Newsletter - May/June 2006

June 6, 2006

Balancing the Palestinian budget

Six months ago, before the election of Hamas, the World Bank urged donors to temporarily cease funding the Palestinian Authority (PA). The cause? Continuous and flagrant breaches of Palestinian promises to reform the PA's bankrupt budget. Wage increases had amounted to around 15%. The number of employees had leaped through all targets, including employment of the terrorist Al-Aksa Martyrs Brigades. The International Monetary Fund had identified thousands of security personnel as "non-performing".

Notwithstanding, all the various factions of the Palestinian military and civil institutions are today asking the world for more money. The media has clearly set out the latest dilemma facing the international community and the Palestinian leadership: how to avert a looming humanitarian crisis, while avoiding the support of terror and corruption.

Pertinently, both President Abbas and Hamas are in the same predicament. Donors are demanding - at least superficially - an adherence from all parties to commitments on accountability and transparency.

The FPC joins the call to find a solution for the deep-rooted unemployment in parts of the Palestinian territories. To do this, the source of this poverty must be openly questioned. It is time for the average Palestinian to "get ahead", despite the conflict.

A refreshing analysis was presented by British MEP Daniel Hannan. He argues that European funding feeds the Israeli-Palestinian conflict and keeps Palestinians trapped in the squalor of dependency.
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Hamas' commitment to Palestinians: accountability

The new Hamas govenment appears to have no intention of addressing the issue of budgetary reform, despite its electoral platform. It has already added thousands of its own terrorists to the already bloated payroll.
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To compound the problem, the Hamas election promises of eradicating the corruption endemic in the previous Fatah regimes have been quickly removed from the agenda. Just a few months after taking the reins of power, two senior Hamas officials were caught traveling with hundreds of thousands of dollars of unexplained cash.
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Not only has Hamas ignored the importance of accountability, its recent statements have vindicated European reluctance to transfer fresh aid to the Palestinians. It wants the money for guns - leaving the looming humanitarian crisis on the conscience of the international donor community.
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Significantly, Arab investment funds and governments are also signaling that they too want to keep their money away from Hamas.
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In a side development, since 2003, the PA's Ministry of Finance had published its expenditures on the internet. This reporting ceased abruptly in January 2006, just as Hamas came to power. While the huge resources controlled by the Palestine Investment Fund, the PLO, UNRWA, NGOs and other hidden assets are not reflected in these analyses, they do provide a fascinating resource for the interested researcher.
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The FPC is pleased to note that shortly after our analysis was circulated, the PA was pressured into releasing part of the January and February 2006 accounts.

President Abbas and transparency

With some irony, as this newsletter was being written, President Abbas announced plans to recruit another 10,000 people to his Presidential Guard. The game continues unchecked. He has appointed Col. Mahmoud Damra as its paid commander, despite his heavy association with continuous acts of violence against civilians.

Abbas' policy is consistent with previous decisions to promote senior political personalities, who are also involved in terror. For example, confessions by Fuad Shubaki, one of Chairman Arafat's top finance officials, confirm previous FPC reports that aid has been used to fund corruption, violence and terror.
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It is with some surprise that the FPC notes that while both Hamas and Abbas claim to be unable to meet the PA payroll, they have recruited thousands of new employees. One can only wonder where the funds to pay these salaries are being taken from.

Budgets for terror

The PA has consistently used internationally funded budgets to provide a "terrorist insurance" scheme for prisoners in Israeli jails. This incentive to terrorism has encouraged Palestinian youth to risk their lives, in the hope of being arrested by Israeli soldiers. Both Palestinian social workers and Israeli officials have expressed their concern openly.
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