This week the Ad-Hoc Liaison Committee (AHLC) will convene in Oslo for the bi-annual meeting of donor countries to the Palestinians. This will be the first time for many years that the delegates meet personally, rather than in a video conference, with Israel represented by the Minister for Regional Cooperation Issawi Frej, who will be pushing for civil and economic assistance for the Palestinians.
Sources close to the matter have told "Globes" that Frej will meet with Palestinian Authority Prime Minister Mohammad Shtayyeh and Minister of Finance Shuki Bishara.
This meeting marks another major change in direction by the current Israeli government compared with the previous government. Frej will present to the donor countries the new Israeli position, backing increased support and donations to the Palestinian Authority, which is in an even more difficult cash flow crisis than usual.
The AHLC of donor countries was founded in 1993 and the main donors are the US, Canada and the EU. The committee meets every six months and in addition to Israel, other member countries include Egypt, the UN, the International Monetary Fund and the World Bank. The original aim of the AHLC was to put the Palestinian Authority on a sound economic footing following the Oslo Agreements. But although tens of billions of dollars have been invested over the years, this aim has not been achieved.
The latest World Bank report reveals that although Palestinian business activity is gradually recovering from the slowdown created by the Covid crisis, the improvement is only on the West Bank, while in Gaza the economy has also failed to recover from the military conflict with Israel in May 2021. According to the report, external assistance to the Palestinians has sunk to a new low in recent years and the Palestinian Authority will have a deficit of $1.36 billion in 2021 from a budget of $6 billion. The Palestinian Authority cannot meet its payments and among other things has again cut transfers to the Gaza Strip and its employees' salaries.
Frej, who is in closer contact with the Palestinian Authority than any other Israeli government minister, will present the new government's position, that even if there is no renewal of the peace process, on the civil-economic level, Israel is interested in assisting the Palestinian Authority in getting out of the economic crisis. This policy is based on the belief that a better economic situation will assist security stability. However, since the diplomatic chill with the Palestinians, mainly after Donald Trump became US President, the grants received by the Palestinians from the rest of the world have been greatly reduced. If in 2008 the Palestinian Authority received $1.2 billion in foreign grants, in 2020 that figure fell to $500 million and this year it will only amount to $184 million.
The AHLC of donor countries, which begins on Wednesday, will be asked to restore the amount donated to the Palestinian Authority to at least $1 billion annually, not including the urgent financial assistance required by the Gaza Strip.
Israel will support this request and the Biden administration and EU also back it in principle but have some demands, the most important of which, is that most of the funds will not be transferred to the budget of the Palestinian Authority but rather dedicated to projects, under the direct supervision of the donor countries and UN organizations. The reason is corruption, and in a professional opinion obtained by the Norwegian government four years ago, it was claimed that 40% of the donor countries' money was not allocated to the purpose for which it was contributed. Norway used this report to justify reducing grants to the Palestinian Authority.
The expectation is that the donor countries will pledge to raise the grants, probably not by the full amount that the Palestinians are asking for and with closer supervision of the projects that the money is designated for.
Green light from Saudi Arabia
In the past few weeks, "Globes" has reported about progress in contacts with Saudi Arabia in efforts to bring the Kingdom, one way or another, in the Abraham accords. The Saudis, even before the reports, were not happy about moving forward on the diplomatic front but are interested in promoting commercial-economic-civil ties. Sources close to the matter have told "Globes" that during talks issues like additional transport agreements, promoting joint ventures between countries in the region and more have been discussed.
A diplomatic source in Saudi Arabia told "Globes" this week that the business, government and private sectors have received a green light to trade with Israeli companies, at this stage via Bahrain and the UAE. Deals have already been agreed in recent months but this green light will expand activities. For Israelis the significance is that it will be less challenging to reach the Saudi market and companies.
Published by Globes, Israel business news - en.globes.co.il - on November 14, 2021.
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