2016 Activities

Management of Available Public funds …Tri-dimensional crisis: Net lending, Salaries and wages, Public Debt

Management of Available Public funds …Tri-dimensional crisis: Net lending, Salaries and wages, Public Debt

Aiming at enhancing transparency of the Palestinian public budget as well as raise awareness of the Palestinian citizen on public spending in general and the budget in particular, the Civil Society Team for of Public Budget Transparency (TEAM) held its yearly conference on February 24, 2016, under the title of “Public Funds Management Crisis: Austerity is a Must; Rationalization is basis”. The Coalition for Integrity and Accountability-AMAN hosted the conferences in its capacity as the team’s secretariat. The conference time was divided to include several presenters and panel discussion sessions.
First, Dr. George Giacaman delivered the welcoming note in his capacity as representative of AMAN’s board of trustees. He also presented a prelude to the conference in which he alludedto the latest teachers’ strike as evidence that the Palestinian citizen considers access to public financial information is his/her right.
Dr. Giacaman also pointed out the negative impact of the absence of the Palestinian Legislative Council (PLC) on transparency of the budget. He said that the absence of the PLC for the past ten years has led to a breach in its two main duties: drafting and passing legislations that govern citizens’ lives, and controlover the work of the executive authority, noting that the later has no jurisdiction over prioritizing the public budget alone, hence deciding for society as a whole including the council elected for this purpose. 
Second, theTEAM presented its analysis of the 2015 budget, where it illustrated its view of the extent the government’s commitment in implementing the budget, pointing out achievements and failures encountered during the process.Representative of the TEAM also presented the TEAMs position in regard to the 2016 budget being adopted without civil society participation.  The presentation focused on two items: net lending, which suffers from lack of accurate data that would provide an explanation for the gap between the estimated and the actual, and the other focus wason the salary and wage item. In that regard, the TEAM, based on the latest statistics of the Ministry of Finance (MoF), concluded that there is a dire need for a careful reading and analysis of this item in order to clarify the ambiguity and obscurity surrounding related numbers within it.
Third, a representative from the economic and financial affair group at the PLC presented the group’s position regarding the 2016 budget, which was symbolized by a number of recommendations related to revenues and expenditures, such as: expanding the tax pool, gradual increase in government fees, intensifying fundraising efforts with donor countries, addressing outstanding issues with the Israelis, adopting an austerity policy, limiting new appointments, and ensuring that there are no additional arrears cumulated to the private sector.

Net Lending continues to drain the public budget

The first of the two sessions was allocated to discuss the net lending item, which had become a heavy burden on the public budget and an intractable dilemma to a radical solutions.  This is due to the failure of some parties such as the local government units, electric distribution companies, and water companies, of not paying due bills to suppliers of these services, in the first place.
As presented by the TEAM, the historical analysis of net lending, i.e., since documentation of this item began in 2003 and until 2014, indicates that it had consumed 3,584.4 billion dollars.  This accounted for 11.31% of the total expenditures of the public budget over the past 12 years.
Dr, Sameer Abdullah, Director of research at the MAS institute, and Dr. Adel Al-Zagha, an economic expert and lecturer at Birzeit University, participated in this session with Dr. Azmi Shuaibi, Advisor to the Board on Anti-Corruption Policy- AMAN, as moderator.
Dr. Abdullah considered the term “net lending” is a beautified term for this item, which in reality is a “takeover” or confiscation of public funds.  He elaborated by saying that this cycle begins with the producer of these services (water and electricity) going through distributers (companies and municipalities) and ending with the public who is accused of not paying dues, wherefinally the Israeli company requests the Israeli government to deduct payments for these services from the clearance tax money (maqassa) .  Dr. Abdullah stressed that once this item is seriously addressed, which requires political will, will save the treasury approximately 80% of the current deficit.
Dr. Zagha agreed with the abovementioned adding that companies monopolizing the water and electricity services do not receive sufficient government support.  This is in addition to the failure of some municipalities and local governance authorities in collecting amounts due for these services. Dr. Zagha also stressed that the government does not know how to prioritize its expenditures, since the bigger share of net lending, which is deducted from the Maqassa, goes to pay for water and electricity.  He described the situation as mere thievery of public funds under the pretense of “unable to pay” applied in several geographical areas.  He also criticized government policies in addressing the issue of net lending by placing a burden on the local government unitsthat leads to weakening of financial decentralization, hence contradictingstated government policy onpromoting economic decentralization.  The session closed with a number of recommendations, most important of which are: activation of the electricity Regulatory system by complying with the legal and institutional framework; signing centralized agreements between the Palestinian Authority (PA) and the Israeli companies; allocating sufficient funds for repair and maintenance of the present infrastructure for these services; increase the use of the pre-paidsystem, as well as the use of alternative energy sources in order to reduce the electricity bill from the Israeli provider.

Thesalary and wage item is in need of refinement

The second session was allocated for discussing refinement of the salary bill (i.e., removal of unnecessary expenditures), which over the past years has been granted the lion’s share of expenditures amounting to 50.37% of the total current expenditures for 2015, and 53.35% of the totalestimated current expenditures for 2016 .  Based on that, the TEAM proposed a mechanism for refining this item taking into consideration employees with low salaries.
This session was held in participation with the Palestinian economic expert, Dr. Nasr Abd-Alkareem, who recently had prepared a full research study on austerity, requested by the TEAM, and Dr. Ammar Dweik, Executive Director at the Independent Commission for Human Rights( ICHR). The session was moderated by Dr. IssamAbdeen, member of the TEAM.
Dr. Abd-Alkareembegan his statement by stating that he personally thinks that problem does not lie in the size of salary bill, but rather in the lack of refinement and injustice within this bill. For example, he said, upon examination, one would find that there are employees who are being paid a salary that is more thandeserved, and other times the opposite is true. Furthermore, appointment decisions are not based on fair competition as much as on being influenced by appeasement and favoritism Policies.
Dr. Dweik, on the other hand, tackled the government’s management of public funds from another angle by talking about the current teachers’ strike, which was mainly triggered by lack justice in salary distribution.  He further criticized the government in its use of mosques, security services and road blocks to manage the teachers’ crisis, describing it as a “dangerous” method that threatens societal peace. He added that the salary problem lies inthe unfair distribution of funds, which leads to very low salaries for junior employees, in addition to the unequal opportunities in competing for jobs.  He then touched upon appointments in senior positions where individuals are appointed upon recommendations and or by circumventing the principle of competition through employment by special contracts.
The following main recommendations were concludedat the end of the session: to end the phenomenon of paid employees that are outside the official administrative formations; no hiring on temporary contracts, and to come to a settlement with employees who hold jobs other than the official jobs with the government.

The absence of a clear fiscal policy and plan to solve the issue of the pension fund

The third session focused on public debt and its impact on the Palestinian Pension Fund.  In this regard, Ms. Lamis Shuibi, a member of the TEAM and moderator of this session, indicated that there were no details in the 2016 budget. In addition, she said that as of November 30, 2015 this item has noticeably increased to reach the amount of 9,695.4 million Shekels (NIS). This means an increase of 1,049.3 million NIS in 11 months.
Participants in this session included Dr. Omar Abd-Alrazeq, who focused on the impact of the Palestinian financial policies relating to the increase of public debt, and Dr. Atef Alawneh who pointed to the negative effects of public debt on the Pension Fund and on salaries.
Upon elaboration, Dr. Abd-Alrazeqplaced emphasis on the absence of a clear government fiscal policy, in addition to the deficiency in the PA’s fiscal policy relating to public debt. Thiswas symbolized by the lack of information available regarding the amount of this item, which has reached 54% of the GDP. This is in addition to the accumulation of unpaid loans to local and international parties since 2007. Furthermore, he pointed out that figures given to public debt have lacked consistency, hence no actual unified amount is available.
Dr. Alawneh began by providing a briefing of the history of the Pension Fund since 1994. He said that the cumulative debt, at the time, reached 700 million dollars, which prompted the PA to proceed with the task of reform for this sector.  Dr. Alawneh said that to solve the problem, it is vital for the MoF to transfer the pensioners’ money directly to the Palestinian Pension Agency, noting that pensioners’ investments in other countries constitute 80% of the Fund’s revenues. In the Palestinian case, however, the MoF has denied pensioners from their entitlements, and has placed them at a lower degree than ordinary employees where their salaries are paid directly by the MoF and not by the Pension Fund, which is a clear violation of the financial laws in force in Palestine.  Alawneh further stressed the need for a positive plan where the pensioners’ accumulated entitlements are included. He also said that it is important that that these entitlements are not subject to the PA’s financial situation, since these individuals continued to pay this money for the duration of their careers.  He directed his criticism to the government for its procrastination in solving the problem with the pensioners.  Heaccused the government of following a postponement policy in this regard.
At the end of the conference, Ms. Hama Zeidan, coordinator for the TEAM, summarized the main conclusions and recommendations of the three sessions.  She said the TEAM will certainly follow-up on these recommendations and select appropriate methods to pressure the Palestinian government to adopt them as well.
• Prepare separate detailed budgets for each security apparatus, where it is later incorporated under either the Ministry of Interior, or the President’s office budgets, according to its administrative subordination.
• Activate the electricity Regulatory system in the various Palestinian areas through compliance with the legal and institutional framework governing this sector.
• The need to pass a law that ensures a comprehensive, sufficient and effective health care system, in terms of resources and coverage; also the need for the Council of Ministers to issue regulations concerning medical referrals. 
• Demand that the PA President form a committee to include the Prime minister, MoF, the General Personnel Council, and the Palestinian National Fund to be in charge of the following: review structures, number of employees, operational expenses, and concessions granted to staff in the Ministry of Foreign Affairs and embassies.
• Update the central database at the Ministry of Social Affairs through a system that ensures the reduction of errors and minimizes chances for duplication of aid provision.
• Respect the right of citizens to hold senior posts regardless of his/hers political orientation by forming a higher national committee for this purpose.
Note: all reports and studies presented at the conference will be available on AMAN’s website.

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