With a ceasefire agreed in Gaza and shakily holding, there is a big gap in the plan — funding to pay for the reconstruction of the territory, which has been estimated by the UN to cost $70bn.
The UN Development Programmesaid on Tuesday it had “very good indications” from potential donor countries in the Middle East and Europe, as well as the US and Canada.
Oil-rich countries in the Persian Gulf region are expected to be called on for support, but what form that takes and when and how they are willing to provide it is unclear. There are many obstacles — above all, the devastation of the enclave, home to 2m people.
The peace plan mediated by the US provides for the territory to be governed by a “technocratic, apolitical Palestinian committee” including international experts, supervised by a Board of Peace chaired by President Trump. In due course the Palestinian Authority is expected to take over government.
Meanwhile a “Trump economic development plan to rebuild and energise Gaza will be created by convening a panel of experts who have helped birth some of the thriving modern miracle cities in the Middle East”.
But there is no plan yet, and it is a long way from Gaza’s current state, with at least 70% of buildings damaged, according to the Hebrew University of Jerusalem, to “miracle cities”.
“Rebuilding Gaza will require a collective effort among multilateral and regional financial institutions,” Muhammad Al Jasser, president of the Islamic Development Bank, told GlobalMarkets.
The Bank is working with fellow multilaterals to conduct damage assessments and design an integrated, long term recovery plan. But willing funders like the IsDB need the right conditions before they can help.
The recovery plan was contingent on the degree of security that could be maintained, Al Jasser said.
James Hoobler, humanitarian policy adviser at Oxfam America, reeled off a long list of acute priorities. “Water, sanitation, hygiene, healthcare, shelter, [unexploded ordnance] and rubble removal and road clearance [and] fuel are some of the most urgent — and of course food and nutrition foremost,” he said.
Even with a ceasefire in place, getting materials and supplies into Gaza is likely to be difficult. Up to now the Israeli government has banned imports of many goods that could also be used for military purposes. It includes a range of materials fundamental for civilian life, particularly construction, Hoobler said. “Unless addressed,” he added, “the underlying blockade will place a hard ceiling on the prospects for reconstruction and recovery, as well as the emergence of an independent economy without long term reliance on aid.”
Stability needed
Political viability will be crucial. The Centre for a New American Security, a thinktank, has criticised Trump’s Gaza plan for putting economic recovery before priorities like crisis management, security and interim governance.
“Reconstruction will come down to the political situation at the time, as no one is going to want to get involved without some kind of backing, for fear that there’s another coup in a month’s time,” said an investment banker in the Gulf.
One senior emerging market economist said obtaining funds would require “a lot of confidence” in the ceasefire holding.
Any support “will probably come with conditionality, for instance that Hamas demilitarises and, possibly, that there’s progress towards a two state solution,” he said.
When rebuilding can finally begin, this will be “a really different type of reconstruction,” said Joel Hellman, dean of Georgetown University’s Walsh School of Foreign Service and a former World Bank chief institutional economist. “The assumption is, if it goes to plan, that very dynamic economies in the Gulf are going to be invigorating their private sectors to extend out to Gaza.”
Private sector will wait
Even though banks and firms in the Gulf Cooperation Council region will likely play a large role, they will stay on the sidelines for some time.
There are precedents for what will have to happen in Gaza, such as parts of Iraq, though the destruction was not as severe.
“The reconstruction of Mosul [in northern Iraq] took a huge amount of cash and time,” said the banker. “It’ll be two years before [Palestine can] clear the rubble and start to build. That means that right now there is no room at all for private sector investment — it has to be governmental aid and funding from the MDBs for relief financing.”
He expected Gulf sovereigns to lead the reconstruction funding efforts, as they had a vested interest in making sure Gaza’s recovery went well. “There’s been this perception that Gulf states have flip-flopped in their support for Palestine, and now they will want to reassert themselves,” he said.
That support may take the form of financing, but it also means lending expertise. The investment banker suggested that Saudi Arabia, which has been undergoing its own physical transformation in recent years, had engineers and contracting firms that would be of great use. But this transformation has also pushed the Kingdom into budget deficits and increased its debt.
“It will be tricky for Saudi,” said the emerging markets economist. “With oil prices at their current level, the government will be running a large deficit and is already cutting back [its own] investment projects.”
Other Gulf states like the United Arab Emirates, Qatar and Kuwait still have very strong balance sheets, even with low oil prices, he added. The question will be whether these sovereigns provide direct grants to reconstruct Gaza, or lend in exchange for assets.
He pointed to Abu Dhabi’s $35bn deal with Egypt to develop the Ras Al-Hekma city, in which the emirate achieved substantial land rights, as a potential example.
“But one of the issues for Gaza is there is nothing there — no resources, no trade,” said another senior banker based in the Gulf. “There’s no opportunity for external partners to say: let’s invest so we can build a relationship for the future. Ideally there would be a way to move the focus away from pure aid to something with more commercial aspects attached to it.”