Hamas Victory Sheds Light on Palestinian Finances

Palestinians vented years of frustration and anger at the polls in late January. They rejected Fatah’s bid for re-election citing high rates of unemployment and poverty attributed to the party’s mismanagement, and instead gave Hamas, a group that ran on the promise of change and reform, a majority of the seats in the 132-member Palestinian parliament.

“Fatah has done nothing but make us poor,” one voter told USA Today after the election.

But with Palestinian votes come high expectations for the group founded in 1987 and labeled a terrorist organization by the United States and Israel. Hamas must now prove its ability to govern the daily lives of some 3.7 million Palestinians in the West Bank and Gaza and turn a legacy of corruption into services for the poor, jobs, a smooth-running government and a budget not blemished by high deficits.

And they must do this under the gun of a threatened withdrawal of aid by European and American officials who have demanded that Hamas reject violence and accept the existence of Israel.

Palestinian spending

Soon after the election, Palestinian officials announced that more than $700 million in funds had been siphoned out of government coffers and that the Palestinian Authority was bankrupt. The Palestinian attorney general is currently conducting an investigation into where the money went, but most Palestinians believe corrupt officials are to blame. They say officials lined their pockets with the money, much of it donated by international organizations for public programs.

Public sentiment also points to a system of cronyism instituted by Palestinian officials over the years, with prime government jobs going to Fatah members and their supporters.

“There’s no concrete study about the degree of corruption,” Samar Assad, executive director of the Palestinian Center in Washington, D.C. said. “A lot of it has to do with perception. It’s a small society. People know people. When a person gets a job in a government institution and you know the financial situation of this family and all of a sudden there’s a villa and a nice car … you get suspicious.”

Though Palestinian President Mahmoud Abbas promised to crack down on corruption and bring in reforms during his tenure, analysts claim little was done under Fatah. Some claim old guard Fatah leaders tied Abbas’ hands. Others have said the former protege of Yasser Arafat had no intention of reforming the government until the election forced his hand.

Can Hamas reform Palestinian finances?

With Fatah now likely playing the role of opposition in parliament, Hamas is left to make sense of the financial situation. Some 135,000 civil and security servants have to be paid each month, the authority’s largest expenditure. The government also must oversee everyday issues such as keeping schools open, running hospitals and ensuring trash gets removed from the streets of Gaza and the West Bank.

In January, the government came close to crisis when Israel, a major contributor to the Palestinian Authority’s monthly revenue, refused to release $55 million in monthly tax revenues owed the Palestinians but acquiesced at the last moment.

And if Hamas refuses to accept Israel and reject its militant past, the United States and other Western countries and organizations may yank their support which helps fund the Palestinian government’s $800 million annual budget.

“Palestinian people are worried about Hamas’ victory, worried about salaries, food,” Palestinian coffee shop owner Samy el-Aklouk told the NewsHour. “And workers are worried that all contacts with Israel will be stopped and they will have no jobs. They are worried that European aid will be cut too.”

Hamas does have some things going for it. It has a history of providing social services in the communities where its officials have been in power since the 2004 municipal elections. The group has avoided corruption, many say because its strong religious beliefs keep such activity in check.

In an opinion piece in The Washington Times, journalist and author Claude Salhani argued that despite Hamas’ track record, the group still might run into problems.

“[T]here is a huge difference between providing free health clinics and schools to a few thousand, versus doing the same for the 2.3 million residents of the West Bank and the 1.4 who live in the overcrowded Gaza Strip,” Salhani wrote.

Other analysts are less skeptical.

“In terms of governance … corruption and redistribution and putting the priorities of the ministries and departments in order, I think that they would do better. I don’t think there are any doubts about that,” the Palestinian Center’s Assad said.

Hamas’ political stance

It may be Hamas’ position on the Israeli question that determines the party’s ability to stabilize the Palestinian Authority’s finances.

The U.S. Congress has approved $150 million in funding for 2006 to the Palestinian Authority, but with stipulations that include peaceful relations with Israel.

Following Israel’s release of the $55 million in January, Israeli Foreign Ministry spokesman Mark Regev said future releases of the money also would be conditional.

And whether Hamas will be able to manage a cessation of violence and work with Israel to loosen strict controls on check points within the occupied territories and between Israel will determine whether unemployment drops and Palestinians are able to do trade with their Israeli counterparts and secure jobs outside of the West Bank and Gaza.

Hamas leaders have until Feb. 18 — the deadline to choose a speaker and deputy speaker of the council — to decide their strategy and a policy on Israel. Analysts believe its leaders will seek an extension until after Israeli elections in March.

“After that we’ll see a much more definite program,” Assad said.

If Ariel Sharon’s new, moderate party Kadima wins, Hamas may have a better chance at working with the Israeli government. If voters back the harder line Likud Party and its leader Benjamin Netanyahu, Israel may launch an international campaign to boycott the Palestinian government, according to Assad.

In the event Israel does refuse to work with a Hamas-led government, Palestinians may turn to Arab states for support. Both Saudi Arabia and Qatar have offered money and Syria has said it will urge Gulf states to support the fledgling government if necessary.