ABSTRACT
Donors initially gave generous support to the Oslo process on the basis that economic development in the Palestinian territories would help underwrite the compromises thought necessary for both sides to reach a consensus on a political solution to the conflict. Additionally, Arafat was seen as the only Palestinian leader capable of making the necessary compromises, which from the Israeli perspective entailed inter alia forgoing the ‘right of return’. The Oslo gambit revolved around a ‘do whatever it takes’ mentality to clinch the deal. As early as 1994-1995, this also entailed shifting their efforts away from development and more towards relief assistance to compensate for the degrading socio-economic situation, in the vain hope that political and economic conditions would change. The intifada led to the near collapse of the PA and the emergence of a severe humanitarian crisis. The donor community remained engaged. It reacted by doubling the level of its assistance to the Palestinians and increasing further the proportion of emergency aid. As pointed out by a Bank official:
With the intifada, the sense was that the Palestinian institutions and economy needed to be prevented from collapsing so there remains something of an economy and institutions when the political process resumes. Underlying this position was the same assumption as during Oslo: that donors should support the peace process and thus that it was worth hanging in to avoid collapse without repair. The intifada marks a real turning point in modalities but the underlying philosophy remains the same. For instance, with the Roadmap we now talk about economic separation rather than integration as was the case in the early 1990s. But the vision remains intact. Donors have been very reactive.
