Ad-Hoc Liaison Committee Meeting

Intervention by

Mr. Thorbjørn Jagland

Minister of Foreign Affairs, Norway, and Chairman of AHLC

Ad-Hoc Liaison Committee Meeting

Lisbon, 7 - 8 June 2000

Foreign Minister Gama,

Ministers Shaath and Masri,

Distinguished Members of the AHLC,

Ladies and gentlemen,

Firstly, I would like to express my gratitude to the Portuguese EU-Presidency for hosting this meeting here in Lisbon. Together with the other countries of the European Union, you have been tireless in your efforts to seek a settlement that can bring lasting peace and stability to the Middle East.

As the chair of the Ad-hoc Liaison Committee (AHLC), I would also like to welcome all member states to this meeting of the Committee.

Since we last met in Tokyo, we have experienced setbacks in some areas of the peace process, while progress in others.

The most recent progress has been made with regard to Lebanon. I would like to commend the Israeli Government for the withdrawal in compliance with United Nations Security Council Resolution No. 425, which has brought us an important step closer to sustainable peace in the region.

On the other hand, the bilateral Israeli-Palestinian negotiations are not moving as rapidly as we could wish. The meeting of the parties in Washington next week, does however, give cause for optimism. It is my hope - which I know is shared by all of us - that it will be possible to reach a permanent settlement before the deadline in September.

Ladies and gentlemen,

Since its establishment, the Ad-hoc Liaison Committee has had as its main task to help reinforce the parties' political achievements.

Social and economic progress - with tangible improvements in living conditions - is the very basis for reconciliation and peace. Our efforts have therefore been focused on supporting the construction of the socio-economic and institutional framework necessary to secure long-term peace and stability.

Our main objective here today is to examine how we can support the ongoing political process by reinforcing the positive economic and institutional developments currently taking place. We should also focus on how to achieve much needed progress in those areas that are still lagging behind.

You may recall that at our last meeting in Tokyo, President Arafat announced that a ministerial committee would be formed to advance a fiscal reform agenda in co-operation with the IMF.

President Arafat’s initiative started a process, which represents a major reorientation of the Palestinian Authority's economic and financial policies.

The Palestinian Authority has in a resolute fashion consolidated all public revenues. A single treasury account has been established. The Palestinian Authority’s commercial and investment activities have been disclosed. A Palestinian Investment Fund, which will manage commercial and investment activities in accordance with international norms of transparency and accountability, has been created.

These steps have greatly improved governance and transparency in public finances - an area which has been a major concern for the Ad-hoc Liaison Committee since 1996. This major achievement has only been possible because of a genuine spirit of partnership between the Palestinian Authority and the international donor community. I would particularly like to commend the IMF for the very constructive role it has played in these efforts.

Ladies and gentlemen,

The Palestinian economy is continuing to show a positive trend. There is sustained economic growth and employment is up. Forty-seven thousand new jobs were created in 1999, and more than 70 per cent were generated in the private sector. This is all very good news.

However, the current growth has built in limitations:

As long as there is no final political agreement in place, the Palestinian economy remains constrained by limitations in the movement of goods and people. Progress made by the parties on such issues as the port in Gaza, the set-up of industrial areas and the safe passages between the West Bank and Gaza, is clearly having a positive effect on the Palestinian economy. But further progress is essential.

Also the Government of Israel has a vital role to play in removing obstacles to the free flow of goods and people, as well as in improving the overall external environment for Palestinian trade. In this regard, it is essential to continue efforts to minimise the negative impacts of the security measures on the Palestinian economy.

Continued economic growth is also constrained by the rapid expansion of the public sector in the Palestinian Territory. More than 100 000 people are employed by the Palestinian Authority, which is one-fourth of the total employment figure. And the number is growing fast. This growth may have a positive impact on social stability in the short term. A policy of unchecked public hiring will, however, have very serious consequences for medium and long-term fiscal stability.

Ladies and gentlemen,

The Rule of law is key to long-term political and economic stability. It is vital in order to attract much needed private investment, to enhance institutional development and to secure effective project implementation.

Rule of law is therefore high on our agenda here today. There is a need for an open and constructive dialogue on this issue. I very much welcome the positive attitude by the Palestinian Authority in this regard.

During the first years of development efforts, we have learned that the peace process is closely linked with the overall political situation in the region. We have learned that development assistance can never be a substitute for political progress. We have also learned that sound economic policies are essential for broad social end economic progress.

Development assistance is nevertheless essential for economic, and hence political progress. Against this background I am glad to see that donor disbursement has improved since last year.

The disbursement rate is, however, still too low. The reasons for this are numerous and complex. In my opinion better planning and co-operation are essential for securing more resources. Also with regard to our own policy co-ordination through the Ad-hoc Liaison Committee, more progress can be made in this regard. Other proposals for securing higher disbursement rates are on the table. Today's discussion on the effectiveness of our joint development effort is therefore most timely.

The principles of tripartite co-operation are at the core of the development effort. These principles have been expressed in operational terms in the Tripartite Action Plan (TAP).

In Tokyo, we successfully completed the deliberations on the updating of the Tripartite Action Plan. I would like to express my gratitude to the European Union for the excellent contribution to this effort.

The updated plan sets out specific commitments to the development effort to be undertaken by the Palestinian Authority, the Government of Israel and the donors. It reflects the common sense of purpose shared by us all.

Ladies and Gentlemen,

We all hope to see the conclusion of a final status agreement this autumn. The implementation of such a final status agreement will require substantial additional assistance to the Palestinian Territory. As donors we need to be prepared to adapt to this situation. The Ad-hoc Liaison Committee has over the years developed considerable experience and should take the lead in co-ordinating also future development efforts.

We will need to draw on our lessons from the past six years if we are to meet this new challenge.

We will need to draw on our lessons from the past, if we are to succeed in establishing a viable and thriving Palestinian economy.

I am convinced that with real progress in the peace negotiations, the necessary economic and structural reforms and enhanced international assistance, the Palestinian society faces a peaceful and prosperous future.

Thank you.