LONDON, 13 June 2006 -- The perennial problem of financing Palestine has this year resurfaced with a difference. Not only has the political landscape changed in both the Palestinian Territories and in Israel itself in a post-Arafat and post-Sharon era, but new ideas as to the sustainable financing of the territories, independent of the international community and Israeli repatriation of Palestinian taxes, are now emerging.

At a side meeting of the 31st annual meeting of the Islamic Development Bank (IDB) in Kuwait at end May 2006, former Iranian President Mohamed Khatami espoused his development finance credentials and suggested the establishment of a permanent account to finance the Palestinian Authority and development in the territories.

"It is not fitting for Muslims to see the oppressed nation of Palestine, with a democratically elected government, in this situation. The IDB-member countries should open an account in the name of the legitimate government of Palestine, and contribute to this account. Given the rise in oil prices, the oil exporting countries for a start could donate 1 percent of their oil revenues to this account, which could be managed as a trust fund by the Islamic Development Bank," suggested Khatami.

Speaking to journalists later, Khatami explained that this could raise an average of about $3 billion a year for the Palestinians. He stressed that the initiative needed the political will of the Muslim countries.

The politics of the Palestinian economy are much more complex. That is why his suggestion drew much more enthusiasm from ordinary delegates and the Middle East media than from ministers from the IDB member countries.

Both Kuwaiti Finance Minister Badr Al-Humaidi and IDB President Ahmad Mohammed Ali were muted in their response to the suggestion. Al-Humaidi said that it is up to individual governments to contribute in whichever way they wish.

Ali similarly reiterated that it is up to the countries to decide how they wish to help the Palestinians. The IDB, he explained, has financed out of its own resources various health and education projects in Palestine and has organized many fairs and exhibitions to promote Palestinian products in the hope of alleviating the effects of the Israeli embargo imposed on the Palestinian economy.

Perhaps it is revealing that the final resolutions of the IDB meeting made no mention of Palestinian financing at all.

Khatami's suggestion seems to have a major contradiction once you know more about his economic philosophy. Economic growth (and by implication progress) and backwardness, he stresses, are "two faces of the same coin."

In many Muslim societies, he suggested, you have the "retroactive (Islamic) hardliners with terrorist tendencies ... with a primitive Islamic vision" and ultra-modernists who argue that society should abandon Islam.

"If we are to achieve development, we must reject both extremist views. Globalization could be a dialogue among civilizations. It is a complex set of processes that affects many orders. Globalization can be prone to threats but at the same time it can give opportunities. If the Muslim countries are not prepared to face the multi-effects of the challenges, globalization could result into a threat rather than an opportunity," he warns.

This is fine "middle way" thinking, which should be encouraged and commended. But if you apply this logic to Palestinian financing, then you run into serious anomalies.

The election of the Hamas government is an anomaly in question. Hamas, unfortunately, is still psychologically caught in that no man's land of being a liberation movement in democratic power.

This current stalemate is serving only the enemies of Palestine.

The IDB, of course, manages the $1 billion Al-Aqsa and Intifada Funds, set up for Palestinian development by the extraordinary Arab League summit in Cairo a few years ago. In Kuwait, the ministers represented on the board of these two funds approved $100 million of funding for Palestinian projects to be managed by the IDB. In addition, Arab League governments have also recently agreed $150 million of specific funding to help the PA to meet some of its salary commitments. The powers that be in Palestine cannot have it both ways -- they cannot have their cake and eat it too.

By Mushtak Parker

© Arab News 2006