Challenges in the Palestinian Economy: Aid Dependency and The Role of Foreign Donors

1. The Palestinian Economy: Between Aid Intervention and an Independent State Economy- Prospects and Challenges. The Paradoxical Reality of the Nation-Less National Economy & The Non- Governmental Government (NGG) By Scheherazade Elfar, Researcher- PALESTINE at PalestineEconomicPolicyResearchInstituteMAS

2. Foreign Aid in Opt -General view- • Foreign aid to the Opt was designed to promote an independent Palestinian Economy. For this reason, it was channeled into development and creation of jobs. But has the Palestinian economy really achieved any more independence • In 2 years, GDP per capita dropped by over 40%. These surpasses the decline during the great depression of 1921 in the USA or the reason financial collapse in Argentina.

3. Foreign Aid in Opt -General view- • According to a study conducted on the Tracking of external donor funding to Palestinian NGOs between 1999 and 2008, External aid to 1967 Palestinian Occupied Territories has increased by 600% to reach US$3.25b. Source: "Tracking External Donor Funding to Palestinian Non- Governmental Organizations in the West Bank and Gza Strip", Joseph DeVoir & AlaaTartir, 2009. • This is an NGOs mushrooming phenomenon witnessed in the 1967 oPt has become a phenomenon that remains in need of comprehensive and accurate analysis, as well keeping records and data related to the funding injected. • With high turn over of NGOs, lack of institutional memory and limitedness of knowledge especially on the part of non Palestinian NGOs operating in the oPt of the Palestinian culture and other vital information as well as a move towards larger and governmentalized donors, all this make international aid contribute to the diffusion of power. Source- Challand

4. Dependence on Aid • 1. With the Palestinians’ income deteriorating and foreign aid increasing, Palestinian dependence on aid reached a worrying peak of almost 50% in 2002. • 2. Following the destruction brought on the Palestinian economy since the Intifada II, the ration of funds reversed from 5:1 in favor of development two 7:1 in favor of crisis management • 3 “That’s not sustainable development; it’s a permanent life support system”.Kieron Monks, The guardian, 2010. • In 2009, over 60% of Palestine’s gross national income, and almost 100% of Government expenditure came from aid.

5. Micro geographies of Aid • Palestine is one of the worlds largest beneficiaries of foreign aid, receiving over 3 billion US dollars annually. Not including of the UNRWA itself. • Aid flows come from numerous sources including primarily: A. Arab States. B. The EU. C. Japan. D. The United Nations. E. USA.

6. Micro Geographies of Aid • Their aid can be governmentalized, institutionalized, bilateral, multilateral or private according to the political conditions withstanding. • European donors constitute by far the largest percentage of donors to the PNGOs 70%. • And while the American and European donors` aid decrease in times of political turmoil, Arab donors` aid increases. • Between 1999 and 2008, the steady decrease of the Arab and American aid which fell from 12% to 5% aid has been parallel to the steady increase of the European aid especially to the budget of the Palestinian Authority (PA). • Arab aid to Palestine emerged in the 1960s, namely the Kingdom of Saudi Arabia (KSA), Kuwait and United Arab Emirates (UAE).

7. Micro Geographies of Aid • Arab donors are distinctive than other foreign donors in that they are usually bilateral, multilateral or private, the amounts shift and unlike other donors` aid, Arab aid is not competitive. • Post Oslo Accords in 1993, PNGOs operating in Israel increased in number. Prior to the Oslo Accords, it was not clear whether they were struggling as a majority in the Palestinian territories or as a minority in Israel. • As a general profile, PNGO`s operating in Israel are liberal, advocating civil and equal rights for Palestinian citizens in Israel, work for social promotion, with a perspective of two state solution on the Palestinian- Israeli conflict. • Additionally, PNGOs in Israel suffer restrictions on funding for two main reasons, from the Israeli point of view, Israeli laws prohibit funding from Arab countries due to what they refer to as funding from "terrorists", while form the Arab donor side, funding Palestinians in Israel means normalization with Israel.Guy- BZU. • Refugees' needs are predominantly targeted by the UNRWA which explains the low number of PNGOs operating in this field. See: "Tracking External Donor Funding to Palestinian Non- Governmental Organizations in the West Bank and Gza Strip", Joseph DeVoir & AlaaTartir, 2009.

8. Palestinian Ownership over the development process- Aid effectiveness • 2005 Paris principles on aid effectiveness stipulated: “developing countries must lead there own development policies” • Foreign aid to the 1967 oPt fluctuates according to the political scene. Accordingly and through aid, sponsors generally dictate directly or indirectly the fields of development interest as well as other fields of productivity. • In 2008, sectors of PNGOs receiving the highest external aid were Rights advocacy sector by 30%, social services 26%, economic sector 22%, Education 14%, and 9% Relief and Charity. Refugees' needs are predominantly targeted by the UNRWA which explains the low number of PNGOs operating in this field. • The vacuum of a powerful and the absence of a full-fledged state paves the way for the hegemony of the NGOs in all areas of livelihood for Palestinians, whether Palestinian NGOs or International NGOs.

9. Palestinian Economy under Occupation • By enforcing customs union on goods and allowing Israel to stop Palestinian workers from entering Israel on security pretexts, the Paris accords effectively subject the Palestinian economy to Israeli control • 73% of all imports to the oPt come from Israel. • The Palestinians involuntary passivity is made possible and perpetuated through foreign aid.

13. Palestinian Economy under Occupation • Israel confiscated 16 million Us dollars of aid to the oPt to pay for the Palestinian utilities debt. “When realpolitik shifts development, takes a backseat”. DeVoir “NGO’s do not achieve political goals; they facilitate the occupation by making it bearable”

14. Palestinian Economy under Occupation • A prominent political economist Sara Roy discussed the paradigm shifts in the aid- industry. Sara Roy • Irreversibility of occupation and acceptance of the status quo- territorial de-fragmentation and geographical discontinuity • Coexistence of peace and occupation- increasing the validity of the unlawful occupation- durability of occupation • Palestinian economy to serve Israel by increasing Israeli utility- Shift of Palestinian national rights into a humanitarian problem- Palestinian alienation within their own territories- Donor community reacting to Hamas gaining power • Perception of Palestinians by International community- "engineering Palestinians into perpetual beggars" Usama from Gaza- more international hired in the NGO sector, especially the Palestinian ones to talk the same language when approaching international donors. Reliability on aid for livelihood. • Humanitarianizationof the Palestinians becoming an alien demographic entity and strictly a humanitarian issue

16. In 2001, the aid Israel received from the US was 17 times the figure reported by the World Bank. • Israel is the biggest recipient of total foreign aid in the world. • Israel receives from Jewish communities worldwide, military aid from the US and compensation payments for the Holocaust.

18. Palestinian Ownership over the development process- Aid effectiveness • On the positive side, this vacuum poses no obstacles in the face of the Palestinian civil society and spares it bombing heads with the government resistance as in other neighboring autocratic Arab countries. However, decoding the agendas of foreign donors and reconciling them with the rights and needs of the Palestinians remains the responsibility of the Palestinians. Source: "Tracking External Donor Funding to Palestinian Non- Governmental Organizations in the West Bank and Gza Strip", Joseph DeVoir & AlaaTartir, 2009.

19. Palestinian Reform an Development Plan PRDP & Independent state Economy • PRDP poses a development challenge in framing an acceptable partner for Israel; peacemaking through the exclusion and the criminalization of Gaza Strip. Coexistence of military presence and aid is underlined. • PRDP is a neoliberal democracy, state building via democracy, via exclusion which is impossible under occupation and heavy dependence on foreign aid. Security and development duality persists. • Much of the Criticism of PRDP as far as aid intervention is concerned and the objective its stipulates has been along the lines of four main points, first: exclusion of Gaza strip and east Jerusalem in strategy, second: unrealistic and lack consultation- donor and business oriented, third: cutting wages bill, forth: lack of legitimacy and accountability, fifth: its relevance to ending occupation • Economic viability and geographic continuity are intrinsic to achieving an independent state of Palestine. Considering the amount of aid, it had negative effects since it should have been enough compared to the population to lead to sustainable economy, however the reverse happened- Source- Sara Roy

20. Alternative forms and mechanisms of aid that address and respond more genuinely to the needs and rights of all Palestinians • Rights based approach rather than needs based approach should be adopted by the donor community. • This can be enforced through a strong civil society that complements rather than replaces the role of the Palestinian government. • The donor community should focus on funding programs that can transfer their know-how and expertise down to the Palestinian locals to implementing projects they tailor according to their rights and needs. • Drafting a charter of principles and code of conduct that stipulates duty, responsibility and promotes accountability can be a good reference point as far as a legal framework is concerned. Intra Palestinian reconciliation remains a prerequisite for any development plan.

21. Alternative forms and mechanisms of aid that address and respond more genuinely to the needs and rights of all Palestinians • This also suggests transforming political tools into economic ones causing a shift in the international aid attitudes and the status quo of the aid industry in Palestine. • In keeping institutionalized records, studying this phenomenon will become a much easier task complementing what the Palestinian Ministry of Planning (MoP) does through its Palestinian Assistance Monitoring System (PAMS). This means more than a number of studies in the field but rather a comprehensive, accurate and up to date monitoring entity completely devoted to monitoring and tracking the funding, its effectiveness not just in corresponding to the narrow targets of the program in which the funds seeks.