(by Michael Kelly, WASHINGTON POST, Dec 2)

There was a wonderful moment in the annals of diplomacy this week. Yasser Arafat, the president of the Palestinian Authority, had come to town to attend an international conference convened by the White House to raise a new pile of money to give to President Arafat. And the conference had gone splendidly.

Everyone had behaved perfectly fine; no one had so much as mentioned the inconvenient London Sunday Times story the day before, which said that the Palestinian Authority had swiped $20 million in British aid intended to build housing for the poor of Gaza, using he money instead to build luxury flats for Arafat's military and bureaucratic elite. After a day of pleasantries, representatives of 43 nations had pledged $3 billion in new aid to the Palestinian Authority, including an extra $400 million from the U.S. president. Arafat saw that it was good. "I am satisfied with the reality of this conference," he pronounced.

The reality? The reality is this: Since July 1, 1994, the day that Yasser Arafat arrived to take charge of Gaza, the international community has given the Palestinian Authority about $2.5 billion in aid. In that time, to the confoundment of confident predictions, life in Gaza became, for most people, even more poor, nasty, brutish and short than it had been before the arrival of President Arafat. In the past four years, wage rates in Gaza have fallen 50 percent and unemployment has risen to highs of 50 percent; currently, it hovers at around 30 percent.

The gross national product per Palestinian has declined by 35 percent. The number of Gazans legally working in Israel (where the jobs are) has fallen from a pre-Arafat figure of 116,000 to as low as 23,000. The percentage of goods manufactured in Gaza and marketed in the West Bank (where the consumers are) declined from about 50 percent to 2 percent by 1996. In the first two years of Arafat's rule, one-third of Gazan businesses folded. Foreign commercial investment in Gaza declined from $520 million in 1993 to below $300 million in 1997. The number of Palestinians living in poverty soared; one out of every four now lives below the poverty line.

In President Arafat's considered opinion, all of this is the fault of Israel, for its habit of closing off the Gaza Strip from time to time, disrupting the flow of commerce. "The Israel closure policy is the primary and direct cause for the dangerous decline in the performance of the Palestinian economy over the past five years," he declared Monday.

It is true that periodically stopping the flow of goods and workers between Gaza and Israel has played an important role in the decline of Gaza's health. But what President Arafat was too diplomatic to mention was that Israel has a reason for its policy. The closures have been in response to the very many -- 279 fatalities since Oslo - terrorist attacks on Israelis by Palestinians living under Arafat's rule. Neither did President Arafat see fit to note that, in the past two years, the government of Binyamin Netanyahu has greatly reduced the number of closures. Yet during the past two years, the economy of Gaza has improved only slightly.

Might there be some other reason for Gaza's decline? Well, tactlessly, yes. The other reason, as the Sunday Times story suggests, is that President Arafat has established in Gaza and the West Bank a nasty, thuggish little kleptocracy run by and for the benefit of President Arafat and his bureaucrats and gunsels and cronies, without benefit of law or semblance of order.

The Palestinian Authority has yet to draft a criminal and civil code. What passes for law is brute and capricious force, imposed by 41,000 members of seven separate police forces -- police forces that may arrest without warrant and detain without due process. The 41,000 are the muscle in an obesity of a bureaucracy: the Palestinian Authority boasts no fewer than 80,451 employees, spread among 24 different ministries. Salaries for these employees consume more than half of the entire Palestinian national budget, which ran to $814 million in 1997.

Where does the rest of the money go? Almost all of it is stolen or dribbled away. The Palestinian Authority's own auditors reported last year that nearly 40 percent of the annual budget -- $323 million -- was wasted, looted or misused. In President Arafat's regime, bribery is endemic, services are nil, connections are everything, and might is the only right there is.

This is the reality that inspires foreign investment to stay far, far away from Gaza. But it isn't diplomatic to say that. Let's give the old fellow a few billion more. Maybe he won't steal all of it.

© 1998 The Washington Post Company

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