Immense donations
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Palestine's 'economic miracle'

Immense amount of international donations inflate Palestinians' disposable income

Part 1 of analysis


Palestinian Prime Minister Salam Fayyad has been crowned as "the Palestinian Ben-Gurion at the recent Herzliya Conference. However, there is a great gap between the achievements attributed to him and his abilities in practice.


Fayyad is credited with changing the corrupt PA apparatus, but even in the financial realm where his expertise lies, his abilities are mostly manifested through the drafting of impressive documents as well as fundraising.


Meanwhile, the absurdity inherent in his statements regarding "Palestinian independence within two years" is clear to anyone familiar with the Palestinian economy. Fayyad is a former World Bank official, but even on the financial front his deeds are far from the image he has nurtured.


The Palestinian economy is the only place in the world where the per capita GDP is less than half the disposable income per capita. This is the result of three factors:


1. The Palestinians barely produce anything. Most of their GDP comes from government expenditures by the PA itself.

2. The Palestinians receive immense sums donated by the world.

3. Tax collection is almost unheard of, aside from the taxes collected (for Fayyad) by the Israeli government, which provides the PA with NIS 450 million (roughly $120 million) monthly; this comprises about 40% of the PA's budget.


The result is clear: Low GDP, but high disposable income. Indeed, it's an economic miracle.


Meanwhile, the situation is even more extreme in the Gaza Strip, where the PA spends 57% of its budget. Fayyad hands over salaries and allowances to 150,000 people, yet tens of thousands of them don't work, while others receive two salaries: One from Fayyad and another from Hamas. This is why the only industries active in Gaza are imports through smuggling tunnels and real estate – the surplus of cash in Gaza's banks prompts them to offer mortgages, and this results in a rise in real estate prices.


The former finance minister in Fayyad's government expressed it vividly in an interview with Le Monde: He said the Europeans are unaware that their money funds Hamas. Hamas doesn't know what to do with all the money in its pockets so it buys real estate. As result, the price of upscale beachfront real estate in Gaza increased by 300%. The money from the EU and from the taxes collected by Israel ultimately reaches Hamas, he said.


When Hamas took power, Fayyad was supposed to ensure (in line with the international community's demand) that the salaries he hands over do not reach Hamas hands. He indeed proceeded to remove 20,000 people form the list of salary earners, but two months later added more than 10,000 of them to the list of recipients of government allowances.


By doing so, Fayyad showed that he too is familiar with the Palestinian concept of the "revolving door." However, this is not his only economic failure.


Part 2 of analysis to be published Sunday evening


פרסום ראשון: 02.07.10, 11:04
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