US mulls aid package for peace process
Regional-Palestine-USA, Economics, 3/26/1999

US Undersecretary of State for Near East Affairs Martin Indyk told a Senate
Appropriations subcommittee yesterday that US financial aid plays an important role in the Middle East peace process, as he lobbied for the approval of a $400 million supplemental request for the Palestinians as part of a $1.9 billion financial aid package that would be distributed over three years with the implementation of the Wye River accord.

Indyk indicated a strong link between US economic and political goals in the Middle East, saying, "With a GNP approaching $100 billion and a standard of living equal to much of Western Europe, Israel is now able to stand on its own feet economically and this has enabled the Congress to begin the phase-out of economic assistance to Israel. On the other side, Israel's Arab partners in the peace process face daunting economic challenges, first and foremost high unemployment rates, which are undercutting support for the peace process. Unemployment in the West Bank/Gaza and Jordan is in the 20-30 percent range. Per capita incomes are one-tenth of Israel's. And with populations that expected a dividend in return for the risks their leaders took for peace, continued economic stagnation is damaging to the peace process and to our interests in the region."

He detailed the complete package submitted to Congress as providing "$1.2 billion in foreign military financing (FMF) for Israel; $400 million in economic support funds (ESF) for the Palestinians; $300 million for Jordan, broken down as $100 million in economic support funds (ESF), and $200 million in foreign military financing (FMF)."

In the fiscal year 1999, just under half of the total package would be made available, with "$600 million in FMF for Israel; $200 million in ESF for the Palestinians; and $100 million for Jordan -- half ESF, half FMF."

In the fiscal year 2000, allocations would include "$300 million in FMF for Israel; $100 million in ESF for the Palestinians; and $100 million for Jordan -- again, half ESF, half FMF."

In the fiscal year 2001 allocations would include "another $300 million in FMF for Israel; another $100 million in ESF for the Palestinians; and $100 million for Jordan -- this time all of it as FMF."

"Disbursement of both the Israeli and Palestinian components of this package would only occur in the context of Wye implementation," Indyk said.

He noted that the Palestinians have "pressing" economic needs associated with the peace process, saying, "Their standard of living has fallen by some 40 percent since the signing of the Oslo accords. Instead of enjoying the tangible benefits of peace, the Palestinian economy has suffered a severe downturn."

Indyk noted Palestinian security efforts under the Wye accord: "Since the signing of the Wye Memorandum, the Palestinians have taken some important steps to combat terrorism and terrorist organizations." However, despite "important progress" on this issue, Indyk indicated that, "More can and must be done because it is essential to peace that the Palestinians make a 100 percent effort to fight terrorism, both unilaterally and in cooperation with Israel."

He said Israel requested aid based on security costs incurred in implementing the Wye agreement, "broken down into the costs of relocating military facilities; providing security, and constructing by-pass roads; meeting strategic military requirements; meeting counter terrorism requirements; and meeting other civilian needs -- for example in the water sector." He indicated that the US is negotiating with Israel to define the allocations for security-related assistance.

The $400 million in aid to the Palestinians would be distributed with $200 million in 1999 split evenly between specific projects "directly related to Wye implementation" and "urgent Palestinian needs." The remaining $200 million would be allocated half in the fiscal year 2000 and half in 2001, Indyk said.

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