The Palestinian Authority and the Rentier State

This study is a theoretical and practical precedence in conceptualizing a rentier state in Palestine. It sets the possibility for understanding the underlying principles of the performance of the Palestinian Authority (PA) since its inception in 1994. It provides a platform for utilizing rentier state theory (RST) in a non-carbon state as a framework for analysing its political economy. More profoundly, it attempts to utilize RST in understanding the sate society relation under the complex political structural reality in Palestine. Firstly, the study makes the case for the gap in literature with regards to non-carbon based rentier states. It does so by providing a short history of literature and an overview of the sub-literature that followed with regards to conditional and specialized theories on the rentier state. Secondly, it elaborates on the PA's sources of income and debates whether they are rents. It categorizes rents in the Palestinian case to include international donations to the PA, and Israeli processed and controlled clearance taxes. Both sources amount to over 70% of the PA's expenditure. Thirdly, it proposes five characteristics that exemplify the non-carbon rentier state. It proposes that flexible neopatrimonialism, external imposed economic policy, active foreign policy contrasted by inactive internal policy, fragile tax collection system and unreliable financial flows, and rentier based economy best describe the non-carbon rentier state using the PA as an example

The Political Economy of Taming the Palestinian Authority

International donors have invested more than USD 34 billion in Palestine to support the Palestinian Authority's (PA) state-building process and promote peace between 1993 and 2016. Foreign aid was distributed based on World Bank-designed internationally-led state-building programs, which focused on economic stability and separated state-building from the larger political context. International state-building efforts resulted in the fiscal and economic integration of the Palestinian economy and the PA with the Israeli economy. The World Bank concocted economic programs that intertwined economic activity between Palestinian and Israeli institutions. It further encouraged the PA to rely on local revenue sources to finance its operations. However, the Authority's lack of territorial control, including borders, meant that Israel was responsible for the collection and distribution of most of the PA's fiscal resources. Consequently, more than 80 per cent of the PA's fiscal resources originated from clearance revenue or foreign aid and, as such, were controlled by Israel or international donors respectively. This chapter discusses the evolution of the PA's dependence on external sources of income. It investigates the role of the World Bank in shaping the current financial structure of the PA and the economic interconnectedness of the Palestinian and Israeli economies. The chapter also explains how Israel's control over the majority of PA's fiscal resources has undermined its fiscal sustainability and independent decision making. It finally argues that internationally-led state-building efforts created PA institutions that were designed to operate only within the political context of Israel's occupation

The Political Economy of Rentierism of the Palestinian Authority

Since the Palestinian Authority's inception in 1994, it has set up institutions that were intended to form the core of a future Palestinian state. It established state institutions such as ministries and agencies, created an extensive security apparatus, and developed a tax system. However, without real sovereignty or control over border crossings, the PA has had to rely on two sources of external income: foreign aid and clearance revenue. Although the effects of foreign aid on the PA's domestic policies have been researched by many, the dynamics of this relationship with regard to the PA's wider revenues are little understood. Moreover, there has been no in-depth examination of the PA budget's components. This research aims to fill this gap. It examines how revenues have shaped the formation and behaviour of the PA. In particular, this thesis studies how foreign aid and clearance revenue have affected the PA's domestic and foreign policies. It does so by using a political economy theoretical framework based on Rentier State Theory to explore the effects of this dependency on the economy, state-society relations and foreign policy. The thesis establishes that the PA suffers from a case of double rentierism, depending on two sources of rentier income. The thesis argues that the relationship between donors and the PA on the one hand, and between the PA and Israeli clearance revenue on the other, has hindered the formation of a stable social contract between the PA and different segments of Palestinian society. The PA has had to continuously balance two separate conditionality mechanisms. The first involves technical conditionalities, whereby foreign donors and Israel forced the PA to meet procedural targets in order to qualify for rent disbursements. The second conditionality mechanism comprises political conditionalities imposed thorough economic, political and security policies. Conditionalities and inconsistent rent income altered the accountability of the PA in favour of rent providers, resulting in weak state-society relations and a limited capacity to co-opt society. Even the PA's limited successes in co-opting some segments of society were the result of external empowerment by rent providers rather than of increased domestic legitimacy. The PA's capacity was further constrained by the fragmentation of governance structures. Continual competition between the PA and NGO sector over foreign aid fragmented services provision and created parallel governance units. Internally, PA ministries competed for legitimacy from foreign donors, resulting in a fragmented and overlapping decision-making and governance structures