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Introduction

Independent Task Force Report
Strengthening Palestinian Public Institutions

June 28, 1999

Council on Foreign Relations

 

Introduction

The Palestinian Authority (PA) is a creation of the Israeli-Palestinian peace process that began in Oslo in 1993. For the first time, the PLO and the government of Israel negotiated directly with one another. The outcome of these historic negotiations was the exchange of letters of mutual recognition and the Declaration of Principles signed in Washington, D.C., on September 13, 1993. The PA was established upon the conclusion, in Cairo, of the Agreement on the Gaza Strip and Jericho Area on May 4, 1994. That agreement was followed on September 28, 1995, by the Israeli-Palestinian Interim Agreement on the West Bank and Gaza Strip (WBGS), which set the stage for the extension of the PA’s authority to additional areas, including Palestinian population centers in the West Bank.

The Oslo framework continues to impose severe constraints on Palestinian jurisdiction and control in both internal and external spheres. Nonetheless, Palestinian jurisdiction has gradually extended to additional areas and population centers in the West Bank. The PA now has territorial and functional control over 70 percent of the Gaza Strip and 29 percent of the West Bank. These areas contain 95 percent of the Palestinian population, other than those living in East Jerusalem, where the PA is not allowed to maintain offices or provide public services. The PA provides civil and legal administration to the population of the WBGS, although the U.N. Relief and Works Agency (UNRWA) for Palestine Refugees in the Near East remains responsible for a substantial share of social services, expenditure, and employment. The PA is also responsible for internal security in 70 percent of the Gaza Strip and 10 percent of the West Bank, with the remaining areas under the overall security control of the Israeli military government.

The Palestinians conducted their first general election on January 20, 1996. More than 780,000 Palestinians resident in the West Bank and Gaza Strip, representing 75 percent of the electorate, cast two separate votes. Palestinians living in East Jerusalem cast their votes at polling stations in the city. The first vote was to select 88 members for the new Palestinian Council, representing 16 electoral districts. The second vote was for the president of the executive authority. PLO Chairman Yasir Arafat was elected president with 88 percent of the vote. The Palestinian Council has come to be known as the Palestinian Legislative Council (PLC), while its executive authority is known as the Council of Ministers, or cabinet. The PLC, presidency, and cabinet, together with the judiciary and the ministries and other operational institutions, collectively form the PA.

The Interim Period as stipulated in the Declaration of Principles came to an end on May 4, 1999. The PLO and Israel conducted a first round of final status negotiations in May 1996, but have yet to begin concrete discussion of the permanent settlement. Major issues of contention postponed by mutual agreement in the Declaration of Principles have yet to be addressed, and resolved. They include Jerusalem, refugees, settlements, security arrangements, borders, foreign relations, and other matters. Whatever the details of a final agreement on these and other issues, the Palestinian people are firmly committed to attaining self-determination in the form of an independent, sovereign state.

The construction of Palestinian public institutions in the WBGS has been extensively shaped by four factors external to the PA: the Oslo framework, the PLO, Israeli policy, and the international donor community.

 

The Oslo Framework

The Oslo accords and subsequent interim agreements have contributed positively and decisively to Palestinian institution-building, not least by launching genuine Palestinian autonomy, by allowing the creation of the PA, and by allowing the first national elections in modern Palestinian history. However, the transitional and open-ended nature of the Oslo framework has also generated uncertainty and increased the incentive for both Palestinians and Israelis to minimize risk. On the Palestinian side, anxiety about further progress of the peace process and lack of assurance that it will lead to the exercise of full self-determination in the form of an independent state have reinforced arguments for a strong and continuing PLO role in PA affairs.

An inadvertent consequence of the stalemate of the peace process and the resulting emphasis on the political agenda has been to divert Palestinian public attention from institution-building. This weakens public demand for good governance and democratic practice. At times, the centrality of security concerns to the peace process has come at the expense of other budgetary priorities and undermined proper regard for human rights and the rule of law.

Moreover, the Oslo framework limits the power of the PA to pass primary legislation and deprives it altogether of legal jurisdiction over Israelis or any activity involving Israelis in the WBGS. The PA lacks responsibility for overall security in the autonomous areas, international crossing points, and foreign relations. It also lacks general control over land, water resources, and the movement of people and goods within the WBGS. This affects the development and functioning of its executive, legislative, and judicial branches of government.

 

The PLO

It is worth emphasizing that it was the PLO, in its internationally recognized capacity as sole legitimate representative of the Palestinians, that signed the Declaration of Principles and subsequent interim agreements with Israel. The PLO authorized the creation of the PA and conferred legitimacy upon it, a legitimacy that was confirmed and expanded by the 1996 general election. The PLO has continued to negotiate with Israel, to maintain foreign relations, and to sign international agreements on behalf of the PA, which lacks sovereign character. The PLO also maintains its status as the representative of all Palestinians, including those of the diaspora, and is therefore the only entity that has the authority to negotiate and guarantee a permanent settlement with Israel.

The continued relationship between the PLO and the PA has therefore been, and remains, necessary for the peace process. However, it has also had some negative effects on the construction of effective and viable public institutions in the WBGS and on the promotion of good governance. One problem is the seeming overlap between certain PLO and PA institutions, which is reflected in disputes over political and functional jurisdiction. One of the clearest examples is the PLO’s Executive Committee and its parliament-in-exile, the Palestine National Council (PNC), on the one hand, and the PA’s cabinet and its Legislative Council on the other. Furthermore, the difficulty of distinguishing the mandates of PLO and PA institutions has impeded the promotion of key elements of good governance, especially the exercise of constitutional power, transparency and accountability, and the rule of law. Inherited PLO norms and practices allow arbitrary decision-making, subordinate formal structures to informal ones, and erode due administrative and legal process. Opinion polls show growing public disaffection and loss of confidence in the PA. The situation is further aggravated by the persistence, among certain segments of the Palestinian population, of a traditional political culture that encourages deference to leaders even at the expense of good governance.

 

Israeli Policy

By signing the Declaration of Principles with the PLO in 1993, the government of Israel acknowledged the need for a Palestinian partner capable of providing the political, economic, and social underpinnings of genuine, long-term peace. It therefore committed itself to facilitating the establishment of effective and viable Palestinian public institutions. Yet the partial severance of links between the West Bank and Gaza Strip, border closures, and denial of free access to markets have had a direct and adverse impact on institution-building and governance in the PA.

On an administrative level, Israeli travel restrictions have compelled Palestinian public institutions to build redundancy into their structure and hire additional staff to maintain parallel departments in the West Bank and Gaza Strip. On an economic level, border closures and restricted access to domestic and external markets have made PA revenue unstable and unpredictable, thus encouraging monopolistic and other market-distorting practices.

Border closures, along with the restrictive Israeli policy regarding permits for travel to Israel or between the West Bank and Gaza Strip, led to lost opportunities worth $3 billion in direct cumulative income from 1993–98. 1 This must be measured against an economy with real GNP of $3.96 billion and real GDP of $3.32 billion in 1998. Border closures contributed to a 14.5 percent decline in per capita income since 1992, pushing up to 20.1 percent the number of Palestinians in the WBGS who lived below the poverty line in 1997. As a result, as much as 25 percent of total international assistance disbursements to the end of 1998 were diverted into emergency relief, instead of being spent on public investment as originally intended.

At the same time, Palestinian private investment has slowed as a result of declining sales and competitiveness coupled with increased costs of production and operation. Trade flows have collapsed. Private investment in the Palestinian economy stands at only 10 to 11 percent of GDP instead of the more usual 15 to 20 percent for countries at similar levels of development. Associated consequences are unemployment, which has averaged 31 percent, and a 17 percent net decline in per capita income since 1994. This weakens the income tax base, as well as purchasing power and the associated purchase and value-added taxes and import duties. Finally, it reduces the ability of lower-income groups to pay user fees for public services.

Israeli restrictions on the issue of permits allowing Palestinians to enter Israel or to travel between the West Bank and Gaza Strip 2 have further impeded the normal conduct of Palestinian affairs. For example, whereas the permits issued to a reported 27,000 Palestinian business travelers in early 1999 allowed them entry to Israel, only 4,000 of these permits allowed them to go additionally between the West Bank and Gaza Strip.2 This has led the two areas to develop bifurcated economies, complicating the efforts of Palestinian public institutions working to provide a unified legal and regulatory framework for both.

Market distortions have also resulted from the failure to revise some of the more restrictive provisions of the Paris Protocol of 1994 that forms the basis for Palestinian-Israeli economic relations. Israeli policy has impeded implementation of preferential and free-trade agreements between the Palestinian and external economies. Indeed, although the incidence of border closures was greatly reduced in the eighteen months before May 1999, the lack of access to the outside world remains the major barrier to Palestinian free trade.

 

International Donor Community

The programs and priorities of the international donor community have had both direct and indirect effects on Palestinian institution-building. In October 1993, two weeks after the signing of the Declaration of Principles, donors pledged $2.4 billion to support Palestinian socioeconomic development over a period of five years. With additional pledges made over the period, that figure increased to $4.2 billion by 1998, although for various reasons actual disbursement to the end of 1998 was $2.5 billion. In November 1998, donors pledged a similar level of support for a further five-year period. In both absolute and per capita terms, the donor effort for the Palestinians has been one of the largest ever undertaken by the international community.

Donor funds were crucial to the establishment phase of the Palestinian Authority, covering a significant portion of start-up, salaries, and other running costs for both the civil service and the Palestinian Police Force. Such support amounted to approximately $520 million by 1998, or some 21 percent of the $2.5 billion in total donor disbursements over the period. In addition, approximately $450 million, or 18 percent of total disbursements, were used to provide various forms of technical assistance to support the development of Palestinian public institutions.

International assistance has had a major impact on the development of all branches of Palestinian government. At the time of the signing of the Declaration of Principles there were no Palestinian governing institutions in the West Bank and Gaza Strip, and thus the Palestinian Authority had to be built from scratch. As a result, PA institutions initially lacked the ability to determine long-term needs and prioritize short- and medium-term objectives. In such a situation, programs were partly or largely donor-driven, particularly in the area of institution-building.

PA capacity in planning and prioritization greatly improved during the period 1994–99 as the Ministry for Planning and International Cooperation gradually assumed the central role for these matters. Nevertheless, competition among PA institutions for donor assistance has also led some donors to conclude direct arrangements with PA ministries, regional agencies, and municipalities. In these cases the striving of separate PA institutions to identify priorities and “shop” for funding has only confused priorities further. In others, donor support for competing institutions has worsened fragmentation, as in the environmental sector. This has been most problematic in the case of institutions that lacked the political or organizational skills to lobby for funding, thus compounding their weakness while favoring other sectors.

Overall, the coordinating mechanisms between the donor community and the PA have worked well, particularly when the scale of the effort and the complex political circumstances associated with the ongoing negotiations process are taken into consideration. Tight oversight and monitoring of international assistance have assured proper use of donor funds and encouraged transparency and accountability in the Palestinian counterpart institutions. Indeed, compared with other contemporary post-conflict situations, performance in general has been outstanding.

Nonetheless, there is room for improvement. Palestinians should continue to assume greater ownership of the planning and prioritization process. This will require that the PA play an increasingly central role in multilateral coordination forums. These forums include the Ad Hoc Liaison Committee of major donors, which is composed of representatives from donor capitals and headquarters of international organizations, and the Local Aid Co-ordination Committee of all donors, which is based in the West Bank and Gaza Strip. The forums are by now well-established arenas for the PA to present its priorities for the use of donor aid and other concerns related to the socioeconomic development aspects of the Oslo process.

Not all donors have delivered fully or in a timely fashion on their pledges: they should be urged to do so without further delay. Restrictions by certain donors requiring aid to be spent on goods and services from their own nationals and companies have also limited the net transfer of capital and technical know-how to the Palestinians.

 

Terms of Reference

As Palestinians prepare to enter into permanent arrangements, it is time to take stock of the PA’s achievements. It is also time to point out areas in which the PA needs to improve the level of effective, efficient, and democratic government in order to ensure the transition to genuine and meaningful Palestinian self-determination. Of course, even with the best of intentions and under the best of circumstances, the requirements of good governance can be blocked or derailed by external actors or by constraints imposed by the Oslo framework. However, this only underscores all the more the need for Palestinians to address any shortcomings in their own institutional capacity, performance, and culture for which they are responsible or capable to ameliorate and correct. No other party or partner can undertake this role on their behalf.

Good governance and democracy require the creation and consolidation of effective and viable institutions. These should be capable of satisfying the Palestinian population’s needs in a way that ensures popular acceptance of government authority. This report assesses Palestinian public institutions and recommends specific reforms for improved governance within a framework that is politically relevant and responsive to local conditions. At the same time, it seeks to apply guiding principles that are applicable globally.

Palestinian public institutions should meet four requirements:

  1. Political and bureaucratic accountability. Public institutions should report, and be accountable, to a source of legitimate authority with a clear chain of command and a popular mandate. Public servants should answer for their actions, and they should do so to independent bodies. Accountability is also a crucial ingredient of political legitimacy and popular acceptance, and for that reason transparency and openness about governmental decision-making are required. In general, public institu-tions need to be constitutionally established and to observe the separation of powers.

  2. The rule of law and due process. Public institutions should operate according to a clearly articulated and comprehensive legal and regulatory framework, and be subject to judicial review and adjudication. The rule of law and due process should be applied effectively and equally to all bodies and individuals both inside and outside government. A fair, reliable, and independent judicial system with the support of the forces of law and order is necessary to ensure such application.

  3. Strong, participatory civil society. Public institutions should cooperate with and be responsive to the institutions of civil society, including nongovernmental organizations, social associations, private sector actors, and political parties. For this requirement to be met, it is imperative that policymaking be open and predictable, especially in matters relating to public resources and resource management. It is also essential that full freedom of association and participation, freedom of information and expression, and respect for social and cultural rights be ensured. In such an environment, the institutions of civil society would be able to question and criticize the appropriateness of government actions. Responsive governance requires popular powers to select and remove political representatives through a guaranteed electoral process. It also requires that government, especially local government, be not conducted at a distance from most of the population.

  4. Competent, effective, and efficient public institutions and administration. Public institutions should have clearly defined mandates, operational objectives, and strategies and be able to generate effective policies under the direction of policymakers. They should have the means to ensure proper and transparent internal regulation and accountability, and procedural methods to monitor and assess performance. The civil service should be recruited on the basis of professional capability and merit, and should be able to implement policies independently of private commercial interests and without corruption or patronage.

In examining Palestinian public institutions and the extent to which they meet the four requirements mentioned above, the study has three objectives:

 

Endnotes:

Note 1: UNSCO, “The Economy of the West Bank and Gaza Strip: A Retrospective on the 1990s and Future Challenges” (AHLC meeting, Frankfurt, February 4, 1999), p. 8. Back.

Note 2: Stuart Eizenstat, Special Policy Forum: Economic Security and the Middle East (The Washington Institute for Near East Policy, March 17, 1999), No. 375. Back.