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The Underpinnings of the Future Palestinian State:Sustainable Growth and Institutions
------------------------------------------------------------------------------Economic Monitoring Report to the Ad Hoc Liaison CommitteeSeptember 21, 2010
The World Bankwww.worldbank.org/ps
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Contents
Acronyms ........................................................................................................................................ 3Executive summary ......................................................................................................................... 4 A. Introduction ............................................................................................................................ 6B. Potential for sustainable growth ..............................................................................................7B.I. Recent economic developments ........................................................................................7B.I.a. Private investment ........................................................................................................ 9B.II. Constraints to private sector development ..................................................................... 13B.II.a. Selective easing of Gaza blockade ............................................................................... 13B.II.b. Lack of access to Area C resources ............................................................................. 14B.II.c. Severed link to East Jerusalem ................................................................................... 16B.II.d. Curtailed entry of visa holders and “dual-use” items ................................................. 18B.II.e. Challenges facing the banking sector ......................................................................... 19B.II.f. Improvements to the business environment ............................................................. 20C. Progress towards robust institutions .................................................................................... 22C.I. The PA’s fiscal position .................................................................................................. 22C.II. Strengthening the fiscal position ................................................................................... 26C.II.a. Social safety net ......................................................................................................... 26C.II.b. Public pension system ............................................................................................... 26C.II.c. Electricity distribution and net lending ..................................................................... 27C.III. Improving public finance management.......................................................................... 28C.III.a. Public procurement .................................................................................................. 29D. Conclusion ............................................................................................................................. 30E. References .............................................................................................................................. 31
List of Figures
Figure 1: Real GDP growth rate, 1999-2009 (percent)....................................................................7Figure 2: GDP per capita, 1999-2009 (constant US$) ................................................................... 8Figure 3: Distribution of outstanding credit portfolio among economic activities in 2009 .........10Figure 4: Newly-registered firms in the West Bank, 1995-2009 .................................................. 11Figure 5: Newly-licensed building area in the West Bank, 1998-2009 (thousands of squaremeters) ........................................................................................................................................... 12
List of Tables
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Acronyms
AHLC Ad Hoc Liaison CommitteeBoI Bank of IsraelEU European UnionGDP Gross Domestic ProductGoI Government of IsraelICT Information and communications technologiesIIRS Israel Internal Revenue ServiceIMF International Monetary FundMoF Ministry of FinanceMoNE Ministry of National EconomyMoPAD Ministry of Planning and Administrative DevelopmentMoSA Ministry of Social AffairsNEDCO Northern Electricity Distribution CompanyNIS New Israeli ShekelsPA Palestinian AuthorityPalTrade Palestine Trade CenterPCBS Palestinian Central Bureau of StatisticsPERC Palestinian Electricity Regulatory CouncilPFM Public financial managementPMA Palestine Monetary AuthorityPNCTP Palestinian National Cash Transfer ProgramPSI Palestine Standards InstitutionUN OCHA oPt United Nations Office for the Coordination of Humanitarian Affairs in theoccupied Palestinian territoryVAT Value-added taxWB&G West Bank and Gaza
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