Palestinian Authority sells stake in cell phone company

JERUSALEM -- The cash-strapped Palestinian Authority has sold its stake in the local cellular phone company to help pay salaries of government employees, a top official said Sunday.

The Palestinian Authority turned over its 35 percent share in the Jawal phone service to Paltel, which runs the cellular phone monopoly, in exchange for $43 million, Palestinian Economics Minister Maher Masri said.

He said the money would go toward the salaries of 125,000 government workers. The sale is also in line with the government's privatization plans.

"At the end, we will not have any government-owned companies. We will only be partners in some companies," Masri said. "This is all part of the greater policy of reform."

Palestinian business people welcomed the deal. "The presence of the Palestinian Authority as a shareholder acts as an obstacle," said Abdel Malik Jaber, chairman of the executive board of Paltel. "Selling their shares would eliminate any accusations of government corruption."

Corruption charges have dogged the Palestinian Authority since its inception in 1994. The Palestinian bureaucracy is bloated, leading to charges of nepotism, and competing security forces provide jobs to thousands.

Donor nations, meanwhile, have been scaling back aid amid complaints that Yasser Arafat's government is slow on reforms and not doing enough to rein in militants, a key requirement of a stalled U.S.-backed peace plan.

Donors balance budget

Since the outbreak of Israeli-Palestinian fighting in 2000, with the Palestinian economy increasingly weakened, donors have paid about 60 percent of the annual budget of the Palestinian Authority.

For 2004, the Palestinian government seeks $1.2 billion in foreign aid. With peace efforts deadlocked, there is increasing reluctance to pay, and the World Bank says the Palestinians could fall $400 million short. In recent months, the Palestinian government has taken out bank loans to make the public payroll.

Donor fatigue is also linked to persistent reports about slush funds and secret accounts in Arafat's name. French prosecutors are investigating the alleged transfer of $11.4 million to Arafat's wife, Suha, at the Arab Bank and at the French bank BNP between July 2002 and September 2003. However, French judicial officials said there is no evidence of illegal activity.

Palestinians have consistently denied Arafat is funneling millions abroad, accusing Israel of spreading rumors to harm the Palestinians' reputation.