NEAR EAST AND NORTH AFRICA
The countries of the Near East and North Africa region continue to face acute macroeconomic problems arising from fiscal deficits, inflationary pressure, deteriorating external terms of trade and a sizeable external debt. Furthermore, the region has been slow in adopting the reform programmes needed to provide an environment that enables sustainable development. These factors, together with episodes of civil war and recurrent droughts, have translated into generally slow and unstable rates of economic growth over the last decade and a half, even in those countries that introduced reform programmes more decisively. Progress has remained slow in such key areas of reform as the reduction of trade barriers, the reformulation of the regulatory framework and privatization of the large public sector. In particular, accelerating the process of privatization represents an arduous task in Egypt, Algeria, the Islamic Republic of Iran and the Syrian Arab Republic, where public enterprises retain dominant roles in industrial activity. There is also much scope for trade liberalization in these countries.
Economic growth in the region as a whole reached a modest 2.4 percent in 1995, after having stagnated the previous year. The oil prices in 1995 remained depressed, despite a notable spur in demand in the importing countries which was met primarily from non-members of the Organization of the Petroleum Exporting Countries (OPEC). Although demand-contracting policies were instrumental in mitigating inflation, weak oil prices continued to restrict growth. Nevertheless, several countries such as Turkey, Iran, Algeria and, to a lesser extent, Egypt, recorded significant improvements in economic growth after the depressed year of 1994. Jordan's economy continued to grow at a sustained pace.
Prospects for the short term appear mixed. On the one hand, improved regional stability may stimulate confidence and activity throughout the region; on the other hand, large macroeconomic imbalances and weak oil prices are expected to continue clouding the prospects for rapid growth in net oil-exporting countries. One major area of positive expectation is in regional cooperation. In particular, the process of peace among Jordan, Israel and their Palestinian neighbours can pave the way for future cooperation in a number of economic areas. Notwithstanding past ineffectual attempts at intra-Arab trade (which accounts for only 8 percent of the total trade at present), the emerging regional trading group comprising these countries and including Egypt can, in the future, be one of the most important areas of regional trade and cooperation. This will require removal of the economic, political and institutional impediments facing regional cooperation at present. In agriculture, one of the more important areas within the ambit of regional cooperation is technology transfer. Israel at present is capable of producing innovative, regional and climate-specific technology, especially in the area of water management, which could be particularly useful elsewhere in the region. On the other hand, progress in regional agricultural trade will also be dependent on Israel removing domestic support and opening up its markets to allow for greater imports of agricultural commodities from its neighbours.
Agricultural performances and issues
Agricultural production growth in the Near East and North Africa region slowed from an already modest 2 percent in 1994 to 1.7 percent in 1995. Overall cereal production, at around 22 million tonnes in 1995, was estimated to be about 18 percent lower than the previous year's above-average harvest. In spite of the improved incentives provided through domestic agricultural policies and higher international prices, the region achieved limited success in the production of strategic crops, the diversification of the agricultural base and the enhancing of productivity of land and labour in the agricultural sector. Wheat production in North Africa, which depends largely on rainfall, was estimated to fall by 22 percent from 11.3 million tonnes in 1994 to 8.9 million tonnes in 1995 as a result of poor rainfall, especially in Morocco.
After a bumper crop in 1994, poor rainfall adversely affected agriculture in Morocco in 1995. Water levels in the country's reservoirs were depleted as a result of the drought in three out of the last four years, which seriously affected water availability for agriculture and other uses. The area planted to cereals was 37 percent less than it had been in 1994 and the production of cereals in 1995, at about 1.9 million tonnes, was estimated to be the lowest in 30 years. Wheat production fell by 80 percent (to 1.1 million tonnes) and that of barley by 84 percent in 1995. Consequently, wheat imports in 1996 are expected to be around 3 million tonnes - an increase of more than 150 percent over 1995. To spur production, the government increased the support price of sugar beet, sugar cane and cotton.
In Egypt, agricultural production increased by about 2.5 percent in both 1994 and 1995. The production of wheat was estimated to increase by 28 percent to 5.7 million tonnes, mainly because of better seed variety and a greater incentive structure. In spite of expanded production, increasing domestic and international prices are beginning to have a negative effect on domestic demand. Egypt remains the region's largest net importer of wheat, however. At the same time, both rice and cotton crop production are responding to favourable prices and market liberalization, particularly since cotton is now being traded by the private sector.
Historically, Turkey has been one of the few countries in the region to enjoy self-sufficiency in food. The government price policy under the current structural adjustment programme provides support to cereals, sugar beet and tobacco with price increases of 100 percent for cereals (barley, rye and oats). Agricultural policies in the recent past have led to Turkey becoming a net importer of wheat. Wheat production in 1995, although higher than the previous year's poor crop, was much lower than the projected 21 million tonnes, in part because of the damaging effects of unseasonable rainfall and pests. To meet the domestic demand, the government abolished the US$20 per tonne import levy on wheat to enable the private sector to import high-quality wheat. In 1995, Turkey imported significant quantities of wheat, sugar and beef; in 1996 it is expected to import about 1 million tonnes of wheat.
In the Sudan, after an exceptionally good cereal harvest in 1994, the forecast for 1995 is 3.3 million tonnes - 26 percent lower than in the previous year. Production of sorghum and millet are expected to decline by 12 percent and 46 percent, respectively, mainly as the result of a drop in the area devoted to these crops in both the mechanized and the irrigated areas. In addition, yields for these crops were affected by poor seasonal rains, pest damage and weed infection. Nonetheless, the overall prospects for wheat and coarse grain in 1996 are favourable following good rainfall, timely control of the desert locust and an increase in the area planted. Favourable domestic and international prices coupled with other incentives are also expected to boost production. Inadequate marketing and transportation infrastructure remains one of the main constraints to the objectives of self-sufficiency in food and food export generation.
In Algeria, cereal production returned to the average level of 2.2 million tonnes in 1995, with wheat production growing twofold and barley threefold. The government took a number of steps to boost long-term agricultural production in view of the increasing food import bill which is one of the highest in the region. The new strategy is based on higher support prices and low interest rates for farmers, as incentives for boosting domestic production of grains, pulses and milk; enhancing production from existing land by improving extension services; and developing dryland agriculture in southern Algeria.
The sanctions on Iraq continue to affect both producers and consumers acutely. In spite of favourable weather conditions, cereal production decreased primarily by 10 percent in 1995 as a result of a lack of seeds and chemical inputs. The availability of food continued to decline, caused by the lack of foreign exchange, estimated at US$2.7 billion, needed to meet domestic food needs. The government's efforts towards containing the deteriorating situation included an increase in the quantity of rations for wheat-flour from 1 kg to 7 kg per caput and for vegetable oil from 625 g to 750 g per caput. The increased ration, nevertheless covers less than 50 percent of the required food energy needs.
In Saudi Arabia, the support price of wheat has been reduced from riyals (SRIs) 2 000 to SRIs1 500 (US$400) per tonne to reduce the government-sponsored subsidy on wheat. The production of 2.5 million tonnes in 1995 is still slightly above domestic requirements of 1.8 million tonnes. Government policy aims at further reduction of subsidies on wheat, to bring the production more in line with domestic demand. At the same time, the production of vegetables, high-value crops and meat is encouraged.
Cereal production in the Syrian Arab Republic rose by 8 percent in 1995. The production of wheat was 4.0 million tonnes, some 13 percent higher than in 1994, while barley production increased by 15 percent.
Issues affecting regional food security
The Near East and North Africa region is traditionally a large net importer of food. The gap between food imports and production, which stood close to 5 million tonnes in 1960-61, stands at more than 20 million tonnes in 1995-96. Of the countries in the region, only Saudi Arabia and, more recently, the Syrian Arab Republic are exporters of wheat. Four countries - Turkey, Iran, Saudi Arabia and the Syrian Arab Republic - maintain most of the regional stocks of wheat with a stocks-to-use ratio of about 25 to 30 percent compared with about 8 to 10 percent in North Africa.
A major increase in food calorie intake took place in the 1970s, except for in some countries such as Afghanistan and Yemen, thus bringing the region's daily calorie intake well above the average of developing countries as a whole. Although food self-sufficiency was historically a strategic objective of the development plans in many countries of the region, most of the increase in daily calorie intake was achieved through increasing food imports. Indeed, agricultural growth failed to achieve self-sufficiency or even keep pace with the increase in population. The accrual of oil earnings to the region was reflected in domestic subsidies to the consumer and led to rapid increases in food consumption during the 1970s and 1980s. Changing patterns towards high nutritional value items also contributed to a rise in food consumption, which was increasingly met through food imports.
The economic performance of most countries in the region followed the cyclical fluctuations of oil revenue earnings. The collapse of oil prices in the early 1980s, and their steady decline thereafter, was an external shock which required a revision of major policies to remove the structural imbalances in the economies of the region. This was especially pertinent in the case of food security policies, which were characterized by consumer subsidies entailing heavy public expenditure in most countries of the region. However, as expansionary fiscal policies (including unsustainable consumer subsidy policies) continued, economic strains resulted in an increasing slow-down of economic growth. Most of the countries of the region experienced a decline in per caput income, budgetary deficits and other disequilibria.
By the late 1980s or early 1990s, many of the countries, such as Egypt, Jordan, Turkey, Morocco, Algeria and Yemen, entered into structural adjustment programmes with the Bretton Woods institutions. In other countries of the region, economic reform programmes are now also being adopted, a cornerstone of which is the removal of structural imbalances in the economy to gear it towards more efficient use of resources. Major objectives of the reforms in agriculture are increasing domestic production and removing the general consumer food subsidies. Although a step in the right direction in a long-term perspective, price liberalization and the phasing out of consumer subsidies in the last few years have had a bad effect on the population, especially the low-income groups, contributing to poverty and precarious food security in many countries of the region. This has created the need for special programmes and measures to protect poor farmers, consumers and vulnerable populations, and these have imposed further budgetary burdens.
A substantial proportion of the population of the Near East and North Africa region live in the rural areas and depend on agriculture for their livelihood. Increasing agricultural production therefore remains important not only for increasing food security but for poverty alleviation. Within this context, the lack of availability of adequate supplies of water in the region is a major limiting factor on the growth of agriculture and, consequently, has implications for food security. Over 50 percent of the region's agricultural production is realized from irrigated agriculture. With rapid growth in population and greater urbanization and industrialization, the pressure on the agricultual sector is bound to increase further. In the long run, land reform and water policies will determine the performance of the agricultural sector in the region. Demand management reform in the water sector is the key to a more efficient performance of agriculture in the region and, therefore, to greater food security.
In general, agriculture is bound to remain the key factor determining economic and food security prospects for many countries in the region. Especially for the 14 low-income food-deficit countries in the region, it is through agricultural development that the issues of food import dependence, meeting the growing food needs of urban populations and improving incomes and food security, particularly of poor rural populations, will be more effectively tackled. Exploiting the region's untapped potential and sustaining the quantity and quality of productive resources, however, represent formidable challenges in several countries constrained by harsh natural and climatic conditions, where soil erosion, desertification, waterlogging and salinity have already reached alarming proportions.
The current transitional phase in the Palestinian Territories (PT), from occupation to self-rule, comes at a time of slow growth of the economy caused by various structural and political problems which evolved over the last 30 years. Income growth has stagnated, infrastructure and social services are heavily taxed and, although the agricultural sector produces a marketable surplus, trade remains constrained by limitations on market access for Palestinian producers. At the same time, the natural resource base is deteriorating at a rapid pace and the economic plight is further affected by the frequent closure of the borders with Israel. The visible economic gains brought about by the peace process are still uncertain because political and economic issues remain to be settled and this, it seems, will take time.
A mixture of asymmetric integration in the region and a weak regulatory framework explains much of the uneven pattern of development in PT over the past three decades. The economy has seen periods of growth and decline which were the result of its atypical political circumstances in the Arab world and Israel.
With restrictions on trade and production, much of the pattern of economic growth after 1967 in the Palestinian economy can be explained by the rise and fall of labour export from PT. Economic growth in PT became closely tied to the cyclical economic fluctuations related to oil earnings, much as in the other Arab countries of the region, and the pattern of development in Israel.
The major cause of the rapid economic growth after 1967 in the Palestinian economy was the increased economic integration of the newly occupied territories with Israel, in terms of the availability of employment in, and a surge of imports from, Israel, although exports, especially of competitive products remained restricted by Israel. The number of Palestinians working in Israel increased from virtually none to 75 000 in 1979. The economic upswing in the Arab region, caused by the rise in oil earnings in the first half of the 1970s, led to further labour export which became the major foreign exchange earner to PT through the remittances of expatriate labour. A boom in investment, although primarily in the construction sector, led to an average annual GDP growth rate of 8.5 percent from 1970 to 1979. During this period, the per caput income surpassed that of Jordan and Egypt.
The 1980s ushered in an era of lower oil earnings to the region as a whole and, consequently, an overall economic slow-down. The decline in demand for Palestinian labour and lower growth in the trade and services sectors, combined with the decline in remittances, led to recession in the PT economy as well. From 1980 to 1987, annual GDP growth averaged 3.6 percent in the West Bank and around 1.6 percent in the Gaza Strip. The development of infrastructure, institutions and social services, which was already restricted because of the occupation, suffered further as a result of the economic recession. At the same time, high inflation in Israel had a spill-over effect on the Palestinian economy, affecting the low-income groups in particular. The start of the intifada movement towards the late 1980s led to frequent strikes and closure of the borders with Israel, contributing to stricter restrictions on Palestinian labour movements and economic controls on PT. In 1991, the crisis in the Persian Gulf further exacerbated the situation as a result of the drastic reduction in the Palestinian expatriate labour employed in the Persian Gulf countries, especially in Kuwait, and the closure of the border by Israel for labour movement.
The peace process brings both challenges and opportunities for PT. With full autonomy already in place, Palestinian development efforts are entering a new phase, as a consequence of both the historic Interim Agreement on the West Bank and the Gaza Strip in 1993 and the progress made after the Cairo Agreement in 1994. Since then, an agreement for a joint effort towards economic development has been concluded between the Palestinian Authority, the Government of Israel, the donors supported by the World Bank and UN. Considerable financial assistance is expected to flow in from the international donors in the coming years. The major challenge faced by the authorities is how to use the expected financial capital inflow as a vehicle to remove the structural imbalances in the economy and lay the foundation for sustainable development in the long term.
More specifically, key policy issues to be addressed include a reduction in the traditional dependence on outside sources of employment for the PT labour force by harnessing domestic production opportunities. The trade regime, characterized by a large trade gap, remains heavily dependent on employment opportunities in Israel. What is required is to broaden the production base, diversify markets and liberalize trade with both the Arab countries and Israel to establish an enabling environment consistent with an export-oriented growth strategy that is conducive
to greater economic integration. At the same time, the provision of public infrastructure and services is required not only to improve living conditions but also to support private-sector investment activities and to avoid further environmental degradation.
Role of agriculture
Historically, agriculture has played a more dominant role in the overall economy of PT than in the economies of its neighbours, Jordan or Israel. During the period of economic growth from 1968 to 1974, the share of GDP averaged 37 percent in the West Bank and 32 percent in the Gaza Strip, declining to around 27 and 23 percent, respectively, during the 1975-1986 period as a result of stringent restrictions on trade, control over access to land and water by Israeli authorities and the shifts of labour from low-return agriculture to high-return sectors, especially services.
During the last few years of the 1980s, the agricultural sector regained some of its importance, as is evident from the increase in its share in the overall economy to its historical levels. A good olive crop in the West Bank and
a citrus crop in the Gaza Strip remained the major contributors to the growth of GDP. This resurgence was instrumental not only in providing employment opportunities for workers returning from abroad and those previously employed in Israel (which, together, represented a high 40 percent of the labour force in the peak year of 1987) but also in contributing to the Palestinian economy during the recessionary economic climate within the region over this period.
The agricultural sector continues to be an important source of employment to the PT population of 1.7 million. Rural areas contain 70 percent of the overall population. The share of employment in agriculture is 26 percent of the labour force in the West Bank and 19 percent in the Gaza Strip. A distinctive characteristic of this structure is that women are, by far, the major source of labour because male labour has migrated to the cities, Israel or elsewhere.
Agricultural resource use
Agriculture in the West Bank is primarily rain-fed, encompassing 95 percent of the cultivated areas; the remaining 5 percent is devoted to permanent irrigation. Out of about 156 000 ha, about 7 800 ha are under irrigated agriculture. The areas within the Jordan Valley (3 500 ha) and Tulkarem (2 600 ha) are by far the leading districts in irrigated agriculture. In the rain-fed areas, most of the traditional crops are grown within a low-risk, low-input and low-technology environment. Olives, grapes and almonds constitute 60 percent and wheat and barley 35 percent of the total cultivated area. Of the irrigated areas, 60 percent
is used for vegetables and fruits, 25 percent for citrus and
12 percent for bananas. Compared with the practices prevalent in the areas of rain-fed agriculture, those used in irrigated agricultural areas are more advanced in terms of adopting modern technology, especially in the case of protected crops, which are produced under greenhouses with high and low tunnels and using the drip irrigation system.
In the Gaza Strip, the total area devoted to agriculture reached a peak in 1968 (18 200 ha). In the last ten years it dropped to 16 500 ha primarily because of urban encroachments.
At present, 65 percent of the area is irrigated. Historically, citrus has been the dominant crop in the Gaza Strip and consumes about half of the water used for agriculture. The remaining irrigated area is devoted to vegetables and multiple cropping. The non-irrigated area is used to grow fruit-trees, grapes and almonds. Almost half of the farms are less than 1 ha and only 11 percent are more than 4.6 ha.
In the West Bank, there are marketable surpluses in vegetables (11.4 percent), citrus (35 percent), grapes (81 percent) and pickled olives (84 percent). Agricultural production, however, has been either stagnant or declining in the West Bank during the last five years. In the Gaza Strip, a shift in the cropping pattern has contributed to an increase in the production of vegetables from 138 000 tonnes in 1989-90 to 201 000 tonnes in 1991-92; although citrus production has declined from 197 000 to 110 000 tonnes over the same period. Increasing salinity, overpumping of water and lack of market access have lowered the rates of return on citrus fruit and led to a substitution from citrus plants to vegetable production.
Water and agriculture
Water is crucial for the future of agriculture in the West Bank and the Gaza Strip. The annual renewable water sources, which are mainly groundwater from aquifers shared with Israel, are about 850 million m3 in the West Bank and 80 million m3 in the Gaza Strip. Demand for water exceeds the available supply. In the Gaza Strip, groundwater sources are being depleted at an alarming rate. With the current rate of extraction exceeding the maximum sustainable yield, increasing the supply of water in the Gaza Strip is a major issue. Inappropriate cropping patterns and free access to water in the past have contributed to a lowering of the water-table beyond the minimum sustainable level. In many cases this has made further pumping uneconomic. In the West Bank, availability of additional water is constrained by limits set by Israeli authorities and the overall scarcity which leads to increasing economic opportunity costs associated with pumpinq additional units of water.
Water is underpriced in the agricultural sector and overpriced for domestic use. In the long term, this pricing pattern is expected to put pressure on agriculture to release some water for the domestic sector where it fetches a higher price.
The lack of an appropriate pricing structure for water is the major factor limiting the productivity of the agricultural sector in PT. The price of water varies within farming zones in the West Bank. The farmer with ownership rights for spring water in the Jordan Valley and the Nablus area, pays only US$0.045 per cubic metre, while the cost (rent) to the farmer without ownership rights to water is $0.080 per cubic metre.
In the Jordan Valley irrigation water from a well costs on average US$0.076 per cubic metre, which is almost equal to the price for spring water for the farmer with ownership rights in the same area. On the other hand, water pumped from a deep well costs $0.18 per cubic metre in the Nablus area. As the costs of pumping have increased in the Nablus area, the responsiveness of the farmers to switching to modern irrigation technology has increased. This is in contrast to the Jericho area where the cost of water is low and there is no incentive to adopt the more costly drip irrigation system.
According to a recent study, the marginal value of water in the production of different crops in the Jordan Valley ranges from US$0.33 per cubic metre for citrus to a high $1.87 to $2.90 per cubic metre for potatoes, tomatoes and peppers grown under greenhouses. In general, the returns on water are higher for vegetables raised under greenhouses. The differential between the marginal value of water in the Jordan Valley and the price currently charged, in general, indicates a hidden gain or rent associated with the current price of water. This rent or gain is more evident for farmers with ownership rights, in particular for spring water (although water extraction volumes are limited by policies enforced by Israel).
The current water policies in PT depict a clear case of economic, institutional and environmental failure. The economic failure is evident in that the average price of water is very low compared with the marginal value of water for crops such as tomatoes, cucumbers and other very high value crops, sending misleading signals to farmers as to the true scarcity value of water and leading to incentives for rent seeking. The results are overuse of water, a decline in the water-table and a corresponding increase in pumping costs. Over the years this has eroded the profitability of many farming activities while at the same time undermining the sustainability of agriculture.
Institutional failure results when property rights are not well defined and enforced. In the West Bank, restrictions from Israel on the extraction of water that are well below its sustainable limits have limited the potential growth of the agricultural sector. The most important factor in the relaxation of past policies, however, will be that it is concomitant with a pricing structure that reflects the opportunity cost of water in the area to ensure efficient and sustainable use. This is particularly important since the removal of similar restrictions on well-digging in the Gaza Strip with the advent of self-rule has already led to the number of wells increasing rapidly in the last two years, which has resulted in approximately 40 million m3 of pumping over the maximum sustainable limits every year. Although the availability of additional water has resulted in an increase in the production of high-value crops in the short term, the rapid depletion of groundwater resources is not sustainable in the long term. There is an urgent need to revise the pricing structure in the Gaza Strip to reflect the economic cost of use and the long-term or intragenerational depletion cost.
As regards the environmental implications of water policies, the need remains to tax (or enact a user charge on) water polluters to ensure minimal environmental degradation and long-term sustainable development. Water quality in the Gaza Strip has already deteriorated as a result of the decline in the water-table and the corresponding sea water intrusion; increased salinization; excessive use of fertilizers and pesticides; and uncontrolled discharge of sewage water into the soil and the natural drainage system. These factors have affected the productivity of the agricultural sector and, if they are not corrected soon, irreversible damage to the natural resources, such as land and water, will lead to an immeasurably high cost to society.
The cornerstone of a future environmental strategy is a combination of supply enhancement and demand management policies. The supply of water can be augmented through water harvesting, treatment of wastewater, desalinization, cloud seeding, artificial recharge of aquifers and rehabilitation of the wells. However, in view of the overall scarcity of water in the region, these need to be complemented by policies that rationalize water demand and improve water-use efficiency. The most important of the demand management policies is appropriate pricing of water which so that it covers at least the operation and maintenance costs in the short term while moving towards full cost pricing in the long term. This will lead to water conservation technologies that are technically feasible, economically viable, socially acceptable and environmentally benign.
Trade and market access
Agricultural trade assumed a significant role in the Palestinian economy during the period of economic boom. Agricultural exports from the West Bank (US$82 million) and the Gaza Strip (US$55 million) comprised 40 percent and 28 percent, respectively, of overall exports in 1981. This share declined in successive years, however. In 1990 the combined exports accounted for only $58 million, representing only 30 percent of the total. Commodity imports in agriculture were (and are) entirely from Israel, including those of wheat, sugar, rice and a host of other commodities. All inputs used in agriculture (seeds, fertilizer, pesticide and water equipment, etc.) were imported from Israel. A slow restructuring of the domestic production pattern (both within the sector and between the sectors), a weak institutional framework governing trade in PT and restrictions on marketing during the occupation reduced the competitiveness of PT agricultural exports over the years. Accompanying this was a shift in the demand for Palestinian agriculture exports caused by the changing domestic economic and political situation in Israel, Jordan and other Arab countries.
Among the major constraints currently facing PT are the limited range and quality of products available for export, the lack of information about external market opportunities, the disrepair of physical infrastructure and ineffective and weak institutional infrastructure for investment and trade promotion. Frequent border closures, resulting in limitations on the free movement of agricultural produce, also adversely affect agricultural trade with Israel.
With surplus production of many agricultural crops, the extent of economic integration with Israel remains a foremost issue. Following the Cairo Agreement of 1994, the Israeli market could be a very lucrative one for PT agricultural produce. The restrictions on exports of agricultural products from PT to Israel are now being relaxed. The Cairo Agreement provides for free movement of agricultural produce between PT and Israel except for five products (tomatoes, eggplants, cucumbers, eggs and white chicken meat), which will remain subject to quotas until 1997.
The basis of a future economic growth strategy for the West Bank and the Gaza Strip remains market access and the development of agricultural trade. These will require increasing productivity to compete in both the regional and the global markets and a trade regime supported by appropriate tariffs (low and uniform) together with an effective institutional and regulatory framework.
The Palestinian economy is constrained by ineffective public policy structures, including an inadequate taxing system and weak legal and administrative frameworks with poor implementation capacity. This represents a major obstacle for the formulation and implementation of sound developmental policies and for addressing the pressing problems faced by PT in the areas of land and water management, agricultural and rural development, trade and marketing. In addition, in the absence of an effective financial services sector, especially of medium-term credit institutions, the private sector relies mostly on informal credit sources. Indeed, the institutional support provided to the sector is limited and fragmentary.
Official responsibility for support and development of the agricultural sector rests with the departments of agriculture which operate out of Nablus, Jericho and Gaza. The budgets of the departments have been cut drastically in recent years and all are grossly understaffed. In addition, with no domestic research programme for support, the extension services are limited. A number of NGOs have taken over to fill the gap. While their efforts have definitely been helpful they have been limited by lack of resources.
The agricultural sector of the West Bank and the Gaza Strip, as well as various water management proposals, have attracted considerable support from the international donor community and NGOs during the past two decades or so.
The United Nations Development Programme (UNDP) has provided support to agriculture through about eight separate projects, most of them involving some kind of training of farmers. The largest project has been the construction of a citrus processing plant in the Gaza Strip in cooperation with the Government of Italy at a cost of about US$12 million. Assistance for the development of a vegetable packing and grading plant has been provided to the Beit Lahia Cooperative in the Gaza Strip. Numerous domestic water supply projects throughout the West Bank and the Gaza Strip have also been supported by UNDP as a high priority over the past 15 years.
UNDP also plans to focus its future assistance to agriculture by again combining upstream support aimed at providing start-up cost and technical advice to the newly created Ministry of Agriculture with downstream intervention, specifically direct support to the farmers to meet their urgent needs.
The World Bank-led Emergency Assistance Programme (EAP) for PT identified areas of priority investments and technical assistance to PT over the three years 1994 to 1996. A total budget of US$1.2 billion, of which 41 percent is earmarked for the development of the Gaza Strip, includes a programme of public investment ($600 million), private sector support ($300 million), start-up expenditure ($225 million) and technical assistance ($75 million).
A US$26-million programme of assistance for the agricultural sector includes support to the Palestinian Authority, programmes for shifts in the production pattern, maintainance of essential support services and building the market infrastructure. In addition, $25 million is earmarked for NGOs and private-sector initiatives to maintain existing support services and to promote on-farm investment. A sum of $1.3 million is envisaged for technical assistance in the area of capacity building, water, fishing and agricultural statistics.
FAO is providing technical assistance in developing and supporting the Agricultural Planning and Policy Department of the Ministry of Agriculture within the Palestinian Authority, in the area of agricultural planning and policy analysis. Support has been requested to formulate an analytical framework for decision-making supporting the economic policy framework in areas such as agricultural price policy, natural resource management, trade policy, rural finance and credit policies, input distribution, the role of government and the private sector and capacity building in agricultural planning, policy analysis and statistics.