Hard Times in Hebron

Can the thriving Palestinian economy survive as millions of U.S. aid dollars slow to a trickle?

HEBRON, West Bank – This flashpoint city, nestled in the West Bank's Judean Mountains, is rarely noted for its bustling economy, neatly paved roads, or sparkling performance center. It is far better known for the nets shopkeepers have stretched above the market streets to keep Jewish settlers from throwing rocks on Palestinian pedestrians, its "apartheid sidewalks," the disputed Ibrahimi Mosque (both a Muslim and Jewish holy site), and the recurring street clashes between Jewish and Arab residents.

And yet, U.S. government funding has led to some small glimmers of economic life for Palestinians here -- gains that may crash to a halt because of a diplomatic feud spurred by the Palestinian bid for statehood at the United Nations.

As with many cities in the West Bank, Hebron's economic vitality centers around the millions in foreign dollars that have poured in, including money from the U.S. Agency for International Development (USAID). An April 2011 World Bank report noted that real economic growth in the West Bank and Gaza reached 9.3 percent of gross domestic product in 2010, exceeding the Palestinian Authority's budget projection of 8 percent -- although the growth was largely "donor-driven."

USAID has been one of those major sources of foreign funds. Since 1994, it has spent $3.4 billion in development funds in the Palestinian territories of West Bank and Gaza, with new roads, water systems, health care facilities, and schools that have served both residents and businesses of cities like Hebron, the largest municipality in the West Bank, with some 189,000 residents.

The money has helped fuel Hebron's recent boom, especially as other economic indicators have improved. The city has doubled the number of building permits issued since 2006, and is preparing to solicit bids for a road to a new $13 million water treatment facility -- financed, of course, by USAID.

"The USAID support is very essential," said Khaled Osaily, Hebron's mayor. "It creates a lot of jobs. The situation here, the infrastructure is very bad. This USAID money stopped a lot of suffering for the people."

But since September -- when Palestinian President Mahmoud Abbas, frustrated with the lack of progress of peace negotiations with Israel, defied the United States and Israel by formally submitting a request to join the United Nations as a full member state -- the flow of U.S. funds has been in jeopardy. The congressional committees responsible for the aid moved quickly to stop it. "Despite decades of assistance totaling billions of dollars, if a Palestinian state were declared today, it would be neither democratic nor peaceful nor willing to negotiate with Israel," Rep. Ileana Ros-Lehtinen (R-FL), chairman of the House Foreign Affairs Committee, said at a congressional hearing to review the funding. "By providing the Palestinians with $2.5 billion over the last five years, the U.S. has only rewarded and reinforced their bad behavior. It raises tough questions as to just what are the tangible benefits for the U.S., or for lasting peace and security between Israel and the Palestinians, derived from decades of assistance provided by the United States taxpayers."

Although the Obama administration opposes Palestinian efforts to seek greater global standing outside of the peace process -- and cut off payments to UNESCO, as required by U.S. law after the organization accepted the Palestinian territories as a full member state in October -- it also rejected the congressional moves to punish the Palestinians. "This money goes to establishing and strengthening the institutions of a future Palestinian state, building a more democratic and stable and secure region," Victoria Nuland, State Department spokeswoman, said in an Oct. 3 briefing with reporters in Washington. "We think it is money that is not only in the interest of the Palestinians; it's in U.S. interest and it's also in Israeli interest, and we would like to see it go forward." The freeze on funds has created a climate of paralyzing uncertainty for the workers employed by USAID, for the agency's partners, for contractors who do business with the NGOs and for a Palestinian government that relies heavily on donors' largesse.

"New schools were built, wells were dug, and judges were trained," said Daoud Kuttab, director general of the non-governmental Community Media Network in the Palestinian territories. "All this positive change ... is threatened to evaporate as the United States Congress decides to punish the Palestinian population for the acts of their political leadership."

On Jan. 16, the Palestinian Authority announced that it would need to raise taxes and cut costs to cover a more than $250 million shortfall in foreign assistance, the majority of which was supposed to come from USAID.

"We're hopeful that the rest of the money will come back, but we're not sure," Ghassan Khatib, spokesman for the Palestinian Authority, told me. "This money is going mainly to development and humanitarian projects. There is no justified reason for holding it. It's important for stabilization."

The Palestinians receive different payouts from different pots of U.S. money, both through USAID and the State Department. Of $187 million in economic assistance from USAID that had been pledged to the Palestinians, Congress is still withholding $147 million from the fiscal year 2011 budget cycle -- $40 million was released in late December. Another $200 million in direct budget support from the State Department to the Palestinian government was paid in two installments; the final $50 million was released in early September after a U.S. congressional delegation returned from visiting the region. Later in the fall, an additional $150 million was released for security assistance through the State Department's Bureau for International Narcotics and Law Enforcement.  

"We have to use whatever levels of influence we have to try to get the peace process going," said Rep. Gary Ackerman (D-N.Y.), the ranking member of the House Subcommittee on the Middle East and South Asia. "They're not entitled to other people's money. We're not punishing them. We're trying to encourage them."

U.S. officials have declined to name which projects will be affected, saying only that health service and education projects will feel the biggest pinch. But Osaily, a businessman by training, is understandably worried about how he will keep his city thriving in the coming months without the money. He knows that Hebron will not get all of the pledged assistance it had expected. "If they cut it, all of these projects will be paralyzed," he said. "It's not in the favor of the Palestinians or America or even Israel to do this."

Palestinian businessmen are also wringing their hands as they look for ways to make up lost business revenues, which had been fueled by foreign-funded infrastructure projects.

Nabil Zghier, chief executive of the Royal Industrial Trading Co., which makes plastics in Hebron, said that although he gets no direct foreign assistance, many of his customers do. Zghier said he owes his suppliers $2 million, but his customers, who rely on USAID funding, have not been able to pay him.

"I'm not sure what we're going to do," he said.

Israel initially withheld funds in retaliation for the statehood bid, freezing the monthly transfer of tax funds collected through customs and other fees, but ultimately released the money in late November. It is now pushing the United States to release the remaining USAID funds, under the logic that withholding the funds will only weaken the Palestinian Authority and empower Hamas.

Critics of the Palestinians' reliance on foreign funds argue that the freeze highlights how fragile the Palestinian economy remains, despite Prime Minister Salam Fayyad's much-touted state-building efforts. They also emphasize donor money's negative effects on private Palestinian businesses -- NGOs pay higher wages, for example, making it difficult for private companies to compete for workers.

Sam S. Bahour, a Palestinian-American businessman who lives in the West Bank, said the money was meant mostly to appease Palestinians, offered as a concession because diplomacy has failed to produce an independent state.

"Those donor monies are not coming in to sustain our economy," he said. "Those monies are coming in to sustain a welfare system."

For many Palestinians, who are concerned about the upheaval in the Middle East and the future of their nascent state, this focus on U.S. congressional funding misses the point.

"The question is bigger than the question of money," said Mahdi F. Abdul Hadi, chairman of the Palestinian Academic Society for the Study of International Affairs, an important think-tank in East Jerusalem. "The stake is bigger than the question of funds. Those experiencing poverty, those experiencing misery, they are living in an apartheid system. They have other priorities. The agenda is so big, so complicated, so much more than the people benefiting from the funds."

Hadi said he is confident the United States will restore funding. "This is a political matter, and it's a matter of timing," he said. "They don't want to be out of the arena."

For now, all the residents of Hebron can do is wait for foreign donors to decide their city's economic fate. And, so far, preoccupied with their own fiscal crises or domestic issues, no other countries have stepped in to fill the void. On the al-Haras road, one of the city's main arteries, the King of Falafel restaurant serves fresh pickles, hummus and, of course, falafel -- which, like most everything else in this disputed region, is claimed by both Palestinians and Israelis cuisine as their native cuisine.

On New Year's Day, King of Falafel was busy, with a steady line of customers keeping the falafel-maker busy scooping balls of mashed chickpeas and dropping them into a vat of oil. Two men who gave their names as Khalid and Waleed took long drags on their post-dinner smokes and discussed the loss of USAID funds.

"We have no resources like gold or oil like the other Arab countries," Khalid said. "We really care about the money that comes from the outside. [But] it all depends on politics. We get it if we are 'good.'"

As he spoke, Waleed interrupted, waving his hand. "The American support for us is not free," he said. "We do not ask for it. It's imposed on us. The one who asks for it is the leadership." In other words, Waleed explained, he who asks for the money is ultimately the one who benefits from it.


Jackie Spinner


Swimming against the Tide

Will Nicolas Sarkozy ditch the French mission in Afghanistan to save his own presidency?

PARIS – In the United States, sadly, the death of four soldiers in Afghanistan is the sort of routine event that barely makes the evening news. In France, on the other hand, which has seen far fewer casualties in over 11 years of fighting, the killing of four French military trainers and the wounding of 15 more by an Afghan recruit on Friday, Jan. 20, is not only a tragedy, it is forcing leaders to reevaluate the entire mission. One doesn’t have to be unduly cynical to think that the impending presidential election is something of a factor.

"The French army is in Afghanistan to serve the Afghan people, against terrorism and against the Taliban," a somber and visibly fatigued President Nicolas Sarkozy told diplomats in Paris after morning arrived with the bad news. "The French army isn't in Afghanistan so that Afghan soldiers fire at them."

While several top French officials initially suggested that a 21-year-old recruit, Abdul Mansour, was a Taliban fighter who had infiltrated Afghan army ranks, other indications suggest that he was a lone wolf or that he -- like millions of Afghans -- suffers from post-traumatic stress disorder. A French security source told the conservative daily Le Figaro that Mansour, who was captured after the attack, asserted he had become enraged over the video of U.S. Marines urinating on Afghan corpses.

What is certain is that the four flag-draped coffins that arrived in France in the pre-dawn hours of Jan. 23 brought the French death toll in Afghanistan to 82 since 2001. Eleven years into a fight without a clear victory, the attack spurred Sarkozy to freeze France's training of Afghan soldiers and publicly mull withdrawing French troops on a sped-up timeline.

So, will Sarkozy's France "go wobbly," as Margaret Thatcher used to say, in Afghanistan? The president set the stage for a wobble when he suggested that France requires substantive assurances that Afghan authorities will properly vet recruits to avoid putting French trainers at unnecessary risk. Sarkozy promised to seek clarification during a meeting with Afghan President Hamid Karzai in Paris slated for Jan 27. If he isn't convinced, Sarkozy suggested, France is gone.

But there are reasons to doubt Sarkozy's seriousness. If this attack, in a remote Afghan province, really shook the Elysée as much as the president suggested, should Washington be worried about the possibility of losing 3,600 French military personnel on the ground in Afghanistan in short order? U.S. Secretary of State Hillary Clinton sounded remarkably unconcerned about that possibility after she expressed her condolences on Jan. 20. "I am in great sympathy with what happened to the French soldiers. It was terrible and I can certainly appreciate the strong feelings that are being expressed," Clinton said at a press conference with German Foreign Minister Guido Westerwelle. "We are in close contact with our French colleagues and we have no reason to believe that France will do anything other than continue to be part of the very carefully considered transition process."

Her confidence that France would stay put until 2014, along with the rest of NATO, enjoyed apparent confirmation when she spoke with French Minister of Foreign Affairs Alain Juppé the next day, as they discussed ways to strengthen their effectiveness and security in Afghanistan. Juppé said several days later that France should not "succumb to panic" by pulling out troops too early. This certainly doesn't make it sound like the French foreign-policy establishment is preparing for withdrawal.

So is it political posturing? Could it be that Sarkozy's public doubts are in large part due to France's looming presidential elections this spring? The latest polls indicate that the strikingly unpopular incumbent, who faces the disapproval of more than two-thirds of the French electorate, will be crushed by double-digit percentages in a likely run-off with Socialist Party candidate François Hollande. Several polls show Hollande defeating Sarkozy by as much as 14 percent.

While a majority of the French (albeit just 55 percent) supported NATO's entry into Afghanistan in the aftermath of the 9/11 attacks, most of France long ago shifted toward bringing home their soldiers after the Taliban were pushed from power. Now, with the Taliban's radical international elements pushed beyond Afghan's borders (into Pakistan) and Osama bin Laden in a watery grave, the feeling is even stronger. A survey taken last August, prior to a recent surge in the killing of French military personnel, showed that 75 percent of French citizens were in favor of moving up the French withdrawal.

Hollande is sensitive to these concerns. His appeal has much to do with his low-key likability, his everyman sensibility, and his refreshingly understated slate of limited-cost domestic promises in a time of double-dip recession and austerity -- all in stark contrast to Sarkozy, who promised almost limitless reforms during the 2007 campaign and a bold foreign policy agenda, and who has little to show for it now.

On Afghanistan, Hollande is benefitting from promising less of a French military presence (a money saver, as well as a life saver), and he is giving the impression that he is more likely to deliver. "Their sacrifices deserve respect from the entire nation," Hollande said of the most recent casualties this weekend, as he simultaneously rolled-out elements of his modest domestic platform and restated his intention to bring all troops home by the end of 2012 -- at the latest. "We must have the lucidity to say ... that our mission in Afghanistan is finished," Hollande said on Jan. 22.

Surely aware that a Socialist victory could guarantee a sped-up French withdrawal from Afghanistan, the Pentagon has been careful not to undermine Sarkozy, as Clinton did when she offered assurances that France would remain in Afghanistan, implicitly suggesting to the French electorate that the president's doubts about NATO mission there were insubstantial. A Pentagon spokesman respectfully emphasized that the decision about when to withdraw French troops lies fully in Sarkozy's hands. After all, it would only serve the Socialists, and make an early French withdrawal more likely, if Sarkozy were successfully portrayed as Washington's poodle.

But the communications contortions coming out of the Elysée presidential palace these days are the norm given a tough electoral climate that leaves Sarkozy with little time and even less leeway on the issues that most worry the French. The two-round elections begin on April 22, with a run-off on May 6. Up until now, Sarkozy's presidential campaign has bordered on the surreal, based on the odd analysis by his inner circle that as France's president in a time of crisis, le peuple don't want a candidate, they want a leader. Based on this analysis, Sarkozy hasn't even formally confirmed that he is running yet, running a kind of stealth campaign disguised as actual governance. At this point, the Elysée's strategy borders on the farcical, given that the ruling political movement has no other plausible candidate for the presidency, and given that Sarkozy's candidacy is a fait accompli to nearly everyone in France.

But most French people also feel that Sarkozy has failed on the lion's share of the most significant issues that propelled him to victory in 2007. He promised the French that they could "work more to earn more," that unemployment would drop to just 5 percent and that their purchasing power would grow. Instead, unemployment is at 9.7 percent and rising, the retirement age has increased by two years, and he is trimming or eliminating an array of popular government subsidies. France has recently entered into a second recession, lost its across-the-board AAA credit rating, and he's increased an array of taxes that affect rich and poor alike.

The traditional pathway to re-election for a French incumbent -- spreading money around and making big-budget promises -- is no longer available given that international credit agencies are keeping a close eye on French spending. So Sarkozy is relegated to doing little of substance other than playing defense, whether on fiscal policy, unemployment, or even protecting the French mission in Afghanistan. As he made clear in his comments to diplomats, Afghanistan is a war that he inherited, but that he thinks is just. A majority of the French initially agreed, and perhaps they still do, but three in four now believe -- as does Sarkozy's challenger -- that it doesn't make sense for France to linger much longer. A slight majority of Sarkozy's own party also feels this way. So how long can the president continue to swim against the tide?