OLAF's Findings Confirmed

May 25, 2005

The outgoing head of the World Bank, Mr James Wolfensohn, has repeated his calls for greater clarity and accountability in the financial dealings of the Palestinian Authority (PA). He says that this is essential if the PA is to receive increased international aid.

In a Reuters report, Wolfensohn commends the skills of the Palestinian Finance Minister, Salam Fayyad, but indicates that Fayyad's desire to implement the necessary changes have yet to deliver the necessary results.

This point is critical.

Wolfensohn has agreed to act on behalf of the "Quartet", following Israel's initiative to pull out of Gaza. He is apparently determined to ensure that new controls are installed for both benefit of the donors and the Palestinians themselves. This follows the global community's growing acknowledgement that lessons must be learned from the corruption of the Arafat regime, many of whose senior officials still hold important positions today.

It should be remembered that OLAF, the EU anti-fraud unit reported in March 2005 that it was unable to confirm that all European funding of the PA had been used for legal purposes. In line with Wolfsensohn's comments, one of OLAF's central findings was that both PA and EU procedures should be restructured to emphasise transparency.

Meanwhile, despite all these recommendations, OLAF has yet to explain why the EU is still transferring an annual average of around EUR 250 million in direct and indirect aid before new controls have been implemented.

The full report on Wolfensohn's comments appears below.

Palestinians must fix financial problems-Wolfensohn

24 May 2005

Source: Reuters

WASHINGTON, May 24 (Reuters) - The Palestinian Authority will have to address financial mismanagement problems if it wants to attract increased donor aid, outgoing World Bank chief James Wolfensohn said on Tuesday.

Wolfensohn, who starts next week as a special envoy for major powers in coordinating Israel's pullout from Gaza, said more certainty about future aid levels was also necessary to help the Palestinians.

Concern about graft and waste under President Yasser Arafat caused foreign donors to withhold funding pledged to the aid-dependent Palestinian Authority.

"Financial management within the Palestinian Authority, which is currently under a remarkable finance minister Salam Fayyad, needs to demonstrate the sort of security of management and the prudence of management that I know he would want to exert," Wolfensohn said.

"If you had that, and you had transparency in expenditures, then I think what perhaps would be needed most would be some certainty about future levels of assistance on which they could plan," he added.

Wolfensohn said he hoped to come up with an economic and aid plan for Palestinians in a month or so.

He said he had recently spent five days in Gaza as the representative for the "quartet" of Middle East peace mediators -- the United States, European Union, Russia and the United Nations.

In his new role, Wolfensohn will focus on economic and social development in Palestinian territories and on marshaling international support as Israeli's withdraw from Gaza.

He will work closely with Palestinian President Mahmoud Abbas, who meets President George W. Bush on Thursday to call for political and economic support.

Wolfensohn said security for Israelis and economic development for Palestinians were key to the withdrawal plan.

"You cannot have security if you do not have hope for the Palestinians, and if you do have hope for the Palestinians, you have a lot better chance of security," he said.

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