EN Official Journal of the European Union CE 78/851

(2004/C 78 E/0904)

WRITTEN QUESTION E-3701/03

by Marco Pannella (NI), Maurizio Turco (NI), Marco Cappato (NI), Gianfranco Dell'Alba (NI), Benedetto Della Vedova (NI) and Olivier Dupuis (NI) to the Commission

(10 December 2003)

Subject: Misappropriation of Community funds intended for the Palestinian National Authority

Knowing that:

— on 15 September 2003 the International Monetary Fund reported that, over the 1995-2000 period, USD 900 million had been paid from the Palestinian National Authority's fund into a special account controlled directly by Yasser Arafat;

— at the end of October 2003 a group of Palestinian Legislative Council members belonging to the Democratic Block called for a committee of inquiry to be set up for the purpose of investigating the hundreds of thousands of dollars belonging to the Palestinian people which had allegedly ended up in secret Swiss bank accounts controlled directly by Yasser Arafat;

— Lesley Stahl, a reporter on the prestigious television programme Sixty Minutes (broadcast by the US television network CBS), has calculated how much it costs each day for Mrs Suah Arafat (the wife of President Yasser Arafat) to stay in Paris (reputedly USD 16 000);

— since 1994 the European Union has paid over EUR 1 500 million to the Palestinian Authority under the Oslo ‘peace agreements’.

The Commission:

— what action has it taken in order to verify what the IMF stated in September 2003 and in order to ensure that money belonging to the people of Europe and paid to the PNA no longer ends up in special accounts which are beyond scrutiny;

— does it not think that, since the reports from various European and international press sources all tally, the Arafat family's expenses are met to a not-inconsiderable extent out of the funding paid by the EU to the PNA;

— does it not consider that the EU funding (which continues to be paid to the PNA) should be suspended until it is known whether the committee of inquiry called for by the members of the Palestinian parliament can be set up and can begin its investigatory work?

Answer given by Mr Patten on behalf of the Commission

(17 February 2004)

The IMF report more specifically refers to the non-consolidation in the Palestinian Authority's (PA) budget of certain revenues (petroleum excises paid by Israel, tobacco and alcohol excises and revenue from commercial activities) generated by state monopolies and commercial assets over the period between 1995 and April 2000. The commercial activities did not come under the budget controlled by the Ministry of Finance and in any case have no relation to the funds paid by the Commission between 2001 and 2002. The international donor community was aware of the off-budget activities.

For that reason, together with the IMF and the Commission, made its assistance subject to very strict conditions:

1. the creation of a Single Treasury Account;

2. prior auditing of the monopolies' assets;

3. the consolidation of all commercial activities in a Palestine Investment Fund (PIF) under the aegis of the Ministry of Finance.

As a result:

1. the PIF was set up in September 2002, enabling the commercial activities to be consolidated;

2. more than half of the PIF's assets have already been audited by Standard and Poor's and the results published on the PIF's internet site; (1) and

3. the PIF is now under a management board chaired by the Ministry of Finance and the net profits from its activities are transferred directly to the Authority's budget.

In short, it is thanks to the action of the international community, the IMF and the European Union that the revenue from commercial activities could be consolidated in the budget.

In 2001 and 2002, budget aid from the Commission accounted on average for about 8 % of total PA budget expenditure. Since this aid is fungible, it is impossible to link the Commission's support to a particular item of expenditure. The conditions linked to budget aid from the Commission and the work of the Task Force on Palestinian Reform have had a very significant impact on the transparency of the PA's budget management. Thanks to them, the budgets of the Authority and of each Ministry, including the President's office, have gradually been subjected to greater financial discipline. It should also be pointed out that the Single Treasury Account and the supervisory mechanisms used by the Commission are the same as those used by the Israeli Government when it transfers revenue collected on behalf of the Palestinian Authority.

The Commission stopped direct budget aid after the resumption of transfers by the Israeli Government and replaced it with targeted support for payments of arrears to the private and social sectors. The Ad Hoc Liaison Committee has asked donors to step up their efforts and to increase the level of financial support to the Palestinian budget, while the Commission will continue to attach conditions to its financial assistance to ensure greater transparency in public finances.

The Commission is unaware of a decision by the Palestinian Legislative Council to set up a committee of inquiry into the allegations of misappropriation of funds in the Palestinian Authority. It is nevertheless true that a number of Palestinian Members of Parliament have voiced concern at allegations to that effect. The Commission is carefully monitoring any discussion of the matter by the Legislative Council.

(1) http://www.pa-inv-fund.com