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Commentary: Funding Scandal Shakes Confidence in Palestinian Civil Society, April 2003

An AP Commentary by Iain Guest, Jerusalem

Throughout the last thirty months of violence between Palestinians and Israelis, European governments have clung to a dream - that Palestinian nongovernmental organizations (NGOs) were creating an independent "Third Way" between two implacable enemies and laying the basis for a Palestinian state based on the rule of law and human rights.

The dream has now turned to a nightmare following the disclosure that one of the largest and most respected Palestinian NGOs, LAW, may have misspent as much as $4 million - about 40 percent of its aid from Western sources.

Tales of excesses - illegal land purchases, personal bank accounts, crooked audits - are now beginning to surface from other NGOs. Several governments and international NGOs that support civil society met in Jerusalem recently to announce a suspension of their funding to LAW. They are now threatening a lawsuit.

This may not sound like headline news at a time when war is raging in Iraq, but it could have a major impact on the Palestinian-Israeli conflict, which many Europeans feel is more of a threat to stability in the Middle East than the regime of Saddam Hussein.

To say that European governments are disappointed by LAW's dishonesty is an understatement. Many European diplomats, who have close friendships with Palestinians, feel a sense of deep personal betrayal. But at the same time, the scandal has also put an end to the comforting illusion that buying off Palestinian civil society can substitute for political intervention.

Ever since the Palestinian uprising began in September 2000, Western governments have shrunk from confronting Israel over the strangulation of Palestinian civilian areas and the expansion of settlements. Many Western diplomats are convinced that Israel's violent response to Palestinian extremism has only encouraged the suicide bombers. But instead of taking Israel to task, their governments have chosen the soft option and poured money into the Palestinian territories. Palestinian NGOs have been one of the main beneficiaries. There now number well over a thousand, and their income from the West has increased from about $35 million annually in 1994 to $120 million in 2002.

This infusion of support has been easy to justify, because many NGOs has performed heroically over the past decade and provided essential emergency services to besieged Palestinian communities, often at great personal risk to their staff. I have seen teenage medics from the Union of Palestinian Medical Relief Committees (UPMRC) negotiate ambulances past roadblocks, and risk their lives to drag wounded demonstrators out of riots under the nose of Israeli snipers. The Community Mental Health Programme in Gaza has provided emergency support to almost a fifth of Gaza deeply traumatised population. It has been a dazzling, heroic, performance.

At the same time, human rights NGOs like the Gaza Mental Health Programme, LAW and the Palestinian Center for Human Rights, have also struggled to be even-handed in their advocacy. They have been relentlessly critical of Israel, but they have also protested against corruption in the Palestinian Authority, detention without trial, and even the summary execution of supposed Israeli sympathisers. One of their biggest successes was to lobby for a new law allowing for independent NGOs which is considered one of the most liberal in the Arab world.

But this attempt at even-handedness has not been welcomed by ordinary Palestinians, who have found it hard to understand the appeal of "transparency" at a time when their villages were under siege and they were living on the breadline.

In addition, many of today's NGO leaders played a key role during the late 1980s as members of the popular uprising that forced Israel to the negotiating table at Madrid. Now they are seen by many Palestinians as having abandoned their grassroots constitituency in favour of the Ford Foundation, USAID and other Western governments. This adds to the suspicion that the West's support for NGOs - like the creation of the Palestinian Authority - is really an effort to defang Palestinian militancy and reduce the security risk to Israel.

As well as alienating Palestinians, the NGOs have also infuriated the Palestinian authorities, which have responded with harassment and even violence. Eyad Serraj, head of the Gaza Mental Health Programme, was detained and tortured for seventeen days by the Palestinian security forces in the late 1990s.

Yet such incidents only enhanced the international credibility of the NGOs. Their international stock has risen further during the current uprising, because they have presented the world with an image of Palestinian decency which contrasts with the brutality of the suicide bombers. This is gratifying to European donors - but also deeply threatening to Israel. There can be no other explanation for the way Israeli troops methodically ransacked NGO offices during their occupation of Ramallah last April, causing over $4 million worth of damage.

Against this background, it is easy to understand the harm caused by LAW's dishonesty. The donors have commissioned an auditor's report (at a cost of $200,000) which has been widely leaked. It appears that LAW banked $2 million secretly and built a radio station. Neither was reported to donors or appeared in an audit. The Executive Director (now resigned) is reported to have spent lavishly on personal travel. LAW did not even register with the new NGO law that it lobbied so strenuously to get passed.

How can all this be justified? How to explain the fact that such a prominent NGO was living high on the hog while Palestinian children were starving? That an organization which has risen to prominence by criticising corruption in the Palestinian Authority was itself corrupt?

Many Palestinians of moderate persuasion are sadly aware that LAW has played into the hands of their critics in Israel, in the Palestinian Authority, and among Islamic extremists like Hamas. This may be one reason why the debacle has been front-page news in the Israeli press, but studiously ignored by the Palestinian papers.

The NGOs and their donors are now circling each other warily. European governments are promising to root out malpractice among Palestinian NGOs, no matter where it leads. The Palestinian NGOs, for their part, are acting hurt and bemused. LAW has changed its director and board, and defiantly insists that the chapter is now closed.

None of this makes much sense. The Palestinian NGOs must know that their credibility is on the line, and that they need to make a concerted effort to remove any suggestions of malpractice. Otherwise, the money from Western governments will likely stop. On the other hand, their donors cannot allow the misdeeds of a few to weaken civil society as a whole, at a time when Palestinian NGOs have a critical role to play in monitoring the Palestinian Authority. In other words, they remain indispensable to the Peace process.

Few NGOs like to hear themselves described as a "Third Way," because they share the aspirations of the Palestinians and do not relish the idea that they are detached from the essential struggle with Israel. Nonetheless, they are still pushing for an independent, democratic Palestinian state in the face of overwhelming difficulties.

There are countless examples of this, and they deserve more attention and more support. One initiative has been launched by the Democracy and Workers Rights Center (DWRC). In a recent interview in Ramallah, Hassan Barghouthi, director of the DWRC, explained to The Advocacy Project how his organization is trying to create jobs in Gaza - and in the process pressing the Palestinian Authority to allow independent trade unions.

Under the scheme, the DWRC is helping workers find short-term emergency work in Gaza City, which has been the target of some vicious Israeli attacks in recent months. Last year the DWRC used a grant from the Norwegian People's Aid - a leading Norwegian NGO - to put up half the wages for almost 2,000 workers, while employers paid the rest. A similar scheme is due to start soon in the West Bank.

By providing jobs, the DWRC also provides essential economic support for families in Gaza, where living standards have fallen drastically and malnutrition is on the rise. But the project has also allowed the DWRC to establish workers committees and use these to train workers in the shop-floor democracy.

These training sessions came up with two appealing - but subversive - ideas. One would allow workers to pay 50 shekels ($12) a month from their wages, as a contribution towards an emergency medical insurance scheme. (They can continue to contribute after they stop working.) Another would entitle workers to an educational allowance.

Both ideas were so popular that hundreds of workers came out on the streets in Gaza to demonstrate for them at the end of last year. Some workers camped out in tents for two months before the Palestinian Authority finally relented.

How does this promote free unions in the Palestinian territories? The answer is that it challenges the power of the two labour federations (the Palestinian General Federation for Trade Unions and the Federation for Palestinian Workers) which are heavily politicized and linked to Fatah, the party of Yasser Arafat - and hence in the pocket of the Authority.

These powerful federations responded to the DWRC's "subversive" initiative in Gaza by bussing in 150 counter-demonstrators who loudly demanded to know where the DWRC had received its funding. (The answer was the Norwegian People's Aid). The DWRC refused to back down. It was a small victory for shop-floor democracy, in the midst of chaos.

Hassan Barghouthi, the architect of this scheme, has repeatedly pressed Chairman Arafat to allow free trade unions. He is convinced that the Palestinian Authority must be pressed to reform, and that NGOs like his own still have a decisive role to play in pressing the Authority to respect the principles of democracy. He is clearly right - and this could be the critical moment. Even though Arafat himself is working out of a ruined compound in Ramallah and is considered an impediment to peace by the Israelis and the Bush Administration, the Authority itself has suddenly acquired a new lease on life.

Four international onlookers (the United Nations, European Union, Russia and the United States) have formed a "Quartet" and are sponsoring a so-called "Road Map" for reviving the Oslo peace process. The road map is still short of details, and the Bush Administration is clearly unwilling to pressure Israel. But the map offers the best chance of salvaging the Oslo accords, and for once the Europeans seem resolved.

They were greatly helped recently when the Palestinian Legislative Council (parliament) faced down Arafat in a power struggle and insisted on apppointing a new Prime Minister, Abu Mazen, with the power to choose his own cabinet. Under pressure from Western governments, several ministries have been abolished and four inept ministers who held key portfolios (including Labor) have been replaced by young, reformist-minded technocrats.

This is the first essential step on the road to making the Palestinian Authority function more like a normal government. Other major steps lie ahead, including new elections.

The problem is that time is running out. On the one hand, Israel is pushing ahead with new settlements, and erecting dividing walls between Israel and the territories, which have a permanent look about them. At this rate, Israel's de facto re-occupation of the territories could be just months away - rendering any renewed peace initiative largely irrelevant.

Equally worrying, the Islamic movement Hamas is rapidly gaining support among Palestinians, who despair of seeing any improvement in their daily lives. Unlike the Authority, which is seen as corrupt and unrepresentative, Hamas is seen as honest and in touch with the grassroots. Hamas gives out large amounts of money, runs charities, and makes sure its officials are visible at traditional events in the villages. Recently, Hamas gave $300 to each of 200 graduating students in Gaza. It was typical gesture, aimed at winning hearts and minds.

All of this reinforces the claim of Hamas to be the legitimate representative of the Palestinians. The fact that Hamas sends young suicide bombers out to die only enhances its reputation as Israel's siege grinds on.

NGO projects like the DWRC's job creation scheme cannot on their own reverse this tide, but they can offer an alternative to the extremism of Hamas and Israel, and also help to keep the Palestinian Authority honest in the critical months ahead. Of course, to do this credibly, the NGOs themselves must be honest. As they seek to make sure their aid is well spent, Western donors would be well advised to commission an independent inquiry which acknowledges the very real accomplishments of civil society, while calling for more oversight.

There are other, larger, lessons to be drawn from the LAW debacle.

European governments in particular need to understand that money is not necessarily the best way to strengthen civil society. The heart and soul of Palestinian civil society lies in the village associations that hold civic life together in communities, and depend on volunteers rather than cash. Many of these villages have been totally isolated by Israeli "closures." They could benefit from some public recognition and support from the diplomatic community.

Another lesson is that donors need to be more even-handed in their largesse. There is a growing perception that donors play favorites among the NGOs, and dole out huge amounts to the larger organizations like LAW without demanding any real accountability. At the same time, donors apply impossibly strict standards when it comes to small organizations, and quibble at tiny amounts. It is almost impossible for small NGOs to secure money to cover their running costs. The LAW debacle suggests that donors have never stood back and conducted a thorough evaluation of what their aid was achieving, and who was best suited to administer it.

At a deeper level, Western governments must finally understand that issuing a blank check to human rights groups like LAW is not the way to bring peace to the Middle East. Put simply, it is time for Europe to stop tip-toeing around this dangerous conflict, and address the root causes.

Part of this lies in reforming the Palestinian Authority and whittling away at Arafat's power without demeaning his role as the figurehead of Palestinian nationhood. But the other, larger, challenge is Israel.

Western governments have stayed mute for too long over the expansion of settlements and Israel's implacable response to each terrorist outrage. Too many innocents are dying without any justification or explanation. Rachel Corrie, the young American who was recently crushed to death in Gaza by an Israeli bulldozer, was a case in point. Ms. Corrie was, after all, protesting against a policy - the demolition of Palestinian homes - that is universally acknowledged to be illegal.

Each bulldozed house, and each unnecessary death, plays into the hands of extremists and chips away at the peace process. If Western governments do not intervene more forcefully with Israel, their credibility in the Middle East - already badly damaged over Iraq - will be further compromised. Palestinian civil society can be an ally, and the West is right to ask Palestinian civil society to reform itself. But civil society alone does not offer the way out of this dangerous and destructive crisis.

Iain Guest is Coordinator of The Advocacy Project

• For AP's 2001 coverage of the work of the DWRC and other NGOs referred to in this commentary see our OTR Series.
• Contact the DWRC

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