Cut in Gulf Funding Pinch Palestinian Economy

IN the Israeli-occupied West Bank and Gaza Strip, Palestinians are beginning to count the economic cost of the month-old Gulf crisis. With Kuwait plunged into chaos, and other Gulf states angered by the Palestine Liberation Organization's support for Iraq, supplies of money and goodwill are in danger of drying up.

``The damage will be enormous,'' says Ghassan Khatib, a lecturer at Bir Zeit University in the West Bank.

Bir Zeit, like other Palestinian centers of higher education, relies heavily on money from the Gulf. The local Higher Education Council, which receives 70 percent of its budget from Gulf states, mainly Kuwait, is responsible for paying salaries at all six universities in the territories.

The potential damage is not confined to higher education. Mr. Khatib predicts the impact of the Gulf crisis will be felt throughout Palestinian national institutions.

One of the most prominent of these is East Jerusalem's Makassed Hospital. Adnan Hammad, the hospital's managing director, describes the situation as ``critical.''

``We used to get over 70 percent of our budget from Kuwait and the Gulf states,'' he says. ``This money is not in our hands anymore.''

Dr. Hammad says the management has already considered ways of economizing, but it is hard to make cuts. ``Closing any single department means denying the service to the people who need it and who don't have an alternative,'' he says.

Saeb Erakat, a professor of political science at An-Najah University, lists six ways in which the Gulf crisis will affect the Palestinian economy:

Remittances. Thirty percent of the gross national product of the Israeli-occupied territories consists of money sent home by 800,000 Palestinians working in the Gulf. About half are in Kuwait, and have sent back some $120 million annually. Erakat says Palestinians have played a large role in building the Gulf states.

Exchange rates. In one month, the value of the Jordanian dinar, in which many Palestinians are paid, dropped by 20 percent against the dollar.

Refugees. As many as 25,000 Palestinians working in Kuwait with Israeli residency permits may return to the Israeli-occupied territories, swelling the ranks of the unemployed.

Exports. Conscious that Palestinian agricultural produce may find its way to Iraq, Israeli authorities could further restrict traffic crossing the Jordan River.

Direct donations. Threats by Gulf leaders to cut funds will seriously affect hospitals, universities, charitable, and social institutions, and may curtail Gulf-funded United Nations operations.

Indirect donations. The Gulf states have provided the PLO with funds to pay some of the costs of the Palestinian uprising.

Not everyone is as pessimistic as Professor Erakat. Ibrahim Muttar, an East Jerusalem economist, says it is too early to gauge the economic consequences of the Gulf crisis, and that Palestinians are accustomed to hard times anyway.

``We have become used to belt-tightening,'' he says, pointing out that the uprising has already wrought an economic recession.

Mr. Muttar doubts the impact on exports will be great. The steady decline in the Jordanian dinar has already rendered trade with the East Bank unprofitable, and more promising markets exist in the West, he says.

Diplomatic sources in Jerusalem suggest Israel is waiting in the wings, only too happy to step in and pick up the bill. If that happens, the principal achievement of the uprising - a degree of Palestinian economic independence from Israel - will be eroded.

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