ABSTRACT
In assessing the governance capacities and areas of weakness of the Palestinian state, we have to remember that we are evaluating a developingcountry state that potentially shared all the challenges of economic development faced by other developing country states. But moreover, the ‘quasi-state’ that was set up in 1994 to administer parts of the occupied Palestinian territories lacked most of the powers of a conventional developing country state. Apart from lacking control over borders or possessing contiguous territory, the PNA also lacked an adequate fiscal base and was dependent on tax remittances of customs and income taxes collected by Israel from Palestinians. Its trade relationships with the outside world were dependent on Israel with which it remained in a customs union. Its economic survival therefore depended on transfers from Israel of taxes collected from Palestinians and on aid from donors. The movements of goods and people to the outside world and even within its own territories had to go through multiple Israeli controlled checkpoints that could be opened or closed depending on the satisfactory performance of the PNA from the Israeli perspective of delivering security (see Chapter 3 by Zagha and Zomlot). On the Palestinian side, Oslo and the subsequent accords were premised on a huge gamble by the PLO, and later by the PNA. Their leadership hoped that rapid progress could be achieved, based on these agreements, to lead to a sovereign Palestinian state on the entire occupied WBG (including East Jerusalem), that a just solution to the question of Palestinian refugees would be found, and that there would be rapid economic progress under Palestinian sovereignty. Only then would it be able to undercut support for rejectionist political positions within the Palestinian community and guarantee its own political survival.
