Memorandum submitted by the Funding for
Peace Coalition (FPC)
We of the Funding for Peace Coalition (FPC)
commend the inquiry. There is a clear moral imperative to assist
the Palestinian people out of their current state of poverty.
There is also no doubt in our minds that international aid to
the Palestinian people is a vital element of hope that peace can
be nurtured in this troubled area of the Middle East.
Sadly, it is equally clear that lack of control
over the billions provided to NGOs and the PA over a period of
more than a decade has allowed international aid to be mismanaged
and diverted to assist corruption and violence, often achieving
the reverse of its original well-meant intentions.
Simply stated, proper controls must be implemented
over every single pound of aid—regardless of who the Palestinians
elect to be their governing party—in order to ensure that
it achieves its desired objective, and is not diverted to support
the corruption and the violence endemic to the region either directly
or indirectly.
As our website www.euFunding.org provides ample
evidence and analysis of our views, it will suffice here to quote
Nigel Roberts, former World Bank country director for Gaza and
the West Bank, in his report "Money Won't Fix Things",
November 2005
"Consistently over the past years, 80% or
more of the Palestinian population is reported in opinion polls
as believing the PA is seriously corrupt, and demanding change||Attacking
corruption is very difficult. It requires|.. transparency, clear
penalties for violators, and a willingness to indict and punish
those officials who have abused their office|"
It is within this context that the FPC challenges
the committee's fundamental premise and line of enquiry. By focusing
on the impact of changes since the election of Hamas and the international
embargo of aid to the Palestinians, it is easy to dismiss the
fundamental issues that have led to the complete failure of international
aid to bring the region any closer to peace or prosperity over
the recent decades. It is pertinent to recall the World Bank's
report of November 2005, issued well before the events under scrutiny:
"The PA has created a serious fiscal crisis for itself|"
This crisis in the PA is partly characterized
by the unpaid salaries of its 165,000 employees. This is also
presented as the underlying factor in inter-factional violence
erupting within Gaza. It is pertinent to note that in September
of 2003, the IMF put out a scathing report on the PA's management
of its fiscal responsibilities. The conclusions detailed poor
control mechanisms, huge sums being "diverted", implications
of rampant corruption, "excessive" employment, yet with
an inexplicable number of employees on the payroll—especially
in "security" roles. Two years later, under Abbas's
presidency, the Al-Aksa Brigades were quietly incorporated onto
the official PA payroll. The IMF felt duty-bound to comment openly
that thousands of new militants had been integrated into the PA
over the summer of 2005. Thousands more were reportedly added
in the run-up to the Palestinian elections.
The donor community has quietly tolerated these
large sums spent on supporting a terrorist infrastructure. The
Al-Aksa Brigades and other Palestinian military units have continued
their attacks against civilians, even after Abbas assumed his
Presidential role.
Eventually, when a 13-20% wage increase was
approved by President Abbas in the run up to the Palestinian elections,
the IMF decried the move as a "substantial breach of the
Wage Bill Containment Plan". Indeed, as we have said, the
World Bank concluded that "The PA has created a serious fiscal
crisis for itself with salary expenditure essentially out of control."
As a direct result of this, shortly before the
Palestinian Legislative Council elections in January 2006, direct
European funding of the PA through the World Bank Trust Fund was
suspended. For EU commissioner Benita Ferrero-Waldner, the reason
was simple, as well as instructive for future policy decisions.
"The benchmarks have not been fulfilled|the budget should
remain within the limits of what the budget has foreseen."
With the election of Hamas, the number of PA
employees has only increased in 2006. And a newly armed, 3,000
strong "operational force", has been formed. The members
came primarily from the internationally outlawed Hamas' Iz a-Din
al-Qassam Brigades and from the Hamas-loyal Popular Resistance
Committees (PRC). The head of the PRC, Jamal Abu Samhadana, (who
was said to have been responsible for the 2003 bombing of a US
diplomatic convoy in Gaza and which killed three Americans) was
asked to lead the troops.
At the same time, President Abbas announced
a further strengthening of his own Presidential guard, upgrading
it from 1,500-10,000 troops.
At a time when the PA claims to be unable to meet
its payroll, one has to wonder which priorities had been downgraded
in order to hire these new recruits!
In the 2½ years since the IMF issued its
damning report, the number of PA employees has grown by around
35,000.
It is instructive to recall the German Newspaper
`Die Zeit's publication of an investigative report in 2002, detailing
EU support of corruption and violence against civilians. The response
of the Commission was derisory, but it made a commitment that:
If any evidence comes to light that the PA is
knowingly employing members of terrorist organizations, the PA
will need to act immediately to take these people off the payroll
and bring them to justice.
The evidence was available then and new facts
are constantly emerging. The donor community has chosen to ignore
this information, spending taxpayers' money in direct contradiction
of its own laws, its own assertions and accepted guiding principles.
Terrorists on an uncontrolled payroll are only
one of the abuses of our taxpayers' generosity in supporting the
underlying infrastructures of violence. Analysis of PA accounts
and other reports published on our website shows large annual
sums dedicated to "terrorist insurance schemes", ensuring
the support of convicted terrorists and their families during
and after being captured and held in Israeli prisons.
Internationally supported PA budgets have long
been abused in order to provide ongoing support of a culture of
"martyrdom", violence, regional hatred and anti-Christian
and anti-Semitic attitudes, in state sponsored schools, tightly
controlled state television and mosques.
It is also relevant to note widespread reports
of cash smuggling by Hamas operatives. Large-scale weapons smuggling,
on-going rocket launchings and other terrorist attacks against
Israeli citizens, border crossings and inter-factional violence
have all been funded, while teachers and health workers remain
unpaid.
The need to re-establish an effective Palestinian
economy is apparent now more than ever. The FPC continues its
active campaigns to ensure that the financial commitments of donor
countries towards the Palestinians reach their target population.
With all this background as context, the FPC
repeats its recommendations submitted to the UK Treasury in November
2005 [see http://eufunding.org/Realpolitik/UKtreasury.html], as
still being highly pertinent.
Specifically, it is recommended that donors
direct their efforts to projects that enable all sides to carry
out their obligations.
Recommendation No 1
Future help needs to be delivered in a transparent
and accountable manner, directed towards ethically defensible
projects. An independent and public monitoring system should immediately
be introduced for all funds provided to the Palestinians. The
Palestinian public will see what is being provided for them, and
the propensity to misuse taxpayers' money will be curtailed.
An appropriate working model is that currently
used by the World Bank (WB) for tracking its specific projects
in the West Bank and Gaza. The level of fiduciary care and transparency
is exemplary—and has no doubt been a major contributing
factor to both the success of the WB projects, and the acceptance
by the WB as an "honest broker" by all parties. The
careful project planning, selection of local partners, and honest
appraisals of progress at every point, coupled with posting detailed
reports on the internet for all to see must be contrasted with
the ongoing criticism the European Commission has been subject
to in the same arena.
It is difficult to justify pouring more resources
into politicised NGOs or even UNRWA. It is advised that the latter,
at least in the Gaza region, be progressively restructured, if
not wound down. There is no longer any political validation for
keeping Palestinians in refugee camps, when they possess full
control over the whole of the Gaza Strip.
Former UNRWA Commissioner-General, Peter Hansen,
put it very well on 1 November 2005, in a speech at Washington's
Palestine Center:
There is no doubt that, at some point, the Palestinian
Authority should take over all of UNRWA's capacity in Gaza and
the West Bank. I would say the sooner the conditions for that
are ripe and it can be done, the better.
Recommendation No 2
When considering infrastructure projects, donors
are advised to consider the "£ for £" concept.
The idea is not just to gain Palestinian ownership and commitment
and appreciation of the true value of the investment considered.
It will also encourage the local populace to take pride in its
own economic revival and not rely on long-term charity.
The alternative was exemplified when Mr Wolfensohn
sought overseas investors to purchase the greenhouses left by
the Israeli settlers, who withdrew from the Gaza region in August
2005. Once the Israelis had ceased to protect the region, Palestinians
ransacked the agricultural facilities. It can be surmised that
if the investors had included local personalities, such malicious
waste may not have occurred.
An alternative to this proposal is to limit
donor participation in a project to 40%, 50% or 60% depending
on its size, scope and third party involvement.
Recommendation No 3
The UK should consider the creation of a seed
fund to co-invest in a growing number of Palestinian start-ups.
The ExpoTech 2005 in Ramallah, sponsored by the Palestinian Information
Technology Association, demonstrated that there are clear opportunities
for investment, which will encourage both employment opportunities
and long-term economic growth.
A possible derivative to this idea is that certain
parts of the investment might be reserved for companies seeking
an Israeli partner, thus helping to promote regional coexistence.
Recommendation No 4
All investment recommendations should carry
a pre-requisite of decommissioning of militias and private armies.
Both in Northern Ireland and in Afghanistan, this stipulation
has provided a greater sense of internal stability for the local
population. It has also decreased the potential for distortions
in the judicial, financial and democratic processes.
In this sphere, the Palestinian President, Mr
Abbas, made a welcome move, demanding that members of militias
resign their posts before taking part in the last elections.
Summary
The FPC calls on all donor countries to find
a moral set of proposals; proposals which will show with evident
transparency that projects can be established on behalf of the
Palestinians themselves, and not just for an oligarchic leadership.
Economic growth, especially established in partnership with economic
neighbours, can only benefit all seekers of peace in the region.
October 2006
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