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Corruption and the Palestinian National Authority

Monday 7 April 2008, by Alternative Information Center (AIC)

The Palestinian Authority (PA) has been repeatedly accused of corruption since it was established in 1994. The first audit conducted by the PA’s comptroller, whose findings were published in 1997, was self-critical. Since then, the battle waged by the Palestinian public and international donors against non-transparent practices of the PA has been ongoing, and is perceived in international circles as most successful under the direction of former Finance Minister and current Prime Minister Salam Fayyad. Several international actors have also accused the PA of corruption, most notably the International Monetary Fund (IMF) in a 2003 report that was widely covered in the local and international press. The IMF’s report of unaccounted public funds being diverted into private bank accounts prompted Israeli allegations at the time that the PA, and specifically Palestinian President Yasser Arafat, “financed terrorism.”

These accusations employ a concept, “corruption,” that can be defined and analyzed scientifically and objectively. However, this concept is employed within a political discourse that is highly moralistic and deeply embroiled in the domestic and international politics of the PA. The Alternative Information Center (AIC) believes that the political side of the problem is also where the solution can be found: to encourage and support the existing Palestinian domestic efforts to curb corruption.

Though corruption in its two primary forms, nepotism and bribery, has clear-cut definitions when set against a standard of good practice, the actual measurement of corruption is a problematic task in relation to the PA. It is by placing the reports of corruption in their political context that the matter can be better understood. During the second half of the 1990s, the Palestinian Authority and especially its Executive Branch, came under substantial internal pressure to explain two things: the appointment of “returnees” (previously exiled PLO politicians and fighters) to administrative positions in the PA, and the management of international donor funding. Prominent domestic critics of these placements included Hanan Ashrawi, Hasan Khreisheh and Abdel Jawad Saleh (chairs of the Palestinian Legislative Council’s Monitoring Committee), and many others in the leftist PLO parties and within the Fatah itself. These were politicians who had remained in the occupied Palestinian territories while the leadership operated in exile, or who had been involved in the Madrid Conference of 1991 as opposed to the secret negotiations of Oslo. These politicians reflected a widespread Palestinian view that their exiled leadership had signed a deficient agreement in the form of the Oslo Accords and had done so to line their pockets with unearned money. Under such internal pressure, the PA formed the General Control Institution that published the critical 1997 report, in which many of the legitimate concerns regarding procurement practices and embezzlement were addressed. It must be remembered, however, that much of the domestic criticism of PA corruption puts into question fundamental features of the PA structure, such as its utter dependence on international aid, and its establishment (by the Oslo Accords) features perceived as inherent to PA corruption.

International criticism has sometimes equally aimed at delegitimizing the PA, especially during the Second Intifada. The IMF report of 2003 revealed that USD 591 million in excise taxes were processed outside the channels of the Palestinian Ministry of Finance between 1995 and 2000. The question was, where had the money gone, and the EU was quick to pose it with regards to its own donations to the PA. No satisfactory answer has been forthcoming, except that part of the diverted funds consisted of transfers from the Israeli Treasury, which collects taxes on behalf of the PA, to bank accounts controlled only by Arafat and his personal financial advisor. This was presumably done to bolster his position as the “moderate statesman” who had signed Oslo. However, by the time the IMF report was published, the tables had turned and Arafat was now to the Israelis the treacherous leader of the Second Intifada, and the reports of diverted funds were used to support allegations that the PA, and Arafat in particular, “abetted terrorism.” This allegation ignored the paragraph of the IMF report noting that the diversions of tax money had been resolved by April 2000 (before the Second Intifada broke out) when all the revenues were consolidated under the management of the Ministry of Finance. (IMF: West Bank and Gaza: Economic Performance and Reform under Conflict Conditions, September 15, 2003, p.88) It is because of this type of political use of criticism that Palestinians have become sensitive to outside accusations of corruption, despite the fact that the compiler of the IMF report’s chapter dealing with corruption was a Palestinian, Karim Nashashibi. Outsiders’ criticism was deemed to be a foreign plot to undermine Palestinian institutions, especially at a time when the circumstances—Israeli crackdowns on the Territory to suppress the Intifada—were not conducive to institution-building. Hanan Ashrawi herself commented that the timing of the IMF’s report was “significant.”

In 2004, when the Intifada petered out due to a Hamas’s truce, internal criticism was renewed. A group of Palestinian intellectuals and parliamentarians signed a document accusing the PA of nepotism in appointments, especially in the security forces, and embezzlement in the area of PA funding, with concerns voiced over the personal enrichment of some politicians in Arafat’s circle. Some of the critics were arrested by the Palestinian police. These were the signs that Palestinians demanded accountability of their leadership, whose corrupt practices amounted to a betrayal of their responsibilities towards the nation. These demands were ultimately expressed in the form of commitment to open elections, the strengthening of parliamentary democracy, and the winning “Change and Reform” platform of Hamas. Israel and the international community have been continuously undermining these demands for transparency and accountability. By supporting and funding, or arresting and boycotting Palestinian politicians as pleases foreign interests but not in accordance with public procedures and internal legitimacy, the Palestinian struggle to bring their leaders to account is rendered impossible.

The Temporary International Mechanism (TIM), set up in early 2006 to allow European and Arab donor funding to bypass PA institutions now headed by Hamas, was reminiscent of precisely those practices used in Arafat’s time that several years of transparency-oriented reform had tried to eradicate: funds were sent directly to the President’s office, payments were made only to political allies, services were suffering from under-funding, and, with resources scarce, these were exchanged for special favors, and finally, alternative channels, such as suitcases of cash carried through the Rafah Border Crossing, were opened. NGOs were suddenly demanded to fulfill public services, though with even less public accountability than PA ministries. After one year and a half of TIM, much of the reforms in the PA ministries have been undone. Without batting an eyelid at the irony, not to say the hypocrisy, the international community continues to vaunt its efforts in promoting democracy and anti-corruption drives.

Aside from these aspects of political corruption, there is not much to say on the issue. The World Bank’s Economic Survey of 2001 found that the existing levels of corruption in the Palestinian Territory did not negatively affect the business environment. Nepotism or influence-wielding is not a problem in the private sector. Businesspeople were not required to pay bribes to public officials in order to operate or receive services. In fact, the frequency of informal payments was roughly of the same volume as in OECD countries, and not at all in the same league as other regional and developing countries (World Bank: Governance And The Business Environment In West Bank/Gaza, David Sewell. April 2001, p. 8). The public equity holdings in some industries (petroleum, telecommunications and cement), which are anticompetitive and led to concerns over the enrichment of some of Arafat’s cronies, were either due to constraints placed on Palestinian economic activity by economic protocols signed within the Oslo framework (with regard to petroleum), or seen as temporary measures in a volatile and transitional economy, awaiting privatization tenders.

Nevertheless, despite the findings that show relatively low levels of corruption in the Palestinian Authority and a very strong internal impetus for reform, Transparency International (TI) published a Palestinian opinion poll showing that 82% of Palestinians thought nepotism to be very common in the public sector (but only 6% in the private sector), and the wide spread of this view put the PA in 107th place out of 158 countries (number 1 being the least corrupt) in TI’s 2005 Corruption Perception Index. It is evident that Palestinians have very high standards and expectations of “clean” practice on the part of their public officials, and judge their failures harshly. They also have good reasons to suspect that anti-corruption reforms will not be helped by outside interference. They had best tackle corruption themselves.

Ultimately, it is only when the rule of law can be firmly established in the Palestinian Territories that corruption may be identified and punished. It is law that sets the standards from which corruption deviates. However, it is impossible to implement the rule of law when another country and its interests—its military occupation—control domestic matters at its whim. Let the Palestinians fight corruption in their sovereign state. They have already proved that they have striven to do so in the stunted, questionable autonomy of the Palestinian Authority.

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