Important economic agreement between Israel and the Palestinians

“The agreement on regulating trade and taxation between Israel and the Palestinian Authority is an important step towards sustainability for the Palestinian economy,” said Minister of Foreign Affairs Jonas Gahr Støre.  

“As chair of the international donor group for the Palestinians, I welcome the signing of this agreement between Israel and the Palestinian Authority. It is an important follow-up to the meeting of the donor countries in Brussels in March this year. Now it is vital that the parties cooperate closely on implementing the agreement,” Mr Støre said. 

On Monday, Prime Minister Salam Fayyad and Finance Minister Yuval Steinitz signed an agreement on improving existing arrangements for bilateral trade between Israel and the Palestinian Authority (PA), and for Israel’s collection of customs and tax revenues on behalf of the PA. Weaknesses in the existing arrangements were a key topic at the meeting of the Ad Hoc Liaison Committee for Assistance to the Palestinians in March. 

“Earlier this year, the donor countries stressed the need for improving existing arrangements for collecting customs and tax revenues, and for facilitating increased trade and value creation in the private sector, with a view to achieving a sustainable Palestinian economy,” Mr Støre said. 

Two thirds of the PA’s revenues come from taxes and customs duties that are collected by Israel, and that are dependent on the domestic economy performing well. 

“Widening the Palestinian tax base and achieving a sustainable economy are essential for Palestinian independence and the future creation of a Palestinian state. External assistance to the Palestinian Authority will be unnecessary once the occupation ends and the Palestinians are able to develop their economy in the normal way. But given the current situation, the Palestinians are dependent on assistance from outside. The donor countries must therefore take their responsibility seriously,” Mr Støre commented. 

“It is worrying that the allocations from donor countries have been reduced dramatically before we are able to see the positive effects of the new economic agreement which enters into force on 1 January 2013. I urge all countries in the strongest possible terms to not let the Palestinians down at this crucial time,” Mr Støre said. 

The EU is the largest donor to the Palestinians. Along with other European countries such as Norway, the EU countries paid out all their planned allocations for 2012 during the first half of the year. Saudi Arabia has just allocated USD 100 million. This funding has covered half of the Palestinians’ financial needs this year. However, few countries have announced plans to contribute during the second half of 2012, which could cause a serious economic crisis for the Palestinians. This will be one of the main topics to be discussed at the next meeting of the donor countries in New York on 23 September.