Regional Outlook : Old Foes Prepare for Uneasy Peace : Paralyzed by bickering, the PLO has barely begun to organize a government for Palestinians.

The image is of Palestine Liberation Organization Chairman Yasser Arafat finally going back to rule in the land from which his organization takes its name.

Marwan Kanafani, the PLO’s Washington adviser, sits in a coffee shop near the organization’s headquarters here and rapturously imagines the scene.

“One morning,” he says, his palms suspended in the air to convey the magic of the scene, “Yasser Arafat will be in Jericho. And the whole area will be inflamed. He will suddenly appear. All hell will open loose. Every man will be holding a flag. Every woman will be dancing.”

The magic wears out when someone asks when Arafat is going to Jericho.

Later this month, when Israeli and Palestinian negotiators hope to conclude an accord for beginning the withdrawal of Israeli troops from Jericho and the nearby Gaza Strip? In April, when they complete their withdrawal? And how will he get there? Will he cross triumphantly from Egypt into Gaza? Take an Israeli El-Al flight to Tel Aviv? Parade across the Allenby Bridge by motorcade from Jordan?

These are details, Kanafani explains impatiently, which have not been decided yet, and which are not very important.

But as this week’s original target date passed for the beginning of Palestinian autonomy in the occupied West Bank and Gaza, with full implementation only four months away, the new Palestinian government which is to begin replacing 26 years of Israeli military rule was only starting to take shape. And the transition, whenever it occurs, looks to be shaky, at best.

The PLO, paralyzed by internal bickering as it attempts to transform itself from a revolutionary movement to a government, still has not designated the membership of the ruling Palestine National Authority (PNA) that will govern in Gaza and Jericho until elections are held next July.

A companion board of governors to administer the more than $2 billion in foreign aid designated for the occupied territories, the Palestinian Economic Council for Development and Reconstruction (PECDAR), is mired in an international controversy because Arafat has appointed himself and two of his top political lieutenants--not seasoned economists--at its helm.

And negotiations for transfer of the mammoth bureaucracy of the Israeli civil administration into Palestinian hands have become bogged down in disputes over how much authority Palestinians will have on issues such as zoning, environmental protection, public works and international borders.

“The situation is horrible,” admits one senior PLO official in Cairo, referring to the political stalemate in Tunis that has delayed any meaningful progress in creating a new government. “It is to the point where the people in Tunis, from a psychological point of view, they need doctors.”

Increasingly apparent from the decisions so far is that whatever Palestinian government seats itself in Jericho, it will be controlled, as the PLO always has been, by Arafat himself.

Arafat has made only one appointment to the PNA so far--himself as its chairman. And he has named himself “reporting point” for the subsidiary economic board--a construction that effectively has Arafat reporting, on issues involving billions of dollars in international financing, to himself.

PLO aides say Arafat has held off on naming other members of the PNA until the last minute, both to head off potential opposition from Palestinians not appointed to the authority and to keep the Israelis guessing until an agreement on implementing the peace accord is signed.

When it is named, PLO officials say the PNA will likely have 21 members, divided between Palestinians who live within the occupied territories and members of the PLO Executive Committee, Arafat’s Cabinet-in-exile, from outside.

Some of the most likely contenders from inside: Faisal Husseini, head of the PLO’s Washington peace talks delegation and the most influential Fatah official inside the territories; Haidar Abdul Shafi, a leading Gaza Strip figure who has been uncomfortable about supporting the peace agreement with Israel; Bethlehem Mayor Elias Freij; Bashir Barghouthi, secretary general of the Palestinian People’s Party; Freij Abu Madan, acting chief of the Gaza Lawyers Assn.; Hanna Nasser, president of Bir Zeit University in the West Bank; Zachariya Agha, a Fatah leader in Gaza, and Nabil Jaabari, director of Hebron University.

From Palestinian exiles outside the territories, the most frequently mentioned names include Mahmoud Abbas (Abu Mazen), the architect of the peace plan with Israel; Yasser Abed Rabbo, chief of the PLO information department; Yasser Amr, Jamal Sourani and Zohdi Nashashibi, all independent members of the Executive Committee; Samir Ghawsheh, head of the Palestinian National Struggle Front; Nabil Shaath, a Palestinian businessman in Cairo; Sulieman Najjab, head of the Palestine People’s Party, and Ahmed Sulieman Khoury (Abu Alaa), deputy chief of the PLO economics department.

Elections for a permanent governing council are to be held throughout the occupied territories, including East Jerusalem, by July 13, after Israeli forces have redeployed from major population centers.

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Even if no implementation agreement is signed with the Israelis this month, and even without the designation of a PNA, Palestinians hope to begin moving in soon to take over control of the day-to-day governing duties in Gaza and Jericho.

The peace accord signed by Israel and the PLO in Washington in September calls for transfer of authority this month in the areas of education and culture, health, social welfare, direct taxation and tourism. In addition, Palestinian police cadets trained in Jordan and Egypt have already begun moving into Gaza to assume security control once Israeli forces withdraw.

The handoff has been delayed by a stalemate in the talks over autonomy, at least until later this month. And precisely how this transition will take place has proved one of the most difficult sticking points. In talks conducted in the Egyptian town of Al-Arish, Palestinian and Israeli negotiators by last week had reached full agreement on transfer mechanisms for fewer than half the areas of authority meant to pass into Palestinian hands.

The 16 areas already agreed included education, tourism, health and social welfare. But 22 more provinces of power remained, and delegates were at odds over issues such as the Israelis’ demand for a joint committee on planning and zoning (Palestinians believe that this should be within their exclusive jurisdiction), for the right to be consulted about a recognized natural preserve in Gaza (the Palestinians say they will protect it) and issues of jurisdiction over a farming kibbutz in what will be Palestinian-controlled Jericho.

Even control of public works is in dispute. The Israelis admit it is up to the Palestinians to start building new roads and infrastructure, but say they should reserve the right to make some improvements if the Palestinians fail to do so.

Palestinians believe they will be able to start taking on the mechanism of government almost immediately by simply assuming the apparatus of the existing Israeli civil administration and replacing its Israeli military chiefs with Palestinians, who compose most of the employees now.

As a legal framework, they plan temporarily to use the existing structure of Jordanian, Egyptian and Palestinian law combined with more recent Israeli military directives, reviewed individually over the next few months for appropriateness.

Meanwhile, the Palestinians will work on drafting their own new constitution.

Some of the PLO’s own departments, with which it has ministered to millions of exiled Palestinians all over the world, will transfer from Tunis to Jericho in the coming months, including, most likely, social affairs, culture and education and a portion of the economics department.

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Lobbying for plum posts at the top of these and newly created government departments has been dizzying in recent months, often involving the kind of horse trading Arafat needs to keep a substantial coalition of Palestinians behind the controversial peace process.

Other departments will remain outside, as part of the PLO’s attempt to maintain itself as a distinct organization still representing the exiled Palestinians who do not immediately benefit from Palestinian autonomy in the occupied territories. The PLO political department, for example, will remain in Tunis to oversee 100 PLO embassies around the world, since the Gaza-Jericho agreement prohibits Palestinians from controlling foreign affairs.

But in Tunis, the mood is grim. The rush to form a new government in the occupied territories means a dismantling of the revolutionary movement upon which many PLO leaders have built their lives. Arafat’s reshaping of the top PLO command, they say, reflects an effective abandonment of the movement outside the territories in an attempt to cast Arafat’s own future with the Palestinians of the West Bank and Gaza.

The proof, they say, is the PLO financial crisis that has now left budgets so tight that some telephones have been disconnected in virtually every PLO department. Thousands of PLO employees in Tunis have no hope of going with Arafat to the occupied territories, and their salaries are drying up as the PLO’s coffers, bled by a halt in wealthy Gulf state financing during the Gulf War, dwindle.

“In our department, four telephones have been cut in the last two months,” said one senior PLO official. “We need about $1,600 to pay the bills, and I have to go to Arafat, to ask him and beg him? Please? I won’t do it.

“When I talked to him, I said, ‘Look . . . My guard who is standing outside, he will not ask me any longer about Palestine. He has forgotten about Palestine. He will ask me about his salary. He wants to know can he take milk for his child.’ But Arafat, he is only counting the days.

“I think when Arafat drops inside, he will form a new formula, a new organization, not the PLO like it is. He will create his own organization, and that’s why those who are outside are feeling now that Arafat is betraying them. He is listening to us, he is saying yes--but he is counting the days until he jumps.”

Governing Palestine

On the eve of self-rule, the government structure is still sketchy. This chart outlines one proposal.

Yasser Arafat

President / Chairman

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Palestinian National Authority

(21 members: 10 members from PLO; 10 members from occupied territories; “Reporting Chief”)

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14-member Palestine Economic Council for Development and Reconstruction

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Tunis: PLO Political Department

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Jericho: PLO Economic Department; PLO Department of Social Affairs; PLO Department of Information