```

[Senate Hearing 109-268]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 109-268
 
               THE CHALLENGE TO THE MIDDLE EAST ROAD MAP

=======================================================================

                                HEARING

                               BEFORE THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 30, 2005

                               __________

       Printed for the use of the Committee on Foreign Relations

  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html

                    U.S. GOVERNMENT PRINTING OFFICE
25-922                      WASHINGTON : 2006
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512�091800  
Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001

                     COMMITTEE ON FOREIGN RELATIONS

                  RICHARD G. LUGAR, Indiana, Chairman

CHUCK HAGEL, Nebraska                JOSEPH R. BIDEN, Jr., Delaware
LINCOLN CHAFEE, Rhode Island         PAUL S. SARBANES, Maryland
GEORGE ALLEN, Virginia               CHRISTOPHER J. DODD, Connecticut
NORM COLEMAN, Minnesota              JOHN F. KERRY, Massachusetts
GEORGE V. VOINOVICH, Ohio            RUSSELL D. FEINGOLD, Wisconsin
LAMAR ALEXANDER, Tennessee           BARBARA BOXER, California
JOHN E. SUNUNU, New Hampshire        BILL NELSON, Florida
LISA MURKOWSKI, Alaska               BARACK OBAMA, Illinois
MEL MARTINEZ, Florida
                 Kenneth A. Myers, Jr., Staff Director
              Antony J. Blinken, Democratic Staff Director

                                  (ii)

                            C O N T E N T S

                              ----------                              
                                                                   Page

Biden, Hon. Joseph R., Jr., U.S. Senator from Delaware, opening 
  statement......................................................    10
Lugar, Hon. John G., U.S. Senator from Indiana, opening statement     1
Welch, Hon. C. David, Assistant Secretary, Bureau of Near Eastern 
  Affairs, Department of State, Washington, DC; accompanied by 
  LTG William E. Ward, Deputy Commander, U.S. Army Europe, U.S. 
  Coordinator for Security, Department of Defense, Washington, DC     3
    Prepared statement...........................................     5
Wolfensohn, James D., Quartet Special Envoy for Gaza 
  Disengagement, Department of State, Washington, DC.............    38
    Prepared statement...........................................    42

       Additional Questions and Answers Submitted for the Record

Responses by James D. Wolfensohn to questions submitted by:
    Senator Chuck Hagel..........................................    52
    Senator Barbara Boxer........................................    53

                                 (iii)

  

               THE CHALLENGES TO THE MIDDLE EAST ROAD MAP

                              ----------                              

                        THURSDAY, JUNE 30, 2005

                                       U.S. Senate,
                               Committee Foreign Relations,
                                                     Washington DC.
    The committee met, pursuant to notice, at 9:30 a.m., in 
Dirksen Senate Office Building in room SD-419, Hon. Richard G. 
Lugar, chairman of the committee, presiding.
    Present: Senators Lugar, Biden, Hagel, Chafee, Coleman, 
Feingold, Obama, Kerry, Sununu.

 OPENING STATEMENT OF HON. RICHARD G. LUGAR, U.S. SENATOR FROM 
                            INDIANA

    The Chairman. This hearing of the Senate Foreign Relations 
Committee is called to order. The committee meets today to 
examine the current state of the Middle East Road Map. 
Advancement of the peaceful two-state solution envisioned in 
the road map is urgently needed by the Israelis and 
Palestinians and is critical to United States success in the 
global war on terrorism. Al-Qaeda and other terrorist 
organizations use the Israeli-Palestinian conflict to enlist 
fresh recruits to conduct terrorism across the globe. We should 
continue to pursue, without delay, every opportunity to resolve 
this longstanding conflict.
    The road map has shown promise as a means for organizing 
talks and resolving issues between Israel and the Palestinians. 
The death of Yasser Arafat and the January election of 
Palestinian Authority President Mahmoud Abbas generated hope 
that the Israelis and Palestinians could find common ground to 
embrace the vision of two states living side by side in peace 
and security.
    Both sides are now focused on the announced Israeli 
withdrawal from 21 Gaza settlements and 4 West Bank 
settlements. If this withdrawal can be accomplished smoothly, 
it could set a precedent for future Israeli-Palestinian 
cooperation. With only 6 weeks before the disengagement begins, 
however, the willingness of both sides to make compromises on 
details of the disengagement plan appears to have diminished. 
Palestinians fear that the Gaza disengagement will result in 
``Gaza first and Gaza last''--a truncated outcome that fails to 
address other settlement issues. Israelis fear that the 
terrorist factions--Hamas, Palestinian Islamic Jihad, and 
others--are using the temporary cease-fire as an opportunity to 
reorganize and rearm.
    The unproductive meeting that occurred on June 21 between 
Prime Minister Sharon and President Abbas reflected the 
fragility of the process. It also demonstrated the need for 
unwavering engagement by the members of the Quartet--the United 
States, the European Union, the United Nations, and Russia, as 
well as regional states. Both Israel and the Palestinians 
urgently need international support to fortify their ability 
and willingness to carry out their responsibilities under the 
road map.
    Israeli and Palestinian leaders must develop a coordinated 
plan for completing the Gaza disengagement. The Palestinians 
must take concrete actions to reform their security forces, 
establish new institutions, enforce the rule of law, and disarm 
those who commit or incite violence. The Israeli Government 
must refrain from taking steps that prejudge peace negotiations 
and must plan beyond the withdrawal of 8,000 settlers from 
Gaza. The Israelis also must take steps to ease access and 
transit, allow trade and commerce, remove unauthorized 
outposts, and stop settlement expansion.
    The United States has pledged $350 million for assistance 
to the Palestinians to facilitate these efforts. This 
assistance, along with support from other nations, must be 
delivered through transparent and accountable mechanisms. In 
addition to the Quartet members, Egypt, Saudi Arabia, Jordan, 
and other Arab States must devote their own political and 
economic resources to supporting the peace process.
    We should consider how international organizations, such as 
the United Nations or nongovernmental groups, might help 
prevent violence by sending observers to monitor the Gaza 
disengagement. The United States should also explore whether 
NATO might oversee a conventional weapons disarmament and 
destruction program to prevent the proliferation of arms to 
terrorists. Such a program might be linked with jobs or other 
economic incentives to address the extremely high unemployment 
rates among Palestinians.
    On our first panel today, we welcome Ambassador David 
Welch, Assistant Secretary of State for Near Eastern Affairs, 
who is responsible for United States policy and diplomacy in 
the region. We also welcome LTG William Ward, Deputy Commander 
of the U.S. Army in Europe and U.S. Coordinator for Security in 
Israel. General Ward has been tasked with helping the 
Palestinians reform their security organization and build 
infrastructure and capabilities to facilitate Palestinian and 
Israeli security cooperation.
    On our second panel, we welcome Mr. James Wolfensohn, the 
Quartet's Special Envoy for the Gaza Disengagement. Mr. 
Wolfensohn is responsible for helping Gaza become economically 
viable after the Israeli withdrawal, a task for which his long 
experience at the World Bank has prepared him well.
    Each of our witnesses is playing a critical role in meeting 
the challenges in the Middle East, and we are grateful for 
their service. We look forward to their testimony.
    At the time that the distinguished member comes to the 
forum this morning, I'll recognize him, of course, for an 
opening statement. But at this time, we would like to proceed 
with our first panel. Ambassador Welch, I understand that you 
have a statement, and General Ward, if you do not have a 
prepared statement, you may have some remarks. We will 
recognize you after Ambassador Welch. Your full statement will 
be made a part of the record, and you may proceed anyway that 
you wish.

 STATEMENT OF HON. C. DAVID WELCH, ASSISTANT SECRETARY, BUREAU 
 OF NEAR EASTERN AFFAIRS, DEPARTMENT OF STATE, WASHINGTON DC; 
ACCOMPANIED BY LTG WILLIAM E. WARD, DEPUTY COMMANDER, U.S. ARMY 
 EUROPE, U.S. COORDINATOR FOR SECURITY, DEPARTMENT OF DEFENSE, 
                         WASHINGTON DC

    Ambassador Welch. Mr. Chairman. I'm pleased to have the 
opportunity to address the committee today. I've recently been 
in the region with my boss, Secretary Rice, meeting with 
Israelis and Palestinians, and I shall shortly be headed back. 
I believe this session is timely, for it gives us the 
opportunity to take your advice and it also affords the three 
of us the opportunity to discuss our policy approach.
    The weeks ahead are hugely important. There is a lot of 
work to do, and the importance of this issue is clear from our 
intensive and multipronged approach to ensuring that 
disengagement is successful, to set the stage for further 
progress afterward. As you shall hear, sir, the missions of 
James Wolfensohn and General Ward, two distinguished public 
servants, are to help the Israelis and Palestinians with the 
hard work needed for a successful disengagement and beyond. We 
have engaged other states in the Middle East, as well as the 
broader international community. And we have the direct 
leadership of the senior levels of the U.S. Government in 
bringing all these elements together. Secretary Rice has been 
to the region twice, making stops in Jerusalem, Ramallah, and 
in neighboring countries to push for this support. I have been 
out to the region numerous times since this committee saw fit 
to confirm me in March. The Secretary has raised these issues 
in international gatherings ranging from Quartet meetings in 
Moscow and London to the recent G-8 Foreign Ministers meeting 
in London, where it was a central topic of discussion. And 
President Bush has placed this issue as a high priority in many 
meetings with his counterparts. Not just those from the region.
    Sir, I believe these activities are starting to show some 
results. The Israelis and Palestinians are now starting to 
focus on the practical issues needed to make Gaza disengagement 
a success. Of those practical issues, security is perhaps the 
most critical, particularly, fulfillment of the commitments by 
Israel and the Palestinians made at Sharm el-Sheikh in 
February. They are discussing their concerns with each other, 
and we are intensively engaged in helping them to make 
progress. As we work in this and other areas to ensure a 
successful withdrawal from Gaza, we're very much aware of the 
constructive role that most of the international community can 
provide and should play in supporting efforts toward peace.
    Unfortunately, sir, there are also states such as Syria, 
whose recidivist support of Palestinian extremist groups is an 
attempt to block Israeli and Palestinian desires to achieve 
peace. Notwithstanding that unhelpful effort, Israel, the 
Palestinians, the United States, and the international 
community are committed to making disengagement a success, as a 
successful Israeli withdrawal from Gaza, an orderly Palestinian 
takeover there, will help to reenergize the road map and bring 
us closer to realizing the two-state vision laid out by 
President Bush.
    Disengagement is scheduled to begin in mid-August, so time 
is short. The Palestinians and Israelis have begun to work 
coordination issues through a system of technical committees 
set up to deal with security and economic issues related to the 
disengagement. Some progress has been made, but more remains to 
be done. Overall Palestinian performance on confronting 
violence has been far from satisfactory, and this is a real 
shortfall and area of concern.
    The main challenges can be divided into two categories--
improving the security situation and creating the conditions 
for growth in the Palestinian economy. In the first category, 
our work is led by General William Ward, the U.S. Security 
Coordinator, who's here with me. And I am pleased to be joined 
by him, because he has devoted full time, 24-hour-a-day, 7-day-
a-week effort to the security reorganization of the 
Palestinians.
    The past 6 months have seen some positive developments on 
the security front, but, of course, much remains to be done. 
That has been made more evident by a recent increase in 
violence in Gaza and the West Bank. The announcement by 
Secretary Rice when she was in Jerusalem, just recently, June 
19, that Israel and the Palestinian Authority agree that the 
Israeli withdrawal must proceed peacefully and without 
violence, is important because both parties have now gone on 
record that peaceful disengagement is crucial for success of 
this entire process.
    President Abbas has taken some concrete steps toward 
security reform, particularly announcing security consolidation 
under an empowered Ministry of Interior, General Nasser Yussif. 
General Ward is working intensively with the Palestinians to 
help them continue their progress on security reform, but I 
have to be objective and acknowledge that complete reform is 
not going to happen overnight. The International Community, 
under General Ward's leadership, is providing assistance. For 
example, the European Union and Egypt are providing training 
for security forces.
    General Ward's assessment of Palestinian equipment needs 
has been provided to the international donor community to guide 
their security assistance efforts. And it identifies four broad 
areas of need: Communications and control; mobility and 
transportation; logistics and medical services; and force 
protection.
    General Ward is also working with Israel and the 
Palestinians to fulfill the remaining commitments they made at 
Sharm el-Sheikh in February. Israel announced, last week, that 
it would transfer control of Bethlehem and Qalqilyah to the 
Palestinians within 2 weeks. It promised also the release of 
some additional prisoners and made a commitment to improve the 
situation of the crossings to ease movement by Palestinians.
    The second pressing area of concern is that of the 
Palestinian--development of the Palestinian economy. Here the 
efforts of the International Community are led by James 
Wolfensohn, the Quartet Special Envoy for Disengagement. Mr. 
Wolfensohn, of course, is going to address the committee after 
my testimony, and he will have plenty to say about this 
important and challenging mission.
    I do want to say this about his work, and I think it's 
important to recognize that he enjoys very high credibility 
with both Israelis and Palestinians. He met recently, also, 
with the Quartet Principals both in Moscow and in London, and 
with the G-8 Foreign Ministers in London. They have endorsed 
his work and his mission. He's focusing on coordination of the 
nonmilitary aspects of withdrawal, as well as economic 
revitalization of the Palestinian economy.
    I would like to, also, highlight the fact that Israel and 
the Palestinians have made progress on two key economic issues 
during Secretary Rice's visit 2 weeks ago. They agreed together 
that removal of existing settler homes in Gaza is the most 
sensible course of action. They also agreed that an improved 
flow of people and goods in and out of Gaza, and between Gaza 
and the West Bank, is necessary for economic revival.
    The missions of Mr. Wolfensohn and General Ward, clearly 
require close consultation with Israelis and Palestinians. In 
order to facilitate those consultations Mr. Chairman, we have 
decided to amend our travel band on official United States 
travel to Gaza. We are now allowing, on an exceptional basis, 
limited travel to Gaza by only Mr. Wolfensohn, and General 
Ward, should he seek to avail himself of that, and others in 
direct support of their mission, on a case-by-case basis in 
recognition of this imperative need to assist the disengagement 
process.
    The broader international community can also advance the 
peace process in many ways, including providing economic 
assistance and helping with security training and reform. It is 
important to note that the Arab States have a key unique role 
to play in promoting peace. They have a special responsibility 
to provide economic assistance to the Palestinians and to press 
for continued reform of the Palestinian Authority, but they can 
also move this process forward by resuming contacts with 
Israel, reopening trade and representative offices, and 
abandoning the Arab League boycott.
    Above all, Israel's neighbors in the region have an 
obligation to clearly oppose those who would support terrorism 
or work against the peace process. Sir, Gaza disengagement does 
hold the possibility of reenergizing the road map, which is the 
only plan on the table. We believe that the road map and 
existing mechanisms, including the Quartet, these missions of 
Mr. Wolfensohn and General Ward, and of course, our diplomatic 
establishments in Tel Aviv and in Jerusalem are the best 
avenues right now for moving the parties forward on both 
disengagement and road-map obligations. Which for the 
Palestinians include confronting violence and dismantling the 
terrorist infrastructure, and for Israel, include halting 
settlement expansion and dismantling unauthorized outposts. 
Thus we'll continue our work through these channels to promote, 
ensure, peaceful--this orderly disengagement which we hope will 
trigger progress along the road map and move us closer to that 
goal of the two-state solution to the Israeli-Palestinian 
conflict.
    Thank you very much, sir.
    [The prepared statement of Ambassador Welch follows:]

Prepared Statement by Hon. C. David Welch, Assistant Secretary, Bureau 
      of Near Eastern Affairs, Department of State, Washington, DC

    Thank you, Mr. Chairman. I'm pleased to have the opportunity to 
address the committee today. I was recently in the region with 
Secretary Rice, meeting with Israeli and Palestinian officials, and I 
am soon headed back. This hearing is timely, for it allows us the 
opportunity to get your advice and views and also affords us the time 
to discuss our policy approach.
    The weeks ahead are hugely important. There is a lot of work still 
to do, and the importance of this issue is clear from our intensive and 
multipronged approach to ensuring that disengagement is successful, to 
set the stage for continued progress afterward. As you shall hear, the 
missions of James Wolfensohn and General Ward are to help the Israelis 
and Palestinians with the hard work needed for successful disengagement 
and beyond. We have engaged other states in the Middle East, as well as 
the broader international community. And we have the direct leadership 
of the senior levels of the U.S. Government in bringing all these 
elements together. Secretary Rice has been to the region twice, making 
stops in Jerusalem, Ramallah, and neighboring countries, to push for 
support, and I have been out to the region numerous times since March. 
The Secretary has raised these issues in international gatherings 
ranging from Quartet meetings in Moscow and London to the recent G-8 
Foreign Ministers meeting, where it was a central topic of discussion. 
President Bush has placed the highest emphasis on the Israeli-
Palestinian issue in many meetings with his counterparts.
    These activities are starting to show results. The Israelis and 
Palestinians are now starting to focus on the practical issues needed 
to make Gaza disengagement a success. Of those practical issues, 
security is perhaps the most critical, particularly fulfillment of the 
commitments the Israelis and Palestinians made at Sharm el-Sheikh in 
February. They are discussing their concerns with each other, and we 
are intensively engaged in helping them make progress. As we work in 
this and other areas to ensure a successful Israeli withdrawal from 
Gaza, we are also very much aware of the constructive role that most of 
the international community can, and does, play in supporting efforts 
toward peace. Unfortunately, there are also states such as Syria, whose 
recidivist support of Palestinian extremist groups is an attempt to 
block the Israeli and Palestinian desire to achieve peace. Despite such 
unhelpful efforts, Israel, the Palestinians, the United States, and the 
international community are committed to making disengagement a 
success, since a successful Israeli withdrawal from Gaza and an orderly 
Palestinian takeover there will help to reenergize the road map and 
bring us closer to realizing the President's two-state vision.
    It has been 3 years since President Bush first put forth his vision 
of two democratic states--Israel and Palestine--living side by side in 
peace and security. Since then, a strong international consensus has 
developed behind his vision and behind the road map for peace designed 
to realize that vision, but we have to be honest and admit that road 
map implementation has lagged and neither side has fulfilled its 
obligations. The death of Arafat, the election of Mahmoud Abbas, who is 
committed to reform and has spoken out publicly against the use of 
violence, and the Israeli initiative to withdraw from Gaza and parts of 
the northern West Bank have together provided an opportunity to get the 
parties talking to each other again and, we hope, moving forward toward 
meeting their obligations under the road map.
    Disengagement is scheduled to begin in mid-August--some 6 weeks 
away. Time is short, and Israelis and Palestinians need to engage in 
genuine, effective coordination. During the Secretary's visit to Israel 
we were briefed on joint planning efforts currently underway between 
the Israelis and the Palestinians. The parties have begun to work 
coordination issues through a system of technical committees set up to 
deal with security and economic issues related to disengagement. Some 
progress has been made, but much work remains to be done to ensure that 
this complex operation is successful. Overall Palestinian performance 
on confronting violence has been far from satisfactory, and this is a 
real shortfall and area of concern.
    The main challenges to be addressed between now and mid-August can 
be divided into two broad categories--improving the security situation 
and creating the conditions for growth in the Palestinian economy. In 
the first category, our efforts are led by General William Ward, the 
U.S. Security Coordinator, who has been in Israel since March 9 to 
assist the Palestinians in reforming and restructuring their security 
services, and to lead and coordinate international assistance toward 
those efforts. I am pleased to be joined today by General Ward, who is 
ready to answer your questions about the status of Palestinian security 
force reorganization efforts.
    The past 6 months have seen some positive developments on the 
security front, but again, much remains to be done. That has been made 
particularly evident by the recent increase in violence in Gaza and the 
West Bank, including the firing of mortars and Qassam rockets into 
Israeli towns and settlements and the killings of Israeli civilians in 
the West Bank. The announcement by Secretary Rice, when she was in 
Jerusalem on June 19, that Israel and the Palestinian Authority agree 
that the Israeli withdrawal must proceed peacefully and without 
violence, may appear to be a basic point, but it is important that both 
parties have now gone on record as agreeing that peaceful disengagement 
is crucial for success of this entire process.
    President Abbas has taken some concrete steps toward security 
reform, including replacing some senior officials, passing a security 
pension law, decreeing the consolidation of the security forces under 
the authority of the Ministry of Interior and its Minister, Nasser 
Yussif, and cooperating fully with General Ward and his team. Abbas has 
made clear he will hold his security chiefs accountable for their 
performance in halting attacks on Israelis. General Ward is working 
intensively with the Palestinians to help them continue their progress 
on security reform, but we must be objective and acknowledge that 
complete reform is not going to happen overnight. The Palestinians 
still do not have a unified command structure, and their forces lack 
the discipline and trust to respond appropriately to their official 
chain of command. The consolidation of the security forces under Nasser 
Yussif is a start, and General Ward is continuing to address this 
problem with the Palestinians. The international community is also 
playing a large role in these security reform efforts, in close 
coordination with General Ward. The European Union's civil policing 
program is training and equipping part of the Palestinian police force. 
Egypt is providing training for some Palestinian security forces. 
General Ward has assessed the equipment needs of the Palestinian 
security services, and a list of those needs has been provided to the 
international donor community to help guide the community's real 
interest in assisting the Palestinians with their reform and capacity-
building efforts in support of successful Gaza disengagement. That list 
identifies four broad areas of need: Communications and control; 
mobility and transportation; logistics and medical; and force 
protection. We will continue to work urgently with the international 
community to identify the best way to channel aid for these areas into 
an effective program to support security reform.
    We are also encouraging Israel and the Palestinians to fulfill the 
commitments they made at Sharm el-Sheikh in February. They have already 
fulfilled some of those commitments: Israel has handed over nearly 900 
Palestinian prisoners and has transferred security responsibility for 
Tulkarm and Jericho to the Palestinian Authority. After Prime Minister 
Sharon's meeting with President Abbas last week, Israel announced that 
it would transfer control of Bethlehem and Qalqilya to the Palestinians 
within 2 weeks, promised the release of some additional prisoners, and 
made a commitment to improve the crossing situation to ease movement by 
Palestinians.
    An improved security environment is crucial for progress in our 
second category of pressing concern: That of Palestinian economic 
development. Here our efforts are led by James Wolfensohn, the Quartet 
Special Envoy for Disengagement. Mr. Wolfensohn will address this 
committee after my testimony, so I will not go into great detail on his 
mission, but I do want to say a few words about it. First of all, Mr. 
Wolfensohn has high credibility with both Israelis and Palestinians and 
met recently with the Quartet Principals and G-8 Foreign Ministers, who 
endorsed his work. Jim is focusing on Israeli-Palestinian coordination 
of the nonmilitary aspects of the withdrawal, as well as on economic 
revitalization of the Palestinian economy. He has brought together a 
team drawn from both the U.S. Government and from our Quartet 
counterparts, and his mission is clear evidence of how the 
international community can work together to contribute to the peace 
process. Mr. Wolfensohn has acted as a catalyst to improve coordination 
between Israel and the Palestinian Authority, and has engaged the donor 
community on the continued need to support the Palestinian economy. The 
key issues for Palestinian economic revival have been clearly 
identified. The immediate challenges include the disposition of 
settlement assets, improving the flow of goods and people, and the 
establishment of transportation links between the West Bank and Gaza. 
The Israelis and Palestinians made progress on the first two points 
during Secretary Rice's visit 2 weeks ago, mutually agreeing that 
removal of existing settler homes in Gaza is the most sensible course 
of action; and Israel agreed to evaluate the way it manages crossings, 
in order to improve the flow of people and goods. However, we must 
remember that resolving these issues alone will not lead to an improved 
Palestinian economy if the Palestinian Authority does not maintain the 
pace of reform. Building transparent, accountable government 
institutions and creating an investor-friendly climate is critical to 
restoring growth.
    The task of returning the Palestinian economy to a sustainable 
footing will require the coordinated efforts of both the parties and 
the international community. Efforts by the Israelis and Palestinians 
alone are unlikely to be sufficient to revive the Palestinian economy. 
Four years of intifada-induced economic decline have left over two-
thirds of Gazans in poverty. Declining revenue has left the Palestinian 
Authority with a $660 million shortfall in its budget this year, 
according to IMF estimates. At the March 1 London Meeting Supporting 
the Palestinian Authority, the international community underscored its 
readiness to play a vital role by providing financial and technical 
support to the Palestinians at this critical moment.
    In this regard, it is important to highlight the impact of our own 
efforts. The United States remains the single largest contributor of 
assistance to the Palestinian people. The $200 million in FY 2005 
supplemental funding and our FY 2006 request for $150 million in 
assistance will be used to help improve the quality of life for 
Palestinians in both Gaza and in the West Bank. During President Abbas' 
May 26 visit to the White House, President Bush announced that $50 
million would be used in direct assistance to the Palestinian Authority 
for new housing and infrastructure projects in Gaza. This assistance 
will be drawn from remaining unobligated FY 2005 funds.
    The challenging missions of Mr. Wolfensohn and General Ward clearly 
require close consultation with Israeli and Palestinian officials. In 
order to facilitate these consultations in the short time left before 
Gaza disengagement begins, we have decided to amend our travel ban on 
official United States travel to Gaza. The travel ban remains in place, 
but we are now allowing limited travel to Gaza by only Mr. Wolfensohn 
and General Ward--and others needed for direct support of their 
missions--on a case-by-case basis, in recognition of the imperative 
need to assist the Gaza disengagement process.
    I have mentioned a number of areas in which the international 
community can be, or has been, helpful, including providing economic 
assistance and helping with security training and reform. It is 
important to note that amongst the members of the international 
community, the Arab States have a key role to play in promoting peace. 
They have a special responsibility to provide economic assistance to 
the Palestinians and to press for continued reform of the Palestinian 
Authority, but they can also move the process forward by resuming 
contacts with Israel, reopening trade and representative offices, and 
abandoning the Arab League boycott. Above all, Israel's neighbors in 
the region have an obligation to clearly oppose those who would support 
terrorism or work against the peace process. We will continue to work 
over the coming months to encourage our friends and partners, in the 
region, to help create a positive environment for peace.
    Gaza disengagement holds out the possibility of reenergizing the 
road map, which is still the only plan on the table. We believe that 
the road map and existing mechanisms, including the Quartet, the 
Wolfensohn mission, the Ward mission, and of course, our Ambassador in 
Tel Aviv and our Consul General in Jerusalem, are the best avenues 
right now for moving the parties forward on disengagement and on their 
road map commitments. Both Israel and the Palestinians continue to have 
obligations under the road map: Palestinians must confront violence and 
dismantle the terrorist infrastructure; Israel must stop settlement 
expansion and dismantle unauthorized outposts. We will continue to work 
with both parties, through our existing channels, to encourage them to 
meet their road map commitments and achieve a peaceful, orderly Israeli 
withdrawal from Gaza and parts of the northern West Bank. Successful 
Israeli disengagement will--we hope--trigger progress along the road 
map and move us closer to our ultimate goal of the two-state solution 
to the Israeli-Palestinian conflict.
    Thank you, I'll be happy to take your questions.

    The Chairman. Thank you very much, Ambassador Welch. 
General Ward, do you have comments at this point in the 
hearing?
    General Ward. Thank you, Mr. Chairman, I do. And I, too, am 
pleased to be here to provide an overview of the ongoing 
Palestinian security sector reform and disengagement. As you 
know, last February, the Secretary of State announced my 
special assignment as the U.S. Security Coordinator for Israel 
and the Palestinian Authority. My responsibilities include 
advising and assisting the Palestinian Authority and 
consolidating their security sector, as well as coordinating 
the International Assistance to the Palestinians, and 
encouraging meaningful bilateral cooperation between the 
Israelis and the Palestinians.
    I work closely with the chief of mission in Tel Aviv and in 
Jerusalem, and with various members of the international 
community and organizations that are also located there in 
Jerusalem. I have direct access to the Secretary of State, and 
work most often through the Assistant Secretary for Middle 
Eastern Affairs.
    It is my belief that both President Abbas and Prime 
Minister Sharon are committed to peace and to the immediate 
task at hand associated with disengagement. Now success could 
sure rest with both parties. They have done things with respect 
to expressing their commitment to this process, but they must 
follow through on those commitments. Bilateral meetings are now 
occurring on multiple levels within the security sector and 
elsewhere, and these are important steps for this disengagement 
process. Now these meetings must occur, however, and continue 
to be put in place regardless of the day-to-day circumstances 
that occur on the ground which are up and down as you are well 
aware.
    The requirement for both sides to compromise and to develop 
a sense of trust and cooperation remains an ongoing challenge. 
Most accounts of these bilateral meetings that do occur, 
however, are positive, and I get that from both parties. And my 
team and I meet regularly with Israeli and Palestinian security 
sector leaders to keep pushing them for doing those things that 
are important for the continuation of this process. As you are 
aware, the Palestinian security sector was fractured and 
dysfunctional, with separate chieftans that were loyal to 
individuals with not having any clear lines of authority and 
unresponsive to any central command. To reform their security 
sector, first required the Palestinians to shift the way they 
thought about providing security and the role of these security 
institutions. And that I believe, sir, has occurred.
    Translating that into actions on the ground is where the 
challenge still remains. Our focus is to assist the 
Palestinians in developing a security sector that is based on 
the rule of law, good governance, with clear lines of 
authority, responsive and responsible to the duly elected 
civilians' authorities and to the Palestinian people. I believe 
that the emphasis on institutions is critical if we are to see 
meaningful and lasting change in the Palestinian security 
sector. No doubt this will be a long-term proposition.
    The Palestinian Authority is taking steps to reform. The 
security forces are in the process of restructuring from a 
number in excess of 16 different security organizations to a 
number now about 6, moving to their goal of 3. These structures 
all report now to the Minister of the Interior which is what 
was outlined by President Abbas. We continually reinforce with 
all the need to use the Minister of the Interior and those 
institutional lines as the basis for dealing with the security 
sector, and not through side channels as has been the practice, 
all contributing to the dysfunctional nature of the security 
sector.
    While the Palestinian security forces are taking actions on 
the ground, they must continually seek ways to do more. And 
they need the full support from the political environment that 
is so important for legitimizing those actions there, in the 
region. Now, with the recent state of lawlessness on the 
Palestinian streets, there is evidence that these requirements 
are taking hold. There are arrests being made, albeit not to 
the degree that I would like to see, but there is movement that 
we need to continue to push and encourage them to do.
    I'd also highlight some positive work being done in 
detecting and closing down tunnels along the Gaza Strip. This 
work was being done in cooperation with the Israelis on some 
cases, and then being taken--action being taken by the 
Palestinians.
    However, as I indicated, more needs to be done. Regarding 
the Palestinian reforce requirements; we are working with the 
international community to identify donors for their material 
needs and the Israelis to expedite delivery of these items once 
they are in country. Currently our efforts are focused on 
providing materials, moving it. Right now, the Europeans, 
through their assistance programs, their police force, have 
brought in equipment and we're working with the Israelis to get 
that expedited to the Palestinians. We've also provided, as 
Ambassador Welch pointed out, an initial consolidated list of 
material needs to the international community. These items 
include individual equipment and clothing, vehicles, 
communications equipment, as well as facilities. Another 
important aspect of our approach is working with, and 
coordinating the efforts of, the international community and 
ensuring that our aid is synchronized, targeted, and not 
disruptive to the overall process of restructuring an effective 
security force. As the Ambassador pointed out, disengagement 
remains our immediate focus.
    A successful disengagement sets the conditions for a return 
to the road map. Disengagement success will be a function of 
the actions taken by both sides, leading up to, during, and 
after; it is about the sides honoring their commitments and the 
understandings that were agreed to at Sharm. Both critical to 
an atmosphere of peaceful disengagement; one that does not 
occur under fire. Both the Israelis and the Palestinians must 
take actions to do what they stated they would do irrespective 
of what the other side is doing or not doing. The ongoing 
disengagement coordination is critical in this endeavor. In my 
estimation, the most significant factor for improving the 
security situation rests in the leadership of the Palestinian 
Authority providing consistent and unified direction to the 
Minister of the Interior and to the security chiefs. They must 
gain the support and commitment of the process by all. Notably 
the FAFA leadership, ministers, security chiefs, and heads of 
families in that environment. There must be an effective 
information program that reaffirms the future, both near and 
far events, and provides hope for the Palestinian people, 
backed by credible programs that my friend, Mr. James 
Wolfensohn, is leading an effort on, that will make peace and 
stability a better option than violence and terror.
    Success rests on the shoulders of both parties. There's a 
commitment at the highest levels. Translating that commitment 
to actions on the ground, as I said, remains a challenge. They 
must follow through with those actions.
    In the end, effective security sector reform is an effort 
and effective economic and social advantage.
    Sir, thank you for the opportunity to make that statement.
    The Chairman. Thank you very much, General Ward, for that 
statement. Let me recognize now the distinguished ranking 
member of our committee for his opening statement.

 OPENING STATEMENT OF HON. JOSEPH R. BIDEN, JR., U.S. SENATOR 
                          FROM DELWARE

    Senator Biden. Thank you very much. And, Mr. Chairman, 
thank you for holding this hearing. I think oversight is 
absolutely critical, not just for our information, but for 
informing the American people as to exactly what commitments 
we've made, what actions we're taking, and how well we're 
doing, and what needs to be done that isn't being done, if 
that's the case.
    And it's a pleasure to see you again, Mr. Secretary, and 
General, welcome. Prime Minister Sharon, I think we'd all 
agree--and I've had my disagreements, privately with Prime 
Minister Sharon over the last 30 years, but I think he deserves 
special praise right now, because what he's doing not only 
takes political courage, it takes some personal courage. And I 
want to just acknowledge that.
    Removing 8,500 people, figuratively speaking, with their 
mattresses on their back, heading out from a place they've been 
living to move to another place, is no small feat. If you were 
going to remove 8,500 people from North Capital Street and out 
toward the stadium, it would be an undertaking. It would be 
very different if we were doing it under extremely emotional 
and hostile circumstances. I see the job that the General has, 
obviously, is to see to it that it's less hostile. And you 
can't do much about the emotion, but you can do a lot about the 
hostility. And I thank you for your efforts, General.
    So the question to me is: What's the role of the United 
States, our Partners in the Quartet, and the Arab States in 
this process? First, the Palestinians and the Israelis have to 
dramatically improve the coordination with regard to 
disengagement. The General and the Secretary have spoken a 
little bit to that, but it seems to me, and I'm going to be 
asking about this, General, there's a long way to go. And not 
much time to do it.
    Second, it seems to me we have to step up our efforts to 
help President Abbas, to bring tangible--tangible improvements 
to the lives of the Palestinians. I know my colleagues on the 
committee have been with me, and we've all done some version of 
this where every meeting I've had with Abbas over the last 
year, 6 months--and going back 2 years to his short stretch as 
Prime Minister--has been, tell me what you need. What is it 
specifically that we can do to demonstrate rapidly that you're 
able to produce for your constituency.
    All of us know Hamas is a violent form of a Tammany Hall of 
the 19th century. Not only is it a physical threat, but it 
provides some economic grounding for people in Gaza. You want 
to go to college you go to Hamas. You want to get a--their 
version of a Christmas turkey, perhaps not the best analogy, 
but you know, you go to Hamas. And so I applaud the President's 
announcement this week of $50 million in direct aid to the 
Palestinian Government. The fact of the matter is, I think 
we're making a serious mistake putting the $200 million 
supplemental appropriation through NGOs. I think you need a big 
bang for the buck now. There's an election that's been put off 
6 months. I'm just a plain old politician, Mr. Secretary, but I 
tell you, if the water ain't running, and if you've got to go 
to this unofficial guy to help you get your kid to school, and 
I'm the elected official, and I've got to go to an NGO down the 
road, then it doesn't give me much leverage, it doesn't give me 
much authority, it doesn't give me much standing. I think we're 
making a serious mistake, and I think we should be moving more 
of that $200 million directly, and immediately, to Abbas.
    I would also suggest, Mr. Chairman, that even as we bolster 
the Palestinian Authority, we have to make it clear that it's 
going to have to move decisively. Decisively, against 
lawlessness as it's occurring and if it occurs during this 
process. And fourth, it seems to me, we have to be prepared to 
help Israel meet cost of shifting its development priorities 
away from settlements in the West Bank and Gaza and toward 
areas within Israel proper such as in the Negev and Galilee. I 
think this would be a wise and necessary investment for the 
United States to make.
    And fifth, even as we give Israel our full support in 
disengagement, I fully support the administration call for 
Israel to avoid unilateral actions, such as settlement 
expansions. I think that would be incredibly counterproductive. 
I can only imagine the political pressures that might be in 
play for the Prime Minister. But I think it's a tragic mistake, 
if you were to do that. Expansion complicates the prospects for 
peace, creates unnecessary hardship for Palestinians, and I 
think creates fear that this is Gaza last, not Gaza first.
    Sixth, seems to me we have to press Egypt to take 
responsibility for the boarder with Gaza, so that Israel can 
make a complete withdrawal. Egypt has a significant stake in 
preventing Gaza from becoming an armed terrorist camp and the 
source of instability. The smuggling of sophisticated weapons 
from Egypt's territory has to stop.
    Seventh, we must press, in my view, the oil rich Arab 
States to give a small portion of their windfall profits, and 
they are windfall profits now, they have more money than the 
Lord at the moment--to the Palestinians. It's time to step up, 
help your Arab brothers and sisters. Step up to the ball big 
time.
    When I met with Prime Minister Sharon, one of the several 
times this year, in his office--it was interesting for the 
Israeli Prime Minister to say this, and he said it to you guys, 
I know, on the panel--but he said, the Palestinians should be 
building--and we would join them in building, a multimillion 
dollar desalinization plant. Their own electrical capability. 
The Arab States should step up to the ball and provide hundreds 
of millions of dollars to do that, now.
    They're so phoney in their bleeding and concern for their 
Palestinian brothers and sisters, now is the time. Now is the 
time. And I realize they're strong words saying phoney, but I 
think they are phoney, in the way in which they express their 
deep concern for the Palestinians. Show me. It's that old Cuba 
Gooding expression, show me the money. Show them the money, 
show them your concern.
    Mr. Chairman, in the weeks ahead I think we have an 
opportunity to make significant progress toward the goal of 
securing a lasting peace in the Middle East. Many of the 
challenges we face in this region will seem a lot more 
manageable if we're able to make progress on this front. And we 
all know what the stakes are, the General knows it better than 
anybody. If this goes successfully, I think there's an 
inevitable momentum to put us back on the road and move us on 
the road map. But if we don't, the Intifada's of the past will 
pale in my view. I think this is the single most significant 
thing that we have been a party to in the last--I don't know, 
last couple of decades.
    So, I thank you both for your being here, I thank you for 
your leadership, and, General, I wish you all the luck in the 
world. It's like herding cats, but you're doing a good job. And 
I will yield my questioning time, because I took other people's 
time.
    The Chairman. Well, thank you very much, Senator Biden. No 
need to do that. We'll just have a round of 10 minutes at this 
point for each of us to be recognized. And let me commence the 
questioning by asking you, Ambassador Welch, about Prime 
Minister Sharon's comment that there will be a long pause after 
disengagement before Israel would take additional steps. You 
know clearly this idea of a pause comes into, at least, the 
journalistic accounts of the situation. Is that, in fact, the 
Prime Minister's intent? You have visited with him and have 
been with Secretary Rice during her recent visits. What is the 
meaning of this ``pause'' business, and furthermore, does the 
Prime Minister still recognize the same road map? We talked 
about the road map almost as a generic situation, but what sort 
of road would he be prepared to take with or without the pause?
    Ambassador Welch. Mr. Senator, the road map remains the 
recognized guide, toward peace negotiations. It's a phased 
program of reciprocal actions by the parties, with support from 
the international community. It's accepted by Israel, the 
Palestinian Authority, by us, and the Quartet, of course, who 
drafted it. When Secretary Rice, was in Israel on this last 
trip, she had a press appearance with Prime Minister Sharon and 
at that press appearance, he stated--the Prime Minister stated 
that he saw the steps before us now, as a way to reenergize the 
road map. I think that's an affirmation of his continued 
commitment to the road map, as the recognized path forward. 
That's it. As the Secretary has mentioned, I think to you and 
to others, there's a tendency in the region to look at the 
horizon before looking at what's the first step toward it. The 
first step we are all agreed, is Gaza disengagement. Gaza 
disengagement is necessary, but not in sufficient condition to 
arrive at negotiations as envisioned in the road map. But, of 
course, the reverse is also true, because if it doesn't go 
well, our progress along that path is going to be very, very 
difficult indeed. So what we are focused on now, with 
intensity, and the gentleman here with me today can describe 
that in great detail, about how their missions are designed to 
support this, is to make this Gaza disengagement process 
succeed. It is not an end in and of itself. It is the first 
step. Thank you.
    The Chairman. But what about the pause, and this idea that 
somehow we take time out? How much time? What is your comment 
about that?
    Ambassador Welch. Well, I seen his remarks and I, you know, 
there are various statements out there about the acceleration 
on the road map, or the lack thereof--again this next several 
weeks here, between now and August 15, when Gaza disengagement 
is scheduled to begin, and during the period in which it's 
conducted, are very critical to ensuring that we have a 
possibility of moving along the road map, pause or no pause. 
This has got to remain the focus of our effort. My job is to 
present our position on this, not to explain the various 
statements of others involved.
    I'm confident in Israel's commitment and in the Prime 
Minister's commitment to the road map as the agreed basis to 
move.
    The Chairman. Does the road map have anything to say about 
the wall along the current boundaries? When Prime Minister 
Sharon came to the United States--a couple of years ago, I 
suppose--for one meeting that he had with some members of our 
committee, he described the building of this wall as important 
for security, to combat terrorism. Does the wall remain, what 
happens to it in the process?
    Ambassador Welch. Sir, the barrier that is--has been 
constructed, is still under construction in some areas, as I 
understand it, designed to protect Israel security. We 
understand and believe in Israel's right to defend itself 
against violence and terrorism. It's not the barrier per se 
that's of concern, but its course that is of concern. With 
respect to that, we do have issues regarding the course of the 
barrier, those are not resolved. This falls into the category 
of concerns that we have related to unilateral steps that could 
potentially, either affect the lives of Palestinians involved 
in the areas, or have the impact of prejudicing final status 
negotiations when we get to that point.
    Like settlement activity, we express our concerns directly, 
both publically and privately to the Israeli Government on 
those issues.
    The Chairman. General Ward, do you believe that the 
Palestinians, as they train and equip a security force, will 
have the ability to enforce the rule of law and to combat 
terrorism as we require them to do? And what is the status of 
that training, with regard to this mission that we all agree is 
important? What are the means of effecting it successfully?
    General Ward. Sir, the ability will come after time. It is 
not there at this current juncture. It will take a resourcing, 
a training regimen, it will take a training program that 
includes discipline, that includes causing a situation where 
you have royalty attributed to individuals as opposed to the 
institutions, the legitimate institutions of the government. 
That process, sir, will occur over time. That translation will 
take time and it does not currently exist. We are doing things 
now to put them on the road to accomplishing those sorts of 
things. We are working with members of the international 
community, Egypt, Jordan, who have offered training assistance. 
European nations, other nations of the world agencies, are 
offering resource material that will be used to help 
reestablish, rebuild this security sector. But a big part of 
this rebuild program process, sir, also includes and requires 
and demands a change in how you have security sector functions 
being accomplished. Where you have units, loyalty, individuals, 
chieftans, if you will, and having this entire sector that's 
responsible to the essential authority, with direct 
responsiveness, and responsibilities back to these central 
governing bodies. That has not taken hold. We are working that 
each and every day, we've put those sorts of things into place. 
The security sector, initially when I arrived there, the 
numbers of organizations, 12, 16, point being, sir, it was 
fractured, they were dysfunctional. President Abbas has decreed 
that that security sector be consolidated, steps have been 
taken to consolidate the security sector. Those steps have not 
been completed, it's a process that is currently ongoing and it 
will continue to take time.
    The Chairman. And, General, let me just ask you about that 
aspect, because frequently we have been visiting with military 
authorities as to how training is going in Iraq. Now that's 
much more complex and a larger situation. But still there are 
some parallels. For the diplomacy to work, and for people to 
have confidence in the results and so forth, the security 
forces that you've described have to be there. As you say, it 
has not been accomplished. You were assertive at the beginning. 
But can you give any road map of your own as to how this might 
proceed, given the potential for training, as you have 
suggested, from the Egyptians and the Jordanians, quite apart 
from anything we may contribute? How are these people to be 
recruited? How will they be paid for? Is 1 year, or 2 years, a 
likely plan for setting up adequate security forces?
    General Ward. Sir, the current security sector includes 
about 58,000-plus members.
    The Chairman. Palestinians?
    General Ward. Palestinians. Of that number, sir, I'd say 20 
to 22,000 of those folks actually show up to work. What has 
occurred over time is that the security sector, in my words, 
has been a ``social welfare net,'' and you have payments being 
made to individuals who don't come out and contribute to the 
day-to-day security situation on the Palestinian streets. That 
is being looked at, is being reformed. The President recently 
issued a decree retiring those over 60, that has been something 
that had never occurred before in that society. You know the 
notion of retiring someone, moving them aside and letting the 
younger generation come forward, just wasn't something that was 
in that mentality of doing business.
    Those steps are being taken. There are steps being taken to 
recruit from within these numbers of forces that exist. A 
formation that can be used for Gaza disengagement, that 
formation is being recruited. It is being stationed in Gaza, 
and we will continue to look for ways to get them basic 
training and then over time, what will be needed is sustained 
training, sir, that will be provided by any number of potential 
donors in order to professionalize and put discipline into 
this--into this force. And we are working with international 
donors to make that--make that happen.
    The Chairman. Senator Biden.
    Senator Biden. Thank you very much. General, in 10 minutes 
I want to focus on you, if I may. I've been hanging around you 
guys for the past 32 years and I have an incredible respect for 
you. I know that you generally go out and look at what the 
requirements are, and what the capabilities are, and then you 
make a judgment about what you think the intent of the parties 
are. Could you tell us as in clear laymen terms as you might be 
able to, what the requirements are. Forget whether or not the 
Palestinians or Israelis are doing what they're supposed to do. 
What are the requirements, as you see it from a security 
standpoint, that have to be in place to enhance the possibility 
that the disengagement will be able to be carried off, 
relatively peacefully without Jihadist or renegade Hamas forces 
or anyone else using violence? What are the physical 
requirements? How does this get organized?
    General Ward. Sir, I appreciate that. One of the things 
that I have to say is, it doesn't fit the typical model, sir, 
that we looked over this past couple of decades.
    Senator Biden. I bet that's true.
    General Ward. So that's the first thing that I had to kind 
of calibrate my thinking when I arrived there. The first thing 
to me--intent, I think, is the first thing.
    Senator Biden. Okay.
    General Ward. Because, what is their commitment to doing 
these sorts of things. You need a chain of command, sir, that 
will cause something that's dictated and ordered, that's been 
issued, is there an effective mechanism means to, in fact, 
carry it out. You need communications that will allow that to 
be done. And meaningful ways, expedient ways, and then the 
ability to check and confirm. Without question material 
resources are required. The last 4 years the infrastructure of 
Palestinian security sector destroyed, facilities are gone, by 
and large, there are some facilities that exist, the equipment 
is old, that that's there, within--and the legitimate sector, 
there will be those who will say there's a lot of other stuff 
out there on the other side of the picture. You need basic 
individual equipment, items, protective clothing, you need the 
ability to move your force, transportation, vehicles, those are 
the sorts of material resources that are lacking. The question 
of armaments, and arms and ammunition is there--with respect to 
how much of that----
    Senator Biden. If I can stop you. This is very helpful, at 
least to me, to try to get my head around this. Because we talk 
in broad general terms sitting here, but you're on the ground 
there. And speaking with Palestinian officials they expressed, 
not in as precise a way as you just did, the same kinds of 
concerns. In meeting with Mr. Abbas in Ramallah a while ago, he 
indicated that his first order of business was to get that 
chain of command in place. To consolidate the various militia 
out there, whatever you want to call them. How well is that 
going? How much consolidation is taking place? There are 
reports of efforts to reform the retirement and the pension 
systems and try to get rid of a lot of these folks; my words, 
not Mr. Abbas' words. How is that moving along in shaping the 
pool of Palestinian military, quasi-military police forces that 
you have to deal with--how is that moving?
    General Ward. Sir, I'm often asked: Am I satisfied with 
that aspect of the restructuring? The answer is ``No''; I'm 
not.
    Senator Biden. I've never met a Lieutenant General who is 
satisfied with anything, thank God. But tell me how far off are 
we before you would be able to say to the Ambassador in Israel: 
Mr. Ambassador, I think when Abbas sends an order it is likely 
to get to the police station in Rafah, for example, and be 
honored.
    General Ward. Sir, I think we're much better off today than 
we were when I arrived there 3 months ago. There is momentum, 
there is movement to legitimize and institute a chain of 
command in that structure. I think quite frankly, sir, some of 
the things that we see today with respect to some of the 
lawlessness is, in fact, a result of that as some of these 
traditional power centers are being jumbled, being jeopardized, 
those who would take issue with that are acting accordingly.
    So I believe that there is progress on legitimizing this 
structure. I think the--an order issued by the President, by 
the Minister of the Interior, has a far better chance of being 
implemented throughout the chain of command today, than it was 
3 months ago. On a scale of 1 to 10 I wouldn't want to judge 
it, but it's something more than--it's in the upper half of 
that, I would say as opposed to being----
    Senator Biden. Now a very practical thing, which I know a 
little more about from years of working with police officers. 
They have to have a vehicle. They have to have a radio, they 
have to have a weapon, once that order has been sent down the 
chain of command. And my understanding is there's not--there's 
not much of that. I mean literally, just vehicles to be able to 
take the bad guys that the Palestinians may arrest and put them 
in prison. Do they even have a working prison now?
    General Ward. Sir, again, not by our standards. There are 
facilities where they can put----
    Senator Biden. They can detain, but not a----
    General Ward [continuing]. Yes, sir; yes, sir. But it's 
certainly not--it's a different structure is not----
    Senator Biden [continuing]. And let me put it another way, 
and you may not want to answer this, and I understand, and 
maybe you could privately if it is not appropriate to answer it 
publically. Have any of the material requests you've asked for 
on behalf of standing up a Palestinian force, that would add to 
the prospects of a successful disengagement, not been 
forthcoming? In other words do you issue a report to the 
Quartet and say, hey look, I can tell you right now, fellas, 
they only have two vehicles and they need 24 at minimum. Or 
they don't have communication capability, we need to get this 
in from here to there. Do you make suggestions like that and if 
you do, to whom do you make them?
    General Ward. I do. Most recently we have provided to the 
international community, which would include members of the 
Quartet and others, our assessment based on multiple inputs of 
some resourcing requirements. We have given that to the 
international community, have asked for them to come back and 
give us their ability to contribute, to react to those 
requirements, that is an ongoing process, sir. There are 
efforts underway currently through the European Union to bring 
in those same sorts of equipment vehicles, communications gear. 
We're working with the Israelis to expedite the delivery of 
those goods through their port, once that equipment is in, but 
we continue to provide that type of information and data to the 
international community.
    Senator Biden. Well, my time is up. I have a lot more 
questions. I may submit some to you in writing, General. But 
let me say, and I'm sure the committee shares my view, I think 
you're doing a great job. I know you're supposed to rotate back 
to Europe pretty soon. I don't know if you want to stay, I'm 
not asking you. But in my observation from hanging around this 
issue for a while, continuity is pretty important. And I hope--
well I just hope there's some continuity. And I appreciate it. 
The reason I ask the questions, Mr. Chairman, are obvious. One 
of my criticisms of every administration, is that I don't sense 
a sense of urgency. You know there's an urgent requirement. All 
the little things. The little things add up to whether or not 
this is a success, not the overarching policy goals we're 
talking about.
    Whether or not you got radios. Whether or not a guy that 
you trust that will, in fact, respond to a central authority in 
Ramallah is able to pick up the radio and contact a guy who is 
near where the action may take place, God forbid. It's a 
gigantic issue. I mean you know, and so I hope that your 
recommendations are heeded and heeded quickly, and again I have 
more questions, but I've gone over my time already, and I thank 
you very much, General, for doing what you're doing.
    The Chairman. Well, thank you very much, Senator Biden.
    Senator Hagel.
    Senator Hagel. Mr. Chairman, thank you. Gentlemen, good 
morning. Thank you for your good work and your leadership, and 
convey to your colleagues how much we appreciate their efforts 
as well. General Ward, could you explain the progress being 
made between the Israeli and Egyptian Governments on the 
security issues concerning the Gaza-Egyptian border? Obviously, 
that's going to be a critical component of this effort you have 
alluded to it, as well as Secretary Welch. But give us your 
opinion of how those negotiations are going.
    General Ward. Sir, I think the current situation along the 
border, and as it pertains to the future given Gaza 
disengagement, is encouraging. The level of coordination 
between the Egyptians and the Israelis with respect to the 
force along the Palestine corridor, what that force is, how 
that force will be equipped, and where that force will be 
positioned, I believe is just about been resolved between the 
Egyptians and the Israelis and I would suspect that within a 
matter of days, as I've been told by--by both parties, that 
they will have those issues resolved that will then put the 
mechanisms in place for that corridor to be taken by the 
Egyptians. We will continue to watch that, we'll continue to 
work with both parties to ensure that they work that to 
completion to get an agreement that, as the Ambassador pointed 
out, does not impact the existing treaty arrangements between 
Egypt and Israel.
    The level of coordination between the Israelis and the 
Palestinians with respect to the Gaza disengagement is likewise 
favorable. There has been established a series of meetings at 
three different levels. At the ministerial level, where the 
Israeli Minister of Defense and the Palestinian Minister of the 
Interior have met to discuss overwatching parameters for the 
coordination. There have been meetings at the planning level 
chaired by general officers from both the Israeli side as well 
as from the Palestinian side. There have been at least two of 
those, I believe, within the last couple of weeks. Also 
characterized as positive meetings by both parties.
    And, most importantly, the meetings that will occur on the 
ground by the commanders who will be in charge of the day-to-
day activities, to help ensure that disengagement does not 
occur under fire. That those meetings likewise have occurred. 
The good news, Mr. Senator, is that those commanders on the 
ground have been meeting throughout this period and so there is 
a relationship that exists there. What we require now is the 
type of central commitment and direction to those field 
commanders that will enable them to continue to do effective 
coordination for movement of forces, employment of forces, 
positioning of the forces, and awareness of where the 
requirement is to move a force, in order to prevent some action 
of occurring that would be detrimental to the process.
    Senator Hagel. Well, that's encouraging, General, and thank 
you. Secretary Welch, you eluded briefly to this in your 
testimony and in answer to a question here, but to your 
knowledge, have all the Israeli settlements' activity ceased?
    Ambassador Welch. We watch this activity as closely as we 
possibly can, there are a number of concerns we have with 
respect to settlement activity, the--it's sometimes difficult 
to distinguish between what's new or previously existing 
settlements. There's the whole question of the unauthorized 
outpost, there's a question of some of the associated measures 
with settlement activity, such as land confiscation, building 
in certain areas. And then there's the barrier wall which you 
asked about earlier. In all these areas we do have some ongoing 
concerns and issues that we raised with the Government of 
Israel. I think Israel recognizes its obligations under the 
road map, and we continue to point out to them that not only is 
it important to understand that those remain and should not be 
compromised, but even if we have a difference of where we are 
on the road map, Mr. Senator, we have a concern about 
settlement activity with respect to its impact on the lives of 
Palestinians on a daily basis, but also that it might prejudice 
to get to energizing the road map, or negotiations on final 
status. The President, President Bush, has addressed this very 
directly. Both publically and privately with our Israeli 
friends. And the Secretary of State did so, as well, during 
both of her trips to the region. This is an ongoing dialog and 
there remain issues there.
    Senator Hagel. Thank you, Mr. Secretary. What's your 
assessment of the--Israel's actions today, to remove 
checkpoints on the West Bank, Gaza, facilitating better entry, 
more entry, in Israel for Palestinian workers.
    Ambassador Welch. A very pertinent question, sir, both to 
the process of Gaza disengagement and a situation as it obtains 
on a daily basis. Perhaps you can also, sir, ask this question 
of Mr. Wolfensohn when he presents his views. Because I know a 
lot of his work is designed to address that situation with 
respect to Gaza and it's one of the major issues between Israel 
and the Palestinian Authority with respect to Gaza 
disengagement. As you know from your own travels to the area, 
this issue of movement of people is a very delicate and 
sensitive one. There are security implications for Israel on 
one side. And then there are implications for the Palestinians 
for their daily lives, for their economic activity, for the 
social interaction between Palestinian populations, wherever 
they are.
    There has been some turnover of towns pursuant to the Sharm 
el-Sheikh cease-fire understandings arrived at between Israel 
and the Palestinian Authority. This issue was also addressed in 
the recent summit meeting between Prime Minister Sharon and 
President Mahmoud Abbas. We understand from our Israeli friends 
that further turnover of towns is contemplated, and that 
they're seeking to resolve some of the issues, the security 
issues that arise from that.
    General Ward has been involved in that dialog, also, 
because one part of our effort here, and I think this speaks to 
Senator Biden's concern about the urgency and the small steps 
that are necessary to make sure all this knits together in the 
most positive outcome possible. One of our steps that we have 
underway is to remain attentive to trying to facilitate this 
dialog between Israel and the Palestinian Authority about those 
Sharm el-Shaykh understandings. Because alongside the Gaza 
disengagement, there's a very important reality that the 
security of the West Bank, those parts of the occupied 
territories is also a highly relevant and immediate concern. 
And we would like to see more towns turned over, provided that 
Israel's security needs are in that process, are also 
addressed.
    Senator Hagel. General Ward, would you like to add anything 
to that, just briefly, in anyway?
    General Ward. No, sir; other than to reiterate the point 
that the checkpoints to turn over those cities, the freedom of 
movement, the mobility, are all important factors here, and as 
the Ambassador mentioned, we work very hard pushing to have 
those requirements met by the Israelis within their security 
concerns.
    Senator Hagel. Mr. Secretary, in your opinion, and I will 
ask Mr. Wolfensohn this as well. How much progress do you 
believe the Palestinian Authority made on institutional reform? 
Judiciary reform, transparent finances, pension issues, 
payroll, some of the more significant dynamics of governance, 
that are going to be critical. And I would appreciate your 
assessment. And again, I will ask the former President of the 
World Bank this same question, thank you.
    Ambassador Welch. Senator Hagel, this is a very, very 
important aspect of ensuring that this whole process can 
produce a positive result. To put it bluntly, one of the great 
difficulties here is the Palestinian Authority does not have 
capable institutions of governance. As a general matter. Now 
there are important differences within it's pieces, with 
respect to their development. Let me say this on the 
encouraging side. On the encouraging side, I think under their 
Minister of Finance, Mr. Salam Fayad, they have done a very 
good job of trying to get their hands around control of the 
money, the budget, and provide transparency to the 
international community for how assistance of support is used.
    That's very important for the United States, because as you 
all have mentioned the American taxpayer is a very strong 
contributor. And the United States is the single number one 
donor to the Palestinian Authority, to the Palestinian people 
of assistance. We have made a limited number of exceptions to 
provide such assistance through the Palestinian Authority 
itself. And we would not do that unless we had confidence in 
the measures that Mr. Fayad has put in place. That's on the 
encouraging side. On the less encouraging side, I think you 
just had a fairly objective report from General Ward, of where 
security reform stands. Its as he said, a work in progress. In 
the middle there are a variety of other institutions, some that 
function, you know, tolerably well, others that need a lot of 
improvement. The elections process that some members of this 
committee intended as observers, that I think was capably 
handled by the PA authorities, and we believe that those parts 
of the Palestinian institution of governance could work well 
for future elections. The justice system, that's an area that 
needs considerable improvement. I think Mr. Wolfensohn is 
likely to tell you, and he knows a great deal more about this 
than I do, that the donor community international is going to 
look very carefully at some particular aspects of the 
institutional immaturity of the Palestinian Authority. So, 
broadly speaking, I think there are some good signs. There are 
some worrisome signs, and I would put security foremost among 
those, and in the middle there's a lot of work to do.
    Senator Hagel. Mr. Secretary, I thank you. General, thank 
you.
    The Chairman. Thank you, Senator Hagel.
    Senator Feingold.
    Senator Feingold. Thank you, Mr. Chairman, and I thank the 
witnesses. Let me ask the Secretary about regional attitudes. 
Is the regional suspicion that originally met Prime Minister 
Sharon's commitment to Gaza disengagement subsiding at all? In 
other words, is Israel getting any credit for taking the steps 
it's taking in Gaza? Are there any indications that the Arab 
States recognize the courage that is involved in Israel taking 
these steps?
    Ambassador Welch. Senator, I want to be candid in answering 
this. I think the recognition on the part of regional states 
has--for the importance of this moment, and for their 
obligation to support potential progress has been uneven at 
best. Some states, Jordan and Egypt for example, who have peace 
treaties with Israel, have lent their support in very important 
ways to making it work. And General Ward mentioned, for 
example, the negotiations between Egypt and Israel over 
additional security support along the Gaza-Egypt border. 
Egypt's also providing training for Palestinian security 
services. The Jordanians are likewise in a position, not simply 
to perfect their own border with these territories, but also to 
provide training support. Most importantly of all both those 
parties have provided a great deal of political support for the 
Palestinian Authority under it's President Mahmoud Abbas.
    Frankly, the performance of other governments in the region 
has been wanting by comparison. We have been doing a lot of 
work to bolster that. I think it's going to take much more than 
the rhetorical support that Senator Biden referred to in his 
opening remarks. I think there's some practical support that's 
necessary too. We intend to be very engaged on this. As I said, 
my bosses have already done some work on it. And we have not, 
by any means, concluded that work. I expect that Mr. 
Wolfensohn, when he speaks to you, will lay out his program, 
and point to a couple of places where the international 
community including the Arab States could be more supportive. 
And once we have his presentation and the international 
community endorses it, then we will lend our weight, very 
directly, to each and every one of those governments to make 
sure that they try to move forward on it.
    Senator Feingold. Do you take any of this to mean that some 
of these countries are less suspicious of Sharon's motives?
    Ambassador Welch. Well, you notice my answer casted in 
support for the Palestinians, and I think that's how they 
should present it. It would be good and comforting to all of 
us, were they to endorse Prime Minister Sharon's decision, 
which we think is a--not only a bold decision, but a 
responsible one in trying to advance the peace process. But I'm 
objective and realistic. I would content myself with support 
for the Palestinians.
    Senator Feingold. Do you believe that both the Israelis and 
the Palestinians have a viable strategy in place for dealing 
with the actions of those who would be spoilers in any attempt 
to move toward a two-state solution?
    Ambassador Welch. This is a significant matter, Senator. 
And in my opening remarks, sir, before you arrived I referred 
to our concern about Syria's actions. I'll repeat that to you 
now. We are deeply concerned about the fact that certain 
Palestinian extremist groups have offices and headquarters in 
Damascus. And under the circumstances I think that is a 
dangerous indication of Syrian support for the activities of 
these groups. And these groups in particular have conducted 
actions, including recently, that threaten this process that is 
underway. Apart from that there--we have other concerns with 
respect to, for example, Iranian support for some of these 
extremist organizations also.
    That is an ongoing concern, and, frankly, I think the 
General and I, and others involved in this expect that we're 
going to see more of these kinds of activities because they--
some of those who would do this, may be reading into the 
situation now that this is moving forward. And they want to try 
to find a way to harm it, interrupt it.
    Senator Feingold. I understand Chairman Lugar touched on 
this point, but I want to discuss it a bit further. Let's 
assume that disengagement is completed and the process goes 
reasonably well. Please talk a little bit about the likely 
pacing and sequencing of the next steps in the peace process. 
Is there any disagreement among the Quartet about the, what 
comes next question?
    Ambassador Welch. Sir, the Quartet's road map, which 
drafted by the members of the Quartet, provides the accepted 
international standard path forward to energize peace 
negotiations. It's also been accepted by the Palestinian 
Authority and the Government of Israel. And we see the Gaza 
disengagement process as a necessary, but not sufficient 
condition to activate the road map and get it moving in a real 
way. But as Secretary Rice likes to say, first things first. We 
need to keep our eye on the issue right in front of us, and 
that is to make this process of disengagement succeed. If it 
goes well, I think our potential for energizing that road map 
grows.
    When we were in Israel several days ago, the Secretary was 
meeting with Prime Minister Sharon, he declared, again, his 
commitment to the road map and saw this process as a way to 
reenergize it. We trust that commitment. Again everybody will 
have its differences--their differences about what to do under 
the road map, or where we are on the road map, of what 
standards have been met, and how well when we get to that 
point. But the critical thing is to actually arrive at that 
destination that begins with doing, as Senator Biden said, 
these things, and small things right now, so that we enhance 
that potential. Thank you.
    Senator Feingold. General, let me ask you a question. Do 
you believe that President Abbas' strategy of trying to co-op 
Islamic Jihad and Hamas into the Palestinian Authority's formal 
governing institutions has any real chance of success? And 
without disarmament, how can the effect of consolidation of 
security services and the primacy of the rule of law take hold?
    General Ward. Senator, that's a tough question. And I'm not 
sure I'm prepared to answer it. And I'll tell you why. I don't 
know if I'd do business that way. But again, with respect to 
how that society functions, what he must do now to get this 
calm period--correction--to maintain this calm period, I do not 
necessarily say that that process won't work. And so I think at 
this juncture, that is a process that has created an atmosphere 
that is allowing other things that are important to occur, and, 
therefore, I think that that particular tactic, that course of 
action is one that we work with them to make it as effective as 
it can be. The part that I stress in all of that, is the 
vetting of these individuals and be assured that these papers 
that are signed, these commitments that are made, is there a 
degree of assurance that they would be, in fact, lived up to by 
those individuals. And in all instances, I get an affirmative 
to that. So at this juncture I would say that it is a process, 
it has created a situation on the ground today that has 
produced some calm, and even though we have these space of 
activity that occur, I believe they are more attributable to--
as the Secretary pointed out, those who do not want to see 
progress occur and things being done to disrupt this progress, 
or the potential for the progress. So I would probably leave it 
at that with respect to these fugitives, and the long-term 
potential.
    I think for now, it seems to be working, and we need 
something to be working right now.
    Senator Feingold. I thank the witnesses. Thank you, Mr. 
Chairman.
    The Chairman. Thank you very much, Senator Feingold.
    Senator Chafee.
    Senator Chafee. Well, thank you very much, Mr. Chairman, 
welcome gentlemen. I give President Bush a great deal of 
credit. I believe he's the first President to propose a 
Palestinian State. And the path to that, of course, is the road 
map and I, for one, believe that it is in Israel's long-term 
best interest to have a contiguous viable Palestinian State. I 
do think it will improve security for Israel, if we're 
successful at that.
    However, as we go forward in the months and years since the 
President has proposed the road map, there has been a lot of 
difficulties and, of course, we're here at this hearing, 
hearing the challenges to the road map. But as we look back, 
the--Prime Minister Sharon said about 2 years ago in an 
interview with Newsweek, the interviewer asked him, what do you 
think of the peace plan and the so-called Quartet, the United 
States, United Nations, you, and Russia. And he said, oh, the 
Quartet is nothing, don't take it seriously. There's another 
plan that will work. And then, last year in October in a 
controversial interview, the Prime Minister's Chief of Staff 
talked about the peace plan and said that the plan to withdraw 
settlers from the Gaza Strip, while expanding its settlement in 
the West Bank was designed to freeze the peace process.
    And he said, when you freeze the process you prevent the 
establishment of a Palestinian State, and you prevent the 
discussion on the refugees, the borders in Jerusalem. And he 
went on to say, effectively this whole package called the 
Palestinian State with all that it entails has been removed 
indefinitely from our agenda. And he went on to say the 
disengagement is actually formaldehyde. It provides the amount 
of formaldehyde that is necessary, so there will not be a 
political process with the Palestinians.
    So, in the context of these statements, first Prime 
Minister Sharon saying, oh no, there's going to be another 
plan, and the Chief of Staff saying we're going to have 
essentially another plan separate from the road map, and then 
the evidence that supports these statements, and Senator Lugar 
asked about the long pause after Gaza disengagement, and 
Senator Hagel asked about the settlement expansion. And, Mr. 
Ambassador, you said, yes, we have concern, but nonetheless it 
does continue.
    So my question is, disavow me of the knowledge--of the 
perception that the road map really is obsolete and we really 
should be talking about this other plan that Prime Minister 
Sharon eluded to a couple of years ago, that it's Gaza 
withdrawal, it's not a Palestinian, you know, disavow me of 
that perception.
    Ambassador Welch. Well, sir, let me say this about that. 
Prime Minister Sharon stood with the President of the United 
States in Crawford, Texas, a few months ago. And just a few 
weeks ago, June 19 I believe, with the Secretary of State. And 
in each instance he committed his Government and Israel to the 
road map. That remains the plan that Israel has accepted. Like 
any diplomatic plan or effort, I'm confident that Israel has 
it's own views on what it means and how it would seek to 
interpret its provisions. So do other parties. And we, of 
course, have our own. It remains the internationally accepted 
guide--way forward. And we take the Prime Minister's statements 
standing with the President of the United States, and with the 
Secretary of State seriously, as the word--his word and the 
word of the Government of Israel.
    Senator Chafee. Okay. If that's--I'll take you at your word 
also. Now let's go back to the elements of the road map and the 
road map does call in phase one for the Palestinians to 
unconditionally end violence, resume security cooperation, 
undertake the protocol reforms. That has occurred twice. First 
in the summer of 2003 when Abu Mazen was elevated to a 
leadership position after the meeting in Aqaba and is a long 
summer of so-called hudna, they ceased fire, but nonetheless, 
the other element of that phase one which calls on Israel to 
withdraw from areas occupied since September 28, 2000, and to 
freeze all settlement activities, did not occur. And here we 
are 2 years later, the same opportunities are here under the 
road map. A long cease-fire, Abu Mazen once again in a 
leadership position doing the best he can, yet the settlement 
activities do--which are precluded under the road map--do 
continue. Am I accurate?
    Ambassador Welch. Well, sir, first I do believe, and I 
think General Ward's interpretation would be the same as mine. 
That President Mahmoud Abbas commitment to end violence and 
stop terror is a serious commitment and a credible statement of 
his own intent. That was the platform that he ran on for--to be 
President of the Palestinian Authority and that he was elected 
on.
    We are working with that to expand the opportunity here to 
move along the road map. I think I have a bit of a difference 
with you about the current state of activity in that respect 
however. If Gaza disengagement does proceed, and our 
understanding from the Prime Minister, and from the Government 
of Israel is that it will proceed, despite the political 
difficulties in getting it moved through their political 
process and the difficulties we see everyday in terms of the 
tension it causes within Israel, we're confident it's going to 
move ahead.
    And if that happens, sir, this is the first time since 1967 
that that large a portion of the occupied territories will be 
returned to, we hope, the control of a capable Palestinian 
entity, Palestinian Authority. In addition there are four 
settlements in the northern West Bank that are to be abandoned 
as part of this process, too. So I mean I think that will be a 
very large testament to their willingness to move along this 
path. That does not mean that there are not other obligations 
under the road map, to which we would hold Israel, and to which 
they have restated their commitment, and we do discuss our 
views on those directly with them. And we do discuss our views 
on the--on settlement activity more generally, in a public 
manner as well. And I think I've repeated earlier what those 
positions are.
    Senator Chafee. Thank you, Mr. Ambassador. Once again I 
reiterate my own feeling, that it's in Israel's long-term-
security best interest that there is a viable contiguous 
Palestinian State and I think it would improve Israel's long 
term security. Would you agree that the expansion activity, 
particularly in E-1, Ma'ale Adummim, and Ariel jeopardize the 
vision of a viable contiguous Palestinian State?
    Ambassador Welch. As I said earlier, we have several 
concerns with respect to this. But first there are those road 
map obligations which call for ending settlement activity 
including natural growth. And we hold Israel to those 
obligations. Second, we have concern about settlement activity 
in general whenever it occurs, wherever it occurs, because we 
believe it impacts the daily lives of people and could 
potentially prejudice arriving at negotiations on final status. 
That's a broader concern if you will, it goes beyond the road 
map obligations they're equally as specific, obviously. And we 
state those very directly to the Israeli Government with 
respect to any particular places or issues that arise, 
including E-1.
    Senator Chafee. And my last question would be: Can you 
point to any concrete efforts made to address this part of 
phase one of the road map? Critical part of phase one of the 
road map, a cessation of settlement activity, in concrete 
efforts made by our Government in the years since the road map 
was proposed, its beyond concern, which you've mentioned 
several times, concern with it. Is there anything that has 
actually been done more than just concern?
    Ambassador Welch. Well, Senator, I'm sure that the 
Government of Israel listens to us on these issues. I believe 
the word of the President of the United States is a powerful 
instrument. And when our President and our Secretary of State 
declare the American position on these matters, I believe it 
has an important resonance in Israel. And there can be no 
mistake on the part of the Israeli Government of our views 
about these matters. I think that's in politics quite a 
concrete demonstration of our understanding.
    Senator Chafee. I admire your efforts and everybody that's 
working so hard on the tremendous challenges we have here. 
Thank you.
    The Chairman. Thank you very much, Senator Chafee.
    Senator Obama.
    Senator Obama. Thank you very much, Mr. Chairman. Thank 
you, Ambassador and Lieutenant General for taking the time to 
be here. Let me just pursue a couple of themes that have 
already been touched on. You know, first of all, I am very 
impressed and commend Mr. Sharon for taking the political risks 
that he's taking with respect to disengagement from Gaza, it's 
a difficult political task, as well as a logistical task. And I 
think the Israeli Government's to be commended for taking that 
risk. And I think we should do everything that we can to 
support it. I am concerned that there may be a weakening of Abu 
Mazen's position internally among the Palestinian people to the 
extent that it does not--that the engagement process and his 
election does not appear to result in any concrete benefits to 
the Palestinian people. Immediate signs that their life 
prospects are improving. And I guess recognizing that there are 
important and difficult political problems within Israel with 
respect to the settlers, how can we do a better job of shoring 
up Abu Mazen's position during this disengagement process if we 
have this long pause, or any sort of pause in which Sharon 
feels that it's necessary to take some time just to focus on 
Gaza disengagement?
    In the interim what can Abbas show the Palestinian people 
they are getting for their patience, during this period?
    Ambassador Welch. It's an excellent question, sir, and I 
hope I can help answer it for you. First of all we recognize 
that Prime Minister Sharon's decisions about Gaza disengagement 
and moving out of the four settlements in the northern West 
Bank are important and bold political decisions. I think 
likewise we should recognize that Mahmoud Abbas took a bold 
political decision in running on a platform of peace. After the 
death of Arafat, and after a long bitter uprising, where the 
was loss of life to violence and terror on both sides, in other 
words, high. Both need to be supported in their decisions. With 
respect to our support for President Mahmoud Abbas, I think 
from the outset, we have tried to signal to the Palestinian 
community at large that this is a moment that if they unite 
behind this platform for peace and their President, we'll be 
there to help. This committee has recognized that also by being 
supportive--the United States being the number one donor of 
assistance to the Palestinian people. That's an important 
demonstration of our credibility. President Bush met with 
President Mahmoud Abbas, first time in his time in office that 
he has met with the President of the Palestinian Authority and 
recognized him in that capacity and gave a strong statement of 
the United States support for the path ahead. And in that 
statement we also agreed that we would take the extraordinary 
step of providing some portion of our assistance through the 
Palestinian Authority, there's another signal of that support.
    Our work alone is not going to be sufficient, however, 
there are two other--well three other communities I think who 
also must step forward. Obviously, the three of us here are 
working very hard for the Israeli Government, to see that they 
too step forward. Because Israel I think has enormous tools at 
its disposal to effect the kind of support that you're asking 
about. Second there's the Arab nations also. Those who have 
made peace with Israel and those who have yet to do so. And 
they need to be encouraged and brought into this process as 
well.
    There are also the adversaries of peace, sir, and they need 
to be contained and moved back.
    Senator Obama. Let me focus on a couple of points that 
you've made. I think that's a good summary. With respect to 
economic aid to the Palestinian Authority, my impression is, is 
that Finance Minister Fayad has started to put some systems of 
order and transparency in place, at least within his ministry, 
or funds that are controlled by his ministry. But there still 
appears to be a sufficient impression of corruption within the 
ruling party of the Palestinian Authority. But Hamas is able to 
exploit some of these issues, running on a platform of 
anticorruption or being closer to the people. And I'm wondering 
whether that's an area in which we can be helpful in 
encouraging further movement in the direction of reform and 
transparency when it comes to economic aid.
    Ambassador Welch. Yes, sir. We're trying to do that in a 
couple of directions. First any assistance that we provide 
through the Palestinian Authority has to be done in a way 
that's accountable and transparent to us and to a destination 
that we understand and agree with. So we're not just writing 
the check and handing it over to anybody no matter how 
creditable their own efforts are, such as those of Minister 
Fayad.
    Second, your question is also a little bit broader about 
what to do more generally to bolster the political center, if 
you will, in Palestinian politics. And do so in a manner that 
supports the institutions of governance that need to be created 
for this to be a functioning entity. Rule of law is one clear 
area for such effort and we do have programs underway designed 
to support that. And our political positions are also 
constructed with that in mind. I think General Ward would--I 
mean he works quite a bit on this, on the administration of 
justice side. Because a law and order depends not just on a 
capable police force but on a justice system that works. And 
the Palestinian has some serious inadequacies in that regard, 
and part of their being able to address them, is us bringing 
them to their attention, encouraging others to do the same, and 
helping them to resolve some of those difficulties.
    This is one of those areas of work where the picture is 
frankly mixed. We are not as confident about some of the steps 
they're taking in that area, there's a lot of effort that needs 
to be done. I think we have good partners in the international 
community, because as Mr. Wolfensohn will say to you later on, 
this is an area of keen interest to the European Union and 
other donors to the Palestinian Authority also. And I think an 
area where we're likely to see further progress.
    Senator Obama. General, do you want to pick up on this 
theme in terms of just basic law and order in the Palestinian, 
the administration of justice, not only how the police forces 
may be functioning, but also how--how we're making improvements 
in terms of the prosecution of basic street crime and ways that 
people feel good about it.
    General Ward. Senator, I think that right now is probably 
the most significant thing for the Palestinian people. What is 
it about the Palestinian street that to them says that their 
homes will be secure. They can be on the street secure. Right 
now, the efforts for law and order and security are being 
looked at and addressed, be it from European programs that we, 
in fact, do monitor and pay attention to, because as the 
Ambassador pointed out, the linkage between what happens when 
someone is picked up, then the arrest, the confinement, the 
trial, et cetera. Those are in fact very weak linkages. And 
that reform that needs to occur across the security sectors, 
the judicial reform, reform in the justice, the courts, the 
lawyers, the judges, all these are aspects of this entire 
process that is a work in progress. It's being addressed. It's 
being addressed by predominately male members of the European 
community who have programs, projects that are trying to reform 
what's going on within the judicial system.
    As the Ambassador pointed out one of my focus areas, is to, 
at least when they know that there has been an infraction, and 
someone is, in fact, detained, and picked up, to use even the 
rudimentary justice system that exists, but use that as a means 
of demonstrating to the Palestinian people that they are 
concerned about it. And they just won't turn criminals loose to 
operate back on the street again. But it requires a lot of 
work.
    Senator Obama. Mr. Chairman, could I ask just one more 
question, very briefly. And that is the issue that was raised 
earlier about participation of other Arab States, in this 
entire process. Surely they recognize, at this point, that this 
is a rare window to try to achieve some stability in the entire 
region, and to bring about a peace process. I'm curious, 
Ambassador, maybe you can talk about it. I recognize that Egypt 
is making some substantial commitments with respect to the 
security situation in Gaza, but beyond that what should our 
Arab partners be doing that is not currently being done? And if 
it's not being done, why isn't it being done and what 
additional pressure can we apply to make sure that they're 
investing the resources and engaging in the process 
sufficiently.
    Ambassador Welch. Well, first, I think it's important to 
have leadership from Jordan and Egypt, as those are the only 
Arab States to have concluded peace treaties with Israel. And 
happily they are leading in that effort.
    However, neither Jordan nor Egypt has significant financial 
resources it can devote to foreign assistance programs. Whereas 
other Arab countries do. So I would suggest, and we are 
directly pressing this with the government concerns--
government's concern--that there are two important steps. One 
is political leadership. This is--in our judgement--this is the 
game in town. And as we have all agreed it is not only the game 
in town, it is the most urgent one.
    And now is the time to show that political support. That 
comes in both positive ways, in terms of gestures toward 
Israel, and gestures in support of the Palestinian leadership 
in this process. But also in ways to convince others, such as 
Syria, who are meddling around in it, that they should not do 
that. That that is highly dangerous to their interests. The 
other point is, is financial support. There are commitments 
that Arab States have made pursuant to the Arab league that are 
designed to support the Palestinian Authority.
    In our judgement those commitments are modest. And not even 
those are fully satisfied. The degree of performance among Arab 
States with respect to those commitments varies. We believe 
that if the United States, for example, is taking a lead among 
international donors to the Palestinian authority, and of the 
magnitude that we are, with American taxpayer dollars, that 
others within the equivalent level of national interest ought 
to step forward as well. And there are countries that have the 
financial wherewithal to do so.
    And, Senator, you know this hearing provides us the 
opportunity to declare that in a way that I'm confident will be 
read by Arab audiences out there----
    Senator Obama. So, very specifically, countries like Saudi 
Arabia or the Emirates.
    Ambassador Welch. That's correct sir.
    Senator Obama. They have the money, and they're not ponying 
up enough to make this----
    Ambassador Welch. Actually Saudi Arabia has met its Arab 
Lead Commitments, so we believe Saudi Arabia could do more in 
support of this process. So I think so for those countries that 
have the financial wherewithal to do so, we're asking them to 
make an extraordinary effort.
    The Chairman. Thank you, Senator Obama.
    Senator Biden.
    Senator Biden. Just for 10 seconds, Mr. Chairman. I'm going 
to go to a judiciary committee markup that's going on now, and 
Mr. Wolfensohn will be on in the next panel. I just wanted to 
indicate it's not a lack of respect. I'm going to have an 
opportunity to spend 45 minutes with him this afternoon. And 
so, Jim, I just want you to know why I'm leaving. I didn't want 
you to think it was lack of interest. And I will see you this 
afternoon. Thank you.
    The Chairman. Thank you very much, Senator Biden.
    Senator Coleman.
    Senator Coleman. Thank you, Mr. Chairman. I do think that 
we have a unique moment of opportunity in the Middle East and I 
think a couple of courageous decisions have been made that need 
to be applauded. Certainly the decision of President Sharon in 
moving forward on Gaza withdrawal. I marvel at the political 
coalition that he had to form to put it together. I visited him 
about a year ago, and I asked how he was going to get it done. 
He just said he'd get it done. But he faced opposition within 
his own party, and, obviously, tremendous opposition from some 
of the settlers there. And I think we have to applaud that 
courage, which has created a moment of opportunity. And I also 
think that President Abbas' commitment to running on a platform 
of ending the violence was absolutely critical, and we need to 
applaud that. My colleague from Rhode Island, in one of his 
questions, inferred that there have been instances where the 
first condition needed to be met to move forward on the road 
map has been the end of violence--the unconditional end of 
violence, stopping the terrorism. There are folks out there 
like Hamas, Islamic Jihad, and other terrorist groups that are 
still not committed to this process, and would like to derail 
it. Does the Palestinian Authority have the necessary control 
over those groups to be able to provide a security guarantee 
against continued violence?
    General Ward. Frankly, Senator, I believe the work being 
done by the Palestinian Authority, President Abbas, in many 
respects, is designed to coalesce the leadership of those 
organizations so that they will, in fact, abide by it. I think 
there is a--given the coherent--the internal coherence of those 
factions to a degree determines whether or not that--peace 
would be adhered to by all members of those factions. In the 
case of some of them, I think there's probably greater 
capability than others, and right now I think that there are 
rogue elements in those factions that are outside the control 
of any of the leadership within the factions. So I think to 
have a total ability to control those rogue activities, the 
answer from my estimation is, ``No.''
    I think there are indications that consensus can be 
achieved among some of the leaders that will make the calm more 
sustainable, but I don't think it will total.
    Senator Coleman. One of the barriers to achieving that 
consensus has been mentioned. Mr. Secretary, you specifically 
talked about Syria. And you talked about Palestinian terrorist 
groups with offices in Syria. So clearly there are parties such 
as Syria who are not being as supportive in this process, but 
instead are providing refuge and opportunities for these 
terrorist groups to operate freely within their borders. What 
can we be doing vis-a-vis Syria to limit the ability of these 
groups to operate freely, to raise funds and to organize in 
Syrian territory?
    Ambassador Welch. We're concerned about Syria's 
destabilizing influence as I mentioned in the Palestinian 
territories through these kind of extremist groups. But also, 
sir, in Lebanon, where although Syrian, foreign Syrian military 
units have withdrawn, we still have a concern about the 
exercise of their influence there in unhealthy ways. And in 
Iraq, where Syria is presently the least protected monitored 
border of any of the contiguous states to Iraq and with some 
important and serious consequences for the violence and 
terrorism that's going on there. So what we've been trying to 
do is, speak directly to the Syrian Government about these 
concerns and urge them to be responsive. To speak to other 
governments including governments that have closer political 
relationships with Syria. To impress upon them the need for 
Syrian actions in each of those areas. And then, sir, the 
administration is also looking at unilateral American measures 
that we have in our inventory and evaluating those, whether any 
further ones are appropriate.
    Senator Coleman. Just to follow up on the Syrian question; 
you talked about unilateral actions that we can take. In your 
conversations with the Syrians urging them to be more 
cooperative, have they not been as responsive as we would like?
    Ambassador Welch. Yes, sir. I would not be highlighting 
Syrian performance today if I had a different judgment. It's 
been lacking, both with respect to Lebanon and Iraq, but today 
we were focusing on the Palestinian territories and that's the 
one I mentioned in my prepared remarks.
    Senator Coleman. I would like to follow up on a question 
from Senator Obama, which asked about the perspective, on the 
street, of Palestinians in Gaza. The ex-mayor in me always 
makes me wonder how the city picks up the garbage. How do 
officials make the city work? Is there running water? Can you 
talk to me a little bit about the nature of basic 
infrastructure services, particularly in Gaza, and what are the 
things we're doing to address that?
    Ambassador Welch. Well, General Ward does security.
    Senator Coleman. If you don't pick up the garbage, you're 
going to have big problems with security.
    Ambassador Welch. Yes, sir, I think that's right. He did 
say that all these issues were interconnected. If you--I don't 
know, sir, whether you've visited the Palestinians territories 
before, but it's--in the West Bank it's quite a bit different 
than Gaza, Gaza is a very poor and underdeveloped place. The 
West Bank has--as areas go in that region is relatively better 
developed. Both areas though have infrastructure. They are--and 
it does function. It depends to some degree, in some places on 
Israeli infrastructure too. These are very important needs. 
Particularly in the water, sewage, electricity areas. And this 
is probably an area where the international community can 
concentrate with great effect in the medium term.
    These are, I think, the normal expectations of the 
Palestinian people of their government. And their government 
has to be seen to be delivering on them. I think they have--
currently have the belief that that government is not 
adequately delivering on those needs. Some part of that they do 
blame on Israel, because of what they see as the occupation 
effect, but some part of it they consider to be the Palestinian 
Authority's responsibility and they have to do better. Mr. 
Wolfensohn his ideas for the future do include addressing these 
kinds of needs. And our own assistance projects have been in 
the past, heavily devoted to those purposes, especially water, 
housing, and social infrastructure in the east, but also job 
creation and education.
    Senator Coleman. And I also want to apologize to Mr. 
Wolfensohn, because I'm not going to be able to be here for 
your testimony. But this is an important area. I have deep 
concerns regarding our ability to work out the security 
arrangements in Gaza. We can facilitate a successful withdrawal 
in Gaza, even deal with the security issues in terms of the 
Egyptian border, but if we don't show the person on the street 
that somehow there's some benefit to their basic quality of 
life, I think it's going to be for naught. One of the lessons 
of Iraq that we're seeing, is that in the insurgents' 
understanding, if you want to destabilize something, stop the 
electricity. Stop the picking up of garbage. Stop the delivery 
of basic services. You can have all the military strength in 
the world, but you're going to lose because the people are 
going to feel their lives have become more oppressed rather 
than more positive. I think my time may be up. At another point 
in time, Mr. Wolfensohn, I'd like to have the opportunity to 
visit with you, because I think this is an area that needs 
certainly greater focus and more effort. Thank you, Mr. 
Chairman.
    The Chairman. Thank you very much, Senator Coleman.
    Senator Kerry.
    Senator Kerry. Mr. Chairman, thank you very much. I 
apologize to you and the witnesses for being late. And I 
apologize to the next panel, because I'm going to leave 
momentarily because I'm ranking at another hearing and I need 
to get back to it. But I'm glad to have a few moments anyway. 
Secretary Welch, it's great to see you again. Thank you for 
your many courtesies on a number of occasions as Ambassador to 
Cairo. I think the last time you and I saw each other was in a 
car in Cairo traffic and you confided to me you'd be taking on 
this job, and asked me not to say anything and blow it for you, 
and I kept part of the bargain. But you're a good man, and 
you're the right man for this job, and I'm glad you're there. 
And, General Ward, welcome, glad to have you here.
    Secretary Welch, I understand that you said with respect to 
the Gaza withdrawal, it was a necessary, but not a sufficient, 
process to reinvigorate the road map. Can you be specific, can 
you tell us what this administration views as necessary in 
conjunction, obviously, with what Israel's view of what is 
necessary to get the road map moving?
    Ambassador Welch. Yes, sir, let me take a stab at that. 
First thing a statement of the obvious if I may. Gaza 
disengagement is going to happen, we've been told by the Prime 
Minister, and I think you have too, Senator, that Israel will 
proceed with this plan. That being the case it is imperative 
and urgent that it be seen to work. And that it worked in fact. 
If that happens then a very significant portion of occupied 
territory will have been returned to Palestinian control. And 
if they are effectively in governance of it, and the 
international communities support----
    Senator Kerry. Pressured over what period of time.
    Ambassador Welch. Well, Gaza disengagement is to take place 
over a period of weeks, sir.
    Senator Kerry. When you say, as long as they're governing 
properly. Is that measured over a----
    Ambassador Welch. I wasn't putting in another marker or 
measurement for the successful accomplishment of disengagement. 
Just that the function of Gaza afterward be in fact and 
perceived as orderly and effective.
    That's necessary. Because if that doesn't happen, then I 
think it's a rather academic debate as to how we get onto the 
road map, we're all just striving for that, but our jobs will 
be much harder. Let's assume the best which is what we're 
working for. In that instance, you have--we foresee that there 
is a real opportunity to make significant progress here on a 
wider issue. That doesn't mean that there aren't some serious 
problems in the very first phase of the road map to be 
addressed. For example. The road map does call for not just 
steps to end terror and violence but the accomplishment of 
dismantlement of terrorist organizations. As General Ward has 
pointed out that's a significant undertaking, and a work in 
progress. It's going to take devoted effort to tackle that 
problem.
    If we are at that point however, not withstanding that 
challenge, I would be I think quite happy. That would mean that 
we have a significant effort that has succeeded in Gaza, the 
political position of the parties could well be entirely 
different as a result. Much higher level of confidence we would 
hope, from both Israelis' and Palestinians' part. About looking 
at what would further would be necessary to really reenergize 
the peace process. And that's our objective sir.
    Senator Kerry. Well, coming back to this dismantlement 
question. In all the years that I've been following this and 
chairman and others. There are often these demands that are set 
up, that are nearly impossible to deliver on. And I think that 
you need to give some more definition to sort of what that 
dismantlement is, or isn't. General Ward, specifically, I mean 
Israel is consistently calling for, and we have called for the 
dismantlement, it's a goal, we should do it, obviously. But if 
the ability to move forward depends on President Abbas' ability 
to quote ``dismantle,'' it seems to me you're setting up one of 
those, you know, constant contradictions that you can't 
perform. To the best of my sense of it, it's a reach under any 
circumstances for President Abbas to disarm them. You might be 
able to get a cease-fire and neutralize them and hold them for 
a period of time. But if that becomes the absolute measure of 
whether you can go forward, aren't we setting ourselves up for 
potential failure?
    Ambassador Welch. Well, let me initiate the answer, and 
then ask General Ward if he would like to chime in, Mr. 
Senator. It's a challenge, of course----
    Senator Kerry. I know that it's a challenge, is it 
realistic, is what I'm asking?
    Ambassador Welch. No, I was going to say that it's one that 
the Palestinian Authority and its President have set for 
themselves in the following sense. President Abbas has run on a 
platform of no violence, no terror. In stating that in his 
conception this means that there should be one authority, one 
law, and one instrument of power, one gun in his words.
    Senator Kerry. What he wants to do, is try to put his gun 
in the hands of some of those carrying a different gun today. 
And there's reluctance by many to see that happen, correct?
    Ambassador Welch. That may be one of the mechanisms he's 
chosen for now to accomplish--to move toward that objective.
    Senator Kerry. Do you support that? Does the administration 
support that?
    Ambassador Welch. What we support is that there should be 
calm, no violence, and no terror now. But our objective is, as 
in the road map, the dismantlement of these organizations if we 
don't recede from that objective.
    Senator Kerry. General Ward, you said that you've presented 
a list of needs for the Palestinian security forces, to the 
European community. I was there the day of the election and 
I've been there a number of times. But I met with President 
Abbas the day after the election, and his plea to me then was 
for basic supplies. Just the basics. They didn't even have 
police cars. They didn't have radios. They didn't have the 
ability to coordinate security. And at that point in time Hamas 
clearly had more ability to deliver to the street than 
Intifadah. When we met with President Abbas, I don't know a few 
weeks ago when he was here. Same request, 6 months later. I 
don't get it. I met with the Finance Minister who we all 
respect, he's, you know, one of the best minds we've seen, I 
think a straight shooter on the numbers, and we, I think, have 
confidence in them. And his plea was likewise for the direct 
kind of infusion of assistance that allows them to deliver.
    How can we let so many months go by, now we're putting in a 
list to the European community, have they responded? If not, 
what's the response going to be and how do we get this capacity 
building to the Palestinian Authorities, so there is a 
legitimate partner to move forward with?
    General Ward. Senator, the effort to resource the 
Palestinians is ongoing. There has been an infusion of 
resources to the Palestinians. It's not all that they have 
asked for, nor is it all that they would want. There has been 
an ongoing--well organized by us, with the Israelis to those 
things, those items that have come into the ports to get them 
into the hands of the Palestinians. It includes things like 
vehicles. It includes things like radios, communication 
equipment. So there are items that are being going--that are 
going----
    Senator Kerry. Can I ask you why it takes so long. There 
was no doubt in our mind that President Abbas, all things being 
equal is going to win. There's never been any doubt that we 
needed to build up the capacity of Israel to have a legitimate 
partner to negotiate with. Why does 6 months go by before this 
maximum infusion takes place so that the Palestinian people 
begin to see changes in the street that they can grab onto.
    General Ward. Sir, I don't know if I can answer that. I've 
been working with----
    Senator Kerry. Does it frustrate you at all?
    General Ward. Oh, sir, it does. I wish there were expedited 
ways through all nations, their bureaucracies, to get things 
into the hands of the people. It's a challenge that I see and 
it is frustrating.
    Senator Kerry. Mr. Secretary, the first part, the first 
phase of the road map also calls for Israel to take action on 
the settlements. When I was going through the West Bank I went 
by an outpost that is new. I mentioned it to Prime Minister 
Sharon, I didn't hold back. I asked him about it. I know the 
administration has raised this issue, but what is happening 
with respect to the other side's component of the settlement 
and outpost issue.
    Ambassador Welch. On the unauthorized, or illegal outposts, 
sir, I think Israel has a commitment to remove those. And my 
understanding of the status of that is that they have not begun 
to remove them. On--with respect to settlement activity more 
generally. That comprises a number of different issues and I've 
tried to aggregate them all here. Activity in the major 
population centers, and activity in contiguous areas such as E-
1. The course of the barrier wall, the other impositions such 
as land confiscations or home demolitions that fall into this 
category as well.
    We have a concern about these types of activities as both 
generally and that is that they are impositions on the daily 
lives of Palestinians and prejudice the possibility of getting 
to negotiations. I repeat those concerns publically and 
privately. There are road map obligations as well where we have 
asked for Israel to recommit itself that--to the road map to 
which they--they have endorsed. That has been an object of 
discussion including at the highest levels when Prime Minister 
Sharon visited the President at his ranch in Crawford. And it's 
been an object of discussion when the Secretary of State has 
gone out there on two trips now, to the area. And when others 
of us have gone out. Let me just say I think it's an important 
factor in this context that Israel has declared that it will 
leave settlements in Gaza and the settlements in the northern 
West Bank. That's an important focus of effort right now, and 
is part of the political context in which we ask Israel to 
address these other concerns as well.
    Senator Kerry. Mr. Chairman, thank you, if I could just 
say, number one, that I think Prime Minister Sharon has 
undertaken a gargantuan and difficult political task, and I saw 
the mood when I was in Israel, it's difficult, even ugly in 
some ways, and very, very--he's certainly spending a large 
amount of political capital, and I think we all have enormous 
respect for that. But I do think it is important, obviously, 
for us to try to maximize these windows of opportunity and 
there are many of them. Not the least of which will also be the 
economic development issue that Jim Wolfensohn's going to 
address shortly.
    The question of the airport, the question of the $3 billion 
that Secretary Rice asked from the Arab countries. I know there 
was a presentation made, I don't know what's come of that. But 
I think that all of these--you know I hope there's going to be 
a real frontal diplomatic engagement here to try to maximize 
this opportunity and not have it marginalized to some degree by 
the preoccupation with Iraq, and other things in the region, 
because I think it is linked to what our possibilities may be 
ultimately in Iraq. Thank you, Mr. Chairman.
    The Chairman. Thank you very much, Senator Kerry.
    Senator Sununu.
    Senator Sununu. Thank you, Mr. Chairman, welcome 
Ambassador. Ambassador, as Senator Kerry and Senator Chafee 
have noted, while the removal of the four settlements is part 
of the Gaza withdrawal that will take place, that doesn't 
change the administration policy of opposing any expansion of 
settlements, including natural growth, and you've emphasized 
that. Secretary of State has emphasized that. Let's be on the 
administration policy, but it doesn't change the observation 
Senator Kerry made about an illegal outpost that he saw, the 
references Senator Chafee made to expansion in E-1 and Ariel 
and activity there, which leads me to the question. Despite the 
fact that you've reiterated the policy, the Secretary of State 
has reiterated the policy, the President has reiterated the 
policy, is there any evidence in any sort of physical response 
whatsoever that would suggest that the administration's policy 
on settlements has made any difference at all on the ground, 
with respect to expansion?
    Ambassador Welch. Well, Senator, I believe they take us 
seriously. I'm not in a position today in this hearing to parse 
every aspect of their performance, on that list of things that 
you have mentioned. And I've tried to mention some others to 
you which I think are important concerns as well. This is--we 
have ongoing dialog with the Government of Israel about this. I 
believe they take our concerns seriously. I don't think that 
they're dismissing this. In some aspects there is activity to 
suggest that they've taken notice and measures, for example, on 
roadblocks and check points. And on the security barriers sir, 
there are----
    Senator Sununu. Let me hold you there, because I'll 
actually come back to those. I appreciate that, this issue as 
you say with the barrier, movement of people. But in this case, 
I was just wondering if there was some action on settlements 
that might indicate a specific action, specific response to the 
U.S. policy. Now if the answer is no, it's no. But I respect 
that doesn't necessarily change the fact that they take us 
seriously, that this is an issue of concern; it should be. I 
believe it is an issue of concern for the Israelis and we have 
obviously been clear on the policy. But I just want to 
understand whether there's something happening, something 
occurring in Ariel, in E-1, with regard to illegal outposts 
that you know--that we as members of the committee should be 
aware of.
    Ambassador Welch. Well, again, those are different issues 
and comprise a number of different kinds of things. And I think 
I indicated in an earlier answer, that with respect to 
unauthorized outposts, they have not yet removed them. And 
that's something that they would do under their own laws and 
procedures. In other instances, sir, the absence of action may 
also be answer. That is if there's not something occurring, 
that may be a good thing.
    Senator Sununu. I guess, I appreciate the response, it 
could be worse, as a response in this case. But I don't know 
that that's consolation to those that look at the road map, 
look at what it's asking for and work to press both sides to 
meet commitments and I fully respect--as all the questioning 
has indicated, there are a whole lot of responsibilities on 
both sides. But I did want to focus on this one, to at least 
understand from my own perspective as was mentioned before by 
Senator Chafee, by Senator Kerry, whether or not there had 
actually been any material improvement or response to the 
American policy on settlement. Because you mentioned it, and 
it's an important issue, let me talk about economic growth, it 
was something Senator Coleman brought up.
    No question, movement of workers, individuals, goods in and 
out of Gaza and the West Bank is very important to the economy 
of the Palestinian people and important to the economy of 
Israel. This is an area where I think there's been some 
progress in planning, there have been funds made available. As 
you pointed out, there has been action on roadblocks and some 
of the checkpoints necessary for economics. I think that's a 
very positive thing. But when the withdrawal of Gaza is 
complete, as you pointed out, it's a small area. A highly 
impoverished area. It seems to me it would be very difficult 
for there to be substantial improvement in the economic 
conditions in Gaza with no airport, no access to a harbor. And 
effectively an isolated region except for those checkpoints.
    What is being done, what needs to be done to ensure that we 
don't end up with a strip of land with no access to the sea, no 
access to the harbor, no access to airport freight, and 
commercial aviation?
    Ambassador Welch. Well, those are absolutely essential 
points. For disengagement to succeed--let me say it 
differently. Part of our definition of success is that Gaza 
function as a economic entity, and that just means that there 
has to be access in and out, in a way that helps the economy, 
not just keeps it where it is. There has to be some economic 
interaction with the West Bank as well, and there has to be 
connectivity to Egypt. Those are all--I mean they are some of 
the most important points to be coordinated, to use the word 
that's so commonly used nowadays with respect to disengagement 
between Israel and the Palestinians. But we, the United States 
have a direct interest. Because this is part of our definition 
of success too. So is the international community, as you'll 
hear from Jim Wolfensohn, this is a big priority. With respect 
to the seaport and airport, those are very different 
undertakings. The seaport, there really isn't a seaport. That's 
a longer term project. On the airport, Secretary Rice raised 
this one when she was last out there 10 days or so ago. And we 
believe there ought to be a process to address the Palestinians 
need for an airport. And we think there is a way to look at how 
that might be done consistent with Israeli security, too. We 
turned that job over, because it's complicated, to Wolfensohn, 
and we'll see what we can do in addition to support it.
    Senator Sununu. Does that fact that you've turned it over 
to him mean it's an easy job or a tough job?
    Ambassador Welch. No, sir. He's got actually a pretty 
considerable list of tasks as he will explain to you. It isn't 
because we're trying to unload the hardest work on him. It's 
because--to make the best case for Gaza as a functioning 
economic entity--all these things have to fit together. We 
believe there is a need for the seaport and the airport. There 
are different ways to address it. How you come up with the 
right package is a complicated coordination. On the crossing 
points I couldn't have been clearer. People have to get in and 
out. It can't be a situation where a fence is built around the 
place and folks are left to fester there in the kind of 
situation they are today.
    Senator Sununu. Thank you. Final question about politics. 
Senator Kerry mentioned the Presidential elections and having 
been there during that period. My sense was most all of the 
observers appreciated the participation level, the supervision, 
the coordination with--between--the Palestinians and the 
Israelis to make those elections a success. Could you comment a 
little bit about the current state of affairs with the 
Palestine election law and what you feel the prospects are for 
successful parliamentary elections in the coming summer months?
    Ambassador Welch. Our observation has been that with 
respect to the Presidential election and then the municipal 
elections that the Palestinian Authority conducted these in 
good order. There was international observation and monitoring. 
And I think they've reached the same conclusions, sir. And I 
believe you went as part of this.
    Our expectation is for the same in the future. As I 
understand the legislative situation now, the Legislative 
Council, has considered a revised election law for 50 percent 
by list, 50 percent by proportional representation. I don't 
know whether that has been signed into law yet or not. That's 
for the format of the next PLC election. The Palestinian 
Authority leadership has not made a decision yet on when to 
conduct the election. They're still deliberating that. Their 
difficulty with having it, last time as they expressed it to us 
was that, given the circumstances with Gaza disengagement 
included, that the Election Commission would not be in a 
position to have things ready to conduct the election when it 
had been scheduled. So it was postponed by the President. I can 
check this for you, sir, and provide the answer for the record, 
but I'm pretty confident they have not yet made a decision on 
when to have the election. I am not exactly certain when they 
will.
    Senator Sununu. Thank you very much, thank you, Mr. 
Chairman. Any additional perspective you can provide for the 
record as to administration response to the structure and the 
nature of that legislative proposal would be appreciated. 
Whether you think it will be a step in the right direction in 
so far as electoral reforms is considered. Thank you, Mr. 
Chairman.
    The Chairman. Well, thank you very much, Senator Sununu. As 
you recognized from his comments, Senator Sununu has been out 
there observing elections. That has been true of several of our 
members. And we've had nine Senators participate, each with 
well over 10 minutes of questioning to the two of you. We 
appreciate your testimony and your forthcoming responses. And 
we look forward to visiting with you again. For the moment, if 
you have further comments, please deliver those, and then we 
will proceed to our next witness.
    Ambassador Welch. Thank you very much, Mr. Chairman. 
Appreciate the opportunity to be here today with you, sir.
    The Chairman. Thank you, Ambassador.
    General Ward. Thank you, Mr. Chairman. I have nothing 
further, sir. Thank you.
    The Chairman. We thank both of you. The Chair now calls 
upon Mr. James Wolfensohn, the Quartet's Special Envoy for Gaza 
Disengagement in the Department of State, Washington, DC.

  STATEMENT OF JAMES D. WOLFENSOHN, QUARTET SPECIAL ENVOY FOR 
    GAZA DISENGAGEMENT, DEPARTMENT OF STATE, WASHINGTON, DC

    Mr. Wolfensohn. Mr. Chairman, members of the committee, 
thank you for the opportunity of being asked to speak before 
you. And given the wide range of subjects that have already 
been traversed this morning, perhaps you will permit me not to 
speak to my testimony, which is before you and which is in the 
record, but maybe just mobile observations.
    The Chairman. Very well.
    Mr. Wolfensohn. That may elicit some further comments. Let 
me first of all say that the Quartet, despite the observations 
that were made earlier about the reactions of Prime Minister 
Sharon, as in fact, an active entity at the moment. And I think 
that the work that we're doing with representatives of all four 
members now established in an office in Jerusalem is having 
some affect. And what affect is it that we're having. The 
first, Mr. Chairman, is that I've now been there three times 
and will go again the fourth time next week. What we've 
succeeded in doing is bringing the discussion from trying to 
agree on agenda to agree those issues which are central to the 
resolution of the current issues.
    And we have both sides now negotiating. Because our belief 
is that in view of the Quartet or even members of the Quartet 
are interesting, but what is important is to get the 
Palestinians and the Israelis to reach an agreement together. 
And we have set a framework for those discussions increasingly 
over the weeks, and the dialog between the two parties has 
increased. I think you and your colleagues know very well the 
long history in the area. And the personal relationships that 
exist at senior levels between Palestinians and Israelis. They 
know each other very well. Many of them have good friends, the 
other side. And the bilateral discussions which they have 
become really at the core of resolving these tough issues. 
Typically it's not done in large meetings, it's done behind the 
scenes bringing the active people together. And that, I think, 
we have succeeded in helping to happen.
    The other rule issue applying to every subject is that from 
the Israeli point of view the fundamental issue is security. 
From the Palestinian point of view the fundamental issue is 
economic hope, social progress, respect, a chance to live their 
lives. And those two aspects really affect a discussion on 
every issue. From the Israeli point of view, how does it affect 
our security, and from the point of view of the Palestinians 
how is this going to affect our lives. And a number of 
questions by you and your colleagues have addressed this 
question. What visible differences are going to be on the 
ground when this takes place. And from my own experience on the 
Bank, and from your own experience in this committee, I think 
you know that what people are not interested in is notice of 
another meeting or another promise. They're interested in 
seeing houses, jobs, roads, sewers being fixed, water being 
delivered. This is the evidence of real progress that we have 
to address. So what have we done, Mr. Chairman? There were some 
26 issues when I arrived there and we decided to try to focus 
the parties on six issues. Because the 26 were interesting, but 
if you didn't deal with the six you could not make movement 
forward.
    First was the issue of the crossings. You could not have 
Gaza, and to a lesser extend but still an important impact on 
the four settlements in the northern West Bank, you couldn't 
have these created as prisons. And particularly Gaza, which as 
you know is only 6 percent of the land mass of the Palestinians 
and has 1,200,000 Palestinians in it, 8,500 Israelis, but 
1,200,000 Palestinians. And so the issue of the crossings, 
particularly in Karni and Erez and the crossing into Gaza which 
is the crossing--to Rafah--the crossing to Egypt became three 
central issues. And we are now addressing those subjects and 
there are very active visits and negotiations going on in 
relation to each of those three and other crossings. Of special 
interest is the Egyptian one, because that invokes the question 
of security and the role of the Egyptians and also the question 
of customs.
    The second point which was also raised earlier is the 
linkage between Gaza and the West Bank. You have 1,200,0000 
Palestinians in Gaza, you have 2.4 million in the West Bank. 
But 94 percent of the territory against the 6 percent to the 
territory in which Gaza finds itself. So it's been agreed by 
everybody that there is a need for some permanent linkage 
between Gaza and the West Bank. And there we're currently 
looking at a railroad, which will take several years and a 
sunken highway which would take less time. And also the 
immediate question of what do you do the day after. How do you 
have people and goods move backward and forward? And there 
we're looking at convoys and we're looking at ways in which the 
Israelis and the Palestinians can come up with methodologies 
that protect security that allow the use of Israeli roads.
    The third item which has been raised here also today is the 
question of movement in the West Bank. Which is very important 
for both sides. And there we are trying to bring about now a 
joint effort on behalf of both the commercial people and the 
military to try and see what can be done to reduce the number 
of inhibitions to trading and to movement.
    Fourth issue, the airport and seaport as Senator Sununu 
raised. You must have access and egress. The port has been 
agreed. That will be a 3-year exercise at least. The airport, 
which I saw just last week can probably be fixed in 4 or 5 
months. And so the question is: Will Israel allow the 
reconstruction of the airport and the operations of the 
airport?
    There's nothing definitive on this, but I must say that I 
feel more optimistic about that than I did. And Prime Minister 
Sharon indicated that planning could commence immediately and 
further discussions would take place after the withdrawal.
    The fifth and sixth questions relate to aspects of the 
withdrawal which are now taking place, which is: What do we do 
with the houses, and what do we do with the greenhouses? And 
those issues are still under discussion. I think there is an 
agreement between the Palestinians and the Israelis that 
there's no sense in having the sort of housing, on by the way 
nearly 30 percent of the land of Gaza, for 8,500 people. When 
the rest of the territory, there are 1,200,000 who do not 
anticipate living in that way, and it would be great 
difficulty, frankly, in probably protecting those houses. And 
so an agreement was reached on both sides that the best thing 
to do would be to take them down and allow for a general 
program of development that would include lower cost housing, 
adequate housing, proper housing for the refugees, and for 
those who do not have houses. And have sort of a master plan 
which is currently being drawn up. The immediate issue now is 
what happens with the debris. Who removes it and where is it 
taken to. And so that is causing some complexity. And on the 
greenhouses, I'd have to say that we're in the middle of 
negotiations on what we do with the greenhouses.
    Those six issues, Mr. Chairman, are real practical issues 
that need to be solved now if the withdraw is to move ahead. 
Now in addition to that, there are three other issues which are 
equally important, but which, in a way, are in the hands of 
Palestinians and supporters. The first, becoming more and more 
urgent is the budget deficit for this year. Which the IMF has 
recently said is somewhere between $550 and $650 million. Every 
year we have a problem with the budget deficit. This year it's 
quite large. But we really do need to deal with that question 
in helping Salam Fayad in his efforts to get some funding for 
that deficit.
    The second issue is the issue which many members of this 
committee have raised, is what happens the day after? And here 
because of, I think all our experiences, whether it be in 
Bosnia or Kosovo or East Timor or the Lakes District, or even 
Iraq. What we are now doing with all the donors and with the 
Palestinians, is trying to see what is it that we don't just 
announce, but what is it that can be delivered the day after? 
We need to create jobs, we need to get people starting on 
roads, we need to have people see that sewage is being fixed, 
that water is being connected. That microcredit is becoming 
available. That life is different. And I think the 
international community generally has failed in post-conflict 
situations. And having been part of it for 10 years I can say 
that. But we really must make certain that we quickly get 
benefits to the Palestinians. Both because it's important in a 
general sense, but second, because immediately after the 
withdrawal you're going to have two elections at some proximate 
period after the withdrawal. One the Palestinian, the other the 
Israelis. As we now believe. If that is true the attention's 
going to be off; what is being done for the Palestinians is 
going to be on electioneering. And the only way that we'll be 
able to keep hope is by having physical evidence of benefit for 
those people.
    And the final point, Mr. President--Mr. Chairman, is the 
question of the medium and long term. And here again questions 
have been asked today: What are we going to do to help the 
Palestinians put themselves in a situation where they can run a 
state in a two-state solution? And here again, I would say that 
there's despite the fact that this is a very emotionally 
charged area, as we all know, the fundamentals are the same for 
the Palestinians as they are for the Brazilians or the 
Congolese or the Americans or anybody. You have to have decent 
government, you have to have a legal system that works. You 
have to have a financial system that is transparent and 
provides services, and you must fight corruption. If you don't 
do those four things you can't run an effective state. And 
that's true for anybody. It was true for the Chinese 10 years 
ago. And they've done a lot about it.
    And so I've said to the leadership there, let's focus on 
getting you the minimum conditions which you require to have a 
state. Then let's have a proper program which takes you out 3 
years. Because again our experience shows if you cannot plan a 
state or a post-conflict restructuring, 3 months to 3 months, 
you have to do it with some outlook for a period of time. And 
so it's been my hope that we would be able to get the global 
community to think in terms of encouraging the Palestinians to 
come up with this program. To show evidence of their progress. 
And then provide substantial funding in relation to assisting 
them to achieve their objectives.
    And I have suggested to the President and to the G-8 that 
they ask for this program to be returned by October. So that we 
can then set about raising funding, not only from the G-8 but 
from other developed countries, and most particularly from the 
Arab world. And it was there that the number $3 billion was 
thrown out, up to $3 billion a year, as an indication that this 
is not a sideshow. We've all spent a lot of time, me included 
over 10 years, talking about the importance of Gaza, Israel, 
and Palestine. But just in terms of the numbers the resources 
that have been provided have been under a billion a year, on 
average, for the last 3 years. When I think you know that some 
hundreds of billions of dollars have been spent on other areas 
of interest. In fact a thousand billion dollars on military 
expenditures globally.
    So it seems to me that we need to have the Palestinian's 
recognize their responsibility for good governance and for 
change. That if they do that then there's the possibility of 
helping them make this area a viable area. And may I say, also, 
that implicit in this is the great need for Israel also to do 
its side of the bargain, in terms of making the situation one 
of balance and one of hope.
    That, Mr. Chairman, is what I've been doing, and I'd be 
very happy to answer questions.
    [The prepared statement of Mr. Wolfensohn follows:]

 Prepared Statement of James D. Wolfensohn, Quartet Special Envoy for 
           Disengagement, Department of State, Washington, DC

    Mr. Chairman and members of the committee, thank you for inviting 
me to share with you today, progress thus far on Gaza disengagement and 
my thoughts about the challenges that lie ahead. The United States has 
a unique role to play in helping to resolve the long struggle between 
Israel and the Palestinians, and I believe events in the region over 
the last 6 months make the Israeli disengagement from Gaza a 
potentially galvanizing moment for change. As the Quartet's Special 
Envoy for Gaza Disengagement, I am honored to have the opportunity to 
bring my energy and 10 years of World Bank experience to bear on an 
issue that is the source of so much conflict.
    I have traveled to the region in my current capacity three times 
since I began nearly 2 months ago, and I depart next week for my fourth 
visit. I have met extensively with the Israelis and the Palestinians on 
my visits, and I can say that I am more optimistic now than I was just 
a month ago. While there remain substantial challenges in the coming 
months, my experience in the first 60 days gives me hope that the 
process of disengagement from Gaza can lead both sides back to the road 
map.
    Two of the most critical aspects for successful disengagement will 
be a restored sense of hope among the Palestinians, and security for 
the residents of Israel. Palestinians must feel that the day after 
disengagement they have hope for increased prosperity and opportunity; 
not that they are living in a prison. The Israelis must believe they 
will be able to live securely beside a Gaza and West Bank controlled by 
strong Palestinian institutions. When these needs are met, both sides 
will be much more likely to live side by side in peace and security.
    Throughout the first weeks of meeting with the parties in my new 
capacity, I have been struck by just how well the two sides have gotten 
to know each other over the years. Senior Israeli and Palestinian 
officials have worked together for more than a decade and personal 
friendships have developed. But rather than create an atmosphere of 
trust that has moved the two sides forward toward peace, there has 
instead come to exist a kind of uneasy chess game, where both sides 
have learned exactly the moves that each will make. The atmosphere 
surrounding the parties is heavy with mistrust.
    I saw it as my first task to find a way to break this unproductive 
and potentially endless cycle. Much of the debate on disengagement 
between the parties, since the Palestinian elections, has centered on 
trying to agree on the terms of the agenda that would form the basis 
for discussions. The resultant discord and disagreement over the agenda 
(from Palestinian insistence on inclusions of ``Safe Passage'' and 
other Oslo accord issues, to Israeli refusal to even raise the 
possibility of reopening the Gaza airport) had stymied progress on any 
real issues. Fortunately this has now changed, and real negotiations 
have begun.
    To bring the sides together, I proposed a set of six key issues the 
parties must address together, urgently, for disengagement to work. 
There are an additional three items the Palestinians must accomplish on 
their own, with international support, if the day after disengagement 
is to bring hope for the Palestinians and not despair. After many hours 
of discussions over the last 3 weeks, I am extremely pleased to report 
the two sides have now agreed to this agenda, and have already begun 
substantive discussions.

                            SIX JOINT ISSUES

    There are many individual items which will require the continued 
attention of both sides for disengagement to be an economic success for 
the Palestinians and assure Israeli security. Of these, the following 
six will ``make or break'' the process:
    (1) Border Crossings and Trade Corridors: Smoothly functioning 
border points between Gaza and Israel, and in the south at Rafah with 
Egypt, and shipping methods that make trade profitable for the 
Palestinians, will be a clear and immediate indication that life is 
better after disengagement. With the proper application of technology 
and adoption of good border management principles, the Palestinians can 
prosper and reap the benefits of free-flowing trade. The Quartet team 
is working to provide assistance to both sides on materials handling, 
scanner technology, customs management, and other essential issues. 
Both sides will also need to seriously address allegations of 
corruption at the crossings. The parties met Sunday, June 26, to 
discuss these issues, and have visited several locations together. I am 
hopeful that there will soon be agreement on some difficult issues, 
including the location of disputed crossings and the type of shipping 
methods that will be used. There is an additional important and 
difficult issue on the Customs Envelope in relation to the border with 
Egypt.
    (2) Connecting Gaza with the West Bank: Free movement of goods and 
people between Gaza and the West Bank is essential to revitalization of 
the Palestinian economy. At present, the parties are discussing first, 
the use of convoys to move goods and people, to possibly be followed by 
construction of a sunken road and eventually a rail link. The World 
Bank is currently working with USAID, other donors, and the parties to 
provide technical advice.
    (3) Movement in the West Bank: The system of closures and movement 
restrictions in the West Bank, introduced for security reasons, is 
disruptive to Palestinian economic recovery, and, as currently 
structured, may not be optimal for Israeli security. The parties have 
at this stage agreed to work to review each of the barriers and 
security measures to determine how the situation can be further eased.
    (4) Air and Seaports: Both a land and a sea port are needed to give 
Gaza and the West Bank direct access to third countries. There has been 
a great deal of movement on these issues since I arrived. The Israelis 
agree that reconstruction of the Gaza airport could start after a 
peaceful disengagement, and that work should immediately begin on the 
construction of a seaport. In each case the issue of security is the 
subject for further discussion and agreement, but I am satisfied that 
several alternatives seem possible.
    (5) The Houses in the Settlements: The existing settlement houses 
in Gaza do not meet the Palestinians' needs for more open land and 
higher density housing. At the same time the Israelis are reluctant to 
leave the structures intact. The parties have tentatively agreed the 
houses should be destroyed, and are working out the best mechanism to 
do so. I am hopeful a solution can be found that generates jobs for the 
Palestinians--whether through removal and processing the rubble, or 
actually dismantling the houses--as well as creates a reusable resource 
in the form of processed rubble or salvaged construction materials. 
Technical issues remain as well as the need for agreement as to where 
this rubble will be placed.
    I want to stress that removal of the houses makes the most sense 
for both sides, for economic and political reasons. I understand this 
may seem somewhat counterintuitive to outside observers, but the 
reality on the ground is that the Palestinians will be best served by a 
land development strategy of their own design, tailored to meet their 
specific needs. I hope the details of the overall arrangement to 
address this issue can be concluded in the coming days.
    (6) The Greenhouses in the Settlements: Unlike the settler houses, 
the agricultural assets settlers could leave behind may have value for 
the Palestinians. From my discussions it is apparent that the settlers 
are willing to leave the greenhouses, as well as the equipment needed 
to operate them, if they are provided adequate compensation. The 
Government of Israel and the settlers are discussing this issue. The 
Palestinian Authority is unwilling to pay the settlers. It remains for 
the Israelis to decide whether additional compensation should be paid 
and how such payment can be funded. I believe the Government of Israel 
is coming to understand they will need to make this compensation 
without donor assistance, and that it is a mutually beneficial way to 
proceed.

             CHANGING THE DYNAMIC: THREE PALESTINIAN ISSUES

    The Palestinian Government has the ultimate responsibility for 
creating hope for its people and the conditions under which they can 
prosper. Only by seriously undertaking key reforms, and continuing to 
build institutions that can better serve its people, will the 
Palestinian Authority (PA) strengthen its legitimacy. If the PA takes 
these steps, the process of disengagement can serve to reinvigorate the 
road map.
    In order for the PA to be successful in its efforts, the 
Palestinian people must believe their future holds promise--for 
economic prosperity, dignity, and a return to normalcy. The Israeli 
people must believe that they are secure, which will then allow for 
freedom within the territories and the ability to move and to trade 
with Israel and the outside world. An essential part of providing these 
conditions will be for the international community to strongly register 
its support for the short-term resources the PA will need simply to 
make it through the end of 2005, as well as the medium and longer term 
support they will need to generate an economic transformation.
    I recognize the idea of helping the Palestinians transform their 
future is not new. But I believe we, as an international community, are 
currently at a moment when a relatively small amount of support could 
have a transformative impact. There are three key areas covering the 
short and medium terms, where donors can support Palestinian reform 
that will have the greatest impact and be most likely to foster hope 
for a new future.
    (1) The Palestinian Authority's Fiscal Crisis and a New Social 
Safety Net: The PA faces a major recurrent budgetary shortfall for 2005 
that must be met through international support. In order to receive 
this assistance, the PA needs to maintain tight wage discipline in 
accordance with the existing Wage Bill Containment Plan, reform the 
public sector pension system, and develop a comprehensive Social Safety 
Net Program that is fiscally sustainable over time. Moving forward, the 
PA needs to develop a Fiscal Stabilization Plan for the 2006-2008 
period. To ensure fiscal solvency for the PA for the remainder of 2005, 
international donors, including Arab countries, should make good on all 
pledges of support. This will allow the PA to manage its current short-
term crisis and focus attention on undertaking reforms.
    (2) A Stable Medium-Term Financial Plan for Palestinian 
Development: Over the medium term, the PA should create a broad 
development plan that is linked to a fiscally sound financial plan. 
This leaves donors with the choice of funding piecemeal programs, or 
financing a hand-to-mouth operation. I propose that the PA, with the 
help of the international community, engage in a fully participatory 
process of developing a consolidated plan, which donors can then 
approach in a coordinated and comprehensive way.
    Support for this plan from the international community, including 
the Arab countries, must be substantial if the existing dynamic is to 
be changed. Both sides should receive a clear message that donors stand 
united in their willingness to use this opportunity to work toward a 
lasting solution. This support should, of course, be contingent on 
Palestinian reforms and on security for Israel. I have met separately 
with many of the G-8 leaders, and will meet in a few days with them 
together in Gleneagles to solicit their strong endorsement of this 
approach.
    (3) A Package of Quick-Impact Economic Programs: Disengagement 
needs to be accompanied by an immediate, demonstrable change in living 
conditions if it is to resonate with the Palestinian people. A sharp 
increase in job opportunities would provide this sense of change and 
hope. Unemployment in the West Bank and Gaza remains dangerously high, 
particularly among Palestinian youth. In the short term, jobs can be 
created by a concerted program of labor-intensive infrastructure and 
agriculture rehabilitation, urban upgrading and housing construction.
    Donors and the PA should meet without delay to develop such a 
program, for which pledged donor funds already exist and should be 
rapidly mobilized. Equally important is Palestinian access to work in 
Israel. If the average daily number of permitted workers crossing into 
Israel can be raised and consistently maintained at a higher level, 
this would have a significant stabilizing effect on the Palestinian 
economy.
    The U.S. Congress will be instrumental in helping the Quartet make 
the plans, I have described here, a reality. I welcome the opportunity 
to work with you because I know I cannot succeed without your help. I 
look forward to a fruitful partnership that could bring real change to 
this long struggle.

    The Chairman. Thank you very much, Mr. Wolfensohn, for your 
testimony, and equal thanks for your willingness to serve in 
this capacity, and to provide the perspective that you have 
developed from a long period of public and private service. Let 
me just ask, because you've brought up the short-term issue of 
the deficit of the budget, about the $650 million you 
mentioned. Suppose that the Palestinians come forward with a 
reasonable plan for maybe as much as $3 billion of support for 
that type of structure, going down the trail.
    From your general survey of attitudes in the world 
community, is that sort of money out there? In other words, is 
the glee of confidence in this process, or in the Palestinians, 
or in all of the above, likely to yield that kind of money? If 
so, under what conditions? What sort of prospects would be 
pleasant enough that the donors would come forward?
    Mr. Wolfensohn. Mr. Chairman, on the deficit this is a 
problem we have every year. Of course Salam Fayad runs around 
the world getting $20 million here and $50 million there, if 
he's lucky. And he puts it together. And I don't think that 
there is anything that will save him that indignity and that 
need over the next 6 months. And I regard that as a separate 
issue. This is not the long-term issue. This is because there's 
been overspending, there's been Intifada. And fiscal 
responsibility has been very difficult.
    The Chairman. Is there any source of revenue for the 
Palestinians to begin with? Even besides the deficit, what 
comes in normally?
    Mr. Wolfensohn. No, they have built up significantly, Mr. 
Chairman, their revenues from some few hundred million to over 
a billion dollars. And for that we have to give enormous credit 
to Salam Fayad for having done this in a extremely effective 
way. Just to give you an idea, the revenue figures for 2002 was 
$237 million and for 2005 it was a billion and 78. So Fayad has 
really done a remarkable job in trying to improve the revenue 
figures.
    Also the arrangements with the Israelis have gone much 
better so that they've had a more ready transfer of funds from 
customs and taxes. But Salam Fayad has, just to give you an 
idea on tax revenues. They've gone from $185 to a number over--
if I can get my glasses out, $538 million last year. Which is a 
remarkable----
    The Chairman. That's significant information all by itself.
    Mr. Wolfensohn. It is a remarkable experience, Mr. 
Chairman. And the nontax revenues which they've had from $103 
to $367 million. So these are people that have a plan in the 
next 3 years to become self-sufficient. The Palestinian people 
at the executive level are really very impressive, I must say. 
And they're not looking to be long-term borrowers.
    Now in relation to your second question. The answer is, 
there has to be a change of opinion on two things. The first is 
that money can be given and the corruption will not take it. 
That is a view that is held in the streets in Palestine, it's a 
view that is held by donors. And I have to give Salam Fayad 
great credit for the increased transparency. As part of this 
plan there is no question that there needs to be the sort of 
transparent box, Mr. Chairman, in which the money comes in and 
the donors can see where it is, where it's going. And there are 
many different methodologies for doing this, but it is part of 
the plan.
    But the second issue is to lift this from the sort of spare 
change department to being something that is central to peace. 
My own view is that this is not--if one spends hundred's of 
billions of dollars on some other area, this is not one-third 
of 1 percent of the importance of those areas. I'm not saying 
that this is the cause of terror, but as many of your 
colleagues have said today it is hugely important in terms of 
being a catchcry from people to use as a source of how unfair 
the world is.
    And my own judgement is that we have a chance now, one 
chance of really saying if the Palestinians are going to move 
forward, and there's going to be security for Israel, which is 
an essential element in this, that you could think of the 
Palestinian area of being more like Jordan and the coast, more 
like other areas of the gulf where there's tourism. Where you 
could think of a people that are highly educated, a remarkable 
people, the Palestinian people. Living not in a state of 
penury, but in a state of growth. And if ever there was a time 
in the self-interest of the world, quite apart from the 
judgement of equity. In the self-interest of the world to try 
and put this right, it is my judgement that it is now, Mr. 
Chairman.
    And that's where we have to try and convince the wealthy 
countries and the Arab nations that now is the time to do it. 
Because if you don't you're going to have a constant problem in 
the area.
    The Chairman. As regards the points that you've made about 
the improved transparency and lack of corruption, that is the 
value of the money actually fulfilling the plan. It is a pretty 
good plan to begin with, something that has confidence-building 
in it. I saw in the Financial Times today on what appeared to 
be an entirely different subject, an article that was 
discussing aid to Africa. And it was suggesting that whether it 
be rock stars or statesmen or the World Bank or what have you, 
clearly the expectations are that large sums are required. But 
the evidence from two studies was that even though large sums 
have been expended, very little growth has occurred in most 
countries from these expenditures.
    This goes to the heart of our Millennium Challenge Account 
idea. There really have to be the conditions there, on the 
ground, in terms of able governments, quite apart from the 
creativity of the plans, if good things are to occur. The money 
is absorbed, but there is greater cynicism about the process 
than growth of the people involved. This is why I'm hopeful. I 
ask for your general observation now that you have met with the 
Quartet members.
    Do they generally share the idealism that you have 
presented today? Likewise, is there any idea that there will be 
observers from the Quartet as this process moves ahead? In 
other words: Is this a collective trusteeship of sorts that has 
been instrumental in getting the plan and the confidence 
together and maybe even helping with the money? At the same 
time, can you offer some assurance to the rest of the world, as 
well as to the donors, that this is making headway?
    Mr. Wolfensohn. Well, in answer to the first question, Mr. 
Chairman, I've had enormous support from the Quartet at some 
three meetings I've been to, including one recently with the 
Secretary of State and Secretary General. And I think they're 
persuaded that this is the way to go. Let me rush to say that 
I'm not saying let's spend $3 billion immediately. You couldn't 
spend $3 billion immediately. And you cannot buy peace. But I 
want to change the perspective, Mr. Chairman, of this being a 
sideshow to something that is really of the essence of peace. 
And I think that I've managed to convince the Quartet of that. 
And I have to say that I took the initiative with the help of 
the President--with the G-8. And I have already met with, 
briefly, the Finance Ministers; at greater length with the 
Foreign Ministers. And I will now--have now been invited to go 
Gleneagles to address this matter with the heads of government.
    So you never know until it's done. But it is my hope, Mr. 
Chairman, that we're changing the momentum. The changing the 
momentum in terms of the resources has equal implications on 
the part of the Israelis and the Palestinians. Unless they do 
their part, each in their own way. The money shouldn't slow and 
the support probably should not be forthcoming. But I have 
indications also from the Palestinians of their real 
willingness to address this issue in a highly professional way.
    And I should comment, Mr. Chairman, that the second level 
of the people in the teams amongst the Palestinians is 
extraordinarily high. These are people of great confidence, 
great experience, and enormous academic qualifications as well. 
There are four woman on the team of Mr. Dahlon, who any country 
should be proud to have in their operation. As there are, of 
course, also on the Israeli side. So I see some real signs that 
now is the moment to move.
    I've been in this area for 10 years and I've not seen this 
before. But I also see the urgency, Mr. Chairman. If we do not 
resolve this question it seems to me that the issue of global 
terror and peace will not be resolved. And so it's a question 
of getting people's perspective to change a bit and say let's 
try to solve this thing which has been going 50 years.
    I should make one other point, and that is the huge 
importance of UNRWA in which this country gives resources. 
UNRWA has more than 11,000 people, and in a way it's sort of a 
parallel government. It provides education, healthcare, 
microcredit, roads, and we often forget it. I often forgot it 
as president of the Bank because it was operating itself. I 
think one of the things we need to do, Mr. Chairman, is to work 
with the new leadership in UNRWA to try and bring together this 
enormous resource place that exists in UNRWA with the rest of 
the donor community. And I think that's another big plus that 
is possible.
    The Chairman. Senator Chafee.
    Senator Chafee. Thank you, Mr. Chairman. Welcome. If I 
heard you right just now you're saying that this centrality of 
this issue and the war on terror, and the urgency of moving 
this peace process forward is--did I hear you correctly on 
that?
    Mr. Wolfensohn. That is my personal view. I'm not a member 
of the State Department, although I have an office there. So I 
don't speak with great authority. But as an individual who's 
been around this game for sometime, it does seem to me that 
this is a very important issue. And certainly I'm operating on 
the basis that that is the case.
    Senator Chafee. And when you use the words sideshow, am I 
assuming that Gaza is--did not want the withdrawal in Gaza to 
be considered a sideshow, that it's got to be considered on 
Gaza first and then on to the West Bank?
    Mr. Wolfensohn. The role--the view of the Quartet, of which 
I'm in 100 percent agreement, is that this only makes sense if 
it is a step toward a settlement which will lead to a two-state 
solution with security for Israel and with hope and economic 
possibilities for Palestine. I think everybody believes that, 
and I certainly do.
    Senator Chafee. And then doesn't it follow that considering 
our experience in the difficulties of the 8,000 settlers in 
Gaza, that's it going to be very difficult with the many, many 
more numbers in the West Bank. If it's going to be very 
difficult with 8,000 in Gaza, but many, many--100,000 more the 
West Bank if we're looking onto that. And so the common sense 
would dictate why continue to have these expansion of these 
settlements if the plan is at some point the dismantling of 
these settlements in the West Bank. As is going on in Gaza. Why 
have expansion?
    Mr. Wolfensohn. Well, I have never suggested that that was 
part of my plan, Senator. And the President has been very clear 
on the view of this country and I think it is a view which is 
correct. I think that the expansion of settlements is something 
that the President is giving attention to and I would support 
his efforts.
    Senator Chafee. Well, thank you for your time and your 
efforts. A little breath of fresh air to have some optimism. 
Keep up the good work.
    Mr. Wolfensohn. Thank you very much.
    The Chairman. Thank you, Senator Chafee.
    Senator Sununu.
    Senator Sununu. Mr. Wolfensohn, you've mentioned the master 
plan for redevelopment of the land--the settlement land that 
will be evacuated in Gaza. Could you speak a little bit more 
specifically about the development of that master plan? Who's 
primarily responsible for the development, what is your role in 
particular, and what methods or approaches would make the most 
sense for financing that plan once it's complete?
    Mr. Wolfensohn. My role is to stimulate and to think about 
a master plan. The stage that----
    Senator Sununu. Does that make you a muse?
    Mr. Wolfensohn. A muse? I'm not sure, maybe. What it does 
do is to indicate what is the obvious. If you are getting out 
of 28 to 30 percent of the land on which 8,500 people lived, 
and you have 1,200,000 other Palestinian's living in the 
territory, it is blindly obvious that you need to come up with 
a plan to use that land, and to use it in the most effective 
human and economic way. It happens to be on very beautiful 
coastline; I just drove down and saw it last week. I have been, 
many times, into Gaza with my World Bank hat on, but it is 
capable of being an absolutely gorgeous place.
    Senator Sununu. Will title to the land pass to the PA?
    Mr. Wolfensohn. That is----
    Senator Sununu. And is most or all of the land in one 
contiguous segment on the coastline you mentioned?
    Mr. Wolfensohn. I don't know the answer to that because 
there is no answer at the moment. There is controversy over 
private ownership or PA ownership. It is something that is 
being reviewed at the moment and I simply cannot give you an 
answer, because I don't think there is an answer. But what is 
being looked at, at the moment in a preliminary way, is some 
people from the gulf were coming in, have studied the area, and 
are looking at a first shot at a master plan. Which would 
include housing, which would include tourist areas, would 
include areas for agriculture. And no one has seen it yet. But 
if you look at the land, it just cries out for sensible 
development, and is adjacent to, frequently, these large 
campsites in which there are hundreds of thousands of people. 
And so what you want to be sure of is that if housing is going 
to be taken down that you see some housing being built. And I'd 
like to see it being built the next day so that it can convey 
an atmosphere not of destruction, but of construction.
    And this, Senator, is really getting to this question of 
what we can do for them the next day. But what we can do for 
them the next day should not be random. It should be part of a 
broader plan. And I think Mr. Dahlan and I think Abu Mazen and 
the Palestinian Authorities understand this. But they've not 
yet concluded on the form of that plan, though they have come 
up with a 3-year financial plan which includes, with the 
Ministry of Planning, a number of initiatives that they should 
take. And over the next 2, 3 months what we're going to try and 
do is to bring together the Ministry of Planning's work with 
the Finance Ministry's work, together with the master plan and 
produce all this by October. But it is not ready yet. There's a 
disconnect.
    Senator Sununu. I think in your answer you mentioned more 
participation from some of the gulf states. Could you speak to 
that point? What role do you see or do you think would be 
appropriate for some of the regional Arab States, Arab 
countries which certainly have significant financial resources 
and have at least dealt in many areas with economic development 
in this part of the world?
    Mr. Wolfensohn. Well, my own view is, because I know the 
gulf and I know the people there pretty well, is that if you 
could change the atmospherics so that you could have something 
that was peaceful, you have to start with beautiful land with 
1,200,000 people that need housing and jobs. And I think that 
you'll find that the private sector will come in from the gulf, 
as will the Palestinian private sector. I've reached out to the 
Palestinian private sector, which is significant and which 
operates throughout the Middle East. And one of the groups 
already got $700 million there, told me the other day they've 
got a billion ready to come in, in private sector development.
    So my hope would be that when we talk about these large 
numbers then you probably won't ever pull them down fully. 
You'll create an environment in which private sector will be 
encouraged to come in. You will certainly need a higher level 
of government funding. But I don't think--I think you might be 
surprised if you had peace, my own judgment is that you'll find 
businessman coming in to do quite a lot. And I know the people 
in the gulf pretty well and interestingly one of the gulf 
countries is the one that is already doing the master plan.
    In response to an earlier question that the chairman asked, 
I just want to add, Mr. Chairman, the Quartet representatives 
are now participating in most of the bilateral meetings. So 
that we're being invited in, it's not that we forced ourselves 
in, we're being invited in to try and facilitate the discussion 
between the two sides. So when it's useful we're there, when a 
couple of people want to go out and have a drink or dinner and 
beat each other up, we probably prefer not to be there. But we 
are trying very hard to be constructive, and make sure that any 
solution is not a Quartet solution. The solution has to be an 
Israeli-Palestinian solution. And so you don't see our name 
very much. I think what you want to do is to see the names of 
the players, not ours. And that's the position we're taking.
    Senator Sununu. Well, I want to thank you very much and 
although my reference was in jest, I suppose that the mark of a 
truly successful muse is that the work of art is brilliant, but 
their name never appears on any signature plate. Good luck to 
you and thank you very much for being here.
    Mr. Wolfensohn. Thank you.
    The Chairman. Thank you very much, Senator Sununu. Let me 
just ask Mr. Wolfensohn about the six joint issues that you 
have identified. Obviously, there are some timeframes on some 
of these that are fairly urgent, as you've mentioned. These are 
not long-term things, these are right upfront, whether it be 
air and the seaports or the houses in the settlements, or even 
the greenhouses. Who on behalf of the Quartet, or anybody else, 
is shepherding over these points? From day to day, is anybody 
giving you progress reports or giving them to the other members 
of the Quartet?
    Mr. Wolfensohn. Everyday, Mr. Chairman, I'm getting a 
report. I'm going straight from here, actually, to the weekly 
teleconference where we get everybody together. But I get daily 
reports on what is going on. I will be going back to the region 
again next week. I'm preferring to go twice a month rather than 
live there. Because of my judgement that if I live there, I'll 
get pulled in on every detail, and I don't want to do that. I 
think it's better to have the first-class operating team, which 
we're building up. We have offices, we're functioning. We're 
working very closely with the World Bank and with the other 
international agencies. With all of whom I've already met.
    And we're trying to pull it together, but the simple answer 
to your question is we've got to deal with the crossings. 
Because if we don't deal with that we're going to be in 
terrible trouble. We're going to have to deal with the question 
of what happens the day after. We're going to have to deal with 
the question of linkage with Gaza and the West Bank, and have 
to have interim arrangements with the port so there is not a 
prison atmosphere. We're going to have to, at an early stage, 
resolve the airport, but probably after the withdrawal.
    So the timeline in a way is described by the subjects and, 
obviously, we must deal with the houses and the greenhouses. 
Because the moment that withdrawal starts places they become 
apparent, not only symbols but parts of the withdrawal process. 
So everything that we've got down there, Mr. Chairman, has a 
very, very proximate timeline. And so we're operating with a 
great sense of urgency at the moment.
    The Chairman. Well, as you've observed and others have, one 
of the purposes of our committee hearings, such as this one, is 
oversight, in the sense of asking questions and receiving 
information from witnesses such as yourself.
    It's very important. My guess is that most of us in the 
Senate, or most Americans viewing all of this, are not really 
aware of precisely what the Quartet does, not even who the 
instrumental persons are in this, quite apart from an agenda 
such as the six points here, or the three points identified by 
Palestinians.
    This is very important in terms of some confidence building 
in our own country about this process. We hear terms 
journalistically such as the road map or the Quartet, or peace 
in our time, or terms of this sort. But the details are 
extremely important, in terms of any crediability of something 
happening. So I appreciate your identifying this very specific 
agenda and sharing that with us today, as well as your own 
modus operandi, that you will have this teleconference after 
you leave here. There are ways of staying in touch with the 
other members so that there is identification of the issues, 
but the followthrough on your part, the oversight of the 
Quartet, is literally on your own agenda.
    What happens, even as all of this is proceeding, if 
extremists on either side decide to try to disrupt the plans? 
Does the Quartet have any mechanism for keeping this thing on 
track? The reason I ask this is that at various points in the 
last few years there have been constructive attempts.
    But then disruptions occur, or a terrorist attack, 
retaliation, vows by both sides that so long as this goes on, 
nothing is going to happen and so forth. Are there any 
parameters of confidence building measures, so that even in the 
face of persons who are deliberately disruptive of the process, 
who don't understand it, who don't want it, and so forth, that 
somehow or another there's some staying power to this 
procedure?
    Mr. Wolfensohn. Well, let me first of all pay tribute to my 
colleague, Kip Ward, with whom I'm working like a twin. Because 
I don't think that we can succeed without the security issues, 
and frankly, I don't think that security will succeed unless 
there's hope.
    The Chairman. He identified you has his good friend this 
morning.
    Mr. Wolfensohn. Well, we are, and we're working very well 
together. But the overall question, Mr. Chairman, is that there 
are things that we can plan and try and control. Which even if 
there was peace would be difficult. But this is the Middle 
East. And this is the Palestine territories, and it's Israel. 
And sadly, the more rational people on both sides are all 
affected by these random and not so random events. And I think 
that the only thing that we can hope is that there will be a 
recognition on both sides sufficient that each side will see 
that it's in their self-interest to keep the temperature down.
    I think we've seen some evidence of that recently. When 
there has been provocations and when the response has been, 
from either side, more modulated. But the big worry all of us 
have is if there's some major tragedy. Something that will not 
allow modulation in response. And we've all seen it, Mr. 
Chairman. You've seen it, I've seen it. I guess the hope that 
we all have is that, you know, around 70 percent either side 
want to get a final settlement and get on with living. And the 
Palestinian and the Israeli people, I think, broadly want to 
live in peace beside each other.
    But I, unfortunately, no Quartet or nobody I know, can 
guarantee the 100 percent that we need. So what we're trying to 
do is to proceed on the basis that there is a plan that makes 
sense and hope that as provocations occur, good sense will 
prevail, and we'll be able to get through it. But a day in 
Israel and in Palestine is like a month anywhere else, Mr. 
Chairman. With the things that happen there. And I think what 
you need of people that are realistic, but I think at the 
moment also optimistic to try and make this thing work. And so 
if I convey a sense of optimism it is because I think we need 
some optimism in this. And I think it's so important for our 
kids that this be done. That we will remain optimistic and as 
these things happen we'll do our best and deal with them.
    The Chairman. Well, that is an excellent way in which to 
conclude our hearing, with those thoughts which I'm sure our 
committee shares, as do the American people who have witnessed 
your work and appreciate it as we do. Let me just say that 
we've had almost 3 hours of hearing. You have participated in 
all of it. We're grateful to you for your testimony and for 
your participation today. Having said this, the hearing is 
adjourned.
    [Whereupon, at 12:28 p.m., the hearing was adjourned.]
                              ----------                              

       Additional Questions and Answers Submitted for the Record

Responses of James D. Wolfensohn to Questions Submitted for the Record 
                         by Senator Chuck Hagel

    Question. During your testimony, you referred to discussion with 
the Palestinian and gulf business officials regarding investment in 
Gaza, including the involvement of a gulf investor in the planning for 
Gaza's development.
    a. Please describe in detail the role you envision for the private 
sector in Gaza's development.
    b. Are you aware of the Aspen Institute's effort to establish a 
public-private partnership, via a loan fund, to encourage foreign 
investment in Gaza? Do you support this effort and how can this effort 
be integrated into your overall effort to promote development planning 
in Gaza?
    c. Please provide, in as much detail as possible, the scope and 
substance of your discussions with the private sector.

    Answer. Generating Private Sector support and engagement--
Palestinian, Israeli, and international--in Gaza and the West Bank is 
essential to the long-term viability of the Palestinian economy. There 
are several areas where some immediate work can be done, but the most 
important goal in the short term should be to get immediate tangible 
projects that provide jobs to Palestinians. I have advised groups, 
including the Aspen Institute, that speed, reality, and visibility, 
rather than the long-term size of investments, should be the priority 
over the next several months. We support the efforts of Portland Trust 
of the United Kingdom, which is working with OPIC and the Aspen 
Institute on putting together a substantial program of loan guarantees 
for the private sector which would be administered through local banks. 
Support from the European Union is now being sought by them.
    I have been very impressed in my meetings with the Palestinian 
business community that there is a very strong core group that can 
generate substantial amounts of resources fairly quickly. We have 
discussed how these businesses can best use their resources in Gaza and 
in the West Bank, and the impediments to investment. The most obvious 
issue is, of course, security and a legal framework that is conducive 
to investment promotion. I am working to raise these issues with the 
PA, especially the Minister of National Economy and with the Minister 
of Finance. I believe there is sufficient political will to address 
many of these issues, and that the PA will seek to build the capacity 
necessary to do so in the course of developing its master development 
plan.
    As a general principle, I believe that the private sector should be 
at the center of the development process. I have met with Palestinian 
groups in Gaza, Nablus, and Jerusalem. Many initiatives from gas 
transmission and power generation to tourism, housing, and highways 
have been discussed. In many cases the Israel business community is 
involved.

    Question. What is the current and planned staffing structure of 
your mission? How much support are you receiving from other members of 
the Quartet?

    Answer. The staff of the Office of the Special Envoy for 
Disengagement (OSED) in Jerusalem consists of one senior representative 
from each of the Quartet members, a senior World Bank liaison, several 
staff officers, and a small administrative support staff. The European 
Commission, the U.S. State Department, and USAID fund all operation 
costs for the Jerusalem office, including staff salaries that are not 
covered by staffers' home institutions. The United Nations administers 
these funds, assists in the establishment of the office, and is 
providing vehicles. Russia has committed funds which we estimate to be 
a minimum of $500 thousand.
                                 ______
                                 

Response of James D. Wolfensohn to Question Submitted for the Record by 
                         Senator Barbara Boxer

    Question. What role do you see for the Arab States in helping Abbas 
rehabilitate the Palestinian economy and infrastructure?
    Aside from Saudi Arabia, the Arab States provide little financial 
assistance to the Palestinians. According to the Palestinian Authority, 
Saudi Arabia provided $107 million last year; the rest of the Arab 
countries combined provided only $15 million. What can be done, if 
anything to get Arab States to contribute more? And if aid is provided 
how do we ensure that it does not fall into the hands of terrorists? Do 
you sense any commitment within the Arab world to helping maintain a 
long-term peace?

    Answer. Building a vibrant and economically sustainable Palestinian 
economy--along side a secure Israel, and thereby hope for the 
Palestinians--will require the support of the Arab countries. The 
entire region has long pledged its solidarity with the Palestinians and 
cited the need for resolution to the conflict. I believe now is the 
time for the Arab countries to do their part in bringing about this 
resolution.
    As you know, the G-8 has pledged their support for a program of up 
to $3 billion per year in assistance and investment for the next 3 
years to the Palestinians. We would hope that between one-third, one-
half of annual funding, should come from the Arab world. The PA is 
beginning work now, with the Quartet team's assistance, to develop a 
master development plan. Once this process is completed to the point 
that specific funding needs can be identified, I will visit the Arab 
countries to obtain their financial support.
    The 3-year development plan will be prepared through a 
participatory process with all Palestinian stakeholders, including 
private sector and civil society, donors and the Israelis, and will be 
integrated into the PA's annual budget. A fully transparent mechanism 
will be established to administer these funds to protect against 
corruption, and that funds go only to benefit the Palestinian people. 
There are a number of models that can be used to establish such a 
mechanism, including World Bank trust funds and USAID's accounting 
controls. The PA has also, over the last year, instituted financial 
controls and reforms that approach world-class standards, and they 
continue to upgrade their capabilities.

                                  

```