GAZA/WEST BANK: Only deeds can overcome donor doubts

29 July 1994

A CONSTRUCTION boom is waiting to happen in Gaza and the West Bank. A team of World Bank and Palestinian economists has produced a database of about 2,600 projects in all sectors which will reconstitute the Palestinian economy after the shattering experience of 27 years under Israeli occupation.

Donors have pledged $2,400 million for the first five years of self-rule and $675 million for the first year alone. But before any contracts can be signed, the Palestinians face the tough task of translating enthusiastic pledges into firm commitments and setting up the institutions that will manage the programme.

The Palestinian leadership has so far been less than complimentary about the donors' reluctance to disburse funds for the reconstruction effort. The Palestine National Authority (PNA) has attempted to allay some donors' fears about transparency by appointing the US' Morgan Stanley Asset Management to manage the aid. But the PNA is still facing an uphill task.

Donors say the Palestinians and the World Bank have focused their efforts too closely on funding capital projects, and paid too little attention to paying for the institutions that will co-ordinate them. 'They have looked at capital investment plans, and prepared an excellent plan with the World Bank, but they have not looked at the really important area of recurrent costs,' says one EU official.

Despite the criticism, the self-rule government has not delayed in setting up the nerve centre of the reconstruction effort, the Palestinian Economic Council for Development & Reconstruction (PECDAR). Officially constituted in May, the council directors have been working on the development programme since January.

The result of PECDAR's efforts is a three-year $1,200 million emergency assistance programme drawn up with the World Bank. The programme covers all sectors, earmarking $600 million for public investment and infrastructure projects, including transport, water and wastewater, power and housing.

The first major award by the council should be the consultancy contract to the project management office, which is responsible for accounting and procurement within PECDAR. Four international consultants were prequalified for the work and submitted their bids at the start of June. The consultant is expected to help PECDAR overcome some of the initial hurdles the organisation has faced in preparing project documents to an international standard.

'There is a huge chasm between what the World Bank likes to see and what PECDAR and its constituent authorities are able to produce,' says one contractor with a close eye on PECDAR's plans.

He says the immediate problem is filling the middle ranks of the council with the necessary technical skills. 'They have the directors at the top and the teaboys at the bottom, but there is nobody in the middle. There is nobody there to get the thing going,' he says.

But in some sectors of the economy the programme of investment is already starting to roll:

HOUSING: The US Agency for International Development (USAID) has been quick off the mark. On 27 June, it awarded contracts totalling $7 million to three local and one US firm to build six buildings with 192 homes near Jabalia in Gaza. It is the first phase of the Al-Karama towers project, that will eventually include 13 apartment blocks. The World Bank programme plans to spend $30 million on housing in the occupied territories, with $25 million going into Gaza where the housing shortage is most acute. The World Bank also plans to provide $80 million in financial support to private-sector housing projects.

TRANSPORT: The World Bank programme calls for investment of $84 million in this sector, allocating the bulk of the funds to the West Bank. Most of this work is likely to be carried out by local contractors. The contracts will be small as much of the work will be to rehabilitate and upgrade old roads, not to build new ones.

WATER AND WASTEWATER: This is one of the most pressing problems in Gaza and the West Bank - where water supply networks exist they are mostly dilapidated and leakage from the system is up to 50 per cent. Wastewater systems are an even rarer feature of towns and villages in the occupied territories, and few of the operating water treatment facilities work at capacity. Water-sector projects have been allocated $111 million in the World Bank programme.

A number of new projects are under way. This includes the $57 million EU-financed Rafah sewerage project in Gaza. Eight European companies and groups have submitted bids to act as consultant for the project, which aims to set up a system to serve a population of 250,000. USAID, with America Near East Refugee Agency, is funding a storm water drainage study in Gaza City where the present system, designed to serve about 80,000, now serves about 400,000. The project is expected to cost about $22 million.

Other projects include rehabilitation work on the sewerage system at the Shati refugee camp and constructing a sewerage system for the other camps around Gaza City. The design and study work for both projects is being carried out by the Netherlands' DHV Water & Environment. The UK/Danish consultancy Carl Bro-Haiste International has also completed a study on a wastewater system for the Jabalia refugee camp.

POWER: The main aim in this sector is to increase the efficiency and capacity of an aging distribution network. In Gaza, energy loss runs at about 40 per cent as a result of a decrepit transmission system and poor metering. The work to rehabilitate and expand the system is expected to be carried out under four turnkey contracts, one in Gaza and three in the West Bank. About $108 million is expected to be spent in the three- year programme, but this does not include any plans for local power generation.

A number of international firms have submitted proposals to the recently established Palestinian Energy Centre for building a power plant. These include a Canadian and US proposal to supply electricity from a barge moored off the Gaza coast and a UK plan to build a 120-MW combined cycle power and desalination plant. However, neither plan is likely to get far off the drawing board until the basic infrastructure is in place.

PRIVATE SECTOR: By necessity, the private sector has been crucial in keeping the economy going under occupation with no state structures to support it. The three-year programme allocates $300 million to building up a financial and legal system to support private investment, as well as lending to specific projects. However, construction projects in the private sector are already numerous and include two projects to build cement plants in the West Bank.

Cement demand

Cement demand is expected to reach between 700,000 and 1 million tonnes a year as the development programme takes off. Two groups of investors hope to displace the Israeli suppliers that now dominate the market. The two groups, the Nablus-based Palestine Cement Company and the Hebron-based Arabian Cement Company, are still raising the capital for their respective plants, having carried out preliminary studies. However, it is unlikely that both projects will make it to production.

A newly established Egyptian/local joint venture, Arab Contractors Palestine (Osman Ahmad Osman & Al-Farra), is building a $20 million-25 million 10- storey office block in Gaza. Joint ventures, such as this one, are likely to become a regular feature of the business landscape as Palestinian business people in neighbouring Jordan and Egypt return to the area.

Other projects in the pipeline include plans for a port and airport in Gaza. Both are at an early stage, with design work still incomplete, but this has not prevented the PNA from signing letters of intent with international consortia to carry out the construction work. A group led by the Netherlands' Ballast Nedam is expected to build the $50 million floating port and an Italian group led by CMC di Ravenna will build the airport.

There is no lack of interest in the new economy. The Palestinians now have to demonstrate that they are capable of making good use of all the aid that is available.

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