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The Future of UNRWA: An Agenda for Policy Research

Source: PRRN / IDRC / RIIA Workshop on The Future of UNRWA

by Rex Brynen, McGill University

As Israel and the Palestinians undertake permanent status negotiations with the aim, among other items, of reaching a just and lasting agreement on the refugee issue, it is important that increased attention be given to the potential role of UNRWA in all of this. Specifically, four main sets of questions should now be asked:

  • what are the main scenarios for permanent status?

  • what are the implications of these potential outcomes for the agency, for the services that it presently delivers, and for the population that it serves?

  • what are the resource implications of any eventual termination or transformation of the agency, subsequent to an agreed resolution of the refugee issue? To what extent might the wind-down of the agency result in a precipitous shift of donor resources away from the (former) refugee population? What positions might donors adopt, and transitional funding mechanisms might be established?

  • what broader role might UNRWA, as well as other UN agencies, play in facilitating the transition to permanent status?

This short paper is intended as a very preliminary discussion of these questions. It also attempts to outline a possible agenda for subsequent in-depth policy research on the future of UNRWA.

Scenarios for Permanent Status
Part of the difficulty inherent in planning for the future of UNRWA arises from the uncertainty of any future outcome of permanent status negotiations. It is possible, however, to identify a range of possible outcomes, and to assess the implications for UNRWA of each.

Within the existing literature on the refugee issue, three major types of outcome are most commonly discussed:

  • a full right-based solution, based on UN General Assembly Resolution 194. This would involve the return of substantial number of refugees to their original homes within Israel, the restitution of refugee properties, and the payment of substantial compensation.

  • a compromise solution, involving the return of a limited number of refugees to 1948 areas, a full right of repatriation to a Palestinian state in the West Bank and Gaza (WBG), residency or citizenship rights for refugees preferring to remain in the diaspora, and some form of compensation. Within this range of choices, refugees would have the freedom to select their desired option.

  • a resettlement solution, involving the resettlement (in place or in third countries) of the refugee population, no refugee return to 1948 areas, possible restrictions on refugee repatriation to a Palestinian state, and some amount of compensation.

The first and third of these correspond to the initial negotiating positions of the PLO and Israel respectively. The second option is one frequently identified as forming the most probable basis for a solution. Even here, however, there is considerable scope for variation in the level of (limited) return, rates of repatriation (and voluntary settlement in place), and the levels of compensation that might be available. Similarly, the demographic implications of the compromise solution vary substantially depending on the assumptions made about migration rates.

Figure 1 shows a potential future distribution of UNRWA-registered refugees (and their descendants) under the compromise solution, based on only one of many possible demographic assumptions. This data, it should be emphasized, makes no particular claim to be politically or economically realistic: the proposed rate of return is much higher than is presently acceptable in Israel and much lower than is presently acceptable to Palestinians, while the rate of repatriation assumes much stronger economic performance in the WBG than has actually characterized most of the post-Oslo period. Furthermore, this data projects UNRWA-registered refugees only, not the entire population of these areas or all refugees. In short, it is merely intended to quantify one of many possible sets of challenges that may emerge from permanent status arrangements. In this case, from the perspective of (former) UNRWA services to (former) refugees, these assumptions would suggest rapidly growing need for health and education expenditures in the WBG, steady or slightly growing need in Jordan and Syria, and a sharp decline in Lebanon.

It is beyond the scope of the current workshop to undertake the full range of plausible demographic projections. However, looking ahead to future research tasks, it would be useful to have much fuller information on the demographic implications of various possible permanent status arrangements, including the implications for service delivery to ex-refugees . This could be further enhanced by making use of data available from UNRWA, FAFO, PCBS and elsewhere on the current socio-economic profile of the refugee population.

Transitions to Permanent Status
While it is clear that no termination of UNRWA or radical change in the agency's mandate can be considered before the achievement of a just and lasting resolution of the refugee issue, it is also clear that in the wake of such an agreement UNRWA will be terminated or transformed. Following an agreement, refugees will gain new political identities, whether as citizens of a Palestinian state or another. After an agreement responsibility for the provision of health, education and other services to former UNRWA-registered refugees will probably pass to the governments of whatever countries the refugees now reside in.

Several variations are possible in the time-line by which this might occur. Services could be transferred as soon as is practicable, and the agency terminated at the earliest possible moment. This would likely be the political aim of the Israeli government, which perceiving UNRWA as a symbolic representation of the refugee issue, would undoubtedly prefer early termination as a way of marking the end of the refugee issue. At the other end of the spectrum, a long transitional period could be envisaged, in which the Agency (whether in present or modified form) gradually transfers its services to local governments (health and education) and possibly NGOs (youth centers and similar facilities). Joint service committees might be established, involving UNRWA, government and refugee representatives, to manage the transfer. Components of UNRWA, for example, its archives, might even remain extant for extended periods, to assist in other aspects of permanent status (for example, refugee compensation claims). The refugees themselves would likely be reassured by a slower, rather rapid, termination of the agency.

Leaving aside the political dimensions of this question, this is an area that cries out for additional research. What are the practical issues that will shape the pace at which services can be transferred? To what extent are current services harmonized? To what extent do current UNRWA models of service delivery fit with those presently in use by host countries? How will the question of differential wage rates, staff termination and employment indemnities affect the transfer of services? What steps might be taken now that would facilitate a smoother transition in the future?

One particularly important of dimension of this concerns the future of donor support. A rapid, abrupt termination of UNRWA risks dissipating the more than $250 million per year that the agency (and hence the refugees) receive. A fuller discussion of this is presented below.

Delivery of Service Issues
As already suggested, there are a host of operational issues that will affect any future transfer of UNRWA services to host governments. As already noted, there is much additional work that could and should be done in this area, preferably through detailed sectoral analysis of the delivery of health, education, and other services by UNRWA and host governments and efforts to identify and ameliorate the challenges that will arise in the eventual transfer of responsibility for service delivery .

In addition to these operational issues, another key aspect of any future transfer of services is fiscal sustainability, that is, the ability of host governments to eventually assume the cost of former UNRWA services. As can be seen from Figure 2, this challenge is particularly acute in the West Bank and Gaza, where UNRWA expenditures currently represent the largest share of local GDP.

Presently, UNRWA spends approximately half of its general budget, or about $125 million per year, on the refugee services in the West Bank and Gaza. This is equal to 10.5% of PA recurrent expenditures in 1999, and over 3% of estimated GDP. It is difficult to see how, under current circumstances, the PA could assume such costs without continued donor support. Any substantial repatriation of former UNRWA service users to the WBG would aggravate this situation still further, particularly given the relatively high dependency ratio found within the Palestinian population.

Figure 3 makes a very rough effort to assess the potential impact on the PA budget of absorbing the cost of current UNRWA services in the WBG, as well as the additional cost of services for potential returnees. It is based on the demographic data presented in Figure 1, a projection of steady growth of 4.5% per year in WBG GDP, as well as the assumption that (ex-) refugee service costs increase in direct proportion to UNRWA-registered population. Varying any of these complex (and perhaps dubious) assumptions would alter the outcome, perhaps substantially. Nevertheless, it does serve to illustrate the magnitude of the potential challenge. As can be seen, a combination of natural demographic growth and returnees could push the additional cost of providing ex-UNRWA services as high as 4.5% of GDP. Presently, the PA expends 29% (or less) of GDP on health and education for all Palestinians in the territories.

The data presented here is very preliminary, and the estimates correspondingly rough ones at best. An agenda for future research might provide more robust estimates of the future cost implications of a transfer of UNRWA services.

Maintaining Donor Support
The preliminary discussion of fiscal burden presented above underscores that continued donor support for refugee services will be required for an extended period following any permanent status agreement on the refugee issue. A precipitous termination of UNRWA, without proper arrangements to assure the maintenance of social services and some donor commitment to continue aid during a transitional period, would result in the loss of $250-300 million per year in resources for refugees.

Equally, however, it is important to recognize that donors will not indefinitely finance the post-UNRWA recurrent costs of providing health, education, and social services to the former refugee population. This is not a category of expenditures that most donor agencies would prefer to support, and there are many other claims on the limited aid budgets of donor agencies. Indeed, while recognizing the great need that exists in many Palestinian refugee camps, UNRWA's past successes mean that Palestinian refugees have average life expectancies, literacy rates, and infant mortality rates that place them in the top one-quarter of developing countries, ahead of such countries as Egypt, Morocco, and Brazil, as well as almost all of South Asia and sub-Saharan Africa. In this context, there will likely be mounting and ultimately irresistible pressure to reallocate (former) UNRWA funding to more needy areas of the world, and to more developmental purposes.

How can this dilemma be addressed? There is an urgent need to consider possible funding mechanisms which would provide a reliable (if ultimately declining) level of donor support for former UNRWA services, while providing donors with an eventual exit from bearing the permanent burden of recurrent program costs. Because of the way that many donor budgets are structured, this may represent a strong argument for the "late" rather than "early" termination of UNRWA. A slower termination of UNRWA would allow existing budgetary envelopes to be used to finance the transitional period. Moreover, UNRWA might act as a credible intermediary between donors and host governments, assuring that donor funds are used in a transparent and accountable way to support the assumption of (ex-)refugee services by host governments. Another possibility is a new transitional arrangement, akin to the World Bank-managed Holst Fund. This provided a flexible mechanism whereby donors could provide transitional support for Palestinian start-up and budgetary costs with a high degree of confidence in the integrity of the process.

Another (complementary) approach might be to secure formal international agreement on a gradual shift of donor support from UNRWA (and refugee services) to more developmental tasks (including support for repatriation, development of those localities where refugees reside, and programs intended to promote broader economic growth). This would better fit the mandate of development agencies, contribute to greater future sustainability, and reduce the prospect that a future Palestinian state would become dangerously dependant on donor support for its recurrent expenditures.

One key issue here may be the credibility of donor commitments. Donors might pledge to shift UNRWA funding into developmental investments in the refugee sector, but in practice cut the former without any overall increase in development expenditures. Recent patterns of donor performance in the WBG underscore the validity of this concern: as donors have reduced their support for transitional costs in the WBG, they have not correspondingly increased their support for infrastructure or other public investment. On the contrary, donors have actually reduced the level of aid disbursement in the territories from an average of $511 million per year in 1996-97 to only $330 million in 1998. With only $268 million disbursed by the third quarter of 1999, it looks as if this lower level will continue.

Finally, it is important to note that the resource implications for refugees are shaped not only by the period over which former UNRWA funding is terminated, but also (and even more so) by the level of compensation that is made available by Israel. Figure 4 shows the impact after 20 years of different donor phase-out periods (immediate, 5, 10 and 15 years) and different levels of refugee compensation (from $2 billion to $25 million). In all cases, $2 billion in compensation coupled with the elimination of donor support for UNRWA, results in a net reduction in the resources available to refugees over a twenty year period, regardless of how fast or slowly donors terminate their support for UNRWA services. Indeed, only at compensation levels well above $5 billion does the net gain to refugees become significant.

Permanent Status and UN Agencies
A final set of issues to be explored concerns the possible contribution of UN agencies to the implementation of permanent status arrangements. UNRWA (or an UNRWA-successor agency calling upon some of the same staff and facilities) might play a role, for example, in refugee repatriation, development initiatives, the administration of refugee compensation, or other possible components of an Israeli-Palestinian agreement. Other elements of the UN system, UNHCR in the case of repatriation, UNDP in the area of development, might also have a contribution to make, whether in conjunction with or instead of UNRWA. It will certainly be the case that a substantial degree of interagency cooperation and coordination will be required to assure an optimal UN role and facilitate a smooth transition.

Speaking in favor of maximum UN involvement in permanent status arrangements is the United Nations' unparalleled experience with both Palestinian refugees (UNRWA) and refugees in general (UNHCR). UN involvement might facilitate fund-raising amongst donors, in as much as UN agencies are considered accountable, transparent, and effective. High-profile UN involvement would also have the effect of reassuring refugees that international responsibility for their rights remained strong during the transitional period.

On the negative side, a central role for UN agencies brings with it potential problems of interagency rivalry and bureaucratization. There certainly exists no common vision among UNRWA, UNHCR, UNDP and others as to what their respective contributions might be. Indeed, at this point there is very little vision at all, with the ability of UN agencies (and UNRWA in particular) to plan for permanent status severely hampered by the unavoidable political sensitivity of the issues involved. Despite the efforts of UNSCO, the size and relative autonomy of the UN leading agencies limit effective coordination. Questions might be raised about UNRWA's capacity to manage major changes in its mandate, with Gaza European Hospital standing as a prime example of what can happen when a UN agency is called upon to attempt a task that lies outside its established area of expertise. It might also open the door for the politicization of sensitive permanent status implementation issues in the General Assembly or elsewhere.

On top of all this are the political interest of the regional parties and others. Israel would undoubtedly prefer not to involve UN agencies in the implementation of permanent status arrangements, whatever their technical competence. From an Israeli perspective, UN involvement perpetuates the refugee issue in a highly internationalized setting, a setting that Israel has long felt is unsympathetic to its position. US preferences on these same issues are likely to tilt toward the Israeli view of the UN. For these same reasons, the Palestinian side may well prefer to maximize UN involvement. UN involvement would also help to legitimize a refugee agreement among the broader Palestinian population. Finally, since some analysts (and the Beilin-Abu Mazen agreement) have suggested the idea of an international commission to implement aspects of a future refugee agreement, the UN system might find itself in competition with member states that wish to perform this role themselves. Consequently, debates over the potential suitability of UN mechanisms may be skewed by narrow national self-interest.

This short paper has identified a number of ways in which UNRWA and future permanent status agreements may be linked. The research agenda that emerges contains the following points:

  • the need to identify and explore a range of possible political and demographic scenarios, which will shape the future delivery of social services to (former) refugees.

  • detailed sectoral analysis of the delivery of health, education, and other services by UNRWA and host governments, in an effort to facilitate any future transfer of responsibilities following a just settlement of the refugee issue.

  • the production of more robust estimates of the future cost implications of a transfer of UNRWA services.

  • detailed analysis of the fiscal consequences of service transfer for the PA in particular, given different assumption of donor transitional support.

  • development of a specific plan for the gradual termination of donor support for UNRWA following a just settlement of the refugee issue, including possible conduits for transitional funding, and a shift in donor emphasis from recurrent costs to development initiatives.

  • more detailed examination of the potential contribution of UNRWA and other UN agencies to the implementation of permanent status arrangements, including refugee return/repatriation, development, and compensation. Such research should also include attention to promoting coordination, cooperation, and a division of labor between agencies so as to enhance the UN's future contribution to resolving the refugee issue.

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