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Wednesday, March 03, 2004

Palestinian Authority Broke and In Disarray

Arafat: "Let it collapse. It will be the fault of Israel and the Americans."

Washington Post Foreign Service
Monday, March 1, 2004; Page A11

RAMALLAH, West Bank -- Three years and five months after Palestinians began their second uprising against Israel, the Palestinian Authority is broke, politically fractured, riddled with corruption, unable to provide security for its own people and seemingly unwilling to crack down on terrorist attacks against Israel, according to Palestinian, Israeli and international officials.

The turmoil within the Palestinian Authority is fueling concern that the agency -- created almost 10 years ago to govern the West Bank and Gaza Strip -- is disintegrating and could collapse, leaving a political and security vacuum in one of the Middle East's most volatile regions, many of those officials said.

At a time when Israel is constructing a massive barrier complex through and around the West Bank and planning for the possible withdrawal of Jewish settlers from the Gaza Strip, Palestinian leaders have offered no political strategy to prevent the authority from becoming marginalized or obsolete, officials and analysts said. Prime Minister Ahmed Qureia's chief of staff, Hassan Abu Libdeh, said the collapse of the governing authority was "a real possibility" and could lead to "a lawless situation" that would play into the hands of radical Islamic groups already competing with the Palestinian Authority for power.

None of the analysts or officials interviewed said they believed a collapse was imminent, and many noted that the key players in the Middle East, including Israel, the United States, the European Union and Palestinian leader Yasser Arafat, have a strong interest in preventing the Palestinian Authority's demise. However, most agreed that the key issue affecting its survival is a lack of money, and they noted that even on the verge of bankruptcy, the authority has not imposed many of the reforms that frustrated donors are demanding.

At the same time, support for the authority among Palestinians has also plunged. In a recent poll by the Jerusalem Media & Communication Center, a Palestinian research organization, 54 percent of Palestinians surveyed said they believed the authority, commonly referred to as the PA, effectively no longer exists. More than 30 percent of respondents said it would be in the "national interest" to abolish it.

...Because of budget shortfalls in recent months, the authority has taken out loans from Arab-owned commercial banks to pay salaries while also imposing pay cuts on its 140,000 employees. Frustrated by allegations of corruption and the slow pace of economic reform, foreign donors are reducing funding to the authority or diverting money to nongovernmental organizations.

Arafat and Qureia reportedly are at loggerheads over security and financial reforms -- the same issues that led to the resignation of the first Palestinian prime minister, Mahmoud Abbas, after 130 days in office. Qureia, who more than three months into his term still has not met with his Israeli counterpart, Prime Minister Ariel Sharon, is increasingly seen as weak and unresponsive.

Edward G. Abington, a former State Department official who is now a Washington consultant to the Palestinian Authority, said he told Arafat during a meeting at the Palestinian leader's bombed-out compound here recently that the governing body was in danger of collapse.

"Let it collapse," Arafat said, according to Abington. "It will be the fault of Israel and the Americans."

The Palestinian Authority was created during the Oslo peace process in the mid-1990s to govern large areas of the West Bank and Gaza Strip -- populated by an estimated 3.5 million Palestinians -- for an interim period of five years. Its governing structure includes an elected president -- Arafat -- and an elected 88-seat legislative council.

Khalil Shikaki, a Palestinian pollster and political analyst, said the main reason the authority has held together is its position as the largest employer in the territories. "The PA is still in existence only because it is able to pay salaries to 140,000 public sector employees in the civil service and security forces," he said. "When you pay 140,000 people a month, your existence is in the interest of a lot of people."

But the authority's grip is weakening, analysts and officials said. Palestinian Economic Minister Maher Masri said earlier this month that the agency probably would not have enough funds to pay February salaries. It recently sold its 35 percent stake in the local Jawal cell phone company to raise $43 million to pay employees.

The Palestinian Authority, which spent about $1.1 million last year, ended 2003 with a $350 million deficit, according to figures compiled by the Finance Ministry and international monitoring groups. Of the nearly $590 million Palestinian officials requested from donor nations, the authority received less than half -- about $230 million.
UPDATE: Tuesday, March 2:

Haaretz: Arafat finally approves key financial reform for PA

Palestinian Authority Chairman Yasser Arafat on Tuesday approved a key reform measure after long delays, paving the way for renewed foreign aid to the financially strapped PA, the Palestinian prime minister said.

At issue was the method of payment to tens of thousands of members of the Palestinian security forces. Under the old method, cash for salaries was sent to commanders who distributed it to the security forces - an invitation to corruption.

Palestinian Finance Minister Salam Fayad, backed by international donor countries, wanted to transfer the salaries directly to personal bank accounts of members of the security forces. However, Arafat blocked the reform for months, for fear it would undercut his control of the security forces.

Palestinian Prime Minister Ahmed Qureia said Arafat finally gave his approval during a cabinet meeting Tuesday.