WITH the money now flowing to a Palestinian economic development fund, international donors are worried about the management and the channeling of the aid.
They fear that infighting among Palestinians, who began self-rule over the Gaza Strip and the West Bank town of Jericho last week, is already slowing down their ability to absorb the sorely needed help.
Some Palestinian groups - from the radicalized Hamas to the more mainstream Palestine People's Party - oppose the recent peace agreement signed between the Palestine Liberation Organization (PLO) and Israel.
But all parties agree that economic development for Palestinians is critically important. Nearly 2 million of them live on the West Bank and in the Gaza Strip, where their annual income per capita is about $1,500 - or 8 percent of the United States's average. For years, the unemployment rate has topped 40 percent.
Given that roughly one half of the population, which is growing faster than any other area in the world, is under the age of 15, there is increasing pressure to boost economic prospects.
And failure of Palestinian leaders to provide jobs and basic services could diminish the confidence of Palestinians in the accord with Israel and the ultimate prospects of expanded autonomy.
Western officials, who last October promised $2.1 billion in aid over the next five years, have pinned hopes on the new Palestine Economic Council for Development and Reconstruction (PECDAR), an interim body funneling aid to Palestinians on the West Bank and Gaza.
Hoping it would be a strong link between donors and Palestinians, the officials have instead been struck by the delays in setting up the organization. PLO Chairman Yasser Arafat, who has long operated outside of the occupied territories and is expected to enter the autonomous zone next month, has ``viewed the donors' request for an autonomous entity to disburse the aid as a threat to his own authority,'' a senior US official says.
But West Bank intellectual Sari Nusseibah, whom Mr. Arafat named deputy director general of PECDAR, bitterly rejects the assertion that the Palestinians lack the organization to spend the money. The donors have broken their promise, he says. ``We heard that $1.2 billion was to be spent the first year, but some of it was supposed to be spent in 1994. It has not been spent. Not one single penny of it. We hear a lot of excuses.''
The US official, meanwhile, says, ``If PECDAR had been set up, money would have flowed.... There was no one to sign the paper.''
The US, which will provide almost 25 percent of the financing, looks at PECDAR as ``the voice of Palestinian economic priorities and can be an agent of cooperation with the donor authorities,'' says Lawrence Summers, Treasury undersecretary for international affairs. ``We're dealing with a problem of `can we develop a [Palestinian] capacity to [effectively absorb the aid]?' ... What we're not dealing with is the capacity to write bigger checks.''
Many Israeli leaders who are anxious to defuse further tensions by realizing tangible economic benefits from the peace agreement, worry that the opportunity to do so is slipping. Ephraim Sneh, former Israeli civil administrator of the West Bank and current Labor Party member of Knesset, says he is very troubled by the PLO's failure to fill crucial economic and financial management positions. ``If there is no economic authority that is accountable and efficient, donors will not give the money,'' Mr. Sneh warns. ``There are a lot of pledges, but the donors have their own [domestic financial] pressures, and most of them are looking for a good pretext to keep the money in their own pockets.''
He says ``the PLO must appoint competent people to run the organizations Israel has handed over, private investment must reach where it is most needed, and supporters of the peace process - the moderates - must make up the majority of the democratically elected [Palestinian] leadership.''
Power sharing doubted
The conflict between Palestinians and the Tunisia-based PLO leadership will also hold up such progress, predicts Peter Gubser, president of American Near East Refugee Aid (ANERA), a nongovernmental organization. ``The question really is, how much autonomy Arafat will give to the locals'' seeking power, he says.
Bashir Bargouti, chairman of the Palestine People's Party, gives a taste of that discord. He questions the viability of the peace agreement, and assails the PLO for selling out to Israel. ``Does the peace agreement give Palestinians a chance to rule themselves? I think not. There are too many controls, too many joint committees. The Palestinians cannot move unless there is agreement by the Israeli side.''
``We are in a very fragile state,'' Mr. Bargouti cautions. ``If we don't achieve good [economic] results, allegiances will shift,'' and ``extremism and terrorism will increase,'' he says.
Mr. Summers underscores the importance of sizeable financial holdings of Palestinians outside the territories, and the potential impact of investing those funds on the West Bank and in Gaza.
But Mr. Gubser, who spent 17 years in the West Bank and Gaza with ANERA, says he is ``very skeptical'' about development prospects. To develop the agricultural, industrial and import-export base, a large amount of private investment is needed, whether it comes from local Palestinian sources, regional Middle Eastern sources, or from around the world. That is ``very remote,'' he says, because international financiers only invest ``where they see stability, and the West Bank and Gaza are going to be unstable. The Palestinians will be arguing who's on top.''