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Are The Palestinians Ready To Get Down To Business?

International Outlook


The boxes are piling up, the crates are being filled. It's moving time at the Tunis headquarters of the Palestine Liberation Organization. PLO Chairman Yassir Arafat has given orders to close the offices down by the end of June. Thirteen hundred miles away, in the oasis town of Jericho, the excitement is building as Palestinians count down to Arafat's return to his homeland after a 46-year absence.

But it's building of a different sort that will decide the success of the Palestinians' experiment in self-determination--and whether one of the globe's longest-running conflicts can be put finally to rest. Can the Palestinians set up institutions to channel billions of dollars in international aid? Can benefits flow quickly enough to the 1.3 million people who will now call the Palestine National Authority their home? Can Arafat nurture a market economy so private investment starts to pour in?

COUGHING UP. On the surface, the answer to those questions is no. Although the U.S., Japan, and other countries have promised $2.4 billion in project aid over the next five years, almost nothing has come through the pipeline. Donor countries are holding back for fear that Arafat and his PLO officials might siphon off funds for political ends. Meanwhile, the lack of funds has left thousands of Palestinian civil servants in Gaza and the West Bank without pay. At an emergency Paris meeting in mid-June, donors finally agreed to cough up $42 million to help the PNA get on its feet. But it's slow in coming.

Nevertheless, things may not be as bleak as they seem. The rudiments of Palestinian government are taking form. PNA officials say finance and tax departments could be up and running within a month. That will allow funds to flow directly to the PNA administration, rather than to the PLO. By July, says Samir Huleileh, an official of the Palestinian Economic Council for Development & Reconstruction, almost all of the PNA's $381 million operating budget for 1994 should be available.

There are also signs that this year's $450 million development budget, overseen by the World Bank, could be implemented soon. According to bank officials, only about 15% of these funds will go to the PNA; the rest is earmarked for specific projects, including badly needed housing, roads, and sewers. In mid-June, the U.S. Agency for International Development and Germany's aid agency both announced plans to open offices in the West Bank to oversee aid flows, while the Bank of England is providing assistance for the fledgling Palestinian Monetary Authority. "The West has been cheap with the Palestinians until now," says Gil Feiler, head of Tel Aviv consulting firm Info-Prod Ltd. "Donors will become more flexible in the months to come."

Overseas Palestinians are also poised to flex their financial muscles. Amman-based Palestine Development & Investment Co. has collected well over $100 million from well-heeled Palestinians for investments in the West Bank and Gaza. The group is hoping to build small satellite communities in the West Bank, complete with shops and communications, not unlike towns constructed by Israel for immigrating Jews. Pedico wants to raise $1 billion, says Chairman Kamal Shaer.

Palestinian investors, just like Western donors, want to see probusiness signals from Arafat. "The PNA should have bright red signs in each office saying `No Big Government,"' says Nidal Sukhtian, a prominent Amman-based Palestinian financier. "But I am afraid the government will be bigger than needed, and it will hurt economic development." Chairman Arafat should ponder that when he gets home.EDITED BY ELIZABETH WEINER By John Rossant in Rome, with Neal Sandler in Jerusalem and Kirk Albrecht in Amman

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