This Scan examines the challenges and opportunities regarding the simplification of administrative procedures in the Palestinian Authority (PA). It observes that the PA is developing an extensive programme of digital government projects, which could help to reduce administrative burdens for the public and businesses. It finds that these digital plans have been well integrated into the broader national policies of the PA and enjoy strong political support. Yet, the Scan also observes that businesses and the public face high burdens while interacting with public entities and that the PA is missing specific policies and guidelines for administrative simplification, which should form an integral part of digital government plans. It also provides key guidelines to inform the future delivery of public services in the PA, drawing upon international OECD good practice.
The statute book of the PA is uniquely complex and fragmented, containing laws issued under different regimes dating back to the era of the Ottoman Empire. The law is a blend of Islamic customary law, Urf, and the principles of Islamic Shari’a (the main source of legislation), the stock of legislation applied or enacted under the Ottoman Empire (1516-1917), British Mandate Law (1917-1948), Jordanian legislation applied to the West Bank and Egyptian legislation applied to the Gaza Strip (1948-1967) and, of course, legislation enacted by the Palestinian Authority since 1994. (OECD, 2022[1]) In addition, the political split between Gaza and the West Bank with the different legal traditions has far-reaching implications for the legislative process and impedes consolidation efforts for the Palestinian legal system. In the absence of sound regulatory systems, public officials could benefit from tools or stronger capacities to develop good quality legislation for businesses and citizens. (OECD, 2011[2])
This legacy has created a complex and burdensome regulatory environment for the general public who find administrative procedures time consuming and costly, and for Small and Medium Sized Enterprises (SMEs) which make up around 99% of enterprises in the PA. (EU, 2022[3]) According to the Ease of Doing Business index, which ranks countries worldwide based on the extent to which their regulatory environment is conducive to business operations, the West Bank and Gaza were ranked 117 among 190 economies worldwide, a deterioration from a place of 116 in 2018. (World Bank, 2020[4]) Business regulations in the PA are a big deterrent to entrepreneurship, and the process of registering a business is lengthy and unclear. There is no automated business registration system and lawyers provide inconsistent information to entrepreneurs. While there have been some important recent reforms, such as the streamlining of municipal business licensing (see sub-heading “Simplification projects”), the reform process has been slow and with limited input from business or civic society. (World Bank, 2019[5])
A overly complex stock of regulation also creates many opportunities for non-compliance with laws and regulations, with many SMEs preferring to stay informal1 in the PA. Research by (Castells and Portes, 1989[6]) and (Portes, 1994[7]) have highlighted noncompliance with government regulations as the main identifier of the informal sector. A more recent study by (Sultan and Tsoukatos, 2019[8]) identified compliance with regulations as a major challenge facing informal firms in the PA. Furthermore, research has shown that the about two-thirds of informal Palestinian entrepreneurs believe that there is no benefit in joining the formal sector. (Fallah, 2014[9]) Home-based entrepreneurs are currently unable to formalise due to business entry requirements, such as municipal licenses, and national regulatory requirements, such as company and tax registration. Business owners must comply with regulatory requirements on business registration, licensing, taxation, chamber or union memberships. This has significant economic and social impacts, as informal workers account for around 60 percent of the workforce in the PA and are disproportionally concentrated in poor and near-poor households, with no access to formal social protection schemes. (World Bank, 2022[10])
This Scan identifies the most pressing challenges in terms of administrative simplification and development of digital government in the PA. The PA has put in place the basis for digital government services since 2005 and plans to roll these reforms out to a wider range of public services, in co-operation with the World Bank. (World Bank, 2022[11]). However, there have not been enough results in the streamlining and simplification of the “back office”. The PA has not yet put in place a comprehensive set of policies and mechanisms to measure and simplify administrative procedures. Civil servants would benefit from guidance and methodologies, as well as sufficient training, to carry such simplification reviews. The Authority faces a number of challenges in implementing digital transformation – including the lack of a digital government strategy (although one is currently being in the process of being developed); a lack of digital skills in ministries; a lack of data on customer’s interactions with public services; a need to update the regulatory framework to support digital governance; and difficulty in accessing predictable financing to support digital government efforts (a wider issue facing the whole of the PA). Crucially, administrative simplification will need to be a core part of future digital transformation strategies in the PA, if they are to be successfully implemented.