Report of the Government of Israel to the Ad Hoc Liaison Committee
September 2010

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Developing and strengthening the Palestinian economy and Palestinian capacity building are challenges shared by the Palestinian Authority, the international community and Israel.

Israel recognizes the importance of international support to projects in the West Bank in the areas of economic development, capacity building and the security and civil sectors. The international community plays an instrumental role in shaping, through its assistance, the manner in which capacity building projects are designed and implemented de facto and how Palestinian institutions are formed. Israel supports efforts by the international community to promote Palestinian development.

During the first half of 2010, the West Bank continued to undergo significant economic recovery. The macroeconomic situation continued to improve in the West Bank and Gaza, with solid economic growth registered so far in 2010.

Real GDP growth in the first half of 2010 (compared to the first half of 2009) is estimated by the IMF at 9 percent for the West Bank and 16 percent for Gaza.

The continuation of the positive trends reported in 2009 and 2008 is also due to measures taken by Israel to support economic activity, improvements in the security situation in the West Bank, the continued financial support of the international community to the Palestinian Authority and increased foreign investment.

The Report also addresses the situation in Gaza and Israel’s actions to support efforts by the international community to meet humanitarian needs. Israel acted to support these efforts despite the fact that Gaza is a hostile territory controlled by Hamas, a terrorist organization supported by Iran, which continues to constitute a security threat to Israeli citizens. As of the publication of this Report, Hamas still holds Israeli soldier Gilad Shalit in captivity.

On June 20, 2010, Israel's Security Cabinet adopted a decision signaling a new civilian policy towards Gaza.

The new policy is based on the following elements:

1) Publication of a list of controlled items. All items that are not on the list are allowed into the Gaza Strip freely, with no need for any special permit.

2) Upgrading and expansion of the capacity of the land commercial crossings.

3) Expansion of internationally-sponsored and monitored humanitarian projects.

Immediately following the adoption of the Security Cabinet Decision, Israel commenced the rapid implementation of its different elements, creating a new reality of the ground.