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A Shadow Falls Over Hope

We brought dreams for a bright economic future; Arafat quashed them.

April 22, 2002|GLENN YAGO | Glenn Yago is director of capital studies for the Milken Institute, an independent, nonprofit economic think tank based in Santa Monica.

On a crystal evening in mid-September 2000, when there was still hope, I crossed the Allenby Bridge into Israel, my luggage cart rumbling over its wooden planks as the sun set over the Jordan River. I was there as part of a brief and heady but ill-fated effort to "privatize the peace process." We were hoping to bring new financial ideas to the region, spawning cross-border projects and a new Middle East.

Maybe I should have known better.

We had cooled our heels on the Jordanian side of the bridge for three hours as Israeli border guards snared a car loaded with C-4 explosives. There were other warning signs, too: The Jordanian taxi driver who dropped me off at the bridge was named Jihad. And there was the call a few days earlier from an Israeli Foreign Ministry contact warning me to dampen my expectations: "No one knows what to do next since the Camp David meltdown."

But as the gate to Israel swung open, Mohammad, the crisply dressed Jordanian border guard, smiled and waved to his less sartorially minded Israeli counterpart, Shuki. I crossed over into Israel, and it struck me: Bathed in the golden light of that Jordan River Valley sunset, neither Shuki nor Mohammed was armed. There wasn't a gun in sight. "Ah," I said to Shuki, "so this is what peace looks like."

Because of the border crossing delay, I was late for a festive gathering at the Peres Peace Center in Tel Aviv that evening. The speeches were over and I arrived just in time to witness another unbelievable sight: two stunningly beautiful young women--one Palestinian and one Israeli--singing a two-part harmony of John Lennon's "Imagine" in Hebrew and Arabic. I'm not particularly religious, but I thought there must be a special blessing to be said upon such an occasion.

September 2000 was that in-between time after the Camp David process crumbled and before this bloody intifada had erupted. Before Palestinian officials winked, nodded and later gave tacit approval to suicide and murder as a military strategy and before the Israel Defense Forces were obliged to take the law into their own hands.

The economic peace track was still bumping along. Despite political setbacks, the atmosphere was upbeat. Jordan, the Palestinian Authority and Israel agreed to become a free-trade zone and form a joint tourist marketing program to increase visitors to the region from 3 million to 30 million each year. Other initiatives were underway to help finance a soon-to-be Palestinian state and encourage cross-border economic development between the Jewish state and its new and old Arab neighbors.

Everyone wanted to help. Palestinians were pitching deals to American and Israeli Jews. The U.S. and Europe were setting up microfinance and capital markets for the Palestinians. The Israeli finance and trade ministries cooperated with U.S. and Palestinian entrepreneurs and industrialists to finance industrial parks for West Bank cities, the same cities that are now burning.

We sat around conference tables in Nablus, Ramallah and Jerusalem. Ideas to lower financing costs to create jobs and build houses for refugees returning to the West Bank and Gaza were flowing with the juices of creative finance: We could use donor money from the U.S. and Israel as a credit enhancement for Palestinian industrial bonds; we would encourage the repatriation of Arab money to buy these new securities and finance jobs to keep Palestinian youth out of mischief. What about creating a water rights market to depoliticize the issue and let the market, not politicians, determine prices for scarce water?

We were giddy with great notions. We could structure a peace index fund with stocks from Tel Aviv, Amman and Nablus bringing new liquidity into capital-starved markets. We could cross-market the fund for baptisms, Ramadan celebrations and bar mitzvahs. Everyone laughed exuberantly--Christian, Muslim and Jew; American, Palestinian and Israeli. It all seemed so possible.

Meanwhile, Yasser Arafat was a bouncing marionette, shuttling from one world capital to the next sounding like a grizzled Rodney Dangerfield getting no respect, dazed that he hadn't been hugged enough at Camp David. We forgot that the Palestinian Authority, despite the many enlightened and hard-working Palestinians we met with, was not a market democracy with the transactional trust required for commerce and investment but simply a gangland dictatorship running a protection racket. No one was allowed to look or think about financing the future, because the "Rais"--the "chief," as Arafat was called--couldn't envision a peaceful future because he was addicted to his violent past.

Each and every proposal we came up with for economic development for and with the Palestinians was blocked until Israel would comply with Arafat's political wishes. "Yes," we were told by Palestinian Authority officials, "these are great economic projects and programs, but we can't move forward until the political final status agreement." Full stop. Time to go home.

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