Few would deny the extreme fragility of the Occupied Palestinian Territories (OPTs) yet, despite this, recent media criticism has centred on the disbursement of UK aid money to the OPTs. Perhaps this backlash is symptomatic of the wider public preference for immediate success stories that help taxpayers visualise exactly how their money has been spent overseas.

By its very nature though, the process of strengthening institutions and building stability in conflict-affected regions is much slower and less clear-cut. It is, however, crucial. After all, what is the point in building a new school if the wider political and economic environment prevents access to quality education?  More broadly, it’s becoming clear that the traditional ‘input equals output’ model of development programming just doesn’t work in fragile and conflict-affected areas – it’s based on too many linear assumptions that simply do not apply in these contexts. 

So what is the alternative? Clearly there’s no “one-size-fits-all” model but rather a recognition that development approaches need to be flexible and adaptable with all interventions rooted in a deeper, more dynamic political economy understanding of the local context. In the OPTs this context is the drive towards a two-state solution to which most parties – on paper at least – subscribe.

Areas of hope

Given the wider structural constraints that need addressing for any peace process to be meaningful, it is perhaps surprising that we’re beginning to see real progress in unheralded, discrete areas. Take healthcare, for example: in the OPTs the sector is financially hamstrung by one issue in particular – external medical referrals. If we take a closer look at these we begin to see a progressive pocket of cooperation between Palestinians and Israelis. As part of work implementing the DFID-funded Palestine Governance Facility programme, we’ve seen this cooperation help translate into estimated efficiency savings of more than US$100m, with external referral expenditure falling from at least 43% of public health expenditure in 2013 to an estimated 31% at the end of 2014.

The reasons for greater cooperation are manifold: a number of internal factors including staff changes in the OPT Ministry of Health (MoH) are being complemented by a ‘perfect storm’ of external drivers. These include increasing international pressure on Israeli authorities to divulge information on customs deductions– a major source of revenue loss for the OPTs when patients are referred to Israeli hospitals; a number of Israeli hospitals are also experiencing financial distress, prompting more amenable price negotiation between the two authorities. 

If we drill down to an even greater level of detail to look at just one area of referrals, we start to see how these factors are playing out in complex ways on the ground.   Cardiac catheterisation - the insertion of artificial tubes to improve the circulation of blood in the heart - is a substantial source of referrals that has seen rapid growth alongside increased prevalence of cardiovascular disease amongst Palestinians in recent years. A confluence of factors were keeping in place a business-as-usual scenario that saw doctors default to costly external referrals even when these were not strictly necessary: limited internal capacity and a lack of clear guidelines were compounded by perverse incentive structures for both those sanctioning the referrals, and the receiving hospitals. 

Only by dissecting the interaction of these factors within their specific context and addressing them together, could more efficient practices begin to become embedded. We’re already seeing encouraging results: the number of catheterisation procedures carried out ‘in-house’ in MoH hospitals rose significantly between 2013 and 2015 - during the same time period, the average cost of a referral for the procedure fell by almost 10%.

Laying the foundations

So why does this matter? Progress in a single area might seem overshadowed by OPT’s larger economic and political challenges. By addressing economic concerns at the micro level, however, these reforms are laying the foundation for a broader development impact.

The economic outlook for the OPTs is a tough one, characterised by a need for austerity in the face of a huge deficit and persistent public debt. Over 60% of revenues to the Palestinian Authority (PA) come from customs revenues, with most of the remaining from external donors. Given that all goods revenues are collected by Israeli authorities and are subject to deductions before being transferred to the PA on a monthly basis, makes for inherent instability, leaving the OPTs especially vulnerable to external economic shocks. In such a climate, internalised efficiency savings become vital.

So while something as obscure as reforming external medical referrals might seem small and insignificant, this sort of bottom-up, slow-burn approach may well turn out to be an effective driver of reform.  It might not follow a populist approach to ‘doing development’ but perhaps it’s time to zoom in on the detail if we want to start to change the bigger picture in a sustainable way.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of The Economist Intelligence Unit Limited (EIU) or any other member of The Economist Group. The Economist Group (including the EIU) cannot accept any responsibility or liability for reliance by any person on this article or any of the information, opinions or conclusions set out in the article.