- The Washington Times - Sunday, October 19, 2003

GENEVA — International aid funds earmarked to help the struggling Palestinian economy are in fact doing more to stimulate the economy of Israel, according to a report by a U.N. agency.

“It cannot be expected under the present circumstances that donor funds injected into the Palestinian economy would have a noticeable positive income multiplier effect,” said the report by the U.N. Conference on Trade and Development (UNCTAD).

“On the contrary, a positive multiplier effect of these funds would be felt in the Israeli economy,” the report said.

Since the signing of the Israeli-Palestinian Oslo accords in 1993, the U.S. government has committed more than $1.3 billion in economic aid to the Palestinians, including more than $180 million in 2002 alone, according to official U.S. estimates.

Other major international donors of development and emergency assistance to the Palestinians include the League of Arab States, the European Union and the World Bank.

But the UNCTAD report found that about 70 percent of Palestinian foreign borrowings were used to pay for imports from Israel.

Overall, the report found that for every dollar generated internally by the Palestinian economy, about 45 cents found its way into the Israeli economy.

Yaakov Levy, Israel’s ambassador to the United Nations in Geneva, criticized the negative tone of the UNCTAD report.

“Such an interpretation is erroneous as it places a negative attitude on the still healthy ties essential for the long-term co-existence of the economies of both people,” Mr. Levy said in an interview.

Mr. Levy also said the report failed to take into account some $700 million that was transferred to the Palestinians by Israel early this year.

The money had accumulated for two years as Israel collected value-added taxes, Customs duties and excise taxes on the Palestinians’ behalf but held up payments because of the 3-year-old Palestinian uprising.

During an UNCTAD session on Palestine last week, Mr. Levy told delegates from more than 100 countries that the uprising “has hurt not only the Palestinian economy but also other economies in the region, first and foremost the Israeli economy.”

The U.S. delegation at the session commended the UNCTAD report for outlining the devastating toll on development that the conflict was having.

But the delegation also said political and economic progress will require an effective Palestinian security performance. Without a Palestinian Authority that can effectively direct its people toward peace, it will be extremely difficult to make any progress at all, the delegation said.

Since September 2000, the loss of Palestinian gross national income has reached $5.4 billion and per capita income has fallen by 46 percent, dropping to $755 in 2002, the U.N. report said.

As a result, more than 2 million Palestinians in the West Bank and Gaza Strip are living on less than $2 a day. Unemployment in the territories has topped 40 percent with rates in the Gaza Strip running as high as 50 percent, it said.

The American delegation said the Palestinian economic crisis called for a continuing humanitarian effort and efforts to build strong and responsible Palestinian institutions.

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