[[Jerusalem Times: Opinion]]


May 8, 2006


This Week in Palestine…behind the News with Hanna Siniora


PA Salaries


The number of PA government employees has mushroomed since Hamas won the elections, now close to 170,000, have entered the third month with promises that soon they will be able to receive their salaries, yet a concrete answer has not yet been found.


In the meeting that took place last Saturday May 6, between President Mahmoud Abbas and Prime Minister Ismail Haniyeh, the issue of how to channel available funds from the account of the Arab League to pay the salaries was at the top of issues discussed for more than four hours. The talks will be resumed Sunday after top officials from both sides try to put recommendations for the night meeting between Abbas and Haniyeh.


Russia relayed to Abbas ten million dollars in assistance that the Presidency distributed in accordance to a protocol accepted by the PA Finance Ministry, two million went to cope with the repercussions of the avian flu, three million to support holding the tawjihi high school examinations, three million four hundred thousand to pay part of the bills of the Ministry of Health, 850 thousand to the Red Crescent, 380 thousand to Al-Makassed Hospital and the remaining 370 to other hospitals. Abbas and Haniyyeh are discussing the President’s suggestion to put such a mechanism on the agenda of the Quartet meeting next Tuesday, May 9, at the UN.


US secretary of State Dr. Rice is studying the possibility of using the office of the Palestinian Presidency as a conduit to channel funds in support of Health and Education following the Russian grant distribution. Most probably the future arrangements will be adopted in the Quartet meeting at the UN. Additionally the Quartet will discuss President Chirac’s proposal that the World Bank should be the party that will receive funds and arrange the mechanism for paying salaries of the PA.




Worsening Economic Conditions


Government employees to a great extent stopped traveling to their offices, especially those in the West Bank and Gaza, who have to travel from their villages and towns to the main offices in Gaza and Ramallah. These civil servants have run out of cash to defray the cost of transportation, many could not raise or borrow funds to pay for basic needs like bread and food. The potential of a humanitarian crisis is already upon us. What was presented by a World Bank report last month is hitting the Palestinian economy faster than was anticipated. A prediction of 25 percent drop in GDP that expected an increase in unemployment and poverty of over 67 percent is being revised at a faster upward scale.


The battered Palestinian economy has already lost one third of its output. Small businesses in Palestine, especially in Gaza, could soon crumple due to sharp drop in domestic purchasing power, outstanding debts and the PA financial crisis. Alternate jobs are non-existent and international development funds have been frozen.


Israel and the International community have to reconsider sanctions put in place, they have to revise policy and dispense humanitarian aid at a faster pace to prevent the deepening of the crisis and an eventual humanitarian disaster.


Palestinian Postal Banking Agency


Many suggestions have been put forward for mechanisms to relieve the civil servants salaries issue, among them, the Chirac World Bank proposal, the redirection of funds to be dispensed by the office of the President and other novel suggestions. A new suggestion being advocated in government circles, is how to go around the fears of the banking institutions that belong to the private sector in Palestine. The Arab Bank and all the other banks in Palestine, local, regional and international refused to deal with the Palestinian Authority because of the embargo on the transfer of funds from Arab and Islamic donors to the PA Finance ministry.


In Palestine, the government has no public owned postal banking system that usually deals in holding the accounts of employees like the civil servants and is an outlet to pay telephone, water, electricity and other consumer bills. The postal bank does not deal with export and import banking, and is being suggested as the best vehicle for the government for receiving grants and contributions without fear of Israeli and US reprisal that would bankrupt the private sector banking system. In Palestine such a system is non-existent and the Finance Ministry is studying the effectiveness of establishing such an institution as the postal services are being run by the PA government.


The PA Minister of finance also approached the Palestinian Monetary Authority (PMA) with a request to borrow a hundred million dollars to be repaid in three months and with no interest. The head of the PMA is studying the request, but the collateral for such a loan does not have the liquidity to justify granting the loan.



The Convergence Plan


The Israeli cabinet coalition held its first meeting. Naturally this cabinet reflects the Israeli public backing of Sharon’s disengagement plans, adopted by his heir Ehud Olmert. The Israeli PM Olmert declared that he wants to negotiate bilaterally the implementation of the disengagement from the West Bank, and renamed it the convergence plan.


Mahmoud Abbas as the chairman of the PLO and the President of the PA have always insisted on his readiness to resume the political process of negotiations according to the Quartet’s Road Map. Abbas, is still considered a non-partner by Israel, and an Olmert-Abbas meeting has failed to materialize although many efforts including those by Egyptian President Mubarak. Palestinians do not oppose the evacuation and dismantling of settlements in the West Bank. The Palestinian people and their Cabinet realize that a major obstacle to peace is the settlement policy adopted by Israel. With Olmert, they disagree on the unilateral approach. They are also dead set against the repeated declarations and intentions of unilateral drawing of permanent borders by Israel.


The Olmert government can receive the backing of additional Knesset support, if it encourages bilateral talks and the resumption of negotiations, President Bush can reshape his credibility and his regional ME policies by directing the Bush administration efforts in reviving the road map process and bringing Israelis and Palestinians back to the negotiating table. It is a domestic American interest, as it is an Israeli-Palestinian interest to prevent a political and humanitarian disaster.