Palestinian cabinet reshuffle: Does smaller equal better?

Published June 16th, 2002 - 02:00 GMT

Following intense domestic and international pressure, Palestinian leader Yasser Arafat has scaled down his Cabinet, reducing the number of ministers from 31 to 21. The new political leadership continues to face a myriad of political and economic challenges, which include reducing corruption and reviving a distressed economy.  


Palestinian leader Yasser Arafat has reduced the size of his Cabinet as part of a plan to reform the Palestinian Authority. Four ministries will have new heads, including the Ministry of Finance, which will be headed by Salam Fayad, a former official with the International Monetary Fund. Fayad is confronted with the daunting task of cleaning up an administration rampant with corruption and lacking transparency.  


Another key newcomer to the Cabinet is General Ahmed Abd Al-Razak Yehieh, who will head the newly created Interior Ministry. This department, which had previously been run by Arafat, controls all security services. Among the senior ministers remaining in the Cabinet are Nabil Shaath (International Cooperation) Saeb Erakat (Local Government) and Maher Masri (Economy).  


In the medium-term future, the primary task of the new Cabinet will be to prepare for forthcoming elections. Municipal elections are to be held in several months, while presidential elections will follow early next year. 


The importance of these municipal elections should rise following the recent approval of a $10 million World Bank credit facility. These funds are expected to improve the access and quality of basic social services in poor and remote communities in the West Bank and Gaza by enhancing the role of local municipalities in delivering these services. The purpose of the credit facility is to engage local governments in managing small-scale civil works projects for roads, water supply, and schools with the active participation of residents.  


The initiative is critical to Palestinian development. With roughly 75 percent of the West Bank’s impoverished population residing in rural areas, local governments can play a more active role in stimulating the economy. However, more than merely the rural population requires assistance. Almost 50 percent of the total Palestinian population is living below the poverty line of two dollars per person per day, while per capita real income declined by 12 percent in 2000 and an additional 19 percent in 2001. 


The ailing Palestinian economy is in dire need of a 1.5 billion New Israeli Shekels (NIS) ($300 million) stimulus in the form of VAT (Value Added Tax) and customs payments collected by Israel. The funds have been retained in the Israeli Treasury since the outbreak of the Intifada in September 2000. Israel refuses to release this money until the outstanding NIS200-million ($40 million) debt owed by Palestinians to Israeli firms is erased. In spite of international pressure, it appears unlikely that Israel will remit these funds any time soon. 


The trimmer Palestinian Cabinet faces immense challenges on many fronts. These include opposition from domestic factions such as Hamas, which has declined an invitation to join the new Cabinet, and Israel’s political leadership, which has yet to acknowledge the significance of Palestinian reforms. With the political atmosphere unlikely to improve in the medium-term, Palestinian economic prospects appear grim indeed. — ( 

© 2002 Mena Report (

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