The Palestinian Authority on Wednesday got mixed grades from the World Bank on official corruption: It's doing well in managing public finances and reducing nepotism in civil service hiring, but has failed to prosecute most senior officials suspected of dipping into the public coffers.
A good governance certificate is vital for West Bank-based Palestinian Prime Minister Salam Fayyad since his government relies on hundreds of millions of dollars in donor money every year. Fayyad is seeking more than US$4.8 billion in international aid over the next three years, including nearly $1.5 billion this year.
The Palestinian Authority was established in 1994 as part of interim agreements with Israel that granted the Palestinians limited self-rule in parts of the West Bank and Gaza. Fayyad's government continues to spend large sums in Gaza, including for welfare payments, despite the Hamas militant's group's control of the area since 2007.
The authority's early years, under then-leader Yasser Arafat, were heavily tainted by corruption suspicions. For example, there was no accountability for a $345 million public investment fund run by Arafat's shadowy economic adviser, and Arafat himself used to spend money with little oversight.
Under Fayyad, who was initially brought in as finance minister in 2002, "major reforms have been put in place" to strengthen management of public finances, the World Bank said.
But reforms are incomplete in key areas such as public procurement, civil service hiring and regulation of the private sector, the bank said. Other issues, such as managing state lands, still await an overhaul.
The bank said there is a gap between public perceptions of official corruption and actual cases, citing two surveys conducted in 2010, one among Palestinian households and the other among Palestinian officials.
Citing public sector hiring as an example, the bank said that in the past it was used as a tool to reward those with political connections. The households survey indicated that 80 per cent still believe personal and family connections are used to get civil service jobs, but that only 15 per cent said they actually activated such connections.
Very few said bribes are expected in dealing with public officials. Only 2 per cent of businesses in the West Bank and Gaza said bribes were expected during tax inspections, compared to 67 per cent in Yemen, 61 per cent in Syria and 19 per cent in Lebanon, the bank said.
Still, the perception of official corruption remains strong, in part because of the failure to prosecute senior officials suspected of wrongdoing, the report said.
"Palestinians overwhelmingly believed that public and political figures have implicit immunity and can engage in acts of corruption without repercussions," the bank said.
The bank did not say how many people were surveyed or provide a margin of error.