DRAFT ANNEX TO INTERIM ISRAEL-PALESTINE-MFO TREATY OF BUSINESS PEACE
(GAZA MEFTA TREATY ANNEX)

PREAMBLE

The Government of the State of Israel (hereinafter "Israel") and the future Government of the Arab Republic of Palestine, herein represented by both the Palestine Liberation Organization (hereinafter "the PLO") and the Government of the Palestinian National Authority (hereinafter "the PNA"), (the PLO, the PNA and the future Government of the Arab Republic of Palestine hereinafter jointly "Palestine", with Israel and Palestine hereinafter also referred to as "the Governments"), and the Multinational Force and Observers (hereinafter "the MFO");

Recognizing that the Interim Israel-Palestine-MFO Treaty of Business Peace (hereinafter "Gaza Mefta Treaty") incorporates this Gaza Mefta Treaty Annex and provides for the establishment in the Gaza Strip of a Gaza Mefta (which includes Port Mefta) and a sunken highway between Port Mefta and the West Bank and Jordan), which are referred to in the following provisions of the Gaza Mefta Treaty:

"ARTICLE VI - Middle East Free Trade Area in the Gaza Strip

1. Palestine, within 90 days after it is established, shall lease to the MFO an area along the coast between Deir El Balah and the southern border of the former Gush Katif, including Port Mefta and excluding Morag, as designated in the Boundaries Annex, to establish and administer a Middle East Free Trade Area (hereinafter "Gaza Mefta") for a period of 35 years (hereinafter "Gaza Mefta Lease"). Just prior to the grant of that lease, Israel shall transfer to Palestine any title to any claimed land in the Gaza Strip by quitclaim deed. Gaza Mefta shall be a free trade area/special economic zone open to companies of all nationalities to do low-labor-cost free trade business pursuant to the attached Gaza Mefta Treaty Annex. In return for the lease, the MFO shall pay to Palestine 20 percent of all rentals paid by acceding parties to this Treaty for land sites for such parties and their companies they designate to construct buildings in Gaza Mefta. The lease shall automatically be renewed for successive 15-year periods unless Palestine, for any reason, terminates the lease on five years' written notice. Upon termination of the lease the entire area of Gaza Mefta, including Port Mefta and its harbor and all other infrastructure and buildings shall come under the sovereignty of Palestine as defined in the Sovereignty Annex. The MFO agrees that Palestine and its companies shall have normal access to the harbor in Port Mefta at operating cost and Palestine agrees to limit its Gaza City harbor to fishing vessels.

2. The Governments and the MFO agree that the MFO shall ensure equal treatment in Gaza Mefta to Palestine and Israel. In particular: a. the MFO international police force shall include equal numbers of Palestinian and Israeli police in addition to MFO nations' police and police of the Arab Republic of Egypt (hereinafter "Egypt") and the Hashemite Kingdom of Jordan (hereinafter "Jordan"); and

b. the MFO shall provide to Palestine and Israel equal areas of land sites free of rent for them and their companies they designate to construct buildings.

3. The Governments and the MFO agree that all nonexecutive labor, as defined in the Gaza Mefta Treaty Annex, employed by businesses in Gaza Mefta shall be Palestinians approved by Palestine, and Palestine agrees that the wage for each such laborer shall not be greater than the average wage for corresponding Palestinian labor in the Gaza Strip.

4. The Governments agree that in Gaza Mefta the MFO shall have exclusive jurisdiction over all non-Palestinians and non-Israelis.

5. The Governments agree that in Gaza Mefta the MFO shall have exclusive jurisdiction over the crimes of terrorism and smuggling (as defined by the MFO), crimes and civil disputes involving citizens other than Palestinian and Israeli citizens, and crimes and civil disputes between an Israeli citizen and a Palestinian citizen. The MFO agrees that, except for the crimes of terrorism and smuggling, Israel shall have exclusive jurisdiction over crimes and civil disputes solely involving Israeli citizens and Palestine shall have exclusive jurisdiction over crimes and civil disputes solely involving Palestinian citizens.

6. The Governments and the MFO agree that after Gaza Mefta is established, Palestine shall join it as part of a duty-free common economic area in the Gaza Strip with common business laws pursuant to the Gaza Mefta Treaty Annex, and Palestine shall be enclosed along its land boundary by an anti-smuggling barrier pursuant to the Security Annex. Thereafter the flow of goods from Palestine to Israel shall be subject to Israel customs, quotas and regulations as set forth in the Normal Business Relations Annex.

7. The Governments and the MFO agree that Port Mefta shall continue to provide a terminus for a sunken highway and accompanying desalinated water pipe and electricity/communication lines and towers (hereinafter "highway facilities") to a terminus near Hebron, and Palestine (including the PLO and PNA individually) and Israel shall grant 35-year easements to the MFO for the highway facilities, and also 35-year easements to the MFO for an extension of the highway facilities to the border of Jordan. These easements shall automatically be renewed for successive 15-year periods unless Israel or Palestine, for any reason, terminates either or both easements on five years' written notice. The Governments shall delegate sole surface patrol of the highway to the MFO. "

Have agreed to the following details concerning the establishment of Gaza Mefta in the Gaza Strip:

ARTICLE MX1 - GAZA MEFTA

1. Gaza Mefta shall comprise the former Gush Katif excluding Morag plus Port Mefta.

2. When Gaza Mefta is established, all Palestinian nonexecutive workers shall commute from Palestine and not reside in Gaza Mefta, except for those nonexecutive workers then resident for at least five years in what becomes Gaza Mefta, who may remain. The al-Mawasi Palestinians will remain in their strip of palm trees, olive orchards and vegetable farms along the former Gush Katif coast. Palestinian fisherman shall keep and expand their facilities in the Khan Yunis and Rafah fishing villages, as provided in the Oslo II accord. These Palestinian communities shall be free of site lease rentals and not subject to the site priority system. Nor shall later added Palestinian site leases under the site priority system be subject to site lease rentals.

3. The Rafah Terminal along the Egypt border as well as the Gaza International Airport at Dahaniya shall be included in Gaza Mefta and secured and administered by the Mefta international police. A Mefta coast guard and the Palestine coast guard along the coast, and Israel's naval forces limited to international waters, shall fight coastal smuggling.

4. The first stage of the Master Plan for Gaza Mefta shall be a two-year construction period for allocation of building sites by the Mefta Administration and building on the leased sites by the lessees, construction of the added infrastructure and expansion of the Port Mefta harbor. The Gaza International Airport shall be expanded to accommodate jumbo jets, and a separate Mefta arrival and departure building added as an exclusive Mefta facility under MFO administration. Later two-year construction stages shall slowly fill Gaza Mefta as expanding free trade business requires more sites.

5. This Annex shall incorporate those details in the Port Mefta Annex to the extent not inconsistent with this Annex, though the Port Mefta Annex is replaced by this Annex.

ARTICLE MX2 - GAZA MEFTA DETAILS

1. Summary

a. Gaza Mefta shall be a free port/special economic area like Singapore, but with an import duty of zero percent. All imported goods, from food to construction materials to automobiles, shall be free of duty, tax and nontariff barriers. English shall be the official language and the United States dollar the official currency. Mefta shall be open to companies of all nationalities, especially Palestinian and Israeli, who shall do low-labor-cost free trade business. It shall have gambling and duty- and tax-free shopping facilities under the exclusive control of the MFO as a source of Mefta operating funds, though profits of gambling casinos shall be shared with the builder/operator of the casinos. Its business laws shall duplicate Singapore's to the extent applicable. Mefta shall have business communities for manufacturing, commerce, tourism, and research and development, many with their own executive housing. Its deepwater port shall be enlarged by the United States Army Corps of Engineers.

b. The MFO's Mefta Authority Cabinet shall continue to comprise the MFO members -- Australia, Canada, Colombia, Fiji, France, Hungary, Italy, New Zealand, United States and Uruguay -- plus China, Egypt, European Union, Israel, Japan, Jordan, Palestine, Russia and Saudi Arabia. The United States shall continue as chairman and Russia vice chairman. The members of the Cabinet and their staffs shall be paid by the countries of their nationality.

c. The Mefta Authority Cabinet's Mefta Administration, which shall be expanded as needed, shall comprise English-speaking civil servants of many nationalities -- particularly Palestinian, Israeli, Egyptian and Jordanian -- to administer Mefta. The English-speaking Mefta International Police Force shall be expanded and include those nationalities plus MFO nations' police. The employees of the Mefta Administration shall be paid by the MFO.

d. The Mefta Administration shall allocate building sites, pursuant to Mefta Master Plans, to the Gaza Mefta Treaty parties for lease by them and their companies to construct buildings. The MFO shall lease the sites according to a priority system directly to designated companies of the Treaty parties, or to the parties for their own buildings. The Treaty parties and designated companies shall pay the rent to the MFO. The structures on the sites shall be wholly financed by the lessees, and be subject to architectural guide lines of the Mefta Master Plans. The Mefta Administration shall set terms, rents, escalations and other conditions for leases on each of the sites. The best sites shall be allocated to Palestine and Israel.

e. Mefta shall be fully funded by the site lease rentals, profits from the MFO-controlled gambling and duty-free shopping businesses, and donations by the international community, all funds going directly to the MFO. The MFO shall pay Palestine 20 percent of the received site rents, but Palestinian and Israeli site leases shall be rent free.

f. Company executives can be of any nationality, but Palestinians shall have the exclusive right to all nonexecutive jobs in Mefta. Those are unskilled, semi-skilled, skilled, clerical and secretarial workers but not foremen, supervisors and managers. Palestine shall issue the work permits to those workers it approves that are first selected by companies. Palestinian workers living in high-rise apartments in Morag and elsewhere in Palestine shall have a low hourly labor rate because they shall buy all goods duty and tax free and pay low rents for their apartments. The Palestinian executives residing in Mefta shall travel under Mefta or Palestine passports, at their option. The Israeli executives residing in Mefta shall travel under Mefta or Israeli passports, at their option. Palestinians will require Israel visas to enter Israel. Israelis will require Palestine visas to enter Palestine, but not solely to traverse Palestine to enter and exit from Mefta.

g. The Mefta harbor's berth length shall be increased to 600 meters and deepened to accommodate vessels up to 15,000 dwt (Phase IB), a modern container gantry crane added to accommodate full-fledged container vessels and the remaining facilities converted to a bulk terminal (Phase II). When needed the main breakwater shall be extended and the harbor deepened to accommodate vessels of 50,000-70,000 dwt with a multi-purpose terminal (Phase III).

h. The construction of the Mefta infrastructure shall be expedited by the "fast track" method. The United States Army Corps of Engineers shall be the MFO's construction agent in Mefta.

i. Mefta and Palestine shall each be enclosed along its land boundaries by an Israeli-designed high-technology anti-smuggling barrier to help prevent duty- and tax-free goods from being smuggled out, and drugs, arms, explosives and terrorists from being smuggled in.

j. All member countries of the United Nations can be Treaty parties except those subject to United Nations sanctions (Angola and Somalia).

2. Mefta Authority Cabinet and Mefta Administration

a. The Mefta Authority Cabinet shall administer all trade activities in Mefta, and all other nonsecurity matters, aided by the Mefta Administration. Security shall be the sole responsibility of the Mefta International Police Force appointed by the American Director-General of the MFO. The Police Commander shall follow the nationality of the MFO Force Commander (presently Italian).

b. The Mefta Authority Cabinet shall govern Mefta like the government of a small state in the United States. It shall be responsible for providing all necessary services including construction and repair of roads, electricity, gas, water, telecommunications, hospital, ambulance, sewage, garbage and waste disposal, and fire protection. All actions shall be taken by majority vote. Any tie vote shall be broken by the president of the Mefta Authority Cabinet.

c. Generally following the country roles in the MFO operation in the Sinai, the President of the Mefta Authority Cabinet shall be nominated by the United States, Vice President by Australia, Transportation Minister by France, Communications Minister by Canada, Justice Minister by Uruguay and Maritime Minister by Italy. Also, the Agriculture Minister by China, the Tourism Minister by Egypt, the Commerce Minister by the European Union, the Duty-Free Shopping and Gambling Minister by Israel, the Construction Minister by Japan, the Water Minister by Jordan, the Power Minister by New Zealand, the Health Minister by Palestine, the Labor Minister by Russia and the Energy Minister by Saudi Arabia. Fiji, Colombia and Hungary shall appoint ministers without portfolio available to assume other areas of responsibility. The members of the Cabinet shall serve four-year renewable terms. The salaries and expenses of all Cabinet officers and their staffs hall be paid by their countries of nationality.

d. The Mefta Authority Cabinet shall raise capital by the sale of tax-exempt, interest-bearing bonds to finance the costs of the construction of infrastructure, to the extent the international community does not finance those costs by donations. Capital from bonds shall also pay for the construction of additional nondonated Mefta Authority Cabinet and Mefta Administration office buildings, police stations, hospitals, prisons and duty- and tax-free shopping facilities. The Mefta Authority Cabinet may delegate the construction and operation of additional gambling facilities and the duty-and tax-free shopping facilities to qualified jointly-owned companies providing the MFO continues to retain control of each of such companies by a majority of the voting shares of each of such companies, and profits shall be shared equitably with the constructor/operator of each of such facilities.

e. The Mefta Administration's Secretary General, Under Secretary General and Deputy Secretary General shall jointly add permanent civil servants in accordance with Mefta Authority Cabinet guidelines.

f. Pay scales for civil servants shall follow Singapore's formula to encourage good and able men and women to serve without sacrificing their financial livelihood.

g. The Mefta Authority Cabinet's planning and appeal boards shall administer the Mefta Master Plans.

3. Mefta International Police Force

a. The MFO shall substantially expand the Mefta International Police Force to police Gaza Mefta.

b. The Mefta International Police Force shall include English-speaking police of the MFO nationalities, comprising one half of the force, plus Palestinians, Israelis, Egyptians and Jordanians, jointly comprising the other half. The Palestinians and Israelis shall each have one sixth of the total number of police in the force, and the Egyptians and Jordanians shall each have one twelfth, with each of the four contingents having its own captain under the command of the Police Commander.

4. Free Trade in Mefta and Palestine

a. Mefta and Palestine shall comprise a common economic and free trade area in the Gaza Strip.

b. In the Gaza Strip there shall be no duties, customs, tariffs, licenses, quotas or taxes levied on goods or services, including financial and investment services, which are imported or exported, and no restrictions on the movement of capital. There shall be no labeling, standards, sizing, language or other nontariff trade barriers. There shall be no charges for goods that are manufactured, loaded, unloaded, bought, sold, repacked or reshipped, except for services rendered. There shall be no laws, regulations, policies or other nontariff practices restricting trade. There shall be no monopolies. There shall be a free press with no censorship. There shall be no limitation on the creation of investment banks or funds to serve as the lending agencies for the development of businesses. However, banking shall be regulated by the Mefta Authority Cabinet in Mefta and the Palestine Government in Palestine.

c. Each Treaty party shall afford all goods coming from Mefta and Palestine the same duty-free treatment as goods coming from Jordan under the United States-Jordan Free Trade Agreement, including its Rules of Origin.

d. Social security and medical insurance payments shall be withheld from the salaries of all Palestinian and Israeli workers in Mefta. The social security and medical insurance payments withheld from Palestinians working in Mefta shall go to Palestine at the then current Palestine rates, and Palestine shall pay for the corresponding benefits as if the Palestinians worked in Palestine. The social security and medical insurance payments withheld from Israeli workers in Mefta shall go to Israel at the then current Israeli rates, and Israel shall pay for the corresponding benefits as if the Israelis worked in Israel. Other nationals working in Mefta shall pay for and receive social security and medical benefits as if they worked in their own countries.

e. All nationals, including Israelis, shall be subject to their own country's income and any capital gains taxes applicable by their country to taxable persons working abroad. Similarly, corporations doing business in Mefta shall be subject to their own country's taxes applicable to that country's corporations doing business abroad. There shall be no Mefta income or capital gains tax or real estate tax.

f. Singapore's list of controlled imports includes the following, which also shall be controlled in the Gaza Strip: (1) arms and explosives; (2) articles of asbestos; (3) bullet-proof vests; (4) chlorofluorocarbons; (5) pistol-shaped cigarette lighters; (6) fire crackers; (7) handcuffs; (8) nitro-cellulose; (9) poisons and hazardous chemicals; (10) radioactive materials; (11) toy currency; (12) toy guns. These items shall require import certificates from the appropriate agencies of the Mefta Administration and Palestine.

5. Palestinian Job Priority and VAT in Mefta

a. Palestinians living in Palestine shall have job priority in Mefta, followed by Palestinians living in Jordan who originated in Gaza and then West Bank Palestinians. Job and immigration quotas shall be set by Palestine and Jordan. All non-Gaza Palestinian breadwinners shall only have the right to immigrate to Mefta and Palestine upon proof of a permanent and authentic job there and a separate residence for their family plus a work permit from Palestine, but single Palestinian immigrant workers can share rooms. The Police Commander, with the advice of the Israeli and Palestinian security services, shall have the unlimited right to exclude from Mefta those persons deemed by him to be security risks, with no right of review. Illegal immigrants can be deported from Mefta by the MFO with no right of review.

b. No immigrant to Mefta or Palestine can have nontraining support from the United Nations Relief and Works Agency (UNRWA). The United Nations Education, Scientific and Cultural Organization (UNESCO) and UNRWA shall train Palestinians for basic trades like apparel, shoe and electronics manufacturing. Palestinian women shall be trained to machine sew for piece work at home or in factories where the supervisors and workers are all women.

c. Palestinian purchases in Mefta and Palestine shall be subject to a low Palestine value added tax (VAT, not exceeding five percent compared with the PNA's 17 percent) which shall go to Palestine. (The common VAT will expedite the movement of Palestinians carrying goods from Mefta to Palestine, and permit Palestine stores to compete with Mefta stores.) Substantial real estate taxes (real estate will greatly increase in value) shall supplement the VAT to help fund Palestine. There preferably shall be no income or capital gains taxes in Palestine since there are no such taxes in Mefta.

d. Israeli purchases in Mefta shall be free of any value added tax. But such Israeli purchases imported into Israel shall be subject to the Israel value added tax (18 percent) .

6. Mefta Financing

Tax-exempt interest-bearing Mefta bonds used to finance nondonated infrastructure shall continue to be issued by Mefta Bank Ltd., domiciled in Washington, D.C. The bonds shall be paid off from rent payments for leased building sites. Mefta Bank's Board of Directors shall continue to consist of the nominees of each of the 19 members of the Mefta Authority Cabinet, with each having an equal amount of stock.

7. Mefta Constitution, Laws and Court System

a. The salaries and expenses of the seven judge Mefta Court and their office staffs shall be paid by their countries of nationality. The salaries of the court staff shall be paid by the MFO.

b. Palestine shall replace its business laws with the Mefta business laws so there shall be a uniform set of business laws in the Gaza Strip.

c. The Mefta Court shall have exclusive jurisdiction over the crimes of terrorism and smuggling, especially arms, explosives and drugs. It shall also have jurisdiction over all other crimes and all civil matters involving a non-Palestinian or non-Israeli, and between a Palestinian and an Israeli.

d. Resident and commuting Palestinians shall be under the jurisdiction of their own courts in Palestine, except for the crimes of terrorism and smuggling, and criminal and civil matters involving a non-Palestinian, which shall be tried in the Mefta Court. Other crimes and civil disputes solely involving Palestinians shall fall under the jurisdiction of the Palestinian court system in Palestine. (A Magistrate's Court handles small claims, a District Court handles larger claims and a High Court of Appeals serves as "Supreme Court." Palestinian security courts shall have no jurisdiction over accused Palestinians.) Palestinians convicted of terrorism or smuggling shall be imprisoned in Mefta or in Palestine, at the option of the Mefta Court.

e. Resident and commuting Israelis shall be under the jurisdiction of their own courts in Israel, except for the crimes of terrorism and smuggling, and criminal and civil matters involving a non-Israeli, which shall be tried in the Mefta Court. Other crimes and civil disputes solely involving Israelis shall fall under the jurisdiction of the Israel court system. Israelis convicted of terrorism or smuggling shall be imprisoned in Mefta or in Israel, at the option of the Mefta Court.

f. Nationals of Treaty parties other than Palestine and Israel charged with crimes shall have the right of extradition to their countries for trial, except for the crimes of terrorism and smuggling, which shall be tried by the Mefta Court. If convicted by the Mefta Court, the criminals shall be imprisoned in Mefta or in the country of their nationality, at the option of the Mefta Court. Nationals of nonparty states shall be tried for any crime in the Mefta Court and, if convicted, imprisoned in Mefta or their country of nationality, at the option of the Mefta Court. There shall be no right of extradition for nonparty states, although the court could allow it. Extradition agreements between the MFO and Treaty parties, including Palestine and Israel, shall govern the transfer of accused persons to the jurisdiction where an alleged crime was committed.

g. There shall be no patents and copyrights granted by Mefta, to avoid expensive and protracted litigation. Trademarks shall only be protected in Mefta from the crime of counterfeiting, and not from confusing similarity. Mefta trademark registrations to prevent counterfeiting shall be limited to marks previously registered in the United States Patent and Trademark Office. Protection from patent, trademark and copyright infringement shall be in the countries of the imported goods and services.

8. Site Priority System
a. There are three types of site priorities in Mefta: super, primary and secondary. The super priorities recycle three times as often as secondary priorities, and primary twice as often as secondary. Super priorities go to Palestine, Israel, Egypt, Jordan, United States and Russia. The primary priorities go to major powers and the remaining major MFO members -- Australia, Canada, China, Italy, France, Germany, Hungary, Japan, New Zealand and United Kingdom -- in order selected by lot. The secondary priorities go to the remaining MFO members -- Colombia, Fiji and Uruguay -- and then to the remaining Treaty parties, in order selected by lot.

b. Sites for hotels, office buildings, factories and high-rise apartments, as well as for industrial, commercial, residential, and research and development parks, are allocated by types. Thus, the first six shore front hotel (including harbor front) site choices in the Mefta Master Plans shall go to Palestine, Israel, Egypt, Jordan, United States and Russia in that order, as do the next six inland sites and the subsequent six inland sites. The next choices shall be for paired shore front and inland hotel sites. Choices 19 and 28 (depending on selection by lot) could go to Australia, 20 and 29 to Canada, 21 and 30 to China, 22 and 31 to Italy, 23 and 32 to France, 24 and 33 to Germany, 25 and 34 to Japan, 26 and 35 to Hungary, 27 and 36 to New Zealand and 28 and 37 to the United Kingdom. The remaining MFO parties follow with one inland site each in order selected by lot. Then the remaining parties follow with one inland site each in order selected by lot. Then the whole site selection process repeats until all available hotel sites for that stage of the Master Plans have been selected. Prime sites
shall be allocated to additional duty- and tax-free shops and gambling facilities, consulates and international organizations.

c. If construction of the structure specified on a site by the Master Plans is not begun and finished by the lessee by the completion date set by the Mefta Administration, that site and its investment shall be lost and shall be offered to the next one on the priority list willing to complete construction. Site leases can be swapped but not sold.