Palestinian economic plan taking shape

Behind the scenes, a team of international experts have for months been working on a plan to boost the stagnant Palestinian economy, set to be launched if peace talks with the Israelis resume. US Secretary of State John Kerry unveiled the broad contours of the scheme to attract some $4 billion in private-sector investment over the next three years at a World Economic Forum in Jordan in late May. But decades of frustrations and disappointments mean the concrete details are being kept under wraps until there is an agreement to resume the talks, stalled since September 2010. The hope is that, hand in hand with movement on the political front, the scheme could sew tangible economic benefits on the ground to alleviate dire unemployment and poverty for the Palestinians. Kerry said business experts had been working to make the project "real, tangible and shovel-ready," adding an initial analysis had predicted "stunning" results. These included boosting the Palestinian GDP by as much as 50 percent over three years and cutting unemployment from 21 percent to eight percent. But similarly ambitious US-led plans by past administrations have faltered, and a blanket of secrecy has been thrown up as Quartet special envoy Tony Blair and his team hammer out the details with the aid of international experts. Critics say the vague details may signal a lack of substance. But others believe the need for secrecy is in part due to concerns on the Palestinian side that any so-called "economic peace" would sideline efforts to seal a two-state peace deal with Israel. "The Palestinian leadership will not offer political concessions in exchange for economic benefits," insisted Mohammad Mustafa, president of the Palestine Investment Fund, a day after Kerry's announcement. Part of the aim, though, is to wean the Palestinian economy off its dependence on donor handouts, sources told AFP. After several years of what the World Bank called "robust growth," the Palestinian economy has slowed since 2012, hit by a fall in aid amid international fatigue at the moribund peace process. The basis for Palestinian economic growth "is largely donor support, which in the long term is not sustainable. And it is really job creation that is needed," said Mariam Sherman, World Bank country director for the West Bank and Gaza. "We would like to see greater private sector investment," she told AFP. The International Monetary Fund said last week that Palestinian growth was expected to slow to about 4.25 percent this year down from about 11 percent in 2010 and 2011. Unemployment in the West Bank is set to reach 24 percent this year, while in Gaza joblessness stands at 31 percent -- with half of all women in the Gaza Strip out of work. Cuts in donor aid had in the past two years "brought the PA close to insolvency," wrote the Moshe Dayan Center at Tel Aviv University last month. "The PA was unable to pay the salaries of public sector employees fully and on time." The Quartet is understood to have targeted eight sectors for growth -- construction/housing, building materials, tourism, light manufacturing, agriculture, energy, water and information technology. The aim is not to present an investment plan dividing money between each sector, but rather to map out a potential path forward. Much needs to be done on both sides to foster a better environment to lure private investors. "If that $4 billion flows in and meets all the security-driven restrictions, you will not get the proper result," Kari Tapiola, a special advisor to the International Labor Organization, cautioned about the Quartet-Kerry plan. "You have different areas of potential productive investment, but under the current conditions they are very limited," agreed Sherman. Last week's IMF report sharply criticized "persistent Israeli controls and obstacles on internal movement, exports, and imports in the West Bank, as well as the virtual closure of Gaza." Such restrictions "thwart the private sector," the report warned. Prohibitions and bureaucratic red-tape have contributed to a fall in Palestinian exports, while the industrial and agricultural sectors have also weakened. With no functioning airport, much of what the Palestinians produce has to be trucked out through the West Bank and sent to Jordan via the Allenby Bridge. Marble from quarries, dates and herbs from farms, as well as some processed foods are among the most successful exports from small Palestinian businesses. But such built-in inefficiencies add to the overall cost, while a strict Israeli ban on importing dual-use items such as fertilizer mean West Bank manufacturers can struggle to get materials. It remains unknown when the Quartet plan will be unveiled -- if ever. US Secretary of State John Kerry had been expected to return this week, but has put all plans on hold after his wife fell ill. During intense diplomacy in the region last month "he felt we made real progress, and with a little more work, we believe the start of negotiations could be within reach," State Department spokeswoman Jen Psaki said.