By Tim Marshall , July 18, 2011.

An African UN worker in the West Bank recently remarked to a mutual friend ‘When people see me coming they see a walking ATM machine’.

Driving through Ramallah, and then Jericho, the other day I was reminded of that quip as I looked at the smart restaurants, sparkling new hotels, and the scale of building work.

The Palestinian Authority likes to boast about the West Bank’ s 8% economic growth, so does the Israeli government, which uses it to suggest that a prosperous Palestine would make an easier negotiating partner. They also know the Palestinians have more lose if a 3rd Intifada breaks out.

What they fail to remind us is that there are well over 200 NGOs in the West Bank and Gaza, and 30% of the GDP here comes from international aid. Palestinians are among the most foreign aid funded people in the world and the place is awash with money.

This underlying economic problem is further complicated by the fact that UN Relief and Works Agency for Palestine Refugees stipulates that not only are the Palestinians who fled their homes in 1948 refugees, but so are their sons and daughters grandsons and granddaughters, great grandsons and granddaughters and so on into the future. In Palestine many people are born refugees. There are people who have a vested interest in this continuing. In 1950 there were 750,000 Palestinians in the Middle East, now there are 4.8 million. UNWRA is considered a ‘temporary agency’.

Even if the Palestinians declare full statehood in September they would not be truly independent, not only because of the continuing Israeli occupation, checkpoints, lack of freedom of movement of goods etc, but also because Palestine is addicted to aid and as long as you are addicted you are in thrall to your supplier.

The billions that pour in here mean the Palestinian Authority does not need to try very hard to deliver the services expected by voters, it also stifles the private sector, inflates wages and causes an internal ‘brain drain’.

The restaurant I went to in Ramallah had a line of expensive cars outside and ranks of NGO workers picking their way through an expensive menu inside. The NGOs do fine work alleviating suffering, helping projects with expertise etc, but they also recruit the best of the local talent and take advantage of their charitable status to get tax breaks.

No Palestinian business can compete with NGOs which routinely triple what a local firm would pay. Many NGOs fork out ‘danger money’ and even ‘hardship payments’ to both local and international staff which further undermines the local private businesses. So the NGOs get the brightest and the highest paid, and the private firms get the rest but without the tax exemptions.

“Palestine is the best-kept secret in the aid industry,” a medical NGO worker recently told This Week In Palestine, “People need field experience and Palestine sounds cool and dangerous because it can be described as a war zone, but in reality it’s quite safe and has all the comforts that internationals want.”

Of course that could change. At any moment the West Bank could explode, indeed there are scenarios you can paint which suggest violence this September after the declaration, or non declaration, of statehood. But Palestine remains a friendly place, welcoming, hospitable, full of air con, hi-fi, wi-fi and wine. Journalists also take advantage of this state of affairs, writing of the poverty and suffering of Gaza for example, before retiring to very expensive sea front hotels after an excellent dinner in one of the expensive fish restaurants.

This is not to argue that NGOs are not required, many are, but they distort the situation and fundamentally the Palestinians cannot have properly functioning businesses, nor be fully independent until their leaders are partially weaned off their addiction to other peoples money.