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Businessweek Archives

Graft In His Government Weakens Arafat's Grip

International Outlook


Yassir Arafat is one of the Mideast's great survivors. As head of the Palestine Liberation Organization, he has lived through assassination attempts, accidents, and expulsion from Jordan and Lebanon. But recent events have shaken his seeming iron grip on power.

Arafat is weaker now than at any time since the creation in 1993 of the Palestinian National Authority, of which he is president. While beset by yet another halt in the peace process, he now also faces a rising tide of sleaze that is damaging him domestically. Allegations of official corruption, whispered for months, are becoming public. An internal audit unveiled recently showed that $323 million of spending--or 40% of the Authority's budget--couldn't be accounted for. To ordinary Palestinians, who have grown increasingly angry about the extravagant lifestyle, including fancy cars and other perks, of Authority officials, it seemed like the confirmation of their worst suspicions. Nearly 80% of Palestinians in a recent poll said they thought corruption was extensive.

Palestinian lawmakers are urging Arafat to dump his entire Cabinet because of the alleged corruption. Now, 16 of his 18 ministers are offering to resign. Worse yet, international donors, mostly from the European Union, threatened to cut off $1.4 billion of aid pledged but not yet paid to Palestine when they got wind of the extent of the problem. They told Arafat privately to clean up his act.

DENTED POWER. Arafat's presidency is not yet threatened; he purged potential rivals long ago and doesn't face elections until 1998. As a result, he is the only realistic negotiating partner that Israel has. But the allegations and the suspension of donor aid and tax receipts from Israel have put a serious dent in his power. Any economic benefit to ordinary Palestinians from the Oslo peace process has to be bankrolled from those sources. So his grassroots support risks being leached away by such extremist groups as Hamas, which, unlike Arafat's Authority, operates a well-functioning social services network.

Rooting out corruption, however, will be tricky. There is no evidence that Arafat himself is directly implicated. But turning a blind eye to graft and sweet deals is one of the main devices he has used to control rival factions--and keep himself in power--over the years. Despite the risk of losing that clout, Arafat may have a lot to gain by dealing head-on with the problem.

Local analysts argue that Arafat must clean house and implement a proper system of accountability, rather than just reshuffle ministers. "[Such moves] will strengthen his local position and make him more able to face external pressure," says Ghassan Khateeb, director of the Jerusalem Media & Communication Centre.

Paradoxically, the crisis in the peace process could let Arafat off the hook. When Israeli Prime Minister Benjamin Netanyahu blames him for terrorist incidents, such as the July 30 suicide bomb attack in a Jerusalem market, even Arafat's Palestinian critics rally around him. Punitive Israeli measures to seal off the West Bank and Gaza areas, where 2 1/2 million Palestinians live, and stop payment of tax revenues due to Arafat's government have the same perverse effect. "We are under total economic siege," says Hisham Awartani, head of economics at the Nablus Center for Palestine Research & Studies. "It's a luxury now to talk about some ministers abusing money and power."

Still, Arafat urgently needs to shore up his beleaguered domestic position. If Israel decides to put the peace process, which it controls, back in motion, Arafat's domestic problems will return to haunt him.EDITED BY JOHN TEMPLEMAN By Sharon Moshavi in JerusalemReturn to top


-- South Africa's labor unions, long allies of President Nelson Mandela, are forcing a showdown with his African National Congress government. The Congress of South African Trade Unions (COSATU) called 2 million members out on a one-hour stoppage on Aug. 4 as a prelude to a series of 24-hour strikes beginning Aug. 18.

Though support for the stoppage was thin, business leaders worry that foreign investors will be scared off by threats of ongoing labor unrest. The core union demand is for a 40-hour work week, phased in over five years. The best government offer is a 45-hour week, a big gain for many workers still required to work 60 hours. The government has promised not to ram a new law through the legislature unless it can reach consensus with its old union allies.Return to top

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