Palestinian Authority Corruption is Eating the Palestinians Alive
Aaron Menenberg June 2014
Across the world we have seen how kleptocratic governments destroy the chances of ordinary people to make a living.
A first-hand account of how corruption and self-interest at the highest levels of the Palestinian Authority have prevented ordinary Palestinians from achieving economic prosperity with devastating consequences.
In 2010-2011 I worked with the Israeli Ministry of Defense’s Civil Administration, which administers non-security policy in the West Bank. This unique experience has informed my thinking about Israelis, Palestinians, and the Israeli-Palestinian conflict to a great extent. Among the many lessons I learned was that the Palestinian Authority does little to help the Palestinian people. One of my responsibilities as an Israel Government Fellow was to work with the Civil Administration’s agriculture team to ensure aid projects funded by foreign governments in the West Bank were executed successfully and lawfully. Much of this work involved significant interaction with individual Palestinians, most of whom were hard working, entrepreneurial-minded people focused on societal and self-improvement. In fact, many of them inspired me. I also worked intensively with the Palestinian Authority. Unfortunately, many of those experiences were deeply troubling, as I came to learn that the Palestinian Authority’s priorities and goals were often in conflict with those of its people, and held them back. This piece offers insight into the relationship between the PA and the Palestinian people.
Middle East scholar Jonathan Schanzer explains in his recent book State of Failure that the American approach to the Palestinian Authority has failed because it revolves around “getting to yes” in the peace process without transforming the PA into a responsible and trustworthy government. The right approach, he says, would involve fiscal reform and institution-building, while simultaneously negotiating the thorny issues with Israel. By myopically focusing on “yes,” the U.S. is ensuring the Palestinian Authority will remain corrupt and therefore illegitimate in the eyes of the Palestinian people. My experience confirms Schanzer’s argument. The PA is an incredibly corrupt organization. So is its dominant party, Fatah. Together they form a motley crew of elites seeking to maintain power and the attenuating trappings, willing to do whatever it takes to ensure their power and position are not lost.
This issue has now become too important to ignore because the most recent round of ill-conceived Israeli-Palestinian negotiations have, unsurprisingly, failed the Israeli and Palestinian people yet again and have resulted in the victory of the status quo. This outcome leads down a dark tunnel because we have failed to understand a basic fundamental: the Palestinian Authority as it exists is not a force for good. I returned to the U.S. in the summer of 2011, and although I have told the following stories anecdotally in private, I have resisted making them public because I wanted to give the PA the benefit of the doubt, hoping that in the end their role would be a positive one. I am not the only one who has held this hope. It is a hope that drives much of the support given by the US and Europe to the PA. But this hope has not been fulfilled, and it is now a barrier to better outcomes.
Nothing I experienced dashed my hope more than the story of Sammy Khalidi.
It began with a phone call. It was Sammy. He and I had just seen each other the day before at his farm in the central Jordan Valley in the West Bank. Sammy had a medium-sized farm growing tomatoes, bell peppers, cucumbers, and herbs. He was participating in a development project run by an American consulting firm on behalf of the United States Agency for International Development (USAID) that aimed to enable Palestinian agricultural producers to export their products to foreign markets.
“Hello,” I said, “this is Aaron.”
“Aaron, it’s Sammy Khalidi. I have a problem, and I do not know what to do.”
“What’s the problem?”
“I got called from someone in the office of Fayyad. He said I have two days to switch packing houses. They do not want me using the Jewish pack house. They want me to use the Palestinian one. I cannot do that. It is too far away and too expensive. It would not work, I would go out of business. They said if I do not obey, they will take away my export license.”
Salam Fayyad was then the prime minister of the Palestinian Authority and an international darling. More technocrat than politician, Fayyad was credited with establishing rule of law and building political and social institutions in the West Bank that were creating better economic outcomes. I was a fan of Fayyad myself, but I was about to learn that even an internationally loved American-educated technocrat (or at least someone working in his office) could, and would, prioritize politics and the politically connected over the future success of the Palestinian people.
“Why not?” I asked.
“The Sinokrot pack house is south of me. My product must go north. This means my product will go bad before it gets to market. And they are more expensive.”
Sinokrot is a well-known Palestinian name. Sinokrot Global Group Ltd. is owned by Mazen T. Sinokrot. Sinokrot, also Western-educated (in Britain), has been instrumental in the development of the agriculture sector in the West Bank, and one of its greatest advocates in export markets. He also founded and chairs Al-Quds Holdings, which invests in education, real estate, tourism, information technology, and health care in Jerusalem.
He has excellent political connections, having served as the PA’s Minister of Economy in 2005 and 2006. He remains influential, and is a prominent board member of the Palestinian Investment Fund (PIF), which was created by a transfer of assets previously managed by the Palestinian Authority. Though independent, it benefits from deep political connections. During my time with the Civil Administration, PIF was receiving hundreds of millions of dollars from the American government’s Overseas Private Investment Corporation (OPIC) and USAID. When Hamas took over Gaza in 2007, it also took over PIF’s Gaza operations. While not a member of Hamas, Sinokrot was arrested in 1998 by Israel for operating an investment company it believed was involved with Hamas. Three years later the U.S. Treasury designated the same company as a financer of terrorism associated with Hamas. A rumor in 2011 was that Hamas was hoping to name Sinokrot prime minister of a unity government with Fatah.
“You use a pack house in Argaman, right?”
Argaman is a Jewish settlement about 26 miles north of Jericho. There are two produce-packing houses there, both owned by Jews. The problem quickly became clear: A Palestinian businessman participating in a U.S.-funded project was working with a Jewish company in a Jewish settlement when there was a Palestinian alternative. I doubt Fayyad was actively helping a Hamas affiliate, but he recognized a potential problem for his reputation and the PA’s political agenda. The instructions issued to Sammy were clearly politically motivated, even though they came at the cost of supporting a potential political rival and threatened the existence of a business that provided jobs to dozens of Palestinians.
“You know Sammy, there’s nothing I can do. We have a policy of not interfering in internal Palestinian decision-making. What are you going to do?”
“I do not know. I have told my employees, and asked them and their families to march in front of Fayyad’s office tomorrow.”
“How many people is that?”
“Maybe one thousand. My men have big families.”
“That’s a lot of people.”
“I am very worried.”
The USAID-funded program Sammy was participating in was a good one. As an American taxpayer I really liked the concept. It provided assistance to small- and medium-sized agrobusinesses in the West Bank to help them export their products to Europe and Russia, where profit margins were higher than the Palestinian, Israeli, and Jordanian markets where they normally were sold. The project provided affordable financing and, in partnership with Israel, access to materials and expertise to meet the required product standards of destination markets. Israel then, on its own dime, set up an Israel-West Bank border crossing dedicated to agricultural transport, and helped the participants partner with Israeli companies who could get their product to market via Israeli ports. I had met a number of participants, and all of them seemed pleased with the project. I could understand why Sammy was worried.
“Do you think it will work? Do you think Fayyad will back down?”
I had a thought.
“Sammy, what time will your people show up tomorrow?”
“Okay, make sure they are there. I have an idea, but it is best you do not know what it is. I make no promises, but I will try to help. Make sure you tell no one we spoke tonight, okay?”
I felt for Sammy, and the families his business supported. My experience in Israel and the West Bank showed me something few witness: Israelis and Palestinians have rubbed off a lot more on each other than either is willing to admit. Palestinians have intimate experience with Israeli culture and business, and the innovative entrepreneurial spirit and capitalism that has catapulted Israel into the first-world Organization for Economic and Co-operation and Development club has rubbed off on many Palestinians. Sammy wanted to run a successful business free from crippling government bureaucracy, and was willing to work with Jews if it meant greater profits for himself and higher pay for his workers. I wanted to support him.
I called some journalists I knew in Jerusalem, several from global news agencies and several from local outlets, and told them Sammy’s story as an anonymous source. I also told them when and where the demonstration was taking place. I suggested they cover the story, and emphasized the power of the camera and what it could do for Sammy’s cause.
The story was not a sexy one. People did not die, and the oppression of the Palestinians involved came at the hands of the Palestinian Authority, not Israel. I never did see it on the news and that did not surprise me. But Sammy did not lose his export license. The next time he saw me, he thanked me for the “friends” I had sent. If I had to guess, I would say at least one reporter with a camera showed up and asked a government official to comment. This led to a reversal of policy, and thus a non-story for the media.
Yet behind the specific story of Sammy Khalidi is a more general one, and it is not a non-story at all. It is hugely important, and it is high time it was reported, because there are a thousand Sammy Khalidis in the West Bank whose problems with the corruption and cronyism of the Palestinian Authority are ours as well as theirs.
The cost of PA corruption is monumental. More than anything else, it makes Palestinian political and economic progress all but impossible. The poor quality of governance and the resulting lack of political inclusiveness and economic opportunities in the Palestinian territories are a surefire model for the kind of economic and political repression that typifies underperforming societies. You will not find a single example of a people governed by such a regime that has achieved long-term success. The inevitable result is social stagnation and the kind of discontent that can lead to violence and even war.
In one of my favorite examples of how Palestinian governance is subservient to political power, the PA still pays its Gaza-based employees even though they are unable to perform their duties due to the Hamas takeover. In other words, the PA—using donor funds—is paying people not to work. There is only one reason for this: It allows PA President Mahmoud Abbas to maintain his political base in Gaza.
Perhaps more infuriating, however, is the fact that an enormous amount of PA money—foreign and domestic—goes to line the pockets of the Palestinian political elite. About two years ago, Hasan Khreishah, the deputy speaker of the Palestinian Legislative Council, spoke out on the issue. “Since the signing of the Oslo Accords,” he said, “we have had 12 Palestinian governments…. Each government [has]… at least 24 ministers. This means we have had 228 ministers, in addition to advisors. All receive high salaries and luxurious vehicles.” He went on to point out that the aforementioned PIF pays its chairman $35,000 per month, which is over 12 times the West Bank’s per capita gross domestic product in 2008—the most recent data available.
This is, unfortunately, the PA’s standard operating procedure. An EU audit of the years 2008-2012 found that around 2 billion Euros of its aid were lost to corruption. It has also been shown that Yasser Arafat and his advisors stole millions of dollars in foreign donations, turning them into billions as they moved the money around the world. According to several reports, this practice has continued—and may have gotten worse—under Abbas. And with the Palestinians’ acceptance into the United Nations Convention Against Corruption, the PA will now have a shield with which to protect itself from any real reform.
Many supporters of the PA tend to look for ways to explain away these problems. They have composed a popular narrative in which, despite the PA’s corruption—or perhaps regardless of it—the Palestinians’ problems are primarily Israel’s fault. Economic and political development in the Palestinian territories, it is claimed, can only move forward if Israel withdraws from the West Bank, voids its security requirements for border movement, and allows the free flow of people and goods.
I have witnessed something different. I have observed the West Bank economy and labor market from within, and have come to understand that the best opportunities for Palestinians are abroad. Not only do foreign markets offer larger consumer bases and greater profits for exporters, but most importantly they do not suffer from the corruption experienced under the Palestinian Authority that stifles prosperity well beyond any other factor. Even within the West Bank economy, many of the best opportunities come from Israeli and foreign assistance.
Given that the highest profit margins for Palestinian goods are found outside the territories, such assistance is essential. And given that Israel is the Palestinians’ main point of access to foreign markets, its help is equally important. Even though many opportunities for economic development are initiated by aid agencies and NGOs from the West and Asia—such as the project Sammy Khalidi participated in—they not only require Israel’s help, but also benefit from direct Israeli participation that mostly goes unreported. This is partly because Israel’s assistance can be politically unpopular domestically, but it also because, as in Sammy’s case, it does not fit the narrative people are comfortable with.
Sammy needed more than access to affordable financing and Israel’s ports to successfully and profitably export. He needed to produce products that met the higher standards of the export markets he was targeting. And he needed to reduce his costs through more advanced and efficient techniques. To do this, he needed help. Enter Israel.
Israel’s agricultural policy in the West Bank includes active facilitation of foreign-funded development projects. As previously stated, Israel has built, at its own expense, an agriculture-only border crossing to ensure timely transport and help connect Palestinian farmers with Israeli companies that can transport their products to market. But Israel’s support goes beyond this, and in many cases actively contributes to Palestinian economic success.
The agriculture department of the Civil Administration paid for and organized at least six seminars and conferences for Palestinians while I was there. At these events, experts gave lectures and demonstrations on agricultural practices. Each of them took place in Israel and were one to three days in length. Israel bused the participants to the events, paid for food, and—when necessary—overnight accommodations as well. Between 25 and 30 people usually attended.
I was lucky enough to be present at many of these conferences. One took participants to the Eshkol Forest in the Judean Hills, where experts from the Jewish National Fund explained the best methods for building sustainable forest roads, including drainage techniques that aid in substantial water reclamation. Among those present was the director of soil management for the Palestinian Authority’s Ministry of Agriculture. A three-day conference in Haifa covered the best ways to manage grazing land, which is a particularly important topic for a society of herders unaccustomed to the implications of private property. Private property is a relatively recent development in the Palestinian territories and has complicated grazing patterns that are often centuries old. Grazing lands, improperly managed, quickly lose their nutrients and become useless and result in underfed animals. Four experts from Israel’s Ministry of Agriculture taught the seminars, which were attended by 30 Palestinians.
My favorite trip was to a facility operated by Tnuva—Israel’s biggest dairy producing conglomerate. I love dairy, especially yogurt, which happens to be my favorite food. So I was ecstatic to find a conference table covered with Tnuva products for us to sample. And I was over the moon when we were all given a large, insulated picnic basket of Tnuva products on our way out. Between these two favorite memories of mine, Tnuva’s head scientist and dairy quality manager gave lectures and took the participants on a guided tour of the entire facility. After leaving, we visited a nearby dairy farm to receive an overview of sustainable practices. This event was not only for farmers, but also public health officials, veterinarians, and those involved in animal policy. Members of the PA’s central veterinary laboratory and a Hebron veterinary service attended, as did the PA’s directors of public and animal health.
Farming practices, the topic of most interest to Sammy, was a common theme. One event focused on product and safety standards. Another included irrigation techniques, at which Israel is particularly adept. The cost of a year’s worth of these events was in the hundreds of thousands of shekels, and it came directly out of Israel’s budget. Their sole aim, moreover, was to improve the performance and competitiveness of the Palestinian agricultural sector. This goal, if met, would come at a cost to the Israeli agricultural sector, which would face stronger competition domestically and internationally. This fact was not lost on many of the Palestinians who prized their spots on these trips.
The Palestinian Authority also recognized the benefits to Palestinians who attended the events, and therefore would sometimes deny a person’s attendance. If someone we expected for an event pulled out or did not show up, we knew they hadn’t paid their taxes or, just as likely, had done something to irk the PA—like fail to pay a bribe or seek a particularly robust business relationship with non-Palestinians.
The best part of these trips for me was that, from time to time, Palestinian attendees would feel safe enough to speak candidly about their lives and their thoughts on the Israeli-Palestinian conflict. I got to know several of them quite well, and they gave me a unique look at a cross-section of Palestinian society.
This was largely due to the unique position I held. I worked for the Israelis, but I was not—and am still not—Israeli. My fellowship was as much about learning as it was about participating, and it was for only a limited period of time. I was open about this with the Palestinians I came into contact with. As they came to know and trust me, they also came to understand that I was going to take my experiences back to the United States. As a result, they wanted to make sure I understood certain things.
Some who shared their “insights” and “reflections” with me were clearly trying to indoctrinate me. A farmer who lived near a settlement contacted us several times to complain that settlers were stealing from his water supply. I took him seriously until I made a surprise visit to his farm where I learned that the PA had coerced him into dismantling his well in order to influence an NGO conducting a research trip. Several very pleasant visits to the Sinokrot pack house had me believing that they could be a valued partner in the export development project Sammy was participating in. Then came Sammy’s phone call, and I realized Sinokrot had been using its political influence to send more business its way.
Other conversations and experiences were more helpful and more honest. Most of them came during agricultural field trips as the day was winding down. Those who opened up to me did not do so to the group. Once in a while, one of the senior advisors to the PA’s Minister of Agriculture attended. On those trips, no one felt like chatting over dessert or a beer. But when the advisor was not part of the trip, I could usually count on the opportunity to discuss things with one or two people. The trips always included private business owners and farmers, but also a substantial number of people from the Palestinian Authority. The middle-managers were usually the most interesting and informative to talk to. And as with Sammy’s story, I will never forget what Izzat Faruq told me.
Izzat worked for the Palestinian Authority and was a middle manager in one of the Agriculture Ministry’s departments. Smart and articulate, Izzat had worked his way up the bureaucracy through hard work. Sadly for him, however, he lacked the political connections to progress any further. He was aware of his station in life and stoic about it. We were on several trips together, and after dinner one night, he spoke openly to me.
“Izzat, why do you come on these trips?” I asked.
“It is a good chance to learn. The Israelis are very good at this work.”
“Do you enjoy coming to Israel?”
“Sometimes yes, but it is not home.”
“Would you like to live in Israel? Do you like the cities? Everything is available here, much more than in your town.”
“That is true, but it is not home. It does not feel like home. My family has lived in the Jordan Valley for a thousand years, that is my home.”
“Will that be your children’s’ home?”
“I hope not.”
Izzat was in his late 30s. He was married and had two sons and a daughter. I knew this because Izzat is one of those fathers who carries pictures of his kids in his wallet, and needs little if any prompting to display them. Clearly a proud father, I wanted to understand what a committed bread winner in the West Bank thought about what is, objectively, the more materially advanced society of Israel.
“I hope Palestine becomes like Israel, but does not become Israel.”
“What do you mean? Does that mean you support the two-state solution? Or do you mean you just want more McDonalds and some Gap stores? Or do you want a democratic government?”
“In Israel children will have a better life than their parents had. I want this for my children. I want them to grow up thinking that they can be more successful than me. But that is not the case, they do not think this, and I do not believe this.”
This is when Izzat paused to look around the dining room. He wanted to make sure there was not anyone around who, if they overheard him, would get him into trouble. A composed man, he took a deep breath before answering.
At its own expense, Israel trains Palestinian farmers and businessmen in modern practices, knowing that a strong Palestinian export economy will be mutually beneficial.
“Do not misunderstand me, Israel is at great fault. But Israel is not why my people have failed to be a nation. You know my job, you know what I do, and you know the people I work for. Their interests are not the same as mine.”
“They do not want what is best for your children?”
“No, they want what is best for their children. A father wants what is best for his kids.”
I did not need Izzat to finish the thought; I knew what he was implying. His bosses wanted what is best for their children, which is not the same as what is best for his children. His bosses are part of the elite class that derives its power and wealth from corruption. Izzat earned what little was left over through hard work and subservience to the dysfunctional system, and with his small salary had to support his family and likely some extended family as well, if not also his aging parents.
“If I could give you and your family Israeli citizenship, would you take it?”
“I do not know. I have friends in Israel, Palestinians and Jews, and I could maybe make more money in Israel. My kids might have a better life. It is a nice country, but it is not home.”
“Would a successful two-station solution make your life better? Would it help your kids have a better life than you have had?”
“I do not think about that, it is pointless. I want a better life for me, and for my family. I want economic opportunity. Would a two-state solution help that? If so, then yes, I want it. If not, then it is not the most important thing.”
Izzat’s comments haunted me on my way home the next day. I genuinely felt bad for him, and I still do. He is completely shut out of the political process and stuck in a position below his talents through no fault of his own. In my experience, Izzat’s story is as powerful as it is common. That is to say, very powerful and very common.
A few months earlier, I and those in my fellowship program had the opportunity to visit Kfar Vradim, an Israeli town nearly equidistant between Nahariya and Tzfat, and meet with its mayor, Sivan Yehieli. Yehieli is a charismatic and outspoken man. Our discussion with him was wide-ranging. He talked about his particular brand of Zionism, the existential importance of Israelis settling the north and south of the country, efforts he and other mayors were making to improve relations with Arab towns in the north, and his personal reflections on the Israeli-Palestinian conflict. During the discussion I had scribbled down some comments Yehieli had made, and one had come to strongly resonate with me as I spent more time in The West Bank:
“The Palestinians have the responsibility for themselves, but they have not taken that responsibility. They want a judiciary, where are their judges? They want schools, where are their teachers?”
What Izzat told me was that Yehieli oversimplified the situation. If the Palestinians were led by Izzat and Sammy and those who, like them, wanted to build a better society, things would be dramatically better. If Palestinian leaders reflected the common desire for an independent judiciary capable of enforcing the rule of law, there would be capable judges protecting businesses from government overreach. If Palestinian leaders recognized that schools capable of teaching all Palestinian children the skills and knowledge they need to achieve a better life than their parents are critical to the future of the Palestinian people, there would be more teachers interested in and capable of achieving these goals.
Unfortunately, the reality is just as Izzat implied. The elite class of politicians and businessmen that make up the Palestinian Authority have different interests and different responsibilities than the rest of Palestinian society. Put another way, the average Palestinian is not often the constituency the Palestinian Authority is serving. The PA Ministry of Agriculture did not have Sammy or his employees’ best interests in mind, and was clearly prioritizing its own needs; it was not responsible to the people it, as a government, has a duty to serve. And Izzat’s bosses in the same ministry did not care about the future of Izzat’s children, only the future of their own sons and daughters. Unfortunately for Sammy, Izzat, and a sizeable majority of Palestinians, the interests of the few in power are dramatically different than theirs.
Through the PA, a small group of elites has concentrated power and wealth,
estranging the Palestinian people from its government and insulating the government from the people. Sadly, foreign attempts to aid the Palestinians are subject to the same regime, with devastating consequences. The attempt to use foreign aid to the PA as both a carrot and a stick has not closed the gap between the Palestinian people and their government. Rather, it has helped widen it.
American and European support for the Palestinian Authority now totals hundreds of billions of dollars—possibly trillions if non-governmental activities are included. With that money, we have helped build an elite-run system that bludgeons the entrepreneurial Sammys and marginalizes the pragmatic Izzats. Not a lot of Westerners get to see this dynamic from the inside, and that is a shame.
Much of the foreign support for the Palestinians is given with the best of intentions. This makes those who question it susceptible to all manner of criticism. That this questioning is often warranted, however, escapes many supporters and financiers of the Palestinian Authority, because it contradicts the comfortable mainstream narrative that reinforces their motivation. Meanwhile, the PA is as corrupt as ever, and uses our foreign aid to literally sell its people short.
The gap between the Palestinian people and their leadership is nothing less than catastrophic, and it will not be closed unless donors change the way they support the Palestinian Authority. A good first step would be to tie aid to greater PA transparency and responsibility to the Palestinian people. Donors should also insist on fiscal and legal reforms, as well as the establishment of robust and independent institutions—judiciary and education included. These are all necessary ingredients for economic growth and nation-building. Unfortunately, so long as we and other donors refuse to take these steps, we will remain part of the problem, not part of the solution.