An Interview with Gavin Evans and Isabel Candela of the European
Commission Representative Office in the West Bank and the Gaza
Strip.
Palestine-Israel Journal: Maybe you can start by telling us in
general how the European Commission (EC) mission in Palestine views
the economic situation? What are the basic tenets of your policy
here?
Gavin Evans: The basic tenets of our policy are very much in line
with those of other donors. We are looking to private sector-led,
export-led recovery eventually. But, obviously, after the relative
neglect of investment in the West Bank and the Gaza Strip (WBGS)
during the occupation, we put a great deal of emphasis on
investment in social and economic infrastructure. Apart from that,
we placed special emphasis on education. We placed some emphasis as
well on institution building. And, naturally, on private-sector
development.
But looking more broadly, the policy of the European Commission,
and indeed the European Union (EU), is to integrate the
Palestinians in the WBGS into the Euro-Mediterranean space as full
and equal partners in the Barcelona Process.1 Now, obviously, there
is a difference between the Palestinian Authority (PA) or the WBGS
and the other 11 Mediterranean partners in economic terms: there is
a need for a great deal more investment in infrastructure
particularly. That is why, relative to its population size, out of
the so-called Meda-Funding of the European Commission, the WBGS
benefit from a huge amount of assistance (that is, more than 400
million euro in grant funding alone in the five years since 1993 -
for a population of some three million).
I should mention one other aspect of our policy here - that is the
trade aspect. We hope the Palestinian economy will benefit from
trade concessions on a par with, or better than, the other
Mediterranean partners.
PIJ: Obviously, the economic development is very much obstructed
by political decisions. What, in your view, are the main obstacles
to the economic growth of the Palestinians?
Isabel Candela: Well, I think, especially over the last five years,
since the donor assistance in the WBGS commenced - the Washington
conference - the main factor to have hampered economic development
in the WBGS has been the closure policy. This has made it extremely
difficult for Palestinian traders to develop links with the outside
world. Closure has therefore served to intensify what is in any
case probably an unhealthy dependence of the Palestinian economy on
the Israeli one.
We do not believe that you can develop an economy without access to
the outside world, without control over your own - without,
ultimately, sovereignty. A very good example of just this point
relates to the EC-PLO Agreement. It has not been possible to
implement this to the full, precisely because of the obstacles put
in the way of its implementation. I refer in particular to the
closure of the West Bank and the Gaza Strip, but there are other
practices which are detrimental to Palestinian trade about which we
are concerned.
And this is also why the European Commission and its EU partners
have been engaged in efforts to persuade Israel to adopt policies
which will encourage rather than discourage Palestinian
trade.
PIJ: In this respect, has the Gaza airport done anything to
lessen the negative effects?
I.C.: The airport has yet to be used for import/export.
PIJ: Are they not using it for flower export?
I.C.: Construction of the cargo facilities at the airport have not
yet commenced (the European Commission has been approached as a
possible funder). Without the specialized cargo facilities required
for the bulk of export of flowers, vegetables and fruits, the
airport will not be of major significance for Palestinian
trade.
Although there is an agreement on the security control of
passengers, in contrast there isn't yet an agreement between the
Palestinian and Israeli sides on the security aspects of handling
bulk quantities of traded goods. This alone leads to the suspicion
that there is little interest in Israel in the Palestinian economy
developing its own trade outlets. So, for the time being, the
airport remains unfortunately more symbolic than anything
else.
PIJ: And a small footnote here: the idea of a port. Do you think
it would have a major difference on the economy if it is
created?
I.C.: Right now the Palestinians depend on Israeli ports and
airports. This has significant disadvantages for Palestinian
companies. There are no Palestinian customs agents at Ben-Gurion
Airport or at Ashdod or Haifa ports. So Palestinians have to rely
on agents who often don't speak their language or perhaps
appreciate their particular concerns. If the Palestinian companies
want to be present themselves at the airport or ports, this is
often not possible because they have been unable for one reason or
another to get a permit.
So, whatever the security arrangements might turn out to be there,
it would be an improvement for Palestinian traders to be able to
use their own port.
PIJ: In addition to the closure policy, are there any other
major political obstacles to economic growth in
Palestine?
G.E.: First let me reiterate that the port will be particularly
important to the EC and the EU, as is the Gaza airport, because of
the potential for trade with Europe. Obviously, we tend to see
things from a European perspective, but there is another angle:
that the Palestinians should enjoy conditions whereby they can
trade as much as they wish and develop their trade with the Arab
world. Again, this is all part of the Barcelona Process.
I agree, obviously, with what Isabel is saying about the closure,
but I think there is another angle. In March 1998, the Commission
stated its belief (in a communication to the Council and the
European Parliament) that the Palestinian economy was constrained
by the closure policy and practices. But we also pointed out the
negative effects that PA mismanagement of the economy could have,
and we were referring not only to mismanagement, but also to the
dangers to a developing economy of mismanagement in its worst form
- corruption. To us, and I think to the donor community as a whole,
the lack of a clear separation between the private and public
business sectors has set off alarm bells; how will it be possible,
in an uncertain business environment where those with contacts get
the best opportunities to develop their businesses, that the
Palestinian Diaspora will be persuaded to invest here and so launch
the long-term, private sector-led recovery which we all hope for -
and for which the donors can do no more than lay the
foundations?
But also of relevance to your question - about political obstacles
to economic growth - I would also mention the problems there have
been with the coordination by the PA of the development effort. In
the past the PA really did not take hold of the donors and tell
them what sort of development was needed.
PIJ: Are you referring to the fact that there was no centralized
plan for development?
G.E.: There wasn't. But I think the situation is improving day by
day, month by month. We entirely welcome that. We are coordinating
on a greater and greater extent with the PA Ministry of Planning
and International Cooperation (MOPIC) precisely on these sorts of
questions. We would really like to see the day where the
Palestinian Authority is in charge of a Palestinian development
process rather than the process by the donors.
PIJ: Now the PA has issued a three-year plan which many people
felt was only done for the donors and did not really have any
practical basis on the ground. What was your reaction?
G.E.: I would see things on a sort of continuum. Back in 1994, the
donors were basically doing development the way they wanted, in the
way they saw fit. The PA started coming up with development plans
over successive years. These were rather weak, which is hardly
surprising as the PA had only just been set up. Still, even now, I
don't think that the latest, in fact, five-year Palestinian
Development Plan (PDP) - presented to the donors in Frankfurt in
February of this year - is ideal. I am afraid that the strategy
contained within the PDP has been made to fit the projects which
the donors are offering, rather than there being a clearly defined
Palestinian strategy towards which the donors are asked to tailor
their projects.
This said, I do think that this is beginning to change now. I have
noticed that MOPIC is working more and more closely with the
ministries, asking them what their strategies and policies are,
with the ministries themselves becoming ever more assertive about
what their strategy should be in the different areas.
I think that what you will see in the next few years is the PA
starting to direct the donors, accepting those offers of projects
which dovetail with a Palestinian development strategy, and
rejecting others. And of course this would be good for the donor
countries too.
PIJ: If you were to review the performance of the PA, where
would you give high marks and where would you give low
marks?
I.C.: Well, much has been accomplished, yet a great deal of work
remains to be done. Let me start with the accomplishments. The
Palestinian Authority has been set up from scratch. It is now
providing services to the Palestinian people and laying the
groundwork for long-term development.
G.E.: And from a political point of view, one could point to the
holding of the first Palestinian national elections in 1996. Ever
since then the Legislative Council has been fighting - without
getting discouraged - to make sure that the Palestinians continue
to be governed on a democratic basis, with respect for human rights
and democracy.
Moving on to the question of the management of the economy, and
using your terminology, Daoud, I think we should be giving the PA
much higher marks on things like coordination of the development
effort within the PA, and its coordination of the donor community,
than even a year ago. I would also note that some progressive
legislation has been passed, particularly that relating to banking
and commercial activities, and to the promotion of
investment.
On the other hand - and this goes back to something I was saying
earlier in the interview - my worry has always been that, because
the public and private sectors of the economy are so close, a
parastatal bureaucracy will emerge, made up of people who have not
been elected and yet who can interfere in business activities and,
therefore, enjoy extensive powers of patronage. There could be a
concentration of economic wealth in a small number of highly
successful businesses which in effect enjoy monopolistic market
positions. This will give the impression - but the impression only
- of economic growth and development, but which is neither
deep-rooted nor, therefore, economic.
Of course, it has to be acknowledged that the hugely complex set of
rules and regulations, committees and sub-committees, which
surround the Israeli-Palestinian economic accords - the Paris
Protocol - is in itself an unhealthy environment of red tape and
bureaucracy, which can be exploited by those in positions of
influence.
So, in return to the political, it would be wrong of me to omit
that the Palestinian Authority's tendency towards the concentration
of power is of concern to the European Commission, not to mention
other donors. This tendency manifests itself for example in the
nervousness which the Palestinian Authority shows towards the
activities of NGOs. This in itself could have unfortunate
repercussions, but what is even more unfortunate, indeed tragic, is
the rather poor record on human rights that the Palestinian
Authority has begun to develop.
PIJ: Is there disagreement over monopolies?
G.E.: You might say that part of the reason we are working with the
Palestinian Authority is to encourage all our partners to abandon
restrictive economic practices across the Mediterranean, to the
mutual benefit of Europe and our partners.
PIJ: In responding to criticism, Nabil Sha'ath is quoted as
saying that every amount of money the donors give, especially the
Europeans, is accounted for, is put in a separate account. As far
as I can tell, there is transparency. Where is the difference?
Because European officials have not been very happy about
it.
G.E.: Well, Nabil Sha'ath is entirely correct as far as concerns
the money that the European Commission administers. The money we
have invested in the West Bank and Gaza Strip has been accounted
for properly, so that we have no worries about the use of money for
the projects we have financed.
But the issue for us is rather wider. You know that the European
Union as a whole, as well as other donors, have in the past made
direct contributions to the budget of the PA, for example by paying
salaries. Even today, donors make other contributions to the PA
budget by, for example, purchasing equipment for ministries.
Now, if the donors do not have a clear and transparent picture of
the revenues accruing to the PA, then they are not in a position to
judge how much money the PA actually needs, weighed for example
against the need for long-term development projects which improve
the living conditions of ordinary people. This is not entirely
fair, and explains donor concern that the PA's accounts be
consolidated. This would therefore be a positive step towards the
transparency for which the donors have been calling.
PIJ: There is a discussion in the Palestinian community about
the fact that there is an overblown number of employees in the
Palestinian Authority. Is that an issue that has come up in
discussions between you and the PA?
G.E.: Yes.
PIJ: What were the main topics of the discussions?
I.C.: The donor community signed in 1995 with Israel and with the
PA what is called the Tripartite Action Plan for the development of
the Palestinian economy. One of the commitments on the Palestinian
side was to limit the increase of civil servants and officials.
There were even figures. These have not been respected and it is a
major concern of the donors and we have raised the issue several
times in international and local coordination meetings with the
Palestinian side. We understand the political logic of creating
jobs in the administration, but our position is clearly that this
is not sustainable economically and will affect the quality of the
administration. The more people you employ, the lower the salaries
will have to be, and therefore the lower the motivation amongst
civil servants. We do not believe that this is a solution for
creating employment in the medium and long terms. So, if we
understand the logic, we do not agree with it and we have raised
the issue several times with the PA.
PIJ: The issue of Palestinian statehood is something that the EU
has been discussing lately - the Berlin Declaration. How important
do you think such a change in the final status of the statehood of
Palestine would do to the economic situation?
I.C.: I think there are two aspects to statehood: one is symbolic,
the political one. You can become a state and you can become
recognized by everybody, but it can be an empty concept. Or - and
the two are not mutually exclusive, of course - you can have a
proper sovereignty over your own resources and your borders. That
would make a significant difference to the Palestinian
economy.
PIJ: Regarding the West Bank and Gaza connectivity, how
important will a genuine safe passage between Gaza and the West
Bank be to the economy?
I.C.: I think that would be a very important improvement. Right
now, one of the main problems for economic development is the lack
of communication between the West Bank and Gaza. If there is total
closure, this basically means that there can be no communication.
But even under normal circumstances, Palestinians and their goods
are restricted in one way or another between the two areas. There
is undoubtedly potential for trade and labor exchanges and business
activities between Gaza and the West Bank that hasn't been tapped
at all because of these difficulties.
PIJ: How could that specifically improve?
G.E.: I think what is sad is that we accept the status quo. If the
closure is tightened, for example on Jewish holidays, we say there
is a closure, as if there wasn't a closure the day before. There
has been a closure since 1993. The other thing that has come to
seem natural is that virtually no communication exists between the
West Bank and Gaza and I think we've all forgotten that. It is
clearly difficult to estimate how much larger Palestinian GDP may
have been made by intra-Palestinian trade alone (that is, trade
between the West Bank and the Gaza Strip), not to mention trade
with Israel and beyond, if the closure had not been in place, but I
think it is fair to say that GDP and GNP would both have been
significantly higher.
PIJ: Over five years the PA has been attempting to improve the
economic situation. Would you say the life of Palestinians in 1999
is better than it was in 1994?
I.C.: Some aspects of life for the Palestinians probably have
improved. The occupation has, after all, been lifted, at least in
some areas. And the enormous investments made by the donors in
public infrastructure have undoubtedly contributed to an
improvement in public services, education and health, at least in
many of the urban areas. But the plain fact of the matter is that
average per-capita income has fallen since 1993.
So, despite all the money that has been invested by the
international community in the West Bank and Gaza Strip, and
basically because of the obstacles that have been put in the way of
the Palestinian economy - you might say that this is a result of
the political situation - on the simplest of measures there has
been no economic development at all, on the contrary. This is
shocking.
PIJ: You don't think the infrastructure investment will improve
the level?
I.C.: Given present economic realities, naturally the media has
come to question whether donor funding has had any effect at all in
the West Bank and Gaza Strip. This is being too pessimistic.
Investments in infrastructure will in the end, however indirectly,
have an effect on incomes. Donor money has not been squandered; the
improvements in infrastructure are tangible and there for all to
see. And in the long run, these investments can only be of benefit
to the Palestinian economy.
Endnote
1. On November 27-28, 1995, ministers of Foreign Affairs of the
twelve member states of the European Union, and of its twelve
Mediterranean partners - President Arafat attended in person for
the Palestinians - met in Barcelona to establish the
Euro-Mediterranean Partnership. The Partnership aims to establish -
through the Barcelona Process - a common area of peace and
stability, to build an area of shared prosperity and to encourage
exchanges between civil societies. More recently, the third
Euro-Mediterranean Conference in Stuttgart (April 15-16, 1999)
reaffirmed the importance to this Euro-Mediterranean space of the
establishment of a free trade area by the year 2010, and, in
parallel, the importance of inward investment and to accompanying
measures of economic transition in order to smooth the evolution to
free trade.