House of Commons - International Development

Select Committee on International Development Fourth Report

1 Introduction

1. On 25 January 2006 the Palestinian Authority (PA) election was won by the militant Palestinian liberation group Hamas. They won by a clear majority taking 74 out of 132 seats with Fatah, the other major contender, and the incumbent party, taking 45 seats.[2] Hamas's share of the vote was 45%. The divided Fatah and four other secular parties won 55% of the vote.[3] Rafiq Husseni, Chief of Staff to the Palestinian President, told us that Hamas had won the elections for three reasons:

the inefficiency of the Fatah Government—the Palestinian Authority had built up debts of US$440 million;
the failure of Fatah to make any progress with the Government of Israel in the peace talks leading to the unilateral withdrawal from Gaza; and,
the growth and visibility of Islamic fundamentalism.

Other people we spoke to mentioned corrupt practices, economic mismanagement and poor delivery of services by the former Fatah PA. These were contrasted with the record of welfare organisations associated with Hamas in delivering welfare support in recent years and were seen as additional reasons for Fatah's electoral defeat. We were also told that Fatah had failed to manage the election campaign properly and had fielded too many candidates who ended up competing against each other

2. Some have said that the Hamas victory was predictable. For example, Alan Seatter, Head of the Near East Unit, Directorate-General for External Relations in the European Commission, told us that it was possible to see that there was a major political shift in Palestinian public opinion before the elections, and that the likelihood of a Hamas victory was growing.[4] Officials from the Department for International Development (DFID) commented that, although it was clear that Hamas would do well, everyone was surprised at how well they did. In response to questioning about whether warnings should have been given on the probable implications of a Hamas victory, DFID explained that the view of the Middle East Quartet (the EU, US, UN and Russia) was that it would not be right to try to influence the outcome of the elections.[5] Following the elections, a package of emergency assistance was arranged by the EU in February 2006, in anticipation of the problems which Hamas might face once it had formed a government.

3. After the election the Israeli and the US Governments immediately stated that they would not work with a government which included Hamas. The Quartet issued a statement on 26 January 2006 saying: "the Quartet reiterates its view that there is a fundamental contradiction between armed group and militia activities and the building of a democratic state. A two-state solution to the conflict requires all participants in the democratic process to renounce violence and terror, accept Israel's right to exist, and disarm, as outlined in the Road Map."[6]

4. Following the formation of a Hamas-led government on 29 March 2006, the Government of Israel stopped the transfer of revenues that it collects on behalf of the Palestinian Authority. (This is a measure which the Government of Israel has used on previous occasions.) We have been told that these funds have not been confiscated but are being held in a trust fund. On 30 March the Quartet called upon the newly-formed government to commit to the principles of non-violence, recognition of Israel and acceptance of previous agreements and obligations.[7] Having made no progress in this regard, on 7 April the European Union and the US announced the suspension of direct aid to the Hamas-led government.

5. Direct aid to the Palestinian Authority was approximately US$30 million per month or 25% of the PA's monthly revenues in 2005.[8] The withholding of PA revenues by the Government of Israel amounts to about US$60 million a month or approximately 50% of the PA's monthly revenues.[9] While many donors, including the UK, have redirected their funding to the UN Consolidated Appeal, the UN Relief and Works Agency (UNRWA), NGOs, the Office of the President and the Temporary International Mechanism (TIM), the PA is deprived of about 75% of its monthly budget.[10] The biggest part of PA expenditure is the payment of salaries to PA workers, effectively the Palestinian public sector, including teachers, doctors and PA officials. As well as paying the wages of the expanding public sector, the PA has also become the 'financier of last resort' covering the unmet obligations of Palestinian utilities and public institutions.[11] In addition international banks have withdrawn credit and other services from the PA, fearing anti-terrorism litigation. It has been possible for the PA to continue to collect domestic tax revenues since March 2006 but the increase in unemployment and poverty in the territories has affected the amount that domestic taxation can bring in. There have been continued donations coming from outside Arab sources and Iran, sometimes carried in cash through the Egyptian border with Gaza. Given the nature of these donations and the haphazard way they reach the territories, it is not clear which are intended for the PA and which for the work of individual organisations and factions.

6. The suspension of direct payments to the Palestinian Authority was accompanied by an increase in humanitarian assistance to the OPTs. DFID figures indicate that EU assistance to the PA was £65 million in 2005 and that this will increase to £117 million in 2006.[12] The UN Consolidated Appeals Process increased its appeal in mid-2006 and again for 2007. The 2007 appeal is for US$454 million.[13] The Palestinian economy is already heavily reliant on development assistance. Annual donor funding to the Palestinians had doubled since the beginning of the second intifada in 2000.[14] The OPTs have received more than $300 per capita or approximately US$1 billion a year in aid in each of the last five years reflecting the continuing and acute needs of the Palestinian people.[15] This is about one quarter of annual GDP.[16]

7. In June 2006 the Quartet endorsed a proposal by the European Commission to channel aid directly to the Palestinian people, by-passing Hamas. The Temporary International Mechanism, which will be discussed in detail in Chapter 4, provides funding for essential supplies and running costs of hospitals and healthcare centres, supplies of energy utilities including fuel, and support for vulnerable Palestinians through the payment of social allowances.

8. Inevitably, the impact of the withdrawal of revenues has been overwhelmingly and predictably negative.[17] At the time of writing this report, public sector workers had not been paid full salaries since mid-March 2006 and teachers, civil servants and health workers in both Gaza and the West Bank either had been or continue to be on strike as a result. During the week of our visit in November, some school-teachers in the West Bank returned to work but doctors in West Bank hospitals were on strike. According to OCHA up to one million Palestinians are dependent on PA incomes.[18] Levels of poverty have risen. Evidence from Save the Children indicates that 66% of Palestinian households are living below the poverty line.[19] A more detailed analysis of the socio-economic situation is presented in Chapter 2.

The security situation

9. Israel disengaged unilaterally from Gaza in September 2005. But this has not resulted in a diminution of conflict. Statistics from OCHA show that during the period from September 2005 to the beginning of November 2006:

1,700 qassam rockets were fired into southern Israel from northern Gaza resulting in 41 people being injured.

14,200 artillery shells were fired into Gaza and there were 550 air strikes by the Israeli Defence Force (IDF) on Gaza resulting in 525 people being killed and 1,527 injured.[20]

10. We do not in any way condone the firing of qassam rockets from Gaza into Israel. Such actions need to stop. The question of a proportionate response nevertheless arises. The Israeli Defence Force's response has killed and injured many more people than the actions of the Palestinian militants. Many civilians, including women and children, have been killed in Gaza. We accept that in situations of conflict there will be mistakes and even excesses but proportionate response must be an integral part of any state's security policy. The actions of neither the Palestinian militants nor the IDF in and around Gaza enhance the prospects for a peaceful settlement.

11. Gaza was also subject to an intensified military assault by the IDF in the five months following the kidnapping of an Israeli soldier by Palestinian militants in June 2006. During our visit the IDF was engaged in a major offensive in the town of Beit Hanoun from where hundreds of qassam rockets have been launched into Israel. On the night of Tuesday 7 November 19 Palestinian civilians, including 14 women and children, were killed when Israeli artillery hit the residential area of the town.[21] We were deeply shocked by the outcome of this action by the IDF which, we were subsequently told, was due to a technical error. The Foreign Secretary, Rt. Hon. Margaret Beckett MP, said she was gravely disturbed by the incident and the Government of Israel expressed regret for the civilian deaths which were apparently caused by the misalignment of artillery by one soldier.[22] On 17 November the UN General Assembly condemned the attack "expressing deep sorrow."[23] A resolution by the Security Council was vetoed by the United States.

12. A ceasefire between Israel and the Palestinians was subsequently agreed on 28 November preventing the predicted outbreak of revenge attacks. However the Beit Hanoun incident raised questions about the extent to which the operational directives of the IDF are aligned with Israel's security policy.[24] The shelling also serves as a reminder that the Government of Israel has obligations, including the protection of civilians, which it is failing to fulfil. This is discussed in Chapter 3.

13. In the summer of 2006 Israel and Hezbollah were engaged in violent conflict in Lebanon and northern Israel after the kidnapping of two Israeli soldiers by Hezbollah. The conflict ended after the UN brokered a ceasefire. The inconclusive nature of the war has weakened the Olmert government and raised the possibility of a return to conflict at some point in the future. The significance of this conflict for the OPTs is as yet unclear. Evidence from the Palestinian NGO, BADIL Resource Centre for Palestinian Residency and Refugee Rights, points out that the war led to an expansion of illegal outposts,[25] while DFID considers that the war leaves any plans for Israeli disengagement from the West Bank in question.[26]

The Department for International Development's programme in the OPTs

14. Our remit is to scrutinise the work of the Department for International Development. In relation to the OPTs, this requires us to assess the immediate impact of DFID's programme on the territories but also to examine DFID's engagement with the wider donor community, including the EU and the UN, and with the Government of Israel. The DFID programme in the OPTs has three main objectives:

"direct support to the peace process;

humanitarian assistance to improve the prospects for peace; and,

supporting the institutions of a Palestinian state which could participate in the peace process and govern the Palestinian Territories following a final peace settlement."[27]

DFID says these objectives, set out in their Country Assistance Plan,[28] have not changed as a result of the Hamas election victory although it has reconfigured its programme to support the peace process without working directly with Hamas by bolstering the Office of the President and the institutions reporting to him, and by supporting the PLO Negotiations Support Unit.[29]

15. However DFID cannot meet the objectives of its Country Assistance Programme in the current circumstances, in particular that of building up Palestinian institutions.[30] DFID says that it does not wish to punish ordinary Palestinians for the actions and policies of their government but the measures it has put in place mean that the budget for the OPTs is now skewed heavily in favour of humanitarian and emergency assistance. This is provided through the EU's Temporary International Mechanism (TIM) as well as through the UN Relief and Works Agency (UNRWA) and the UN Office for the Co-ordination of Humanitarian Affairs (OCHA). Despite DFID continuing to provide assistance through alternative means, the perception among Palestinians with whom we held discussions on our visit was that the decision to withhold direct aid, or not to renegotiate budget support for 2006, has been harmful to ordinary Palestinians, is contributing to the erosion of Palestinian institutions which DFID has been trying to build up, and has deprived the opposition of its legitimate role. Many Palestinian people we met told us that they felt they were being punished for the outcome of their democratic elections.

16. In its 2004 Country Assistance Plan DFID states that a funding crisis in the Palestinian Authority carries a high risk and would have severe repercussions for poverty and unemployment.[31] In its response to the previous International Development Committee's report on the Occupied Palestinian Territories the Government states that, while conventional development assistance is problematic under conditions of occupation, it has a major role to play, "particularly in supporting the PA to meet its peace process commitments and to build the institutions of a viable Palestinian state. The case for this type of assistance is arguably even stronger when the peace process is not going well."[32] We commend DFID on its foresight. This analysis was accurate in 2004 and remains so today. If the PA collapses the prospects for peace will be set back significantly. By supporting the Office of the President, and indeed using the Office as the intermediary for the Temporary International Mechanism, the EU and the UK are managing to by-pass Hamas. However there are risks inherent in supporting a democratically elected head of state who is also the leader of the opposition party as a substitute for, rather than in addition to, having direct relations with the government properly elected under the provisions of the Oslo process to provide services to the people of the West Bank and Gaza.

17. The international community's decision to suspend funding to the PA has had significant implications—political, social and economic. The socio-economic implications are discussed in Chapter 2. The political implications include the isolation of Hamas by the international community. It is also worth remembering that efforts to isolate the Hamas-led PA have led Hamas increasingly to look elsewhere for financial support. Hamas now has closer links to governments like that of Iran than it had two years ago. We doubt whether this is a development that the international community would have intended. We believe that the international community is right to place pressure on Hamas to change those policies which militate against a peace process. However this would best be achieved through dialogue and engagement rather than isolation. The danger of the current approach is that it might push Hamas into a corner which encourages violence rather than negotiation. The international community must also ensure it is not bolstering one faction against the other and thereby increasing the risk of internal strife.

The Committee's inquiry and visit

18. We started our visit in Jerusalem in early November 2006 by meeting with the UN Office for the Coordination of Humanitarian Assistance (OCHA), who gave us an update on movement and access in the OPTs. We then met the World Bank, European Commission representatives and other donors, the Office of the Palestinian President and the Negotiations Affairs Department of the PLO. We made two field visits—one to the northern West Bank to look at the system of checkpoints and to visit the Balata refugee camp, and another to Bethlehem. We were unable to get to Hebron due to planned protests. In Jerusalem we also met with a wide cross-section of Palestinian civil society organisations. After a short visit to an Israeli settlement we met with a number of Israeli Government officials in Jerusalem and Tel Aviv. We also held meetings with Israeli civil society organisations in Tel Aviv. Because we placed excessive reliance on the Foreign and Commonwealth Office and the Department for International Development to arrange our programme, and they were constrained by the Government's boycott of Hamas, we were unable to meet members of the Hamas government. This was a regrettable omission—our information-gathering would have been enhanced by such a meeting. The full programme of our visit is included as an Annex to this report.

19. Because of the security situation during our visit we were unable to visit Gaza, where 1.4 million Palestinians live. We were also told that neither DFID nor the FCO had been able to go to Gaza since May although we understand that some other European donors have been able to do so. We recognise that in not visiting Gaza we have not seen the full extent of Palestinian poverty and the worsening humanitarian situation.

20. During our visit there were fresh attempts to create a government of national unity, composed of representatives of all parties, which would reflect the Quartet principles. Some Palestinian representatives we met were positive about the initiative while others were less hopeful. The Hamas Prime Minister, Ismail Haniyeh, offered to step down to facilitate the formation of such a government.[33] The cease-fire between Israel and the Palestinians raised the possibility of a return to peace talks but little progress has been made to date. A meeting between President Abbas and Prime Minister Olmert on 24 December 2006 offered the possibility of some of the withheld revenues being disbursed.[34] This is discussed in Chapter 6.

21. In his speech at the Guildhall in November 2006, the British Prime Minister listed progress in the Middle East Peace Process (MEPP) as a priority for the Government: "engagement has to start with Israel and the Palestinians—it's the central conflict in the Middle East."[35] We agree that until the Israeli-Palestinian conflict is solved there will be no peace in the region. 2006 has been a year of crisis for the OPTs; much of the progress made in the past has been eroded. We hope the Prime Minister's comments will revive interest in a peaceful settlement for the Israeli-Palestinian conflict which has continued for several decades.

22. This report looks firstly at the situation in the OPTs three years after the previous International Development Committee's inquiry to see where progress has been made and where the situation, in terms of development, has deteriorated. Chapter 3 assesses progress on the Agreement on Movement and Access which was signed in November 2005. Progress on movement and access is vital for the future of the Palestinian economy. In Chapter 4 we examine the EU's response to the crisis by looking at the operation and impact of the Temporary International Mechanism designed to help meet basic needs in the OPTs. Chapter 5 focuses on the health sector which, we believe, is in crisis. In Chapter 6 we explore donor engagement in difficult environments.

23. The information contained in the report was correct at the time of writing. We are conscious that the situation changes from day-to-day and as far as possible we have tried to take account of this.

2 The Sunday Telegraph, 8 October 2006. See also Democracy and the Middle East: Egypt, the Palestinian territories and Saudi Arabia, House of Commons Library Research Paper 06/54. Back

3 The Palestinian Parliamentary Election and the rise of Hamas, House of Commons Library Research Paper 06/17, p 10. Back

4 Q 172 [Mr Seatter] Back

5 Q 2 [DFID]; see also Q 275 [Hilary Benn] Back

6 Statement on Palestinian elections by Middle East Quartet, Press release SG/2103, 26 January 2006. Back

7 www.bbc.co.uk 30 March 2006. Back

8 OCHA, Occupied Palestinian Territory 2007: Consolidated Appeals Process, p 13. Back

9 OCHA, Occupied Palestinian Territory 2007 p 13. Back

10 OCHA, Occupied Palestinian Territory 2007 p 13. Back

11 World Bank, West Bank and Gaza Update, September 2006. Back

12 HC Deb, 4 December 2006, col 66W. Back

13 OCHA, Occupied Palestinian Territory 2007. Back