Any attempt of the Bush administration to restart the peace process in the Middle East must first recognize why the Palestinian economy is on the brink of collapse.

According to surveys by the research centre of the Israeli Yad Tabenkin, the West Bank per capita gross domestic product (GDP) before the Oslo accord in 1993 was approximately $3,500, and in Gaza, about $2,800. Now, the per capita GDP for both territories is around $1,300. And UN Envoy Terje Roed-Larsen says that 30 percent of the Palestinian people live on less than $2.10 a day.

Before Yasser Arafat and the Palestinian Liberation Organization (PLO) entered the territories in May of 1994, the Palestinian per capita GDP in the West Bank was about 40 percent of the $8,000 Israeli per capita GDP for the same period, and in the 1990s, the economic development of the West Bank exceeded that of Israel. If that trend would have been allowed to continue, the West Bank’s GDP would have reached at least $7,000 by now, similar to Saudi Arabia, and 700 percent higher than the average in other oil-devoid Arab states such as Egypt, Syria, Jordan and Morocco.

In 1990, the CIA estimated that the PLO had between $8 billion to $14 billion worth of assets generated from a 5 percent tax on every Palestinian working in Arab countries. However, according to a 1993 British National Criminal Intelligence Service (NCIS) report published on the eve of the famous "hand shake" on the White House lawn, most of the PLO’s assets originated from "donations, extortion, payoffs, illegal arms dealing, drug trafficking, money laundering, fraud, etc." A General Accounting Office (GAO) investigation of Mr Arafat in November 1995 was kept secret, due to "national security interest." Subsequent to the "hand shake" on the White House lawn on Sept. 1993, Arafat received at least $3 billion more from the United States and the international donor community, again, without any serious demand for accountability. The present condition of the Palestinians in the territories is a grim affirmation that becoming the official leader of the Palestinian people did nothing to change Arafat’s old habits.

Shortly after the current Intifada began, Arab donor countries pledged to give $1 billion to the Palestinian Authority to ease the economic hardship of the Palestinian people. However, the Arab donors’ past experience with money given to Arafat and the Palestinian Authority prompted them to demand, according to reports in Ha’aretz, the Israeli daily, that "Chairman Arafat show complete transparency in the funds" and a detailed report on how it was spent. Arafat and the Palestinian Authority declined to comply, and the Arab donors suspended the transfer of the money "for fear that the money will end up in the wrong pockets." The rapidly growing, very visible social disparity in the territories — rows of ostentatious villas and late model Mercedes-Benz automobiles for Arafat’s cronies while most Palestinians live in dismal conditions — began to threaten Arafat’s leadership. Igniting another Intifada enabled Yasser Arafat to redefine the economic decline in the territories as "sacrifices" to mobilize against the "zionist enemy," while blaming the victim of the violence, Israel.

In 1994, British National Criminal Intelligence Service (NCIS) sources asserted that following Oslo, the PLO’s illegal activities actually increased. No Robin Hood, Mr Arafat kept the loot for himself and his cronies, hiding large amounts of money in Swiss and other secret bank accounts, and making large investments in real estate and industry all over the world. At the same time he has done nothing to improve the living conditions of the Palestinians he allegedly collected the money for. Never having to account for the billions he had stolen, he continues to claim poverty.

Now the cat is out of the bag: The Palestinian Authority has admitted that the current Intifada was planned in detail last July following the failed Camp David Summit. Imad Faluji, the Palestinian Authority’s communications minister, told a PLO rally in the Ein Hilwe refugee camp in South Lebanon on March 2 that, as part of that plan, all the PLO "military action groups of the 1960s, 1970s, and 1980s are returning to work to escalate the fighting against Israel." Arafat has successfully claimed that Israel causes the economic hardship suffered by the Palestinian people. These claims are based on two fundamentally false assumptions: One, that Israel, rather than Chairman Arafat’s misgovernance and corruption, is responsible for the economic collapse; and, two, that on some level, there is still some hope or belief that the disingenuous behaviour Arafat and the PLO’s leadership is a result of pressure from the street resulting from lack of tangible gains to the average Palestinian rather than Arafat’s intentions and a reflection of his bad faith in entering the Oslo process in 1993, that led to the establishment of the Palestinian Authority.

Arafat’s past is a good indication that he will continue to use terror and corruption to stay in power. He does not want to give peace a chance because in peacetime the Palestinians working in Israel will earn many times over those working under Chairman Arafat’s corrupt leadership in the West Bank, and especially in Gaza, where they will continue to earn a pittance. This will lead, as it already has, to demands to end corruption, thus, threatening Arafat’s regime.

That, more than anything else, explains the failure of "the peace process" wherein the Barak government made unprecedented concessions that Arafat failed to accept as a compromise to end the conflict. And it is why any attempt by the Bush administration to pick up the pieces of the failed effort appear, at best, extremely difficult.

 

Rachel Ehrenfeld is Director of the New York-based Centre for the Study of Corruption and the Rule of Law. © 2001 News World Communication Inc. Reprinted with permission of The Washington Times.

---

Some Facts About the Palestininan Economy

* In the wake of the violent confrontations with Israel, the PA is experiencing a financial crisis. This is because the riots caused a significant decline in the revenue from taxes collected by the PA and a reduction in revenue from money transferred from Israel. Accordingly, the PA has expended great effort in different channels to obtain aid for its activities. This effort has so far yielded $140 million in Arab and international aid and enabled the PA to continue paying salaries regularly to its approximately 100,000 employees.

* During the current conflict, from the beginning of October 2000 until the end of that year, Israel has transferred NIS 407 million (approximately 100 million US dollars) to the Palestinian Authority from indirect tax revenues that Israel collects on the PA’s behalf, as set forth in the interim agreements. This amount is lower than the sum normally transferred (pre-October 2000) because of a decrease in the economic activity in the PA, as well as a decrease in the economic activity between Israel and the PA.

* The economic difficulties of the Palestinians are directly linked to their choice of violence and terrorism as the way to achieve their political goals. The PA has been tied to terrorist activities, incites to violence and is not doing a thing to prevent any of these acts. Terrorism forces Israel to adopt stringent security and cautionary measures to minimise the dangers and prevent attacks and injuries. As a natural result of the violent events, there has been an appreciable decline in economic activity. This decline has led to decreased income for the Palestinians, from salaries and taxes, as well as a considerable increase in poverty among the population.

* At the same time, alongside the strict security measures, Israel is doing everything it can to make things easier for the Palestinian population, in the framework of what is called a "permeable" closure. This means that the closure, for humanitarian reasons, is not "hermetic" and therefore Israel is taking upon itself an enormous security risk that has so far cost the lives of dozens of Israelis and injured hundreds more.

* Israel is allowing the free entry of consumer goods, food, fuel and medicines (humanitarian aid) - as well as unlimited transport of agricultural produce intended for export or for use in other areas of the PA. The main crossing to Gaza was closed for only 5 days because of the disturbances. The Palestinians, by their own decision, closed it from their side for an additional 13 days.

* In addition, despite the enormous debts owed by the PA and semi-governmental bodies within it (for example the electric, telephone and cellular phone companies) to Israeli companies supplying these services. Israel, for humanitarian reasons, is not disconnecting the Palestinians from these services, and is itself absorbing the costs.

* When the violence first broke out, Israel did not immediately halt the "ongoing employment" program, attempting to allow Palestinians to continue working in Israel, so that their livelihood would not be disrupted. The regular work program was stopped only after the disturbances intensified. Attempts to reinstate the program failed because of terrorist attacks on Israeli citizens.

* In contrast, work in the industrial areas along the "seam line" was not halted, although the amount of work has diminished due to violent Palestinian attempts to prevent workers from arriving at these areas and as a result of the burning of industrial areas (such as the one near Tulkarm) by Palestinians.

* Recently, official elements in the PA have placed a boycott on certain types of Israeli goods, threatening to arrest anyone who violates the decree. We know of cases where Israeli goods have been taken off the store shelves.

* It should be pointed out that the PA, in order to make the picture of suffering, which is bad enough, look even worse, likes to cite incorrect information to international investigative bodies. Thus, for example, UNSCO’s report, based on Palestinian information, states that the Karni crossing, through which goods are transported between Gaza and Israel, was closed for 93 days. In reality, according to the Coordinator of Activities in the Territories, the passage was closed for only 18 days, thirteen of which were at the instigation of the Palestinians themselves. The report also states that Allenby Bridge was closed for 35 days when, in fact, according to figures from the Airport Authority (which operates the crossing), the bridge was closed for only 16 days.

* Israel regrets the great suffering caused to the civilian Palestinian population, whose situation has deteriorated to one of great economic distress, poverty and unemployment. However, the biggest source of regret is that the PA has not reached an agreement with Israel, an agreement that was possible in light of Israel’s sweeping concessions.

(Prepared by the Israeli Ministry of Foreign Affairs)