Afternoon Tea in Jerusalem Blog

Life in Israel

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Israeli commercial life and society

In addition to my work as a business coach, one of my interests is blogging about life in Israel. This is a country full of contrasts – over eight million citizens living in an area the size of Wales. You can see snow and the lowest place on the globe in the same day. Although surrounded by geopolitical extremes, Israel has achieved a decade of high economic growth. My work brings me in contact with an array of new companies, exciting technologies and dynamic characters. Sitting back with a relaxing cup of strong tea (with milk), you realise just how much there is to appreciate in the Holyland. Large or small operations, private sector or non profit, my clients provide experiences from which others can learn and benefit.

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BDS? Those surprising Palestinians who do not boycott Israel.

I have just returned from a visit to a large medical in clinic in Jerusalem. People of all persuasions and languages – pensioners, soldiers, Arabic, English, Hebrew and Russian.

And this started me thinking how some of those in the waiting room might define themselves as Palestinians. Surely there are other areas of cooperation between the sides that the world media just does not allow others to learn about. A quick consultation with Rabbi Google, and I was stunned to learn just how embracing are the joint areas of activity. For example: –

  • Let us start with a practical example of everyday life. A dog sanctuary, located in Beit Sahour near Bethlehem, is often short of resources. A way has been found by the Palestinian Authority (PA) to enable Israeli animal lovers to help out.
  • The Negev desert has seen many projects involving both Israelis and Jordanians. Much of the effort is focused around the Arava Institute For Environmental Studies. With nearly a thousand graduates over two decades, “about 29 percent are Israeli Jewish, and about 24% are Arabs from Israel, Jordan and the Palestinian Territories“.
  • Israel’s scientific partnerships with the EU are well documented. However, I came across this EU sponsored consortium, the SESAME Project – Synchrotron Light for Experimental Science and Applications in the Middle East.

Based in Jordan, it is an independent laboratory formally created under the auspices of UNESCO nearly 15 years ago. The founding members of SESAME include Israel and countries that do and some that don’t have diplomatic relations with each other, including Iran, Bahrain, Cyprus, Egypt, Iran, Jordan, Pakistan and Turkey, as well as the PA.

  • Water has often been a cause of sharp rhetoric for those campaigning against Israel. Last Sunday, “Israel and the PA signed a water cooperation agreement , the fourth major infrastructure deal agreed to in the past year and a half.” Other accords refer to electricity, mobile phones and mail distribution. Significantly, the document on water takes a long term approach, allowing for parallel changes in population for many years to come.
  • And finally, if all of that is a tad too gentle for you, yes, cooperation between Israel and the PA exists over security issues. Maj. Gen. Majid Faraj is the powerful head of President Abbas’ General Intelligence Service. He has also been seen as a potential successor to his octogenarian boss. Interviewed by “Defense News” last year, at the height of tensions with Israel, Faraj confirmed that in previous months “PA intelligence and security forces have prevented 200 attacks against Israelis, confiscated weapons and arrested about 100 Palestinians – claims that were not rejected out of hand.”

The past month has revealed a flood of stories from university campuses in the USA and the UK, where Jewish and Israeli students are physically and verbally abused. This is part of the  BDS campaign to boycott anything remotely resembling a link to the Jewish State.

As I have frequently observed, such a campaign is nothing short of anti-semitic. It is certainly hypocritical because has less to do with Palestinians and more to do with denigrating Israel. And BDS proponents simply lie, because they will not admit that Palestinians – from top leaders down – are also working, very well, with their Israeli counterparts.

Reporting the Palestinian economy – some good news

Reporting accurately on the Palestinian economy has never been easy. If you look carefully at the documents of the World Bank or the IMF, they often contain statements that data collected from Ramallah and Gaza is not of the most reliable standards. That said, various news items more recently have given the outside world a better understanding as to how revenues are used by the Palestinian Authority and by Hamas.

Why is this important for outsiders? Because according to the OECD, approximately 70% of Palestinian expenditure comes from overseas aid. And the overwhelming majority of that aid comes from the generosity of Western taxpayers, who in turn are suffering from their own economic uncertainties.

The OECD estimates that the Palestinians receive around US$2.5 billion in direct aid annually. Ostensibly, the USA is the largest single donor, but much of UNRWA’s support comes from the pockets of European citizens. 49% of the total sums are designated for ‘other social infrastructure’, whatever that may mean. (BTW, total annual contributions to global aid peak above $130 billion. Thus, per capita, the Palestinians receive a very healthy share of the total pool).

And where specially does this money end up? Here are four quick case studies:

  1. A few weeks ago, I discussed how in spite of the checks in place, monies from the UK and from the EU seep through to political prisoners and terrorists. Coblogger Arnold Roth has expanded on this theme. He believes that “the perpetually financially strapped PA spent $144 million paying salaries” in 2014 alone.  Thus, using the 70% factor, donors (including British taxpayers) paid about US$100m towards helping these ‘deserving people’.
  2. On a similar note, the Palestinian commentator Khaled Abu Toameh observed this week that “The Palestinian Authority has used international funds to build prisons and detention centers in the West Bank where torture has become the norm.” He outlines how the Independent Palestinian Commission for Human Rights (ICHR) has received 782 complaints concerning torture and similar abuses. Again, the money to maintain this state of affairs primarily came from overseas.
  3. Moving away from direct political issues, even culture is not immune to the misuse of funds. The New York Times revealed that a spanking new museum in Ramallah was opened on the basis of a US$24m budget. This is to be a great celebration of Palestinian history and art. However, due to internal wrangling, there is not one exhibit for inspection. So, I am forced to ask, where did the budget disappear to and how was it accounted for in front of the donors?
  4. And there is UNRWA, where the EU is proud to show off its contribution. VP Mogherini announced on 4th April:

Since 2000, EU has provided over EUR 1.6 billion to UNRWA out of the European Neighbourhood Instrument (ENI) allocation for Palestine. The bulk of EU aid for UNRWA, EUR 82 million per year for the period 2014-2016, has gone to finance its General Fund (or  Programme Budget)………On top of this, there are ad hoc temporary projects financed via other instruments. Humanitarian funding to UNRWA amounted to EUR 5 million both in 2015 and 2016 (of which, EUR 4 million for shelter assistance in Gaza)……….

Well that is clear. However, less than a month later, we learnt of an event that took place at the UNRWA refugee camp in Aida, near Bethlehem. This celebrated a violent attack on Israeli buses a few days previously. And it would appear that this abuse of funds is not one isolated party.

I could list other items. For example, Hamas has returned to building offensive tunnels to fight Israel. Such an operation can only be carried out by syphoning off raw materials meant for the reconstruction of the area.

If there is good news it is that more and more of this misuse of Western generosity is being reported. However, sadly, Western governments, the EU and others are failing to take serious action. Meanwhile, the instigators of the verbal and military war against Israel grow richer.

Give aid by all means, but make sure you can check where it is going in a transparent and accountable manner. Otherwise, send it to those who do not just need it but will…………..actually receive it.

UK taxpayers’ contributions to Palestinians – more about the true beneficiaries

My post earlier this week about “UK taxpayers’ contributions to the Palestinians – Who benefits? ” has proven to be very timely.

For example, I noted that the UK government struggles to fund joint cooperation programmes between Israeli and Palestinian groups. I was encouraged to read a news release yesterday from the House of Commons, which confirmed that:

As many as 25 Conservative MPs and Lord Polak CBE have written a joint-letter to the Secretary of State for International Development, Rt. Hon. Justine Greening MP, calling on her Department to consider Israeli NGO Save A Child’s Heart (SACH) for funding support.

The MPs write: “Having seen the work of SACH at the Wolfson Medical Centre first-hand, we believe that further UK Government involvement in this laudable charity would be extremely worthwhile”.

Over 50% of the 4000 children who have received life-saving heart surgery from SACH live in Gaza and the West Bank, with the rest coming from across the developing world. The charity also trains physicians and nurses from these countries, providing them with in-depth postgraduate training.

At a time, when the Daily Mail newspaper and others have highlighted the loose way overseas aid is distributed, supporting SACH could only improve the lives of thousands. More importantly, it will allow Palestinian children and their parents to see how Israel need not be seen as an evil enemy.

However, as I asked in my original piece, why is the UK government not seen to be fully transparent and accountable in its funding of Palestinians? And I stress: The issue is not if the Palestinians deserve assistance, but who receives it. The repeated stories of corruption are numerous. And there is no doubt that Palestinian terrorists and their families benefit from overseas aid.

On the latter subject, Palestinian Media Watch has just released a 15 page report, detailing how both the Palestinian Authority (PA) and the Palestinian Liberation Organisation (PLO) have repeatedly hidden the truth from Western governments. Bluntly speaking, both the PA and the PLO subvert the generosity of Western taxpayers. Millions end up with those who have carried out acts of violence against ordinary civilians!

This has to stop. And one way to do that is to ensure that all UK overseas aid is fully scrutinized. And that includes knowing who the independent auditors are and what is their mode of operandi. Otherwise, the unworthy will get richer. More people will be harmed or worse. And British taxpayers will end up throwing away yet more money.

The untold abuse of Palestinian children

Over six months has passed since Human Rights Watch (HRW) released an extensive report regarding the use of Palestinian child labour in Israel settlements. It sets out to detail that hundreds of children are employed, usually on farms, sometimes under aged, and frequently for miserable amounts of money. If correct, this is wrong. The analysis still triggers questions in the European, British and other Parliaments.

NGO Monitor has regularly pointed out the disproportionality of HRW’s work when it comes to Israel. In this specific case, the group rightly questions the methodology as well as the transparency of the evidence supplied. Reading the  HRW report, the flaws are obvious to even the untrained eye.

But what about those Palestinian children?

First, let us assume that there is just one Palestinian child abused on just one farm. That is one too many. However, as the report admits, Israeli child law is based on international law. Instead of investing millions in creating a 70 page document – of which over 50% seems to focus on the minutiae of irrelevant international law and not the children – and in order to obtain justice, HRW merely needed to ensure that prosecution lawyers were found – again assuming the allegations are truthful.

It would seem that HRW is not actually interested in the children per se. And for the record, HRW did not discuss the possibility of Jewish kids working on the farms – a point which I find abhorrently selective.

Second, and in my view more relevant, why is stronger criticism not thrown at the Palestinian middlemen, who reportedly connect the children with potential employers. If the kids need to work, why do the not place them with Palestinian businesses and farms?

Also lacking here is equivalency. There is no parallel HRW report of such Palestinian employees. Yet, if you surf the internet carefully, you will find documented incidences of how these children are exploited by their own community leaders.

The ‘need to work’ then prompts the issue of the Palestinian economy itself. We know that since the Oslo Accords of 1994, the Israeli economy has doubled in size. Yet, as asked by leading academic Moshe Elad, what have the Palestinians done to develop their own economy? Yes, the IMF has confirmed that the Palestinian economy grew annually by 5.5% for three decades since 1967 under Israeli supervision. However,

In other words, what can be left for the average Palestinian business owner in order to employ adults or even teenagers? Wages in the Palestinians territories are clearly so poor that it is the key factor why every day tens of thousands of Palestinians flock to work inside Israel, and this includes people under the age of eighteen. And as for the practices of good social government and the protection of children by the regimes in Ramallah and in Gaza, forget it!

Israel has often claimed that Palestinian children have been used as human shields in the fields of battle. That is against the Geneva Convention. But these youngsters have also become pawns in the battle for Western media and the opinions of decision makers.

The true winner in this  debate is ‘reverse psychology’. The Palestinian children are abused. The real criminals are shouting, pouring bile and blame in the direction of Israel. This rhetoric merely serves as a convenient cover for their own sins. The HRW was blind enough to lap it all up. And you now know who has lost out? The abused themselves.

The surprise of the hidden Palestinian economy

As Palestinians and Israelis sink into another tragic round of reciprocal violence, the micro economies of each sector are also taking a direct hit. Small traders in the centre of Jerusalem or Nablus, providers of tourist services, businesses looking for investment, etc, – with some irony, there are similar effects on both sides of the divide

The Palestinians often claim that Israel can absorb the financial downside, as it has a larger economy. Maybe, but I am not sure why this is a justification for violence. And surely traders should want to protect their precious sources of revenue rather than support violence that destroys such wealth.

Palestinians and their advocates will also point to the weak base of the Palestinian economy, which has become a spark for much of the new troubles this month. There is a wealth of documents, detailing how the economy in Gaza and the West Bank continues to worsen.

But again, some of the murderers of Israelis have come from reasonable social backgrounds. To be blunt, there are many poorer regions in the world, and their inhabitants are not throwing rocks at innocent children and women in protest.

So, I must assume that the Palestinians are rejecting a perceived lack of hope. It is that damn occupation that is causing the desperation. Maybe, until along comes two little known facts, hidden away from the view of CNN, New York Times, the Guardian et al.

First, the Israelis often complain that the Palestinian leadership has been tainted – no, ridden – with corruption. For example, just look at how the widow of Chairman Arafat, Suha, lives in luxurious exile. More recently, there have been a series of leaked documents re Palestinian corruption, reportedly outlining rape and severe financial wrong doings at high levels of the Ramallah government.

And into this arena has jumped the respected magazine, “The Economist’, not usually noted as a friend of Israel. The editorial wondered how long it will be before locals reject the continuing “extravagance and graft in Ramallah“.

The Palestinian Authority (PA), the limited self-governing body in the occupied territories, has been plagued by waste, graft and accusations of both since its inception in 1994 following the Oslo accords. When auditors looked at the books three years later, they concluded that nearly 40% of the budget had been frittered away.

Second, and here is a genuine surprise for Palestinian economy, “a joint study by the Palestinian Central Bureau of Statistics (PCBS) and the Palestine Monetary Authority (PMA) ….. has revealed that the Palestinian economy’s investment outside Palestine outweighs investment in Palestine from abroad by the end of Second quarter of 2015.”

To clarify for the non-economists: The Palestinian economy of its various sectors had invested outside Palestinian territory by more than the investment amount in the Palestinian territory from abroad to the tune of US$1,254 million. And if I can remind my readers – that is just what is recorded…officially!

So you have to wonder. If much of this money was left in ‘Palestine’, theoretically available for use on behalf of that nebulous average man on the street, how much of this current violence would still be taking place……….and which continues to destabilise the economies of all?

The Palestinian crisis people do not want to see

This time last year, Israel was fighting a bloody conflict in Gaza with the people’s’ army of Hamas. Around 2,200 lost their lives, primarily on the Palestinian side. While Israel’s economy took a blow, those on the West Bank were left relatively untouched.

We have been reminded of these sad events in the past few days. As memorial services have been held in Israel, international journalists like Jon Snow from the UK flocked back to Gaza to report what has – or has not – been repaired. And a small flotilla tried to beat Israel’s naval surveillance of Gaza, although it was stopped before reaching its destination. (It was later reported that the only provisions for Gaza was a small box of medical supplies that would have been cheaper and simpler to send by express mail!).

So how can the Palestinians be helped? Compared to a decade ago, the number of roadblocks in the West Bank are minimal. While Israel has left Gaza, those who thought that life would be better, the “disengagement has backfired badly.”

And last week, we witnessed the most absurd report. Palestinian workers are going to the courts of the Palestinian Authority in order to secure the same fair treatment that they would have received under Israeli labour law.

Help from elsewhere? With some ironic timing, I was handed a pamphlet, prepared by UNSCO on behalf of UNCT in June 2013. Entitled “The United Nations in Palestine”, it details 25 – I repeat twenty five – UN based organisations that are involved in supporting Palestinians in an on-going manner. ILO/ OCHA / UNDSS / UNFPA / UNROD etc, etc. And remember, most of this is paid for by the generosity of Western tax payers.

Their combined budget for the Palestinian issue alone? I have no idea. However, as I have often cited, UNRWA’s annual finances alone stretch to over one billion dollars. As politicians and diplomats close their eyes, there are no independent audits to verify transparency and accountability of this monolith.

From the Israeli side, there is no humanitarian crisis in Gaza. Speak to soldiers in COGAT and you will be informed that even if the economy is fragile, the residents of Gaza are not starving. In fact, Israel has ensured that the volume of goods entering Gaza has doubled in 2015. Who receives them and on what basis? Well, that is a different question. I suppose much can be said about the resources dripping down the various UN groupings.

On a highly pertinent side note, what also emerged this week is that there are around 18,000 civilians, mainly Palestinians from Syria, who are trapped in a pathetic refugee camp near Yarmouk. About 3,500 are children. International rescue efforts are simply not on the horizon. Yet the UN did release its report on the 2014 war, which heavily criticized Israel’s use of force in defending itself. There seems to be a disproportion here.

What is truly sad for me is that the main Palestinian crisis is one that has been cutting through the Middle East for decades and remains unresolved. There has never been a leadership that has placed nation-building above its hatred of Israel……and its parallel desire for the good life. And that is the key lesson we can take away, a year after that wasteful and tragic war in Gaza.

What Israeli society just does not get

Yes, the overwhelming majority of Israelis have supported the war in Gaza. Even bastions of opposition to government policies in the West Bank, such as internationally celebrated author Amos Oz, gave an unequivocal thumbs up.

And yes, Israelis do not understand why they have annoyed many of the world’s diplomats and politicians, who reject such actions. Can the two views be justified?

On the one hand, hundreds of lethal rockets have been lobbied callously into Israel every year from Gaza, and the world kept silent. The Hamas fire prior to Israel’s response had yet again turned tens of thousands into refugees. Using aid given as charity, Hamas has dug dozens of threatening tunnels under the homes of kibbutzim and other civilians. This netherworld has been furnished with weapons, chloroform, and even motorbikes – all to be used to kill, kidnap and maim – yet that is seen as a casus belli by Israel’s opponents.

However, when Hamas broke a UN-sponsored ceasefire last Friday with a murderous and premeditated act, the primary concern of Philip Hammond, the British Foreign Minister, was the plight of the poor Palestinians as opposed to Israelis blown to pieces (literally). Israeli society just does not get it. As I quipped previously on Facebook, the world appears interested in peace in Gaza – fair enough – but few are concerned about peace for Israelis.

Moving forwards and now that the fighting has ceased (for the moment), are neutral observers that interested why and how Israel believes that it went above and beyond the letter of international law in order to protect innocents during the fighting? The points below are not extensive, but I was warned how they might be interpreted as repetitive and even patronizing.

And so the list goes on. Israel can justifiably pat itself on the back for its past achievements. Israel in 1948 was a country of refugees and today is a member of the OECD. Gazans consider themselves to be refugees, yet their rulers invest in teaching hatred and destruction, a tasteless recipe for poverty. Hamas main building project has been the construction of tunnels to attack and then murder its neighbours.

And yet most of Israel’s 8 million citizens do not understand why the neutral observer and many world leaders do not buy into their arguments. How else, they cry, can you defend yourself against Hamas, dedicated to the violent destruction of a Jewish-based democracy, protected by human shields?

This international rejection was driven home on Sunday. When it seemed that Israel had bombed a school and killed children, the international media rushed to cajole global leaders into condemning the Israeli military……..even though much of the story is turning out to be a sick and cynical hoax!

Similarly, in an interview on Channel 4, seasoned British reporter Jon Snow repeatedly challenged the Israeli ambassador to the UK as to when the killings will stop. The denigrating implication is that Israel is responsible for the deaths. What Mr Snow managed to forget was that Hamas had flagrantly broken six ceasefires.

And during the conflict, Israeli newspapers observed how ‘the neutrals’ have responded to news elsewhere in the world.  Planes have been downed around the globe; ancient Christian communities have been wiped out; ISIS slaughtered children in Iraq; a few more thousand Syrians have perished, as thousands of others face torture. These are terrible acts, but the world, the UN and Ban Ki Moon have not been forced to move too far out of their comfort zone…. except when it comes to Gaza.

In an interesting anecdote on Al-Jazeera television, Israel’s Minister of Economics was interviewed. He explained that it comes down to: “Do I let Hamas kill my mother or do I take pre-emptive action?”. What characterizes this conflict from Syria and others is that Israel has fought back, without waiting for permission. And it is this proficiency that acts as an embarrassing projector on the inabilities of Hammond, Moon et al.

I offer that Israeli society should learn to accept that neutrals are not anti-Israel, yet they are driven by two intertwined considerations, which count against the Jewish State.

First, when the world sees pictures on destruction on their TV screens, the revulsion about tunnels and rockets and the facts of Hamas using human shields all become redundant. Blown up buildings imply de facto that Israel has not reacted ‘proportionally’. Such images do not appeal to a sense of fair play. In England, it is not cricket.

(For the record, it must be stated that many homes were destroyed and innocents lost their lives. This is not the place to drown in an argument over stats. However, it must also be stressed that Hamas fought the war in built up areas, as per their manual.)

So what is allowed, proportionally? Apparently 2 million poor Gazans can attack 8 million Israelis. Or as Rabbi Ari Kahn observed, Israel was encouraged to release over 1,000 Palestinians in return for Gilad Shalit. And David Miliband, leader of the British socialists, argues that Israel has his backing to defend itself, so long as Gaza is not attacked, whatever that may mean.

The true disconnect of the proportionality debate is that it is designed to force Israel to accept current UN standards, which demand …..… inaction. Proportionality is a baseless and malicious argument because its proponents fail to explain what Israel can do to ensure Hamas ceases to launch rockets from built up citizen areas. (And yes, that is a war crime in itself, yet ignored).

The other consideration about neutrals brings me to an interesting discussion on CNN led by Wolf Blitzer, who asked why the international media seem to target Israel. The BBC is a great example. (For the record, It is estimated that over 700 journalists form 42 countries entered Israel to cover the war, doubling the current high entourage.)

The CNN panel concluded that the ‘world expects more or better’ from Israel.  Enough said, no?

No! Better than what? Than Hamas? Of course not, because there are no expectations about those naughty people. OK. Better than how the West has performed in the Middle East? Well, a thousand kids have been killed in Afghanistan so far in 2014.  Or more moral than South Africa, whose countryperson is the UN High Commissioner for Human Rights.?  There, the abomination of rape is now an accepted instance of life, and commonly practiced by the teaching profession.

Israelis are livid. There is mounting evidence that Hamas bludgeons reporters into silence. Witness the features from Italian and other correspondents. So-called massacres in Sejaiyah have been miserably misreported. Networks like the BBC so rarely show Hamas soldiers in uniform. France24 has taken off its website a video showing the launch of a Kassam missile from the al-Shifa hospital, where the Hamas high command is encamped.

I think that the phrase ‘expecting more’ has the same function as ‘proportionality’. It is a polite way for the world to ask Israel to shut up. Politicians, diplomats, intellects and journalists around the globe are demanding that Israel does not force them to analyse some their own moral inadequacies.

So maybe I started out from the wrong premise. It is not really a case of what Israeli society does not understand about the world. More poignantly, it is time to consider what the world does not want to comprehend about Gaza. Just because Hamas operates with halo of the underdog, the biblical David,  that in itself does not automatically mean it has ‘right’ on its side

In effect what Israel has done in the past three weeks is to force the so-called leaders of the world to ask what they would have done if they had been in her shoes. And that change in the way of thinking, just like many other changes in life, is very difficult to accept. And the consequences of that new opening are not too easy to digest.

What is the cost-benefit of building a tunnel?

An outsider looking in on the Middle East must be wondering why Israel and Hamas are fighting a war over a series of tunnels. After all, if Gaza is so poor, as its supporters maintain, how could they afford to build such a network?

It is an open secret that for at least a decade how the tunnel economy has funded Hamas, even before it came to power. Before Egypt shut down the Sinai side of the operations last year and sealed up its side of the border, it is estimated that via taxes and sales the trade was valued in billions for the Hamas exchequer.

So how much does it cost to build a tunnel?

I have already cited Doron Peskin last week. Yesterday, writing in Hebrew, he estimated that one meter costs about US$200, and tunneling work can achieve about 20 meters per day. The cement used to be smuggled through from Egypt. More recently, it has come in ‘regular’ lorry-loads via Israel. Since 2011, Qatar has replaced Iran as the prime paymaster.

Israeli reserve Col.Miri Eisen – former deputy head of IDF’s combat intelligence corps and former assistant to the director of Military intelligence, commented in an interview: –

It is a lucrative economic job in the Hamas. It is their top-tier unit, which is called the tunneling unit. They have put an enormous amount of money when they saw that the tunneling itself was something which Israel has intelligence challenges in finding the tunnels themselves while they’re building them. They put an immense amount of money and effort. They put the best into the tunneling units. They’ve built tunnels from the Gaza Strip into Israel that are a mile, a mile and a half, a mile and 800…I mean incredibly long tunnels and we’re not talking about a little mole tunnel which is dug and a person goes through like in [Shawshank] Redemption… We are talking about tunnels that are done in the tunneling mode, the way you would build nowadays trains, roads, anything that goes underground into a mountain. They are tunneling out, they are using their money, their capabilities, with little Caterpillar tractors that go in and dig out the dirt, covering it with an enormous amount of cement, and you’re all aware of the issue of cement going into the Gaza Strip.

However, in economics, for every cost, there is an alternative cost. In other words, if you can spend on X, that means you did not invest in Y. And therefore, those needed the benefits of Y lose out.

I have no idea how many tunnels exist in Gaza or how long they are. The IDF claims that it has already found 13. So, let’s assume conservatively there are only 20 in total and each one is 2 kilometers long. By my wobbly maths, that is close to a US$100m investment. The alternatives?

Point 1: 13 tunnels may have been found so far. There is no record of a one public bomb shelter being discovered in Gaza. In contrast, history has forced Israel to build one in every one of its homes in order to protect its citizens.

Point 2: BBC journalists and others decry the lack of medical services in Gaza. Now this is compounded by Hamas fighters using ambulances for transport. On the other hand, how is it possible that Israel has managed to establish a field hospital for Gazan citizens during the battles (as it has done for Syrians), while Hamas officialdom is nowhere in sight?

Point 3: Hamas relies on UNRWA to provide a schooling system. And yet the facilities are abused to store weapons. (I understand that UNRWA has since returned the equipment to the government)

The war could have been avoided. As Egypt’s foreign minister said last week: “Had Hamas accepted the Egyptian (ceasefire) proposal, it could have saved the lives of at least 40 Palestinians.”

The pathetic reality is that while Hamas leaders are safely closeted in the tunnels that they have erected for their own means, far more than 40 lives have been lost. The true cost of the Gaza tunnel network, for both sides of the diplomatic divide, has to be measured in terms of emotional loss, a horribly unnecessary evil.

The house of the hill – in Brussels and in Ramallah

Why has Europe begun to question its role in the Palestinian financial system?

recent diplomatic conference highlighted the problems of the Palestinian economy; strikescorruptionhigh unemployment, and more. The event was hosted in Prague and since  1991, the European Union – through its taxpayers – has been arguably the principal monetary supporter of the Palestinian territories, directly and through organization such as UNRWA.

The flow of these billions is set to continue, at least to the end of the decade. Yet throughout this period, there have always been three key ‘misfits’, enveloping these subsidies.

  1. Why has the Palestinian cause earned such large fiscal attention, when others in Africa and elsewhere have missed out? It is a decade ago since Nigel Roberts, former ranking World Bank representative in the region surmised global financial support for Palestinians as “the highest per capita aid transfer in the history of foreign aid anywhere”.
  2. Why has the Arab League, for all its wealth, never matched the contributions of the Europeans?
  3. Why is Palestinian poverty highlighted and blamed solely on the Israelis, when a World Bank report noted that the Palestinian economy grew under Israeli control by 5.5% annually up to 1999? That is a phenomenal performance, absolutely and relatively.

Something does not add up.

Back in 2003, the European Union investigated claims of fraudulent use of its resources by the Palestinians. The report under Christopher Patten was never released. (Interestingly, Patten went on to run the BBC and was famed for burying reports there). In parallel, The Funding for Peace Coalition was active for many years on these same issues. As the website poses: Where has all this money disappeared to?

These are contribution paid for by farmers in Greece, small businesses in Germany or even the owner of a pub in Putney, London What has been achieved through their generosity? Specifically, as Alarabiya News questioned regarding Suha Arafat, how did the wife of the former Palestinian Chairman amass such wealth? Should people be concerned? I believe so and for three separate reasons:

First, it is an issue of good governance. A taxpayer expects his representative to take responsibility. He has a fundamental right to know where his money ends up and that it is for a reasonable purpose. It is difficult to find any other subject, where such sums – billions – were and still are transferred with relatively little transparency and accountability.

Second, as reported above, there are a lot of poor Palestinians. No argument. They deserve better. It is staggering to consider that the financial transfers from the European Union have not made a more lasting and significant positive contribution on the Palestinian economy. It is even more amazing when you compare this failure to the World Bank analysis, noted above, about how the economy had previously leapt forward when Israel had full control of the territories.

Third, there is considerable evidence, which suggests that not only have funds been diverted for the benefit of an autocracy, both in Hamas and in the Palestinian Authority. Monies have ended up in the hands of terrorists. As admitted in the House of Commons in London, by a minister at the Foreign Office, Mr Hugh Robertson, “UK officials raised the issue of payments to Palestinian prisoners in Israeli jails with the Palestinian Authority (PA) most recently in March 2014. The International Development Committee also received information on this issue from the Minister of Finance during their visit in March.” In the same vein and possibly even more bewildering was the question raised in the European Parliament by Michal Kaminski.

It is a well-known fact that the Palestinian Authority proudly owns up to illegally spending over 6% of its budget — donated by, among others, the EU, where funding terrorism is against the law — on salaries for terrorists in Israeli prisons and pensions for the families of suicide bombers. The Palestinian Prisoner Affairs Minister, Issa Qarake, has admitted on television that the salaries are directly proportional to the terrorists’ sentences and the number of Jews they have killed……What is the Commission’s strategy to stop EU funds being used to pay salaries to terrorists in Israeli prisons?

And the response:

The EU is aware that the Palestinian Authority has a system of allowances in place for Palestinian prisoners, their families and ex-detainees. This scheme is not and has never been financed by the EU.

Maybe………..BUT how did the PA have enough money in the first place to distribute such payments?

For the record, there is also growing disapproval of some of the actions of UNRWA, to which Europe pays hundreds of millions of Euros annually. Not only does this billion dollar organisation have no external auditing procedures. It prints and distributes textbooks in its schools that appear to promote violent incitement against Israelis.

So where to now? The current round of peace talks is precariously balanced. The Palestinians are fuming about the non-release of terrorists by Israelis. In turn, Jerusalem feels that President Abbas has deliberately instigated the crisis, just like at the beginning of the Intifada in 2000. In response, Prime Minister Netanyahu is forcing the Ramallah government to pay up on extensive debts, which sounds ironic in light of the above discussion.

There is some hope. On the ground, individual Palestinian entrepreneurs are trying to work with Israelis. And Israel is actively seeking to open up commerce for its Arab population. It is also very welcome to see the read of the approach of Michael Theurer, chairman of the European Parliament’s Committee on Budgetary Control. Writing in the Wall Street Journal, he observed how in December 2013,”the European Court of Auditors revealed major dysfunctions in the management of EU financial support to the Palestinian Authority, and called for a serious overhaul of the funding mechanism.” He continued:

The report from the European Court of Auditors is a wake-up call on the need for stricter supervision of how EU funding to the Palestinian Authority is spent……A useful next step would be the imposition of clear benchmarks and conditions that the Palestinian Authority would have to meet in order to receive additional EU funds. These should include improving the state of human rights in the West Bank, cracking down on corruption and cutting off subsidies to convicted Palestinian terrorists.

Until then? The sad fact is that as long as Palestinian and European decision makers remain safely ensconced on their hilltops in Ramallah and in Brussels, Palestinian and Israeli civilians alike will continue to suffer, as will the bank accounts of European taxpayers.

Time to sanction the Israel economy

When I looked up the word “sanctions”, I had to agree that it is time to sanction the Israeli economy. Two of the definitions imply bringing penalties in order to force a country to comply with a specific issue.

The Palestinian-based BDS movement campaigns for “calls for action against projects and initiatives which amount to recognition of or cooperation with Israel’s regime of apartheid…” This includes banks divesting from Israel, rock stars like Elvis Costello cancelling performances, and US basketball legend Kareem Abdul-Jabbar cancelling a scheduled public visit to Israel.

An outspoken supporter of BDS is the international charity Oxfam, which refuses to help Israeli children. Hollywood star Scarlett Johannson has campaigned actively on behalf of Oxfam. When she recently promoted at the Superbowl the Israeli firm, SodaStream, which is partially located in the West Bank, Oxfam was furious.

However, as social commentator Melanie Philips pointed out:

Ms Johansson stunned everyone by sacking Oxfam, on the grounds that she was a supporter of “economic co-operation and social interaction between a democratic Israel and Palestine”. Which, by implication, Oxfam was not.

As Phillips indicated, Johannson had in effect initiated her own sanctions. However, and more importantly, she had invoked the other definition of sanctions: authoritative permission or approval”.

What Johansson was saying is that Israel’s economy deserves a huge ‘thumbs up’ from the rest of the world. Here are some examples why:

1) Even the Director of Policy for Oxfam had to admit on the BBC that Palestinians at the SodaStream factory are treated fairly.

2) Israel has taken major steps in recent years to ensure that minorities are a full part of the country’s successful high-tech bandwagon.

3) Israel does not keep its capabilities to itself, but shares them with the stricken and crippled. Classic case studies include the ongoing support in the Philippines and the treatment of Syrian refuges.

4) Without Israeli technology, millions around the world would be worse off – physically, financially, and socially.

BDS’s use of the word ‘sanction’ is at best hypocritical, as rappers have pointed out. When it involves academics insisting that Israeli research should be ignored, it invokes images of Kristallnacht in 1938.

Significantly, BDS is a secret movement. There are few records of senior staff, financial structure, donors, records of board members, etc. While demanding transparency and accountability from Israel, it refuses to play by the same rules.

The only person that we really know is running it is Omar Barghouti, who flouted his own standards and studied at Tel Aviv University. He does not accept Israel’s right to exist.

Last week, a court in Gaza sentenced a man to death; execution. Although condemned by the EU, the BDS team was silent on this gross abuse of human rights. Therefore, as is their cause, they sanctioned it.

Palestinian economy – A story of ‘if only’?

Palestinians have long blamed Israel and the ‘occupation’ for its economic woes.  For example, using selective quotes from the World Bank, they cite that if Israel ended its restrictions on Palestinian businesses and farms operating in “Area C” – 61 percent of the occupied West Bank – “this would add as much as 35 percent to the Palestinian GDP.”

And yet, as I have pointed out several times, until the Intifada, the World Bank had also observed how the Palestinians had one of the fastest growing economies on the global map. So where do we go from here?

Palestinian news agencies will seemingly report with near glee how their economy is in trouble. Strikes, not enough money to pay for the ever- growing number of civil servants, extreme weather, etc are just some of the disaster stories. There are a few bright spots, such as possible gas exploration and fleeting high-tech successes.

What some supporters of Israel may find surprising is that it has been the EU that recently pointed a way forward for the Palestinian economy. Now remember, depending on how you calculate it, the EU, directly, through member countries and through UNRWA etc contributes over one billion dollars annually to the Palestinians. As reported by Al Jazeera, “European officials recently warned the Palestinians that European countries were suffering from “donor fatigue” after spending billions of dollars in aid with limited results in achieving a lasting peace with the Israelis.”

Over what is written in the article,there is a greater concern, that of corruption. Evidently, the EU is concerned that billions has been ‘lost’ in the system. This was confirmed by a senior research assistant at Chatham House, a leading research institute in London. Entitled “Middle East peace – it’s not the economy stupid”, the paper considers that:

Corruption and inequality in the Palestinian territories are a significant factor behind public scepticism and cynicism about economic plans. Palestinians are well aware of corruption in business, and their negative views are exacerbated by socioeconomic divisions.

These “self-inflicted wounds” to borrow another commentator’s phrase simply damage the hopes and aspirations of Palestinians, who deserve better. The culture of corruption that was allowed and encouraged and utilized by Chairman Arafat continues way beyond his death.

Al-Shabaka is an independent non-profit organization whose mission is to educate and foster public debate on Palestinian human rights and self-determination within the framework of international law.” It argued in a research paper  how “while most Palestinians living under Israeli occupation are struggling to survive, a powerful group of Palestinian capitalists is thriving and growing in political, economic, and social influence.”

The report provides examples of the retail, banking and building sectors, where Palestinian capitalists have made huge profits. the centralization of economic power has come at the expense of millions, who are left to complain about the exploitation by Israelis. This is ironic in a week, when a leading official of Oxfam, one of England’s leading charities, called for Palestinians to stop working in Israeli factories, even though they earn much better wages there.

There is another route. The Israeli government has made great efforts in recent years to ensure that venture capital is increasingly available for the minority sector. Is it enough? Probably not? Does this provide an excellent start, leading to jobs and the creation of wealth for more? Seemingly so.

Effectively, what the EU and Al Shakaba are asking is: If only the Palestinian leadership had been able to demonstrate better financial leadership over decades, how much better off would millions of people have become today? And how would that have impacted on the peace process?

7 new economic and social quirks of ‘the Middle East issue’

Some readers often ask me why I do not write specifically about the Israeli-Palestinian conflict. In response I explain how there are so many bloggers already out there, each with their own agenda. Another one will not make a difference.

That said, just recently, I have come across a series of financial and social issues that are out of the ordinary – certainly, unexpected – and deserve wider review.

1) Investing in Palestine: As the UN Assembly meets and President Abbas implores the world to support his cause against Israel, I recently questioned who is actually investing in the emerging Palestinian economy. The bottom line is that the Arab block, who Abbas says wants to recognise Israel, transfers relatively few funds towards its favourite political project. Most of Ramallah’s joint ventures are with ……Israel.

2) Israel’s economy and the global recession: At a time when America is struggling to maintain its economic momentum and the UK may finally be seeing an initial emergence from a deep recession, Israel’s finances appear to be under control. The stock market  is beginning to perform and public expenditure is finally in check. Growth predictions for 2014 have been raised to 3.4%.

3) The level of aid for the Palestinian economy: It is well established that the Palestinian economy is bolstered by aid received from large international agencies. One recent report calculates that “the Palestinian people, have received per capita, adjusted for inflation, 25 times more aid than did Europeans to rebuild war-torn Western Europe under the Marshall plan after the Second World War.” Much comes via UNRWA’s near US$1,000 million annual budget, a self-perpetuating black hole of Western taxpayer largesse.

4) The main beneficiaries of Israeli Arabic health care: About six months ago, Israel’s largest health fund released a series of training videos in Arabic for the local market. Over 90% of the million plus views have been registered to countries with no official relations with the Holy Land. So much a for a boycott of the Jewish state.

5) The main beneficiaries of Palestinian justice system: Amnesty International (AI) has just released a report condemning the Palestinian Authority (PA) for not allowing free political demonstrations. It is only a month since AI condemned Hamas in Gaza for its frequent use of executions, a horror confirmed by the BBC. When one considers that the Palestinian Women’s Center for Legal Aid and Counseling has documented 25 honour killings so far in 2013, it has to be asked: Why does the Palestinian system demand political and social justice from Israel but does not apply the same principles for its own people?

6) What Egypt and Syria are teaching others:   The Arab Spring, the revolting pictures emerging from Syria, the Islamic-Marxist rule in Iran and more have challenged a vital core part of Western thinking for decades. Until now, it was accepted that the Israeli-Palestinian conflict was the main core of distress in the region. Clearly, it is becoming evident that pressuring Israel into a peace deal will not bring overall peace to the Middle East. Well done Assad and co for highlighting the unspeakable.

7) Not worth visiting? So with all these trouble points and instability, who would visit Israel today? Well for the first eight months of 2013, 2.13 million tourists were recorded. That figure continues the upward record trend over the past three years.

The surprise of investing in the Palestinian economy

However you look at it, the Palestinian economy is not very strong. It is easy and convenient for outsiders to hoist the blame on Israel. And whenever a Palestinian leader meets a Western counterpart, the resulting press release almost always refers to a request for foreign aid.

I have often tested the fallacy of this argument by citing an IMF report that shows how under Israeli rule, the joint economies of Gaza and the West Bank were one of the best performers from 1968 to 2000 – 5.5% per annum on average. It now appears that there is a second fallacy. Despite popular belief, while Europeans pour their taxpayers money into the Palestinian economy, there is a relatively poor parallel response from members of the Arab League.

My starting point is a comment reposted on the LinkedIn page of the ‘Economist’ magazine. According to a Malaysian expert, Prof. M. Aslam Haneef,  “The total amount of charities and gifts that are coming from the Muslim world is 15 times more than the total of the UN aid package.” A bold statement, which I am not able to challenge.

And then I read a commentary from the Gladstone Institute. Mainly through UNRWA, yes a UN body, “the Palestinian people have received per capita, adjusted for inflation, 25 times more aid than did Europeans to rebuild war-torn Western Europe after the Second World War.” UNRWA’s budget in 2012 exceeded a staggering US$900 billion.

The USA, EU, UK, Sweden, Norway, Germany, The Netherlands and Japan pay $644,701,999, or 71% of the annual UNRWA budget.

So where do the Muslim states rank? First in, at #15, is Saudi Arabia. The land of palaces and private gold leaf painted Airbus A380’s on the Royal runways chipped in $12,030,540 — less than half of a tiny country such as the Netherlands. Second, at #18, is Turkey, the supposedly economically flourishing state of a prime minister who zealously supports Hamas, but which contributes only $8,100,000. Qatar, which stands accused of paying millions in bribes to win the bid to host the 2022 World Cup, and is now spending millions on the construction of high end soccer stadiums, contributed exactly $0 to its Palestinian brothers in faith.

Seeking to move beyond the sarcasm, I checked out the ‘economy page‘ of the Ma’an News Agency, based in Ramallah. Of the twelve leading items, six refer to pleas for overseas aid. Of these, only one connects to an Arab source, a Saudi contribution ‘to develop sewage refineries’ (sic), while the rest are the USA, EU and…..well the story begins to repeat itself.

In the private sector, the situation is not much different. One of the few genuine venture capital groups in Ramallah is Sadara, which recently raised US$30 million. From whom? “Google, the investment fund of George Soros, the European Investment Bank, the Skoll Foundation and the Case Foundation. The software giant Cisco has invested $5 million.” Again, no prizes for observing who is not listed.

The Palestinians need financial help. No argument. Assumedly, they would reap greater rewards from current donors if they could improve their transparency and accountability. Meanwhile, you have to ask, what is it that the Arab block knows, which forces it not to invest in the Palestinian economy?

Does Israeli society promote peace in the Middle East?

I was in Tiberias this Saturday night, walking along the edge of the Sea of Galilee. As I strolled down to the sea front, past the Scottish Hotel, owned by the Church of Scotland, the crowds were deafening. Jews mixed with Druze, who mixed with Moslems, along with the foreign tourists. All were customers and waiters at the multitude of restaurants on the thriving promenade.

And while thousands of Israelis were partying, American Secretary of State, John Kerry, was on the warpath. He is pulling out all the stops to reignite peace talks – at least, talks about talks – between Israelis and Palestinians.

Depending on whose spin you believe: Either the Israelis are not serious, because they keep building or enlarging so-called settlements. Or the Palestinians have shown less than a minimalistic level of commitment by bombing tourists in Eilat. UN experts have shown revealed their position by criticising Israel for its supposed harassment of a Palestinian human rights’ activist.

All this comes on a day, when Israel released 26 Palestinian prisoners, as a gesture of good will. Judging from the record of the former inmates, Israel was forced into this move by Kerry. Tom Gross, an experienced journalist covering the region, has noted that:

  • Abu-Musa Salam Ali Atia of Fatah  hacked to death  Holocaust survivor, using an axe in broad daylight.
  • Ra’ai Ibrahim Salam Ali of Fatah killed a pensioner by axe blows to the head while he sat on a public bench reading a book.
  • Two of the prisoners, Abu Satta Ahmad Sa’id Aladdin and Abu Sita Talab Mahmad Ayman, were imprisoned in 1994 for the murder of David Dadi and Haim Weizman. They killed Dadi and Weizman as they slept in Weizman’s apartment, and then cut off their ears as trophies.

And so the list goes on. You have to ask. Why would Palestinian President Abbas want such people released into his society? Why give them a heroes welcome? And why has there been no reciprocal move to show to Israelis and the peace brokers how serious the Palestinians are about peace?

What the process is showing is that while Israel, and specifically her Prime Minister Netanyahu, are not liked by parts of the international diplomatic community, their complaints do not stand up to realities on the ground. It is not just that citizens of different religions mix freely on the streets in the Holy Land, Israel goes out of its way to help others. For example, dozens of Syrians have now been treated in Israeli hospitals as a result of fighting on their own soil.

In contrast, as Palestinian journalist Abu Toameh records, “while Palestinians are being slaughtered and forced out of their homes in Syria, the Lebanese government is preventing them from entering Lebanon.” And in Gaza, the planned executions of named traitors has even attracted the disgust of the British government, as well as the UN and Amnesty International.

There are no simple paths along the journey towards peace. This was best illustrated by a recent and amazingly frank appraisal by an outgoing member of the Spokesperson’s Unit of the Israeli army.

However, I would like to take one step further what the Wall Street Journal wrote. “What does it say about a prospective state of Palestine that among its heroes is Salah Ibrahim Ahmad Mugdad?“, who beat a 72 year old security guard to death with a steel rod. When Abbas and co are prepared to find a new type of hero, one that Israeli society can relate to, than Kerry’s efforts will have a far deeper meaning.

Peace talks and what Palestinians says about their own economy (2)

Earlier this week I questioned if the potential of increased economic wealth for the Palestinians is a priority for their own leadership during the peace process, which has made a solid start.

The issue is not the scope and vast potential of the Palestinian economy. As one person remarked – only half in jest – that it is possible to predict how Hamas and Fatah will go to arms; not over the role of religion but over who will control the revenues from energy reserves off the Gaza coast.

“Where is the money” has always been a sensitive issue amongst the Palestinian elite. This issue of financial responsibility and transparency is barely discussed openly, if not censored. However with a large dose of ironical timing, Mohammed Dahlan, the former head of the Palestinian internal security services in Gaza, has just accused the Palestinian Authority of being a corrupt institution under Abbas’s thumb. And using an Israeli legal team, he is seeking to take his own President to an international tribunal.

Now Dahlan is no saint. Google long enough and you can discover how he rose to fame by controlling youth gangs in Gaza. Along the way, he secured for himself the rich cream off monopolies and perpetuated via the ‘tunnel economy’. Hamas ousted him from Gaza, and he left the West Bank two years ago in political disgrace, but wealthy.

What must be disappointing for the average Palestinian is that Dahlan is not alone in achieving financial security while his people endure 30% unemployment. Mrs Suha Arafat, wife of former Palestinian President, has probably visited every 6 Star hotel in Europe over the past few years, a lifestyle supported by some extra generous handouts. And as Al-Monitor reported:

The annual report for 2013 issued by the Coalition for Accountability and Integrity (AMAN) showed that corruption is still rampant inside public Palestinian institutions…….Examples were given of public-fund squandering in Palestinian municipalities of the West Bank, where the total accumulated debt of municipalities and water-works agencies owed to the PA amounted to 1 billion Israeli shekels [$280 million] in the period between 1996 until 2012. Official vehicles were still being misappropriated by employees while suspicions grew concerning the running of Palestinian Airlines and the building of a mausoleum for the late President Yasser Arafat in Ramallah.

For the patient reader, detailed reports of misappropriation, lack of transparency and low accountability from 1993 to 2010 can be found at the website of the Funding for Peace Coalition.

What is so disturbing? The world is looking to create a stable peace treaty. Unfortunately, the same Palestinian hierarchy that has a self-vested interest in perpetuating the poverty that has been ramped up since 1993 (when Arafat returned to Gaza) are the very people surrounding President Abbas…… and condemned for corruption by senior Palestinians themselves.

Peace talks in the Middle East? What Palestinians says about their own economy

So the Palestinians and the Israelis are due to meet today in Washington to begin talks about talks.

One of the issues that always annoys me is the way the Palestinian economy is reported and analysed. The standard retort is that the economy is in a mess – eg unemployment at over 25% – because of Israeli restrictions on the freedom of movement.

Well that specific stat is agreed upon by most sources. And it cannot be denied that Israeli security measures by definition must inhibit economic development. However, there is a flip side. For example, before the violence of the Intifada and up to 1999, the World Bank has stated that Palestinian economy grew by 5.5% annually for over two decades. And what about the implications of the violence on the Israeli side, which demands that resources are directed towards defence rather than structural growth?

So,let’s try to move away from the spin and the meaningless of politically correct statements. I often like to hear what Palestinians are saying about their own economy.

Last week, the Palestinian Monetary Authority released the latest figures on the state of the business environment. “In general, the overall index indicates that recovery in economic activity that took place during the past months of 2013 was back on the track in July, as a result of improvement in some industrial sectors such as food industries (index increased from 0.37 to 1.97) and furniture (from 0.24 to 1.75).”

The figures were especially encouraging for the West Bank region. It can be no coincidence that the Swedish furniture multinational, IKEA, has confirmed that it is holding discussions to open a new outlet in Ramallah in the coming year.

Despite the hypocritical howls of the BDS movement, cooperation with Israeli authorities continues. One notable example is the annual seminar held for farmers from Gaza. This year, around 50 people attended. Last month, a new industrial complex was inaugurated in Jericho with the open support of Israel, Jordan and Japan. And there is increasing speculation that discoveries of energy resources in the Eastern Mediterranean and its forthcoming development will also bring the two sides together.

The down side at the moment for the Palestinian economy can be traced to events in Egypt. Seasoned Middle East observer Tom Gross cites a report from AP from 24th July. “Egypt’s new government has imposed the toughest border restrictions on the Hamas-run Gaza Strip in years, sealing smuggling tunnels, blocking most passenger traffic and causing millions of dollars in economic losses.”

This was not a one-off comment. Egypt controls around 70% of the power supply into Gaza. And Al-Monitor headlined that Gaza fishermen can no longer ship out into Egyptian waters, which will have a clear negative impact on a major local industry. Gross observes these are blatant restrictions of economic movement, but there is no international outcry. Why?

So what does this all this mean for Mr Kerry has he brings the two sides together over a very wide negotiating table?

As these pictures illustrate (even if I do no agree with the flavour of the website), there are many aspects of affluence in the Palestinian territories. However, the population as a whole deserves better. And here’s the catch.

Instead of blaming Israel for their poverty, Palestinians can do more to resolve their own issues. A simple but obvious start would be to divert their limited resources from activities which generate hatred against Israel. They can be moved towards fostering internal structural growth for the civilian population.

The question remains if this potential of increased economic wealth for the Palestinians is a priority for their own leadership during the peace process?

Two pointers on the Palestinian economy – May 2013

Gross Domestic Product (GDP) in Palestine witnessed remarkable growth of 5.9% during 2012, Palestinian Central Bureau of Statistics (PCBS) said in its report.

That is certainly progress for an economy that was set back for a decade by the Intifada. Accordingly, there are encouraging signs in multiple sectors. Government revenues have risen marginally.

In parallel, some international aid is having a positive impact. For example, last month the UK’s International Development Minister Alan Duncan announced to an audience of the Hebron Chamber of Commerce the details of a new £15 million Palestinian Market Development Programme. The previous grant had “helped hundreds of businesses turn over £80 million in sales and exports, enter 87 new export markets, develop 129 new products, create 3,400 jobs and increase their exports by 52%.”

That said, all is not rosy. Just look at the unemployment rate that seems pegged around 25%. With a young population, that raises ominous social questions for the immediate future and stability of any governing party in Gaza and in the West Bank. So here are two suggestions that should help to make a positive change and relatively quickly.

First, to paraphrase a detailed report from the International Monetary Fund, ‘better governance’ would make fundamental difference. In fact, the report makes for more depressing than the official Palestinian stats I have cited above.  The key recommendations are hidden on pages 17 and 18. While it no longer blames Israel for all the economic woes in the Palestinian territories, there is a demand for halting pay rises to a bloated public sector, implementing better tax revenue collection systems, and reducing capital outlays on dubious public sector projects.

However, second, in order for this to happen, the Palestinian people will need a leadership that is…….well, capable. Unfortunately, after weeks of internal haggling, the Palestinian Prime Minister, Salam Fayyad, resigned on April 24th. Texas-educated, IMF-trained and one of the few that was determined to introoduce transparency in the system, Fayyad had had enough.

According to some observers, Fayyad could see that the Palestinian economy under President Abbas may be heading for a dive. Not only has substantial donor aid from Arab countries effectively dried up. Just as pertinent is the fact that corruption and graft amongst the leaders in Ramallah and in Gaza have rarely seen better times.

An analysis prepared by a Gaza journalist, details how money is leaking out of the official Palestinian financial system, which lacks accountability . It is near unbelievable to read how “the report criticised the murkiness surrounding the PA’s security budget, which  accounts for nearly one third of the Palestinian public budget, because it was  comprised of only one figure, without details….”

The truly worrying aspect is when one links that statement with the policies of Western governments. Less than two weeks ago, on May 6th, the European Union released a further €20 million to help fund the payment of the April salaries and pensions of nearly 76,000 Palestinian civil servants and pensioners in the West Bank and the Gaza Strip. Totally funding in this field has reached around €1.5 billion since 2008. If the corruption is so widespread, you have to ask what has European taxpayers money actually been spent on?

There are countless micro examples, which illustrate the lack of open government, at least from the point of view of Western standards. Even when the UN is supposed to hand resources and aid out to Palestinian refugees, the money slips away unguardedly from the hands of those who need it.

The Palestinians deserve a better economy. For that to happen, they require a true leadership, neither laden by the demands of corruption nor beholden to violent ideologies.

Controlling your finances – a Palestinian perspective

All finance directors need to control their budgets and cash flows. Otherwise, your shop, your corporation or your country enters the world of bankruptcy.

Palestinian Treasury officials have never been able to plan future positions from a position of stability. Blame Israel, internal politics, donors not fulfilling pledges, etc, but their excel spreadsheets have often lacked substance.

The draft budget for 2013 was presented this week in Ramallah. As noted by Finance Minister, Qassis, Israel has not transferred funds for January. Further, Arab countries have yet again defaulted on promises of support. Palestinian Monetary Authority (PMA) chairman, Jihad Al Wazir, says that from 2008 to 2012, handouts have dropped by two-thirds to a paltry US$600 million.

I am sure that the irony was not lost on the cabinet when a seminar, hosted by Transparency International the previous week, had noted how there was a need to take “measures to improve oversight of PA financial controls at the borders and increase coordination between the border and finance authorities.”  To put it diplomatically, money is simply going astray.

There are clear positives, which give room for cautious optimism. A feature posted on CNBC noted that while the public sector debt was moving dangerously upwards to over 12% of gdp, the PMA has ensured that the banks have been protected from financial harm.

The banking system’s Tier 1 capital, its main benchmark of health, stood at a remarkably robust 24 percent of assets last year, according to the IMF. Struggling European banks’ Tier 1 ratios generally hover between 7 and 10 percent, and at around 8 percent for Israeli banks. Non-performing loans at Palestinian banks stand at less than 3 percent of total loans, and debt-to-deposit ratios remain far healthier than in neighbouring Jordan and Israel.

In parallel to this island of stability has been the slow but detectable rise of a new middle class. Rawabi is a fascinating new town, located near the city of Ramallah. Its development has been encouraged by Israel. Intriguingly, much of the properties are slated for young couples with ‘new money’. And that trend is matched by the growth of Palestinian women in employment, and more specifically as entrepreneurs. Their numbers may now be as high as 30% of the labour force.

Personally, I have found it interesting to read a Palestinian blog describing the “flood of Israeli goods” entering Gaza. While the author clearly believes that this is not a healthy situation, they also failed to note that Egypt has began to waste smuggling tunnels on its border with Gaza. This vital lifeline “brings in an estimated 30 percent of all goods that reach the enclave.”

And of course, if the Palestinians cannot rely on their Arab neighbours for donations, the good news is that the contributions from the relatively affluent EU taxpayer have not seized up. It is difficult to assess accurately the level of payments that the EU devolves to each citizen in Gaza and in the West Bank, as Brussels conceals the statistics. However, the direct directives added up to almost €200 million in 2012. This not only went to financing salaries of civil servants. As confirmed by leading local politicians, the money financed the living standards of convicted terrorists.

For all these positives and their starts, significant change will not come for sometime. The geopolitical dynamics will see to that. In addition, tunnel destruction, rising debt and continuing corruption do not facilitate a mass Palestinian socio-economic revival. As one Palestinian commentator indicated, when the wife of a senior PLO official spends $20,000 for dental treatment in Tel Aviv at a time when there is no shortage of renowned Palestinian dentists in Ramallah, Bethlehem and Nablus, the average citizen is forced to deals with inconvenient truths.

Over the next few months, UN committees, the World Bank, the EU and others are due to release reports blaming continuing Palestinian government poverty on the punishing measures of the Israeli government. There is no space to discuss here what is “punishing”, but even one roadblock has a limiting effect on the surrounding economy.

However, as an economist, I am forced to ask if these international bodies have considered whether the actions of Palestinian leaders are responsible for their own financial mess. Once all the mud-slinging and spin is eliminated from the Palestinian playing field, the regimes in Gaza and in Ramallah are just that – regimes, dictatorships. Historically, these types of government rarely to deliver economic freedom for their voters………….which is why the economists in Ramallah find themsleves ruling over a bankrupt treasury.

Economic cost of war (2) – Gaza

Cunningham concludes by citing a second IMF analysis, posted this October. Gaza’s economy is set to grow by 7% in 2013 and 6.5% in 2014. You are left wondering. Why does Hamas and its allies would want to jeopardise this prosperity that benefits for the Palestinians and replace it with an on-going bloody fight with Israel?

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Will the real Gaza economy stand up and be counted?

The economies of Gaza and Ramallah may share a common trend. Life may not be comfortable for all, while there are still many who are doing well – in fact, really well. However, from there for the UN to argue that life is unbearable and that is all the fault of Israel’s reminds one of those who print such racist documents as the “Protocols of Zion”. Both contain the same level of hatred and distortion.

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