bitterlemons: How has foreign aid influenced the Palestinian-Israeli conflict, particularly in recent years?

Ajluni: Donors have said very specifically for a decade now that foreign aid is designed to underpin a peace process. They say very bluntly and openly that aid to the Palestinian Authority is seen as peace implementation or peace facilitation. Whether or not it has played that role is another question.

I think that foreign aid has played an important role to some extent in reducing the distortion in the occupied Palestinian territories that existed particularly in the period prior to the last ten years. Palestinian incomes were rising while their public services, infrastructure and public spaces were degrading for close to 30 years [after Israel's 1967 occupation].

For the last decade, though, personal incomes have been on the decline due to Israeli measures blocking Palestinian access to the Israeli labor and commodity markets. The aid has to some extent served to mitigate the distortion of this occupied economy. In the last three years, much of the aid has been budgetary support for the Palestinian Authority to allow it to be able to meet salary payments.

bitterlemons: How then has the aid influenced the course of the conflict?

Ajluni: Some donor countries have said openly, and others have said not so openly, that for the last two years at least, they have been financing the fallout of Israel's measures rather than allowing Israel to bear the full weight of its actions and pay for the damage and destruction that it has caused. Seen from that donor perspective, some might say that they have fueled the conflict--if the aid had stopped, then the Israelis would bear a much bigger burden and not engage in the behavior that they have.

bitterlemons: Is the international community considering pulling back for this reason?

Ajluni: I think that the donors are engaged in that rethinking. It is a good question.

bitterlemons: Both Israel and the Palestinian Authority draw a large portion of their budget from foreign aid. How might each, in a perfect world, make the transition to a self-sufficient economy?

Ajluni: Were it not for the movement restrictions and the difficulties imposed on the Palestinian population as a result of Israeli measures, there would be no need for budgetary support. In 1999, [the Palestinian Authority] had a balanced operating budget. The Palestinian Authority, relative to what it has received, however, would have only minimally been able to cover the development budget that creates medical facilities, public infrastructure, public space, technical assistance, etc.

Let's keep in mind that we are talking about a population that has a large component of refugees and that has been under occupation since 1967. The degradation of public infrastructure has been great and ongoing for nearly four decades.

Israel, on the other hand, is the largest recipient of external funding in the world, bar none. On a per capita basis, that equals three times what the Palestinians receive, and somewhere over $1,000 per person per year. Could the Israelis do without that? Most of this assistance is official and comes from the United States. Roughly half of that is military assistance. If Israel wants to maintain the fourth largest army in the world at the current level of readiness, then it will probably have to continue to receive that amount.

bitterlemons: Given the experience of the Oslo accords where donors gave a large amount of money and then the process collapsed, if there were to be a comprehensive settlement would there also be a willingness to give?

Ajluni: My sense is that if there were to be a comprehensive settlement bringing real peace and justice, the donors would give more. In the past three years, most of the assistance has come from Arab countries for budget support [of the Palestinian Authority]. In that case, the Arab states would play a greater role if a comprehensive solution were to be found. The other main donors of the Palestinians--the European Union, Japan, and the United States--would probably also be forthcoming. -Published 22/3/2004©bitterlemons.org

Salem Ajluni is an economist and consultant focusing on the Palestinian occupied territories.

Israel - Palästina:
Zur Notwendigkeit einer internationalen Intervention

• Yossi Alpher:
  From hostility to opportunity
  Israel's disengagement plans provide the aid community with a new and unique opportunity.
• Ghassan Khatib:
  Not a prop for the peace process
  The international donor community dangled foreign aid as a carrot and stick before the Palestinian Authority.
• An interview with Dov Sedaka:
  You can't turn back the clock
  There was a disguised threat to leave, but largely to pressure Israel to let them get the job done.