Why the Oslo Accords Failed

What went wrong?

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The Economic View

The economic reconstruction of the Palestinian territories was to be handled by internationally respected Palestinian economists and businesspeople working along with the World Bank and enjoying the financial support of Western donations. Toward this end, as early as November and December 1993, potential donor nations were gathered to commit large sums of money and an organization that was supposed to oversee the new Palestinian Authority economy--the Palestinian Economic Council for Development and Reconstruction (PECDAR)--was  formed.
These plans were halted by Yasser Arafat. Arafat regarded an independent and authoritative organization such as PECDAR as a potential threat to his power. The entire World Bank vision for a modern, Western-style Palestinian economy, built around competitive markets, transparent and accountable public bodies, and solid financial and legal institutions, went against the grain of the methods Arafat had used to run the PLO for decades. Those methods, instead of the World Bank and PECDAR paradigm, were imposed in the Palestinian Authority.
The economy in the Palestinian Authority was since its inception run as if it were a syndicate, with monopolistic control over sectors granted to individuals or institutions in return for “percentage kick-backs” paid to authority figures in a pyramid going all the way to Arafat’s office. These public figures operated under no requirement to make use of the funds at their disposal, whether public money or “kick back payments” in an accountable or transparent manner --a state of affairs generally called “corruption.”
Donor money, instead of being invested in infrastructures that could support future job growth, was used to cover salaries for teachers and police officers, which translated into a potentially never-ending dependency on donations--because cuts in donations could threaten the collapse of the entire system. As the Palestinian Authority lacked any clear legal protections for economic activities, private investors refused to come near it. The more terrorism mounted, the firmer Israel became in sealing its borders to Palestinian job seekers.
The Palestinian economy went into a downward spiral. By the time the second Intifada led to permanent Israeli closures, choking off all trade, it went into a coma. Observers in Washington have concluded that the Palestinian Authority was a “failed state” that can only be helped back to the road to normality by “regime change.”


The success of the Oslo process was predicated on a beneficial spiral of confidence-building measures that would bring Israelis and Palestinians ever closer to trusting in the possibility of peaceful co-existence. In actual fact, Oslo led to a series of claims and counter-claims of breaches of the accords that formed a negative spiral of mistrust and feelings of enmity.
In light of these facts, it might be said in hindsight that Oslo ultimately failed because while its fashioners set in motion a process that could potentially lead to trust and confidence, they did not establish mechanisms for monitoring violations or ensuring that claims of violations could be arbitrated and corrections could be guaranteed. Without such safeguards, the dynamic of the Oslo process fell prey to longstanding sentiments of mistrust and anger between Palestinians and Israelis.

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Ziv Hellman is a Jerusalem-based writer and mathematician. A former editor at the Jerusalem Post, Ziv was a founding member of Peace Watch--the watchdog group reporting on the implementation of the Oslo Agreements. He also led the Israeli elections observer team evaluating the Palestinian Authority elections.