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Palestinian Authority Chairman Yasser Arafat this week approved the establishment of the Palestinian Investment Fund, a company intended to manage all the commercial and investment activity of the PA. The approval is another step in the implementation of the PA's 100-day reform plan approved by its cabinet on June 26.

PA Finance Minster Salem Fayad announced the establishment of the fund yesterday, saying he would head it along with seven other directors - three ministers and four individuals from the private sector. He said all property or economic activity either wholly or partly owned or managed by the PA and not included in the fund would be considered illegal.

Since the establishment of the PA, it has nurtured a network of profitable economic activity under the direction of Arafat's long-time financial adviser, Mohammed Rashid. But the profits never made it to the treasury's coffers, going instead to hidden bank accounts. Sources in the territories have long said some of the monies were used to pay for the many security forces and their troops; other funds made their way to special accounts used to pay loyalists or provide charity to the needy in exchange for political and personal support.

Palestinian activists, including members of the Palestinian Legislative Council, as well as foreign critics, demanded that the PA break up its monopolies, guarantee transparency about its holdings in private companies, and that profits be handed over in their entirety to the PA treasury through a single recognized account.

The promise for such a fund was made in a reform plan prepared in January 2000, under the supervision of the donor countries and against the backdrop of mounting Palestinian criticism about corruption in the regime. But its implementation was postponed, at first by foot-dragging, then by the intifada.

Fayad said yesterday he hoped the fund would encourage private-sector investment, and that it would be run according to generally-accepted, international accounting practices.

According to the reform plan, the company had to be established by September 30 and the auditing of the PA's property and economic activity will be handled by an international auditing company. By December 31, all the economic activities of the PA are supposed to be conducted under the roof of the fund.