• That Was the Week That Was in the Official Media of the Palestinian Authority by Steve Rodan
• P.A. Accountability by David Bedein

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The Palestinian media highlighted the latest in the negotiations with Israel and preparations for final status negotiations. The lead story concerned the dispute between Israel and the Palestinian Authority over plans by Prime Minister Ehud Barak to withdraw from five percent of the West Bank. The PA demanded the right to approve Israel's map and called for the withdrawal to focus in the Samarian district around Ramallah. This would give the PA territorial contiguity in the West Bank.

The week began with PA astonishment over Barak's statement that United Nations Security Council resolution 242 and 338 do not apply to the West Bank and Gaza Strip. Barak's argument was that the sovereignty of these two areas were never defined and so they can't be automatically returned. The Al Quds daily on Nov. 8 said Barak decided to expand area of settlement near Nablus by tenfold. The daily quoted PA Cabinet secretary Ahmed Abdul Rahman as saying, "Barak's statement is very dangerous and destroys the whole peace process."

The newspaper also quoted Information Minister Yasser Abed Rabbo, the head of the Palestinian final status talks. Abbed Rabbo said that the expansion of Israeli settlements "is our top issue in negotiations today. Abed Rabbo said the decision to expand the Itamar settlement near Nablus reveals the real policy of the Israeli government, which "rejects international legitimacy and the peace process."

In an editorial, Al Quds said the real test of whether Israel and the Palestinians can reconcile lies in the final status negotiations, which began in early November.

"These sessions will be the real test if the peace process will fail or succeed," the editorial said. "The final-status negotiations are different since they deal with permanent issues that will decide if the region will witness comprehensive peace. Achieving the goal of the final-status negotiations must not move away from the international legitimacy and the national rights of the Palestinian people, mainly the right for self determination and the establishment of the independent Palestinian state. Away from euphoria or black pessimism, we must say that the negotiations will be hard in light of the gap between the two positions."

PLO Executive Committee member Faisal Husseini referred to Barak's interpretation of UN Security Council resolution 242 in an interview on Voice of Palestine. Husseini said the final status talks have been launched to implement that resolution.

"He cannot ignore this reality," he said. "If he doesn't implement 242 resolution, and and 338, there is another resolution, 181. If he also want to deny this resolution, he in fact getting us back to square number one."

UN Security Council resolution 181, passed in 1947, calls for the partition of the British mandate of Palestine into a Jewish and Arab state. The PA has said this would be the basis for final status talks.

Regarding settlements, Husseini said, "This is totally a blatant violation to the basic principals that guide negotiations. The principals include that no party should conduct unilateral measures that preempt the final settlement."

The PLO news agency, Wafa, went further. It covered the remarks of a Jewish author, George Steiner. During a visit to Israel this month, the agency said, Steiner said Jews are not in need of a state.

Steiner, a lecturer at Cambridge University, "confirmed that Judaism is a religion built upon loving the others not suppressing them. The writer is a lecturer at Cambridge university and has published many cultural books," Wafa said. "He considers himself to be an international thinker."

Palestinian newspapers also covered new settlement activity in the West Bank as well as Palestinian attempts to build in Israeli-controlled territories. They reported that Israeli authorities halted construction of a school in Kalkilia that was being built in Area C, under full Israeli control. The reports said the school will alleviate overcrowding in PA schools.

The Suha Affair

The Palestinian press was on the defensive in the wake of accusations by Palestinian First Lady Suha Arafat, who said on Nov. 11 during a ceremony in Gaza with her U.S. counterpart, Hillary Clinton, "Our people have been subjected to the daily and extensive use of poisonous gas by the Israeli forces, which has led to an increase in cancer cases among women and children."

Palestinian newspapers and radio and television were upset by the U.S. reaction to Suha's remarks. They accused American leaders of merely bowing to Jewish pressure. "The main motive for the White House's eagerness to condemn sister Suha's statement lies in its wish to make New York Jews happy in order to get a few votes supporting Hillary Clinton's candidacy," Fuad Abu Hijleh wrote in Al Hayat Al Jadida. "If elections to Congress bring the United States to endorse such a position, what can we expect in the presidential elections?"

Al Hayat Al Jadida, with the smallest circulation among Palestinian dailies, has a new policy of strident advocacy of the PA and PA Chairman Yasser Arafat.

Other Palestinian columnists said Suha's charges are nothing new. They ignored statements by some PA officials that expressed reservation over Mrs. Arafat's remarks.

"Since the occupation's beginning, Israel has conducted a pre-meditated campaign against the Palestinians and their land," Fathi Abd Hamid said in the Al Manar weekly.

"Water poisoning incidents are known and proven. The burial of nuclear waste is not a secret. and spoiled foodstuffs are collected in settlements with the knowledge of Israeli leaders, and thrown to Palestinian markets. Suha Arafat's statements represent the people's suffering of hated Israeli colonialism, which continues. despite the beginning of the peace process."

Abd Hamid's assertion reflects the statements of Palestinian ministers that resemble Suha's charges. Over the last year, Health Minister Riyad Zanoun has accused Israeli doctors of experimenting on Palestinian patients. Deputy Supply Minister Abd Hamid Qudsi has asserted that Israel is trying to annihilate Palestinians by bringing diseased food into Palestinian areas. Environment Minister Yusef Abu Safiyeh has repeatedly charged Israel with dumping poison into Palestinian groundwater.

Palestinian Independence

Palestinian independence day was celebrated around the West Bank and Gaza Strip on Nov. 15. The celebration included marches in Ramallah and other major cities. The daily newspapers that morning highlighted the 11th anniversary of the PLO declaration of statehood. The front page of each newspaper published numerous congratulatory messages. The PA-aligned Al Ayyam and Al Hayat Al Jadida contained the same independence photos. Al Quds did not have an independence day photograph.

Al Hayat published a front-page editorial that reviewed Palestinian independence plans. "Today, we are hanging on to our land grain by grain and we will confront the occupation throughout the entire negotiations and we will liberate our prisoners step by step and our leadership will head our independent state and we are getting closer and closer to our capital, the holy Jerusalem. We have the right to be proud of this achievement."

But there were plenty of stories absent from the official PA media. Here's one that concerns Farouk Abu-Hassan. A Palestinian human rights group says the PA has detained Abu-Hassan five years without charges because he supported peace with Israel, a human rights group says.

The Palestinian Human Rights Monitoring Group said Abu-Hassan has been held for five years without charges in Gaza prison. Abu-Hassan, 45, was arrested by the Palestinian Intelligence Service on Nov. 8, 1994.

The group said the reason for the arrest was a letter signed by Abu-Hassan and others, addressed to President Anwar Sadat of Egypt, in 1981. In the letter, Abu-Hassan congratulates Sadat on his initiative of peace agreement with Israel in 1977.

The PLO and most of the Arab world was against the Egyptian move.

The group, in a statement on Nov. 16 to mark Palestinian independence day, said Abu-Hassan said he was tortured. His wife was ordered to pay $12,000 for Abu-Hassan's release. But Abu-Hassan remained in jail.

The human rights group said the PA is holding 220 political prisoners and 250 security prisoners in jail without charges. They said the security prisoners include Palestinians accused of collaborating with Israel, or selling land to Jews.

Cooperation with Israel

Al-Hayat Al-Jadida reported that Col. Mohammed Dahlan, Chief of the Palestinian Preventive Security Apparatus in Gaza concluded an agreement with Israeli Transport Minister Yitzhak Mordechai to form a joint Palestinian-Israeli Committee to grant facilities to investors in the industrial zone at the Gaza Al-Mintar entrance to the safe passage between Gaza and the West Bank.

WAFA reported that Dahlan and Mordechai also discussed ways to facilitate the transportation of commodities and passengers through the entrance and the safe passage, in addition to discussing the obstacles encountered by the Palestinian investors in the Palestinian territories.

On security issues, Al Ayam reported that Israel and the PA intelligence apparatuses revealed that they jointly thwarted a chemical weapons terror attack, against Israel, planned to take place before the Israeli elections last May.

"A terrorist chemical attack by Hamas that was scheduled to be executed on the eve of the Israeli elections last May. The TV said a head of a Fidai [fighter] cell, one of the most extremist men in Hamas, received detailed information from abroad, it seems, on how to prepare chemical substances and transfer them to chemical weapons. The Israeli Deputy Defense Minister Efraim Sneh said the attack was frustrated but he could not deny the fact that capabilities of Hamas are developing," Al Ayam said.

On the continuation of negotiations, the Voice of Palestine reported that both the Palestinian and Israeli sides in Jericho decided on activating all of the interim phase committees including the Prisoners Committee to review the release of another group of Palestinian prisoners before the month of Ramadan.

WAFA cites a report from the Israeli human rights group B'Tselem asserting that the Israeli General Security Services is recruiting more Palestinian collaborators.

"The GSS is exerting more pressure to recruit the Palestinian workers as collaborators," WAFA said quoting the report. "The GSS is misusing its responsibilities and delegations of providing permits of work and magnetized cards to bargain them on collaborating with the it. The increasing pressure came after the Israeli redeployment from the Palestinian cities and the decrease of its intelligence information in Gaza."

The unpublished report includes testimonies of several Palestinian workers who describe the humiliation they encountered from the Israeli soldiers and border guards.

Settlements

The Voice of Palestine reported that PA Chairman Arafat announced at the International Socialism Conference in Paris that Israel should withdraw from all the areas that it occupied on 1967. He reiterated that the Palestinian Israeli peace process is represented in the U.N. resolutions 242, 338 and the other resolutions. For the first time, Arafat said, the Palestinians are able to have a resolution that demands Israel to halt its unilateral measures particularly settlements.

The Voice of Palestine also reported that the Israeli army dismantled a settlement enclave in Havat Ma'on near Hebron. The removal of the enclave was part of an agreement between Prime Minister Ehud Barak and the Jewish settlers representaive body.

In an editorial on November 10, Al Quds castigated the Israeli settlers who refused to vacate Havat Ma'on and had to be evicted by the Israeli army and police force.

"It has become clear that the so called Israeli peace policy is in the hands of a group of non-sensible settlers, most of whom are teenagers and adolescents who seek to create the conditions for a violent confrontation with the Israeli government and free the extremist feelings deep inside them. It seems that Barak prefers to be flexible when dealing with the settlement phenomenon, which explains his retreat from his previous promises to dismantle "illegal" settlement sites although he made a deal with settlers to dismantle some sites," Al Quds said.

Questioning whether the settlers who opposed the Israeli government decision were representative of all the settlers or that they acted independently, Al Quds asked, "Are these adolescent settlers acting on their own or do they constitute the tip of the iceberg in the confrontation between the settlement movement and the slow peace process?. Even if the Israeli government ignores the settlement phenomenon, settlers seem determined to sabotage the peace process and that some kind of confrontation with the government will take place sooner or later."

In conclusion, the editorial said, "past experiences have shown that using a flexible policy with the settlement policy will only encourage settlers to continue their provocative acts. The peace process requires a firm policy to make the settlers understand that their government is really serious in its path towards peace, that is if the Israeli government really seeks a just and comprehensive peace. There is no place for settlements in the peace process."

WAFA reported that the annual yearbook released by the Israeli Central Bureau of Statistics stated that there are 166,000 Jewish settlers in the West Bank and 6,100 settlers in the Gaza Strip, amounting to an increase of 1200 settlers during 1999.

Return to Contents

While the US Congress deliberates over whether or not to comply with the request of President Clinton to grant an additional $400M to the Palestinian Authority, a team of Palestinian and Israeli journalists have prepared a comprehensive report concerning Palestinian Authority fiscal accountability.

This carefully researched Palestinian-Israeli analysis reports severe financial mismanagement by the PA that casts doubt on the ability of the PA to be responsive to the health, education, welfare or even the business needs of the Palestinian Arab population.

Principle problems documented by the report:

• At least two private bank accounts of the Palestinian Authority operate under the exclusive control of Yasser Arafat, and the monies that go through those accounts are not invested in any concerns of the Palestinian Arab people. Half a billion dollars remain in these private accounts.
• The Palestinian Authority recklessly and brutally domineers the business affairs of the Palestinian Arab population through monopolies in industries such as cement-mixing and gasoline, which kick back all profits to private coffers of PA officials. The US state department estimates that there are 27 PA-controlled monopolies.
• Fourteen PA security services collect taxes from the Palestinian Arab population, with little coordination by the PA treasury. These militias all claim loyalty to Arafat under the aegis of the various arms of the Palestinian Liberation Army.
• Assets of the PLO abroad are not being transferred to the Palestinian Authority.
• Laxity of supervision from donor-nations has given Arafat free and arbitrary control over the 2.75 billion dollars received so far from those nations.
• Proliferation of thousands of unnecessary employees in public service of the Palestinian Authority

Meanwhile, the report notes that agreements signed between Arafat and all donor nations to the PA require total supervision of the Palestinian Authority's bank accounts along with knowledge and certification of exactly what the funds were used for. For that reason, the International Monetary Fund was brought in as a "consultant" to the Palestinian staff to prepare the Authority's annual budget.

The report points out that the Palestinian Authority gladly accepts foreign donations but is unhappy with the supervision that accompanies it. In fact, two budgetary systems operate within the PA; one ruled by Arafat with little or no accountability to the World Bank, the IMF, and donor nations. The other, under the supervision of the contributing countries which serves to develop PA infrastructure.

The World Bank and the IMF which represent the donor nations have repeatedly demanded that the Authority close the secret set of accounts that remain under Arafat's personal control, and whose assets run in excess of half a billion dollars. Yet Arafat has simply ignored those requests, with no consequences.

At the conference of donor nations to the PA that was held in mid-October in Japan, the Palestinian Authority promised to clean up the arbitrary accounts and to make various economic reforms. In private discussions, however, Palestinian Authority representatives joked in the corridors of the conference that they will continue to do whatever they like with the money that they receive.

A theory propagated by proponents of the Oslo process was that the flow of capital to the Palestinian Arab community would foster peace and a "new Middle East". Instead, the billions of dollars of cash-flow in Palestinian society has led to rampant corruption and a seething population that may turn to violence - not only against Arafat's PA, but also against Israel and the US, whom the Palestinian people blame for imposing a corrupt regime upon them.

Part I

Introduction

With regard to the economic policies of the Palestinian Authority it is important to note several severe problems of inappropriate and illegal financial management. These problems cast a heavy shadow over the ability of the PA to transform itself into a sovereign state with a stable ruling system. The lack of economic planning and questionable policy making taking into account only narrow political interests, is not economically directed and is based on corrupt norms, nepotism and defective administration. These policies have the potential to stimulate the rise in power of extremist movements and the collapse of the peace agreement.

Among the principal problems are:

• Private banks accounts which remain under the exclusive control of Arafat, with monies not invested in the Authority's interests.
• The Authority's involvement in business affairs in the form of state monopolistic rule.
• A total lack of knowledge, rule or control regarding the amont of money that the Authority receives from these monopolies.
• Concentration of significant governmental economic strength in the hands of one unsupervised individual (Mohammed Rashid).
• Collection of taxes by various state bodies for the financing of their own activities, without supervision or rule by the Palestinian treasury.
• Most of the assets of the PLO abroad have still not been transferred to the Palestinian Authority.
• Laxity in supervision by the donor nations over actions taken by the Authority and a lack of desire to confront Arafat.
• Exaggeration of the governmental staff regarding unnecessary employees and the creation of a large measure of concealed unemployment.

Economic Agreements with Israel

The underlying premise of the economic negotiations between Israel and the Palestinians, held simultaneously with the political discussions, was that the two economies were dependent upon one another and integrally connected. The Paris Protocol, signed in April 1994, determined two clear principles: the absence of a financial limitation between Israel and the Authority and the existence of a unified tax mantle. In other words, tax officials, value added tax officials and other governmental collectors will not be situated at the Erez checkpoint or at the demarcation line, but rather on the external borders only. Thus, the Palestinian Authority adopted Israel's customs and taxation policy.

The Paris Agreements determined that Israel would "repay" the amounts to be collected under the four types of taxes, to the Palestinian Authority. For example, if a television is imported through the Ashdod port into the Palestinian Authority, the importer pays the Israeli government import tax. The amount received from these tax revenues will later be transferred to Palestinian Authority representatives. The same procedure would take place in exchange for bills for V.A.T. collected for a purchase in Israel, stamps on gasoline, alcohol, tobacco, income tax on employees from the territories and health tax. From this sum, Israel deducts a handling fee and, at intervals, deducts the Palestinian debt to Bezek (phone company), the electric company and hospitals in Israel.

Immediately following the Oslo Agreements, the parties and contributing organizations promised to transfer four billion dollars to the Palestinian Authority in three stages:

• A general promise of money and aid.
• Appropriation of monies from the contributing group for a specific purpose.
• Actual transfer of the money for that purpose.

The entire $4M has already been appropriated for specific purposes, including $2.75 billion which has actually been contributed. The contributing countries demanded accountability in exchange for money. They insisted on total supervision of the Palestinian Authority's bank accounts; they insisted on knowing and certifying precisely how the money was used and they requested that the International Monetary Fund participate as a "consultant" to the Palestinian staff preparing the Authority's annual budget.

The Palestinian Authority gladly accepted the money but objected to the supervision that accompanied it. The contributing countries demanded an investment of funds in the rehabilitation of the territories' primitive infrastructure and the creation of as many work places as po. They did not authorize exaggerated expenditures. Also they did not designate their monies to support institutions and individuals that overlapped the President's national goals. Chairman Arafat had other ideas.

The Secret Account

According to the Paris Agreement, in 1994, 72 million NIS were transferred to the Authority. In 1995 the sum increased to NIS 792 million. In 1996, NIS 1,391million was transferred and in 1997, one billion, six hundred million NIS. In 1989 and 1999, the annual budget remained at an average of NIS.2.3 million. These monies are the prinicpal lifeline for the Palestinian Authority. The Authority uses this money for one purpose: to pay salaries. All of the investments in infrastructure and welfare are made by the contributing countries. In this manner, two budgetary systems have actually been created in the Authority: one ruled by Arafat with some oversight by the World Bank, the IMF, and the contributing countries, and the second, under the total supervision of the contributing countries designated expressly for development. The donor nations claim the privilege of supervision over the first budget. If Arafat has extra money in these budgets (such as that which is in the secret account) then these funds should be invested in aiding the activity of the contributions to infrastructure development.

Upon implementation of the Paris Agreements, representatives of the Israeli Treasury requested clarification from the Palestinians as to where the funds should be deposited. The Palestinians asked that all of the transfers be made to four separate accounts in the Palestine Bank and the Arab Bank in Gaza, excepting the repayments for taxes on gasoline. Mohammed Rashid then requested that those funds be transferred to a secret account in the Chashmonaim branch of Bank Leumi in Tel Aviv. Israeli representatives hsd no interest in becoming involved in the manner in which the Palestinian economy was handled. Up until February 1997 about half a billion Shekels were deposited in the account. Since then the rate of transferring of monies to the bank has stabilized at an average of NIS.35 million per month, i.e. NIS.1.5 million from 1994 until today.

This account in the territories and in Israel is known as "As-sundouk at-tanee - Cashbox B, the second budget, the secret budget, the budget of the Ra'is. According to an investigation conducted by senior personnel within the countries contributing to the Authority, only two people have the right of signature on the account, Yassir Arafat himself and his senior financial consultant, the mystery man, Mohammed Rashid (see below). In an internal report, the IMF determined that the account in Tel Aviv "is not under the supervision and rule of the Palestinian Treasury". What happened to the money? How much is left in the account and how much has been transferred to financing other activities or has arrived in the hands of individuals? Nobody knows. Senior Israeli clerks report hearing harsh complaints from generations of ministers of the Palestinian Treasury and finance (several replacements have occurred regarding this position) that the monies transferred into the Tel Aviv account do not find their way to the Palestinian Treasury.

An Israeli government source states two additional purposes for Cashbox B: The Palestinian Authority wants to assure the possibilty of smuggling family members and several senior officials in the event of a coup and to establish a government in exile. This program is highly organized and involves very large sums of money. Another reason is that the money in the Cashbox B account is used for a series of activities that Arafat's regime feels obligated to finance-- in order not to lose its political grip. This is unconnected to the economic condition. Thus, for example, Arafat continues to pay, from Cashbox B, the shahidim pensions given to widows and orphans. He continues to support those injured at Sabra and Shatila, whom he sees as his own children. For these purposes there is no financial logic and the contributing countries will never authorize such expenses.

Dr. Maher Al-Kurd, Palestinian Deuputy Minister of Finance and Commerce has stated:

"The Palestinian Authority has the permission to create financial reserves for itself for a time at which something such as a civil war will occur and it is a pity that the contributing countries and Israel do not understand this. If the Authority would receive all of the money they were promised from Israel and the contributors, our situation would be much better."

Question: That is to say, you are maintaining another, hidden cashbox?

Answer: "I don't know for sure that this cashbox exists, yet I think that I would definitely be happy if it did".

Question: To which bank accounts are transferred the monies that Israel returns from the taxes?

Answer: To bank accounts in Gaza and the (West) Bank.

Question: Is there also an account in Tel Aviv?

Answer: "Actually I don't know exactly what accounts we have and also I am not in charge of this. Ask someone else."

The World Bank and the IMF which represent the contributing countries demanded that the Authority immediately close all the different accounts in which the monies are collecting and to unite them into one open account in the Palestine Bank in Gaza. In 1996, a three-party agreement (TAP) was signed between Israel, the contributing countries and the Authority in which the Authority promised that it would unite all of the accounts in March 1997. It fulfilled its promise, with the exception of the account in Tel Aviv.

Joseph Saba, Director of the World Bank in the territories certifies this: "Israel, the Palestinians and the contributors came to an agreement (TAP) in 1996 in which the Authority promised, among other things, to subject the said account or any other private account that they had, to the supervision and responsibility of the Palestinian Treasury. This was not done. Therefore we, the World Bank, like all of the other contributors, are not at all happy with the existing situation. We have no idea what is happening in that account."

According to the estimate of the contributing countries, only thirty percent of the hundreds of millions of dollars actually arrive at the Palestinian Treasury. Something like forty percent finance the activities of PLO institutions throughout the world and are invested in welfare activities and in supporting orphans and widows in the Lebanese refugee camps. This sum increased in the last year as a result of a propaganda battle that is occurring in these camps between PLO supporters and Hamas trustees. The other thirty percent remains in the account as reserve or is transferred abroad to be used on the day of command.

In his response to the daily newspaper, Ha'aretz, Mohammed Rashid said that "the money for the indirect taxes is transferred from Israel directly to the territories."

Question: And what about the account in Tel Aviv?

Answer: Ah, that, that's nothing. That's a transit account. Israel deposits money in it and the following day it is transferred to Gaza."

Question: So why is it needed at all?

Answer: "The Israelis agreed to transfer money to there. You don't really thing that someone steals this money or makes it into cashbox B. How is it possible to hide so much money? The Authority does not work under the table and we received permission from the contributing countries to hire enough policemen. Actually, I don't know how many policemen we have, that's not my job. We don't have any need for a hidden budget, everything is lucid and clear. All of the money is transferred to the Treasury. I know that we promised to close all of the accounts and we are making great, serious and very sincere efforts to fulfill this promise."

Recently Israel opened another hidden account for Arafat. Arafat requested that the repayment of money that Israel collects from the Palestinians at the border (port tariffs) between Israel and Jordan and Egypt, be returned to the Authority according to the Paris Agreement. They requested that theis money no longer be transferred to the account in Gaza but rather to the private of the Director of the Palestinian Border Authority. This is a sum of three million NIS per year.

The publicity in Ha'aretz on 15th October, 1999 regarding the monies that Israel continues to deposit into Arafat's private account in Tel Aviv ignited an old dispute, especially among those dealing with the Palestinian issue in the Israeli Foreign Ministry and the Treasury: How should Israel deal with the disclosure of corruption and the failing financial management of the Palestinian Authority?

There is no dispute that Israel has a reason for being very concerned, with the establishment of the norms described in the Authority. The Palestinian state, if it is established, will be integrally connected to the Israeli economy and vice versa (Israel exports two billion dollars per year to the Authority). Even "the separation discussion" that began in September in the Prime Minister's office will not change this. Corruption and questionable economic policies may cause an increase in the (social) gap within Palestinian society, poverty that will lead to extremism which could lead to political instability and future threats to the entire region.

At the Treasury, there were those who claimed that Israel has the moral authority to demand significant changes from Arafat and to present an ultimatum in the form of the cessation of customs money transfer - the Authority's main faucet - until the change is enacted. Others say that this step is not only a serious breach of signed agreements, but it will immediately be understood as a political attempt to heat up the edict with the Palestinians.

In previous years, Israel decided to try and use its influence via the contributing countries, the IMF and the World Bank. About a year ago, senior officials of these bodies proposed the cessation of contributions until Arafat fulfilled his promise of 1996: unification of all accounts, especially the private one in Tel Aviv into one official bank of the Palestinian Treasury. The initiative was torpedoed by political echelons of the contributing countries who decided that the matter of proper financial management is not sufficiently important to them to enter into a face-to-face confrontation with Arafat.

Even if it were not torpedoed, it is not at all clear that the threat would have influenced Arafat. It must be recalled that during the first six months of 1999 there was a significant decrease in the amount of contributions that were made to the Palestinian Authority. $126 M compared to $330 M during 1998 and $500M in 1997. This decrease may be primarily attributed to the donor nation's suspicions that they are paying lots of money while, in effect, Arafat maintains secret accounts that are not being used for the development of his future state.

Contributions did not cause any difference in Palestinian leadership. In fact, the Palestinian parliament is now investigating several new incidents of large-scale corruption. If one relies on previous experience with the parliament's reports, the heads of government will thank the members who conducted the inquiry and then totally ignore the conclusions.

At the conference of contributing countries that was held Oct 14-15, 1999 the Palestinians promised once again to make various economic reforms and to unite the accounts. Despite this, the Palestinians will likely continue to do whatever they like. Without these changes, there is no real chance for an improvement of the situation in the near future.

So the ball returns to Jerusalem. Some claim that after 32 years of occupation, Israel should not behave in a paternalistic manner toward the young state budding in its proximity. Israel may recommend, she may suggest, but is forbidden to coerce by making ultimatums and punishments. Aside from this, those same sources say that the present situation with the Authority is not substantially different from that which existed in Israel during the 1950s. On the other hand, many disqualify the historic comparison and say that it is not relevant. Even if a similarity exists, in the Palestinian case the Palestinians will not be the only ones to suffer. Israel would also pay the price for the increase in Hamas strength based on its economic deficiency and the break of trust in existing leadership. Even now, as several senior Treasury officials have diagnosed, there is a worrisome leakage from Palestinian businessmen (some of whom also serve as senior Palestinian officials) to Israeli colleagues with whom they are in touch, of defective, not to mention criminal, business management practices.

Those who feel that Israel should be much more involved, posit that Israel must do everything, within the limits of international law, to prevent corruption in the Palestinian Authority. For example, the Israeli police would have to demonstrate far more strength in treating the agile big-shots who jump on the peace train in order to tear out a coupon, even if their corrupt activity falls mainly on Palestinian tax payers. Only the contributing countries or the strength of public opinion itself, can solve the problem of the personal account in Tel Aviv. Up until today, there has been little public reaction to revelations of Palestine Authority corruption.

Creating a customs mantle common to Israel and the Palestinian Authority created an additional problem which Israel Chamber of Commerce offices already warned against in an internal letter to the ministers of the Treasury, the Foreign Ministry and the Ministry of Trade and Commerce. The differences in income tax between the Authority and Israel, the strict supervision of Israeli standards and the expensive marketing trips of the importers here inflate the cost of any product sold to consumers. Palestinian businessmen can sell an identical item for much less and it becomes good business for them to market in Israel some of the merchandise they import from abroad via Israel. It is possible to perform an even more sophisticated deal: to reach an agreement with a senior official in the Authority who, sometimes, is also a private businessman, and to agree on the import into the Authority's area of much greater amounts of an item that is needed for the local market. The Authority will receive from Israel the entire sum of the tax and will transfer a part of it back to the importer. In this way, the Authority will profit on the merchandise which it did not market in its area, and the importer, to whom part of the customs' tariff was returned, can sell the merchandise at a much cheaper price on the Israeli market.

A senior Israeli economist raises an additional problem: "The contributing countries also transfer large sums of money in an unofficial way. Private survey institutes or various philanthropic organizations transfer large scholarships for research and other projects that are carried out by groups in the territories or in Israel. These millions of dollars will be received only by institutions that are associated with Arafat's regime. It will be very difficult for a Palestinian who does not have a good relationship with the Authority to enjoy these funds. As one who knows the matter, I can say that most of the money is spent or lost on the way. This is a large cash reservoir which can be played with, unsupervised and without the rule of anyone. Things go on in Palestinian research institutes that are incredulous. By the way, senior officials in the Israeli regime as well carried out "donation drives" abroad in order to get money for all kinds of research institutes that, in the end, produced very sorrowful results or no results at all."

PLO Assets Abroad

Avraham Burg, Knesset Speaker, did not ask Ahmed Kre (Abu-Alla), the Palestinian parliament chairmen, one very important question during his visit to the Knesset two months ago. The question: "Where is the money?

Abu-Alla's main role prior to the Oslo Agreements, was head of the "Sammed" Organization or its full name "Sons of the Palestinian Martyrs Enterprise", a position that he holds to this very day. The organization is essentially the PLO's economic arm. In a document recently composed by an assessment team in Israel it wasdetermined that "Sammed" continues to hold monies and assets around the world despite the fact that, according to the report's description, it is an inactive organization in advanced stages of degeneration and corruption. In Israel it is estimated that the heads of Sammed consistently avoid selling this property and transferring it to the territory to assist the unstable financial condition of the Authority.

PA leadership from Tunis has not yet reached an understanding of the need to shift gears from their functioning as an underground organization to their supposed operation as a state in formation. Yassir Arafat did not order the PLO or its branches to internalize the change. Sammed remained intact, paralyzed and perhaps degenerated but of a great monetary worth. This is one of the great drawbacks of the financial structure of the Palestinian Authority - the assets of the Palestinian National Liberation Organization gathered over its thirty years of existence simply remained abroad.

The PLO was an organization of immense economic strength. Throughout the years, the Organization received millions of dollars from Saudi Arabia and Gulf princedoms. In addition, that latter assisted in collecting from Palestinian employees living within their area, the "Palestine Liberation Fund tax", about five percent of the salary of each Palestinian with source deduction and transferred to the Organization's account in Switzerland and Spain. This collection alone yielded something like five million dollars per year.

During the 1970-80s, senior members of Israel's intelligence community estimated that the PLO earned about $5M dollars per day. The Organization had huge assets and many straw companies that helped to penetrated the European market. Kuwait assisted in purchasing stock in companies such as Mercedes. The Organization had great financial influence in France, Switzerland, Italy, Holland and Scandinavia.

In order to control its many assets, the PLO established the "Sammed" Organization. The Organization made many investments for the PLO and its management was highly secret and subject directly to Arafat who also personally signed the checks. The part that the PLO was willing to disclose was the productive socialistic segment of Sammed. The Organization published a newspaper entitled "Sammed Al-Iktasadi" (the financial Sammed) including many photographs of Palestinian women weaving and Palestinian men plowing fields in agricultural farms in Africa and Lebanon. According to data cited by Guy Bechor in "The PLO Lexicon", before the Lebanese War in June 1982, several thousand workers were members of the Sammae in Lebanon. Fatah related to them as if they were active in everything, even with regard to the table of severance pay, for example. The Sammed had several bureaus, among them the bureau of industry, the bureau of trade and marketing, the bureau of agriculture and agricultural products, the division of research and publicity and the division for movie production and information. The latter initiated and produced several informational films and dramas about the Palestinian struggle. At the end of the 1980s it initiated the production of a full length movie and invested many millions in the project, which included the importation of foreign actors and renowned cameramen. The raw material was sent for editing to a laboratory in Rome. In the midst of the night, July 1989, someone broke into the laboratory and stole every segment of the Palestinian movie.

The Sammed newspaper documents great, world-wide financial activity. It brings reports about the Sammed's participation in many economic fairs and tells about its cooperation with countries from the Mediterranean nations and with Black Africa. The Sammed Organization also opened 20 commercial offices throughout the world, including Japan, Thailand and China, Sudan, Somalia, Guinea, Hungary, Mali, Syria, Poland, South America, France and Italy. In its peak years, the Organization had 26 permanent trade legations. The Sammed itself reports its involvement in weapons factories. The Organization stated that it has weapons factories in southern Yemen and in the princedom of Borneo. Guy Bachor stated that with the end of the Iran-Iraq War in 1988, Arafat presented a gift of an Sammed produced RPG rocket projector to President Saddam Hussein.

It is difficult to determine the full scope of the PLO's entire assets. Besides being the pride of Sammed's contributing production activities, they obviously did not expedite releasing data on its financial activities. According to an article published by Eric Loron in the French Le Figaro, hundreds of millions of PLO dollars were transferred from Lebanon to Switzerland when the IDF opened its siege of Beirut in 1982.

Already in the 1970s, with the help of the Soviet Union and especially representatives of the "Moskva Narodni" Bank, Arafat and several of his aides made several important investments in Wall Street, in the Bank of the City of London and in several Arab banks. The Organization also invested in large industrial companies on the stock exchanges in Frankfurt, Paris and Tokyo and in land in the Mayfair district of London.

Until the Gulf War in 1991, according to Le Figaro, the Organization's cash reserves reached over 7 billion dollars, an awesome sum that Arafat spread out in numbered accounts in Zurich, Geneva in banks such as Union of Swiss Bank or Chemical Bank of New York.

Israeli Intelligence officials believe that the sums stated by Le Figaro are too high, but agree that during the 1970s and 1980s the PLO was a very strong financial body. The sums devoted to daily expenses and operations were much lower than money collected from taxes, resuting in major "profit."

In the middle of 1988, a group of experts from a large and renowned intelligence organization broke into the computer network connecting PLO headquarters in Tunisia and PLO financial representatives around the world. This break-in disclosed a very large monetary turnover and many bank accounts, especially in Europe. The nickname "computer network" is a bit exaggerated. The Palestinians, who had not heard of "hackers”, used very simple communications between simple personal computers - sometimes two people that were talking via computer through two household modems. Instructions for transferring money were done via on-line discussion between the headquarters in Tunisia and the relevant body abroad or by transferring data files that were based mainly on Lotus, Quarto-pro and D-base programs' electronic worksheets.

The break-in to the PLO's system in 1988 disclosed a very complicated system of connections and people who dealt with money matters. The computer experts understood while working that they did not disclose the entire picture. For example, data would arrive on transferring monies under the name "the Ra'is transferred to you so many thousands of dollars". Bank accounts were spread around the entire globe, especially in Tunisia and East Jerusalem, and they were registered in the names of many private individual (never officially in the name of the PLO), including the name of Ahmed Karya (Abu-Alla). As much as the computer experts could glean, there was not one central account of the Organization but rather of mixed monetary reservoirs whose destination would change, usually according to the operational relationship of the account owner or his courier. In other words, if the account owner was connected to a terrorist activity, it could be assumed that the money that was sent through him was used also for this purpose. If he were connected with the PLO's extensive relief activities, it may be assumed that the money was used for widows and orphans.

The close watch that the computer hackers kept on the computer network at times revealed a picture of the path of the money transfers - from its beginning as a mysterious grant that came from someplace, through several couriers until its final destination, for example the "Shahidim" pensions that were paid from accounts at Bank Mizrachi in Jerusalem. Through following the money, the experts discovered an interesting phenomenon accto which several of those receiving payment are careful to keep, with every transfer via their account, a permanent percentage of commission. It is not clear if this was with permission or from personal incentive. In any event, this computer network documented transfers of tens of millions of dollars if not more, and especially sharpened the great fog that was spread over the purpose of the PLO's financial layout which only a few, if any aside from the Chairman, knew of all its secrets. If the Chairman sat down one day to write his financial memoirs he might be able to solve another mystery - the one connected to the mysterious character of Samir Najm A-din, a Palestinian from Saudi Arabia, who would be about 60-70 years old, if he is still alive, with a "good head" for financial matters.

According to Western sources, A-din served as one of the distinguished money men in the PLO although not in the front of the Organization but rather as a long secret arm for transferring monies to secret targets. Najm A-din was the head of an organization called S.A.S. The name is the first letter of the personal names of the three directors. The first S stands for Samir Najm A-din. The A stands for Adnan Al-Kilani and the additional S stands for Sakir Farhan. This trio managed world wide businesses via the international bank for credit and commerce (B.C.C.I.). This is the institution that caused a scandal several years ago. This bank was founded by a group of sheiks from the unified Arab princedom and quickly became a strong bank. According to Western publications, the bank was closed in July 1992 through a joint operation of Interpol and the World Bank, during which the officials succeeded in confiscating $20 million which constituted 75 percent of all of the bank's assets in 69 countries. According to those publications, the bank was actually a great laundered of illegal monies. For reasons of convenience, many underground and terrorist organizations navigated their businesses to this bank. Its directorial board was located in Pakistan but the real instructions came from Abu Dabi.

The closing of the bank also disclosed account 80820577 in the name of Samir Najm A-din, which served as a wide cushion for transferring monies to various needs. For example, on 13 March 1984, the owner of the account instructed the transfer of payment to the Defax ammunition factory in Portugal and on 2 April 1982 instructed the transfer of one hundred thousand dollars to the credit of Mr. Munzar Al Kazar at Banco de Bilbao in Spain. Al Kazar, by the way, is a Syrian who is close with the regime in Damascus. His name has recently been connected with many criminal acts, among them the explosion of Pan Am 103 above Lockerbie. He is considered an opportune contractor for coordinating dirty work for Palestinian terrorist organizations.

After the dissolution of the Bank for Credit and Commerce, Jasan Ahmed Kassim, the branch director on Sloane Street in London granted an interview to the BBC in which he related that Najm A-din opened the account with capital of $50 million and that this money was mainly used for purchasing weapons in Great Britain. In order to strengthen the obtuseness around Ad-din's character, other sources in the West claim that Ad-din was actually the money man of Abu Nidal's organization which separated from the PLO already at the beginning of the 1970s, and therefore he is not connected with the secret accounts of the Ra'is. As proof of this, they bring a document which instructs Najm Ad-din to transfer a permanent monthly sum of 10,000 Pounds Sterling to Amin Al-Bana, apparently Abu Nidal's cousin and the one later suspected of involvement in the murder of Issaam As-sirtawi, Arafat's political advisor.

According to various sources, the PSO was a partner in several airline companies which also served as a camouflage for his clandestine activities. For example, he was a partner in establishing the Moldavian Islands airlines and subsequently was the owner of Bisau, a Guinean airlines, whose head was Fayez Zaidan, today the head of the Palestinian airport authority.

Sammed purchased a duty-free shop at Tanzania's "Dar As-Salam" International Airport. A PLO representative in Zimbabwe, Ali Halima, said that "this is a pure financial investment" and that Sammed at that time also bought additional stores in Zimbabwe and Mozambique.

A Western diplomatic official says that information about the airline companies and duty-free shops in Africa owned by the PLO are basically true and that people holding positions in the Palestinian Authority admitted to their existence. However, those same Palestinians claimed that over the years, many of these assets produced heavy losses to the Authority and that part of them are in bankruptcy.

In his book "Within the P.L.O.," journalist David Halevi describes a complicated array of clandestine accounts under the sole direction of Arafat in different banks. These monies served for exceptional activities and for financing special operations. According to Halevi, the PLO apportioned about$150M dollars per year to the Chairman's private accounts network. He notes that Arafat had so much money that he could even make extensive loans to northern Yemen, the Congo, the Lebanese president Amin Jemail and many others. Perhaps Levi's estimations are exaggerated but the same logic that came from the existence of Cashbox B in Tel Aviv after the establishment of a semi-independent Palestinian Authority, existed also during the days of the underground movement. It must also be emphasized that Arafat is known as a modest man who does not use these great resources for his own benefit. It is questionable, however, whether Arafat's use of these funds is acceptable or known to the Palestinian public.

Halevi notes that the P.L.O. is the chief owner of stock in the Monte Carlo radio station, as well as other radio stations. The PLO are the owners or, at least were the owners, of a chain of newspapers (the editor of one, Suwet el-Bilad was Mohammed Rashid in his rebellious period). In addition, the P.L.O. also owns many buildings in Cyprus, Greece, France, Spain, Jerusalem and Lebanon. The organization has also invested in a list of airlines in Africa.

Opposition to Arafat from within the P.L.O. (including the rebellion of Abu Za'im (Attalah Attalah) in 1986) disclosed a long line of monetary transfers to high officials in the P.L.O.,including secret bank accounts under the direct supervision of Arafat.

The cessation of the Gulf countries' support of the P.L.O. and the expulsion of Palestinian workers following the Ra'is' support of Saddam Hussein, brought the Organization to near bankruptcy. It is also known that a part of Sammed's assets were sold during this period in order to finance the P.L.O's ongoing activities. It is not clear which part. Three years ago, the inspection committee of the US Congress initiated a secret investigation on this subject and even gathered the testimony of private and official witnesses in Israel. The report on the investigation was never published. However, it is known that the investigators could not reach an unequivocal conclusion regarding the present scope of the P.L.O.'s assets abroad.

Hossam Hadr, member of the Palestinian parliament, raised the subject of the transfer of assets to the name of the Palestinian Authority several times in the parliament but did not receive a clear response to it. Another subject he raised in the Authority's parliament was the scandal over the theft of the P.L.O. commander's safe in Tunis. It appears that large sums of cash that were found in that safe, disappeared into thin air. A senior P.L.O. official who lived in the territories for several weeks after Arafat's return also disappeared when the theft was discovered, as if the ground swallowed him up.

Ahmad Kre (Abu Alla), head of the Sammed and chairman of the Palestinian parliament told Ha'aretz in April 1997: "I don't know anything about the P.L.O.'s assets abroad."

Question: So lets talk about Sammed.

Answer: I don't know anything about Sammed.

Question: But you are the chairman of the Organization. It is big problem if you don't know anything about the organization which you head.

Answer: I don't know anything about Sammed. If you want to speak about the peace process that is dying in front of our eyes, please (do so). (If you) want to speak about the Palestinian governing council, no problem. But the P.L.O. abroad or Shamad, I don't know nothing about, really nothing. Thank you and goodbye.

Official Palestinian sources claimed in conversations with the representatives of contributing countries that demanded immediate transfer of monies to the territories, that all of Sammed's assets have always amounted to agricultural farms alone, most of which were located in Lebanon and were destroyed during the I.D.F.'s infiltration in 1982. These hard-pressed explanations are far from convincing and contradict things that were said by other representatives of the Authority and the P.L.O.

Arafat and his group of close contacts that came with him from Tunis and took over the Authority are, in many ways, attempting to imitate the establishment of the State of Israel in 1948. The failure of this attempt up until today is also resultant from the preservation of manner of thought of the life of the underground (movement) that are wrapped in secrecy and lack signs of democracy. The excuse that the Chairman's close friendsare responsible for this behavior, as well as for other deeds (the distention of the governmental staff, holding great amounts of money in a bank account in Tel Aviv, in Arafat's name, etc.) is the need to ensure Abu Amar's survival. Arafat continues to act like a persecuted leader of an underground (movement) who has a decent chance that on any day he will have to leave Palestine and establish a government in the Diaspora.

Even if we ignore the notices about the use of Sammed assets abroad for personal corruption of senior P.L.O. officials, indeed the excuse about the economic back-up for days of crisis is not acceptable either. Sammed cannot continue to hold such a large amount of assets abroad while the economy of the Authority cries out for outside investment and Arafat's subjects in the territories suffer from a low quality of life, unemployment and poverty. From the moment that an independent Palestinian Authority was established, there was no justification for the existence of such a body separate from the Authority's institutions. The sale of its assets and transfer of remuneration from the territories can aid in the struggle against poverty and against the Hamas and for the benefit of Arafat's citizens. Simultaneously, perhaps Abu Alla, who speaks so well about democracy and openness from the rostrum as the Palestinian parliament chairman, will release some data on the true scope of the Sammed's assets and what exactly is happening with them today.

Part II

Mohammed Rashid

Mohammed Rashid, a.k.a, Haled Salam, is today one of the strongest people in the P.A. and definitely the one responsible in all matters regarding its financial management. Elegantly dressed, speaking excellent English, married to a beautiful Canadian woman, knowing how to tell a good joke when necessary, Rashid is cloaked in mystery and concentrates great financial wealth, while serving as senior financial consultant to the Ra'is and simultaneously wearing his hat as a private businessman, nourished from the bonuses he receives from the Chief hat. In the Strip, Rashid is known as "The Kurdish Doctor" due to his origin in the Kurdish region of Iraq. He is not a Palestinian Arab and he became connected with the P.L.O. during the PLO's happier days in Beirut. In the past, Rashid was Yassir Arafat's consultant on communications affairs in Tunis. He was the editor of Al Bilad, an Arabic newspaper that was published through the support of the Soviet Union and he was another of the tens of aides and officers in the P.L.O. command. During his time in Tunis, and perhaps even before then, Arafat grew to like Rashid very much and, like other leaders in the Middle East, he preferred to befriend him and other minorities and to strengthen them in the knowledge that without his support, they have no independent existence. Rashid is dependent upon Arafat and according to a senior Palestinian politician, Arafat is also dependent upon Rashid since he does not understand financial matters and blindly trusts his advisor. General Security Services believe that definite proof of the secret of Rashid's great strength is that he also manages Arafat's private financial matters. He is the only one in the world, besides Arafat himself, who knows the numbers of the secret bank accounts abroad. Arafat trusts him implicitly.

Until two years ago, Israeli representatives were in contact with the various officials of the Palestinian Authority. Attending the Joint Economic Committee (JEC) there were members, officials from the Palestinian Treasury, customs officials, additional authorities and, of course, Mohammed Rashid. Over the last two years the situation changed and Rashid became the sole negotiator on behalf of the P.A. At his building complex in Ramallah, he established a special staff of aides whose entire role is to be members in the JEC. This situation is significantly different from the one in Israel since for the Treasury officials, the proceedings with the Palestinians are only one of many roles. From the previous Palestinian staff, Rashid left only one individual close to him, Nasser Tahboub, director of customs, who occupies the room adjacent to his. Rashid has additional offices in Gaza on t on the boarder of the prestigious Rimal neighborhood. The building is five stories high and bears one sign: The Cultural Ministry. On the third floor are the offices of the PCSC Company, which is defined as a governmental cement company but in reality it is not known where its income is directed. The office is stately from every criteria: many wooden decorations and expensive furniture.

The Israeli Treasury reports that today there is not even one main project in the Palestinian Authority that Rashid is not involved in. Even monopolies which include the involvement of others (Nabil Sha'at, Jamil Tariffi, for example) or a system of licensing individual importers and exporters, in which it appears that he has no involvement, all are run under his close supervision. Every time he is asked, Rashid presents himself as a "Civil Servant" who has no knowledge at all of the great excitement about him.

Over the last few months, Israel's General Security Services, Intelligence and the Administration for Coordination and Communication with the Palestinians, attempted to investigate all the companies in which Rashid is involved and to understand the measure of his ownership and personal involvement in them. It is apparent that Rashid is connected to a network of companies that are rooted downward. He holds not only the stocks of the mother company but the subsidiary companies that are actually connected to most of the financial activities in the territories.

In an interview in Ha'aretz of April 1997 Rashid said: "I want to say that corruption occurs in the dark, under cover and not in daylight. It is not possible that a man like myself, who acts openly, will also preoccupy himself with corruption. Nobody could protect me. I met with the chairman of the Economic Committee of the parliament, Hikmat Zeyd and I gave him all of the data that he requested. I think that if you go to him, he will tell you how happy he was from the meeting with me."

Hikmat Zed certified that according to the information that he possesses, the PSCS company (the cement monopoly) belongs entirely to the Palestinian Authority "however this is a company that has maintained itself since its establishment without a directorial board, without supervision, without control and without any involvement of the Palestinian Authority in the actions of the general manager, the almighty Mohammed Rashid, and this is the biggest company in the territories. I do not know of any cigarette businesses in which they are involved. I was told that they are connected to cement and that they invested a little in construction. I was promised tfrom this week the company would be under the control of the Authority.

Question: Those close to you told us that you left the meeting with Rashid with a very heavy feeling.

Answer: My feeling is not important but the results are important. It is clear to you that I cannot tell a journalist what I say to friends in a closed forum. Mohammed Rashid is an official of the Palestinian Authority. There are officials with whom everything is fine and there are officials in the Authority whose activities are vague and they make many mistakes, like Rashid.

Monopolies

Rashid is the focal point of the central problem in the economic structure of the Palestinian Authority as it is today: the monopolies. Together with the establishment of the Authority, several areas were declared to be subject to monopolies and simultaneously concessions were given to senior people in the Palestinian Authority to manage monopolies, with Rashid at their head. The monopoly purchases the item on which he has placed a deposit of a certain sum with the manufacturer or the importer in Israel and he sells the same merchandise in the territories for a much higher price. It is not at all clear what happens to the difference. The amount of the sums transferred to the secret account in Tel Aviv is known - Israel reports these amounts to the IMF which computes them as amounts that were transferred to the Palestinian Authority. Even if in this way the problem cannot be solved, then at least the Palestinians are prevented from presenting these monies in their annual deficit computation. With regard to the monopolies' money and the private collection systems, there is no data on the amount of profit or to where it is transferred. The US State Department noted in the past that it counted 27 monopolies in the territories.

Monopolistic activities in several sectors increased the price to the consumer. The mixture of sheep food was sold during the Israeli regime for 120 Dinar per ton. Today the price is 400 Dinar per ton. The price of a package of six kilograms of flour rose almost three times from $15 to $40.

The story of the gasoline is an excellent example of an especially profitable monopoly. Since the Six Day War and until the establishment of the Palestinian Authority, the Padesco Company in partnership with the large gasoline companies in Israel (Paz, Delek and Sonol) controlled most of the gasoline market in the territories which reached some four million liters of gasoline per month. The company sold gasoline and oil to 65 private stations throughout the Gaza Strip. Padesco leased the equipment at the stations to the local owners.

Padesco had supply contracts with the station owners until after the year 2000. In the economic agreement between the Palestinian A, the former promised not to damage the contracts that were made between Israeli suppliers and Palestinian customers prior to the signing of the Paris Protocol. However, promises are one thing and reality is another. On October 18, 1994, representatives of Jabril Rajub, head of the Authority's security staff, informed all the gas station owners in the territories that they were prohibited from receiving more gasoline from any source other than the "Dor Energy" Company. Two days later, Jabril Rajoub's men, brandishing their weapons, blocked the path of Padesco's tankers on their way between Israel and the Palestinian Authority. The gas station owners sent a letter to the Authority in which they expressed a desire to continue to work with Padesco. Rajoub did not grant their request.

The Palestinian Authority did not address Padesco, not to mention not publishing a public tender regarding gasoline supply to the territories. In hindsight, it became apparent that the Palestinian Authority had earlier signed an exclusive supply contract with the French company when suddenly the Dor Company appeared and stole the box office. The agreement was signed between Yossi Antverg, General Manage of Dor at the time and for the Palestinian side Mohammed Rashid, who is written as "Senior Financial Advisor to Arafat" (see agreement in appendices). The business works such that the gas station owners have no business contact whatsoever with Dor Energy. Dor sells to the monopoly at a specified price, the monopoly sells to the gas station owners for much more. The difference remains with the monopoly. The gas station owners have no other options because Rajoub's staff in the territories and Dahlan in Gaza prevent any competitive import and offer an armored escort to the Dor tankers, right up to the stations themselves.

Although the gasoline agreement was signed while Rajoub wore his governmental hat, it is not clear which hat he wore when he directed the gasoline monopoly. The Palestinian parliament several times requested data about the companies in Rashid's management and met with a definitive refusal for reasons of secrecy. Maher Al-Kurd, the Palestinian Deputy Finance Minister, refuses to respond to questions regarding Mohammed Rashid. Padesco addressed the Authority's appointee on gasoline, Harbi Mohammed Abd Al-Kudr Sarsur and requested compensation for the great property that belongs to it within the gas stations in the territories. Sarsur informed them that the money was on the way. That was in November 1995.

Padesco petitioned the District Court requesting that Dor be ordered to stop supplying gasoline to the Palestinian Authority. Dor claimed, and justifiably from a legal point of view, that it has no connection whatsoever with the station owners who sign contracts with Padesco and that its contract is only with the Palestinian Authority. Padesco petitioned the Supreme Court against the State of Israel and the Palestinian Authority. It claimed that it is not the one to be sued in this case. Padesco estimated its damages resulting from granting the concession to Dor, at NIS.43 million which it requested that the State of Israel deduct from the customs repayment monies to the Authority.

A senior member of the Israeli customs system explains that during one of the financial negotiation stages, Mohammed Rashid tried to include a representative of Dor as external consultants to the parties. The Israelis did not agree and the "Dor Energy" people had to leave the discussion hall. In July 1997, Dor Energy's concession ended and was immediately renewed without a tender.

Yossi Antwurg, the General Manager of Dor Engery at the time told Ha'aretz in April 1997: "I don't want to talk, not formally and not informally."

Question: You don't want to talk about Dor or about the Palestinian economy?

Answer: I prefer about nothing at all.

Question: Were you directly connected to the negotiations with the Palestinians?

Answer: I don't say yes and I don't say no. But until now I have kept quiet, I never spoke and won't now. Talk to Orna Dankner, she is the spokesperson.

Question: And if she agrees that you speak, will you agree?

Answer: No, if I am asked I will say that I don't want to speak. I don't want to get involved in the matter. There are things that work more smoothly far away from the press.

Question: Several months ago several Israelis were invited to the wedding of Mohammed Rashid in Cairo. Where you one of them?

Answer: I was invited and I did not go.

Question: Are negative activities are being attributed to Dor regarding the manner in which it won the gasoline tender?

Answer: I know that they said, okay, never mind, he should be successful. Goodbye.

In the same article, Shmuel Goren stated: "Padesco's claims are lies and I know them from before. I submitted to the State Comptroller documents and certifications that prove that I left my position as coordinator of activities in the territories in 1991 and the business with the monopoly was signed only in 1994. I worked for the Dankner Group but I did not have contact with the Dor Energy and Palestinian matter. I also do not know Mohammed Rashid and I never met him. I know that he is involved with Yossi Ginnosar and others, but I don't know him. "

Shmuel Dankner, owner of Dor Energy at the time of the article (Ha'aretz- April 1997) responded: Thconnection between Dor and the Palestinian Authority began as a regular negotiation, like with any client. They spoke with all of the gas companies. What exactly motivated them to chose us? I guess the competitive prices and the ability to convince them that we will give them the best service.

Question: Padesco representatives claim that a tender was not held, that suddenly one day everything ended.

Answer: I know that Padesco offered all kinds of proposals. Tender or no tender, it was not a tender that was publicized in the newspapers but there definitely was a tender between all of the gas companies.

Question: A real tender? They claim that one day Jabril Rajoub's men prevented their entry.

Answer: It hurts them. Dor Energy in general bothers them. That's the way it is. They need to get used to the open, competative market.

Question: The Paris Agreements determined that the Authority needs to respect agreements. Padesco claims that their long-term agreemens were cancelled.

Answer: According to international law, an entity such as an autonomy has the authority to nullify contracts when it began to work, even if there were legal contracts.

Question: It is said that you have very good connections with Mohammed Rashid . . . .

Answer: Firstly, anything that you want to hear about him, address him. Secondly, warm connections is exaggerated. We have orderly connections, like any large customer.

Question: But he only invited his really good friends to his wedding in Cairo.

Answer: Yes, I was invited to the wedding in Cairo.

Question: At what price are you selling to the Authority per year?

Answer: One hundred and fifty million Dollars.

* * *

Another problematic government monopoly is that of cement (PCSC). Nesher sells the Authority, per year, over a million tons of cement which represent about 18 percent of all of its sales, and it receives in payment between $50-60 million. Yitzchak Davidy, the General Manager, discloses that "The first agreement with the Palestinians we signed even before Arafat got to Gaza, in 1994, Mohammed Rashid signed on their behalf".

Question: King of the monopolies?

Answer: I don't call him that. On his business card it states Senior Financial Consultant to Chairman Arafat. He came with a letter from the Chairman authorizing him to sign. From our point of view this was just fine.

Contrary to the findings of the contributing countries' investigation and to the testimony of businessmen and members of the Palestinian parliament, Davidy states that according to the information that was given to him from the Palestinian company PCSC, it is governmental company and it has personal relationship with Mohammed Rashid. If he knew of such a connection, he adds, he would not have entered the giant financial project with the company. Mohammed Rashid says that the PCSC company is a company totally owned by the Palestinian Authority: "I think that the source of all of the rumors about me, which have no truth to them, is the confusion between my position as Senior Financial Advisor to the Chairman and my position as President and General Manage of the PCSC company. Our company deals only with matters of cement and this is the only concession that we have. I do not like to use the word monopoly. The profits from the business venture that it makes, after deducting the on-going expenses, are transferred to the Palestinian Authority. We do not deal with the matter of gasoline in any form. The Palestinian gasoline authority deals with gasoline."

Question: But you signed the contract with Dor and they call you "a big partner".

Answer: Ah, that was my position as Financial Advisor to the Ra'is. I told you that it was confusing.

Question: And why did you specifically sign with Dor Energy?

Answer: We received proposals for all of the companies, including Padesco and business with Dor was the most profitable. We decided to go with something that smells of monopoly because it was hard for us to collect the taxes back from Israel any other way.

Question: The security people deal with enacting the Dor monopoly in the territories. This is not connected to security.

Answer: We signed an agreement with Dor and agreements are meant to be kept and they must be carried out.

Cigarettes were one of the first branches that the Palestinians dealt with where they tried to oust the Israeli manufacturers and importers. A UNIPAL company was established in the Authority which, according to Dr. Awartani, is a subsidiary company of PSCS under the control of Mohammed Rashid. The senior Western diplomat is not sure if the company belongs to Rashid or to foreign investors, but he found that it received significant reductions on the conditions of import into Authority territories. UNIPAL's first target was Dubek.

Parenthetically, it must be explained that according to the Paris Protocol, the Palestinians are not eligible for a repayment of purchase tax that is paid on an Israeli product. In other words, if one smokes Marlboro, the Palestinian Authority profits. If one smokes Time, the Authority receives nothing. The Authority demanded to receive the purchase tax as well. Israel said that there is an agreement and politely refused. The Authority suddenly remembered a Jordanian law from 1964 which was nullified in Jordan, and informed that it is enforcing it in the territories. This law places impossible conditions on anyone who tries to export to the Palestinian Authority, especially the obligation to appoint a single agent, obligation to register and licensing and much more. Israel protested the use of this regulation and claimed that it contains a breach of the open commercial sections of the Paris Agreement. The Authority claimed its privilege to determine laws for itself. In the Authority's territories the security staff began to confiscate the merchandise, especially cigarettes, with Hebrew writing. At first this had an unexpected influence on consumption: the public refused to buy packages with the Arabic writing with the suspicion that they were fake (although they were not), and heavy smokers even swore that the taste was totally different.

Dubek had to stop its sales in the territories for a long time and only recently returned to its matters while by-passing the Israeli directives through a simple act: the cigarettes are sent to Jordan and from there "exported" to the Palestinian Authority. In this way, there is no import from Israel but rather regular import from abroad and therefore the Palestinians are able to receive the entire repayment.

Like flour and gasoline, monopolies were established for importing steel, meat, paint, building supplies, cement and cigarettes. All were under the control of senior officers in the Palestinian Authority or their relatives. In addition, the Authority permitted the import of other items only to some of those who requested them. In this way, Nabil Sha'at's Egyptian company imports computers into the territories. In Ramallah the Paltec company, owned by Yassir Abbas (Abu Mazen's son) and Sami Ramalawi, senior officers in the Palestinian Treasury import electronic entertainment products (televisions, etc.). Many Palestinian merchants are embittered about the monopoly that caused the nullification of competition and the closure of markets and contracts that were previously open during the Israeli occupation. Today there is one supplier and all must buy from him.

Joseph Saba (in an interview with Haaretz) : "It is not clear to us why the Palestinian public sector needs to be involved in private clearly private areas: cement and mortar, for example, are usually the first businesses to be established within the private framework. Why does the Palestinian Authority want to be hotel owners? Aside from that the Palestinian Authority creates de-facto monopolies by giving exclusive concessions to private parties. If you want to obtain a license you have no way to know if you will receive it or not. There are no clear laws in this regard and the system of consideration of those giving the concession are not clear at all.

Question: Actually this is a diplomatic way to define corruption.

Answer: It is clear that there and political and familial considerations involved in giving these licenses. This is a very complicated matter where money that goes into private pockets plays the main role. It cannot be that if I am a private business, I will never know what the end of the licensing request process will be unless I am a relative."

Among those incidents of awarding commercial and import concessions to relatives, were those that were done in a prominent manner. Rawia Shawa, a member of the Palestinian parliament, read an emotional speech in which she described "how the sea swallowed Gaza". The analogy was clear to those who understood the matter. Shirkat Al-Bacher (“The Sea” Company) is a company in Gaza that is building a vacation region in Gaza and is involved in other immobile (land) transactions. From looking at the registration document of "Him Company" as it was printed from the computer at the Palestine Ministry of Justice, it becomes clear that the company today has two owners. The first is the Financial Advisor to the Chairman and one of the senior officers in the Treasury, Hasham Hussein Abu Nada, known as a "merchant". The second owner is Muayin Huri also known as Ramzi and defined also as a "merchant" but, in truth, he is the head of the bureau of Authority Chairman Yassir Arafat.

A resident of central Israel who deals in importing electrical products and installation of infrastructure for the Palestinian Authority tells that his first connection with Palestinians was made with Nabil Sha'at during the period that preceded the Oslo Accords in the offices of Sha'at's financial empire in Cairo: "I wanted to export to Egypt but Nabil told me forget it, soon there will be peace and we will be able to do wonderful business in Palestine.

After the Oslo Accords, Nabil Sha'at's "Tim" company opened a branch in Gaza and his son, Ali, was appointed to manage it. I did business with Ali both in the private sector as well as in the government sector, that is the sale of equipment to the Palestinian Authority. Via these business transaction I met people in the Chairman's bureau, among them the Financial Advisor to the Ra'is, Abu Nada. "By the way, the Tim International Company at the time won a contract of half a million dollars in order to set up a computer network for the Palestinian Authority. After eight months, Nabil Sha'at's activities greatly weakened and I began doing business with the "El Baher" company in a partnership in which they seemingly were doing all of the work for the network and selling equipment.

Question: If everything comes from you, why is Abu Nada needed?

Answer: (laughing) Are you crazy? And exactly how can a Jew from Israel win a supply contract from the Palestinian Authority? Abu Nada would go with me into the Ra'is' room and tell him that he needs to order from the "El Baher" company such and such light bulbs, electrical outlets, cables, air-conditioners, etc. The Ra'is would sign and that's that."

The Flour Incident

In another incident it became apparent that one of the people close to a specific minister in the Palestinian Authority received the concession to import flour into the Authority. That person imported 5,000 tons of flour from Romania and for this he received an authorization for import from the supply office. The flour was improperly stored in large storehouses in Damascus and became rancid. Husam Hadir: "The storehouses (are) near my home and it seems to me a bit strange to see Israeli trucks coming in the middle of the night and loading a large quantity of flour from the storehouse. I followed one of the trucks and arrived with it to a flour packaging factory in Tel Aviv. I discovered that they repacked the rancid flour as if it were good and returned it to the territories for sale to the stores.

"Immediately with the discovery of the incident, the minister of supply, Abu Alli Shahin, ordered his office manager not to supply the judicial council with any documents or details connected with the import of the flour. Yassir Arafat appointed an investigation committee of ministers who, without even one meeting, came to the conclusion that everything was in order. Next week our investigation committee will submit its conclusions." Hadir adds that he received threats from senior officials in the Palestinian Authority that if he continues dealing with the matter, his parliamentary immunity will be relinquished. He said that those same senior officials have a general custom of visiting the offices of the flour importer. Abu Alli Shahin is one of those men who, just before the establishment of the Palestinian Authority published an open proclamation regarding the corruption in the Palestinian Liberation Organization.

Additional Monopolies

Another financial managerial and budgetary control problem in the Palestinian Authority is found in the financing of increased activities of the various administrations, especially the security agency of various taxes, which are enforced and collected directly by them, transferred to private accounts and never pass through the central financial system. Thus, for example, after founding the rule of the Palestinian Authority in the West Bank, Rajoub announced that from now on, an additional tax will be collected from store owners, a tax that will be a permanent percentage of their daily sales. The "gasoline reconnaissance team" of the security force takes measurements each day at the gas stations and examines the difference in what is left of the black oil between morning and evening. According to Intelligence sources in Israel, it is this tax that enables the increase of the Rajoub administration's power and scope by way of the struggle over Arafat's heir to the leadership of the Palestinian nation. Today in the territories there are about 20 different active security administrations. They compete with one another with their degree of influence which, of course, comes from their financial ability: he who is richer can employ more policemen, etc.

Another tax has been levied on the unloading tax. Rajoub and Dahlan actually rule all the unloading ports in the Palestinian Authority. Dahlan is also the owner of the forklifts at the Erez checkpoint. Every merchant, every truck owner must pay the security administration ten percent in order to proceed. In other instances, the manner of approach is much easier. For example a person who imported cleaning products from Israel, who opened a branch in Gaza, was asked to "contribute" the sum of $2,000 to the Force 17. One year ago a rich Arab from East Jerusalem requested to buy 14 new jeeps from his money for the benefit of Rajoub's organization.

Dahalan is also the man who collects the handling taxes at the Karni checkpoint and his organization receives the entire sum. From an angle of proper administration this is most serious. The situation existing throughout the reformed countries of the world is that all taxes are collected into one central account and from there are divided and appropriated according to the needs of the various parts of the regime. In the Wild West of the Palestinian Authority, every group collects for itself without it being clear what the amounts are, where they are invested and if they could be put to better use in another place.

Part III

Inflation of P.A. Governmental Mechanism

One of the grave mistakes of the Palestinian leadership was the unnecessary employment of numerous government workers, without having enough work for them. The Palestinians unjustifiably inflated their system. They did not fire the 21 thousand Israeli civil administration workers, who were all, with the exception of Israeli army commanders, Palestinians. In addition they added 20 thousand clerks from Tunis and, furthermore, they added 40 thousand policemen and security personnel, ending up with a huge mechanism to which salaries have to be paid.

Joseph Saba: "Even though in the past two years a certain trend towards improvement in the Palestinian economy has been noted, the bottom line is rather gloomy. It is easy to explain: The donor states pay one hundred per cent of the total investment in infrast. In recent years the Palestinians have greatly improved their system of tax collection from the citizens of the Palestinian Authority, as well as improving the process of receiving of tax returns which Israel collected for them from imported merchandise. That is excellent, except for the fact that most of that money is re-channeled to pay salaries to the government sector. They are hiring more and more personnel that they don't need in the public sector and they are unable to find work for them. Part of the inflated government mechanism is suitable to its work and part of it is not at all. That is the main problem in the Palestinian Authority. For instance, I have just hired someone for my own office. He comes from some government job and he told me how he passed his time in that office without doing anything. A young man, talented, with an academic degree, who was never correctly utilized. The Authority also hires many older men who come from the Palestinian 'diaspora', usually from the PLO organization in Tunis.

"These people have absolutely no professional training. They also never worked in a regularl police force. So they are given uniforms and called policemen. In actual fact they don't know how to do anything and they do nothing. It is actually quite pathetic. Sometimes they try to find them something to do. They assist children crossing the road, do a little gardening. If you go to the Gaza beach in the summer you will see tens of them standing idly by looking at what one normally looks at while on the beach. We approached Arafat on this subject and demanded that he minimize the number of the state workers. Supposedly, the Palestinian Authority only owes us accountability with regard to money which we donate, but we demand a full report from them on all the money because we donate 100% of the total investment in infrastructure. If they are earning money from other sources, they should take that money and use it as their share in the effort. Arafat refused our demand to reduce the number of employees and said: "What do you want me to do?"

Dr. Maher el Kurd, the Palestinian Deputy Minister of Finance and Industry: "I think that the inflation of the governmental mechanism is one of the major economic achievements of the Palestinian Authority. Where would all those people have found work if we didn't turn them into clerks?!"

The Legal System

Upon its founding, the Palestinian Authority emphasized its independence from Israel in every area. The Authority announced the cancellation of all the orders and regulations which Israel had made since the occupation of the West Bank and the Gaza Strip in 1967. In the opinion of renowned financial experts, the Authority made a grave mistake in doing so and in its attempt to demonstrate independence, it formed a legal vacuum and commercial chaos which have not been corrected to this day. In this matter the Palestinians have not learnt the Israeli lesson of adopting most of the British system, upon the founding of the State.

As a matter of fact, the cancellation of orders of the military government and the cancellation of the connection to the Israeli Law set back the legal development by 30 years in such a way that the Jordanian Law of the pre-Six Day War applies to the West Bank today, while in Gaza the Egyptian Law of that same period applies. Despite the fact that in both these countries the legal systems have greatly developed, the Palestinians took upon themselves the old book of laws. At that time this book did not include basic major laws such as Companies' Law, Contracts Law or Investments Law and other laws which nowadays are vital in order to carry out trade in the modern world. Choosing an old book of laws which does not meet today's needs means that, today, in the Palestinian Authority, there is no obligation to register companies, no obligation to issue tenders, no organized system of legal execution and debt collection, no law to regulate the giving of mortgages and there is no possibility, whatsoever, to document Joint Venture, and the list goes on and on.

The Palestinians agreed in talks behind closed doors, that the situation, the topic and the laws are indeed pretty bad and even they, themselves, bring up the subject of the failed attempt to run statutory, economic institutions such as a monetary authority or a tax office. In relation to this, the heads of the Palestinian system blame the donor countries for not having transferred enough money to the brainstorming groups who were dealing with the formation of the laws.

A senior American diplomatic source says that the donors have in fact transferred money but have become stuck in the bureaucracy and by the lack of response and willingness from the Palestinians. During last year, certain progress was noted by the creation and the crystallization of brainstorming teams on the legal issues, yet still not at a really noticeable level.

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