Русскийراעברית Search MFA News Archive Articles 1997 THE MAN WHO SWALLOWED GAZA - 04-Apr-97 E-mail to a friend THE MAN WHO Print the article Add to my bookmarks Twitter - Israel SWALLOWED GAZA - 04- Twitter - MFA YouTube - Israel Apr-97 YouTube - MFA 4 Apr 1997 Flickr Facebook - MFA CultureBuzzIsrael Green Israel DepFM Ayalon Note: The translations of articles from the Hebrew press are Blog prepared by the Government Press Office as a service to MFA newsletter foreign journalists in Israel. They express the views of the authors. THE MAN WHO SWALLOWED GAZA (Article by Ronen Bergman and David Ratner, "Ha'aretz", Weekend Supplement, April 4, 1997) This is how Yasser Arafat's Fund B works: The Al- Bahr Company, for example, belongs to his chef de bureau and economic advisor. The cement monopoly is run by mystery man Muhammad Rashid, who signed the multi- million dollar contract with Dor Energy on behalf of the Authority. In a first interview with an Israeli newspaper, Rashid confirms the existence of a secret bank account in Tel Aviv. Last Tuesday, a bearded man entered the Bank Leumi branch on Hahashmonaim Street in Tel Aviv. He spoke fluent English, presented a German passport, and asked one of the tellers to deposit a check into the account of the Palestinian Authority at the branch. The clerk mumbled something about having to ask the manager and disappeared for a few minutes. When he returned, he told the German that the bank does not know what he is talking about, that there is no Palestinian Authority account there, have a good day, thank you and good-bye. The teller was not being accurate, to put it mildly. The Hahashmonaim branch of Bank Leumi is where Palestinian Authority chief Yasser Arafat maintains what people in the know in the territories call "A-Sunduk A- Thani," Fund B, the Chairman's second, secret budget. According to an investigation conducted by top brass of the nations contributing to the Authority, only two people have the right to sign vis-a-vis this account: Yasser Arafat and his senior economic advisor, mystery man and his senior economic advisor, mystery man Muhammad Rashid, known also by the name Khaled Salaam. According to other sources, the Palestinian finance minister, Ahmad Zuhadi Nashashibi, also has access to the account. Since it was opened in 1994, Israel has transferred at least NIS 500 million into the secret account in Tel Aviv. An International Monetary Fund (IMF) internal document in Ha'aretz's possession raises the possibility that the sums are even greater. The IMF states definitively that the account in Tel Aviv "is not under the control or supervision of the Palestinian finance ministry." What is being done with these funds? How much has been used to finance Palestinian Authority operations, and how much has been channeled for other uses, or into private hands? Aside from the account holders, no-one knows. Matters have reached the point where senior Israeli officials have heard angry complaints from successive Palestinian ministers of finance and economics (there have already been several ministerial reshuffles) to the effect that the moneys transferred by Israel to the account in Tel Aviv never reach the coffers of the Palestinian treasury. The Paris protocol, signed in April 1994 after the economic negotiations between Israel and the Palestinians, set forth two clear rules: from an economic point of view, there is no border between Israel and the territories of the Palestinian Authority; and both parties would continue to act within one customs enclave. In other words, customs and V.A.T. officials, and other Israeli collection authorities, would not be stationed at the Erez checkpoint or along the border between Israel and the territories, but only along external borders. Thus, the Palestinian Authority in effect adopted Israel's taxation and customs policies. Simple enough? Not at all. The Paris agreements determined that Israel would refund four types of taxes to the Palestinian Authority. Thus, for example, if a television is imported into Gaza via the port of Ashdod, the Israeli importer pays import taxes on it to the Israeli government. These taxes are subsequently funneled to the coffers of the Palestinian Authority. In a similar fashion, the V.A.T. to be collected on purchases in Israel, the excise taxes on fuel, alcohol, and tobacco, the income taxes from the work of laborers from the territories, and the health tax will be transferred. Israel deducts handling charges from these sums, as well as, from time to time, the Authority's debts to Bezek, the Electric Company, and Israeli hospitals. An internal finance ministry document breaks down the sums that Israel transferred to the Authority in accordance with the agreement: NIS 72 million in 1994, NIS 792 million in 1995, NIS 1,391 million in 1996. In the first two months of this year, NIS 264 million have already been transferred in other million have already been transferred in other words, an annual rate of approximately NIS 1.5 billion. At the very beginning of the process, several ministers in the Labor government requested that the money be given by check directly to Yasser Arafat, in order to impress him. Finance ministry officials explained to them that that is not the way things are done. Eventually, it was agreed that Arafat would receive a copy of every transfer order. This is the Palestinian Authority's lifeline. The following story is proof: the day after the Western Wall tunnel was opened, at the height of the battles between IDF soldiers and Palestinian policemen, a professional conference was being held, attended by Aryeh Zeif, then director of customs and responsible for transfers of moneys to the Palestinians. One of the Authority's senior economists managed to reach Zeif on his mobile phone. He did not want to talk about the tunnel. He wanted to know whether Israel could move up the transfer of moneys by two days, for technical reasons, something to do with holidays on the Palestinian calendar. Zeif acquiesced. When the Paris agreements first went into effect, finance ministry representatives asked the Palestinians exactly where they wanted their money transferred. The Palestinians requested that all transfers be made to four separate accounts in the Palestine Bank and the Arab Bank in Gaza, with the exception of refunds for taxes on fuel. Muhammad Rashid then requested that these refunds be transferred to a secret account in Bank Leumi, Hahashmonaim branch, in Tel Aviv. This raised Israeli eyebrows; but the Israelis smiled among themselves and did not feel free to intervene in the running of the Palestinian economy. The moneys passing through this account constitute a tremendous economic reserve under the direct control of Yasser Arafat. What does he need it for? The nations contributing to the Palestinian Authority have pledged to donate $2.4 billion, of which $1 billion has been transferred so far. These nations demanded transparency in respect of the money: they wanted full oversight over the Authority's bank accounts, they wanted knowledge of and to approve exactly on what the money was being spent, and they wanted to add the IMF as an "advisor" to the Palestinian team drawing up the Authority's annual budget. The Palestinian leadership happily accepted the money, but they were much less happy about the surveillance that came with it. The contributing nations demanded that the money be invested in rehabilitating the territories' destroyed infrastructures, and in creating jobs. They did not approve exaggerated current expenditures, or support for individuals and institutions that the chairman wanted to favor. Arafat had other plans. "The Palestinians inflated their bureaucracy totally unjustifiably," says General (Res.) Danny Rothschild, coordinator of the government's activities in the territories when the Authority was founded. "They did not fire the 21,000 employees of the Israeli civil administration who were all, except for IDF officers, Palestinians; and to this number they added 20,000 clerks who came from Tunis and another 40,000 policemen and security apparatus officers. The result was a huge system that had to receive salaries. Dr. Hisham Awartani, one of the top experts on the economy in territories: "The inflation of the bureaucracy is a disaster for the economy; they have to cut very significant percentages from the number of employees in the public sector. But my remarks are purely theoretical; in reality, not one can be fired. Arafat needs these people as a political power base, and therefore he pays the salaries out of the slush fund. In effect, this is a time bomb. The vast majority of those employed in the public sector or the security forces earn up to NIS 1,000 per month. This isn't money. These people will get married and will want to buy food for their children. Its only a matter of time before they revolt. They must create real jobs, with reasonable salaries." Dr. Mahr Al-Kurd, the Authority's deputy minister of economics and trade, has this response: "I think that the inflation of the government bureaucracy is one of the Authority's great economic achievements. Where would all these people find work, if we had not made them clerks?" A senior Israeli official points out two more objectives of the slush fund: "The Palestinian Authority has a fall back plan for the rescue of Arafat, his family, and several top dogs, in the event of a coup. This plan involves operating a leadership in exile, and a great deal of money. A second matter is a series of activities that Arafat's regime feels obligated to finance, in order not to lose political power bases, regardless of good or bad economic times.