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Identifier
Created
Classification
Origin
05TELAVIV350
2005-01-20 11:31:00
CONFIDENTIAL
Embassy Tel Aviv
Cable title:  

PERES ON INNOVATIVE ECONOMIC SOLUTIONS FOR PA

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						C O N F I D E N T I A L SECTION 01 OF 02 TEL AVIV 000350 

SIPDIS

E.O. 12958: DECL: 01/18/2014
TAGS: KWBG ECON EFIN PREL IS ECONOMY AND FINANCE ISRAELI PALESTINIAN AFFAIRS GOI INTERNAL GAZA DISENGAGEMENT
SUBJECT: PERES ON INNOVATIVE ECONOMIC SOLUTIONS FOR PA
TERRITORIES, NEGEV REGION


Classified By: Ambassador Daniel C. Kurtzer for reasons 1.4 (b) and (d)

C O N F I D E N T I A L SECTION 01 OF 02 TEL AVIV 000350

SIPDIS

E.O. 12958: DECL: 01/18/2014
TAGS: KWBG ECON EFIN PREL IS ECONOMY AND FINANCE ISRAELI PALESTINIAN AFFAIRS GOI INTERNAL GAZA DISENGAGEMENT
SUBJECT: PERES ON INNOVATIVE ECONOMIC SOLUTIONS FOR PA
TERRITORIES, NEGEV REGION


Classified By: Ambassador Daniel C. Kurtzer for reasons 1.4 (b) and (d)


1. (C) Summary: Deputy PM Shimon Peres met with the
Ambassador recently and discussed prospects for renewed peace
process negotiations with the PA, as well as his new role in
coordinating economic aspects of the disengagement plan and
development of the Negev and Galilee. Peres was skeptical
that the new PA will be able to control terrorism and return
to the negotiating table, but added that economic progress
could be utilized to free up the political process. He
explained that he will seek outside-the-box solutions to PA
economic problems, including EU investment in Gazan
industrial zones. The Ambassador noted our planning for a
USAID 90-day and supplemental assistance programs, explaining
that these would boost job creation and develop civil
society. He also spoke positively about Peres' plans to ask
U.S. high-tech companies to take a leading role in Gazan
economic development. The Ambassador suggested that GOI
"speak with one voice" on the need for U.S. assistance for
improving the Gaza border crossings. End summary.

--------------
Coordination: New PA Too Weak,
GOI Hampered by Unstable Politics
--------------


2. (C) Deputy Prime Minister Shimon Peres told the
Ambassador recently that he is hopeful but uncertain that
disengagement will "come through politically" within the GOI.
Israel's biggest obstacle to coordination with the PA, he
said, is its own unstable political environment, as evidenced
by the lack of unity within the Likud party. On the
Palestinian side, the PA "lacks sufficient finances" to do
anything besides support its own bureaucracy and payroll.
Peres explained that although Abu Mazen wants to go "full
steam ahead" towards peace negotiations, he is politically
too weak to control terrorism yet, potentially leaving Hamas
and PIJ free to dictate politics. "Without this he will not

get to the peace table."

--------------
Opening Up Palestinian Economy is the Key
--------------


3. (C) Reflecting on his new role coordinating economic
aspects of the disengagement plan and development of the
Negev and Galilee, Peres said that he would not seek to
expand the bureaucracy. He would work with small staff in his
office, and coordinate with others in the government who are
experts on these issues. He firmly believes that Palestinian
economic development can have a "profound effect" on the
current political situation. The GOI has unprecedented
opportunity now to act "all over the region", he explained,
citing Israel's participation in the Jordanian QIZ agreement,
which resulted in an increase from 25 million to 1 billion in
trade annually. "We need to do this with the Palestinians as
well." Peres said he plans to put forward "new ideas not
bound by formality." In his position as Deputy PM Peres will
focus on "outside-the-box" projects -- Israel could turn one
of the Gaza settlements to be handed over into a modern
hospital, for example, thereby bolstering Gazan social
services and relieving the need for many Gazans to cross into
Israel via Erez for medical treatment.


4. (C) Peres will also look to PA-EU economic partnerships
-- Switzerland and Germany have already expressed interest in
investing in their own industrial zones in PA territories,
and he has been talking to the EU about a joint
Israeli-Palestinian-European QIZ. Governments have limited
aid resources, however -- Peres said that Israel and the
donor community must look to the private sector to lead the
way, and proposed that the U.S. nominate five to ten
companies to help "mobilize Palestinian entrepreneurs" and
create democratization through economics.

--------------
Negev and Galilee Development
--------------


5. (C) The Negev and Galilee regions are hard-hit by
poverty, he said, especially among their nearly 20 percent
Israeli-Arab populations. Negev development must therefore
be addressed with immediate solutions, rather than with
longer-term plans to relocate settlers there. While the
Bush-Sharon letter acknowledges the need to develop the
Negev, U.S. funds are limited and EU assistance is
conditioned on political progress. A possible source of
funding might be the outstanding monies available through the
Loan Guarantee Agreement, he said, yet overall Israel will
need more outside-the-box ideas for Negev development. He
raised the idea of a safari park on the Egyptian border that
could employ some 40,000 people, including Palestinians.

-------------- --------------
USAID 90-Day Deliverables and Supplemental Assistance
-------------- --------------


6. (C) The Ambassador described U.S. efforts to get more aid
to the Palestinians via USAID's 90-day and supplemental
assistance programs. In the immediate term, he explained,
the 90-day program will bolster support for Abu Mazen's PA by
creating jobs, expanding the agriculture and construction
sectors, and offering micro credit programs. In the
medium-to-long term, the four-year supplemental program will
concentrate on strengthening civil society. He agreed with
Peres, however, that current financial aid levels to the
Palestinians are not enough, and that Arab states in
particular must contribute more. Peres responded by
expressing his support for the 90-day and four year
supplemental assistance programs.

-------------- --------------
U.S. Investors in Israel Best Equipped to Help Gaza
-------------- --------------

7. (C) In response to Peres' proposal on U.S. private-sector
support for the Palestinian economy, the Ambassador suggested
that the GOI call in the "five best U.S. companies invested
in Israel" -- possibly Intel, Motorola, HP, Oracle, and IBM
-- and encourage them to outsource inputs manufacturing and
other basic services to the West Bank and Gaza by offering
tax breaks and other incentives. Such an initiative could
come from U.S. industry itself, he explained. Regarding
Negev development and U.S. assistance for improvements at the
border crossings, the Ambassador told Peres that now is the
time for the GOI "speak with one voice." There are too many
Israeli actors "testing the waters" while progress would be
better served by coordinating such requests with the Prime
Minister.

********************************************* ********************
Visit Embassy Tel Aviv's Classified Website:
http://www.state.sgov.gov/p/nea/telaviv

You can also access this site through the State Department's
Classified SIPRNET website.
********************************************* ********************
KURTZER