Palestine hopes donor countries money continue to flow
Palestine, Economics, 6/30/1998

The donor countries have so far paid to the Palestinian government almost half of the amount of money they pledged back in October 1993 to allot for the Palestine, said Mohammed Ishtayeh, a leading Palestinian economist.

Ishtayeh, director general of the Palestinian Economic Council for Development and Reconstruction, PECDAR, said that the Palestinian government received over the past five years US $1.6 billion whereas in their conference back on 1st October 1993, the donor countries pledged to pay $ 3 billion over a period of five years. "We hope that another international conference for the donor countries will take place next October and a new decision is taken to continue the financial aid to the PNA," said Ishtayeh.

Since June 1994 until today, the donor countries have paid $ 285 million for Palestinian government salaries. Another $ 350 million went to technical aid that those countries provide to the Palestinian people, in the form of foreign experts, studies, viability researches and training. A considerable amount of money also comes to the Palestinians through non-governmental organizations that operate in Palestine. But according to Ishtayeh, the most useful segment of financial aid was that of money that went directly to infrastructure projects where the results were immediately seen on the ground. Those projects, Ishtayeh noted, include new roads, sewage water systems, water pipes to remote villages, health and educational services, environment and agriculture.

Ishtayeh has no explanation as to why have the donor countries paid only half of what they pledged the Palestinian government. He said that it looks like there is a big difference between pledging to pay and being committed to payment. Some of the donor countries, he said, claimed the Palestinians were neither sufficiently nor efficiently capable of handling a huge set of responsibilities "but this is far behind us. The Palestinian government, through a cluster of bodies including PECDAR, is capable of handling projects worth of US$ 120 million per year provided the money is of course available."

The unique element in the donor countries' aid is that the money comes for political reasons and one day they might cease to flow, either if the peace process leads to acceptable solutions to both sides or if it falls apart. "Therefore we have demanded that aid from the donor countries continue to flow in the future as well. We hope an international conference will be held next October on the fifth anniversary of the international commitments in order to renew international aid to the Palestinian people by five more years," said Ishtayeh. He warned that in some cases the damage caused to the Palestinians due to the Israeli closure policies outnumbered the aid the donor countries paid to the Palestinians. "But as a national authority, we need not make ourselves slaves dependent only on foreign aid. If we need a school and the money does not come from those countries, the Palestinian government would still build the school using other resources. What matters for us today is not to eat fish but to learn how to fish (collect) it from the sea.

What would happen if the donor countries stop to pay their money in a year >from now? The Palestinian economy is efficiently capable of steadfastness, argued Ishtayeh. "But the situation is certainly going to be tough. The Palestinian economy, he said, relies to a great extent on domestic products and on money Palestinians receive from relatives abroad. In periods of Israeli military closures on the West Bank and Gaza, the only source of income was basically the donor countries and the money relatives sent from abroad. "Without the money of the donor countries the development plan for Palestine and the Palestinian development plan will become only a brain exercise that has no chances of implementation," warned Ishtayeh.

He disclosed that the Palestinian government had prepared a three-year development plan, which is no more of a work guide that projects the set of priorities the Palestinian society, including its economic, social and infrastructure sectors, needs over the coming three years. He noted that the major challenge for the PNA is to limit the rising rate of unemployment among the Palestinians. The continued Israeli military occupation and the Israeli laws that bar Palestinian workers from working in Israel, he said, have added up to this unemployment crisis. Ishtayeh said the Palestinian government tried to solve the unemployment crisis by creating jobs for Palestinians within the Palestinian government apparatus, even if those jobs were not really needed. Thus, he said, 64 to 66 percent of the Palestinian budget goes to salaries, causing almost permanent deficits. He said that last year the Palestinian deficit reached US $ 52 million. "This year, however, it is early to judge because the year has not ended. But the Palestinian government has already adopted a tightening policy to decrease its expenditures and fight deficit," he said. PECDAR itself, said Ishtayeh, has spent over the past years $ 70 million in Gaza and 30 million in the West Bank fighting unemployment. "We hope the donor countries continue to finance those projects. This year, we have finished all the money we had allotted for this project," he said.

Since it was established four years ago in the Gaza Strip and parts of the West Bank, the Palestinian government has been unable to implement all its plans in those areas. The lack of geographical contiguity in the Palestinian government areas has made it almost impossible to carry out projects and plans in an effective and efficient way. The major Palestinian cities are today isolated Palestinian enclaves in an area ruled by the Israeli army. So even road networks between these cities are not all within the Palestinian government responsibility, at least not before the Israeli withdrawal out of the West Bank is completed, if ever. Yet PECDAR has prepared plans to reconstruct some of the main roads that link between some of the cities and villages. "This is top priority for us but many of the donor countries do not agree with us and therefore withhold their money for these projects,' said Ishtayeh who gave a list of problems and difficulties that make the work of the Palestinian government and of PECDAR "a real tough job."

The top duty the Palestinian government has put for itself is the reconstruction of the Palestinian economy's infrastructure. One of the topics, for instance, is to decrease the number of Palestinian workers who depend on their work places inside Israel and to find alternative work places for them within the Palestinian government areas. "We need not only to develop productivity among the Palestinians but also to boost their capabilities to liberate themselves gradually from being economically run or influenced by the Israeli economy. We need to find ways that would allow us to export to Israel products and not only labor force," said Ishtayeh who considers PECDAR to be the executive arm of the Palestinian government in designing and implementing plans of development and reconstruction in the Palestinian territories.

PECDAR's mandate is to offer plans and guidance to various sectors of the Palestinian economy. For instance, it was the group that prepared the plan for privatization of the communications sector in the West Bank and Gaza Strip. It is currently preparing a plan for privatization of the energy sector and for setting up a weather forecast authority. Other plans and guidance papers PECDAR is involved in cover sectors of tourism, water, traffic, roads, and others. It has projects and plans pending implementation until the year 2005. The importance of PECDAR is that its financial papers are open for scrutiny by any donor country and its operations are transparent. Unlike finance ministries where a donor country has no right to go through papers of that ministry to check if the money is appropriately spent, PECDAR's budget is always checked by solicited bookkeepers from the World Bank.

"The question we need to answer is whether we are capable of learning from experiences of other nations and countries that had passed similar interim phases like ours," said Ishtayeh. "We need to learn from those countries a lot on subjects like restructuring the economy, privatization, relations between the public and private sectors and urging foreign capital to invest in Palestine." But the Israeli measures in the Occupied Territories and against the Palestinian government areas affect the Palestinian economic performance in the West Bank and Gaza Strip. The gross domestic product has gone down by 23 to 25 percent lately and as such has minimized the capacity of producers and factories to pay their taxes due to the Palestinian government and their value added tax which in itself forms a major source of income for the Palestinian budget.

The Palestinian government economy cannot function independently simply because it is closely connected and even dependent on the economy of other countries like Israel and Jordan. The Palestinian economy to a large extent is still dependent on the Israeli economy and to a lesser extent on the Jordanian economy. Therefore any crisis that hits the Jordanian or the Israeli economy affects the Palestinian economy as well. Any devaluation of the Israeli shekel or the Jordanian dinar, for instance, can automatically and directly influence the Palestinian government budget and the personal budget of the average Palestinian and his power of purchase. According to Ishtayeh, there are some 2.5 billion Israeli shekels in the domestic Palestinian market and some 500 million Jordanian dinars, which form one third of the bank notes issued by the Central Bank of Jordan.

According to Ishtayeh, it is still early to demand compensation from Israel and prefers to leave this subject to the final status talks between the Palestinian government and Israel. "The issue of compensation," he said, "does not relate only to Palestinian losses over the past three or four years. Israel should compensate the Palestinians for the injustice it caused them since its proclamation in 1948," he said. He noted that the Palestinians never dropped their demand for compensation from Israel though this issue has not been put on any talks agenda. Palestinians in general argue that Israel received huge amounts of money as compensation from German and that by the same token, they are entitled to compensation from the Jewish state. Palestinians have made it clear time and again that they would not forget their right to return or repatriation for those who do not wish to return.

Previous Stories:
  Five-year plan to develop Palestinian hospitals   (6/22/1998)
  Comprehensive report on Palestinian economy   (5/29/1998)
  Bethlehem 2000: Birthplace of Jesus to have a big party   (5/21/1998)

Please add a link on your webiste pointing to ArabicNews.com and bookmark ArabicNews.com & subscribe to our daily email news bulletin.

Search