When the first case of COVID-19 was confirmed in Bethlehem on March 15, 2020, the Palestinian territories were already at the height of a fiscal crisis. Unemployment had reached 25% and 24% of Palestinians were living below the $5.5 per day poverty line (2011 PPP). Weakened by a fiscal standoff with the Government of Israel, increased restrictions on movement and infrastructure, and donor support falling to about $266 million, the lowest in over a decade, the Palestinian Authority (PA) lacked the technical and financial capacity to deal with the outbreak.
Since then, COVID deaths have surpassed 2,300 and lockdown measures have had significant fiscal implications. Revenues collected by the PA in 2020 have declined to their lowest levels in 20 years and GDP contracted by an expected 11.5%. The PA’s financing gap exceeded $1 billion for the first time ever and, in 2021, the poverty rate is expected to increase to 30% in the West Bank and to 64% in Gaza . There is no end in sight to the crisis, with the PA so far only receiving 83,440 vaccine doses and the vaccine-plan facing a funding gap of $30 million.
The PA has taken some measures to shield citizens from the impact of the crisis. However, with no access to external borrowing and no independent monetary policy, it has limited fiscal space to expand social protections.
Fostering the development of a digital economy
In this context, investing in the digital economy is more important than ever to mitigate the impact of the accumulating crises. The pandemic has forced Palestinians to isolate and government facilities to shut down at a time when families most need public services. In the absence of reliable internet connectivity and a citizen-centric e-government platform, many citizens and businesses have found it increasingly difficult to access essential information and services.
Digital solutions have already played an important role in maintaining economic and social continuity: aided by relatively good levels of internet access (approx. 71.1% in 2019), the public and private sectors have encouraged employees to work from home, used social media to keep citizens informed, and even introduced home-based learning to some schools. Paltel, the largest telecom operator, has doubled home internet speeds for its subscribers, among several measures aimed at supporting people during the crisis.
However, this rapid shift to doing things digitally has increased inequalities between those with connection to the internet and those without. People and businesses in remote areas are particularly disadvantaged, and municipal government buildings often lack internet connectivity themselves. The PA’s current low capacity to provide e-services and to respond to emergencies, due to a fragmented and ill-equipped emergency response system, has left many citizens more vulnerable — particularly women, who face lower incomes and increased cases of gender-based violence (GBV).
Those people that do have internet connection are often forced to deal with low speeds. Just 7% of Palestinians owned a fixed-broadband subscription in 2019, and, as a result of spectrum restrictions on Palestinian telecom operators, users are limited to 2G mobile broadband in Gaza and 3G in the West Bank. In search for faster and cheaper internet, many Palestinians have turned to unauthorized Israeli operators, increasing uncertainty around the future of the Palestinian telecom industry.
The Digital West Bank and Gaza Project
On March 26, following a year of analytical work and discussions with the Ministry of Telecommunications and Information Technology (MTIT), the World Bank approved a $20 million grant to support the Palestinian territories’ transition to the digital economy. The “Digital West Bank and Gaza” project will assist the PA in accelerating digital transformation under an ecosystem approach, targeting several areas of the digital economy simultaneously in order to maximize impact.
From an institutional perspective, the project will support the MTIT in setting up the necessary regulatory environment to facilitate the development of the digital sector. The design of a Public Key Infrastructure (PKI) and certificate authority (CA) for e-signatures will allow for the introduction of a range of digital transactions. An emergency response center will also be established that will bring together all emergency response services and utilize modern communications systems to coordinate emergency dispatches.
Focusing on the telecom sector, the engagement will back the creation of an independent regulatory body that will promote competition and transparency. Support will also be directed towards increasing access to high-speed internet by expanding the PA’s fiber-optic infrastructure and by funding the purchase of bandwidth for public facilities in remote areas, improving local government service provision in the process.
The World Bank will also assist the PA in embracing a whole-of-government approach to e-service delivery, including the development of a national e-government strategy, an enterprise architecture, and a modern e-procurement system. This will be followed up with the introduction of impactful government-to-citizen (G2C) e-services that will be accessible to the public through an online portal, helping launch a process of digitalization across the PA that can span various sectors, from water and energy to education and skills.
Ultimately, the World Bank’s engagement aims to unleash the development of a digital economy in the Palestinian territories at a critical time. Digital solutions will help Palestinians maximize their opportunities in an environment where their movement is restricted and in-person transactions are increasingly limited ; and an integrated and technology-enabled emergency response unit will facilitate rapid, data-driven responses to a range of incidents, and potentially save lives.
Until restrictions on infrastructure, movement, and broadband spectrum are lifted, it will be difficult to realize the full potential of the Palestinian economy. However, by investing in digital transformation, the Palestinian territories will be better equipped to deal with the current and future crises and will open the door to numerous opportunities of growth, particularly for young graduates and entrepreneurs.
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