Economic Self-Interest for Peace

11/30/2009 05:12 am ET | Updated May 25, 2011

I recently wrote in these pages about the need for Israel to stop settlement construction in the West Bank, and for the Arab world to take real responsibility in ending the Israeli-Palestinian conflict. While immensely important, additional measures by all parties need to be undertaken as well. This article, and three more to follow, will highlight some of the other issues that peace requires, specifically in the economic, educational, political, and regional spheres.
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It has become accepted wisdom that the economic development of the Palestinian Authority (PA) is a necessary precursor to a peaceful resolution of the Israeli-Palestinian conflict. After all, under present economic conditions, if the Palestinians were to exchange the reality of occupation for one of statehood, then nothing tangible will have changed. If nothing changes in the day-to-day lives of the Palestinians, then the conflict will go on.

With the Gaza Strip still under Hamas rule, the potential investors in the PA - the Arab states and international community, especially the European Union and the United States - need to focus on improving conditions in the West Bank, under the control of President Mahmoud Abbas and Prime Minister Salam Fayyad.

The present conditions are not promising. Unemployment is endemic, almost half of all West Bank families live under the poverty line, and nearly a third depend primarily on financial assistance to make ends meet.

More troubling is that the money pledged to the PA by international donors last year in Paris - to the tune of nearly $1.5 billion - has failed to materialize. So far, the Palestinians have only received a quarter of this amount, with the Arab states providing a mere $78 million of the $600 million promised. Based on over 15 years of corruption, mismanagement and political divisions among the Palestinians, this is not completely surprising. No one is soon going to forget the lavish European lifestyle of Mrs. Suha Arafat.

To augment the hard work being done by former British Prime Minister Tony Blair as the international Quartet's point man for Palestinian economic development, a committee of potential private-sector investors should be established. Such a committee would first assist the PA in identifying economic priorities, infrastructure projects, and jobs programs. Second, the committee would be a bridge between the PA and various industry experts and additional outside investors. And third, the committee would play an additional oversight role in monitoring how the subsequent enterprises and companies are managed.

So, who exactly would make up such a committee? First, there is the Arab world, particularly the oil-rich Gulf states like Saudi Arabia, the United Arab Emirates, Qatar, and Kuwait. Their massive sovereign wealth funds have investments all around the globe. Now, in addition to the Arab money already pledged, a real commitment to the future of the Palestinians needs to be made. With the common Iranian threat bringing the Sunni Arab world and Israel closer together, an Israeli-Palestinian peace would go a long way in improving relations and rebuffing Iran's regional ambitions. An economically viable Palestinian state therefore needs to be an Arab priority.

In addition, the Palestinians' immediate Arab neighbors, Jordan and Egypt, need to be brought on board. While not rich, these two states have more of an interest in stability and peace on their borders than arguably anyone else. A full investment on their parts in such an initiative would only improve the prospects for success.

Second, European investors need to be attached to the initiative. In the context of the overall conflict, European sympathies have on the whole been with the Palestinians. Now is the time to back up these sentiments with real action, money, and financial expertise. As European companies are still investing enthusiastically in Iran, they should therefore be encouraged to invest in a more worthwhile cause that actually promotes - rather than undermines - Middle East peace.

Third, and perhaps most controversially, Israelis should be considered for the committee. Not only does the Israeli government still control Palestinian tax revenues, energy and water resources, and traffic into the territories, but Israelis do have actual expertise in regional commerce, private-public initiatives, and the economic possibilities of the area. Ultimately, Israeli involvement would send a strong message in support of future cooperation and co-existence between the two parties.

Finally, American and other international investors committed to a two-state solution should be encouraged to take part. While no one is arguing that this potential committee supplant the work of the Quartet in attracting donor funds to the Palestinian Authority, two lessons that I've learned from my long career in international business and philanthropy are relevant.

The first lesson is that in economic and financial matters, there is no substitute for the resources and knowledge of the private sector. To be sure, there is a role for governments in creating the proper conditions and incentives for investment, but real growth requires real business expertise, which can only be found in the private sector.

The second lesson is that the difference between donating and investing is not only a semantic argument. Investments are a real partnership, with an expected return; donations are a gesture made as a result of ethical, religious, or political passions. The Israeli-Palestinian conflict has always had these passions in overabundance. Now is the time for true economic partnerships to take hold, in the cause of both peace and calculated self-interest.