PA PLANS FOR MARCH 2 CAIRO CONFERENCE

					  UNCLAS SECTION 01 OF 02 JERUSALEM 000284 
 
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SUBJECT: PA PLANS FOR MARCH 2 CAIRO CONFERENCE 
 
					

1. (SBU) Summary: In advance of the Cairo Conference in
Support of the Palestinian Economy on March 2, the
Palestinian Authority has prepared a plan for the early
recovery and reconstruction of Gaza. The PA's goal at the
conference is to demonstrate that the PA is ready and able to
take charge of the recovery effort in Gaza, and to seek
coordinated financial assistance in the form of direct budget
support and project funding to implement the recovery in
Gaza, synchronized with the Palestinian Reform and
Development Plan (PRDP). End summary.

The Gaza Early Recovery and Reconstruction Plan


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2. (SBU) The PA Ministry of Planning has drafted a Gaza Early
Recovery and Reconstruction Plan ("Gaza Plan") with input
from the UN, World Bank, the Palestinian Central Bureau of
Statistics, Palestinian Economic Council for Development and
Reconstruction (PEDCAR), the Ministry of Finance, and other
organizations. The PA will present the plan on March 2. The
guiding principle of the Gaza Plan is Palestinian ownership
of the recovery process, through the leadership of the PA,
and according to the PRDP. The plan delineates priority
areas for intervention and proposes recovery projects in five
categories: Social Sector, Infrastructure Sector, Economic
Sector, Governance, Natural Resources and the Environment.
The plan also lists the specific damage and needs resulting
from the conflict, as well the estimated cost of each
recovery project.



3. (SBU) According to Ministry of Planning contacts, the
PA's goal at the Cairo conference is to (1) create awareness
of the needs in Gaza, (2) make clear the PA is taking charge
of the recovery effort, and (3) seek systematic, coordinated
financial assistance. The PA will seek donor support in two
main areas: a) direct, un-earmarked budget support through
the Single Treasury Account, and b) un-funded gaps in the
Gaza Plan. PM Salam Fayyad will attend the Cairo conference;
President Abbas is considering his attendance.

Financing Mechanisms


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4. (SBU) The PA will urge donors to channel assistance
directly to the PA, through the Single Treasury Account, as
un-earmarked budget support. Contacts noted the PA is facing
desperate budget constraints, and needs direct budget support
to pay salaries in the West Bank and Gaza, as well as to
implement parts of the recovery plan. The Gaza Plan
encourages donors to support existing mechanisms such as the
PRDP Trust Fund and World Bank program, PEGASE, and the
Islamic Development Bank, all of which can transfer funds
quickly to the PA and to other public entities for recovery
activities. The PA also supports the funding of UN agencies,
but wants such funding to be closely coordinated with the PA.
Finally, in recognition of possible donor constraints,
Ministry of Planning contacts said the PA is willing to
explore other funding mechanisms, provided they do not
duplicate or undermine existing mechanisms.



5. (SBU) The PA will also highlight the measures it has
already taken to provide immediate relief in Gaza. This
includes allocating USD 50m to compensate people whose homes
were totally or partially demolished during the fighting.
USD 20m has already been transferred to UNDP, which reports
that disbursement began on February 11. The PA will also
note its commitment to provide USD 17m for water/sanitation
and electricity repairs, to be carried out by broadening the
scope of projects already underway in Gaza. Finally, the PA
will seek donor support for its USD 600m project to provide
grants (with a small loan component) through commercial banks
to people whose houses were damaged during the conflict.

Cash and Crossings


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6. (SBU) Contacts in the PA, NGO, and international community
all stated that success of any recovery efforts in Gaza will
depend on GOI policies at the crossings. On February 6, the
PMA transferred NIS 175m (USD 44m) worth of banknotes from
West Bank banks into Gaza. PM Fayyad stated that a portion
of this will be used to fund the first phase of the cash
assistance program, which UNDP is implementing. (Note: The
first phase of the cash assistance program will require
approximately NIS 80m, or nearly half of the cash that was

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allowed into Gaza on February 6. End note.) Salaries are
also due to be paid no later than February 18, and the PA
payroll in Gaza equals approximately NIS 200m.

Reactions in Gaza


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7. (SBU) A business contact in Gaza told Econoff Febuary 12
that although he understands the PA's need to "do something"
in Gaza, the business community as a whole is not supportive
of Fayyad's decision to fund the cash assistance program at
the expense of salary payments. Contacts were skeptical that
the USD 600m assistance program for house reconstruction
could succeed, given the scarcity of cash and of building
materials in Gaza due to GOI crossing policies. (Note:
Contacts also referred to the cash assistance program as "the
UN reconstruction effort" indicating that if these programs
are successful, the PA will have to work hard to claim credit
for PA-funded recovery programs. End note.)
WALLES