Australia/Israel & Jewish Affairs Council

The State of the Palestinian Authority

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Update from AIJAC

July 3, 2009
Number 07/09 #03

This Update is devoted to some new discussion of the state of the West Bank-based Palestinian Authority (PA) and its readiness to play the main role in pursuing peace with Israel.

First up is Yossi Alpher, a former intelligence official and academic turned peace activist, now co-editing the Bitterlemons group of publications devoted to Israeli-Palestinian dialogue. He looks at how the Palestinians, and particularly Palestinian Authority President Mahmoud Abbas, have presented the contents of talks with Israel's Olmert government last year. Alpher argues that it is a very poor omen for peace that Abbas is presenting Olmert as having offered the Palestinians essentially everything on their list of demands, but still insisting "the gaps were wide." For this look at the message even the most moderate of Palestinian leaders is sending about peace, CLICK HERE. A new short video about the real obstacle to Israeli-Palestinian peace more or less squares with Alpher's argument. 

Next up, Barry Rubin looks at the response by Palestinian Authority PM Salaam Fayad to Israeli PM Netanyahu's speech on peace policy at Bar Ilan University. Rubin points out that Fayad was vague, made some dubious points about the "weaker side" being forced to make all the concessions, and while disputing the Israeli narrative, declined to explain the Palestinian narrative - because, Rubin says, the traditional Palestinian narrative basically contradicts any future two state resolution. Rubin also makes clear that while Fayad is moderate himself, he is disliked not only by Hamas, but by most of Fatah, and is only being kept in office to assuage Western donors who like his genuinely impressive economic credentials. For more on the Palestinian Authority PM and his statement on peace, CLICK HERE.

Finally, Mohammed Yaghi, Palestinian journalist and Palestinian affairs expert at the Washington Institute for Near East Policy, examines the Palestinian Authority's latest financial crisis and the reasons for it. Yaghi points out that the Palestinian Authority is having to borrow large amounts of money because international donations are not coming in at the expected rates - especially in terms of pledges made by Arab states. He also identifies the loss of Gaza revenue and Israeli security restrictions as contributing to the shortfall, and suggests some solutions. For his full discussion of the PA's financial situation, CLICK HERE.

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A blow to the chances for peace

by Yossi Alpher

Bitterlemons.org, 29/06/09

The Israeli-Palestinian final status negotiations launched by the Annapolis meeting of late 2007 never seemed to have a serious chance of success. The leaders on all sides--Israeli, Palestinian and American--were either too weak or too disinterested. Some supporters of the negotiations, which lasted throughout most of 2008, went so far as to argue that even hopeless talks were important as a means of underpinning the security and economic confidence-building measures being implemented simultaneously in the West Bank. And if the talks did somehow succeed, their outcome was in any case destined by Annapolis to become a "shelf agreement" that awaits completion of phase I of the roadmap and the restoration of PLO rule in the Gaza Strip.

Palestinian President Mahmoud Abbas and former Israeli PM Ehud Olmert recently discussed with the American press (in interviews in the Washington Post on May 29 and Newsweek of June 13, respectively) the extent to which they actually reached agreement in their 2008 negotiations. The "product" they describe is roughly similar to the Clinton parameters of 2000, the Taba agreements of early 2001 and the unofficial Geneva accords of 2003. Bearing in mind the two leaders' apparent inability to even contemplate implementing an agreement, these appear to be the not-so-original details of yet another virtual Israeli-Palestinian exercise in peacemaking.

Perhaps the protocols the leaders left behind will prove useful for future peacemakers. But we also have to hope that the ultimate failure of their negotiations will not negatively affect the willingness of the next generation of leaders to try again. Personally, this is why I opposed the Annapolis process: to engage in negotiations that have no chance of reaching fruition and success is liable to mean adding yet another layer of failure to the increasingly depressing structure of abortive Israeli-Palestinian peacemaking enterprises. That is liable to deter rather than assist the next set of negotiators. How many more times will Israeli and Palestinian leaders agree to risk their political careers and perhaps their lives and reinvent the very same peace wheel, only to see it fall off its axle?

Olmert says he offered Abbas 93.5 to 93.7 percent of the West Bank, along with 5.8 percent in land swaps and a Gaza-West Bank safe passage corridor. Abbas recalls the offer as 97 percent. Both agree that Israel agreed to accept a small number of Palestinian refugees, with Olmert adding that he rejected the right of return and offered limited return to Israel as a "humanitarian gesture". Olmert also offered to, in effect, internationalize the Jerusalem Holy Basin. Olmert's interviewer reports that Palestinian chief negotiator Saeb Erekat "confirmed that Olmert had made the offer. . . . [Olmert] was serious."

Erekat claims the Palestinians needed time to study Olmert's offer and prepare a reply and that time ran out when Olmert resigned and Israel invaded the Gaza Strip. But that's not what Abbas says (nor has anyone in his entourage denied what he told the Washington Post's Jackson Diehl)--and this is the troublesome part for anyone examining this negotiating experience for clues as to future chances of success.

Every so often, a national leader makes statements in an interview that redefine his position on the world stage. Abbas appears to have done this. Abbas chose to interpret whatever statement of empathy Olmert made about the refugees--the effort the Israeli leader apparently undertook to offer the Palestinians some sort of psychological closure regarding the events of 1948--as acceptance of the right of return, while the Israeli prime minister understood he was saying the opposite and rejecting the right of return. Abbas looks at an offer of virtually the entire territory of the West Bank, internationalization of the disputed holy sites in Jerusalem and (according to him) the right of return, turns it down and says "the gaps were wide".

Can we Israelis be blamed for suspecting that we really do not have a partner for a two-state deal?

This is very bad news indeed. Abbas is about as moderate as the Palestinian leadership gets. Olmert proved to be about as moderate as the Israeli leadership gets, placing himself on a par with Yossi Beilin, the chief Israeli architect of the Geneva accords. I know of no other Israeli leader who would wish to offer the Palestinians even more in order to close the gap. I myself would not have offered as much: I believe Palestinians must accept an unequivocal Israeli position that the right of return contradicts the very spirit of a two-state solution. I also would argue that the West Bank-Gaza safe passage corridor is "worth" a lot more than around one percent of the "swaps" calculation, if only because a Palestinian state cannot survive without it.

Be that as it may, I can only hope that somewhere, waiting in the wings, is the Palestinian leader capable of broadly accepting at least Olmert's offer--and without distorting it. Or that some sort of international leadership, Arab or American, will prove ready and able to persuade the Palestinian leadership and public to make the necessary concessions. Otherwise, the chances of a successful two-state breakthrough in the near future were definitely reduced by Abbas' statements.- Published 29/6/2009 © bitterlemons.org

Yossi Alpher is coeditor of the bitterlemons.org family of internet publications. He is former director of the Jaffee Center for Strategic Studies at Tel Aviv University.

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The Region: The world according to Fayad

Barry Rubin

THE JERUSALEM POST,

Jun. 28, 2009

Prime Minister Binyamin Netanyahu's big policy speech received global attention. Not so that of his Palestinian Authority counterpart, Salaam Fayad, whose June 22 presentation deserves careful analysis.

Fayad is prime minister for one reason only: to please Western governments and financial donors. Lacking political skill, ideological influence or a strong support base, he does keep the money flowing since he's relatively honest, moderate and professional on economic issues.

But his own people don't listen to him. Most PA politicians want him out; international pressure keeps him in. So here's the Fayad paradox: If he really represented PA stances and thinking, there'd be some hope for peace. Since he's so out of tune with his colleagues, though, Fayad sounds sharply different from them. And even he's highly restricted by what's permissible in PA politics, limits which ensure the PA's failure, absence of peace and nonexistence of a Palestinian state.

HIS FIRST problem is that Hamas controls the Gaza Strip and seeks the PA's overthrow in the West Bank. Most Fatah and PA leaders prefer peace with Hamas rather than Israel. Make no mistake: This is a mutually exclusive choice. If Hamas merged with the PA, the result would be far too radical to negotiate a solution and would eventually be dominated by Teheran-allied radical Islamism.

Moreover, to keep the door open for such conciliation, the PA can't come closer to making a deal with Israel. But that's not all. In veiled - an appropriate word here - language, Fayad says Palestinians must avoid "politicizing" the Gaza issue that would enable sanctions to continue against the Hamas regime there.

By not opposing the suicide bombers, Fayad follows suicidal policies. By fighting any isolation or sanctions on Hamas, the PA ensures that Hamas tightens its hold on the Gaza Strip. By supporting Hamas's ability to attack Israel without costs, the PA ensures its Islamist rival appears the more effective fighter.

Second, while not directly endorsing terrorism and violence - in contrast to most of his colleagues and the PA's own institutions - Fayad argues that Israel holding any Palestinian prisoners in jail is "a violation of international law." In other words, if a Palestinian attacks or murders Israelis, Israel has no right to imprison him. What option does it have? Only to set them free to try again. Here, too, Fayad supports and glorifies cost-free terrorism.

Third, Fayad argues that it's not the PA's job to convince Israel by its good behavior or to negotiate bilaterally on the basis of mutual concessions and compromises. Instead, as other PA leaders have openly stated recently, the PA's strategy is to get the world to pressure Israel to give it everything it wants.

While presenting his speech partly as a response to Netanyahu, Fayad confronts none of his points, merely dismissing his position as vague, which it certainly wasn't. (Ironically, in contrast to most Western observers, Fayad acknowledges that Netanyahu endorsed a two-state solution six years ago.)

It's Fayad who is vague - Netanyahu gives a list of specific conditions; Fayad does nothing of the kind. In fact, he does something peculiar. According to him, Netanyahu is presenting an "Israeli narrative" about the conflict, while Palestinians say they have their own "narrative" - one which Fayad says he won't talk about. Why is he vague and not presenting his own case? Because he cannot do so. The narrative as laid out by Netanyahu is clear: Jews want and merit a state; the conflict is due to an Arab refusal to accept that state's existence. This does not prevent a two-state solution, one state for each people.

The Palestinian narrative, to this day, is that Jews have no such right to a state and that all the land is rightly Palestinian, Arab and (for the most part) Muslim. This narrative does prevent a two-state solution. That is what Fayad cannot admit.

He does claim that Palestinians' "main aspiration" is to have their own homeland, which he promises will live in peace, cooperation and respect with its neighbor. But he cannot say it will resettle all Palestinian refugees within its borders, won't bring in foreign troops, will end the conflict permanently or will provide security guarantees. Fayad might prefer such an outcome, but that's not the Palestinian position.

FAYAD SAYS the PA has done a good job and that "the citizens sense this progress." Why, then, is the PA afraid to hold elections, even in the West Bank? It is no secret that the PA isn't popular and fears Hamas's appeal. Fayad speaks of building a strong economy, dealing with poverty and developing social services, yet gives no sense of how this might be done. Even given massive international subsidies, the PA's management remains poor, riddled with corruption and incompetence. Fayad can do nothing to reform it since the political elite isn't with him and he has no power over the warlords and their gunmen, who are often the real powers in the West Bank.

Finally, he predicts a Palestinian state within two years. Yet he has no way to make this happen except to prove that the real reason the peace process hasn't succeeded is the misconception "that it is always possible to exert pressure on the weaker side in the conflict, as if there is no limit to the concessions that it could offer." In other words, the reason why peace has not been achieved is because the PA had to make all the concessions.

The truth, of course, is the exact opposite. Israel withdrew from most of the territory, allowed 200,000 Palestinians to come in, cooperated in the establishment of security forces, agreed to large-scale subsidies for the PA and so on.

And what concession did the Palestinians make? They said to international audiences - though not in their own media, mosques, schools or internal statements - that they accepted Israel's existence and sometimes, but far from always, stopped some terrorist attacks - when it suited them .

Doesn't Fayad see the irony in his words? He views Israel as the weaker side in relation to the West and thinks those other countries will force it to make concessions without limit.

By feeding the PA's false belief that the West will pressure Israel into giving it a state in the borders it wants, without concessions, restrictions or even implementation of past promises, the US and European governments are doing a very effective job in sabotaging any possibility for peace.

The writer is director of the Global Research in International Affairs Center and editor of Middle East Review of International Affairs Journal and Turkish Studies.

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The PA Financial Crisis: Causes and Implications

By Mohammad Yaghi

PolicyWatch #1546
June 29, 2009

Eighteen months have passed since the Paris donor conference, where members of the international community promised the Palestinian government $1.45 billion in assistance for its 2009 budget. The Palestinian Authority (PA), however, has received less than a quarter of this amount, and Arab governments in particular have fallen short, contributing only $78 million of the $600 million pledged. Palestinian prime minister Salam Fayad has been forced to borrow $530 million from local banks this year in order to pay the salaries of PA employees, who with their families constitute one-quarter of the Palestinian population. When combined with the loss of internal revenue from the Gaza Strip since the Hamas takeover and the continuing Israeli restrictions on West Bank movement, the failure of donors to live up to their commitments threatens the tenuous economic progress the PA has made to date.

The Current Financial Crisis

The PA's 2009 budget of approximately $3 billion expects $1.63 billion of internal revenue and $1.45 billion of external funding (including $300 million approved at the March Sharm al-Sheikh conference for Gaza reconstruction). To meet its $250 million monthly budgetary needs, the PA relies on international donors for $120 million of this total. According to its own financial reports, the PA received a total of $328 million in external financing in the first five months of this year, far short of the $600 million it required.

To cover the deficit, the PA is borrowing from private banks and drawing on excess 2008 donor aid. The record $1.76 billion of external financing in 2008 exceeded the PA's expected budgetary support by $130 million. The European Commission was the largest donor last year, providing $651 million, while the United States was the largest individual donor nation, contributing $302 million. Arab countries gave $526 million and the World Bank granted $283 million. The 2008 donor commitment allowed the PA to cover its $1.12 billion deficit and ensure regular payments to PA employees, repayment of all wages in arrears ($317 million), private sector loans ($70 million), and some of its commercial banks loans ($29 million).

Reasons for the Current Budget Deficit

Three major developments have contributed to the current PA budget deficit:

Lack of Arab government commitment to the PA budget. While international donors pledged an impressive $7.7 billion at the November 2007 Paris conference and $4.2 billion at the March 2009 Sharm al-Sheikh conference to rebuild Gaza and support the PA budget, the lack of follow-through this year by Arab governments has left the Fayad government in a precarious position.

The miniscule contributions by Arab governments are particularly troubling when compared to their bold promises made at the 2007 Paris conference when Saudi Arabia, the United Arab Emirates (UAE), Kuwait, and Qatar together promised $400 million in annual budget support between 2008 and 2010. As of June 15, only Algeria, Saudi Arabia, and the UAE had delivered their share -- a total of $78 million -- of the promised aid for 2009. While Arab states contend they are withholding aid in order to pressure the Palestinian factions into forming a unity government, this approach is unrealistic and counterproductive. The Ramallah-based PA government is already spending almost half of its budget on Gaza. If the PA is forced to curtail spending on Gaza, this would only intensify the division between the West Bank and Gaza, making reconciliation more difficult.

The loss of Gaza revenue. Although Fayad's budget performance in 2008 was impressive, the Hamas takeover of Gaza has narrowed the tax base from which the PA is able to draw revenue. While 2008 saw overall revenues exceed budget targets due to increased economic activity in the West Bank and Fayad's administrative reforms, the PA draws revenue only from the West Bank -- there is no real income from Gaza. Indeed, while taxes collected by Israel on behalf of the PA increased in 2008 by 6.2 percent over 2007, this percentage conceals a much higher increase in the West Bank and a sharp decline in Gaza. In the West Bank, there was a 20 percent increase in value added taxes (VAT) on goods sold by Israel, and a 10 percent increase in petroleum purchases, but Gaza witnessed a sharp decline in receipts with a drop of 65 percent in VAT and 7 percent in petroleum purchases. Hamas, on the other hand, is able to raise funds in Gaza by collecting taxes and various domestic fees and by smuggling commercial goods (in addition to arms) through hundreds of tunnels under the Egyptian border. According to Tor Wennesland, the Norwegian representative in the Palestinian territories, Hamas runs nearly 1,000 tunnels (400 of which are officially approved), allowing the Islamist group to generate revenue to pay the salaries of its own employees and security forces while preventing the PA from collecting taxes on goods that would otherwise come through Israel.

Israeli restrictions on movement. In addition to cash donations, countries also promised to take on various development-related projects in the West Bank. In 2008, donor-financed expenditures on large infrastructure projects were estimated at about $190 million, less than half the $492 million commitment detailed in the Palestinian Reform and Development Plan of 2008. Cumbersome Israeli restrictions on movement resulted in frequent delays in projects and some cancellations. According to a June 8 World Bank report, "Israel's system of security has weakened the growth of the Palestinian economy and increased the dependence on the public sector." Restrictions on internal movement and goods transfers (import/export) have hampered efforts to build a developed economy and have made the Palestinian public heavily dependent on the government; the PA is now responsible for 145,000 employees whose salaries constitute 45 percent of the total budget. While the PA has tried to invest in small community projects that are less vulnerable to Israeli movement restrictions -- water sanitation, irrigation projects, electrifying villages or rural road paving -- these smaller initiatives do not have the economic impact of the larger infrastructure projects.

Conclusion

While Fayad's achievements are numerous -- improving law and order in the West Bank, creating a more favorable environment for local and foreign investment, reducing the back payments owed on salaries, enhancing the collection of domestic revenues, and reducing dependence on external donors -- his government faces major economic obstacles. According to the Palestinian Central Bureau of Statistics, the West Bank's gross domestic product grew by 2.3 percent in 2008, but the lower than expected level of international donor assistance and continuing movement restrictions in the West Bank make it unrealistic for the PA to reach its 2009 growth target of 5 percent. Spending on Gaza consumes almost half of the PA budget while Israeli restrictions on movement hampers economic development and makes the Palestinians more reliant on the public sector and international aid.

The failure of donor states to deliver on their pledges this year will weaken government confidence and threaten the PA's fragile financial stability. More importantly, it signals to the Palestinian public that its government lacks international support at a time when the PA is confronting Hamas, enforcing law and order, and implementing its security obligations under the Quartet's 2003 Roadmap peace initiative. This confrontation includes recent crackdowns on two Hamas cells in Qalqilya in early June and the killing of five Hamas Izz al-Din al-Qassam Brigades militants.

For Washington, U.S. special Middle East envoy George Mitchell should work with Israel to ease restrictions on Palestinian movement as security improves in the West Bank, and convince the Gulf Arab states to live up to their donor commitments.

Mohammad Yaghi is a Lafer international fellow at The Washington Institute, focusing on Palestinian politics.

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