Examination of Witnesses (Questions 80-99)
RT HON
DOUGLAS ALEXANDER
MP, MR MICHAEL
ANDERSON AND
MR JOHN
JENKINS
20 MAY 2008
Q80 Sir Robert Smith: You refer to
planning to avoid spikes. It cannot really control the political
factors that create humanitarian situations. Are there other problems
in its management that you have identified?
Mr Anderson: There is a whole
series of management-informed targets which UNRWA itself has identified,
including achieving better results in education and having in
place better monitoring and evaluation systems, financial controls
and so on. Part of the business case it has itself identified
is that UNRWA is in the business where it needs to have a contingency
on which to draw because spikes are part of its business; they
are normal in UNRWA's business. In the past UNRWA has not planned
for those spikes. We have encouraged UNRWA to support its own
initiative to move towards planning to have flexibility in its
budgeting. It will need to continue to make emergency appeals,
but we want it to be an organisation that is better able to anticipate
and absorb spikes in need.
Q81 Jim Sheridan: Secretary of State,
what are your views on the current position with Hamas? The Chairman
has already made reference to the video conference with John Ging
who gave an extremely detailed account of exactly what was going
on in Gaza. I take the view that when people like John Ging, a
highly respected figure, tell you something perhaps you should
listen to it. He said quite clearly that the current blockade
in Gaza was not having the intended effect in stopping the firing
of rockets into Israel. The only people who suffer are the civilians
in that area. I should also be interested to know your views on
organisations such as Oxfam. Oxfam says quite clearly that now
it is time for Hamas to be brought to the negotiating table, if
for no other reason than for it to justify what it is doing to
its own people. It is important that that happens given the control
it has within the civilian population but also under international
law Hamas should be encouraged to come along. If we do not invite
Hamas what other steps or measures can we take to make Hamas face
up to its responsibilities in terms of what it is doing for its
people? You and I know that in our profession we have to negotiate
with people we would rather not deal with, but that is the nature
of the job we do. Surely, it is time that Hamas is brought to
the negotiating table to seek its views on what is going on there.
Mr Alexander: As my parliamentary
neighbour, I hope and trust that was not a reference to Renfrewshire
politics. I will deal with the points in the order in which you
put them. First, is this achieving the intended effect? I suppose
that implicit in that question is: is the effect of the blockade
to radicalise those within Gaza and thereby cause greater security
risks to the people of Israel? Clearly, Hamas aims to portray
the current situation as having been caused solely by Israel's
actions and deploys that narrative on an ongoing basis with the
public in Gaza, but it is right to recognise that Hamas itself
has chosen violence and must accept responsibility for the rocket
attacks which pose a real security threat to the people of Israel.
That is why in terms of the statements David Miliband and I have
made and in our private and public utterances we unreservedly
condemn the continued rocket attacks from Gaza into Israel and
recognise the security dilemma that that poses for the state of
Israel in terms of its response. Equally, we have been clear that
any response by the state of Israel must be consistent with its
obligations under international law and that applies in relation
to access by humanitarian aid to people within Gaza. As to negotiations
with Hamas, clearly Abu Mazen leads on the question of how the
Palestinian Authority can once again be judged to be in control
of Gaza. In that sense there is an intra-Palestinian dialogue
in which it is right to be respectful of the right of Abu Mazen
to take that forward not simply in terms of his position within
the PA but his position within the PLO. Our position as a member
of the Quartet has not changed and on that basis we do not have
contact with Hamas. I have great respect for Oxfam; indeed, I
have just been on the airwaves in recent days complimenting them
on its work with partners in Burma, but it is right to recognise
that while NGOs, even respected ones, within the development community
have a point of view on these issues, ultimately it is for the
government to reach a view on the right approach. The approach
we have taken is one that has been agreed in concert with international
partners. Because we believe that the key to making progress in
terms of the negotiated settlement, which is the aim of all of
us, is to support the process being led by Olmert and Abbas in
the bilateral talks, we do not want to do anything that is judged
to undermine the process or the capacity of Abu Mazen to be seen
as a credible negotiating partner with the state of Israel. We
judge that that includes talking with Hamas at this stage absent
some significant movement by it towards the principles set out
originally by the Quartet: recognition of the state of Israel,
adherence to previous agreements and the renunciation of violence.
We do not judge that these set an unreasonably high bar. On that
issue I appreciate that there are others who disagree with us
and that may be reflected in the comments from Oxfam to which
you have referred, but we see them as fundamental conditions for
it to be able to engage in a serious way and negotiate ultimately
with Israel. In passing I note the recent comments made by President
Carter following his conversations with Hamas, but I think that
a political dialogue is impossible so long as one party is dedicated
to violence and the destruction of the other. In that sense there
is a heavy responsibility, but we regard the principal responsibility
as resting with Hamas and do not regard the bar that is set as
being unachievable. I assure you that the reason the bar has been
set at that level, which incidentally was determined long before
the most recent actions taken by Hamas in 2007, is to ensure that
there can be credible negotiations rather than that it should
prevent them.
Mr Jenkins: I said that I was
Consul General in Jerusalem. I was also Ambassador in Damascus.
Therefore, I was in the two places where Hamas was established.
It is true that Abu Mazen is authorised to negotiate on behalf
of the Palestinian people because he is chairman of the PLO which
is the institution that chairs the negotiations. I recall speaking
to Abu Mazen two or three times back in 2006 after Hamas had won
the elections about what it would take to make Hamas part of the
negotiating process. His position was that it needed to subscribe
to what he considered to be his government's programme. He tried
this twice in formal letters to the then Hamas Prime Minister,
inviting Haniyeh to sign up. Both times Haniyeh refused. He did
not just refuse; there was no answer to those letters. Therefore,
there is a fundamental disconnect between Hamas's desire to exercise
power in the Palestinian territories and the PLO's desire arising
out of Oslo to have serious negotiations with Israel. Personally,
I think it would be great if Hamas wanted to be part of the negotiating
process and would allow Abu Mazen to negotiate on behalf of the
Palestinian people and accept the conclusions of those negotiations.
A couple of times it seems to have come close to it but each time
it approaches the point when it says it will let Abu Mazen do
this it steps back again; it says it will not happen and refuses
to recognise Israel. There are no negotiations; it will offer
a 10-year truce or whatever it is, but that is all; and in the
end it wants back the whole of mandated Palestine. That does not
seem to be a basis on which Hamas can be part of the negotiating
process. Whether it wants to participate in something which has
international legality behind it—the Oslo process which
empowers Abu Mazen to do what he is doing—or to strike off
completely on its own irrespective of international legality and
continue on the course it has set is a decision it must make itself.
I think that it should do the former but at the moment it is doing
the latter.
Mr Alexander: Another matter that
it may be helpful to draw to the attention of the Committee is
the point that we reached in discussion on the criteria set for
Fatah.
Mr Jenkins: The three Quartet
principles are in effect those to which Fatah signed up at Geneva
in December 1988 in the exchange of letters between Arafat and
Rabin and with Clinton in 1993: recognition of Israel; signing
up to previous undertakings, including Oslo, and renunciation
of violence. Those were exactly the principles to which Fatah
signed up, so they are not being asked to do anything that Fatah
did not do.
Q82 Jim Sheridan: To expand on the
response you have given, I go back to the situation in Northern
Ireland. The response was exactly the same until paramilitary
groups gave up their arms. We managed to overcome that and get
a peace agreement in Northern Ireland. I do not defend Hamas in
any way or wish to force it, but if the status quo prevails and
it refuses to speak what other measures can be taken to make it
face up to its responsibilities to the people of Gaza?
Mr Alexander: First, although
there is a superficial attraction in drawing a parallel between
the ultimate resolution of the historic conflict in Northern Ireland
and the continuing challenge of finding a resolution to continuing
conflict in the Middle East, I am not sure how helpful it is.
Even if you take that example as your starting point, a fair reading
of what happened not simply in terms of the Good Friday agreement
but the discussions that preceded it involving Michael Ancram
and John Major's government was that at some level within the
IRA leadership a judgment had been reached to take the democratic
and political path and renounce violence. That may not have been
publicly articulated immediately, but it was not simply that the
British state chose to engage in negotiations, albeit at that
stage in secret; a separate and equally important judgment had
been reached within the Provisional IRA in terms of the path forward
to try to secure its objectives. In that sense it is still open
to Hamas to participate in discussions, negotiations and consultations
internationally, but ultimately it rests on judgments and the
responsibility that it has. In that sense I am not sure it is
always the right parallel to draw in terms of a willingness to
negotiate on the one hand and a willingness to negotiate on another.
The relevance of the point on which Mr Jenkins concluded his earlier
remarks is that all too often in the public press it is suggested
that somehow there is a uniquely onerous set of obligations being
placed on Hamas as a barrier to it participating in further discussion
when in essence the criteria set for credibility in having those
discussions are exactly the same as those set for another significant
part of the Palestinian community, Fatah, in a previous time.
Second, I do not want to leave the Committee with the impression
that somehow we are sanguine about the status quo. Clearly, already
in this evidence session there has been great emphasis placed
on the humanitarian efforts we are making. We are unstinting in
our efforts to try to find a political way forward, but in order
to do that it is essential that we have a credible negotiating
partner in the Palestinian Authority. Of course the armed takeover
of Gaza in 2007 by Hamas has complicated what was already an extremely
challenging political situation, but I think that if we want to
get to a negotiated two-state solution one of the prerequisites
is a credible negotiating partner. If you accept the legitimacy
of having a credible negotiating partner then at some level you
also need to accept the ability of that negotiating partner, in
this case Abu Mazen and the Palestinian Authority and principally
the PLO, to be able to resolve the issue in relation to the takeover
by Hamas. In that sense the intra-Palestinian conversation rightly
has to be led by the PLO leadership.
Mr Jenkins: I do not want to pontificate
on the situation in Northern Ireland, but one aspect of that which
seems to be distinct from the situation in the occupied Palestinian
territories is that all the parties engaged in the negotiations
in that case could in some sense do the deal and sign up to something.
In Palestinian and Israeli terms that means Palestinians talking
to Israelis. The fundamental conversation that needs to take place
is between those two parties because they are the ones who in
the end will sign the deal. I see no indication that Hamas is
prepared to do that. This takes us back to the Quartet principle
on the recognition of Israel about which there is a lot of debate.
It seems to me that a fundamental principle that lies behind this
is that recognition in particular gets you a seat at the table
because you recognise the power of the other party to do the deal.
Of all that I have seen of Hamas in public and the indications
from private dialogue or debate going on within Hamas over the
past two years nothing tells me that its fundamental position
on this or the desirability of negotiations leading to two states
has changed. I think there has been inconclusive debate within
Hamas about this and that the power of the radicals—the
military wing and so forth—is such that for the moment it
has closed off the possibility of this evolving into something
more serious. At the moment I just do not believe we are in a
position to move this forward. Hamas really needs to decide which
way it is going.
Q83 Chairman: I do not know whether
you have any observations to make about the apparent engagement
by the French at arm's length as reported today? I do not defend
Hamas, but it will argue that there was an election. It went into
the election in a situation where consistently Israel said that
it should not be allowed to contest it because it had not signed
up to the principles but the international community said that
it could contest it and it won. There is competition between Hamas
and Fatah as to who is defending the rights of the Palestinian
people. Therefore, in terms of realpolitik does not somebody
somewhere need to test from where the point of engagement will
come?
Mr Jenkins: I think there is a
contest between Hamas and Fatah. Speaking to another point which
has been raised about opinion in Gaza, quite often you see polls
saying that Hamas has more support in Gaza and so on. Having looked
at polls over the past four years, they tell me that Palestinian
opinion is very volatile and the thing which appears to be growing
is the bit in the middle which says in respect of both Fatah and
Hamas "a plague on both your houses". In a way, it is
that unrepresented segment in the middle that loses out through
the freezing of forward political movement within the Palestinian
territories. As to the French, I read about this yesterday in
the French press before it was reported this morning in the Guardian.
Looking at the press reports, the man concerned is a former ambassador
and is no longer a member of the French diplomatic service. They
have said that this is not the French opening talks with Hamas.
I believe what I read in the press statement.
Mr Alexander: If we have an interest
in seeing a single unified Palestinian Authority there is an urgency
and importance in having not simply the capacity of the proto-state
build but also these negotiations proceeding in the sense that
if you are Abu Mazen sitting today in Ramallah you want to see
tangible benefits emerging from the Annapolis process, not simply
because it makes sense for the broader Middle East peace process
but it clearly would be a strengthening of his position not only
in terms of the West Bank but his claim to support within Gaza.
In that sense I think there is a real urgency in seeing sustained
progress in the Annapolis process on which I am sure we are all
agreed.
Q84 John Battle: Given the positive
approach you take to Annapolis, how is it possible to conclude
an agreement as suggested by the end of 2008 without the participation
of Hamas? Is that not completely idealistic?
Mr Alexander: To add an important
caveat, I am not panglossian in terms of Annapolis, but I think
optimism offers more potential for progress than pessimism at
this stage. Let us not underestimate the historical differences
or the fact that intelligent, committed people have been working
on these issues for many decades to find a way forward. I think
that the kind of timescale that has been set for the progress
that the parties want to see in the course of 2008 is a necessary
corrective to the idea that this is a process without end and
we can take our time as an international community or as individual
partners in negotiating. I cannot prescribe where that process
will reach in terms of the remaining months of 2008; nor can I
yet offer you clear views as to where Abu Mazen will reach in
terms of his strategy to ensure there is a single unified Palestinian
Authority not only with legal but actual authority over Gaza and
the West Bank. Obviously, I will take the opportunity to discuss
that issue with him and Salaam Fayyad in the course of our discussions
tomorrow.
Q85 John Battle: It almost seems
as though we are operating in parallel universes. One is more
hopeful. I do not use the word "optimistic". It is seriously
negotiated by the best minds with the intention of seeing the
process go forward which we should and must support. Then President
Bush of the US makes a visit and the reaction to that is that
Israel steps up its rocket campaign. How can there be prospects
of peace in the future if the response is to step up the rocket
campaign against Gaza by Israel? We are taking a step back. In
that sense what should the international community do in circumstances
where there are parallel discourses going on, one being the rocket
attacks and the other being the Annapolis peace process?
Mr Alexander: It will not surprise
you that I come before you to speak on behalf of the British Government,
not the Government of Israel or the Administration in Washington.
Notwithstanding that, I am not sure how clearly the connection
can be made between the rocket attacks you describe and the visit
of the President of the United States. For me that would be conjecture
rather than a clear connection. I know that there is a wide variety
of opinions about the President of the United States both among
the British public and within Parliament. It is less often recognised
in debates around the Middle East that he is, if I recollect,
the first American president to state support for a two-state
solution. As Mr Jenkins pointed out earlier, frankly Annapolis
is the only show in town. For the first time in seven years we
have a negotiating process moving forward. That is not to underestimate
the profoundly difficult and challenging final status issues under
discussion; it is not to diminish the historic alliance between
the state of Israel and the United States, or the strong desire
on the part of the international community collectively to find
a solution to the Middle East. The reason I am optimistic is that
we have a process by which progress can be made. Without such
a process we would return to the period we witnessed after the
Clinton presidency. For years we had no process by which progress
could be made.
Q86 John Battle: But when President
Bush visited at the very same time Israel said that it would step
up the military operations in response to the rocket attacks.
Therefore, the signal appears to be going in the opposite direction
and was not clawed back in any way by the international community
in general. Nobody said that would not help the peace process;
it was just left as if that was the situation which moved it in
the wrong direction. My heart dipped when I saw that.
Mr Jenkins: Often the matters
that periodically derailed the peace process in the 1990s were
the violence and terror. The good bits of the 1990s were when
the peace process continued in spite of the violence. For seven
years we have hardly seen anything. There have been occasional
meetings mostly with Abu Mazen and at Sharm el-Sheikh but they
were always stopped by violence. I am not starry-eyed about all
of this and I recognise there is massive scepticism about the
whole Annapolis process, but it is the first continuous negotiation—sustained
in spite of the violence—for seven years. That seems to
be an important point which suggests to me there is something
which both parties think is really valuable in what is happening
and want to keep hold of. There may be elements of domestic politics
in this on both sides, but given the past and where we are it
seems to me that this is something we should recognise, grasp
and support as much as we can.
Mr Anderson: Mr Battle, you raise
a characterisation which I recognise about what seem to be parallel
universes in which on the one hand the facts on the ground are
just terrible. On the other hand, there is optimism about the
peace process. That is precisely why Tony Blair is there trying
to move forward the confidence-building measures. We strongly
recognise that the facts on the ground are fundamentally connected
to the confidence that the parties will have in the peace talks.
But I think that in the mind of Abu Mazen in these two parallel
universes the future of Palestinian unity with Hamas and what
happens in terms of negotiations with Israel are matters that
are absolutely and intimately connected because clearly the political
strategy for Abu Mazen and Salaam Fayyad is that if they can deliver
some progress on the peace front that is the magic key to finding
a way into Palestinian unity where popular support among Palestinians
will recognise that `we all need to be in it together'. So there
is a purpose to Palestinian unity which is doing a deal where
real benefits are delivered to the Palestinian people. I strongly
recognise that often they appear to be different worlds but they
are quite strongly connected in an overall political strategy
which we support.
Q87 Daniel Kawczynski: Secretary
of State, at the beginning of this session you said that you were
flying out to the conference later today to be held to talk about
the aid that goes to Palestine. What message will you take with
you to some of these countries about stumping up the cash they
have promised to the Palestinian authority? You will know that
part of the economic crisis in Palestine is the result of a lack
of finance from donor countries. I am particularly interested
in Saudi Arabia. As Chairman of the All-Party Group on Saudi Arabia,
I am continually told by the Saudis that they are doing everything
possible to give money to the Palestinian Authority. Interestingly,
Saudi Arabia has a budget surplus this year of over $300 billion.
We are borrowing about £45 billion. I should like to have
your comments on that.
Mr Alexander: First, as a point
of clarification the principal focus of the conference that I
shall attend tomorrow is not international donations but private
sector growth within Palestine. That is complementary to the continuing
efforts to provide both the capacity to develop the architecture
of governance within the Palestinian territories and the immediate
humanitarian needs. We need a sustainable economic foundation
which requires a dynamic and thriving private sector which has
been a big focus of the work that Tony Blair as Quartet representative
has taken forward. You raise a very valid point and was one much
discussed at the Ad Hoc Liaison Committee meeting at Lancaster
House just a couple of weeks ago under Norwegian chairmanship.
Progress was made in the sense that another Gulf country, Kuwait,
made an $80 million commitment at the conference which was regarded
as a significant step. We were genuinely heartened and not a little
surprised by the scale of the contributions that emerged in Paris
in December. In that sense we had worked hard to facilitate that
outcome. We had been vocal fairly early on with full understanding
of the relevant parties that we wanted to encourage others, to
be something of a cheerleader for significant donations to add
momentum and sustain progress on Annapolis. That being said, the
Arab pledges in Paris totalled $1.5 billion, 20 per cent of the
total. You are right to recognise that there is a gap between
pledges being made and commitments being delivered. My recollection
is that there is a meeting of the Gulf Co-operation Council at
which some suggestion is made that Saudi Arabia may take the step
that you are looking for. I do not know whether Mr Jenkins can
clarify the date of the meeting.
Mr Jenkins: There is a GCC summit,
I believe, on the 24th or the end of this month. This was a matter
that came up a good deal at the AHLC both in its plenary meetings
and the meetings that the Quartet had with the Arab foreign ministers
who were present. There was a lot of discussion about the need
for Arab donors to provider faster funding this year to the Palestinian
Authority. To be fair to the Saudis, historically they have been
the most consistent of all the Arab League states in providing
funding to the Palestinian Authority. They were the ones who consistently
provided $7 million to $8 million a month as its contribution
throughout the 1990s and up until 2006. I think the Saudis have
done pretty well over the years. There is now an issue about getting
funding into the Palestinian Authority faster to deal with the
looming fiscal crisis that Salaam Fayyad faces. That is something
which he himself has highlighted at the AHLC. Tony Blair has been
very active on this in the Gulf since his appointment as Quartet
envoy. When he is not in Palestine quite often he is in the Gulf
to try to get those states to meet their pledges.
Mr Alexander: This is a matter
about which we talked to Salaam Fayyad. I had conversations with
him even ahead of the December conference at which we discussed
the Saudi contribution. If you have opportunities to continue
to make the case that I know you have been making through the
All-Party Group that there is urgency in terms of the fiscal crisis
facing the Palestinian Authority we would be genuinely grateful.
Q88 Daniel Kawczynski: Obviously,
given the present price of a barrel of oil, which is likely to
continue its upward trend, some of these countries in the Arab
League find themselves with a lot more resources at their disposal.
I presume you will tell us that in comparison we are better at
fulfilling the pledges we have made. Can you confirm that we have
stumped up the cash we have said we would?
Mr Alexander: Yes—not least
because we hosted the AHLC meeting along with the Norwegians,
we certainly made sure of that in terms of being able to say that
we were beginning the spend of the £243 million we had committed
in Paris.
Mr Anderson: In the first quarter
of 2008 we spent £39 million which is well ahead of the trajectory
of delivering our £243 million pledge over the course of
three years. Therefore, the UK is right out in front in setting
an example on giving aid on the ground. We are also right out
in front in terms of making a large commitment to budget support
which is absolutely vital to both increased capacity and the sustained
existence of the Palestinian Authority. It really faces an existential
crisis unless it is able to face its fiscal challenges.
Mr Alexander: To be fair to Salaam
Fayyad, he has been fulsome both in private to us and in public
in recognising the extent to which the British have been leaders
both in terms of translating pledges into commitments but also
the manner in which that money has been committed, addressing
the most urgent and specific needs that the Palestinian Authority
faces. As to your observation on the continuing rise in the price
of oil, which bears on a point made earlier about why in the international
community there is such a sense of urgency, one of the contributory
factors, in addition to the fact that the global need for oil
is growing at about two per cent a year and production at about
one per cent a year, which itself contributes to rising prices,
is that a significant risk premium is built into concerns in terms
of security of supply emerging from the Middle East. In that sense
there is very practical benefit in terms of fuel costs and the
price of a barrel of oil which would emerge if we were able to
see the kind of progress we all want to see in the Middle East
peace process. Again, that is a clear example of interaction between
commerce and politics. If we were able to find a way through the
Middle East peace process in a manner that resulted in a greater
premium in terms of oil prices the benefit would immediately be
felt not simply in our own petrol tax but also in the global economy.
Q89 Ann McKechin: Secretary of State,
has the Ad Hoc Liaison Committee made a formal assessment of the
likely impact of the shortfall in funds? Are donors fully aware
of what the impact would be and how soon it would kick in in terms
of the current cost and essential services?
Mr Anderson: The Ad Hoc Liaison
Committee did not issue any formal report. There was a Chair's
Summary but it did not go into detail. The tracking is being done
by Salaam Fayyad; he is keeping a close eye on it. On current
projections he anticipates a fiscal shortfall for the PA of $650
million. It will start to kick in in late June, so we hope there
will be very strong Saudi and further Arab pledge of support before
then.
Q90 Ann McKechin: As to economic
development, given the fact it has been effectively strangled
in Gaza by the current blockade and also an increasing number
of roadblocks in the West Bank, what is your assessment of the
possibility of an improvement in economic development? Given the
fact this has gone on for a considerable period of time, how quickly
could things recover if there was an easing of the blockade?
Mr Alexander: It is extremely
difficult to achieve sustainable economic growth under present
circumstances for the reasons you describe, principally the constraints
on movement and access. It is probable that the West Bank economy
grew in 2007 but, at the same time, we judged there was a significant
contraction in terms of Gaza. Regrettably, if one looks at where
the principal drivers of growth are judged to have been even in
terms of the West Bank economy that was principally in terms of
aid and support for the public sector rather than private sector
investment. There were significant concerns there. The IMF has
suggested three scenarios based almost solely on the Israeli closure
regime. Its pessimistic scenario is the status quo with little
or no improvements in movement and access, leading to continuing
falls in per capita income of about two per cent a year. Its baseline
and optimistic scenarios cover modest and marked improvements
in the closure regime and a corresponding one to two per cent
and five per cent increases in per capital incomes. The IMF has
itself recognised the fairly mechanistic connection between rates
of growth or contraction and change in terms of movement and access.
Q91 Ann McKechin: Given that there
are so many young people in the West Bank and Gaza—I believe
that about half the population of the latter are under 16—has
any thought been given to how employment can be created should
there be a change in circumstances? People need to see some rapid
progress if they are to believe that a political settlement is
possible.
Mr Anderson: A critical factor
in employment is that we need to see a larger sector of the economy
taken up by the private sector. In 2000 when the Palestinian economy
was quite a different place the PA expenditure was 27 per cent
of gross domestic product. By 2007 it had nearly doubled to 50
per cent.
Q92 Chairman: Do you mean that the
private sector or the economy had contracted?
Mr Anderson: There were two things
going on. First, there was a growth in public expenditure; second,
the economy contracted. Of those two, you are right that the larger
factor was the contraction of the overall economy. Salaam Fayyad
has very impressively managed to bring that down to 47 per cent
in a short period of time, but what this illustrates is that the
part of the economy that has collapsed has been business. There
is a long historical tradition of Palestinians being very effective
entrepreneurs. As we saw between the two intifadas, Palestinian
growth took off given the right policy context. You are absolutely
right about the demographic bulge of young people that faces the
Palestinians and the need to create a lot more jobs, but the key
to that must be getting the private sector moving again. That
does not require a huge amount of public sector pump-priming.
There can be some of that. For example the confidence-building
measure that Tony Blair has recently announced on the housing
initiative is a way to create construction jobs which would be
helpful, but the real key is simply to unlock the potential of
the private sector that is there. Yet again that focuses on the
importance of making political progress on movement and access.
On that front I can report that the Quartet representative Blair
has recently shifted the strategy on movement and access restrictions
to focus on the small number of restrictions which make the biggest
difference. In the past we have perhaps spent too much time looking
at the aggregate number of roadblocks and restrictions. Blair's
team has recently focused down. There are probably 40 to 60 roadblocks
and other restrictions that make the biggest difference. The Blair
tram are focusing on some of those and will try to make progress
in the next few weeks.
Q93 Richard Burden: If I may put
some historical context, when we carried out our previous inquiry
a lot of emphasis was placed by DFID on the fact that whilst the
boycott of the PA was going on the actual amount of funding to
the occupied territories was not going down; on the contrary,
to some extent it was going up. All that was happening was that
we were shifting where it went but it still went on payments to
the poorest and helped maintain fuel supplies and so on. In a
sense my question could have been asked then but, looking back,
what was meant by that? Was it saying that the quantitative nature
of the aid and to which organisations it went changed but it was
doing the same kinds of things, or was it saying that the assistance
became qualitatively different at the time of the boycott? If
it was the latter what was the difference? What new things were
you trying to achieve? Has the department made any assessment
of how effective things were during that period? What was that
assessment and how, if at all, does it inform the ways you have
gone about resuming direct assistance to the PA and, say, policies
towards things like funding NGOs and other civil society organisations?
Mr Alexander: Let me start and
then I will ask Mr Anderson to say a word or two given that this
period preceded my time within the department. One of the untold
stories amidst much of the concern and disappointment in terms
of recent years within the Middle East has been the extent to
which Britain has genuinely been a leader—this was a department
that I did not lead at the time and so it is not in any way a
personal observation—in developing innovative and effective
new mechanisms and instruments for aid in what is and has been
an almost constantly changing political environment. In that sense
I think we can take real pride in the work we have done. For example,
the establishment of the Temporary International Mechanism ensured
that essential aid continued to reach exactly the type of people
you were describing, whether it be teachers, doctors or engineers.
Over the piece we provided about £15 million through the
Temporary International Mechanism and an equivalent sum to its
successor PEGASE established by the European Union. The rationale
was to ensure that we were able to get the resource directly on
the ground with all of the stringent conditions that were set
in terms of checks and audit being secured. In that sense it required
a degree of policy innovation as to how best to do it both by
checking with the individuals who received the money against five
lists to establish whether they had any connection with terrorist
organisations and it was subject to both pre and post-audit checks.
There has been real innovation about which I will ask Mr Anderson
to say a word. That is not simply my assertion in terms of what
has happened with TIM. There was an independent review in July
2007 which said that it was both appropriate and an effective
instrument to continue donor engagement with the occupied Palestinian
territories. As you implied in your question, it has informed
the development of what now has been taken forward principally
by the World Bank. In that sense it has affected PEGASE and informed
the thinking of the World Bank in terms of the new instruments
to be used. I have probably talked enough about a period of the
department when I was happily ensconced in transport.
Mr Anderson: I can answer your
question very simply. There was an aid framework for the Palestinians
within DFID prior to January 2006 and that was £30 million
a year. We did not modify that up or down, so the level of UK
assistance remained exactly where we anticipated it to be prior
to the 2006 elections; it did not change. What did change was
how we disbursed it because we took the view that we could no
longer provide budget support through the Palestinian Authority
once Hamas formed the government in March 2006. As this Committee
will know very well, budget support is an instrument which DFID
regards as an important tool in helping to build government capacity
and helping donors to align behind the country priorities and
build leadership and capacity. That is particularly important
in the context of the Middle East peace process. An absolutely
vital function of aid in the Middle East peace process is to help
create a Palestinian Authority which has the capacity to manage
its own affairs, police its own borders and guarantee the security
of its people and Israel. That is an absolutely essential function
of aid in the context of the Middle East peace process. Therefore,
we wanted to continue budget support. The Temporary International
Mechanism was designed largely internally by DFID and was launched
through the European Union with the EC running it. In particular,
the third window of TIM which provided allowances and salaries
was a real attempt to mimic as closely as possible budget support
without going through the Hamas-controlled systems which we could
not use. We felt that we had to provide assurances to UK taxpayers
that there was simply no chance that UK assistance was going into
the hands of terrorists or those pursuing violence. Therefore,
we came up with a system with the European Commission which we
hoped would do the very best at minimising the undermining effects
of the parallel system. The review which was carried out—if
the Committee does not have a copy of it we shall be happy to
provide one—was conducted by the European Commission and
was an independent assessment. It was in the public domain. It
indicated that one of the drawbacks of the TIM was that to some
extent it created parallel systems, but in the circumstances that
was inevitable and it had to be temporary. A further element of
the review was that the TIM should work more closely with the
Palestinian Authority in terms of priorities and management. After
Salaam Fayyad came into power in July 2007 that became possible,
and that was precisely what the TIM did. In its new form PEGASE
we feel it is now doing that. We have taken the decision to move
away from the TIM and into direct budget support for precisely
the reasons I have indicated. Our view was that given the circumstances
at the time where most donors went for project support, or humanitarian
support, or stopped support entirely, the UK effort sustained
capacity building and delivery of frontline services by doctors,
nurses and teachers. We think we did a pretty good job.
Q94 Mr Singh: Poverty rates increased
in the West Bank and Gaza throughout 2006. I presume there was
an increase in 2007 and that has continued this year. According
to the figures we have, in 2006 64 per cent of the West Bank population
was below the poverty line and for Gaza the figure is 78 per cent.
Given that the central mission of DFID is poverty reduction, is
it fair to say that we are fighting a rearguard action in the
West Bank and a lost cause in Gaza?
Mr Alexander: First, as to the
information available to us, we do not have good data on the levels
of poverty in 2008. Second, it would be remiss of me if I did
not challenge the assertion that getting humanitarian assistance
to people in desperate need is somehow a lost cause. DFID is called
upon to work in increasingly challenging environments and undoubtedly
Gaza and to an extent the West Bank meet that criterion. That
challenges us to be both innovative in terms of the approach we
take but not naive in presuming that aid alone will ever be the
solution to the problem we face. In a conversation about a conventional
aid programme no doubt I would be telling the Committee we would
seek to balance the development assistance we offered with development
of the private sector which in turn would allow a credible exit
strategy. That is true in terms of both Gaza and the West Bank
as we have described and that will be the substance of the conversations
tomorrow at the Palestinian Investment Conference, but in the
context of the Middle East it is only part of the story. Unless
we find a way forward in terms of a credible peace process then
notwithstanding our best efforts to stimulate economic growth
within the private sector, to secure humanitarian access and the
kind of innovations we have heard about in terms of the Temporary
International Mechanism that delivered allowances to 77,000 frontline
workers, we shall continue to fight a rearguard action against
the consequences of the failure of politics to find sustainable
common ground on which people in the Middle East can live and
in turn prosper. In that sense I would say that the very difficult
circumstances in Gaza, which were further complicated by the armed
takeover by Hamas in 2007, does not diminish our determination
to work there. If anything, the kinds of figures you quote on
levels of poverty make very clear why it must continue to be a
priority for DFID to work directly in the region at the same time
that it supports the efforts of our colleagues in the Foreign
and Commonwealth Office to find a sustainable peace process and
way forward.
Q95 Mr Singh: I appreciate that humanitarian
assistance is of the utmost importance in the situation in which
we find ourselves, but is it fair to say that most of DFID's aid
is now spent on humanitarian assistance rather than development
projects to reduce poverty?
Mr Alexander: Our aid is spent
both on humanitarian assistance and in building the capacity of
the Palestinian Authority, first, to be a credible negotiator
and, second, to be able to bear the responsibilities of the two-state
solution which is the ultimate goal in terms of the peace process.
There is a very clear correlation between the capacity of the
Palestinian Authority to be allowed to make that evolution and
the consequential impact in terms of levels of poverty because
there is an inter-relationship between the economics and politics
in the region. In that sense our humanitarian assistance is a
necessary but insufficient condition of the progress we want to
see. That is why in addition to the humanitarian aid we provide
we continue to provide support for the capacity of the Palestinian
Authority to develop and support the efforts of the international
community to find a way forward in terms of the peace process.
With humility, we recognise that we are only one part of the jigsaw
and that is why cross-departmental working on this issue is so
important. At both government and international level it is critical
that we pool our resources because none of us independently will
be sufficient to the task.
Q96 Mr Singh: Is there any co-ordination
of aid resources to Palestine by the international community or
is everybody doing their own thing?
Mr Alexander: To take the most
basic example, UNRWA has worked there for many decades and is
reflective of a co-ordinated international response. We have been
innovative in providing both core funding and also an incentives-based
package against an established set of criteria. We are but one
of a number of donors that provide support in a co-ordinated fashion
through UNRWA and we continue to work with our colleagues in the
European Union, which is the largest single funder of the Palestinian
people, along with the United States and others to make sure we
have as co-ordinated an approach as possible. Clearly, there are
a number of actors, but there is progress in terms of co-ordination
and UNRWA is one example of where that co-ordination takes place.
Mr Anderson: Leaving aside the
humanitarian side, the systems of aid co-ordination for development
assistance were renegotiated at the AHLC which the UK hosted in
December 2005. That was the result of UK leadership in the aid
co-ordination effort in which Mr Jenkins played a big role. What
is agreed is that the Ad Hoc Liaison Committee remains the international
supervisory body but on the ground in Jerusalem there is the Local
Aid Co-ordination committee. There are four working groups dealing
with governance, infrastructure, economics and the social sector.
Those working groups co-ordinate the aid. The idea is to put the
Palestinian Authority in the lead on setting the agenda and to
work closely with the Authority, and the UK has put a lot of effort
into making sure that those structures work. They do not always
work as well as we would like. To be honest, a good part of the
reason is that a lot of the donors who operate in the Palestinian
Authority have strong incentives to have their national flag on
programmes that they run. The truth is that aid effectiveness
sometimes is undermined by that set of incentives, but we and
the World Bank work very hard to try to pull everyone together
so that does not happen. On the humanitarian side, the co-ordination
is very good. There is always room for improvement but OCHA has
done a very good job of pulling together various agencies—11
major UN agencies and a number of NGOs—in the form of a
consolidated appeal. Co-ordination is taking place. In terms of
compliance with the Paris principles on aid effectiveness we are
not doing badly given the circumstances.
Mr Jenkins: This has been an issue
in Palestine since the start of the Palestinian Authority. Various
mechanisms were designed in the 1990s to enhance aid effectiveness.
I think it became clear some years ago that these were not working
very effectively. It sounds as though we are all congratulating
each other, but in my time DFID has worked extremely hard on this
issue in making this much more effective with real resources and
people on the ground because it is critical to making aid effective.
Q97 Sir Robert Smith: I should like
to clarify why if direct assistance to the Palestinian Authority
is resumed there is still a need for a funding mechanism like
PEGASE?
Mr Alexander: In terms of progression
from the Temporary International Mechanism to PEGASE and now the
World Bank, in part it reflects the real progress that is being
made by Salaam Fayyad in terms of strengthening public financial
management and systems within the Palestinian Authority. He is
an individual with a significant international reputation given
his background in the World Bank; he is impressive in terms of
his understanding as to the steps that need to be taken in order
to allow the international community to make direct budgetary
support payments. He already has a track record of being seen
to deliver on that progress. We have worked very closely with
him in facilitating the progress he has managed to make to date,
but equally he is clear given his own position as a leading Palestinian
and having worked in the development field as an economist for
a number of years that it is far preferable not to have parallel
systems. In that sense there has been a genuine urgency in his
work but he does not miss an opportunity to tell even his valued
partners that the best way they can support him is to address
the fiscal crisis that is being faced and to uphold and strengthen
the legitimacy and capacity of the Palestinian Authority's own
systems, and in that regard he serves the cause of the Palestinians
well in terms of both words and actions.
Q98 Sir Robert Smith: Therefore,
will PEGASE be phased out?
Mr Anderson: When TIM changed
into PEGASE a fourth window was added. The European Commission
runs its own budget support window. There are now two budget support
vehicles for the Palestinian Authority: the European Commission
which operates under PEGASE and the World Bank Trust Fund which
is a much more standard operating procedure. The idea is that
PEGASE will stay in place in part because for the very first time
the European Commission is committed to the provision of budget
support through its own mechanisms. In the past it has always
worked through the World Bank. In terms of aid architecture this
is a new thing. But there are also some donors who are not comfortable
working through budget support, so PEGASE provides the three other
channels by which other money goes in. It presents a package of
different kinds of aid instruments with which European Union Member
States are comfortable.
Q99 Sir Robert Smith: How much of
the PEGASE funds do you expect to go to Gaza? Is there an impartial
distribution of those funds to the territories?
Mr Anderson: Of the three windows
of PEGASE the most important is that dealing with budget support.
On Salaam Fayyad's estimate, approximately 55 per cent of that
goes to Gaza. As to the other three windows, the funding that
is probably most important for Gaza is the second one which is
purely about supplying fuel and other supplies, so it is really
paying Israeli companies to supply fuel which is absolutely vital.
Therefore, 100 per cent of the fuel that goes to the Gaza power
plant now is paid for by the European Commission under that heading.
In terms of the improvements made by Salaam Fayyad, it is worth
visiting the webpage of the Ministry of Finance which every month
provides a record of where all the expenditure goes. In terms
of transparency this is a remarkable achievement; it is the kind
of dream world that we hope for in our other partner governments.
Mr Alexander: Your parallel universe
is ending!
Mr Anderson: In terms of transparency
it does not get better than this. Salaam Fayyad is doing his utmost
to deliver world-class public financial management in the face
of some big challenges. Partly because of his background in the
International Monetary Fund he is taking very dramatic steps to
improve the transparency and effectiveness of the public financial
management system.
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