Washington Report on Middle East Affairs, October/November 1997, Page 39

Special Report

Builders for Peace: Another Casualty in Dying Peace Process

By Eugene Bird

A casualty of the derailed American peacemaking effort in the Middle East is Builders for Peace, the joint initiative launched in 1993 by former Rep. Mel Levine (D-CA) and Arab-American Institute President Jim Zogby as a U.S. government-funded catalyst for American private investment in the Palestinian territories. It will be dissolved by mutual agreement between USAID and its own board, which included both Jewish and Palestinian Americans.

There was no lack of enthusiastic investors, according to sources close to the initiative, which was sponsored by Vice President Al Gore. But a combination of concern by Israelis for protection of their own markets and a Palestinian tendency to centralize regulation of investments led to a complete stalemate. Another major problem was with Israeli security authorities who, from the beginning, blocked shipments of goods across Palestinian borders, even to Jordan and Egypt.

No U.S. official would comment on the decision to end the whole promotional concept, except to attribute it to the stalled peace process. There are no plans to revive Builders for Peace or to attempt to promote American-Israeli-Palestinian business ventures in some other way. In effect, the administration is admitting defeat of efforts to build a Palestinian economy separate from that of Israel, at least during the interim period.

Not a single project of the several dozen seriously considered actually produced any goods. One, however, from an Ohio cast concrete entrepreneur, did result in establishment of a plant in Gaza with Overseas Private Investment Corporation (OPIC) financing. However, the financing was backed by 100 percent collateral in the form of a first mortgage on buildings in Washington, DC. Litigation between the parties on even this investment is expected to drag on for a long time.

The obvious first choice for such investments was the tourist industry in and around Jerusalem. However, the U.S. refused to finance any Palestinian hotels or other projects in East Jerusalem, and OPIC loan reviewers judged a Marriott Hotel for Gaza as too risky. The Marriott Hotel project subsequently has acquired private-sector financing.

Builders for Peace was founded after the handshake on the White House lawn in late 1993.

In announcing its end, USAID indicated that it was a reluctant decision based more on the political problems than on economic ones or lack of investors. In fact, Builders for Peace claims that there was no lack of Palestinian-American investors and that a surprising number of Jewish-Americans also had expressed serious interest over the past three years.

The U.S. refused to finance any Palestinian hotels or other projects in East Jerusalem.

The Builders decision not to seek further funding can be seen as a turning point in U.S. attempts to substitute confidence-building measures for tough decisions on final status issues. If the U.S. desire to create a viable Palestinian economy has been thwarted by Israel's lack of interest in such a development, then the whole basis for U.S. optimism about a peace process based on the division of land and water and access to the outside world for the Palestinians is called into question.

Initially Congress had been quite supportive of the funding for Builders for Peace, seeing it as a cheap way to jump start the Palestinian economy which, according to senior European and American observers, had been deliberately prevented from natural growth during 30 years of Israeli occupation. (See Sara Roy's The Gaza Strip: The Political Economy of De-Development, for example.)

While the demise of Builders for Peace by itself will have little effect on the economies of either the Palestinian territories or Israel, it is proof that from the standpoint of economic decision-making, the autonomous Palestinian areas are still captive. It is also a confession by American officials that even in this limited sphere, the United States will not use its obvious power with either party to achieve its goals, in this case, joint economic development that can only benefit everyone involved, including U.S. investors.

The losers, besides presidential hopeful Gore, are both the prospects for real peace and the peace team, still facing an intransigent Israeli refusal to delay expansion of settlements, particularly in Jerusalem, or carry out pledges to let the Palestinians open the airport and seaport they have constructed in Gaza.

All sources contacted for this article agreed that the basic problem for investors in the territories remains the adamant and self-serving policies of Israel, carefully developed over the past 30 years, to deny development to Palestinian areas, ostensibly on grounds of "security," but also to prevent creation of low-cost competition for Israeli industries and agriculture.

Since the signing of the Oslo accords in 1993, Palestinian per capita income has shrunk by at least one-third and the recurrent, massive closures continue to block any viable export industries and many, if not most, domestic industries.

Israel still has not resolved five-year-old U.S. complaints that Israel has failed to implement agreed market-opening policies for U.S. goods in exchange for very liberal free trade provisions negotiated in the 1980s. These provided Israel with the means to enter the U.S. market with Israeli goods.

Builders for Peace was headed for much of its short life by R. Joseph DeSutter. He had served in White House positions in the Reagan, Bush and Clinton administrations before being named Builders for Peace executive director on March 1, 1994. A former Air Force officer, he also had served as deputy foreign affairs adviser to Vice President Gore, with some Middle East policy responsibilities.

Builders for Peace board members were unavailable for comment. Presumably some of them will continue to work on investments in the Palestinian territories.