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International Aid The Lifeline Of The Palestinian Economy
Palestinian exchange currency before crossing into Egypt through the Rafah border crossing in the southern Gaza Strip. (Photo: SAID KHATIB/AFP/Getty Images)

International Aid The Lifeline Of The Palestinian Economy

Lack of skilled workers, corruption preventing the Palestinians from getting the most out of billions of dollars in foreign funding

Since 2008, the Palestinian economy has grown by a remarkable 64 percent, but the population still struggles with both high unemployment rates and is harmed by Israeli restrictions on trade in the West Bank and the blockade on the Gaza Strip.

Today, the Palestinian Gross Domestic Product is some $8 billion annually, but living standards remain low as many lack the resources to create jobs and the skillsets to fill them.

After the establishment in the mid-90s of autonomous Palestinian territories in the West Bank and Gaza, many governments began providing the Palestinians with huge sums of foreign aid. The United States is the biggest of some 20-odd donors, followed by European bodies and states.

According to a former USAID project director, who spoke to The Media Line on condition of anonymity, the organization’s “main goal is to sustain the [Palestinian] economy,” while improving specific sectors such as health and education. At the same time, USAID helps to “develop the water sector and overall infrastructure as well as improve the services provided by the PA to its citizens.”

In this respect, he explained that USAID provides “direct cash assistance to the [Palestinian] government,” which he said allows it “to employ more people, open new markets or develop current ones, support and strengthen the existing legal framework and focus of training youth,” among many other aspects.

Washington has also provided humanitarian assistance for Palestinian refugees—to the tune of billions of dollars—through the United Nations Relief and Works Agency.

For its part, the European Commission’s Humanitarian Aid and Civil Protection Program helps more than two million Palestinians, with most of the funding allocated to providing legal assistance—mainly in cases involving home evictions or demolitions—to families living in Area C of the West Bank (as designated by the Oslo Accords) and east Jerusalem.

A senior official at the Palestinian Ministry of Economy, who spoke to The Media Line under condition of anonymity, explained that the economy in the West Bank is fully dependent on international aid, whereas it is a matter of life and death for those living in Gaza. “Early in 2013, there was a drop in international assistance to Palestine for the first time in a decade, causing the GDP in the West Bank to shrink dramatically,” the official revealed.

“Much of the aid coming from the U.S.,” he continued, “is utilized for education and infrastructure. The European Union is also providing remarkable support.”

Sam Bahour, an economic analyst, explained to The Media Line that a large proportion of the funds is allocated towards fulfilling political and security needs, at the expense of economic and social ones. “Over the past ten years, a lot the funds donated by the U.S has gone towards beefing up the security forces or developing democratic institutions, which doesn’t help the economy if Palestinians still feel insecure and Washington refuses to respect the results of our democratic elections.

“In Palestine, we need to focus on education and infrastructure,” he contended.

In this respect, the Japanese government offers a range of assistance, from providing funds to care for refugees in the West Bank and throughout Middle East to helping socially vulnerable Gazans. Tokyo has also provided funding to enhance the Palestinian financial system as well as the private sector, in general.

Hannah Diwani, a coordinator at Business Development Services (BDS), one of the projects funded by the Japanese government, explained that the focus of his job focused on was training Palestinian employees who went on to work throughout the West Bank in sectors such as marketing, management and production.

“There are many obstacles faced by people in the West Bank,” Diwani conceded to The Media Line, “many don’t have the know-how to run a growing business. Our project aims to create an environment that promotes productivity in their workplaces.”

One of the biggest projects currently underway is the construction of a new industrial area in Jericho. Financed by the Japan International Cooperation Agency (JICA), the goal of the program is to encourage Palestinian manufacturers to export goods.

“The industrial zone is going to be full of factories,” Diwwani asserted, “with JICA providing grants to encourage business owners to open facilities and operate there. JICA has also provided high-end X-Ray machines that will be used to check large containers, which will facilitate exportation.”

Yet many of the people who started their own businesses were not able to succeed due to a lack of management skills, according to Diwani, who stressed that the key to the effectiveness of Japan’s aid, in particular, is the fact that the Tokyo retains control over the distribution of its donations.

By contrast, some NGOs in the West Bank that receive foreign aid are unable to maximize its potential because they lack people with the skills to use the resources properly.

Muhammad, who requested that his last name not be shared, previously worked at an NGO in Hebron whose mission is to empower women. He told to The Media Line that while working in the organization’s fundraising department he uncovered corruption. “Salaries and other expenses were paid for when in reality they were non-existent,” Muhammad said.

“The aid is donated to stimulate growth, so when there is corruption in managing these funds, the impact of the aid is limited. It is like a waterfall—it looks significant and dense at the top, but by the time the water reaches the bottom it represents merely a trickle.”

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