Charles Shammas is the founder and project director of Mattin, an industry promotion organization in the West Bank. He is also a founding member of al-Haq, a leading Palestinian human rights organization, and of the Jerusalem-based Center for International Human Rights Enforcement. Joe Stork spoke with him in late October 1993.

I’ve detected a lot of pessimism here about the way things have been developing since the Oslo accords were announced.

If your worldview is the Palestinian world, the pessimism is well-grounded. There are almost no functional structures for Palestinian political decision-making and no mechanisms for internal accountability. But the complete picture may not be so bad, because external actors will have considerable influence on the coloration if not the quality of our political dynamic. And Palestinian society itself seems to be waking up to the need to establish a more open, democratic and competent political process.

Do you think democracy is on the external agenda?

It can be, but we will have to work quickly to build a coherent alliance with European and whatever elements of American civil society can be mobilized in support of a Palestinian agenda. We have to face the fact that Europe and the US are already engaged in a massive intervention. The issue is the quality of that intervention. Here, I don’t think that the game is so stacked against us. Our allies in Western civil societies have enough leverage to exert some accountability on their governments if we do our part.

You will be going up against a Palestinian leadership with other ideas.

Arafat will probably try to concentrate discretionary authority even further into his own hands. However, he would rather maintain control by inclusion and cooptation, and I don’t think there are any reasons why he can’t make the needed concessions. It’s the closest thing to democracy that we’re going to get. He managed to make clear gestures in our direction after we raised some human rights issues.

By setting up a human rights authority?

Yes, but we could wind up in a situation where the political authority expects to control the actions of such a body, and falls into treating independent activity as an illegitimate challenge. That’s where the role of third parties is important, in convincing Arafat himself that he has to accommodate new guidelines and standards. Initially, Palestinians by themselves will not have the standing or leverage needed to persuade him as much as third parties will. I’m not saying I’m happy with the situation, but the scenarios I prefer were not possible. After all, beneath Arafat there has been paralytic competition bordering on chaos in the system he presides over.

How do you see the internal balance?

One scenario is that Arafat will go through the rather messy process of appointing individuals, mostly from the inside, but give them more freedom of action than local lieutenants have previously had. The non-rejectionist left will be in the coalition. There will be a few congenial and capable elements in the new system.

Arafat’s practical. The reward of having people on board is greater than resorting to repression. The threat is that the foreign actors right now will engage the Palestinian system in a very short-sighted manner and encourage even more the concentration of power into the system that Arafat builds.

What’s going on with international donors, particularly the World Bank?

They are ideologically committed to the private sector and the free market, and to removing as much discretion as possible from the economic managers. The World Bank at this stage can be an ally. I’ve been impressed by the effort they’ve put into understanding our issues. But you need a capable Palestinian development authority. The World Bank can’t come in and micromanage the process of development here. But it can help hold the line against a non-accountable and non-professional Palestinian economic authority.

The big actors on the economic scene are going to be the private sector. Fatah’s strength is in this sector.

This means that Fatah’s style of governance will have to adapt to this sector’s preferences.

But its preferences are going to be non-interference.

Non-interference and a lot of infrastructure. I think they might prove to be very important allies in establishing some basic freedoms.

Do you see a problem of concentration of economic power?

The fear is that the business sector will focus on capturing the money coming in. Certain parts of the business sector might turn into clients of the political authority. We have already been approached by business people from the outside who say, “We’re looking for a politically well-connected Palestinian partner. We can provide the operating capabilities, resources and capital.” And in the short term these people will have to deal with a cash-starved political authority to make their deals. The Palestinian business community risks being drawn into a dynamic that is not so much productive as it is mercantile.

What about Palestinian diaspora capital?

Many of the Palestinian diaspora would clearly be happy to establish a profitable presence. But for risky investment in innovation and development the attitude will be to work with other people’s money rather than their own. The donor-funded reconstruction process will provide them with some opportunities. On the other hand, they will have to make a strategic alliance with Palestinians inside, to capture the donor dollars. When it comes to more ordinary types of investment, they’ll put money where they think they can get the best return at the lowest risk. I’m not sure that they’ll think this place qualifies in those respects. They’re worried about the business environment. Will people be able to find workers and managers? Will our economic annexation to Israel price us out of the regional and world markets? Will political graft and corruption spoil the game for everybody in the private sector?

External aid is going to be in place only for three to five years. This place is going to have to be standing on its own feet soon.

My big worry is that our entrepreneurial resources will be drawn to chasing opportunities supported by reconstruction and development aid, opportunities that won’t persist. I don’t know to what extent they might also chase opportunities generated by Israeli business’ need for a bridge to the Arab world for Israeli business. A number of initial joint ventures have been set up by Israelis working on getting construction contracts. They’ll work with Palestinian firms that will provide certain inputs and they’ll provide the rest, fast and big. The development of the Palestinian processed food industry is going to be done in conjunction with its Israeli counterpart. In agriculture there’s going to be a very crop-specific division of labor. Israeli manufacturing firms with superior know how and marketing capabilities are already looking to buy into, or buy out, Palestinian firms.

What is the danger of this economy becoming a protectorate?

We have to concentrate on developing export options for Palestinian industry and attracting diversified sources of investment. This will require a Palestinian-controlled marketing structure. Of course, such development is a lot slower off the block. We’ve got a young but promising trade promotion organization now. It’s got good political protection, good relations with external governments. But we need an environment in which we can develop higher value-added ways of utilizing indigenous resources and, in particular, Palestinian labor. We will have to try to ally ourselves with that element of the bourgeoisie that feels this same need.

What about issues of worker control and strikes?

The real question is what kind of bias will be introduced by successfully exploiting the comparative advantage that would be the basis for Palestinian export production. That comparative advantage has got to be, in the first place, labor productivity, skilled labor. The types of industries I see us developing are those in which labor will have relatively high bargaining strength for structural reasons. Employers will be renting human capital more than simple production power. If our labor force remains confined to low-skilled job opportunities, labor relations are likely to be based more on adversarial than cooperative dynamics.

We’re not going to be cost-efficient producers of commodities. In garments and footwear we have the possibility of developing competitive design, marketing and other skill-based aspects. We’ve discovered we can compete effectively with smaller-sized firms in southern Europe, catering to the middle and upper end of the market. Where their own scale of operations and marketing volumes permit, quality-based small European firms start outward processing. That’s where we can offer proximity, good communications and infrastructure, and cost-efficient management and skilled labor.

The other area in which we may have a comparative advantage is highly trainable engineering personnel. Our engineering sector is very underutilized. They are forced to work for next to nothing. But our problem is a lack of management and marketing expertise needed to employ them. Certain types of joint ventures with European firms could create employment opportunities.

Is this happening now?

Most Palestinian firms are not in a position to make this kind of deal. The conditions arising out of the Oslo agreement are not likely to encourage these entrepreneurial scenarios. My own organization, for decidedly non-commercial reasons, adopted a strategy based on some of these ideas. Our aim was to establish what could be possible under an economic administration that helps direct resources to skilled labor-based export development. But the harassment we confronted from the Israeli side and the underdevelopment and unreliability of our Palestinian system imposed insurmountable burdens.

Can those problems be overcome now?

We can give it a good shot. But people are very anxious and cautious. They are despondent and bitter at the failure of the peace process to bring about any positive change in Israel’s treatment of the population. We don’t have all that much confidence in the wisdom and clarity of thought and attention to detail of the apparatus that is negotiating the foundation of our future governmental and economic life. The Oslo agreement was made without even the minimal degree of consultation people here have come to expect. It is understandable that people have begun to wonder what other surprises await them further down the road.

Are the elections critical?

If they indeed occur, some civic education will take place, there may be some small electoral surprises. Elections will help us construct an image of a Palestinian body politic. But I don’t think most people here will see voting as a way of delivering a strong message to our politicians. Having said that, not having elections would deal a further blow to public confidence in the peace process, though poorly conducted elections might be far worse. The Palestinian leadership will have the power to promote free and fair elections. Row it chooses to approach the process of elections will perhaps send the clearest signal to the population regarding its commitment to accountability, democracy and pluralism.