A Year After Peace Pact, PLO Gets US Aid - Slowly

Washington worries about funding accountability

ONE year after President Clinton presided over a signing ceremony for the Israeli-Palestinian peace accord and pledged to boost West Bank and Gaza Strip living standards, the White House is anxious to demonstrate the economic benefits of peace.

Next week, the administration is expected to announce its financing for a host of new Palestinian development projects in Gaza, Jericho, and territories still under Israeli occupation.

But while Washington - the leading sponsor of Arab-Israeli negotiations - is pressed to deliver help, there is much holding it back.

US officials and development workers in the region say their best intentions to make quick and noticeable standard-of-living improvements have been thwarted by a Palestinian authority unable to process and channel needed economic assistance.

Although United States planners hoped to dole out an average of $100 million annually over five years, only $56 million has been given so far.

Yasser Arafat, chairman of the Palestinian Liberation Organization (PLO), who called early offers of aid insultingly low, delayed his return to the West Bank until international donors agreed to transfer substantial funds to Palestinian coffers. His newly set up Palestine National Authority (PNA) functions without the transparency that donors demand from aid recipients.

But despite Washington's insistence that it would not give money under these conditions, it is doing just that.

In addition to the $5 million it directly disbursed to the PNA to help pay for the Palestinian police force, it put another $10 million into a World Bank fund to help cover start-up costs of the Palestinian authority and $5 million into a World Bank fund for technical assistance.

While a senior State Department official insists that ''the World Bank has worked very hard to set up a monitoring system,'' Bank specialists say the job is still very difficult.

Peter Gubser, president of American Near East Refugee Aid, is concerned about the PNA's accountability. As a long-time operator of agricultural, entrepreneur and infrastructure projects in the West Bank and Gaza Strip, he has carefully tracked the use of ANERA funds (much of it US government supplied), and maintained working relationships with the recipients.

But, he says, he ''reluctantly come[s] to the conclusion that it's worth violating this principle of transparency, because if the PNA doesn't have the funds and cannot pay salaries then this whole thing is going to fail.''

Mr. ''Arafat is pressuring the United States'' and other benefactors to give money directly to the new authority, adds Geoffrey Aronson, director of the Foundation for Middle East Peace.

''He understands that there are political pressures operating for donors to put money in regardless of the transparency. Arafat knows that everyone has a lot riding on the apparent success of this enterprise, and no one wants a fault-finding finger pointed at them.''

Mr. Aronson says he doubts ''the assumption that money can effect the desired change.''

Instead, he subscribes to what he calls ''the black-hole theory,'' which holds that most of the funds will be squandered.

''Look at Egypt'' [Israel's first peace partner], he says. ''It's been sucking roughly $55 billion in US aid since the 1979 Peace Accord'' and it remains financially strapped and underdeveloped. ''Gaza,'' Aronson contends, ''is a never-ending money pit. You could easily spend $3 billion and not see it.''

In Gaza, US aid is making a visible difference by financing 192 apartment units, counters the State Department official. In other areas, the US is funding Palestinian health facilities and neighborhood and village upgrading projects designed to put Palestinians to work.

Nweek, the Overseas Private Investment Corporation will announce an investment agreement with the Palestinians. Last year, OPIC set aside $125 million in project finance, which it has been waiting to tap for Palestinian projects.

While it has been negotiating the agreement with the PLO, it has identified five ventures that appear commercially viable. Some of those were developed in cooperation with Builders For Peace, a group of Arab and Jewish-Americans intent on ferrying US private sector investment into the West Bank and Gaza.

At a White House ceremony next week, Vice President Al Gore Jr., who started the group, is expected to unveil the projects, including business hotels, a furniture factory, a construction-materials plant, and a water-bottling firm. Much more is in the pipeline.

''Economic stability itself won't guarantee the peace process,'' says Joseph DeSutter, director of Builders for Peace. ''But economic instability will make the peace process impossible.''

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