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Give Peace A Chance – Financial Solution?

On May 21, 2021 a ceasefire ended the latest 11 day conflict between Israel and Hamas-ruled Gaza, known as Operation Guardian of the Walls. The loss of civilian lives was a tragedy for all sides. An IDF spokesman said on Israeli TV that the ceasefire may be considered a success if it lasts 5 years.  But the Israeli public and international community want more. The solution might be…. a Trust Fund, as discussed below.

Main Issue – No Transparency:

There are many issues regarding Gaza, but they might be summarized as lack of transparency. The IDF claims it destroyed around 100 kilometers of underground tunnels used to plan hostile activities, store munitions and launch missiles. It is assumed that foreign aid was syphoned off, including cash, cement and missile fuel.

Such syphoning off may amount to corruption. According to Wikipedia, forms of corruption can include bribery, money laundering and misuse of government power for other purposes such as police brutality. Also missile brutality?

Financial Solution:

History teaches us that a financial solution may be the best way of reaching a political agreement that ends intractable issues – make money not war. Examples include the Marshall Plan and formation of the EU’s predecessor after World War II, the Irish Good Friday agreement and UK financial support in 1998 and even the Oslo Accord of 1993 between Israel and the Palestinian Authority – it included the Paris Agreement economic annex still applied today.

US Planned Aid:

The White House issued a statement on May 20 saying that the United States is committed to working with the United Nations and other international stakeholders to provide rapid humanitarian assistance and to marshal international support for the people of Gaza and the Gaza reconstruction efforts. The US will do this in partnership with the Palestinian Authority — not Hamas — in a manner that does not permit Hamas to simply restock its military arsenal (https://www.whitehouse.gov/briefing-room/speeches-remarks/2021/05/20/remarks-by-president-biden-on-the-middle-east/).

How can aid be disbursed without syphoning off/corruption? The US has the Foreign Corrupt Practices act, and the UK, UN, OECD and EU have published various pronouncements on addressing corruption.

Essentially, they call for proper accounting, internal controls, internal audit, external audit and due diligence.

The EU says that individuals and groups should not advance their political aims by using terror. And the EU Treaty on the Functioning of the EU recognises corruption as a “euro-crime”.

Nevertheless, such self-governance isn’t always effective.

What May Work?

The World Bank and others advocate the use of Trust Funds for development programs, especially in fragile states (https://www.worldbank.org/en/about/unit/dfi/trust-funds-and-program).

What is a trust? A trust is not just a tax planning device. The  Hague Convention on the Law Applicable to Trusts and on their Recognition defines a Trust as: the legal relationship created by a person, the settlor, when assets have been placed under the control of a trustee for the benefit of a beneficiary or for a specified purpose.

Comments on Possible Scenario:

An economic development plan for Gaza would be transparently drawn up and implemented. The goals would include improving infrastructure, housing, education, health care and economic activity. Aid would be donated into the Trust Fund. The Trust Fund bank account might be in Israel, Wall Street or the City of London. The public should be granted read-only access to the bank statements.

Engineers and appraisers would evaluate quantities needed and the cost. Engineers and inspectors would monitor the construction/implementation process for each project like any other construction/installation project. Accountants would maintain full accounting records. Carefully selected professionals would administer it all using procurement and enterprise resource management systems (ERM). Lawyers would assist with public tender documents, procurement contracts, etc. Multiple signatories would sign off on disbursements. There would be internal checks, internal audit and measures to protect against corruption or conflict of interest. The Trustees would publish quarterly audited financial statements and closing valuation statements.

Donors should also have a role to play beyond putting up the cash. One possibility is securitization, which means each donor’s money would be tracked all the way to a specific project or property (like university endowment funds). If a project fails to materialize, there may be criminal sanctions at the point the audit trail goes dry.

An insurance policy might also be considered e.g. putting say 10% of cash into a pool to finance repairs following hostilities.

Last but not least, a better land registry may be needed.

Hoped-For Outcome

The aim is prosperity and maximum transparency – physically and financially – unlike previous less determined attempts. Hopefully, all this would spur full peace negotiations, not just another short-lived ceasefire or armistice.

The above is presented purely for discussion and does not constitute advice.