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.