ANALYSIS: Hurdles face Palestinian economic revival despite donations

Dec 18, 2007, 14:17 GMT

Ramallah/Tel Aviv - The 7.4 billion US dollars pledged at the Paris donors' conference is unprecedented even for the Palestinians, already the recipients of the largest amount of financial aid per capita in history.

The amount nearly equals the entire sum of aid received by the Palestinian Authority since the autonomous administration was established in 1994 as part of the Oslo interim peace accords.

And it was well above the amount hoped for by Acting Palestinian Prime Minister Salam Fayyad, who had said he needed 5.6 billion dollars for the next three years.

Fayyad has no nickname. But if he had one, it would probably be Mr Clean or better yet, Dr Clean. The 55-year-old, who has a PhD in economics from the University of Texas and worked for many years for the World Bank as well as the International Monetary Fund (IMF), has a reputation for fighting corruption. No other Palestinian would have succeeded in collecting such a vast sum of money.

But Fayyad faces great hurdles.

First and foremost, there will be no economic recovery without a real peace process materializing. Without this, confidence and investment in the Palestinian economy will not be restored.

Most importantly, without this Israel is unlikely to remove some of the 168 staffed military checkpoints and more than 200 physical roadblocks - dirt piles, cement blocks and trenches - which, according to the B'Tselem human rights group, it has set up throughout the West Bank during the past years of Intifada (uprising.)

The network of checkpoints and roadblocks are a key cause of the economic paralysis, but Israel says it and its controversial West Bank barrier have foiled scores of suicide bombings and shooting attacks.

And for Israel, its own security is more important than anything else, including the creation of a Palestinian state. Economic revival, peace talks and action against militants are therefore inseparably linked. Fayyad knows this and plans to spend a large amount of the money on training and equipping a new police force.

He also told the donors in Paris that he wants improved law enforcement and an independent judiciary, among other things by establishing a 'vigorous public prosecution arm' and a training institute for the judiciary.

While fighting lawlessness is an internal Palestinian interest first, the Palestinian premier is making it a top priority also to counter Israeli fears of the creation of an anarchic state next to it, headed by a government that has no control over armed gangs.

But Fayyad faces more difficult tasks that have already proven unpopular among some members of an establishment dominated by President Mahmoud Abbas' Fatah party.

As part of his financial reforms, the independent politician wants to improve transparency to fight the widespread corruption that plagued past Fatah-led governments. One of the first things he did after taking over as the head of an emergency government following the June takeover of the Gaza Strip by the radical Islamic Hamas movement, was to restore what he calls a Single Treasury Account, through which all aid can be channelled and accounted for.

He also wants to pare a civil service that has - as part of desperate bids to curb growing unemployment - bloated from some 150,000 to nearly 190,000 public employees over the past two years. Fayyad wants to counter this and take some 40,000 state employees off the government payroll.

But in the first incidence of open warfare by a senior Fatah official against Fayyad, Abbas' media advisor Nabil Amr last week published a front page article in the official al-Hayat al-Jadida daily, slamming Fayyad and his cabinet of independents for failing to hire more Fatah members to public offices and firing others.

Many of these Fatah employees had been hired in the past based on party loyalty and connections, and lacked basic qualifications.

'There is concern about the Salam Fayyad government. Is it going to continue and for how long?' wrote Amr. 'Is it a solid ally of Fatah, or a make-believe alternative to it?'

Whether Dr Clean's cash injection will succeed in reviving the Palestinian economy - or even secure the survival of himself and that of his government - therefore remains to be seen.