  remains  a  priority  precondition  for  the  reinvigoration  of  democratic 
legitimacy,  institutional  sustainability  and  the  reinforcement  of  good  governance.  In 
October  2011,  the  parliamentary  assembly  of  the  Council  of  Europe  awarded  the 
Palestinian  National  Council,  the  parliamentary  body  of  the  PLO,  the  status  of 
‘Partner for Democracy’. 

The implementation of the Fatah-Hamas reconciliation agreement, signed on 3 May in 
Cairo, stalled. Several months later there was still no new government of independent 
technocrats, which was supposed to be the first step in the deal's implementation.  The 
agreement  also  included  a  commitment  to  hold  elections  within  one  year.  Although 
President Abbas announced in early December 2011 that elections were scheduled for 
4  May  2012,  no  Presidential  Decree  to  this  effect  has  been  issued.    Following  its 
resignation on 14 February 2011, the 13th government under Prime Minister Fayyad 
thus  continued  to  rule  the  Palestinian  Authority  in  a  care-taker  capacity.  A  de  facto 
government continued to rule in the Gaza Strip.  The PLC continued not to meet and 
laws were issued by Presidential Decree under emergency rule.  Democratic oversight 
over  the  PA  was  maintained,  but  only  to  a  limited  extent,  through  civil  society 
organisations and informal sessions held by remaining PLC members in Ramallah. 

While  there  is  a  thriving  civil  society,  freedom  of  association  remains  under  tight 
control  in  the  West  Bank  and  is  under  permanent  threat  in  the  Gaza  Strip,  where  a 
number  of  civil  society  organisations  and  associations  have  been  shut  down. 
Palestinian  freedom  of  association  is  also  curtailed  in  East  Jerusalem,  where  five 
Palestinian organizations have been closed down by the Israeli authorities. 

Freedom  of  assembly  is  guaranteed  by  the  Palestinian  Basic  Law  but  has  been 
violated  a  number  of  times  in  the  West  Bank.  On  various  occasions  since  the 
crackdown on the March 14 youth movement that rallied support for Palestinian unity, 
permission  to  hold  a  number  of  demonstrations,  marches  and  events  has  not  been 
granted.    In  the  Gaza  Strip,  the  de-facto  authorities  prevented  peaceful  marches  to 
commemorate the annual anniversary of the death of former President Arafat.  These 
rights  have  also  been  curtailed  by  the  Israeli  authorities,  especially  in  villages 
organising peaceful protests against the Separation Barrier. 

4 

 
Violations  of  the  rights  of  Palestinian  journalists,  both  by  Israeli  forces  and  by  the 
Palestinian security forces in the West Bank and Gaza Strip, persisted on a wide scale 
with  journalists  being  severely  harassed  and  at  times  arbitrarily  detained.    The 
Palestinian  Centre  for  Development  and  Media  Freedoms  deplored  the  numerous 
violations  of  the  freedom  of  expression  and  the  media  in  the  oPt,  including  the 
banning of some newspapers from working in the West Bank or the Gaza Strip.   

Improvements  continued  to  be  observed  on  the  independence  of  the  judiciary  and 
combating  impunity  with  the  population  showing  more  confidence  in  the  justice 
system  and  increased  access  to  higher  quality  services  in  the  West  Bank.    The  EU 
continued  to  support  the  reform  process  through  education  and  training  for  judges, 
prosecutors and lawyers.  Preparations have started for the construction of seven new 
courthouses  across  the  West  Bank,  where  institutional  capacity  and  the  skills  of 
judges, court staff and lawyers are improving. The PA has taken significant measures 
to  improve  efficiency  in  the  judicial  process,  for  instance  in  the  areas  of  case 
management and inter-institutional collaboration in criminal justice. 

Despite  these  positive  developments,  further  improvements  are  required  to  maintain 
the pace of reform so as to ensure fair trials, especially with regard to the quality of 
judgments,  the  independence  of  judges,  the  implementation  of  court  decisions  and 
putting  a  stop  to  civilians’  trials  by  the  military  judiciary.    The  Ministry  of  Justice 
(MoJ), the High Judicial Council and the Office of the Attorney General have worked 
together on improving their units and departments, including the reinforcement of the 
human  rights  unit  at  the  MoJ.  However,  a  draft  memorandum  of  understanding  to 
clarify  the  division  of  responsibilities  between  these  institutions  has  not  yet  been 
approved.  A draft new penal code is awaiting approval.  The PA should also make 
greater efforts to ensure that the human rights enshrined in the Basic Law and other 
legislation  are  respected  by  all  state  institutions  responsible  for  applying  the  rule  of 
law. 

The  PA  continued  to  make  progress  in  the  fight  against  corruption.  An  Anti-
corruption Commission was created, co-operation between the Ministry of Finance’s 
Internal  Audit  Department  and  the  PA’s  audit  committee  improved  and  the  PA’s 
supreme  audit,  the  State  Audit  and  Administrative  Control  Bureau  (SAACB),  was 
strengthened with EU support.   

Security  and  law  enforcement  sector  reform  remained  unsatisfactory,  with  no 
major progress in terms of civilian or democratic control over security forces or in 
terms of the integration of the various security services under the Ministry of Interior.  
Little  progress  was  made  on  a  number  of  initiatives  suggested  by  the  EU  and  the 
international  community  aimed  at  bolstering  accountability.  Although  there  are 
indications  that  citizens  are  generally  positive  about  police  activities  in  the  areas 
where  the  Palestinian  Civil  Police  is  active,  they  are  less  positive  about  the  other 
security services such as Preventive Security and General Intelligence, over which the 
Ministry  of  Interior  has  less  control.    The  Israeli  occupation  continued  to  have  a 
serious impact both on the functioning of the security sector and on its ability to serve 
the public effectively.   

5 

 
Other human rights and governance-related issues 

In 2011, recurrent cycles of hostilities in the Gaza Strip continued to put civilians at 
risk;  in  an  escalation  between  8  and  11  December,  civilians  accounted  for  over  90 
percent of casualties in the Gaza Strip. According the UN Office for the Coordination 
of Humanitarian Affairs (OCHA), in 2011 a total of 121 Palestinians have been killed 
in Israeli-Palestinian conflict related incidents in the West Bank and Gaza Strip.  

West  Bank  settler-related  violence  remains  a  matter  of  grave  concern.  OCHA 
registered 377 cases of settler violence in 2011. The weekly average of settler attacks 
across  the  West  Bank  resulting  in  Palestinian  casualties  and  property  damage 
increased by 40% in 2011 compared with 2010. In addition one Palestinian was killed 
and  101  injured  by  Israeli  soldiers  during  clashes  with  Israeli  settlers.  Eight  Israeli 
settlers were killed and 30 others injured by Palestinians in 2011, compared with five 
killed  and  43  injured  during  2010.  Nearly  10  000  Palestinian-owned  trees  were 
damaged  by  Israeli  settlers  in  2011.  Although  the  Israeli  army  recently  stepped  up 
interventions  against  settler  violence,  ninety  per  cent  of  cases  filed  with  the  Israeli 
police concerning settler violence are closed without indictments.  

In the West Bank the de facto moratorium on the death penalty continued. The new 
draft penal code foresees the abolition of the death penalty. Death sentences continued 
to be issued and carried out in the Gaza Strip. 

Concerning the prison system, conditions of detention in the West Bank and the Gaza 
Strip  continued  to  be  a  matter  of  concern,  with  the  Independent  Commission  for 
Human  Rights  (ICHR)  noting  on-going  serious  violations  of  detainees’  rights  by 
security agencies and patterns of ill-treatment and torture across the oPt. Between July 
and  December  2011,  the  ICHR  received  435  complaints  against  the  security  and 
police services in the oPt, 55 of which included claims of torture and/or ill-treatment. 
For the third consecutive year, the ICHR has been prevented from visiting the Internal 
Security  detention  compounds.  Moreover,  there  has  still  not  been  any  documented 
evidence  of  the  punishment  of  violators  because  of  the  lack  of  transparency  of  the 
military  court  system  and  of  disciplinary  mechanisms  in  the  security  services. 
Following the release of Palestinian prisoners in Israeli detention in exchange for the 
release of Israeli soldier Gilad Shalit, at the end of 2011, 4 281 Palestinian prisoners 
remained  in  Israeli  detention  of  whom  135  were  children  including  one  in 
administrative detention. 

Concerning  women’s  rights,  in  May  2011,  the  Ministry  of  Women  Affairs  in 
Ramallah launched the Cross Sectoral National Gender Strategy which paves the way 
for a better integration of gender equality issues in all PA ministries.  In June 2011, 
following  the  discovery  of  an  honour  killing,  President  Abbas  announced  a 
Presidential  Decree  freezing  a  clause  of  the  1960  Jordanian  penal  code  granting 
leniency  to  perpetrators.    Although  this  was  welcomed  as  a  first  step  by  women’s 
organizations, only a thorough reform of the penal code can ensure proper justice for 
victims of honour killings.   

Furthermore,  Israeli  occupation  had  an  adverse  impact  on  freedom  of  religion, 
economic and social rights, children’s rights and property rights.  

6 

 
On regional and international issues, the EU continued its efforts to encourage both 
the Israelis and the Palestinians to return to the negotiating table, while also leading 
efforts  to  reinvigorate  the  Quartet.  In  its  statement  on  23  September,  the  Quartet 
called  for  the  resumption  of  direct  bilateral  negotiations  without  delay  or 
preconditions, the aim being to reach an agreement within a timeframe agreed to by 
the parties but by the end of 2012 at the latest. The Quartet called upon the parties to 
refrain from provocative actions and reiterated the obligations under the Roadmap.  

The  Palestinians  refused  to  re-enter  negotiations  without  an  Israeli  settlement  freeze, 
including  in  East  Jerusalem,  a  demand  with  which  Israel  did  not  comply.  On  the 
contrary, in response to the Palestinian bid for full UN membership and to Palestine’s 
admission  as  a  member  of  UNESCO,  Israel  announced  plans  to  step  up  settlement 
building. After UNESCO admitted Palestine as a member, Israel temporarily suspended 
the transfer of Palestinian tax revenues to the PA, contrary to its obligations under the 
Paris Protocol.   

On  9  October  in  Brussels,  the  High  Representative  hosted  Quartet  envoys  and  the 
parties,  the  latter  stating  their  readiness  to  engage  in  line  with  the  Quartet  statement.  
Under the auspices of the Quartet, this process brought about the first direct meeting of 
the parties’ negotiators on 3 January 2012. 

Settlement  construction  and  expansion  continued  in  the  West  Bank,  including  East 
Jerusalem  with  a  surge  in  settlement  activity  at  the  end  of  2011.    The  proposed 
constructions  in  Givat  Hamatos  are  of  particular  concern  as  they  would  sever 
Palestinian geographic contiguity between Jerusalem and Bethlehem. 

3. 

ECONOMIC AND SOCIAL REFORM 

Macroeconomic framework and functioning market economy  

The economy of the occupied Palestinian territory (oPt) grew by 9.5% in the first half 
of 2011 although there was a sharp contrast between the Gaza Strip ( 20%) that began 
to recover due to the 2010 slight loosening of the Israeli blockade, and the West Bank 
where growth declined to just 5.7%. 

The  slowdown  in  the  West  Bank  was  the  result  of  a  decrease  in  donor  aid,  fiscal 
retrenchment and a 9% drop in agricultural output during the first semester, reflecting 
difficulties  in  access  to  markets  and  land.  Whilst  many  of  the  West  Bank's  gains  in 
recent  years  are  attributable  to  a  partial  relaxation  of  closure  restrictions,  no  further 
easing took place in the West Bank (including East Jerusalem) in 2011.  

The  rapid  growth  in  the  Gaza  Strip  -  which  accounts  for  around  25%  of  total 
Palestinian  GDP  -  mainly  represented  a  base  effect,  and  GDP  per  capita  in  Gaza 
remains well below that in the West Bank. Almost half of Gaza's growth came from 
its  construction  sector,  which  had  dramatically  declined  owing  to  Israeli  restrictions 
on the import of building materials. Agriculture and fishing also grew by 27% year-
on-year.  

The  Palestinian  Authority  (PA)  continued  its  efforts  to  reduce  the  structural  deficit, 
increasing tax collection and lowering spending in line with the Action Plan and the 

7 

 
Palestinian  National  Development  Plan.  However,  by  October  the  PA  had  only 
received  35%  of  pledged  donor  contributions,  despite  the  EU’s  front-loading  of  its 
disbursements at the PA’s request. The most significant delayed payments were from 
Arab donor countries, although the US also suspended aid worth EUR 149 million in 
response  to  the  PA's  bid  for  statehood  recognition  at  the  UN.  All  of  this  created  a 
problem  for  the  PA’s  finances,  as  donor  contributions  were  to  cover  45%  of  2011 
expenditures.  

The  PA  was  forced  to  fill  its  funding  gap  by  borrowing  from  domestic  banks. 
However, by May it reached the banks’ financing limit - borrowing just under EUR 
700  million  from  them  -  and  as  a  result  the  PA  has  since  been  building  up  large 
arrears. The fiscal situation could deteriorate further if there is a renewed suspension 
of clearance revenue (import duties collected by Israel on the PA’s behalf) accounting 
for approximately 70% of the PA's non-aid revenue.  

Employment and social policy 

High unemployment rates (20.2%), low participation rate (around 42% of the labour 
force),  low  wages  and  high  rates  of  poverty  against  the  background  of  rapid 
population  growth  continue  to  be  crucial  concerns.  This  refers  in  particular  to 
unemployment  rates  in  Gaza  and  youth  unemployment,  which  are  particularly  high.  
A National Employment Strategy under the National Development Plan was released 
in April 2011.  

The  women’s  participation  rate  remains  exceptionally  low  (16%  against  70%  for 
men) and unemployment among women is 10% higher than among men. In July 2011, 
the by-laws regulating the National Women’s Employment Committee were endorsed 
and a number of workshops and conferences were held.  The Committee should act as 
an advisory platform to policy making. 

A national tri-partite Socio-economic Council was set up with the aim of facilitating 
social dialogue. However, adoption of by-laws is still necessary to make the Council 
operational.  

On  social  protection  and  the  fight  against  poverty,  the  Palestinian  Fund  for 
Employment  and  Social  Protection  was  reactivated.    A  social  development  strategy 
group was established, including relevant ministries, NGOs and donors. 

In  May  2011,  the  PA  adopted  a  Business  Strategy  (2011-2013)  of  the  Ministry  of 
Social Affairs (which also covers Gaza). The EU supported the institutional capacity 
building of the Ministry of Social Affairs.   

Further  progress  was  made  in  the  implementation  of  the  Cash  Transfer  Programme 
(CTP) which is a part of the Palestinian National Programme for Social Protection and 
targets  families  below  the  extreme  poverty  line.  In  October  2011  full  coverage  was 
extended  to  the  Gaza  Strip,  bank  accounts  for  beneficiaries  were  opened,  and  cash 
transfer payments were fully integrated into the PA’s centralised accounting system. 
The  CTP  total  caseload  of  eligible  beneficiaries  in  the  West  Bank  and  Gaza  rose  to 
over 75,500, for an estimated annual cost of over EUR64 million, with over EUR29 
million of EU contributions in 2011.  

8 

 
4. 

TRADE-RELATED ISSUES, MARKET AND REGULATORY REFORM 

In  2011  oPt  was  the  smallest  trading  partner  for  the  EU  in  the  Euro-Mediterranean 
region,  with  total  trade  amounting  to  EUR  99  million  in  2011  with  the  majority 
accounted for by EU exports (EUR 87 million). EU–oPt bilateral trade contracted by 
13%  year-on-year  (2010:  EUR114  million)  after  having  doubled  in  2010.  The  oPt 
ranks in 164th position among the EU's major partners. EU imports from the oPt were 
just EUR 12 million in 2011, a third of what the EU imported in 2010. These consist 
mainly  of  agricultural  products  (75%).  EU  exports  to  oPt  increased  by  8%  over  the 
same  period  and  reached  EUR  87  million.  These  include  machinery  and  transport 
equipment (51%), chemicals (15%) and agricultural products (10.3%).  

In  September  2011,  the  Palestine  Liberation  Organisation  (PLO)  joined  the  Agadir 
free  trade  agreement,  whose  signatories  are  Morocco,  Tunisia,  Egypt  and  Jordan. 
Participation  in  the  Agadir  free  trade  area  is  expected  to  integrate  the  oPT  into  the 
regional trading system.  

The  Agreement  between  the  EU  and  the  PA  on  the  further  liberalisation  of  trade  in 
agriculture,  processed  agricultural  products,  and  fish  and  fisheries  products, 
concluded in 2011, entered into force in 2012. 

Palestinian customs trained its staff on the use of the latest version of the automated 
system for customs data and negotiated data exchange with its Israeli counterpart. The 
EU provided training  to  develop  competency in the area of pan-Euro-Mediterranean 
rules of origin. A customs court of appeal was established. 

The PA amended its tax law, providing more flexibility to the Government to modify 
the tax rate and to widen the tax base, hence improving tax collection. The oPt suffers 
from fiscal leakages that co-operation with Israel would help to contain. Discussions 
between  the  two  administrations  started  in  February  2011  but  were  interrupted 
following the May 2011 Palestinian reconciliation Agreement. 

The  PA  and  the  EU  cooperated  on  sanitary  and  phyto-sanitary  (SPS)  issues.  An 
assessment  under  the  EU  TAIEX  programme  noted  various  gaps  in  the  SPS 
legislation and in institutional capacity. A food safety strategy and SPS legislation are 
being  prepared,  aiming 
to  support  public  health  and  sustainable  economic 
development of primary production, food processing and retail sectors. 

The improvement of the investment climate in 2011 was severely hampered by the 
closures imposed by the Israeli government on both the West Bank and Gaza. These 
restrict  the  movement  of  goods  and  people  both  within  and  across  borders,  thereby 
increasing  labour  and  transport  costs  and  strongly  discouraging  private  and  foreign 
investment.  The  oPt’s  ranking  in  the  World  Bank's  "Doing  Business  2012"  annual 
report fell from 128 to 131, compared with the previous year. 

No regulatory reforms were undertaken in the area of financial services. The banking 
sector remained stable and credit conditions improved. The share of non-performing 
loans  continued  to  decrease  and  reached  about  3%  in  mid-2011.  The  Palestinian 
Monetary  Authority  continued  to  progress  towards  the  implementation  of  Basel  II 
standards and worked with commercial banks stress tests in line with these principles. 

9 

 
Other Key Areas  

The PA procurement law was adopted in July 2011, reflecting, to a large extent, the 
essence  of  the  United  Nation  Commission  on  International  trade  Law  Model 
Procurement  Law  (1994).  The  law  established  a  Higher  Council  for  Public 
Procurement Policies that will assume an oversight role and ensure compliance with 
legislation.  It also established a complaint mechanism and a dispute review body.  

The  Palestinian  Central  Bureau  of  Statistics  (PCBS)  published  in  2011  the 
accelerated  data  program  on  the  PCBS  website  and  built  the  Palestinian  economic 
module for forecasting. The transition from the General Data Dissemination Standard 
to  the  Special  Data  Dissemination  Standard  was  completed  in  2011.  Results  of  the 
first  ever  2010  agriculture  census  were  published  in  2011.  The  PCBS  resumed  its 
operations in Gaza in early  2011,  after a  suspension dating back to  the  2007 census 
operations. 
improve  cooperation  with  other 
administrations  to  increase  the  use  of  administrative  data  sources  and  more 
systematically report on data quality, including on metadata. 

the  PCBS  should 

future, 

In 

As  regards  public  finance  management  and  external  audit,  the  EU  continued  to 
support  the  PA  Supreme  Audit  Institution,  State  Audit  and  administrative  Control 
Bureau  (SAACB)  with  technical  assistance.  The  financial  statements  for  the  year 
2009 were sent by the Ministry of Finance to the SAACB in early 2011 and their audit 
was  completed  in  September  2011.  The  Ministry  of  Finance  created  a  macro-fiscal 
unit,  which  will  increase  its  capacity  to  analyse  macroeconomic  and  fiscal  data  and 
report  on  budget  execution.  Legislative  amendments  to  the  pension  system  were 
finalised in May 2011 and submitted to the council.  As a contribution to reducing net 
lending  in  the  context  of  Public  Finance  Management,  the  EU  is  also  providing 
support  to  the  restructuring  of  the  electricity  providers  and  to  installing  pre-paid 
meters. 

The  enterprise  policy  of  the  PA  received  substantial  support  from  international 
donors  to  revive  the  private  sector,  in  particular  in  Gaza.  Financial  assistance  was 
provided  to  businesses  that  need  to  restore  production  machinery,  office  equipment 
and  re-build  facilities  and  other  business  premises  damaged  or  destroyed  by  the 
conflict. In January the 1998 investment law was amended by presidential decree.  It 
now provides for simpler investment procedures, reform of the Palestinian Investment 
Promotion Agency (PIPA) and tax exemptions and incentives.   

The  PA  participated  in  implementing  the  2011-2012  industrial  cooperation  work 
programme that Euro-Mediterranean Industry Ministers adopted on 11-12 May 2011 
in Malta. 

5. 

ENERGY, ENVIRONMENT, TRANSPORT, RESEARCH AND INNOVATION 

Due to the political situation, the provision of transport operations remained limited, 
especially  in  light  of  the  closure  of  the  Gaza  Strip,  the  absence  of  sovereignty  and 
limited  access  to  certain  areas  in  the  West  Bank.  Nonetheless  the  transport  sector 
remains a vital recovery tool for the Palestinian economy. The PA adopted a revised 
transport  strategy  in  April  2011.  Restructuring  of  the  public  passenger  transport  is 
ongoing and the independent roads regulator remained to be established.  

10 

 
In 2011, the PA adopted an energy strategy until 2013 and pursued electricity sector 
reform, with EU assistance aimed at reducing net lending. The Electricity Regulatory 
Council,  which  was  strengthened,  adopted  licensing  rules  and  a  tariff  methodology. 
The  PA  made  progress  on  the  establishment  of  regional  electricity  distribution 
companies and prepared the construction of a power plant in the Northern West Bank. 
It  continued  developing  Gaza  and  West  Bank  electricity  networks  including  in  rural 
areas. To improve bill collection rates, the PA installed additional pre-paid electricity 
meters.  The  PA  implemented  energy  efficiency  measures  and  developed  renewable 
energy  projects,  solar  energy  in  particular.  Energy  efficiency  and  renewable  energy 
plans are in preparation. The EU remains committed to re-launching trilateral energy 
cooperation with the Palestinian Authority and Israel. 

In  the  field  of  climate  change,  sub-regional  co-operation  (Israel,  Jordan,  Palestine) 
was launched on the impact of climate change on water availability.  

The  reform  of  the  environment  and  water  sectors  continued.  The  National 
Development Plan (2011-2013) identifies water supply, sewage treatment, solid waste 
management, sustainable use and conservation of natural resources as well as public 
awareness as key issues. Construction of wastewater treatment plants continued in the 
Gaza Strip. The state of the environment in the Gaza Strip continues to be a serious 
concern,  exacerbated  by the  restrictions  on  the  Environmental  Quality  Authority’s 
(EQA) ability to operation in the area. Works continued to drill new wells in the West 
Bank  and  to  build  a  new  water  supply  system.  Environmental  impact  assessments 
were carried out for a number of infrastructure projects. 

The  Cabinet  endorsed  the  environment  sector  strategy  for  2011–2013,  and  the  EQA 
prepared the related action plan for 2012-2014. The Cabinet also endorsed the bylaw 
on  environmental  conditions  for  stone  and  marble  cutting  industry.  The  EQA 
developed a National strategy for combating desertification as well as plans on solid 
waste  management.  The  Palestinian  Water  Authority  released  the  final  report  of  the 
institutional  water  sector  review,  which  recommends  measures  to  reform  the  water 
and  sanitation  sector  institutions.  Water  and  wastewater  is  a  focal  issue  of  EU-
Palestine  co-operation,  including  the  financing  of  a  small-scale  desalination  plant  in 
Gaza.  In  2011,  EUR22  million  was  allocated  for  water  sanitation  and  reuse  in  the 
West Bank.  

With  regard  to  civil  protection,  the  Civil  Defence  and  the  Ministry  of  Women’s 
Affairs launched an action programme aimed at raising the awareness of Palestinian 
women. The Palestinian Authority intensified cooperation with the countries from the 
region  and  the  exchange  of  best  practices  with  the  EU  in  the  field  of  disaster 
prevention, preparedness and response through its participation in the EU Programme 
for Prevention of, Preparedness for, and Response to natural and man-made disasters.  

On  the  information  society  sector,  the  law  on  setting  up  an  independent  regulatory 
authority,  which  was  enacted  by  presidential  decree  in  2011,  has  not  been 
implemented as a result of political disagreement over the legal basis for this decree 
and the recruitment of the Board. This caused the World Bank to freeze its activities, 
and  also  US  aid  has  halted  its  activities  in  telecoms  for  now.  The  Ministry  of 
Telecommunications and Information Technology is nonetheless trying to modernise 

11 

 
the sector, for example by preparing number portability. However, it seriously lacks 
resources - in particular for the introduction of a licensing system. 

On  audiovisual  issues,  the  draft  of  the  broadcasting  law  addressing  certain 
restrictions  on  media  freedom  has  yet  to  be  adopted.  In  the  area  of  research  and 
technology, participation by Palestinian researchers in the 7th Framework Programme 
for Research (FP7) in 2011 increased. Up to mid-October 2011, the PA had 11 signed 
grant  agreements,  involving  11  participants  from  the  occupied  Palestinian  territory 
and  benefiting  from  an  EU  financial  contribution  of  EUR0.9  million.  The  occupied 
Palestinian  territory  has  an  appointed  National  Contact  Point  Coordinator  and 
participates  in  the  Mediterranean  Innovation  and  Research  Action  project,  which 
contributes to setting up and training this NCP. 

6. 

PEOPLE-TO-PEOPLE CONTACTS, EDUCATION AND HEALTH 

The  Palestinian  Authority  remained  highly  committed  to  the  implementation  of  the 
Education  Development  Strategic  Plan  2008-2012.  However,  challenges  persisted, 
such as lack of infrastructure, high drop-out in certain geographical areas, access by 
the  poorest  students  to  higher  education,  as  well  as  high  dependence  on  donor 
financial  support.  The  situation  in  East  Jerusalem  is  of  particular  concern.    The 
EU/World Bank Project on Tertiary Education was extended until June 2011; it aimed 
to foster employability of students and bridge labour market gaps and was positively 
assessed. The EU continued to support the implementation of the Teacher Education 
Strategy.   

As  regards  EU-oPT  higher  education  cooperation,  no  consortia  or  partnerships 
involving institutions from the occupied Palestinian territory could be selected under 
the  Erasmus  Mundus  programme  in  2011.  Two  additional  Tempus  university 
cooperation projects involving the oPt were selected, in line with the participation of 
previous years. At the end of 2011 the oPt was involved in nine projects, including six 
multi-country projects, offering access to international networks and the possibility to 
modernise curricula and the quality of teaching and learning.  Unlike 2010, no project 
under the Jean Monnet programme (aimed at fostering EU integration studies) was 
selected  in  2011,  nor  did  the  oPt  participate  in Marie  Curie  research  collaboration.  
Palestinian involvement in these programmes should be enhanced.  

On  a  more  positive  note  an  increasing  number  of  Palestinian  youth  and  youth 
organisations benefitted from the Youth in Action  programme  (56 projects targeting 
236 young people/youth workers compared to 31 projects and 98 young people/youth 
workers in 2010). 

In the framework of the Torino Process, the European Training Foundation (ETF), in 
cooperation  with  main  stakeholders,  carried  out  an  analysis  of  oPt  vocational 
education and training (VET) policies. Major challenges were identified in the fields 
of teacher training and VET costing. ETF took initiatives to improve the relevance of 
VET, reinforce the role of social partners and strengthen partnership between public 
VET institutions and the private sector at local level. The EU is supporting a EUR4 
million  programme  to  assist  of  the  implementation  of  the  national  Palestinian 
Technical Vocational Education and Training strategy in three target governorates.  

12 

 
The PA developed a cross-cutting Youth Strategy for 2011-2013. On this basis, work 
started to develop related action plans, as well as setting out priorities in the area of 
youth integration.  An increasing number of Palestinian youth and youth organisations 
benefitted  from  the  Youth  in  Action  programme  (43  projects  targeting  176  young 
people compared to 31 projects and 98 persons in 2010.     

Five projects under the 2009/2010 Culture programme's special actions continued to 
run.  No  additional  project  was  selected  in  2011.  Ten  Palestinian  candidates  were 
selected  to  participate  in  the  Euromed  Scuola  2011  event  in  November  2011  in 
Strasbourg.  The  oPt  continued  to  directly  benefit  from  the  Euromed  Heritage  IV 
programmes.   

implementing 

its  health  strategy  2011–2013 

The  PA  started 
including  by 
rehabilitating health care facilities, establishing a chronic diseases centre and further 
preparing a health insurance law. Availability of medicines in the oPt and access by 
patients and medical personnel to East Jerusalem hospitals remained difficult. The PA 
participated  in  the  EU-supported  ‘Episouth  Plus’  project  aimed  at  increasing  health 
security 
the  Mediterranean  region  and  South  East  Europe  network  on 
communicable  diseases  for  the  EU,  Mediterranean  and  Balkan  countries.  The  EU 
provided  various  types  of  support  to  the  health  sector  including  East  Jerusalem 
hospitals,  mental  health,  salaries,  medicines,  rehabilitation  services,  emergency 
preparedness and primary health care including mobile health clinics to facilitate care 
in areas where movement of persons is limited due to the political situation. 

in 

13