Don’t Throw Good Money After Bad in the Middle East

(Washington, D.C.): The Bush Administration has apparently decided on the eve of Secretary of State Colin Powell’s trip to the Middle East to urge Israel to turn over an estimated $54 million in tax revenue to the Palestinian Authority (PA). The rationale: Such an infusion of funds is said to be needed to stave off the PA’s imminent bankruptcy, failure to meet payrolls and institutional meltdown.

In fact, Arafat’s proto-government may or may not be about to implode. If the Palestinian Authority does go belly-up, however, it will not be for want of funds.

As Kenneth Timmerman reveals in today’s Washington Times, there appear to be billions of dollars that should be available to the PA and the Palestinian people, but for the fact that Arafat and his cronies have diverted much of the international aid provided for humanitarian relief and other purposes. Specifically, Timmerman writes that the Palestinian chairman and his family members have been “personally pocketing hundreds of millions of dollars each year in tax transfers and kickbacks….” He also reports that former Israeli Prime Minister Ehud Barak turned a blind eye to this endemic corruption, viewing it as just another “price of peace.”

Consequently, the Bush State Department should not make the mistake of perpetuating the Clinton Administration’s reflexive tendency to squeeze the Israeli government to abandon principled positions — such as the present decision to withhold taxes collected on behalf of the Palestinians until the latters’ violent Intifada is brought to a halt.

If the Palestinian Authority genuinely needs money in the meantime, it should be encouraged to remember that charity begins at home — in this case, the home and Swiss bank accounts of Yasser Arafat and his fellow, corrupt apparatchiks.

In October 1999, I had the opportunity to return to Gaza and the West Bank for Reader’s Digest, to research a story on how the Palestinian Authority under Yasser Arafat was spending U.S. taxpayer dollars it received in aid.

After scores of interviews with PA officials, legislators, international aid workers and diplomats, as well as with past and present Israeli officials immersed in the day-to-day financial exchanges with the PA, the story that emerged with stunning clarity was one of monumental corruption.

Mr. Arafat, his wife and a coterie of close advisors, were personally pocketing hundreds of millions of dollars each year in tax transfers and kickbacks from state-controlled monopoly import contracts on virtually every basic commodity needed in Gaza and the West Bank.

Customs revenues booked by Israel on foreign goods transiting through Israel to the PA were transferred to a private bank account at the Bank Leumi in Tel Aviv that was opened in Mr. Arafat’s name and controlled by his personal financial adviser, Mohammad Rashid.

Israeli officials knew Mr. Arafat was transferring funds from this and other accounts under his personal control to terrorist training camps in Lebanon not to starving children in Gaza, or to building schools and roads in the West Bank. And yet, Prime Minister Ehud Barak and his government did nothing to prevent the money transfers, considering them to be the price of “peace” with Mr. Arafat. On Feb. 6, Israeli voters tossed Mr. Barak out of office by a landslide.

United Nations Middle East envoy Terje Roed Larsen will be in Washington this week, to plead with the Bush administration to pour more U.S. taxpayer dollars into the leaking boat of Mr. Arafat’s Palestinian Authority.

“The Palestinian Authority in just a few weeks will not be able to pay its salaries, which as an effect may lead to the collapse of key Palestinian institutions, which might lead to chaos and anarchy in Palestinian areas,” Mr. Larsen told reporters in New York last Friday.

Until now, many wealthy Palestinian investors have shunned putting their money into Gaza or the West Bank, for fear of Mr. Arafat’s corrupt ways. Those who have come such as the family of U.S.-based Palestinian businessman Hani al-Masri have cushioned their investments with hefty doses of political protection, by putting family members in Mr. Arafat’s Cabinet and arranging for U.S. taxpayer-funded guarantees through the Overseas Private Investment Corp.

In October 1999, a $10 million contract to rebuild the central bus station in the West Bank city of Al Bira was awarded to an al-Masri family business without competing bids or an outside evaluation of what the project should cost. An investigation by the Palestinian Legislative Council into alleged corruption was shut down on Mr. Arafat’s orders last year. Legislators who complained of Mr. Arafat’s actions were thrown in jail.

And that is just a trifling example of what goes on. Al-Masri’s corporate empire, known as the Palestine Development and Investment Ltd., PADICO, owns a controlling interest in the fledging Palestinian stock exchange, the country’s telephone company, the electric company, and two tourism companies. It is also the only company licensed by Mr. Arafat’s regime to build projects financed by World Bank, USAID and European Union loans.

Mr. Larsen hopes to meet with Deputy Secretary of State Richard Armitage this week in Washington. While Mr. Larsen has a great deal of credibility with journalists and has spent years on the ground, Mr. Armitage should listen politely to his pleas, then show him the door.

Before the United States dips into the taxpayer’s purse to bail out the Palestinian Authority, Mr. Arafat should take out his own purse. And before he cries poor mouth to the bleeding hearts in Europe again, he might dip into the billions of dollars he has salted away in Swiss bank accounts over the years and use them for the benefit of his people, instead of building new palaces for himself and his family.