The Palestinian Economy. Theoretical and Practical Challenges

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Zagha
and groups in political decisions, and economic constraints such as the economic
structure and income levels.
The paper is organised around four questions that must be answered with respect to
fiscal decentralisation and intergovernmental functions and finances in Palestine:
1) Who does what? This question is about assignment of functions between levels of
government, including spending patterns and allocations to specific sectors.
2) Who levies what revenues? This question is about revenue assignment and the
coherence of the revenue policies of various levels of government.
3) How to resolve the imbalance between the revenues and expenditures of sub-national
governments? This question has to do with vertical imbalances between levels of
government.
4) How to adjust for the differences in capacities and needs among different
geographical areas? This question is about horizontal imbalances or equalisation.
The rest of the paper is organised as follows: section II discusses the theoretical aspects of
decentralisation in light of fiscal federalism and presents the fiscal decentralisation index;
section III presents the critique of the traditional theory of fiscal federalism and presents
arguments for the inclusion of the NGOs in the concept of fiscal decentralisation. It is
also important to explore the relations between the LGUs and NGOs, since many NGOs
are actively involved in service provision at the local level (e.g., in health and education).
How are the relations today between LGUs and NGOs with respect to service delivery?
And what is the scope for constructive partnerships between these institutions? Section
IV maps the functions assigned to the local government units (LGUs) and analyses how
these are resourced. Moreover, the paper analyses to what extent the LGUs are given
access to adequate resources to do the job with which they are entrusted; Section V maps
the Palestinian NGO sector and discusses the role of the Palestinian NGOs in the
economy; Section VI analyses the constraints of devolving fiscal and administrative
powers. An important question for this part of the study is how to secure a balance
between the conflicting forces of centralisation vis-à-vis decentralisation? Section VII
concludes the study and suggests few policy recommendations.