Regional Outlook : Peace Has $11-Billion Price Tag for Palestinians : A working economy is vital to the PLO’s hopes for statehood. And that will take more than the $2 billion pledged so far, group says.

For once, Palestine Liberation Organization spokesman Bassam abu Sharif didn’t have a phone stuck to the side of his head. His phone wasn’t ringing. After he piled up a $140,000 unpaid bill, it apparently had been disconnected.

It was only a little more than a week after dozens of international donors in Washington had pledged more than $2 billion to help the bankrupt PLO build a new Palestinian economy. But Abu Sharif was gloomy, and his wasn’t the only long face in Tunis.

“We need at least $5 billion to take off. We told them that from the beginning,” he said. “If the people do not taste the honey of peace, the prosperity of peace, peace will mean for them no change. Why should they accept it?”

As detailed talks got under way between Israelis and Palestinians last week to build the nucleus of Palestinian self-rule in the Gaza Strip and the West Bank town of Jericho, the PLO leadership was more keenly aware than ever that it is money, not talk, that is likely to spell success or failure when the PLO takes over the reins of government.

For 1.8 million Palestinians in the occupied territories, it will be the appearance of new hospitals, jobs, public facilities and housing that will mean the most important difference between Palestinian self-rule and the 26 years of Israeli occupation that came before. For the PLO, a working economy is crucial to its hopes of turning five years of autonomy into the dream of Palestinian statehood.

Some of the most important questions posed by three decades of economic deterioration have to be answered in the coming two months, when the first Israeli troops and civil administrators begin to withdraw. Will the Palestinians have their own currency? How will taxes be assessed and collected? How can agriculture, the Palestinian economic mainstay, be developed when there isn’t enough water? Will tariffs be collected on Israeli goods coming into the West Bank? How can the geographically separated West Bank and Gaza Strip be linked into an integrated economy?

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For the international community, and Palestinians themselves, even more basic questions have to be answered before the first $2 billion in pledges begins rolling in. Who is going to get the money? And how can the world be assured the money won’t go the way of so many of the PLO’s millions that were apparently siphoned away over the years?

A World Bank team left Tunis last week pledging to recommend an increase in funds for the Palestinians. But bank officials emphasized that the PLO will have to quickly appoint a responsible financial oversight authority if it wants to maintain investor confidence.

“It is very important that all of these funds, of course, follow the rules of the donors, like international tender in our case, and that all will go directly to projects and beneficiaries,” said Caio Koch-Weser, head of the World Bank’s liaison committee with the Palestinians.

PLO Chairman Yasser Arafat has balked during discussions of a new Palestine Emergency Development Reconstruction Authority (PEDRA)--mostly because it would probably be headed not by him but by a technocrat.

For years, the PLO treasury has been at the mercy of Arafat’s whims. Even members of the PLO Executive Committee have been exasperated in recent weeks trying to get an accurate accounting of what happened to the once-massive Palestine National Fund--rumored at up to $3 billion before the Persian Gulf War cut off Arab Gulf aid to the PLO but now said to be empty. “Where has the money gone? You could have run the entire PLO and all the operations they’ve got on the interest from that,” one Western diplomat said.

PLO officials say they never had all those billions and that the $200 million to $300 million a year they were spending bled the account down. But even they admit that they have not been able to get an answer from Arafat about how far down--and exactly where the money went.

“Nobody can get any information about it,” one PLO official said. “Many people have asked, ‘How much money is there?’ They get one answer: ‘We have no money.’ And they ask, ‘Where did the money go?’ And they get the same answer: ‘We have no money.’ ”

Some PLO officials speculate that the wily PLO chairman has secretly diverted a comfortable nest egg from the Palestine National Fund to take with him when he goes to Jericho early next year, allowing him to dispense the largess that has for years been one of the secrets of his power. But most PLO sources say it is unlikely that he has stashed away more than $250 million--and no one claims to know for sure.

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In the meantime, PLO sources say that Arafat has signed off on guarantees for outside auditing and transparent operations for the new PEDRA. But, they add, he has been reluctant to hand over full control to technocrats, recognizing that the new agency is likely to wield enormous power during the coming years of development in Palestine.

One possibility: creation of a political council, headed by Arafat, that would oversee PEDRA but with little direct control over the purse strings, which would be in the hands of a seven-member professional board of directors.

Meanwhile, the task of stacking the building blocks of a new economy has moved into high gear over the last several months, directed out of a sunny, three-story villa in the Tunis suburb of Mutuelleville that is the headquarters of the PLO’s Department of Economic Affairs and Planning.

Heading the planning part of the operation has been political economist Yusif A. Sayigh, a 77-year-old former lecturer at Princeton, Harvard and Oxford who as senior PLO economic adviser has, with a broad range of Palestinian participants, prepared an official seven-year economic development program.

Sayigh speaks of reversing the effects of an Israeli occupation that he says has left the Palestinian economy on its knees.

“Under occupation, we were forced into economic dependence on Israel, and now we are faced with a whole negative legacy of occupation that we will have to deal with and which will limit our ability to develop as we want to and the speed with which we can develop,” he said.

Roads in the occupied territories are often wide when they lead to Jewish settlements but narrow and rutted when they connect Arab villages. Sewage facilities in the Gaza Strip are overloaded or nonexistent. Restrictions on imports and exports have made Palestinians hugely dependent on Israeli goods and markets.

As much as 39% of the Palestinian work force was employed in Israel at one time, mostly in low-skilled jobs. Those workers contributed almost 20% of the income in the occupied territories last year.

Now Palestinians hope to set up their own financing mechanisms and, while not severing the economic bloodline to Israel, begin to focus on Arab markets--especially Jordan. They want to begin developing an independent industrial and agricultural base that is competitive with Israel.

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Among highlights of the seven-year development plan released last month: * To link the West Bank with the Gaza Strip, Palestinians will press during negotiations with Israel for a broad road corridor--at least 100 yards wide--linking the two regions and providing a path for water, gas and telecommunications lines. Because the corridor will pass through Israeli areas, the Palestinians will seek international guarantees to keep it open.

* Palestinians envision a two-year emergency recovery phase, followed by five more years of investment in infrastructure, hospitals, schools and public facilities totaling not the $5 billion proposed by the World Bank but $11.6 billion. They envision about 60% of the total, however, coming from private investment.

* Indeed, a key part of the program calls for attracting capital from millions of Palestinians living around the world. Some talk of raising as much as $20 billion, but PLO officials say they will be pleased if they can attract $250 million in private Palestinian investment over five years.

* Recognizing that more than half the Palestinian population lives in the countryside and should be discouraged from flocking to the cities, planners envision spending only $405 million over seven years to develop industry but nearly $1 billion on agriculture. Industry would be labor-intensive, focusing on the abundant supply of educated Palestinians, with nations like Singapore, Hong Kong and Taiwan as models. of what can be achieved. Tourism would be a mainstay.

* While Arafat wants a Palestinian currency as soon as possible, his technical experts say that given the complications of setting up a central bank, the economy during the first five years of autonomy should be based as much as possible on the Jordanian dinar, with the Israeli shekel playing a progressively smaller role.

* Unemployment will continue to be a problem, but the jobless rate is seen as falling from the present 35%-40% to 10% by the year 2000.

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Importantly, the Palestinians assume that about half a million of the 650,000-800,000 Palestinians displaced from the West Bank and Gaza in 1967 will return. In addition to a strain the job market, that means 185,000 new housing units will have to be built, they calculate. All of those homes are expected to be privately financed except for about 16,000 houses to replace those destroyed through the years by Israeli troops and to provide shelter for families whose wage-earners were killed during the conflict with Israel.

Sayigh said meetings with World Bank officials last week made it clear that the Palestinians will have to move quickly if they want their plans to bear fruit.

“They kept saying, and rightly so, that ‘the donor community seems to be readier than you,’ ” Sayigh said. “They’re beginning to say, ‘Can you handle all this money after all this time?’

“This is all going to be a test for us, really,” Sayigh said. “If we can make it work, then we can establish a credible capability to continue. If not, it is not inconceivable that aid may stop or be drastically reduced.”

Itemizing the Bill The Palestine Liberation Organization has ambitious plans for developing a national economy in the West Bank and Gaza Strip over the next seven years. Here’s how the total breaks down: * Public housing programs: $3.750 billion * Other construction: $2.039 billion * Transport, communication, storage: $1.495 billion * Agriculture: $972.5 million * Energy: $625 million * Education, research, environment: $606 million * Health care: $480 million * Industrial development: $405 million * Public utilities: $325 million * Tourism and hotels: $277 million * Social welfare, recreation, culture: $240 million * Water resources: $225.5 million * Misc. (trade, banking, civil service, etc.): $208 million *

TOTAL: $11.648 billion Source: PLO Department of Economic Affairs and Planning