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World Bank: Palestinian Authority Becoming Welfare State

Increasing dependency on foreign donations is helping turn the PA into a welfare state instead of boosting its economy, the World Bank says.
By Tzvi Ben Gedalyahu
First Publish: 9/17/2008, 10:59 AM

Palestine Media Watch

The Palestinian Authority (PA) is growing more dependent on foreign aid, the World Bank reported Wednesday. Since the Oslo Agreements in the 1990s, the international community has granted the PA billions of dollars, on the assumption that a strong economy would reduce the need for foreign aid, stop terrorism and help the PA establish itself as a viable entity.

The aid has enabled the PA, which seeks to become a state within Israel's current borders, to inflate its public payroll while its education system continues to incite violence against Israel. Donors contributed $1.2 billion so far this year to support the PA's operating budget, including its government payroll. Approximately 160,000 public servants are on the PA payroll, requiring almost $2 billion a year to cover salaries.

The domestic output of the PA economy has actually dropped by 30 percent on a per capita basis since 1999, one year before the Oslo War broke out. Foreign aid in the past eight months has totaled more than $1 billion, slightly more than half of the amount the PA needs for the entire year.

Nevertheless, the World Bank cited Israeli security restrictions on trade in and out of Judea, Samaria and Gaza as one of the reasons for lack of economic growth.

The World Bank report concluded, "Overwhelming evidence suggests that the current restrictions correlate to settlement locations and expansion" and not to security. Israel has placed checkpoints and roadblocks to keep terrorists from circumventing the separation barrier. The Olmert administration has taken down 100 of the restrictions over the past several months in order to ease travel for PA Arabs. A terrorist attack earlier this week occurred near a former checkpoint.

The report blamed Israel for the PA's lack of economic growth. "As such, international manifestations of support toward a viable Palestinian state and institutions are incomplete insofar as they do not tackle Israeli economic restrictions in parallel," the World Bank stated. Israeli Foreign Ministry spokesman Yigal Palmor pointed out that restrictions on movement of people and trade are necessary because of terrorist attacks aimed not only at Israel but also at the Fatah-run PA.
Restrictions on movement of people and trade are necessary because of terrorist attacks.

A Middle East Quarterly essay by Steven Stotsky, a senior research analyst for the Committee for Accuracy in Middle East Reporting in America (CAMERA), stated that donor conferences for increased aid to the PA ignore the issue of terror. "Perhaps aid itself does not cause violence, but there is strong evidence that it contributes to a culture of corruption, government malfeasance, and terrorism that has had lethal consequences for both Israelis and Palestinians over the past decade," he wrote.

He noted that almost all of the foreign aid before the Oslo War was directed to economic and infrastructure development programs. The escalated terror campaign since 2000 cut employees wages and PA tax revenues, leaving the PA more and more dependent on foreign aid.

"In a classic example of the creation of perverse incentives, the decision to fund the government budget made the Palestinian Authority less dependent on revenue derived from commerce, detaching the PA's solvency from the health of the economy," according to Stotsky. "Thus, while the intifada sent the Palestinian economy into free fall, the PA's coffers swelled. The conditions were thus established that ensured the separation of Palestinian governance from responsibility for the economic health of the Palestinian people.

"Not only did the security forces fail to prevent terrorist attacks, in many cases they colluded with terrorist groups and sometimes perpetrated attacks themselves."

Since the Oslo War broke out eight years ago this month, more than 1,300 Israelis have been killed in terrorist attacks. The separation barrier still under construction is supposed to make it more difficult for suicide bombers and other terrorists to reach urban centers.

In addition, Gaza terrorists have bombarded the western Negev with thousands of rockets and mortar shells both before and after the government forced Jews out of the Gaza reign and withdrew all military presence from the area.