Office of the Special Envoy for Disengagement

ii) the Arab countries must continue to support the PA with additional funds in the interest of general Middle East stability, given the current level of oil revenues; we should seek to engage them in a truly international effort - it cannot be that the burden of support falls on only a few donors; and

iii) The Word Bank Trust Fund must consider carefully how much it can release for the next salary payments.

The short-term issues are clearly dominant. However, assuming that we are able to see our way through to overcoming the immediate crisis in this way, we must also be aware that in the absence of a cohesive strategy to address longer-term development needs of the Palestinian people, all efforts to promote institution-building and self-sufficiency will come to a stand-still. The Palestinian economy will be starved of finances that are normally channelled by way of PA salaries and capital investment. This loss will likely be compounded by a reduction in the number of labourers working in Israel and in the movement of goods which in turn will lead to a further deterioration in an already embattled economy and lead to a further drop in domestic revenues. This can only lead to greater discontent.

Suggestions I have heard in recent days indicate a high degree of uncertainty in the donor community and there are many questions on how to deal with the new reality. Some ideas aim at routing aid away from the PA to NGOs and humanitarian organisations, not dissimilar to the situation prior to 1994. Dependency in foreign aid for humanitarian purposes will sharply increase while at the same time unemployment figures and poverty rates will deteriorate and any development progress made will come undone: Others suggest the creation of new structures parallel to the PA or at least structures through which salaries could be paid - which would again unravel all our capacity building efforts of the past ten years and will only result in a disjointed development effort.

I would plead for a careful examination of all these ideas against the long-term development goals we are pursuing. The failure to provide coordinated leadership will lead to hasty decisions, jeopardizing many years of a democratisation process and institution building and lead to the situation where there truly can be no partner for peace. It is clear to me that the international donor community, especially on the ground, is looking for guidance and leadership in the coming months. If we do not want to see rising tension leading to violence and chaos - particularly just before the Israeli election - we will have to develop urgently a convincing strategy addressing the PA's financial and developmental needs not only in the short-term of the next few weeks but also in a longer time frame. This includes addressing in a constructive way the issues of tax and customs revenues withheld by Israel. It cannot be in Israel's interest to have a sharp deterioration of the economic and humanitarian situation next door.

In the immediate future, I suggest a small meeting be called of key donors and the United Nations at the appropriate level during the second week of March to discuss mechanisms which we can all countenance without violating any of our own laws and policies which would, at the same time, ensure the government structure we have all helped the Palestinians develop over these years is maintained and avoid the chaos that is likely to ensue if we do not adopt a common and effective strategy in the near future.

If we don't get this right, I am afraid past investment in the Palestinian development will be lost, a Palestinian economy will not be sustainable, the Palestinian people will live off humanitarian hand-outs, and security for both Palestinians and Israelis will be in greater jeopardy than it has been for years.

Yours sincerely,

James D. Wolfensohn
Special Envoy for Disengagement

Kofi Annan
United Nations Secretary General
New York, New York
USA

Sergei Lavrov
Foreign Minister of the Russian Federation
Moscow, Russia

Condoleeza Rice
United States Secretary of State
Washington, D.C.
USA

Ursula Plassnik
Federal Minister for Foreign Affairs
President of the EU Council of Ministers
Vienna, Austria

Benita Ferrero-Waldner
Member of the European Commission
Brussels, Belgium

Javier Solana
High Representative of the European Union
Brussels, Belgium