Keeping a Ledger for the Future

He’s an improbable hero, stomping through town in a cloud of cigarette smoke, sleeping little and talking much. But this short, frenetic paper pusher has done what only a few fringe optimists thought possible: wrestled some accountability into a snarled Palestinian government and delivered tangible reform.

A Texas-trained technocrat, anti-corruption crusader and zealous nationalist, Palestinian Finance Minister Salam Fayyad has risen to prominence in an era when Israelis and Palestinians are trapped in the margins between war and peace. In these precarious times, the outspoken Fayyad is widely celebrated as one of the few officials pushing doggedly ahead with solid change.

Since the 51-year-old banker quit his job at the International Monetary Fund to take charge of the Palestinian treasury, he’s won the respect of the White House, many Israelis and Yasser Arafat, a group that can rarely find a scrap of common ground.

Fayyad survived the fall of Prime Minister Mahmoud Abbas unscathed. And should the second Palestinian premier, Ahmed Korei, follow through on threats to quit, Fayyad will probably outlast him too. There is an air of political indestructibility in this brusque, owl-eyed figure. Privately, some Palestinians say Fayyad is second only to Arafat, more powerful than any premier in practice if not on paper.

Fayyad has cracked a powerful monopoly. He is polling thousands of workers on the government payroll -- first, to ascertain whether they actually exist, and then to find out who and where they are. He is forcing the security services to accept their pay by direct deposit, rather than passing around -- and pocketing -- fistfuls of cash. He drafted a budget of $1.28 billion, pushed it through the Cabinet and posted it on the Internet.

“By the year’s end,” says Fayyad, a brisk, slightly eggheaded man who occasionally delivers astounding assertions, “the Palestinians will be happy.”

He talks fast, his eyes snap behind his spectacles, and he mixes the language of liberation into the jargon of stuffed shirts. He says he’s taking government to the people. He vows to build systems where chaos, war and corruption have reigned. He uses the same adjective over and over: “Beautiful.”

But Fayyad also carries what he calls “a real deep anger -- a deep anger that things could have been done better.”

Although a native Palestinian, he is divided from the average Palestinian by years lived abroad and a foreign education. Coming home as a prodigal, there are indignities he still can’t quite stomach.

The feet of the Gaza Strip’s street kids, for example. Fayyad has been mulling them ever since they caught his eye. The children go barefoot in the summer, shod in the winter. An economist trained to read indicators, he could explain it only one way.

“The parents were trying to save up on shoes for school days,” he says. “When you see something like that, you see yourself, you see your own children. These are your own people, and these are the ones who are wronged.”

At moments like these, the bureaucrat is at his most human, and the public Fayyad is pure Palestinian. It doesn’t last long.

“Our neck is on the line,” he says firmly. “We do not have forever to do this.”

So here he is, the minister of finance, “and a broke one at that,” sitting alone in Ramallah before a sea of paper and a dwindling pack of Winstons. In the frame of his office window, the dying sun catches the skylights of the Jewish settlement across the way.

It is Friday, the customary day of rest in the Palestinian territories, but Fayyad has been working since dawn. He stays late to answer his e-mail because he wants to nudge a government of fading files and yellowing paper into cyberspace. It’s been a fight, but then again, so has just about everything else.

“I wish him luck,” says Israeli economist Eli Sagi. “The people who have their hands on the power are strong, and their system has to be broken down. It’s not going to be easy.”

Fayyad had been gone nearly three decades when he came home to Jerusalem in 1995. A native of the West Bank town of Tulkarm, he moved as a child to Jordan, studied in Lebanon, and took his PhD in economics from the University of Texas in Austin before working for the IMF in Washington.

In the mid-1990s, after the Oslo peace accords raised the prospect of Palestinian statehood, Fayyad joined legions of Palestinians who made their way home.

“I had this strong desire to come, I was really antsy,” he says. As the first IMF representative to the Palestinian Authority, he was a banker in a suit, navigating among a hardened generation that had come of age in Israeli prisons and exile.

Then as now, Palestinian power resided in the Fatah (“conquest”), the revolutionary party founded by Arafat and Abbas and soon joined by Korei.

Fayyad has no political affiliation. Still, Mahdi Abdul Hadi, head of the Palestinian Academic Society for the Study of International Affairs, called him a “genuine nationalist.”

“His talk, his ways of meeting, are deeply rooted in Palestinian culture and history,” Hadi said. “He doesn’t come from the diaspora faceless or nameless.”

Fayyad came home just in time for heartbreak. The growing corruption of new Palestinian bureaucrats, Israeli intransigence and the weight of the fundamental dilemmas that still fuel the Arab-Israeli conflict were too much. The Palestinian state never appeared; the dream fell apart.

Instead, Fayyad saw the intifada, or uprising, erupt and swallow the lives of hundreds, then thousands, of Palestinians and Israelis. He watched his homeland dissolve once again into war.

Fayyad doesn’t blame the Palestinian leaders, but he believes they faltered at a moment when there was no room for mistakes. Their failure to provide good, transparent government gave Israel an excuse for occupation, he says, and shifted the debate to whether the Palestinian people had earned a state -- which is, Fayyad argues, a fundamental right.

“It’s not a question of whether we deserve a state because we had a bad government,” he says. “Nobody should be buying into that logic.”

Arafat was desperate last spring, and he reached out to Fayyad. The Palestinian Authority president was facing Israel’s threat of exile, the disenchantment of his own people and the rising hostility of the United States. The aging warrior needed to prove that he was serious about reform. That’s where Fayyad came in.

The new finance minister took on the byzantine accounts of the Palestinian Authority with a revolutionary glint in his eye. Of course, he shrugs, he could be banking fatter checks, seeing more of his wife and three young children and suffering fewer headaches. But, he says, “I would not be at ease with myself in more comfortable settings. If we don’t do this with our own hands, who will?”

The day he decided to break the notorious Palestinian petroleum monopoly began like this: Fayyad drove to Gaza City, strolled into the headquarters and demanded the financial records.

The receptionists blanched. The clerks balked. Fayyad pressed on.

“I’m taking over,” he remembers telling them. “You don’t have to call anybody, you don’t have to go next door and ask anybody. Put the books on the table -- now.”

Then he phoned the banks. “It was freeze this account, freeze that account,” he says. “It doesn’t take an army.”

Fuel greases the hinges and pulleys of social life, he reasoned. It feeds industry and technology, seeps into the economy and the private sphere. Profits from fuel sales accounted for a quarter of Palestinian public revenue, but a government monopoly dealt all the oil in secret.

The Palestinian Authority was buying gas from Israeli suppliers, mixing it with kerosene to increase profits and selling the fuel at inflated prices, Fayyad explains. Officials were also closing their eyes to widespread smuggling -- if not participating in it.

“I knew from the beginning there would be many bad episodes, many bad fights,” Fayyad says of his effort to straighten out the industry. “This was the most important one.”

To the Palestinian street, it seemed an impossible battle. When Hamad Yacoub saw a television spot detailing Fayyad’s plans to break the petroleum monopoly, he changed the channel. “I thought it was nonsense,” he said. “I didn’t think it was possible.”

As long as Yacoub had been pumping Palestinian Authority gas, it had been dirty and expensive. “They mixed it with junk and it ruined the motors,” he said. “The customers were always yelling.”

Now the Bethlehem gas station manager leans against the walls of his ramshackle filling station and declares: “Salam Fayyad. This is a great man, a man of honor.”

The corrupt fuel trafficking was just the sort of thing that kept Fayyad awake at night, eating at his thoughts like acid. The economist in him understood the problem. The Palestinian in him felt suffocated.

“It was something that just blew out of control, and became a reminder of everything that was bad in people’s lives,” he says.

Fayyad restructured the petroleum corporation in June, and then waited. The first month, 6.3 million gallons of petroleum sales were recorded in the West Bank, more than double the previous record, an elated Fayyad points out. The jump didn’t mean people were buying more gas. It means they were no longer buying from smugglers. That’s because, for the first time, Palestinian gas was cheap and clean.

It sounds small, but it was a major victory in the disgruntled Palestinian territories, a boost to badly battered morale. “That’s beautiful!” Fayyad says. He is tapping his bar graph triumphantly.

“It’s working,” he mutters. “It’s working.”

Through the years, most Palestinians have learned not to expect much from their leaders. They pay taxes to a sprawling bureaucracy, they carry Palestinian identification and affix Palestinian plates to their cars -- but there is no nation attached to these tokens of statehood, just a perpetual promise.

Most of the West Bank lives under military occupation, and half of all Palestinians get by on less than $2 a day. Taxes never seem to come back to fix broken roads or build houses or create jobs.

The burgeoning Palestinian Authority brought the prospect of self-rule tantalizingly close. But the glory days never came.

“When the Palestinian Authority came, we expected them to rebuild the infrastructure,” said Nadi Farraj, a West Bank agricultural economist. “But instead it was destroyed.”

The reports of Palestinian corruption are many and still emerging. An audit found that, over a stretch of years beginning when he took over the nascent Palestinian government in 1996 and ending in 2000, Arafat moved $900 million in public money into a bank account he controlled.

The cash was then poured into dozens of commercial activities, the IMF said in September, or moved back into public accounts to patch and disguise holes left by other monetary mismanagement. It was easy to move and hide money back then -- there was no centralized treasury until Fayyad pulled all the scattered accounts under his control.

Fayyad has cost some powerful people a great deal of money, and he has made his share of enemies. “He is respected in the street, but not necessarily loved,” says Hadi, the analyst.

But he doesn’t go in for bodyguards, and when asked whether he’s been threatened he says no. Asked again, he shrugs. “I don’t pay attention to things that are said here and there.”

Overshadowed in a general air of political upheaval, a quiet little revolution unfolded recently: With pomp and a small ceremony, the United States for the first time handed cash directly to the Palestinian Authority in Gaza City.

It was just $20 million, a small chip of money in the realm of national budgets. But nobody missed its significance. The United States was tentatively declaring Fayyad trustworthy. Unlike contributions to Israel, U.S. aid to the Palestinians has always been filtered through aid organizations. U.S. policy still bans direct contributions, so President Bush issued a waiver to clear the way for the donation.

“This is the first test,” said a U.S. diplomatic source. Fayyad “has taken quite strong and courageous positions. He knows the Palestinian people deserve to have a government that’s worthy of trust and credit.”

“We’ve been given billions since [the Oslo accords], but this was the most significant,” Fayyad says. “It’s a vote of confidence.”

Israel, too, has come to trust Fayyad -- enough, at least, to begin freeing up Palestinian tax money. In theory, the import taxes collected when Palestinians move commercial goods out of Israel, along with the income taxes paid by Palestinians who work in Israel, are supposed to be handed over to the Palestinian Authority. But Israel has maintained that the Palestinian government bankrolled terrorism, and refused to pass along hundreds of millions of dollars. Israel began to release the money a few months after Fayyad took office, and has been paying the back taxes in monthly installments. Millions of dollars remain frozen by an Israeli court order, entangled in lawsuits that accuse the Palestinians of failing to prevent terrorist attacks. Still, Fayyad says, it’s a beginning.

In foreign eyes, Fayyad has done much to legitimize the Palestinian government. But the deeper question has always been whether he could hold his own among the Palestinians. Bush praised him in the Rose Garden this spring -- but when it came time to name a prime minister, Palestinians immediately rejected Fayyad as an outsider.

Labor Minister Ghassan Khatib isn’t being ironic when he says Fayyad has succeeded “in spite of the fact that he was educated in the West and has worked with international agencies.”

But Fayyad is careful: He meticulously seeks approval from the Palestinian Cabinet. To the media, he speaks about corruption in general, but he doesn’t name names.

“I don’t take the view a priori that people are bad so get them out of there,” he says. “People act the way they do because of incentives and disincentives.”

At the close of an interview, he says, with quiet urgency, “Please go easy on my colleagues.”

When a frail Arafat shuffled into the sight of Fatah leaders and the international media for the inauguration of the emergency Palestinian Cabinet this week, he came flanked by two people -- Korei and Fayyad. Arafat leaned his ailing frame against them and laced his fingers into theirs.

Palestinian insiders say it’s Arafat himself who shelters Fayyad. How long the Westernized reformer and the gruff, old-school autocrat can tolerate each other is a question of some debate. When Fayyad imposed direct deposit on the security services, for example, he took away one of Arafat’s pet methods for doling out favor. Arafat’s determination to cling to power helped drive Abbas from office, and insiders say Fayyad has squared off against the president more than once.

But for the time being, Khatib says bluntly, “Fayyad needs Arafat, and Arafat needs Fayyad.”

In contrast to popular fashion in Palestinian government chambers, Fayyad’s office holds no looming, gilt-framed portrait of Arafat. Instead, there is a small snapshot in which Fayyad and Arafat sit side by side, equal in size and posture.

When the contrast is pointed out to Fayyad, the ghost of a smile flits over his face.

“This,” he says airily, “is a new office.”