TEMPORARY INTERNATIONAL MECHANISM: UPDATE AND

C O N F I D E N T I A L JERUSALEM 003933

SIPDIS

SIPDIS

NEA FOR FRONT OFFICE; NEA/IPA FOR WILLIAMS/MAHER/STEINGER;
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E.O. 12958: DECL: 08/29/2016
TAGS: EFIN EAID KWBG
SUBJECT: TEMPORARY INTERNATIONAL MECHANISM: UPDATE AND
CONSULTATIVE GROUP REVIEW SCHEDULED FOR SEPTEMBER 1

REF: JERUSALEM 3563

Classified By: Consul General Jake Walles, Reasons 1.4 (b) and (d).


1. Action request for Department in para. 11.


2. (C) Summary: Window II (fuel) and Window III (allowances)
of the Temporary International Mechanism (TIM) continue to
function. Window I, the World Bank's Emergency Services
Support Program (ESSP),is still pending as the Bank
finalizes the grant agreement with the PA Office of the
President. The TIM continues to disburse only European Union
funding but is speaking actively with other interested
donors. The first meeting of the TIM Consultative Group is
scheduled for September 1, in anticipation of the Quartet's
scheduled three-month review of the mechanism in
mid-September. ConGen seeks guidance on raising USG concerns
about the expansion of the ESSP beyond the health sector; the
payment of PA debt to one private sector firm; and the TIM's
payment of allowances based on PA employment. End summary.

Window I: ESSP
--------------


3. (C) Stefano Mocci of the local World Bank office
confirmed to EconChief August 28 that neither disbursements
nor procurements had begun under the Emergency Services
Support Program (ESSP),since the Bank is still negotiating
the grant agreement with the PA Office of the President. He
said they are resolving final issues on procurement and
expect disbursements to start the first week of September,
specifically for utility payments for the Ministries of
Health, Education, and Social Affairs. Mocci confirmed that
the Bank had received USD 19 million combined from the
European Commission, DFID, and Austria. Only DFID and
Austria have earmarked their contributions for non-recurring
costs in the health sector. He said the following
contributions are anticipated:
-- USD 3 million from Belgium;
-- USD 6.5 million from Sweden;
-- USD 12.7 million from Spain; and
-- USD 5.5 million more from DFID.


4. (C) Mario Mariani of the European Union's Management Unit
of the Temporary International Mechanism (TIM) confirmed that
8 millions euros of the European Commission's total 10
million euro contribution to the ESSP had been disbursed to
the Bank. Though the Commission indicated a preference for
it to be used for the health sector, it could be disbursed
for other sectors, such as education and social affairs, if
there are pressing needs.

Window II: IERC
--------------


5. (C) Mariani told EconChief August 28 that the TIM had
expended over 1.5 million euros for fuel for health and water
sector generators in Gaza under the Interim Emergency Relief
Contribution (IERC). He said that the TIM is also planning
to disburse more than 5 million euros to the Gaza Power
Generating Company (GPGC),which operates the Gaza Power
Plant, to cover the PA's debts to it for April, May, and
June. The TIM is making these payments, according to
Mariani, in order to ensure that the GPGC has sufficient
funds to restart production once the Egyptian transformers
are delivered, since the company has not earned any other
income since before the government hand-over. (Note: Four
transformers belonging to the GPGC were destroyed in an
Israeli air strike June 28, thereby cutting off the plant's
ability to generate and transfer approximately 50 percent of
the electricity needed in Gaza. Former PA Finance Minister
and Palestinian legislator Salam Fayyad told Consul General
that he thinks it is "ridiculous" that the GPGC is getting
part of the debt it is owed by the PA covered under the TIM,
while other Palestinian private sector firms struggle to
survive with large debts owed to them by the PA and other
humanitarian needs go unmet. Consolidated Contractors
Company (CCC) is the major shareholder in the GPGC. End
note.) Though ConGenOffs had heard that health sector
providers are asking the TIM to purchase new generators,
Mariani said that the TIM would not be purchasing generators,
only fuel for generators. He said there is an ongoing
discussion with the World Bank about having the ESSP cover
generator procurement and the purchase of spare parts.


Window III: Allowances
--------------


6. (C) Mariani confirmed that the TIM had completed
disbursement of a first tranche of 4 million euros in
allowances to 11,562 members of the Palestinian public health
sector. He said a second tranche of allowances would be
disbursed over a two-day period, beginning September 4.
After this September disbursement, Mariani said no further
disbursements are planned for health sector workers.


7. (C) Mariani said that the TIM had begun disbursement of a
one-time flat-rate allowance of NIS 1500 (USD 341) for a
variety of other recipients outside the health sector, and
payments should start appearing in individual bank accounts
August 29 or 30. Mariani described the composition of the
group receiving the needs-based allowance as follows:
-- A maximum of 50,000 PA civil service employees who were on
the PA payroll both in January and June and who earn a basic
monthly income below NIS 2000 (USD 588);
-- 7,000 to 8,000 PA pensioners earning a pension less than
NIS 2000; and
-- 40,000 social hardship cases.
Mariani said that PA security service employees are not
included in this scheme and neither are those on the
unemployment rolls.


8. (C) Mariani said that the TIM Management Unit had
received the names and bank account numbers from the PA
Office of the President. TIM auditors are verifying that the
individuals are eligible for payment per the criteria and
then their names are forwarded on a rolling basis for payment
to HSBC London. He said that the social hardship cases would
likely be paid last since they were the hardest group to
verify. Since many of them do not have bank accounts, their
payments would be disbursed through banks for pick-up by the
beneficiary who would have to present valid identification.

Other interested donors
--------------


9. (C) While the European Union has, to date, been the only
source of financing for the TIM, Mariani said the following
countries have indicated interest: Australia, Japan,
Switzerland, and Norway. No Arab donors have voiced
interest, but Mariani commented that the TIM management unit
is not pursuing donors; rather, it is letting them come to
it. Mariani shared the TIM Management Unit's August 14
document "Implementing donor contributions to TIM." (Note:
ConGen e-mailed the document to NEA/IPA. End note.)

First meeting of TIM Consultative
Group scheduled for September 1
--------------


10. (C) The first meeting of the TIM Consultative Group is
scheduled for September 1 at 15:00 local in Jerusalem,
according to the invitation addressed to the Consul General
(e-mailed to NEA/IPA),the agenda is as follows:
-- Introduction by chair (Richard Weber, Director, European
Commission);
-- Update on donor contributions to the TIM;
-- Update on progress made by the TIM:
A) Window I - ESSP (David Craig, Country Director, World
Bank);
B) Window II - IERC Phase II (Hans Duynhouwer, Head of TIM
Management Unit); and
C) Window III - Payment of Allowances (Hans Duynhouwer, Head
of TIM Management Unit);
-- Update on the fiscal situation (IMF) and the
socio-economic situation (World Bank); and
-- Next steps for the TIM.


11. (C) Action request: ConGen proposes to have EconChief
and the Acting USAID Mission Director attend the TIM
Consultative Group meeting, September 1. ConGen requests
guidance from the Department on how to address the following
specific issues:
-- the broadening of the ESSP pilot to include the PA
Education and Social Affairs Ministries;
-- the TIM's payment of three months of the debt that the PA
owes the GPGC; and
-- the TIM's payment of both health sector and needs-based

allowances based on individual's employment status with the
PA.
End action request.

WALLES