15 June 2008
The recent Palestine Investment Conference concluded with pledges amounting to $1.4 billion in private sector investment in the Palestinian Territories, including $75m from the International Finance Corporation (IFC). Meanwhile, the World Bank’s conditionalities on utility fees and eliminating public sector jobs raises doubts about the institution’s adherence to its poverty reduction mandate.
The Palestine Investment Conference, which ran from May 21st to 23rd in Bethlehem, drew over a thousand delegates, including some of the world’s premier political and business leaders. The assembly followed the Paris Conference in December 2007, during which donors had pledged $7.7 billion in assistance to the Palestinian territories.
During his remarks the World Bank’s Managing Director Juan-Jose Daboub, highlighted the engagement of the Bank’s private sector lending arm, the International Finance Corporation (IFC), which has invested $130 million in 16 companies in the West Bank and Gaza. The IFC’s most recent approval, he added, was a $75 million loan to support the new $500 million Affordable Housing Initiative. What was left unsaid, however, is that the housing project represents the first new IFC investment in Palestine since 1999, though the lender is reportedly considering three new projects.
Furthermore, the World Bank’s latest approval of $40 million in budget support to the Palestinian Authority (PA) raises doubts about the Bank’s pursuance of its poverty reduction mandate. On June 5, the Bank’s Board of Directors approved a new development policy grant (the Bank’s new name for structural adjustment) for the West Bank and Gaza to support the PA’s economic reform agenda, called the Palestinian Reform and Development Plan (PRDP), which was negotiated during the Paris Conference.
The Bank’s program, which hinges on the PA’s compliance with Bank demands “to increase collection of utility fees and reduce the level of public employment” has serious implications for impoverished people in Palestine, considering the already severely limited access people have to water and electricity, and the number of families that depend on public sector jobs. The Bank even acknowledges that “both actions could negatively affect the most vulnerable groups. Consequently, the PA is making the development of the social safety net targeting […] improvements in the social safety net implementation a high priority.” However, the Bank’s track record shows that its efforts to implement safety nets for the poor have done little to offset the worst effects of such reforms.
Compliance with these reforms also has larger implications than just securing the Bank’s $40 million; failure to implement them to the Bank’s satisfaction could jeopardize all donor assistance through the PRDP. In its project document, the Bank cautions that adherence to the Bank’s economic reforms is “crucial for attracting continued international donor support.” The document is also quite explicit in insisting that future disbursements under the newly established Bank-managed multi-donor trust fund, called the PRDP-TF, “will be made based upon the IMF and World Bank reviews of the progress towards the PRDP’s reform goals.”
Further analysis of the program is limited because the Bank is yet to release the full Program Document, which it is required to do following approval. However, the evidence clearly shows that while the Bank is soliciting private investment, it is also taking a heavy-handed approach that could further aggravate the deepening poverty of Palestine’s most vulnerable.
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