When Palestinians and Israelis signed the Oslo accords, the international community promised funding to shore up the interim agreements.
Donor states sought the successful implementation of an interim government plan that would lead to the creation of Palestinian state institutions. Crucial was long-term sustainable socioeconomic development of the occupied Palestinian territories. Another key goal was to sway public opinion towards the peace accords and ensure control of the interim Palestinian government over its constituencies.
As the donor program progressed, criticisms over transparency and cronyism arose. Funding became tied to the character of Palestinian institutions. The European Commission is the largest donor to Palestinians, and includes in its programs the goal of "reform" of the Palestinian Authority.
Fifteen years after the signing of Oslo interim agreements intended to last five years, donor funding continues to support Palestinian institutions.
"Palestinians are the most heavily-aided nation per capita in the world, yet their suffering continues," UK Secretary of State Hilary Benn has said.
Distribution and coordination of aid in the occupied Palestinian territories occurs through a complex hierarchical process. This system, created during the early 1990s, is headed by the Consultative Group for Palestine, an all-donor forum chaired by the World Bank.
This committee is frequently consulted by the Ad Hoc Liasion Committee, which is the principle policy coordinator at the international level. The AHLC is further divided into the Joint Liasion Committee (JLC) and the Local Aid Coordination Committee (LACC). While the first is concerned with establishing economic policy and appropriating aid, the second is a local discussion forum for prioritizing aid and development projects.
Sub-committees or working groups known as SWGs that are directly responsible for Palestinian Authority projects in coordination with the UN and World Bank report to the LACC. These working groups focus on several broad fields: namely, education, institution building, agriculture, health etc.
International aid agencies have not yet begun the work of reconstructing Gaza after Israelzzz*zs war there in early 2009. Most international aid agencies are unwilling to directly deal with Hamas, which controls Gaza, because of its labeling as a "terrorist organization" by some western powers. A donor meeting on March 3, 2009 promised $4.5 billion for the Gaza reconstruction effort. Reportedly, the promised funds have yet to be disbersed.
The United States and European Union prefer channeling funds through the Fateh controlled Palestinian Authority as the legitimate and recognized authority in the occupied territories. Hamas claims that the PA is attempting to divert funds allocated for Gaza reconstruction for its personal benefit.
Christian Berger, the European Commission Representative in Jerusalem stated that "the EU was waiting to see the outcome of Egyptian-brokered reconciliation talks between the Palestinian factions." This effectively means that Hamas and Fateh will have to reconcile their differences and formulate a joint plan for reconstruction in Gaza.