| Grant Profile: |
| Project Title: |
Facilitating Trade Flows Between West Bank and Gaza and Israel |
| PCF/LICUS/SPF: |
PCF |
Status: |
Closed |
| File Number: |
334
| Region: |
MENA |
| Sector: |
Economic Policy |
Country: |
West Bank/Gaza |
| FY approved: |
2006 |
Grant Theme : |
Trade and integration |
| Keyword(s): |
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Approved Amount: |
$216,312.00 |
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Grant Recipient:
Paltrade |
Grant Purpose:
The unreliable and inefficient movement of goods and people across the borders between West Bank and Gaza (WBG) and Israel is one of the most critical problems afflicting the Palestinian economy. Karni, the only goods crossing between Gaza and Israel, is marred by inefficiency, insecurity and corruption. Paltrade (private sector Trade Development Organization for the West Bank and Gaza) has been monitoring trade activity, including both trade volumes and processing times, at Karni since August 2005. Its reports have become a critical input into negotiations to develop a border regime that provides both efficient and reliable trade for Palestinian goods and security for Israel. They were a critical element of the November 2006 Agreement on Movement and Access, which requires that Israel meet prescribed targets for truck movements in 2005/2006, and will continue to be instrumental in monitoring these agreed targets.
The project will support Paltrade for 12 months to continue monitoring Karni, expand monitoring to other border crossings between Israel and the West Bank, and produce regular reports that will be very widely disseminated to both Palestinian and Israeli policy makers and business people, as well as to the donor community and the public at large.
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Grant Activities:
The main components of the project include:
Component 1: Gaza - Karni cargo movement monitoring and analysis: per gate terminal status at terminal, number of trucks, queue times, per truck processing times.
Component 2: Gaza - Rafah (the crossing between Gaza and Egypt and was put under Palestinian control under the AMA) – a report on the progress and needs for providing facilities for cargo export through Rafah.
Component 3: West Bank cargo movement monitoring and analysis: Includes estimation of demand for cargo movement for use in evaluating the impact of impending border terminals. If terminals begin operation during the project, initiating monitoring there will incur additional work and costs in the West Bank.
For each of the program components above, Paltrade will engage in a process of research, analysis, and consultation. The following activities will be conducted in developing the program deliverables:
(1) First-hand data collection from the private sector and at the border terminal (Karni and others, as applicable).
(2) Survey of available data and information – through desktop research and consultations with other stakeholders.
(3) Consultation and research of available information.
Policy makers will use this information to influence border policy and the impact of the closure regime on the Palestinian economy. This will provide a critical technical input into an emotive situation – providing hard data about the impact of the constraints and a strong rationale for keeping the borders functioning in an orderly and transparent fashion. Moreover, the involvement of Paltrade at the border sets an important precedence of private sector involvement which not only helps ensure more efficient and business oriented operations, but also acts as a brake on corruption. The World Bank will be using the output as a regular feature of our economic analysis of the Palestinian economy.
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Results:
• Building an efficient and reliable terminals’ information network with related stakeholders such as governmental bodies, border authorities, the private sector, and related NGOs;
• Upgrading terminal information templates used at related bodies such as The Borders and Passages Department and the Ministry of National Economy.
• Partnering with the private sector to develop a systemized approach in gathering feedback and including them in the negotiation and decision making processes of issues related to the Terminals.
• Providing reliable and timely information on the Gaza cargo terminals performance (operations, imports, exports, etc…) in a specialized database available online for all stakeholders; this is considered the authoritative reference for all major international and local organizations. Information and periodic reports, to help improve the terminals performance, were released to decision makers such as Palestinian Negotiators, the Quartet, The World Bank, US, and others. Collected statistics were widely disseminated to different stakeholders and policy makers.
• Monitoring the Rafah border crossing terminal was not possible since the terminal did not operate during the project period. Instead Paltrade conducted the following activities:
• (a) Paltrade issued focused report on Rafah progress and needs. The Rafah terminal constitutes an important alternative trade route for the Palestinian economy in Gaza. Critically, this trade corridor would offer the Palestinians direct access to Arab countries and Europe, which are potentially the most lucrative markets for Palestinian exports. Throughout this project, Paltrade were able to highlight the current status of the terminal and the export potential and needs of three main sectors in Gaza. To do so, Paltrade conducted the following activities:
i. Three focus groups with 60 companies (20 companies from each sector);
ii. Interviews with officials and the private sector; and
iii. field and desk research
• (b) Paltrade conducted a workshop on Rafah Agreed Principles that were listed in the Agreement on Movement and Access (AMA). The workshop was designed to:
i. Present and discuss the AMA with regard to Rafah with the Palestinian private sector.
ii. Get private sector feedback on: the importance of opening Rafah as a commercial crossing, private sector needs in terms of exporting through Rafah and the privatization of Rafah crossing.
• Overall, the workshop was: informative to the Palestinian private sector since the AMA was clearly presented and discussed, pensive in terms of giving the Palestinian private sector the chance to assess and discuss their needs if and when Rafah opens, and intuitive by giving the participants the chance to explore different alternatives/scenarios for any possibility of opening the border.
• Paltrade was not able to collect, monitor and analyze border crossings in the West Bank. Paltrade was not able to be present at any of the West Bank border crossings as the Israeli authorities will not allow Palestinian monitors to be present at any of the West Bank border crossings. Instead Paltrade conducted the following activities:
i. Updated and improved an online database:
ii. Estimation of demand for cargo movement in West Bank using VAT invoices and ASUCUDA
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Lessons Learned:
• The involvement of the World Bank was very important. Not only in terms of funding but also in terms of the intellectual content of the border monitoring was the involvement of the Bank key. This was not a result of a lack of technical capacity in Paltrade, but rather because the involvement of the Bank on an intellectual/monitoring level adds credibility and assures that the information produced is impartial, non-political and correct. It also allows the World Bank to step in to push both the Palestinians and Israelis to protect Paltrade’s position. The political parties on both sides have self-serving reasons to try to marginalize Paltrade. As long as the World Bank maintains some connection with the project, the Bank can help ensure the free flow of information that is the key outcome of this project.
• Providing reliable information to all stake holders and policy makers can have a large impact on policy and may be a more cost efficient way of moving policy than trying to change policy directly. Good policy depends upon good information, which is usually lacking in conflict areas. There is large value added from gathering and disseminating basic information on the economy.
• The Palestinian economy critically depends upon open borders and efficient crossings. The most significant factors are predictability and reliability not low cost. If enterprises can not be assured of the time and cost of crossing a border they will not engage in trade. Establishing reliable border crossings is essential for growth and stability.
• Data collection requires networking with different parties including private sector, governmental and international institutions. No one institution can provide all of the needed information.
• The Palestinian private sector proved to be a key player. The private sector in Gaza was a crucial source of information on borders in terms of specifying their needs and capacity, as well as recommending new ways for monitoring borders. Any effort to gather information and design policies for border trade must include close cooperation from private enterprises and their organizations. It is not enough to rely on official sources.
• Corruption at borders can be a serious obstacle for trade facilitation in conflict areas. Borders with high levels of screening for security purposes inevitably have high levels of corruption, which can dramatically increase the cost and unpredictability of doing business. For instance, corruption of both Palestinians and Israelis, can raise slotting rate (finding a slot) at Karni to as much as 30,000 ILS ($US7,500) in addition to the cost of transportation
• Recommendations for follow-up or undertaking similar activities in the future:
o The relationship with Chambers of Commerce in the West Bank as well as strengthening their role in monitoring borders should be strengthened;
o Both sides of a border need a strong border management structure to ensure an efficient border. Creating predictability is more important than low costs or reducing the time it takes to cross. Creating a Palestinian entity to provide data on trade traffic at borders is essential to improving the Palestinian economy;
o To monitors borders, it is necessary to coordinate closely with the private sector and its representatives as well as government officials. The private sector must understand and value the effort for it to be successful;
o Making information available to all stakeholders in a timely manner is important. Conflict areas are extremely dynamic and information quickly becomes outdated. For it to have a policy impact, it must be disseminated immediately;
o Any strategy to gather information can be quickly rendered impossible in a conflict zone. Border monitoring projects must have the ability to rapidly shift both the way they gather information and what information they gather to meet the current needs of policy makers. This flexibility must be build into the project in the design phase;
o A sustainable structure, in the continued uncertain political environment, dictates that impartial donor involvement –in funding, mentoring and checking data – is critical for continued success. Although Paltrade had the technical capacity to continue, it will continue to need this high-level, impartial, but influential involvement of the World Bank or other organizations to continue to give the data legitimization.
Key challenges:
• The security situation, along with the absence of a Palestinian presence at West Bank terminals prevented PalTrade monitors from gathering information on the movement of goods through West Bank terminals.
• The lack of security, as well as in-fighting among Palestinian factions sometimes colluded to lessen Paltrade’s access and independence at the Gaza terminals.
• Political instability resulted in the closure of all Gaza trade terminals for exports and in limitations for imports.
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