Overcoming Foreign Dependency: Palestine’s Aid Problem

At a joint White House press conference on 28 January, alongside Israeli Prime Minister Benjamin Netanyahu, U.S. President Donald Trump revealed the long-awaited political framework of his Peace to Prosperity plan: a series of proposals aimed at resolving the ongoing Israeli-Palestinian conflict and fulfilling the Palestinian demand for an independent state. The 180-page document rejects the Palestinian right to return and supports the illegal Israeli settlements in the West Bank. The move has since provoked criticism from the UN, which reaffirmed its commitment to a two-state solution based on pre-1967 borders, and from Palestine National Authority President Mahmoud Abbas, who in response to the plan announced the severing of all ties with Israel and the U.S. Beyond the feasibility of the ambitious proposals, which  include the longest road tunnel in the world, the complete lack of Palestinian involvement in the project illustrates the varied forms of foreign domination that the Occupied Palestinian Territory has historically been subjected to. Since the creation of Israel in 1948, Palestinian dependence on foreign assistance has seen it become the second largest recipient of international aid per capita in the world, yet 29% of the 4.8 million residents continue to live under the poverty line, with 2.4 million living in need of food assistance. The Palestinian experience raises questions about the effectiveness of long-term development aid that often fails to confront institutional limitations that inhibit self-sufficiency, while perpetuating the political and economic power dynamics that facilitate foreign dependency. 

History of Foreign Dependency

Palestinian reliance on international assistance has left the population vulnerable to fluctuating aid programmes that respond to changes in regional and global diplomatic interests. As recently as 2018, the Trump administration announced that it would be ending all contributions to the United Nations Relief and Works Agency for Palestine Refugees (UNRWA), which has provided humanitarian relief in the region since its creation in 1949. This reliance on foreign aid not only leaves the Palestinian population vulnerable to the whims of politicians, but has also resulted in the exertion of political and economic control by outside powers, while little is done to improve institutional structures necessary for self-sufficiency within the occupied Territory. Almost three decades ago, the 1993 Oslo Accords and 1994 Paris Protocols granted  limited administrative responsibility to the Palestinian National Authority (PA) over areas of social policy, a move that appeared to signal a shift towards institutional change. However, as the Israeli government continued to be responsible for collecting VAT import duties on behalf of the Palestinians, they remained in control of 73% of the Territory’s total net revenues. With control over the movement of people, goods, and resources in the region, the reforms only worked to cement Israel’s political and economic dominance.

Institutional Failures

As Israel maintained monetary control, aid contributions also continued to grow, nearly doubling from $424 million in 2000 to $929 million in 2001 alone. The distribution of aid also shifted, and while only 20% was allocated to development programmes, some 58% was sent to the PA. This dependency on foreign aid not only saw the PA detach its interests from the performance of the struggling local economy, but also facilitated disengagement from any practical state building efforts. By 2007, the takeover of the Gaza Strip by Hamas, a group with which the international community refuses contact, only worked to divide the territories further and fracture any future state-building prospects, while the PA continued to be plagued with accusations of corruption, mismanagement, and human rights violations. 

While diplomatic efforts have continuously failed to confront the key issues driving the conflict, international development aid has simultaneously failed to address the lack of key institutional frameworks necessary for an effective, self-sufficient administration. Behind the façade of peace talks and agreements, the PA, while plagued with its own shortcomings, remains subservient to the Israeli government for revenue and for access to the goods and infrastructure necessary for economic development. Even the ‘trade not aid’ initiatives that have sought to overcome dependency have failed to implement any meaningful reforms. In 2007, the World Bank launched the Palestinian Reform and Development Plan that saw $7.7 billion donated to help integrate the Occupied Territory into the world economy. Despite this plan, low cost labour in the Territory saw it being exploited by Israeli interests, and economic growth continued to slow to 1.3% in 2019, with the World Bank predicting negative growth in 2020 and 2021. 

Empowering Alternatives

While aid continues to be an integral part of life in the Occupied Territory, it has failed to facilitate the structural changes necessary for a viable and sovereign Palestinian state. In response to the long-term limitations and volatility of foreign dependency, Palestinians are seeking empowering alternatives to the current political deadlock and apathy. Crowdsourcing is being used to fund local projects, like Build Palestine, an online platform that connects entrepreneurs to small organisations, with the aim of giving the community the power and right to control its own resources and development. These projects stand as symbols of hope and opportunity for a people that have long been under the control of external actors.

In the European Joint Strategy in Support of Palestine, the EU, the single biggest provider of external assistance to the Palestinians, explicitly highlights the role of aid in managing the ongoing conflict, rather than seeking to achieve a lasting and inclusive solution. The Strategy further emphasises that economic recovery can only be sustained with an increase in productive capabilities and a viable economic system which can only be achieved when occupation comes to an end. International actors, especially those such as the EU, who recognise the unsustainability of current humanitarian aid, must find the courage and coordination to prioritise the establishment of legitimate and resilient social, political, and economic institutions within Palestine. In doing so, they would not only ensure Palestinian survival, but finally provide the institutional structures necessary for liberation from dependency on unpredictable and unsustainable foreign development aid. 

Alex Wagner

Alex Wagner is a member of the Defence and Diplomacy policy centre’s working group.

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