FPC Submission to the International Development Committee, Westminster

October 5, 2006

International Development Committee
Committee Office,
House of Commons,
7 Millbank, London SW1P 3JA
Via email:

Dear Committee Members

Subject: Development Assistance and the Occupied Palestinian Territories

We of the Funding for Peace Coalition (FPC) commend the above 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 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 to 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, 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.


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.

Your obedient servant,

David Winter Spokesperson
Funding for Peace Coalition

©2003. All Rights Reserved. Copyright information and fair use notice.
P.O. Box 2009. Rochford, Essex. SS4 1DB ENGLAND. Phone: +44 (700) 593-0923. Fax: +44 (700) 593-0984.