It was recently pointed out to me by a blogger friend that American federal agencies are encouraging those willing to listen that they should place greater investment in the infrastructure of the Palestinian economy. The aim is to move away from the traditional support given to UNRWA or non commercial elements.

A World Bank report in September 2011 describes “the necessity of both sustainable economic growth and effective institutions for a future viable [Palestinian] state. (And)……investment opportunities have arisen in Palestine. For example, in 2011 the Rasmala Investment Bank established the Ras­mala Palestine Equity Fund, which seeks to “achieve long-term capital appreciation by investing in a diversified portfolio of growth and value stocks listed on the Palestine Stock Exchange in securities anticipated to undergo initial public offerings as well as securities at their initial public offering.

One reason for this encouraging change of approach is that the senior Palestinian leadership has yet to shake off the whiff and evil of corruption that pervaded the Arafat dictatorship. To paraphrase a second blogger, Arnold Roth:

Muhammad Rashid, Arafat’s money-carrier (literally), has been arrested. He has been running the Palestine Investment Fund, which in turn controls the Arab Palestinian Investment Company. This organisation is dominated by Tareq and Yasser, the sons of President Abbas.

May not look good to outsiders. The Palestinian Authority (PA) has reserves. Reuters recently observed that:

The Western-backed PA ….says it has poured around $7 billion into the Gaza Strip since its rival Hamas seized control in 2007, but complains that the Islamist group is stymieing its efforts to balance its books……The PA says it spends $120 million a month, or more than 40 percent of its whole budget, on salaries and services in Gaza. 

Remember, those salaries includes dosh for those people launching rockets daily into Israel. And they more than likely funded the “security” provided to a journalist friend as he toured Hamas smuggling tunnels last month. It is also useful to recall that much of this funding comes from the generosity of European taxpayers – over 1 billion dollars since 2008.

Maybe Western leaders are finally aware that this displacement of resources is adversely effecting the average “man on the street” in Ramallah or Jenin. For example, Palestinian sources note that hospitals are facing closure, as they are starved of income. And because the PA has consistently ignored its water obligations under the Oslo Agreement with Israel, villages in the Bethlehem district are now running dry.

Where next? Difficult to say. Palestinian banks are also in a precarious position as they have been struggling to feed the needs of central government. One thing for sure – if you want to invest in the Palestinian economy, make sure that central sources are nowhere near the distribution table.