In the West Bank and Gaza, municipalities face two key challenges: (i) a crippling financial crisis that is preventing them from covering their operating costs or making necessary capital investments in new projects and (ii) redefining their role in light of the consolidation of key services (water, sewage, electricity, solid waste, roads, and public facilities) and increasing need for demand-driven service provision.
Close to 70% of the population of the West Bank (2 million) and Gaza (1.5 million) is urban and lives within the boundaries of 132 municipalities. Municipalities predate the establishment of the Palestinian Authority (PA) and have historically provided a variety of public services. Prior to the year 2000 almost 90% of the budget of municipalities came from local revenue collection. In the last five years however, municipal revenues have declined substantially due to the ongoing conflict, Israeli-imposed movement and access restrictions, and contraction in the economy.
The Ministry of Local Government (MOLG) with the support of the Municipal Development and Lending Fund (MDLF) is leading initiatives to reform local government. The Palestinian Reform and Development Plan, 2008-2010 (PRDP) has set a national developmental agenda (i) that prioritizes an effective and accountable local government system and (ii) calls for new legislation to establish a policy framework which promotes fiscal autonomy and discipline at the local level. Significant progress has been made in reforming and streamlining municipal financial management and accounting systems and practices. These reforms will enable the municipalities to manage budgets and control finances in a more effective manner.
Nevertheless, municipalities are in a dilemma: they have to improve services, invest in new infrastructure projects and increase revenues but they do not have the capital or finance needed to achieve these objectives. The shrinkage of the Palestinian GDP by 13% during the previous period (2000-2008) has been a major factor contributing to the problems the municipalities are currently facing.
Municipalities have therefore to find alternative sources of capital and finance. The private sector is an important source in this regard. This study focuses on the relationship between the public sector and the private sector and the potential and mechanisms for partnership with the private sector to finance new projects.
In the West Bank and Gaza, municipalities face two key challenges: (i
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