Amid Palestinian Financial Crisis, Turkey Donates $5M To PNA

2006-01-05

Salam Fayyad: We Are in Desperate Need of Arab Aid

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Palestine Media Center - PMC

Turkish Foreign Minister Abdullah Gul on Wednesday signed a Memorandum of Understanding (MoU) with the Palestinian National Authority (PNA) to donate $5 million (EUR 4.1 million) to rehabilitate the Beit Hanoon (Erez) industrial zone in the northern Gaza Strip, amid a financial crisis that took President Mahmoud Abbas to GCC countries seeking "desperate Arab aid."

"While supporting Palestinian efforts to establish their independent state, we also place great importance on them being able to stand on their own feet economically," G?l told a press conference with his Palestinian counterpart, Nassir al-Qidwa, on the first day of a two-day visit to Israel and the Israeli-Occupied Palestinian Territory (OPT).

Gul was scheduled to sign a similar understanding with Israeli officials in Jerusalem on Thursday.

The donation was first announced during a meeting in the West Bank city of Ramallah between Gul and Palestinian Prime Minister Ahmad Qurei.

The mostly Turkish companies that are expected to invest in the industrial zone in the Palestinian town of Beit Hanoun will create 10,000 jobs, Palestinian officials said.

"This project aims to... enable the Palestinian economy to export goods worth millions of dollars," Gul said after the meeting.

Turkish business officials, who paid for the reopening of the zone through their Chamber of Commerce, hope the zone will attract investors not only from Turkey but also Israel, Japan and other countries, Gul said.

Under the MoU, the Erez industrial zone will be guarded by armed Turkish security men who are employed by the Turkish Defense Ministry. Israel will issue the guards special permits to enter the Gaza Strip, Israeli daily Haaretz reported on Wednesday.

Qurei said the economic cooperation with Turkey was "greatly needed."

A UN report released last month showed unemployment in Gaza standing at 35 percent.

About a third of Gazans subsist on less than US$2.20 (EUR1.84) a day, the sum set as the poverty line, according to the report.

Donors Plunge PNA in Financial Crisis

International donors are refusing to provide funds to the PNA.

The refusal, which is based on violations of the PNA's commitments not to increase salaries in the public sector and the resignation of the PNA's finance minister, Salam Fayyad, will lead to a $950 million deficit for the Palestinians in 2006, the Israeli newspaper Globes reported.

The PNA's deficit for 2005 is expected to be less than $480 million, Globes said.

The PNA has turned to Arab countries for help in ending what the former Palestinian finance minister Salam Fayyadh calls a suffocating financial crisis after European donors froze their funding.

After a conference in London last month, Western donors decided to withhold millions of dollars in aid until after the Palestinian legislative elections on January 25, citing as a reason failure by the PNA to carry out previously promised economic reforms.

Since then, about $60 million in money reserved for Palestinian salaries has been frozen, said Nigel Roberts, the World Bank's director for the West Bank and Gaza Strip.

"The Palestinian Authority's commitment to maintain a salary containment plan was breached in a major way in the second half of the year," he said.

The spending levels are "completely unsustainable over time," Roberts added.

"Basically, the Palestinian Authority has put itself in a position where every month it will face the same crisis," Roberts said.

Palestinian President Mahmoud Abbas has just returned from a tour in the GCC Arab countries to enlist their aid.

Arab donors sent the Palestinians only about one-third of the $650 million in promised assistance last year, officials say.

"We are in desperate need of Arab aid," said Salam Fayyadh, who recently stepped down as finance minister in order to run for parliament.

Fayyadh said international aid has helped cover about one-third of a $1 billion US deficit in the 2005 budget, but Arab states have not fulfilled their pledges.

Fayyadh, who is expected to return to the finance post after the 25 January election, said international aid had helped to cover about one-third of a $1 billion deficit in the 2005 operating budget, and the Palestinians were searching for more help in covering the remainder.

Fayyadh said he expected the PNA government to withstand the latest crisis.

"But there is no doubt that the Palestinian Authority is going through a suffocating financial crisis," he said.

"There is a lack of foreign aid, and it will be difficult to continue in this way, so we need to reorganize."

He said the Palestinians would have to reduce their dependence on foreign aid, but he gave no details on the reorganization.

His efforts to impose donor-demanded "fiscal discipline" on the PNA were reportedly interrupted.

He resigned his post and ran for elections, forming a new list together with lawmaker Hanan Ashrawi, at first dubbed Freedom and later called simply the "Third Way." The list is supported by the veteran reformer, peace activist, and member of the Executive Committee of the Palestine Liberation Organization (PLO) Yasser Abed Rabbo.

Source: IMRA – Independent Media Review and Analysis