Palestinian Territories. Bethlehem industrial zone CONTENTS

Transcription

1 PUBLIC COMMUNICATION BRIEF ON OPERATIONS Palestinian Territories Bethlehem industrial zone CONTENTS SUMMARY... 2 I - SECTOR AND ISSUES PRESENTATION OF THE SECTOR GOVERNMENT POLICY IMPORTANCE FOR THE COUNTRY CONTRIBUTION TO THE STRATEGIC ORIENTATIONS OF FRENCH AND AFD AID Lessons learned from AFD s main activities and those of other French actors in the sector Contribution to the strategic orientations of French and AFD aid... 5 II - THE PROJECT TARGET SPECIFIC OBJECTIVES PROJECT CONTENT INTERVENORS AND OPERATING METHOD COST AND FINANCING PLAN TYPE OF AND JUSTIFICATION FOR FINANCIAL PRODUCT PROVIDED BY AFD III - PROJECT IMPACT ASSESSMENT EXPECTED PROJECT OUTCOMES Economic effects Environmental effects Social effects Institutional effects Sustainability of project effects ENVIRONMENTAL AND SOCIAL RISKS IV - SUPERVISION-EVALUATION MECHANISM AND INDICATORS IMPACT INDICATORS Aggregatable indicators Other indicators... 12

2 AGENCE FRANCAISE DE DEVELOPPEMENT PALESTINIAN AUTHORITY Project to develop an industrial zone in Bethlehem SUMMARY Project context Following the December 2007 Paris Conference, on 24 June 2008 Presidents Nicolas Sarkozy and Mahmoud Abbas signed a Memorandum of Understanding for the construction of an industrial zone in Bethlehem. Project content and objectives The project aims to facilitate the development of an industrial fabric in Bethlehem and create employment by sustainably developing an industrial zone to the south of the city. The aim is also to boost the tourist city of Bethlehem by developing urban areas currently occupied by these companies and improving their environmental practices. It has three components: (i) to finance, via a grant to the Palestinian Authority, external infrastructure to connect the industrial zone to the water, sanitation, electricity and road networks, and to build the capacities of public entities in charge of their implementation and management; (ii) to finance a training centre and administrative building; (iii) to make an equity investment in the capital of a planning company that will lead the project. The plot selected for the creation of this industrial zone is well located in the southern outskirts of the City of Bethlehem, in zone A (under Palestinian control). The market study also concludes that there is a real demand for a well-developed industrial zone accessible to Bethlehem: the industrial fabric of the southern West Bank (governorates of Bethlehem and Hebron) is relatively dense and there is a real need for additional space. The area to be developed over the next 10 years will be around 20 ha. The financing required for the external infrastructure is estimated at 9.23 million, including electricity supply (with photovoltaic equipment), water and sanitation infrastructure (with water recycling), and the access roads. In order not to deprive the city of water resources which are already scarce, an increase in volumes of water distributed to the City of Bethlehem will be obtained from the Israeli authorities. The accessibility of the site and an easing of restrictions on the transport of merchandise and persons will be largely decisive to the feasibility of the operation and the attractiveness of the industrial zone for companies. The authorisations required should be acquired thanks to the political support the project benefits from. The cost of the training centre and the administrative building is estimated at 0.66M. It is planned to integrate the topics of energy management, reducing water consumption and waste management into the training provided to companies

3 Intervenors and operating method PIEFZA, the public authority in charge of industrial zones in the Palestinian Territories, will grant a concession to a developer/manager for the creation of an industrial zone under which it will make available the Waqf land that it rents. The developer will be BMIP, a Franco- Palestinian steering company whose shareholders will be DESKA (a private French company), AFD for the French part, and private entrepreneurs and the municipality of Bethlehem for the Palestinian part. The 9.89M AFD grant will be allocated to the Palestinian Authority and reallocated to (i) PIEFZA for the access roads, the administrative building and the electricity infrastructure; road assets will ultimately be transferred to the Ministry of Public Works; (ii) the Palestinian Water Authority (PWA) for water and sanitation; the assets will ultimately be transferred to the public operator in charge of water and sanitation management in Bethlehem (WSSA). A capacity building component is planned for PIEFZA and WSSA. Cost and financing The provisional cost for external infrastructure, the training centre and support for PIEFZA and WSSA, financed by an AFD grant, today stands at 9.89M. The cost of internal infrastructure and the buildings, financed by the developer, is estimated at 6.2M. BMIP will have a capital of 1 million Jordanian dinars (roughly 1.1 million euros) with a 10% participation by AFD, i.e. roughly Main anticipated risks Project implementation is subject to authorisation being obtained from Israel for: (1) the possibility to use access roads in zone C (under Israeli control) and the adaptation of checkpoints to facilitate access to the zone; (ii) an increase in the municipality s water supply; (iii) agreement on the norms for wastewater treatment. The soundness of this project is a second major risk: at this stage the financial arrangements for the industrial zone of Bethlehem are based on hypotheses that must be validated when the zone is marketed to companies.

4 I - SECTOR AND ISSUES Presentation of the sector Economic growth in the Palestinian Territories suddenly came to a halt with the beginning of the second Intifada in September Access restrictions imposed by the Israelis severely hamper the activities of the private sector which until this date had played a decisive role in the development of the Territories. Economic growth has been flat for almost 10 years and GDP per capita is today 30% lower than its 1999 level. Unemployment is extremely high (19% in the West Bank). The governorates of Bethlehem and Hebron account for 31% of the population in the West Bank. The economy in this region, pulled up by the industrial sector (42% of GDP, 17% of employment) grew by 5% in The number of companies grew by almost 30% between 1997 and However, the size of companies is falling Government policy During the December 2007 Paris Conference, the international community decided to make a significant increase in aid to the Palestinians on the basis of the triennial Palestinian Reform and Development Plan (PRDP). Industry is seen as a key sector and one of the priorities of the PRDP for the construction of Palestine is to boost the private sector. The development of industrial zones has been planned. They are, indeed, an important source of employment, yet their viability will depend on access restrictions being lifted. Following the Paris Conference, on 24 June 2008 Presidents Nicolas Sarkozy and Mahmoud Abbas signed a Memorandum of Understanding for the construction of an industrial zone in Bethlehem. Despite the recent events in Gaza, the Palestinian Authority continues to explicitly quote the PRDP as its intervention framework. The conference for the reconstruction of Gaza and efforts to boost the Palestinian economy are part of this pluriannual plan Importance for the country The creation of a modern industrial zone will help boost Palestine s private sector which is a priority at a time when the public deficit has reached record levels Contribution to the strategic orientations of French and AFD aid Lessons learned from AFD s main activities and those of other French actors in the sector Palestinian experience in the sector is limited: there is currently only one major industrial zone in Gaza. Several small industrial municipal zones are also in operation. More ambitious projects for industrial zones are currently being launched in the West Bank: in Jenin (KfW financing), Jericho (JICA), and Tarkumia to the west of Hebron (Turkish cooperation) and in the governorate of Bethlehem (a zone specifically dedicated to the marble industry, supported by Italian cooperation).

5 Contribution to the strategic orientations of French and AFD aid The private sector has been defined as a concentration sector for French aid in Palestine in the Country Intervention Framework which is currently being finalised. Projects to support the private sector financed by AFD in Palestine are as follows: support to the olive oil industry (Trade Capacity Building Program), microfinance in rural areas and upgrading for companies in terms of energy efficiency (French GEF), with a specific focus on companies in the industrial zone. II - THE PROJECT Target The project aims to contribute to the development of the Palestinian private sector and the City of Bethlehem Specific objectives The project has the following specific objectives: 1) To facilitate the development of the industrial fabric in Bethlehem and create employment by sustainably developing an industrial zone to the south of the municipality; 2) To boost the touristic city of Bethlehem by developing urban areas that are today occupied by companies; 3) To improve the environmental practices of SMEs and strengthen their human capital Project content This project is financed at the request of the State and includes three components: i. financing for external infrastructure to connect the industrial zone to the water, sanitation, electricity and road networks; this component is supported by technical assistance to the relevant public entities; ii. financing for a training centre and administrative building; iii. an equity investment in the capital of the planning company that will lead the project. AFD commissioned the SCET to conduct a pre-feasibility study whose conclusions submitted in October 2008 were favourable. The feasibility study, which included an environmental and social impact assessment, was finalised in April The site The plot chosen for the establishment of the industrial zone is located in the southern outskirts of the City. It presents advantages which are essential to the viability of the project: It is located in zone A which is under Palestinian control; It is well situated at the geographical centre of Palestine, not far from the economic hubs of Jerusalem and Hebron; The village where the zone will be located is a natural extension of the City of Bethlehem by its nearness and access. In addition to private homes currently under construction, housing estate projects are planned in the neighbouring areas; The City of Bethlehem has an ancient fabric of small and medium-sized enterprises / industries and a positive image which comes from its famous name.

6 The site is made up of two adjacent areas: (i) a m² Waqf plot including around m² that can be developed, (ii) a m² area for potential expansion that is owned by several private landowners The market: The market study concluded that there was a real demand for a well-developed industrial zone accessible to Bethlehem: The industrial fabric in the southern West Bank is relatively dense and is mainly made up of small companies (under 5 employees); There is a real need for additional space and establishment in the zone would be a less costly alternative to Bethlehem where the price of property is extremely high; Demand mainly focuses on constructed plots; The interest of companies in the zone will only be confirmed when they have precise information about the services and conditions proposed; accessibility is a key factor for its attractiveness (access for goods and persons, easing of checkpoint restrictions, transport of employees); The zone will be mainly dedicated to the local market; The sectoral profile of the zone should reflect the composition of the local industrial fabric: metallurgical industry, furniture making, textiles and non-metallurgical industry. The area of the industrial zone to be developed over the next 10 years is about 20 ha. The expansion to private land is consequently not necessary in the medium term The environmental approach to urban planning: AFD proposes to develop the zone in a sustainable manner. The aim is to adapt the environmental approach to urban planning implemented by the ADEME (French Environment and Energy Management Agency) in France. This approach aims to help local authorities design operations for sustainable development that integrate, from an environmental angle, water management, as well as the management of energy, waste, travel, the climatic environment, etc. Experience in France and with the AFD in Reunion shows that projects developed using this approach do not necessarily cost more in terms of investment since most of the additional costs relate to preparatory studies. An expert mission was consequently organised in February 2009 in order to raise the awareness of local actors and train consultants in charge of the feasibility study for this process: the proposed development programme integrates proposals from this work (installation of solar water heaters, photovoltaic equipment, re-using treated wastewaters, limitation of internal roads, etc.) External infrastructure: The cost of external infrastructure is estimated at 9.23M and includes electricity supply, water and sanitation infrastructure and access roads. The cost of connection to the telephone network will be borne by the operator. Connection to electricity and the telecommunication network Three 33 kv medium voltage lines run along or cross the plot. The industrial zone will be supplied from these lines via a 33 kv/11 kv transformer that will be installed inside the site. The

7 feasibility study estimates annual requirements at 5 to 7.5 GWh for the Waqf plot. The development programme also provides for the possibility of using renewable energies, particularly via the installation of solar panels. The telecoms network is accessible by the north east and can easily supply the zone. Water supply and sanitation Supplying water to the industrial zone does not pose any technical difficulties due to the nearness of the primary network. However, it is necessary to raise capacities in order to ensure the city is not deprived of water resources which are already scarce: the municipal operator, the Water Supply and Sewerage Authority (WSSA), 1 is unable to secure a water supply to the city (water is frequently cut off, only 50% of demand is covered). In addition to the WSSA wells, the city s water supply is provided by the West Bank Water Department (WBWD), which reports to the Palestinian Water Authority (PWA), and the Israeli company, Mekorot. However, the supply by the WBWD has recently been experiencing serious difficulties 2 and the quantity of water supplied by Mekorot is insufficient. The PWA and WSSA have adopted a strategy to supply the industrial zone from the WBWD s Palestinian bore holes (3 bore holes nearby) and to obtain from Mekorot in compensation an equivalent increase in the water distributed to the City of Bethlehem. An agreement in principle has been obtained and is to be formalised and made effective by the signing of an agreement between the Palestinian and Israeli parties. 3 The primary and distribution networks will be managed by the WSSA which will bill the water to the companies in the zone; it will consequently consolidate its resources via this industrial client base. The feasibility study estimates the annual volume required by 2020 at m 3 (i.e. 620 m 3 per day). A m 3 reservoir equivalent to 3 days of storage is planned. The Bethlehem East sanitation network is not connected to a wastewater treatment plant, a micro wastewater treatment plant dedicated to the industrial zone has consequently been planned. The topography of the zone (moderate slope) is favourable to the creation of the required networks. The Israeli authorities are demanding extremely restrictive standards for wastewater treatment. However, in the case of the project for the Jenin industrial zone they have accepted to ease their demands. A similar agreement will have to be obtained. The most polluting industries (metalworking, tanning) will have to install pre-treatment units. The scarcity of water in the semi-arid district of Bethlehem is an argument in favour of an exemplary management of water resources in the industrial zone: rainwater collection, recycling of wastewater, etc. Various options for re-using wastewater are consequently planned in the framework of the environmental approach to urban planning: industrial use, watering of green spaces, storage for agricultural purposes. 1 WSSA belongs to the three municipalities of Bethlehem (majority shareholder), Beit Jala and Beit Sahour. 2 AFD reallocated 950K of remaining financing for the rehabilitation of its wells. 3 This issue should be presented as early as 25 February 2009 by the Palestinian Water Authority to the Joint Water Committee which gathers the competent Palestinian and Israeli authorities.

8 Capacity building support to the WSSA has been planned in order to complete this component of the project, particularly for the sanitation component. Decentralised cooperation is currently being set up with the Ile de France Region and will help complete AFD s operations. WSSA had previously benefitted from support from GEKA, the Générale des Eaux and Katib el Alami Group, between 1999 and 2001, financed by the World Bank. Access roads The accessibility of the site and the easing of restrictions on the transport of merchandise and persons will be largely decisive to the feasibility of the operation and the attractiveness of the industrial zone to companies. The site is accessible from the city centre in the north via a narrow winding road which will be rehabilitated by the municipality. Towards the south, the site will be served by a road, most of which still has to be built, the rest needs to be rehabilitated and widened. This road is linked to a recent expressway (2 x 2 lanes) with reduced traffic that links Jerusalem (10 km) to Hebron. The crossroads and the expressway are located in zone C (under Israeli control) The training centre and administrative building: The June 2008 Memorandum of Understanding included France s financing of a training centre. The construction of this centre was consequently included in the project. This centre could house a small business incubator. It has been planned to integrate the topics of energy management, 4 reducing water consumption and waste management into the training provided to companies, in line with the strategy that aims to develop the zone in a sustainable manner. Technical training to meet the needs of SMIs has also been envisaged. AFD will also finance the administrative building that will receive the offices of the PIEFZA and the development company. It will be built in compliance with the most effective environmental standards possible considering the context and will be a pilot site for the dissemination of best practices. 4 French GEF financing for energy management could be mobilised for this.

9 2.4 - Intervenors and operating method Institutional organisation of the project In compliance with the law relative to industrial zones (PIEFZA Law), the institutional framework for the Bethlehem industrial zone will be the following: City of Bethlehem concession Franco-Palestinian Steering Committee PIEFZA Owner, licensor concession BMIP: (concessionaire, developer, manager) Private actors from Bethlehem, Palestinian private developer, City of Bethlehem DESKA, AFD PWA (Water authority) External infrastructure and training centre (coordination / implementation) Internal infrastructure (creation) The project steering committee has now been set up to coordinate the Franco-Palestinian partners and will continue to have an advisory role until the industrial zone has reached completion. The owner PIEFZA (Palestinian Industrial Estate and Free Zone Authority) is the public authority in charge of industrial zones in Palestine and is under the supervision of the Ministry of the Economy. PIEFZA is the entry point for investors and will grant a concession for the creation of the industrial zone to a developer / manager under which it will make available the Waqf plot that it rents. PIEFZA will also coordinate the creation of electricity infrastructure, roads and the administrative building. Water and sanitation works will be conducted by PWA. The municipality of Bethlehem will also be in charge of a part of the area for the extension of the industrial zone, after the acquisition of private land by the Palestinian Authority 5 and may, at the end of this process, lease the land to be developed via a concession contract. Requests for equipment have been made by the City (an abattoir and a sports centre), and plans for their construction on this land need to be defined in the medium term. 5 As with any development project involving the acquisition of private land belonging to small landowners the process will necessarily be long.

10 The concessionaire The concessionaire develops and manages the zone. It must also handle maintenance for infrastructure and all the equipment. It will be in charge of creating the internal infrastructure on the site, building the common equipment, and the industrial premises that will be let. This company will in line with French proposals be a Franco-Palestinian semi-public company, the Bethlehem Multidisciplinary Industrial Park Ltd (BMIP). Its main shareholders will be: (i) on the Palestinian side, a group of local private companies, the municipality of Bethlehem and soon a private Palestinian promoter which will be a benchmark shareholder, (ii) on the French side, DESKA, a subsidiary of SIIFFA (a property investment and financial company) headed by Mrs Evens, and AFD. In order to strengthen its position in terms of the Palestinian shareholders, SIIFFA wanted AFD to invest alongside it via a 10% equity stake in the capital of BMIP. The prospective shareholders, pending the results of the pre-operational studies, only have a limited visibility of the soundness of the project. However, AFD obtained agreement for the concessionaire company to be set up in two phases: (i) creation of a planning company which pilots the project in order to establish a development program prior to its operational implementation; (ii) the transformation of the company into a developer / manager / constructor of the zone, and an increase in its capital: AFD will be able to exit from the capital of the company at this stage if it so desires. Operating method AFD will take a 10% equity stake in the capital of the company, i.e. JOD ( ). This will be financed by a grant. AFD proposes to finance the planned infrastructure by a 9.89M grant to the Palestinian Authority, reallocated to (i) PIEFZA for the access roads, the administrative building and the electricity infrastructure; the maintenance of the road will be under the responsibility of the Ministry of Public Works; (ii) the Palestinian Water Authority (PWA) for water and sanitation; the assets will ultimately be transferred to the public operator in charge of water and sanitation management in Bethlehem (WSSA). The PWA is a privileged partner of AFD, and several projects are underway in the West Bank and Gaza. The Project Management Unit (PMU) will be in charge of the technical studies. 1M of financing will be provided by AFD to strengthen the capacities of PWA. It will be necessary to strengthen the capacities of the public operator PIEFZA in order to help it manage this financing. AFD has already provided a Palestinian consultant to facilitate the supervision of the feasibility study and transfer experience. It will also be necessary to support PIEFZA over a longer period by providing a technical assistant.

11 2.5 - Cost and financing plan The estimation of the cost of works was made by consultants in charge of the feasibility study with support from SCET. Estimated project cost Amount in millions of euros % - Component 1: infrastructure: - external (with support to PIEFZA and WSSA) internal infrastructure + buildings Component 2: training centre Component 3: equity investment in the capital of BMIP Total The provisional cost for the external infrastructure of the training centre and support to PIEFZA and WSSSA, financed by an AFD grant, today stands at 9.89M. The cost of internal infrastructure and buildings financed by the developer is estimated at 6.2M. BMIP will have an initial capital of 1 million Jordanian dinars ( 1.1M). Projected financing plan Amount in millions of euros % AFD 10 Cofinancers - DESKA Holding of Bethlehem companies Municipality of Bethlehem 0.11 BMIP self-financing 6.2 Remainder to be financed 0 Total Type of and justification for financial product provided by AFD AFD only operates through grants with the Palestinian Authority. III - PROJECT IMPACT ASSESSMENT Expected project outcomes Economic effects The project will contribute to boosting the industrial sector in Bethlehem and creating companies and employment. The displacement of industrial companies from the city centre should allow the municipality to take better advantage of its attraction as a tourist centre. The training centre and the building of partnerships with France s private sector should eventually foster an increase in the human capital of the SMEs Environmental effects By using the environmental approach to urban planning, environmental factors will be integrated into the definition of a development programme for the zone. In addition to re-using wastewater and installing solar panels, it is also specifically planned to implement a pilot project for best environmental practices in the administrative building. An environmental charter is currently being defined; it will set the standards that industries present in the industrial zone will have to comply with.

12 The planned training component will reduce the environmental footprint of the SMEs Social effects The first elements from the social studies show that riparian populations are favourable to the project: they expect job opportunities and business start-ups (catering, taxis), an improvement in transport and roads, etc. The absence of populations and activities on the land selected and the route of the access road means it is possible to avoid expropriations and crossing the village. Local agricultural activities may also benefit from the recycling of wastewater Institutional effects The support measures envisaged will strengthen the public partners involved in the project (PIEFZA, WSSA) Sustainability of project effects The sustainability of the project s effects largely depends on relations between the Palestinian Authority and Israel Environmental and social risks The high expectations of populations in terms of spillovers from the project mean there is a risk of disaffection if the impacts are slower or more modest than anticipated. It would therefore be appropriate to provide populations with regular information updates throughout project implementation. The first elements from the impact assessment are quite positive. The biggest risk relates to the establishment of polluting industries which should partly be reduced by the pre-treatment of effluents. Sludge management may however pose more problems. The environmental and social management plan will define measures to be implemented in order to mitigate the expected negative impacts. IV - SUPERVISION-EVALUATION MECHANISM AND INDICATORS Supervision-evaluation mechanism A mid-term evaluation and an ex post evaluation will be planned on the basis of the specific objectives and impact indicators of the project Impact indicators Aggregatable indicators Capacity of wastewater treatment financed: 620m3 per day; Jobs concerned: 500 jobs may be created or supported over 15 years (5 jobs per company); Number of companies supported in the implementation of an SER process: Other indicators The other indicators proposed are the number of companies established, the area developed, the value added created, the equivalent t/co2 saved by the environmental components, and the number of people trained.