Gridlock in Funding for Palestinian Autonomy Imperils Peace

By Frank Collins

More than a year has slipped away since the signing of the Oslo Declaration of Principles (DOP) by Israeli Prime Minister Yitzhak Rabin and PLO Chairman Yasser Arafat. Since then an autonomy authority has been established in the greater part of the Gaza Strip and in a small area of the West Bank enclosing the town of Jericho. For the rest of the West Bank (excluding Arab East Jerusalem), an "early empowerment" agreement was signed at the end of August but is not yet operative.

In the autonomy area of the Gaza Strip, the changes are immediately apparent. The returning visitor is struck by the almost complete absence of grim-faced Israeli soldiers with their fingers on the trigger. The nightly curfew of the 850,000 Palestinians in the Gaza Strip is over and, in the evening, the beaches and the cafes are crowded and young men are relaxing on chairs along the sidewalks. The hated compound of the former Israeli civil administration in Gaza City, still with its 20-foot-high barbed wire fence but with Palestinian flags flying, is now open to all who walk in wanting to visit the offices of the Palestinian National Authority (PNA).

In Jericho, there is little visible change except for the Palestinian flags and the addition of Palestinian checkpoints on the highways. Jericho again has the appearance of a sun-baked sleepy village now that Arafat has departed and the swarm of journalists have lost their interest.

In the rest of the West Bank, the signing of the "early empowerment" agreement at the end of August will not change the outward signs of the occupation. The early empowerment agreement does not call for the redeployment of a single Israeli soldier. The limited administrative powers (education, health, social affairs, sports and youth, tourism, and the collection of taxes) that have been turned over to the Palestinians will make no major change in their lives.

In Hebron, the Israelis reinforced their military presence following the April massacre of 29 Muslim men and boys in the Al-Ibrahimi mosque by Israeli settler Dr. Baruch Goldstein. The central section of this major West Bank Palestinian town now is completely closed off for the benefit of 400 Israelis who live in scattered mini-settlements there. Many restrictions have been imposed on the movement of the town's 80,000 Palestinians, but Jewish settlers are free to go anywhere, and the Israeli army does not interfere with their continual harassment of Palestinians.

The more than 2,000 military orders, regulations that have the force of law in the occupied territories, remain in effect except for fewer than 100 which have been superseded by the DOP and its Cairo implementing agreements. Despite the limited immediate effects of these agreements, in the long run they will form the basis of all future relations between Israel and the Palestinians unless they are overturned following a change in the Israeli government.

The Principal Hurdle

The principal hurdle to the full implementation of autonomy in the Gaza Strip and Jericho is the question of money. Beyond the costs of the start-up of the autonomy, its success finally will depend, in large part, upon the rehabilitation and development of the infrastructure of the territories which has been almost totally neglected by the Israelis for the past 27 years.

The United States, to be consistent with its pursuance of the Middle East peace process over many long years, could have single-handedly assumed responsibility for the financing of the autonomy in the same way that it has with the more than $4 billion in annual grants and $2 billion in annual loan guarantees to Israel and the grant aid to Egypt originally offered as an inducement to sign the Camp David accord and now at $2.3 billion annually.

Instead, the Clinton administration called on the whole world to contribute to the much smaller sum required for the financing of the Palestinian autonomy. Pledges amounting to $2.4 billion over five years were made at a meeting of donor countries a few weeks later. The World Bank was called in to administer and audit the expenditures. Instead of being offered as grants, the pledged money will be largely in the form of financial backing to the Bank for repayable interest-bearing loans that the Bank will advance to the PNA in accordance with the Bank's standing regulations.

In spite of President Clinton's enthusiastic endorsement of the Oslo Declaration of Principles at the time of its signing on the White House lawn, such subsequent developments raise the question of whether the president actually is washing his hands of U.S. responsibility for the future of the Israeli-Palestinian accord.

The World Bank arrangement already has run into difficulties. World Bank loans normally are designed to fund resource development projects in the borrowing country. Such projects ordinarily require one to two years for planning and preparation before the loan money becomes available to the borrower.

The Palestinian autonomy commenced in an administrative vacuum. The ministers appointed by Palestinian National Authority President Arafat may have offices in the former Israeli civil administration compound in Gaza, but they have no supporting staffs or funds with which to hire them.

The same is true for the Palestinian Economic Council for Development and Reconstruction (PECDAR) appointed by Arafat to handle relations with the World Bank and the donor countries. Immediate money is required to hire the technical staff needed to prepare and submit project proposals to the World Bank for funding. By September, few formal project proposals had been submitted.

In fact, it was only after several months that the World Bank took steps to make funds available for the start-up of the autonomy. The sum of $42 million first was allocated in monthly installments of $13 million, each to be doled out after the approval of the past month's audit. That arrangement was put in place because of World Bank reservations as to the proper handling of the money by the PNA.

Arafat's deputy, Nabil Shaath, complained that as of early September the PNA had received a total of only $80 million in start-up and project funding. To reduce further delays, the World Bank and the donor countries scheduled a Sept. 9 meeting in Paris to make $160 million immediately available for start-up purposes.

The meeting ran instantly into the differing political agendas of the two parties to the Oslo agreement and was cancelled on the day it opened because of Israeli objections to Shaath's insistance that $4 million of the $160 million be allocated to Palestinian facilities in East Jerusalem. "We couldn't possibly be seen as compromising our position on Jerusalem as a price for continuing the donor program," Shaath explained.

In Oslo, only days later, the World Bank rebuked both sides for allowing the dispute over Jerusalem to halt the flow of funding. The Palestinians dropped the Jerusalem funding request and a new meeting was scheduled to start the flow of desperately needed funds. In the meantime, cash difficulties of the autonomy multiplied with the opening of the schools on Sept. 1 and with further delay in the hiring of the large bureaucracy required to collect taxes.

The lack of funds for the autonomy is not the only economic problem facing the PLO leadership. The general economy in the occupied territories is in a deep depression, particularly in the Gaza Strip where unemployment in estimated to be between 40 and 60 percent. This results from the closure of Israel to Palestinian workers imposed at the end of March 1993. While the closure has been relaxed and permits to enter Israel have been given to as many as 40,000 Palestinians, jobs for most of them have vanished due to the importation of 30,000 foreign workers, mainly from the Balkan countries. They work for even lower wages than those formerly paid to Palestinians. Therefore, there can be no recovery of the Gazan economy without the infusion of generous outside funding for projects within the Gaza Strip itself.

Most Gazans had unrealistically expected an immediate substantial improvement in the quality of their lives with the coming of the autonomy. The contrary is taking place. The standard of living continues to deteriorate with the onset of inflation caused in part by PNA decrees with respect to trade with Israel. As one example, limits on the importation of frozen chicken from Galilee imposed by the PNA have doubled the price of this commodity, a staple in the Palestinian diet.

Predictably, in the Gaza Strip Arafat is being accused of caring more about the symbols of Palestinan authority than about the welfare of his people.

Critics also cite his alleged unwillingness to submit his decisions to the give and take of democratic discussion. His authoritarianism is alleged to extend even to the exclusion of his closest associates from decision making. While acknowledging that such secretive leadership is normal in a resistance movement, critics say that opening up discussion of PNA decrees is essential now to avoid repetition of some of the colossal miscalculations for which the Palestinians have paid dearly in the past.

Despite such miscalculations as choosing the losing side in the 1990-91 Gulf war, Arafat has retained power through his absolute control of PLO funds, even to the extent that his associates are said to have no knowledge of the banks where the funds are deposited. Both the power that this state of affairs gives Arafat, and the weakness to which it condemns his government may be inferred from a report by Sever Plotzker in Tel Aviv's Hebrew-language daily Yediot Ahronot of July 3, 1994:

"A PLO delegation traveled last week to Washington in a bid to prevail upon the World Bank and the State Department to change the already agreed-upon procedures for the distribution of aid. The chief delegate, Abu Ala, is a serious and talented person. He carried Arafat's message to the effect, 'Give me the money and let me distribute it as I please. Why should it matter to you how the money is distributed? We agree that afterwards your auditors may record how every dollar was spent. The bids will be open, the contracts will be OK. But, as the PLO chairman, I find it imperative that every single check carry my signature. Only in this way can I retain influence in the territories.'"

Arafat's practice of signing every payroll check naturally enforces a higher degree of conformity than initiative among PNA officials. This explanation of PNA methods did not impress the State Department and the World Bank, and their procedures so far remain unchanged. The result is gridlock in an endeavor to whose success not only the PNA but also Israel's Labor government and the Clinton administration profess to be committed.

Frank Collins, a regular contributor to the Washington Report, spent last August in the occupied territories.