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Palestine's 'economic miracle' : Immense amount of international donations inflate Palestinians' disposable income

By David Bedein , Israel Resource News Agency

Palestinian Prime Minister Salam Fayyad has been crowned as "the Palestinian Ben-Gurion at the recent Herzliya Conference. However, there is a great gap between the achievements attributed to him and his abilities in practice.

Fayyad is credited with changing the corrupt PA apparatus, but even in the financial realm where his expertise lies, his abilities are mostly manifested through the drafting of impressive documents as well as fundraising.

Meanwhile, the absurdity inherent in his statements regarding "Palestinian independence within two years" is clear to anyone familiar with the Palestinian economy. Fayyad is a former World Bank official, but even on the financial front his deeds are far from the image he has nurtured.

The Palestinian economy is the only place in the world where the per capita GDP is less than half the disposable income per capita. This is the result of three factors:

1. The Palestinians barely produce anything. Most of their GDP comes from government expenditures by the PA itself.

2. The Palestinians receive immense sums donated by the world.

3. Tax collection is almost unheard of, aside from the taxes collected (for Fayyad) by the Israeli government, which provides the PA with NIS 450 million (roughly $120 million) monthly; this comprises about 40% of the PA's budget.

The result is clear: Low GDP, but high disposable income. Indeed, it's an economic miracle.

Meanwhile, the situation is even more extreme in the Gaza Strip, where the PA spends 57% of its budget. Fayyad hands over salaries and allowances to 150,000 people, yet tens of thousands of them don't work, while others receive two salaries: One from Fayyad and another from Hamas. This is why the only industries active in Gaza are imports through smuggling tunnels and real estate - the surplus of cash in Gaza's banks prompts them to offer mortgages, and this results in a rise in real estate prices.

The former finance minister in Fayyad's government expressed it vividly in an interview with Le Monde: He said the Europeans are unaware that their money funds Hamas. Hamas doesn't know what to do with all the money in its pockets so it buys real estate. As result, the price of upscale beachfront real estate in Gaza increased by 300%. The money from the EU and from the taxes collected by Israel ultimately reaches Hamas, he said.

When Hamas took power, Fayyad was supposed to ensure (in line with the international community's demand) that the salaries he hands over do not reach Hamas hands. He indeed proceeded to remove 20,000 people form the list of salary earners, but two months later added more than 10,000 of them to the list of recipients of government allowances.

By doing so, Fayyad showed that he too is familiar with the Palestinian concept of the "revolving door." However, this is not his only economic failure.

Palestinian PM’s dubious schemes show he’s nothing like Israel’s founding father,2506,L-3845482,00.html

On the security front, Palestinian PM Salam Fayyad counts on the IDF and Shin Bet. Despite his claims that the IDF should not be operating "in the Palestinian state's territory," he knows that he has no control on the ground, neither in the Gaza Strip which he dreams of reuniting with the West Bank, nor in his own backyard in Judea and Samaria.

If Fayyad is indeed interested and capable of reuniting Gaza and the West Bank, when and how does he intend to do so? Will he be leading a Palestinian army that will deploy in Rafah and move north until it retakes Gaza City from the hands of Hamas? Obviously not. He is in fact creating the conditions for boosting Hamas, so that the IDF will ultimately have to enter Gaza, retake it while paying a heavy diplomatic price, and then end the "occupation" and hand it over to Fayyad, without him having to do a thing.

And back to the economic front: About two years ago, the World Bank demanded that Fayyad not only cut down PA salaries (no results thus far) but also that he minimize the second-highest PA budget clause: Payments aimed at covering electricity and water bills which PA residents refuse to pay (the accumulated electricity debt of Gaza residents stands at $2.7 billion.) This clause, which constitutes about 8% of the PA's budget, is hidden by Fayyad under the heading “Net Lending.”

Fayyad seemingly charges local authorities for the electricity provided to their residents by Israel, yet immediately “loans” them the money. As such, they appear as a local authority debt to the Palestinian Treasury. Two years ago, he attempted to force PA residents to present proof of payment on their electricity bills before receiving government allowances. The PA’s “public service sector” immediately embarked on a warning strike, and Fayyad got the hint and has refrained from demanding that the bills be paid.

A few months ago, Fayyad came up with an original solution: As he hands over immense sums for the salaries of tens of thousands of security officials in Gaza, who no longer work since Hamas took power there, he raised their salaries by 4% and even got EU funding for this. However, at the same time he deducted a similar sum from these salaries for “electricity bills.”

Everyone was pleased until Hamas authorities found out about it. They viewed it as financially detrimental to their government, and in response stopped handing over to the Palestinian fuel authority the sums of money collected from Gaza residents who do pay for electricity. This was the reason for the latest fuel crisis in the PA.

In conclusion: Ben-Gurion, who was a man of real work and pioneering spirit would be turning in his grave had he heard that Fayyad - a man who excels in dubious schemes and in drafting impressive donation requests that include words like “transparency,” “responsibility,” and “economic stability” - has been crowned as his successor in the 21st Century.

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