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PALESTINE - July 4 - Arafat Divulges Financial Secrets.

After years of pressure from foreign donors, Pres. Arafat divulges his administration's financial secrets - from the existence of a multimillion dollar slush fund to a state monopoly on cement and a US$60m share in a highly profitable casino. The 16-page report, posted on the Palestinian Authority's Web site, draws praise from the donor community, coupled with warnings that fledgling financial and economic reforms will be eroded if the government doesn't cut the bloated public payroll expected to consume 60% of this year's US$1 bn budget. Foreign aid official Torgeir Larsen, who is economic officer at the Norwegian Representative Office in the West Bank, says: "It's very positive what has been done". (The donor community, led by the US and the EU, has demanded for years that the Palestinian government divulge its financial dealings, including the diversion of millions of dollars in tax revenues to secret accounts in Israeli banks to which only Arafat and a few close advisers have access.)

According to the Palestinian Authority's financial report, which was 1st presented to a donors' conference in Lisbon in June, some US$530m did not reach the Treasury in 1998 and 1999. Some of the money was used to help cover the Palestinian Authority's operating expenses, but the bulk was saved or invested through the Palestinian Commercial Services Company, or PCSC, which is fully owned by the Palestinian Authority. Palestinian Planning Minister Nabil Shaath, who helped draft the document, says Arafat had resisted releasing information on the secret accounts because he wanted to invest the money for the benefit of the state coffers and not be pressed to spend it on social welfare, including increasing the public payroll.

(In 1999, the PCSC had US$345m worth of assets, including US$292m in equity holdings in 3 dozen companies, among them some of the giants of the Palestinian economy. The largest holding, valued at US$60m, was a 3% stake in a casino in the West Bank town of Jericho. In the past, the Palestinian Authority refused to acknowledge its involvement in the casino, apparently fearing criticism by Islamic fundamentalists who oppose gambling on religious grounds.) The Palestinian Authority also confirms that it had a monopoly on cement and a 47% share in the Palestinian areas' only flourmill. (The report says that in 1999, the PCSC had a net profit of US$77m. Palestinian investors have grumbled that it was difficult to do business because of the Palestinian Authority's stranglehold on the economy.) The report says Arafat's government plans to phase out its equity holdings and privatise most public enterprises. The report also says that as of late April, tax revenues would no longer be diverted and would funnel directly into the Treasury - a claim confirmed by the International Monetary Fund. Shaath says the disclosures and reforms are a "giant step forward toward fiscal responsibility".
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Publication:APS Diplomat Recorder
Article Type:Brief Article
Geographic Code:7PALE
Date:Jul 8, 2000
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