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The Murder of Yasser Arafat: "Powerful" - The Times of London

Sunday, 29 November 1998

Corruption in the Palestinian Authority

British aid used to house Arafat elite

Aid scandal: the misuse of housing cash will embarrass Tony Blair and Yasser Arafat

The Sunday Times, London
November 29 1998

by Stephen Grey
Additional reporting: Chris White and Matthew Kalman

BRITISH aid earmarked for poor Palestinians has been used by the
European Union to finance luxury flats - with Italian granite-fitted
designer kitchens - for rich supporters of Yasser Arafat.

The scandal has benefited a general, a police chief and other acolytes
of the Palestinian leader. The millions of pounds involved have been
written off by Brussels.

"In effect, $20m [12m pounds] has been spent without any economic
controls and is not recoverable," admit the EU's own auditors. At least
2m pounds of this sum was contributed by Britain.

The money had been targeted for cheap housing in the desperately poor
and overcrowded Gaza Strip and the West Bank areas controlled by the
Palestinians. Instead, according to a secret EU internal financial
control report, it was used for flats designed with "elegance and
luxury".

Ten of the apartment blocks were built opposite a refugee camp at
Nussairat, eight miles south of Gaza city. Each apartment is more than
100 square metres in size, with three bedrooms, a kitchen fitted with
polished wooden cupboards and granite work-surfaces, and a bathroom
complete with a large bath and shower area, decorated with either pink
or blue ceramic tiles. Satellite television dishes sprout from the
walls. The car parks are tightly packed with military vehicles and
expensive civilian cars bearing red number plates, which are issued only
to officials.

Palestinian sources said 90% of the EU flats had been given to
"returnees" - loyalists who had been in exile with Arafat and now served
in his administration. Three have been taken over by a Palestinian
brigadier-general, Mazan Iss Did. Another was taken by a police chief,
Tala Abo Zaidi. The Palestinian ministry of industry also controls two
flats.

The housing project was part of a 60m pound aid package for the
Palestinians announced after the Oslo peace accords with Israel. It has
been administered by the Palestinian housing authority, which has
refused to meet the EU auditors, according to their secret report.

The original plan was for a self-sustaining building programme: cheap
housing association mortgages would be available for Palestinians on
modest incomes, whose payments would then finance further construction.

Instead, building costs rose to 33,000 pounds for each apartment, 80%
more than planned, due to split-level construction, entry phone systems
and expensive lifts. This made them "inaccessible to the layer of
population for which they were planned and has instead allowed
well-to-do people, who were not targeted, to benefit from EU aid", said
the auditors.

Compounding the scandal, some of these affluent beneficiaries made low
down payments - as little as 1,000 pounds, instead of the 20% required -
and many are not keeping up their mortgage payments. "The degree of
repayment of the loans on the part of the buyers in the Gaza Strip is
zero," said the auditors.

The aid programme is under the control of Manuel Marin, the Spanish
commissioner for EU relations with the Middle East, who is already
facing widespread criticism over his handling of fraud allegations in
the EU's humanitarian aid budget when he was aid commissioner.

The scandal has emerged as Britain prepares to announce in Washington
tomorrow a doubling of aid to the Gaza Strip and West Bank. Derek
Fatchett, the Foreign Office minister, will announce that more than 105m
pounds will be spent over the next three years, half through EU
programmes. More than 1.2 billion pounds has been given by all
international donors to the Palestinians in the past five years.

Fatchett said Britain had already voiced concerns to Arafat about
corruption involving aid and planned to use tomorrow's announcement to
demand much greater accountability and openness from the Palestinians.

"Anyone going to Gaza is struck by its poverty and disadvantage. It is
very important to ensure that the aid reaches those in the greatest
need," he said.

The Palestinian Authority's own auditors have already embarrassed Arafat
with an inquiry which showed that nearly 40% of his administration's
budget was misused or stolen through "kickbacks." The EU auditors warn
the same corruption could apply to money in its projects and demanded
"extreme vigilance".

They are also critical of EU funding for a new hospital in Gaza, which
was "not conceived correctly or run according to the principles of
efficiency". More than 14m pounds was handed over to build a "luxurious"
clinic which was far too lavish for local needs. "The cost of
maintaining and using this hospital will be well over the financial
means of this country," said the report.

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