International Aid to the Palestinian Authority

The international aid to the Palestinian Authority composite all the institutions, organizations and arrangements which have been created by the international community in order to assist and to support the Palestinian Authority.

Definition

The concept of international aid to the Palestinian Authority (PA) refers to all the institutions, organizations and arrangements which have been created by the international community in order to assist and to support the Palestinian Authority.

This concept does not include the financial transfers from Israel to the PA which are part of the income clearance arrangements in the Interim Agreement.

Preface

The idea of international aid to the Palestinian Authority was consolidated after the signing of Declaration of Principles between Israel to the PLO (9/93). Its aim was to assist the economic development of the PA in order to prepare it for its expected evolution into statehood.

The aid is given by a group composed of states, non-governmental organizations and international organizations such as World Bank and the International Monetary Fund.1 The Ad-Hoc Liaison Committee (AHLC) is the most important entity in this support system.

This economic assistance which has been transferred to the PA since 1993 is exceptional in its extent per capita and is considered as the highest since WW2 to population.2

The Structure and Elements of Assistance

The transfer of monies and the assistance to the PA may be divided into three types:

  • Budgetary aid – aid is transferred to the PA budget in order to cover its ongoing expenses and to ensure its ongoing functioning. These monies are intended to cover salaries and to finance health, social welfare and educational services. This aid is supervised by international actors.3
  • Project aid – This is aid that is transferred to the PA in order to implement projects, mostly in the area of physical and social infrastructure, such as the paving of roads, establishment of schools, or the training of personnel. For the most part, it is given with the direct supervision of the funding body.4
  • Humanitarian assistance – Aid is given to goals of social welfare and social support and is intended for food, medicine and health services. During times of emergency, this assistance is transferred in order to avoid a humanitarian crisis in the PA. In some of the instances, this activity is carried out by Palestinian groups acting as sub-contractors.5

This division of aid is ambiguous. Part of the budgetary aid and the project aid is in fact humanitarian, and the opposite is also the case.

In 2005 the international community donated approximately 1.3 billion dollars to the PA,6 divided as follows: budgetary aid - 350 million dollars – 27% of the assistance, Projects aid - 450 million dollars – 35%, humanitarian aid – 500 million dollars - 38%.7

Historical background

Following are the main periods in the development of the assistance to the PA:

Oslo Period (93-00) – after signing on the Declaration of Principles (9/93) the international involvement in the area has grown. Various countries had started to transfer financial aid to the PA in order to help its economic development as part of its progress towards statehood. In 1993 the AHLC was established. During these years the support was channeled mainly to infrastructure and social development of the PA by investment in projects.8

Al Aqsa Intifada (00-03) – During this period most of the support was channeled to immediate humanitarian aid and for budgetary aid to the PA rather than project aid.9 This occurred because of the decrease in standard of living in the PA in the context of the violent conflict. The project's budgetary surplus has been directed to rehabilitation of infrastructure.

In addition, after the increase of criticism on Arafat's regime and the concern for money flow which might support Palestinian terrorist activity, the international community had started to oversee financial aid in a stricter manner.10 The community demanded that the PA manage all financial aid and PA income in one central bank account (Consolidation of Accounts process11).

The Road Map and the Disengagement Plan (03-06) – The launch of the Road Map and the strengthening of Abu Mazen's political status had increased in involvement of the international community in project finance and development in the PA.12 In parallel, the oversight on PA finance system has been tightened as a result of a determined demand for transparency in management of the national accounts.13

In the London Meeting (03/05) the contributing countries and institutions called for an increase in the assistance to the PA and administrative, economic and security reforms in the PA.

Rise of the Hamas (01/06) – Following Hamas’ victory in the elections to the Palestinian Legislative Council (01/06), the international community has started to reexamine its aid policy. The Quartet had raised three preconditions for continuing the support in the PA: recognition of Israel, ratification of existing agreements and an end to violence.14 The rejection of these conditions by the Hamas has stopped the budgetary support to the PA for the present.



1 Main institutions which are involved in aid:Coordination and oversight - Quartet representatives, forum of contributing countries (AHLC) and the Local Aid Coordinating Committee (LACC), World Bank, Public Financial Management Reform Trust Fund and International Monetary Fund.Main support countriesU.S., EU, Norway, Britain, Japan, Canada. Some of the states support agencies aid such as the American USAID or the EU aid agency (ECHO).International aid organizations - World Bank, International Monetary Fund, Red Cross, UN Organizations (UNRWA, UNDP, UNESCO and more).

2 Michael Keating, Anne Le More and Robert Lowe (ed's), Aid Diplomacy and Facts on the Ground, (London: Chatman House, 2005), p. 17.

3 The International Monetary Fund (IMF) and the Public Financial Management Reform Trust Fund are responsible for oversight of the financial transfers and their use.

4 In recent years USAID promoted projects of physical infrastructures as water and sanitation and social projects such as improvement of community services and promoting of democratization process (see USAID site). The humanitarian aid agency of the EU initiated similar projects such as water supply, improvement of medical services, community works and more (see EU site).

5 his kind of aid is support by UNRWA, the Red Cross and other international organizations and countries.

6 This is the amount reported by the World Bank on 15/3/06.

7 Without the financial support which is transferred to UNRWA in every year. In 2005 it was estimated at 200 million dollars.

8 Nigel Roberts, "Hard lessons from Oslo: Foreign Aid and the Mistakes of the 1990s", in Michael Keating, Anne Le More and Robert Lowe (Ed's), Aid Diplomacy and Facts on the Ground, (London: Chatman House, 2005) p. 18.

9 Keating, Le More and Lowe (ed's) Ibid, p. 218.

10 The international community demanded from the PA to implement criterions of transparency in financial accounts. An example for this trend is the contact of the USAID with the Democracy Council and other contribute states with accountant companies.

11 Consolidation of accounts process had started as a part of the international demanding to strengthen financial transparency in the PA. The IMF appointed to oversight this process.

12 Keating, Le More and Lowe (ed's), Ibid, p. 218.

13 See at the World Bank site – establishment of the Public Financial Management Reform Trust Fund which oversight the budgetary assistance.

14 See the Quartet conditions.

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