Salam Fayyad, the western-educated economist/Prime Minister of the West Bank, has been the point man for western backed development efforts throughout Palestine. Fayyad’s institution-based approach to development and his unwavering support for peace with Israel has won over many converts throughout the United States and Europe who have made a habit of promising (and occasionally writing) large checks to support the Palestinian drive for economic independence. Four years after his appointment to the Prime Minister’s office, Fayyad has seemed to have more friends in the west than he does in Palestine, particularly after the recent agreement between Hamas and Fatah. Fayyad’s economic successes have so far hid the downfalls that are inherent in so-called Fayyadism; however it is possible that Fayyad may fall victim to those invisible dangers he has built into the Palestinian economy.
Fayyadism is the Prime Minister’s call to put economic reform, security and good governance ahead of violent resistance to the occupation and useless negotiations. The west, particularly the United States, admired the dedication to the institution-building approach of Fayyad (though demanded a continuation of negotiations) and rewarded the novel approach through millions of dollars of aid to support the Palestinian National Authority (PNA) projects throughout the West Bank. Consequently, the Palestinian economy has blossomed, growing at 9.3% in 2010, according to the World Bank. Yet, despite great success at building the governmental infrastructure fo the PNA, the 9.3% economic growth rate rang hollow.
Nearly all the economic growth has occurred in the quasi-capital city of Ramallah, not only creating a terribly unequal economic growth distribution across the country, but also presenting the international community with a false idea of the state of the Palestinian economy (see Thomas Friedman’s glowing answers for the Palestinians as an example). Fayyad’s economic policy focuses on Ramallah’s growth as a center for Palestinian businesses has nearly completely neglected the rest of the West Bank and all of Gaza (where, admittedly, he is limited). Indeed, poverty levels in parts of Area C, where the PNA is unable to work, is worse than in some parts of the beleaguered Gaza Strip. A recent report from the UNRWA undermines the economic successes of Fayyad by highlighting the soaring unemployment rates of both refugees (nearly 28%) and non-refugees alike (around 24%).
In addition to the growing unemployment rates, the relative purchasing power of Palestinians decreased in 2010. Of course, these numbers run counter to the general growth rate of the Palestinian economy, which is predicted to grow at a healthy 7% in 2011. Yet again, these growth rates are misleading. Palestinians are still recovering from the massive economic damage of the Second Intifada, allowing for higher than normal growth rates. Secondly, says the World Bank, Palestinian economic growth rates are dependent on international aid and are not sustainable without the help of the international community. As the PNA is dependent on international funds for economic success, the Palestinian government is forced to meet certain requirements dictated by the funding agency, thus reducing the efficiency of aid; the PNA, for example, spends ten times as much on security than it does on sustainable development projects.
The problems that are hidden behind Fayyad’s success in government may be catching up to him. By building a donor-dependent economy, Fayyad has not only prohibited sustainable development, but has also built inherent vulnerabilities into the Palestinian economy. These economic cracks are showing as Fayyad announced a national deficit of nearly US$1 billion and expressed concern that the Palestinian economy was failing due to slow delivery of international aid. Politically, Fayyad is in a similarly stressful situation. The Prime Minister has disagreed with Palestinian President Mahmoud Abbas’ plan to seek UN recognition in September, straining an already tense relationship between the ruling party, Fatah, and the Prime Minister. Fayyad has also been rejected as Prime Minister by Hamas after Fatah and Hamas were able to reach a preliminary reconciliation agreement earlier this spring.
Fayyad is in the rather odd position of being highly regarded as the man for the job throughout the west (including Israel) while losing popularity rather quickly throughout Palestine. Fayyad, an independent, has earned the ire of both major parties in the country, is seen by many as working too closely with Israel and has left the majority of the population out of his economic rejuvenation program. Yet the support of the west could save Fayyad’s neck, as the PNA does not want to lose support from Europe and the United States, particularly if a unification deal between Hamas and Fatah can be finalized and implemented; a unity government that included Hamas would seem far less radical to the west with a friendly and familiar face remaining at the helm.
Photo From Palestinian Pundit