Turning "Gaza-Jericho-First" into Jobs and Projects

By MacKinnon, Colin | Washington Report on Middle East Affairs, August 31, 1994 | Go to article overview

Turning "Gaza-Jericho-First" into Jobs and Projects


MacKinnon, Colin, Washington Report on Middle East Affairs


Turning "Gaza-Jericho-First" Into Jobs and Projects

By Colin MacKinnon

The Palestinian National Authority has contracted with Morgan Stanley Asset Management, the fund-management subsidiary of the Morgan Stanley Group, to manage its cash assets, including the cash portion of the $2.4 billion in aid that 40 international donors have pledged to provide the PNA over the next five years. The PLO made the announcement on May 26 in Tunis.

One well-informed source describes the arrangement as a "classic assignment that an investment manager would get." Typically, asset managers who advise governments suggest to their clients where to place cash, what sort of investments to make, how to handle loans, how to hedge currency futures and the like. This kind of thing is what Morgan Stanley will be doing for the PNA.

At the moment the PNA, unlike Israel, has few assets to manage.

Worldwide, Morgan Stanley handles some $50 billion in governmental and private assets, including funds of a number of Middle East governments and well-heeled individuals in the region, though the firm will not comment on specific clients. It is known, however--and it's one of the current ironies of Middle East politics--that Morgan Stanley has also been advising the government of Israel on how to handle the U.S.-guaranteed loans that Israel is arranging.

At the moment, of course, the PNA, unlike Israel, has few assets to manage. And for that matter nobody seems to know what portion of the $2.4 billion in aid, when and if it arrives, will be cash. Much of the pledging is in the form of credits and guarantees.

According to informed sources, Morgan Stanley will be compensated the way investment managers ordinarily are compensated, that is, by being paid a set percentage of the funds managed.

A PLO press release in Tunis said that Morgan Stanley was retained "to help assure contributing nations and agencies that funds provided directly to the PNA for the administration and development of the West Bank and Gaza Strip would be managed with total transparency."

The appointment may do just that. If it does, it's a good and necessary thing to reassure the international donors, who were swift to pledge but slow to come forward with actual aid.

First World Bank Project Approved

At the end of May, the World Bank Board approved its first project for the West Bank and Gaza, the Emergency Rehabilitation Project. The project--actually a host of relatively small projects--will cost $128 million and aim at improving water supply, sewage, roads, and schools in the territories.

The bank says improvements should be visible within a year. That seems slow for a program that's supposed to get quick relief to a sadly deteriorated place, but it's probably a realistic estimate.

Of the project's $128 million cost, Arab donors contributed $70 million. Of the $70 million, the Saudi Fund for Development donated $30 million; the Arab Fund for Economic and Social Development, an autonomous Kuwait-based organization, gave $30 million; and the Kuwait Fund for Arab Economic Development, a Kuwait state agency, gave $10 million. Other donors are Denmark, $20 million; Switzerland, $8 million; and the World Bank itself, $30 million. The World Bank donation is part of its Trust Fund for Gaza, a special $50 million fund created in September of last year from Bank profits. The fund is to help priority rehabilitation projects in the Gaza Strip.

The biggest chunk of the funding, $41 million, will go for improvements in roads, both rural and urban. Water and sanitation will get $32 million, other infrastructure will get $17 million, power $8.3 million.

The World Bank's Three-Year Plan

The Emergency Rehabilitation Project is actually part of a larger aid plan that the bank announced on May 3. It calls the plan the Emergency Assistance Plan for the Occupied Territories. EAP is a fat, two volume guide for spending $1. …

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