Distinguished Chairmen and Members:
It is always a pleasure to meet this Committee and to exchange views on the situation of UNRWA and the Palestine refugees we serve.
The European Union, its member States and its institutions are our largest donors. We are sincerely grateful for your generous support and trust that this will continue in spite of the economic turbulence around the globe.
I understand that financial and budgetary matters are very much on your minds as you enter a critical phase of negotiating the European Commission budget for 2009. We deeply appreciate the work this Parliament has done to adopt a budgetary comment recognizing the growing needs of Palestine refugees and calling for increased contributions for UNRWA. We hope that the European Commission will demonstrate the same empathy for Palestine refugees and endorse your recommendations.
Enhanced levels of funding have never been as urgently needed as they are now. UNRWA is no stranger to budget deficits in all three of its budget lines, namely, the General Fund, our Emergency Appeals, and the project budget. At this time, however, there is cause for heightened anxiety because the 2009 financial projections for our core budget, the General Fund, are far more precarious than anything we have ever experienced. Our projected income stands at $416.3 million against a conservatively estimated budget of just over $541 million. This means that at the onset of 2009, we face a deficit of over $125 million in the principal budget line which provides salaries for the staff who form the backbone of UNRWA's humanitarian and human development work. These are the teachers and staff who run UNRWA schools, the doctors and other professionals who ensure that primary health care needs are addressed, the social workers who attend to refugees rendered vulnerable by poverty and the experts who ensure that refugee homes and infrastructure are built and maintained in accordance with international standards.
Our alarm about UNRWA's serious financial situation stems from several related reasons. The current global economic downturn commenced many months ago, well before the extreme uncertainties of the financial markets over the last two months. Beginning from the last quarter of 2007, we saw a significant rise in the cost of living throughout UNRWA's areas of operation. These continued throughout 2008 with escalating fuel and food prices. Several host governments responded with salary increases, compelling UNRWA, in accordance with its pay policy, to do likewise. As staff salaries constitute just over 76% of UNRWA's expenditure, these unbudgeted salary hikes exerted huge pressure on the Agency's finances and continue to account for an ever large part of our costs.
Another factor contributing to our financial crises is the unfavourable trend in present exchange rate fluctuations. UNRWA receives the majority of its donations in euros, while the largest portion of expenditure, notably for staff salaries, is denominated in US dollars. With the dollar's value rising against the euro, UNRWA exchange rate earnings no longer augment our income as they did in the past few years.
A further reason for concern is the already dire state of UNRWA's facilities and infrastructure. Over the years, UNRWA has had no choice but to manage budget shortfalls by deferring important activities such as maintenance and repairs for our facilities. Rather than allow financial pressures to affect the education health or social welfare of refugees, we have maintained those core services at the cost of other necessary work. In 2009, we fear we will be at a novel juncture where even our core services will be threatened, unless we receive additional pledges of more than $60 million.
The grave financial situation also holds risks for UNRWA's efforts since 2006 to transform itself through comprehensive management reforms. In embarking on this reform process, which we call Organizational Development, or "OD" for short, UNRWA has made a public commitment to respond more effectively to the needs of those we serve. Our staff, donors, host countries, other stakeholders and most importantly, refugees, have high expectations of the OD process.
As we enter the final year of the three-year OD plan, UNRWA is making significant strides along the road of reforms in key areas of human resources management, programme management, procurement, leadership and organizational processes. In just over a month's time, we expect to complete a qualitative upgrade of our information systems connectivity, and put into effect a comprehensive human resources policy to improve the conditions for our 27,500 local staff. We also expect to complete shortly our handbook on programme and project cycle management, as well as a framework for performance indicators. Taken together, these reforms are improving our ability to plan, monitor and evaluate our operations and their impact on beneficiaries.
In recognition of the importance of these reforms, donors have so far covered $22.3 million of the Organizational Development plan's $27.3 million budget to the end of 2009.
We are fearful that the situation in 2009 may oblige us to renege on undertakings to enhance service quality, dashing expectations for meaningful change held by refugees and stakeholders.
A further cause for unease is the prevailing atmosphere of global economic insecurity. We are concerned that donors may consider reducing their contributions. We appreciate the heavy burdens the crisis imposes on many of our traditional donors and the fact that the need for an immediate response may well have implications for the availability of humanitarian and development funding.
Nevertheless, my strong appeal to you and other UNRWA donors is that the present global situation should not serve as a rationale for shrinking support to UNRWA and Palestine refugees. My appeal is based on a conviction that UNRWA's services contribute not only to the humanitarian sustenance and human security of refugees, but also to stability and calm in the communities in which they live. I believe that this conviction is shared by the international community, and Europe in particular, hence the substantial investments made in safeguarding the well-being of Palestine refugees. In this time of uncertainty, the appropriate course of action is to protect those investments by consolidating and strengthening support to UNRWA.
Allow me to turn briefly to the situation in the areas of operation where UNRWA and Palestine refugees contend with extraordinary conditions, namely Lebanon and the occupied Palestinian territory.
This year, the people of Lebanon and the refugees they host have been spared the large scale armed conflicts they experienced in the summers of 2006 and 2007. In a country often affected by political instability and insecurity, the second half of this year brought positive signs in the election of a President and the establishment of a national unity government. In spite of these significant examples of progress, an air of volatility lingers. Inter-factional tensions and rivalries continue to simmer, erupting all too often in security incidents that place Lebanese and refugees alike at risk. Against this backdrop, the stabilizing impact of UNRWA's work and the reassurance it gives to refugees assumes particular importance.
One of our main operational preoccupations in Lebanon is the protection and care of some 30,000 refugees who were displaced when the Nahr el-Bared camp was destroyed in the summer of 2007. UNRWA has launched a $43 million Relief and Early Recovery Appeal to address the needs of the displaced and consolidate the emergency assistance provided throughout 2008.
Covering the period September 2008 to December 2009, the appeal will ensure support for the most vulnerable, covering food aid, health care and shelter. It will also guarantee primary education, health and social services and provide improved water and sanitation services to refugees. Unfortunately, the response to this appeal has been worringly slow in coming. The United States had pledged $4.3 million and Norway $500,000. Thanks to confirmation today of an ECHO pledge of 15m euro, we can reassure refugees that there will be no immediate reduction of services.
UNRWA is also focused on the reconstruction of Nahr el-Bared and its surrounding areas in accordance with a master plan prepared in cooperation with the government of Lebanon, the World Bank, UN agencies and other partners. The appeal, made jointly in Vienna this June, is for $445 million, $282 million for UNRWA, of which $80 million is needed for this coming year. $33 million has been received so far. I cannot emphasize enough that the timely reconstruction of Nahr el-Bared will contribute in no small way to the stability of Lebanon and the region.
I shall now speak about the occupied Palestinian territory where the situation continues to exact a disturbingly high cost in economic and human terms. The fundamental cause of this distress is the system of closures and other movement restrictions imposed by the Government of Israel on Gaza and the West Bank, with the aim of improving security for Israelis. The World Bank estimates that the Palestinian economy would have doubled in size between 2000 and 2007 were it not for the restrictions and other punitive measures that have choked the economy. Palestinian growth rates plummeted from six per cent in 1999 to consecutive years of negative real growth. In 2007 alone, the projected income loss was $4 billion, an intolerable price to be paid by a people living under occupation and struggling to lift themselves out of dependency and hardship.
In the West Bank, the illegal separation barrier and its associated regime of rigid controls continues to stifle the ability of Palestinians to lead normal lives. Physical obstacles to movement are reinforced by a complementary system of permits and identity cards. Many Palestinians require valid permits to visit relatives, schools, clinics, mosques and their own land. Families are separated and kept apart as the occupation authorities require Palestinians to remain confined in the part of the occupied territory where they are registered as having been born.
The proliferation of physical obstacles, security zones and other aspects of occupation have resulted in the splintering of the West Bank to a point where its integrity as a viable economic and social unit is compromised. This has obvious repercussions for a negotiated settlement. There is a real question whether, in its condition of multiple fragments, the West Bank provides the foundation for a viable Palestinian State. Israeli settlements continue to expand on Palestinian land, further whittling away the living space and resources available to Palestinians. Add to this bleak picture of a beleaguered, abused people the phenomenon of house demolitions. Hundreds of Palestinians have become homeless for lack of having been granted a valid building permit. These include nomadic herders who have lived off the land for centuries and are already deeply affected by poverty.
In Gaza, where I live, conditions are particularly wrenching. Following the takeover of the territory by Hamas in June 2007, a blockade has severely severed Gaza's access to the outside world, including for medical care, higher education and all manner of economic life. Ninety per cent of Gaza's small businesses and manufacturers shut down in the last year. The unemployment rate is now among the highest in the world, at 45 to 50 per cent. When all the evidence is considered, there can be no doubt of the futility and destructive impact of the closure of Gaza's borders. The need to end the blockade of Gaza has never been more obvious.
UNRWA is providing food aid to close to one million Palestinians rendered either destitute or food insecure. Additionally, last year we initiated a school feeding programme for 110,000 pupils in Gaza after noting that hunger was affecting their educational performance. Close to 13,000 jobless refugees are employed each month on short-term contracts, generating modest incomes for a few months at a time for families living in deep poverty.
Distinguished Chair and members:
Palestinians are now in their sixtieth year of exile, a period of dispossession without historical precedent. The travesty of their protracted dispossession is an indictment of the international community's failure to fulfill its obligations under the UN Charter, international humanitarian law and human rights instruments. It is a painful irony that as Palestinians mark sixty years of the denial of their rights and freedoms, the sixtieth anniversary of the Universal Declaration of Human Rights is also being observed, reinforcing a list of rights, every one of which is denied to Palestinians.
Based on its past experiences, I believe that Europe and its institutions and member states have a special ability and therefore responsibility to lead the search for a restoration of Palestinian rights and the achievement of a negotiated settlement to the Arab/Israeli conflict. Europe has long been a champion in upholding international law and human rights standards and insisting that its partners comply with these norms. It is this rights based approach that Palestinians would welcome as Europe's contribution to the peace process.
I believe there is a need for a new, principled and more engaged approach in the search for a negotiated settlement. Such an approach would ensure that Palestinians and Israelis alike are protected under human rights law and international humanitarian law while negotiations are in train. It would entail holding both parties to account under international law and ensuring that the international community's policies towards Palestinians are consistent with the rights, freedoms and human dignity guaranteed by international law.
A just and lasting peace can emerge only from a process that is inclusive and which places the humanity and rights of Palestinians at par with other actors. In UNRWA, we are certain that a positive contribution would be made to the search for solutions if the views, interests and choices of Palestine refugees could be heard and respected. Whenever an agreement is reached, UNRWA will be ready and able to play whatever role it is given by Member States in managing transitional arrangements for the refugees and handing over its responsibilities to the appropriate authorities.
Distinguished Chair and Members of this Committee:
Allow me, in conclusion, to thank you once again for the support you provide to UNRWA and to Palestine refugees. With your partnership, UNRWA is prepared to face the future, alongside the refugees it serves.
Thank you for your attention.