December 17, 2004
Donors Consider Large Rise in Aid to Palestinians
http://www.nytimes.com/2004/12/17/international/middleeast/17diplo.html
By STEVEN R. WEISMAN


WASHINGTON, Dec. 16 - The United States, Europe and Arab countries are
considering greatly increasing - maybe even doubling - aid to the Palestinians
on
condition that they and Israel take certain steps toward reducing their
conflict,
American and Palestinian officials say.

A four-year package of $6 billion to $8 billion would be forthcoming, they said,
if the Palestinian elections set for Jan. 9 occurred successfully and if the new
government cracked down on militant groups and Israel lifted scores of
roadblocks
and checkpoints to ease the transit of goods and people in Palestinian areas.

The possibility of an aid increase was the subject of intense discussions at a
donors meeting on Dec. 8 in Oslo. According to participants, the aim of the
meeting was to help moderate Palestinian leaders after the death of Yasir Arafat
and to prepare for the fulfillment of Prime Minister Ariel Sharon's decision to
pull settlers and forces out of the Gaza Strip and parts of the West Bank.

The World Bank says the package, which would come from the United States, the
European Union, Arab states and other donors, would be the largest per person
international aid program since World War II.

The Palestinians are already the world's largest per capita recipients of
international aid, getting about $1 billion for 3.5 million inhabitants, or
nearly $300 per person. The contemplated aid package would increase that amount
by 50 to 100 percent.

To support the new Palestinian leaders and send a signal to European and Arab
leaders to step up their own aid programs, the United States announced in Oslo
that it would add to the $200 million it contributed indirectly to the
Palestinians this year by channeling another $20 million directly to the
Palestinian Authority.

"What you are seeing is a new effort to coordinate with Europeans and the
Palestinians on these issues," said a senior Bush administration official. "The
question is whether it will be possible after the Palestinian elections to
reorganize Palestinian forces and get them to restore order. The answer so far
has been no. But now there is a chance." No pledges were sought at Oslo,
participants said. Instead the discussion focused on what aid might be
realistic.

"We are looking at the possibility of another $500 million a year or more, but
it
has to be in the context of conditions permissive to a much deeper development
effort," Salam Fayyad, the Palestinian finance minister, said in a telephone
interview from Qatar. "That cannot happen unless conditions on the ground
improve
substantially."

Other officials said the target was an additional $500 million to $1 billion a
year. Despite the large aid amounts in recent years, economic conditions have
deteriorated and a lot of the financing was deemed wasted. Donors have
complained
of poor accounting practices.

A large portion of the financing in recent years has gone not for development
but
to help the Authority meet its payroll of 130,000 employees - a major jobs
program that has prevented destitution for more than a million Palestinians.

Donors have been increasingly unhappy that so much of their money has gone to
keep the Palestinian Authority afloat, and not to long-term economic
improvement,
but they say that Mr. Fayyad has instituted reforms improving accountability and
increasing tax collections.

"He's taken a number of measures establishing tighter control over public
finance," said Nigel Roberts, the World Bank's director for the West Bank and
Gaza. "But donors are also able to see that all their spending over the last
four
years has yielded very little, and they want to exercise some leverage over the
situation."

Mr. Fayyad said the Palestinian uprising of the last four years, and the Israeli
response of sending forces throughout the West Bank and the Gaza Strip had
combined to devastate the economy. "We've had an existence of hand to mouth, all
kinds of arrears, late payments, a miserable existence," he said. "We've been so
preoccupied with cash management, it has been hard to focus on improving our
economic infrastructure."

European and Arab donors are likely to call on the United States to pay more
attention to their views in peace talks as they demand a say in return for their
increased donations.

The Palestinians have already started courting Arab countries for the money.
This
week Mr. Fayyad has been accompanying Mahmoud Abbas, who succeeded Mr. Arafat as
chairman of the Palestine Liberation Organization and is on a tour of Gulf
countries, some of which have not come through on past pledges.

Mr. Fayyad and Mr. Abbas, the leading candidate for Palestinian Authority
president, are arguing that Arab countries can afford to be more generous
because
of high oil prices. In an important gesture to one donor nation, Mr. Abbas has
also apologized to Kuwaiti leaders for Mr. Arafat's failure to denounce Iraq's
invasion of their country in 1991.

"If you have those things in place, plus improved internal governance by
Palestinians, then you can legitimately go to the donor community and say,
'Maybe
your $1 billion a year hasn't produced much, but we think there's a case for
doing even more in the next three or four years,' " said Mr. Roberts of the
World
Bank.

"This is going to require a huge push for the donor community," he said, adding
that while the Palestinians had instituted many reforms, many more were needed
to
establish the rule of law and eliminate payoffs and corruption.

As for Israel's myriad checkpoints and roadblocks in the West Bank, the Bush
administration has long been pressing Israel to remove them to make the coming
elections easier to conduct. But Israeli leaders plan to do so for only a
three-day period before the voting.

A senior Bush administration official said Mr. Abbas's attempts to negotiate a
cease-fire by Palestinian militant groups during the campaign period was welcome
but must be followed by a genuine crackdown after the elections.

"Cease-fires are not the answer," the official said. "But if the Israelis react
to the Palestinian cease-fire by easing conditions, and the Palestinians react
to
that by getting control of security, you can have a kind of virtuous circle that
has to be a step forward."

Some European leaders, anticipating increased leverage as European financing for
the Palestinians increases, are pressing Israel and the Palestinians to start
talking soon about difficult issues like Jerusalem, the boundaries of a
Palestinian state and the status of refugees.

The Bush administration and Mr. Sharon's government want those issues put off
until the Palestinians show more progress against terrorism. "We're trying to
maintain a united front with the Europeans," the senior administration official
said, "and I think we've succeeded on that. We can achieve a solution by keeping
our eyes focused on realistic goals and not talking about pie in the sky."



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