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For decades, the international community through the United Nations Relief and Works Agency (UNRWA) had aided the Palestinian refugees in Palestine. With the Oslo process, it now became possible to offer the Palestinians aid through other channels than the UNRWA. This was partly dictated by clear self-interest, as it was important to bring under control one of the world’s largest sources of tension. The aid was primarily focused upon setting up the PNA’s administrative apparatus and improving the structurally neglected infrastructure.
In order to get the economy in Palestine back on the rails, from 1994 an appeal was made for the services and aid provided by institutions such as the International Monetary Fund (IMF) and the World Bank. These advocate a small government and a central role for the private sector in stimulating economic growth. However, on various levels, this was unfeasible due to the intractable situation in Palestine. Job opportunities within the administration increased greatly (up to 25 percent of the working population) – among others, within the police and security services – in order to absorb the huge increase in unemployment as a result of the loss of job opportunities in Israel.
The Second Intifada
Whereas initially the emphasis was strongly on development, after the outbreak of the Second Intifada and its dramatic effects on Palestine’s economy, the focus was shifted to relief. This especially applied to the Palestinians in the Gaza Strip after Hamas’ election victory in 2006. Afterwards, the new Hamas-led PNA government had to manage without the Israeli contribution of tax revenues and levies, or the assistance of Western states. After Hamas’ assumption of power in the Gaza Strip in mid-2007, a general blockade was further imposed, and at the end of 2008 – beginning 2009, Israel held a devastating military operation.
In order to maintain the (non-constitutional) government of PNA/Fatah in the West Bank, led by the former World Bank and IMF head, all Western funds have since flowed towards the West Bank. For the same reason, Israel allowed Palestinian workers from the West Bank access to Israel once again.