THE ASPEN INSTITUTE IN CONVERSATION WITH SALAM FAYYAD SATURDAY, JULY 4, 2009

Transcription

1 THE ASPEN INSTITUTE IN CONVERSATION WITH SALAM FAYYAD SATURDAY, JULY, 0

2 P R O C E E D I N G S MR. FRIEDMAN: Well, thank you very much for coming out on this Fourth of July afternoon, on this Independence Day. We are really honored to have the Palestinian prime minister here, Salam Fayyad. I can say with some authority that I've known a lot of the good guys and a lot of the bad guys in the Middle East, and this is one of the really good guys. (Applause) MR. FRIEDMAN: So, it's a treat to be here with you, Prime Minister. MR. FAYYAD: Thank you. MR. FRIEDMAN: And I have really been looking forward to this conversation. I actually wanted to begin by not asking you the usual Hamas, Obama question, but ask you something that -- as long as I've known you -- I've actually never really known, which is, where were you born? What have you been doing for all these years before you became prime minister, and how did you become the prime minister of this nascent state of Palestine? MR. FAYYAD: Story of my life in minutes.

3 MR. FRIEDMAN: Story of your life in maybe. (Laughter) MR. FAYYAD: Well, first of all, a happy Fourth of July to you and everybody. MR. FRIEDMAN: Thank you. MR. FAYYAD: And thanks for having me. MR. FRIEDMAN: Thank you. (Applause) MR. FAYYAD: I was born in, in the West Bank town of Nablus. Just born there, lived most of my childhood days. MR. FRIEDMAN: What did your parents do? MR. FAYYAD: My father was director of agricultural department in Nablus. MR. FRIEDMAN: The agricultural department in Nablus. MR. FAYYAD: Department, up until -- MR. FRIEDMAN: So for the Jordanian government - - MR. FAYYAD: Yes, until. MR. FRIEDMAN: Uh-huh. MR. FAYYAD: Lived most of my childhood days in

4 Tulkarm, another small town in the West bank. And then in, we traveled to Amman, Jordan because my father had to go to then Abu Dhabi, before it became UAE, to work as director of agriculture there. That's where I finished my high school. MR. FRIEDMAN: In Amman or -- in Abu Dhabi or in Amman? MR. FAYYAD: No, in Amman. And then I went to the American University of Beirut after that, where I did my first degree. MR. FRIEDMAN: In what? MR. FAYYAD: In chemistry and biology. While doing that, actually during my junior year, I discovered that I really wanted to do something else. Economics that happened around the time of the first oil crisis, if you remember. And those -- MR. FRIEDMAN:. MR. FAYYAD:, and I was junior at the time and I thought this is what I really wanted to do. I wanted to find out what this business of economics is about, everybody was talking about it. That is the beauty of American system of education.

5 You could do that as an elective. I tried that and I liked it so much. And I told to myself, why am I doing this chemistry business? But something about what was going on in Lebanon, Marwan Muasher was in the crowd - - we were together at the AUB. Something that was happening in Lebanon around that time told me even at the young age of, years old, that something not right was happening, and that if I'd changed majors, I just might not be able to actually get the degree from AUB; something which people generally felt was a good thing to do, to get a degree from American University of Beirut. So I decided to actually, to finish my degree and then do graduate studies in economics. I did apply for that. Sure enough, by the time we started doing it, what then became known as Lebanese Civil war had begun and it became too much of a luxury for me to see postgraduate studies at a time of such great difficulty in Lebanon. So I left Lebanon, came back to Jordan, where I worked first as a volunteer in an orphanage, waiting for things to normalize to go back to Beirut to continue with my studies. Of course, those of you who know the

6 situation in Lebanon know that that war went on for another years. So I then decided to begin to do something other than just volunteer work. I worked in business for a while, about -/ years MR. FRIEDMAN: What kind of business? MR. FAYYAD: All the while trading, contracting, and projects. During the oil boom, there was a lot of that going on in the Middle East; that was a good business to be in. But not withstanding the success I had, something about going back to school just never left me. I wanted to do that -- to get that degree in economics. So one day, just like this, I was sitting there and I decided, unless I do it today, I'm not going to do it ever. I called another friend of ours -- Marwan Muasher knows him actually -- who had before me left the AUB for the United States to study something in pharmacy administration. I said I'm coming to the States. I want to do postgraduate study in economics. He said, well, it doesn't work like that here. There are deadlines for application and things like that. (Laughter)

7 MR. FAYYAD: So I said, well, anything, just get me anything, and then he was in Austin, Texas at the time and there was this other school, other than UT, Austin, that offered an evening program, an MBA program. I said, I don't want to do MBA, but well, I'll do a semester of this and then transfer. I ended up actually doing the full MBA degree coincidently at a college called St Edward's University in Texas. After which time I finally, ultimately, moved to UT, Austin, to do that degree which I really wanted to do. And it turned out to be everything I wanted it to be. It was fun, did it with a great deal of enthusiasm. And while doing it, as a matter of fact, I got a job offer to work at the Federal Reserve Bank, St. Louis, except that I couldn't do that, because I was on scholarship by University in Jordan, and the requirement was that you go back and teach after you do this sort of thing. MR. FRIEDMAN: Greenspan, actually. (Laughter) So you could have been Alan MR. FAYYAD: Well, I was -- to see him this

8 morning. Not in that league, no, I'm sorry. Anyway, but so anyway, I did go back to Jordan, taught for a little while, ended up going back to St. Louis on a -- as a visiting scholar. I liked it very much there. While doing this and thinking as to where it was going, got married along the way. MR. FRIEDMAN: Is your wife American or Palestinian? MR. FAYYAD: She is a Palestinian from Jerusalem. MR. FRIEDMAN: Uh-huh. MR. FAYYAD: While I was there at St. Louis, I got an offer from the IMF to work there and I took that. It happened around the time when I was getting married and I thought to myself, you know, Washington would be safer from that point of view because being at St. Louis, with my wife coming from overseas; if she was going to sit, wait for me all day long, it was not going to be -- it was not going to work out very well. Washington, you know, there are a lot of people there, cosmopolitan and all. I ended up working at the IMF, beginning January, and stayed there until the mid-'0s.

9 After Oslo process had started -- and that was really another important turning point in my personal life. Around the time, something started to be known about Oslo, with a lot of people traveling to the Middle East and to our part of it for that matter to act as experts particularly in economics. That's when life started to be not too happy for me. MR. FRIEDMAN: So you got drafted into the Palestinian -- MR. FAYYAD: You know, here I was working in Washington at the IMF, having my coffee on Sunday afternoons at a porch in Western Virginia. Something about this did not make that much sense, with experts from all over the world traveling to our part of the world to help us. MR. FRIEDMAN: Yeah. MR. FAYYAD: So I very much wanted to be a part of that. Coincidently, and fortunately, it happened to be around the time when the IMF managed to get permit from government of Israel to set up an office in West Bank and Gaza. And I was chosen as the first IMF res rep to the Palestinian Authority. A good friend of mine, Stanley

10 Fischer, has something to do with it. He was then first deputy managing director of the IMF. Now, he is governor of Bank of Israel, as everybody knows. In that event, I ended up being there initially for a -year assignment -- MR. FRIEDMAN: In Jerusalem. MR. FAYYAD: Yes, living there, but working with my office in Gaza, shuttling between West Bank, Gaza, et cetera, doing what the IMF does, making life a little bit miserable for authorities we deal with, trying to get them to do finances right and things like that. And I think it was highly rewarding. You know, it gave me an opportunity to work as a profession; my own profession. But also doing it for a very, very good cause, for people I belong to and I'm one of. It could not have been better. And the years became, and became, and that's when we started to run over that which is customary. You know, how it is. With these sort of diplomatic missions, I mean, there is a time limit beyond which you cannot continue to do what you are doing. So then came the time for me to ship out of there and to go back to Washington, if I had wanted to stay with the IMF.

11 But you know, given what this was about, you know, I was not about to actually, you know, go back to headquarters and all, and I opted out of IMF career to stay in Palestine. That happened around 0. Also ended up serving a very long -year period term as res rep. So I resigned my job with the IMF to become a banker in private sector -- that lasted a few months. MR. FRIEDMAN: You can't keep a job so long. (Laughter) MR. FAYYAD: Yeah, less than months. It was fun. It was -- I mean, for those of you in banking, it's something to really think about. Because you know, bankers have a tough life, contrary to what many people think. But in addition to things bankers usually have to worry about, most of the time credit risk, there, you know acting -- operating in Palestine at the time of breakout of the Second Intifada, with violence and all, curfews, incursions, military operations, and what have you, operational risk was a lot more prominent source of concern than credit risk. Things as basic as moving money, cash from one branch to another, those used to be, you know, the kinds

12 of preoccupation I had to contend with over there. And here I was new to the profession. I really never was a banker before; did not have formal training for it, but then having to worry about which branch is open today, which city is under curfew, and you know, it happened around the time of great challenge. Actually, we started to see one branch after another close. And I was the head of the largest bank there, the Arab Bank. It was very, very challenging and demanding. In the midst of all of this, there were calls first from within the Palestinian authority. But then they coincided with a large push internationally for reform of Palestinian Authority. There was an important session that was held by the Palestinian Legislative Council in May of 0, where they demanded new government and changes and all. And that was around the time when there was great deal of interest internationally, and having things done right by the PA in the governance field. I was called in by our late president, Yasser Arafat, and asked to become minister of finance in a government that was to be -- represent big change. Much

13 to many people's surprise, I accepted to do this, and obviously not for the glamour of it, to be honest with you. It looked virtually impossible, just like many things I ended up doing later after I joined the PA. But then what started out being a big government change involving many portfolios -- and that's what really gave me little bit of an inkling as to how things happened there -- it ended up being fairly limited government change, about four portfolios in all. Nevertheless, I ended up joining the PA in June of 0, first as finance minister. Luckily, given my background, I knew what had to be done and went about doing it as quickly and efficiently as we could possibly do it, and in the process introducing major reforms and major changes in the way business was done. And I can tell you with honesty that the basic elements of the public finance system -- functioning public finance system were put in place during that period, which is something that not many people know. MR. FRIEDMAN: Accountability, transparency -- MR. FAYYAD: Yes, and this happened, you know, while President Arafat was still live.

14 MR. FRIEDMAN: Right, right. MR. FAYYAD: Many people, you know, associate reform with the post-arafat era; not true in finance. I can tell you for the record for history; it started with earnest, in the summer of 0. We did a lot of things. By a year later, most of everything that had to be done in terms of the basic elements of reform were completely introduced. The system subsequently came pretty much undone after the elections of January 0. I was away from government. I was asked -- MR. FRIEDMAN: With the Hamas -- MR. FAYYAD: Yeah, yes, Hamas took the government for a year, March 0 through March 0. I was away from government then, during which time I ran for office and I joined the PLC as a member along with Hanan Ashrawi, (inaudible) called Third Way, put together in haste and all. In any event, I was away about a year. A year later, I rejoined the government in the so-called national unity government that was formed after Mecca Accord. MR. FRIEDMAN: Mecca Accord between Hamas and

15 Fatah. MR. FAYYAD: Between Hamas and Fatah, yes. And that government lasted about months, almost exactly months; th of March 0 through th of June. MR. FRIEDMAN: Hamas takes over Gaza. MR. FAYYAD: Hamas takes over Gaza in mid-june 0. I was called in on th of June to see Abu Mazen -- President Abbas in Ramallah. I was at the commencement function for our eldest son, Khaled who is now a sophomore at Texas, University of Texas too. And I was having -- being given the honor of being the keynote speaker for the function. MR. FRIEDMAN: Wow. MR. FAYYAD: And literally, as I finished delivering that speech, I was told to go to Ramallah. I knew bad things were happening obviously, but there's something I had to do, and I was asked that faithful evening if I would not put together an emergency cabinet. MR. FRIEDMAN: Become prime minister? MR. FAYYAD: Yes. And I don't know what people make of this, but it was not the time to do much thinking about anything. It was a time of great emergency, and to

16 this day, I get extremely emotional when I think about those days, not the easiest of time. Our country was (inaudible) Gaza gone, West Bank not far behind. Not really the kind of time or moment in your life where you get the privilege of thinking about and consulting family and all. So I did that and I served in that capacity since then, except that in May of this year, we put together an expanded government and that's where we are. I don't know if I managed to do this in minutes. MR. FRIEDMAN: That was wonderful. (Laughter) MR. FRIEDMAN: It was fascinating. I think everybody appreciated that. Prime Minister -- (Applause) MR. FRIEDMAN: Let's pick up really where, you know, where you came in on the scene, because I think one of the big questions out there is can there be a Palestinian decision without a Hamas-Fatah unity government? And if there can, what are the prospects of such a unity government? MR. FAYYAD: You know it need not, technically

17 speaking, be a unity government in the sense of factions sitting on it. What it needs to be is a form of a consensus government, which could mean technically, a government of nonpartisan cabinet officers. MR. FRIEDMAN: Right, we technocrats. MR. FAYYAD: Technocrats with the consent, or at least not objection -- MR. FRIEDMAN: Of Hamas -- MR. FAYYAD: Of Hamas, Fatah, or anyone else for that matter. I thought for a long time that that was the best formula and not because I happen to be a nonpartisan, I mean, I'm independent. I thought it best because it was very clear to us that Hamas was not about to change its platform, political platform in the areas that matter. MR. FRIEDMAN: Vis-à-vis Israel -- MR. FAYYAD: Vis-à-vis Israel, and specifically vis-à-vis the commitments that the PLO had entered into on behalf of Palestinian people in September -- in ; involving, number one, recognizing Israel's right to exist in peace and security, and number two, renunciation of violence. These are important commitments -- MR. FRIEDMAN: Right.

18 MR. FAYYAD: -- into which the PLO had entered into on behalf of all of the Palestinian people at home and that's where -- and these are commitments that it was clear that Hamas was not going to subscribe to it. Given that, and given the fact that they represented a significant chunk of the electorate, how do you govern under conditions like this? Clearly, the Hamas-only government did not solve the problem. They tried to handle it for a year. And it's not theory, we have experience with that, and during that year, the entire PA was subject to major financial boycott. People think of this in terms of official assistance not going to the PA, but that's really not the issue. I can tell you for sure that in the close of , I'm sorry -- the PA had received more assistance, more official assistance, I would say, three times as much assistance as it had received in 0, before Hamas' accession to power. It was not really the issue, because you know, while money did not come from let's say OECD donors; the United States, European Union, some money came in from the region that more than made up for the

19 difference. The issue -- and what crippled the government and its capacity to function, I would say, the PA as the whole, was the financial siege; meaning that banks -- commercial banks could not deal with the Palestinian Authority with the institution of government. And you know -- you cannot run a public finance system without using the banking system. You cannot run the affairs of a country on cash transactions. I mean, that's one of the things we had eliminated actually during the first wave of reform we had introduced over the period 0, And I say this glossingly, but it was a major reform, because one way in which the PA had conducted finances before was to pay salaries to security in cash. I mean many, many other such reforms. In any event, the PA did come under financial siege and that really contributed to bringing the system pretty much down in terms of transparency, in terms of knowledge of what was going on, and it also restored something we worked very hard to eliminate completely, extra-budgetary spending.

20 There was no reference to anything, so there is virtually complete breakdown in just about everything, total loss of transparency. I mentioned here, mentioned to you about external assistance -- MR. FRIEDMAN: Yeah. MR. FAYYAD: -- official assistance; one of the very few facts that are now known as to what has happened or what had happened in public finance area during that period. So that's basically -- MR. FRIEDMAN: Well, I mean -- MR. FAYYAD: So you know what happened when Hamas was in power. What is less known and less understood actually is what happened during the tenure of the national unity government. That was interesting. And the history of all that is not understood well, and I think some of this is intentional. MR. FRIEDMAN: So this is the government that followed the Hamas tenure? MR. FAYYAD: This is the government that followed the Hamas tenure after everybody realized that this Hamas-only business is not going to work out. MR. FRIEDMAN: Not working --

21 MR. FAYYAD: So the best thing to do is to try to put up what you call "national unity government." There was a lot of dialogue on this and that was sponsored by Kingdom of Saudi Arabia, and the most recent -- I mean, the last round of which took place actually in Mecca itself, the holiest of all places for the Muslim world. Great symbolic importance to this, the involvement by the king himself in doing it was something of great importance and significance, symbolically and all. And then there was not really a full agreement on the political platform in terms of language. And a lot of it really -- a lot of the discussion revolved around finding language that sort of was workable or acceptable to everyone, while at the same time appearing to be consistent with those obligations. And anyway, this is one part of our history which I really think should be studied carefully for future reference. MR. FRIEDMAN: Why? MR. FAYYAD: For one thing, you know, it was the first time for me, personally -- and I happened to know a little bit of English and as much in Arabic language -- first time in my life that I realized that I had to really

22 draw a distinction between "observe" and "respect." I mean -- (Laughter) MR. FAYYAD: -- we got into this business of semantics and language in ways of absolute -- MR. FRIEDMAN: This was all about how to create a language that Hamas would come into the government, but wouldn't violate -- MR. FAYYAD: Yes. MR. FRIEDMAN: -- Palestinian commitments to recognize? MR. FAYYAD: I mean, here we are, you know, we get formulation that says language as "This government will honor -- respect -- MR. FRIEDMAN: Right. MR. FAYYAD: -- will honor agreements entered into by the PLO on behalf of Palestinian people. But you know, somebody -- I mean, the intent there was "honor" is something less than "observe." And then we -- you know, why I bother with -- either you agree or disagree, this is really -- MR. FRIEDMAN: Let me try to bring this up-to-

23 date, because elections are scheduled in January -- MR. FAYYAD: Yes. MR. FRIEDMAN: -- by the Palestinian constitution. So let me try to ask you this kind of -- MR. FAYYAD: Can I just back for one minute? MR. FRIEDMAN: Oh, I'm sorry. Go ahead, please. MR. FAYYAD: Because if this is a -months story, I can tell in one month. (Laughter) MR. FAYYAD: One minute. Because it fell, I mean that government actually -- MR. FRIEDMAN: That government of Hamas-Fatah fell -- MR. FAYYAD: -- that government actually lasted only months. MR. FRIEDMAN: Yeah. MR. FAYYAD: A lot of people there say it come down because of the siege. What I really want everybody to know, not so, not so. The financial siege on the PA was beginning to be broken. I was the minister of finance in that government, and even though technically, the government was boycotted by Europe, by the United States,

24 and seconded by Israel -- MR. FRIEDMAN: Because Hamas was in it? MR. FAYYAD: Yes, because Hamas was in it and because you know somebody drew the distinction between observe and honor. Anyway, nevertheless, we were beginning to make inroads on breaking the siege, and the government in my view was beginning to act and was beginning to be seeing as a working government. When that really -- actually did not that very much look like Hamas or act like Hamas government. And maybe that's what brought it down, to be honest with you. Not the siege itself. Yes, it would have been easier had the world received that government with open arms and said, yes, we recognize you, it would have been easier for the government. But the government did not fall under the weight of the siege, that's not true, that that's not true. MR. FRIEDMAN: Would you say it fell because Hamas wanted it to fall? MR. FAYYAD: Well, internal problems, for sure, as I just told you, the government did not act like a Hamas government. I was on that government and I made

25 sure, so that everybody understood where I was coming from before I joined the government. I gave an interview -- and it's on record -- to Newsweek, just after it became known that I was going to be on this government. And my name was in that Mecca Accord, actually, as a minister of finance, so not much of a decision-making involved on my part, so it was over with. I felt it important to make my position clear. So in an interview I gave to Newsweek magazine, literally a couple of weeks before I formally joined the government, I clearly stated continued commitment to those obligations and commitments that the PLO had entered into. And my -- you know, the reason I did that so publicly was so everybody knew where I was coming from. I did not want, you know, colleagues in government, after the government is formed, to really say, you know, you changed your mind or anything like that. This is different government. I made sure I gave that. Shortly after I joined that government, I took an op-ed -- actually I believe in LA Times -- after I was in that government. And here I was, an officer on that cabinet which

26 I stated I've always subscribed to all of the commitments entered into by the PLO on behalf of Palestinian people, including recognition of Israel's right to exist in peace and security, and including renunciation of violence, and I said I still do. You know in your business how it is with the opeds, the editors of the paper wanted to take -- I still do. I said give me back the op-ed, I want -- the main reason why I'm publishing it is because I want everyone to know that things have not changed. I was on that government. So that government really, actually did not look like a factional government. It started to act like a pragmatic, an organ of the Palestinian authority. It was beginning to make inroads, things were beginning to happen. But then it really fell down because it just simply didn't look like the government that Hamas had wanted. MR. FRIEDMAN: So elections are slated for January 0th under the constitution. MR. FAYYAD: Yeah. January th, I hope, by the --

27 MR. FRIEDMAN: Well, or the end of January. Let me ask you a question to try to put it in a regional context, Prime Minister. You know, if we look back at the Middle East now, over the last -- since the American invasion of Iraq, you could say that, you know, America decapitated the regime of Saddam Hussein. It was I think instrumental in pushing Syria out of Lebanon. It was instrumental in getting Mubarak to loosen up a little bit in Egypt, and it was instrumental in pushing the Palestinian elections that brought Hamas to power. And what you can see in all four of these theaters is that when the lid got loosened, the parties that first were able to take advantage of it were all the Islamist parties. In Iraq it was SCIRI, in Lebanon it was Hezbollah, in West Bank it was Hamas, and in Egypt it was the Muslim Brotherhood. It seems to me over the last couple of years, you've had a very interesting backlash that the Islamist's rule, I think they messed up and they overreached in a lot of areas. And you've had a kind of interesting moderate backlash. We saw the pro-iranian party decimated in the

28 Iraqi provincial election in January. We saw Hezbollah defeated in the Lebanese election. We saw what happened in Tehran, and I sense -- and this is really not my question -- is that same backlash now happening in the West Bank and Gaza, vis-à-vis Hamas; therefore, if there were elections in January, how do you look at that? Do you see the elections as an opportunity for the kind of moderate mainstream to do what happened in Lebanon, to do what happened in Iraq, to do what happened in Iran in the West Bank? MR. FAYYAD: I agree with describing the -- in a former case when -- where Islamists ascended to power, certainly, in Palestine and other places, as a backlash in the sense that anybody who drove against traffic would have won that -- those elections. It was more a reflection of unsettlement, unhappiness -- MR. FRIEDMAN: With the Fatah regime? MR. FAYYAD: -- with status quo, generally, whether in Palestine -- MR. FRIEDMAN: Right. MR. FAYYAD: Whether elsewhere. MR. FRIEDMAN: Yeah.

29 MR. FAYYAD: And you know, that actually is really more like an ideology. It combines elements from far left to far right; what combines them all is a rejection of status quo, after you know, decades of disenchantment with status quo and all of the things that go into this, including not only lack of settlement politically, of the overall issue, but also you know, social injustice or sense of social injustice, inequity, poor governance, ineffective governance, and the rest of it. That is, I think, something I can go along with describing as a backlash. It maybe the latter way of -- could be described as a backlash, I hope not. I hope it's really more -- MR. FRIEDMAN: If elections are held in January -- MR. FAYYAD: Yeah. MR. FRIEDMAN: -- who do you think will win? Will Hamas be able to sweep these elections? Will Fatah or the more mainstream movements be able to make a comeback? What are the calculations of whether or not elections will or should be held?

30 0 MR. FAYYAD: First of all, this is not January. We're still six months away from that; seven months, and God knows what may be happening then to alter or -- MR. FRIEDMAN: Calculations. MR. FAYYAD: -- to influence the calculations, influence people's decision-making. But in analysis of what had happened in early 0, I think, there is pretty much consensus on the factors that led to a rise to eminence of Hamas and groups like Hamas. When I mention -- I mean just basically unhappiness with status quo, it having failed miserably in delivering on promises and all. And you know, the history of this is long and is very well known without really getting into it -- and with the way, you know, the world, the powers to be, including Washington, viewed the world and dealt with third world countries, whether in the Middle East, whether in Africa, whether in Asia, but that's history. There are other elements, as a matter of fact. You know, Fatah had been in power whether in the context of the PA or as the dominant faction within the Palestinian political system that's the PLO and before

31 then, there are the failures of the political process, there are the failures of governors that everybody knows about, corruption and perception of -- MR. FRIEDMAN: But would you like elections to be held? MR. FAYYAD: Definitely. MR. FRIEDMAN: You would. MR. FAYYAD: Elections in January of next year are the constitutionally mandated rights of the Palestinian people, and they should be held in January of next year; period, no discussion. I think, you know, when people are talking about early elections, that's a different matter. MR. FRIEDMAN: Right. MR. FAYYAD: Early elections require consensus. Sometimes they're provided for in constitutions of countries. Sometimes the head of state has that power. In Palestine, the head of state does not have the power to call early elections. One of the shortcomings of the system as the legislature, for a while, was working on weakening the presidency. We ended up stuck with the system where nobody can short-circuit elections or call

32 early elections. MR. FRIEDMAN: So elections -- MR. FAYYAD: So early elections require consensus. But constitutionally mandated elections in January of -- MR. FRIEDMAN: Should happen. MR. FAYYAD: Should happen. That's an absolute right for the people, they should happen. And I think that ought to be the driving force, and part of the political effort that should be mounted in order to make a win by people who -- and factions -- of a persuasion that's based on a sensible approach to governance, sensible approach to delivering the Palestinian people that which we desperately need -- freedom, where they would have much better chance of winning. One way of doing this is actually to act on behalf of the people and in their interest. And one way in which you can do that specifically in this case is not to act, and certainly not to be seen as acting as getting in the way of people enjoying that, which is an absolute right, to have elections. So clearly, this is part of the overall

33 political effort that should be mounted to win people over. It is no secret that Hamas does not want elections in January of next year. MR. FRIEDMAN: Because they think they'll lose? MR. FAYYAD: I mean, I don't know what other reasons they may have. That seems to be -- (Laughter) MR. FRIEDMAN: It's usually a pretty good reason not to have elections. MR. FAYYAD: That seems to be the calculus there. MR. FRIEDMAN: So let me ask you this. Does Barack Obama -- President Barack Obama know something about how to resolve this problem that George Bush, Bill Clinton, you know, George Bush, Sr. -- that others didn't -- or is his force of personality, his style as manifested by his speech in Cairo, even if we have the same old policies, itself a huge advance so we can create maybe a better atmosphere for those January elections. Are we on the right track? MR. FAYYAD: You know, what I think is different. I think what he has is the benefit of the

34 experience of the past attempts at making peace in the Middle East, that's what he has for sure. I mean, style is always, you know, an integral part of the equation, certainly. But the substance of it, I believe, and what I believe is driving it -- certainly I like to believe this -- is the benefit of experience of nearly years of trying to do this unsuccessfully. And I say this analytically. And I say this because what I perceive to be as a matter of very sharp focus on what I call elements of success, rather than just on the grant picture of getting there. MR. FRIEDMAN: So building more from the ground -- MR. FAYYAD: Right. What needs to happen, I mean, as one of my professors in economics used to -- was fond of saying, you need to have potatoes to make potato chips. And really -- MR. FRIEDMAN: So what are those potatoes from the Palestinian point of view? MR. FAYYAD: The potatoes from the Palestinian point of view are the institutions capable of delivering

35 good governance to the Palestinian people. The institutions of the Palestinian state in the making. MR. FRIEDMAN: Be specific. Which ones you think are important? MR. FAYYAD: Security, law and order, justice, public finance, economic management, welfare, all of the functions that any responsible state should feel obligated to provide -- MR. FRIEDMAN: To deliver. MR. FAYYAD: -- to deliver to its citizens in all spheres of governance. You know, this is about building toward statehood. I mean, this is what I view our key obligation as being; one, of really actually preparing for that there, when we are really on our own, only if we can get there. MR. FRIEDMAN: So if you have the -- MR. FAYYAD: That's what we really want. MR. FRIEDMAN: You'd have the institutions and you just need the borders in a sense. MR. FAYYAD: Definitely. You know, I'll tell you what drives me personally, what conditions my thinking about all of this -- and it really started long before I

36 became prime minister; in fact, when I was -- when I joined the PA as treasurer, as the finance minister. I mean, let's do all of those things. You know, people were saying at the time, you know, the Americans -- the international community asked that the roadmap report, you know, they want these reforms; they want the PA to do all of these things. And my message all along to people was the world wants us to have a good public finance system, but is that against our interest? What's wrong with that, let's do that. I mean, we need to do it. Ladies and gentlemen, every time we, you know, take a step in the direction of having a function of a state perform competently, you know, it means a great deal to us and to me personally, for sure. It should be the same thing to any official anywhere in the world. But to us Palestinians, it means a lot more because with every step that we take in the direction of institutionbuilding, that's a step closer to our freedom, to our statehood, that's what it is about. So therefore, that's what really drives this process. These happen to be our potatoes, so to speak.

37 These happen to be our obligations under the roadmap. Roadmap is about security, it's about security for Israel, but it's about security for Palestinians, it's about governance, it's about enhancing, ensuring capacity of Palestinian people to govern themselves in all facets and spheres of governance including security. That's what this is about. And that's why we took it upon ourselves, particularly after what happened to us in 0 with the fall of Gaza to Hamas, with the West Bank, at the time, being under such a state of complete and utter lawlessness. We took it upon ourselves to actually be serious about state building, get people to rally around the cores of state-building indeed. You know, if this is about statehood, then let us build toward that. I do not need anyone to remind me that we're doing it under occupation, I know that. But we are doing it because we are under occupation, in spite of the occupation, to end it. Unless we actually do it this way, unless we create the state as a fact on the ground in a positive way, in the way that I'm saying it to you, and in a way

38 that we mean for it to be positive facts on the ground, in response to adversity -- in spite of the adversity, to end the adversity. So that years from now, I estimate technically -- and those years happen to mean something politically too, given what everybody must be thinking about politically, because things are linked -- within years from now, I hope it will not be difficult for anyone to look toward us and come to the conclusion, indeed the Palestinians do have a state, but for the occupation, if in fact it's still around by then. And if it is, for it to be the only thing that has to change. I mean, if we do that, we'll have succeeded. That's our message. It's a progressive message, it's a positive message. It is independent of what might be said by way of detraction or distraction here or there or everywhere. Now, on the Israeli side, the potatoes consist of also things that make sense relative to the key deliverable of the peace process. Ending the occupation -- words of George W. Bush -- ending the occupation that began in ' and the establishment of independent, viable, sovereign

39 Palestinian state -- roadmap language -- alongside the state of Israel with peace and security, that's what it is. Relative to that objective, focusing on governance as a key requirement, the potatoes of the Palestinian side make sense. Similarly, with the obligations of the potatoes on the Israeli side being comprehensive settlement freeze, it makes perfect sense. Why? Where is that Palestinian state going to emerge if settlement activity were to continue? Obligations of the Israeli side also include importantly stopping military incursions in areas under security control of Palestinian Authority. That too also makes sense. And now it's compelling, the case where it is compelling, with us having succeeded so remarkably in establishing law and order in the West Bank uniformly through out all urban areas in the West Bank, at a time not many people gave us much of a chance to do so. So we have made progress, given emphasis and focus on the requirements for success. I believe that what's new. MR. FRIEDMAN: That's very good. MR. FAYYAD: And I think that's what we really

40 0 should all unite and support, you know, focusing on the elements of success because we're just not going to get there in one leap by usual thinking, to build toward that. MR. FRIEDMAN: Do you feel that -- that was very well said, you know. Do you feel that the -- (Applause) MR. FRIEDMAN: Do you feel that in Prime Minister Netanyahu, you have an Israeli prime minister who appreciates that there is a new Palestinian strategy, that it is making headway and that he can and will contribute to it assuming you deliver on the security side. Do you feel that Netanyahu gets it? MR. FAYYAD: You know, I can only hope so. And I really would hate to think that the politics from either side would continue to drive this process forever in the wrong direction because good part of the failure is due to that, and is due to time wasted on speculating whether or not there is a partner here or there is a partner there. I invite everyone who thinks of those ways to look in the mirror; let's all, you know, live up to the extent that -- let's all measure up, let's all do what we all have to do. And each focus on those requirements --

41 look, the roadmap did not say, you know, who begins what first, when. I mean it said, you Palestinians have to do this, you Israelis have to do that. A lot of time was wasted on who goes first and who goes second and all of that. And we all paid dearly for it; Israelis and Palestinians all alike, the region to -- because, you know, what happens there is not something that the region happens to be insulated from. Indeed, the world at large. So you know, I call on Israeli leadership to basically do what has to be done. I call on us to do what we have to do. And what I like about the new paradigm, if it is that and I hope it is, is for us both -- for both sides to be expected to deliver. What I believe is happening here is the yardstick on accountability had just been raised. They are -- I mean, it should be, the bar has to be raised. We both should act with much great sense of -- greater sense of urgency. We both should feel accountable. Look, we can't do it alone. I mean, everybody, you know, will tell you that. But that should come at certain price. It

42 should mean something. If I say that we need the United States to help us with this, it should follow from that that I should be willing to accept accountability to that party that I want to help us. That's what has been missing. Obligations are taken, but never fulfilled, nobody asks. I mean, that's what's wrong with the process. MR. FRIEDMAN: Have you seen -- you said you hope with Prime Minister Netanyahu, have you seen any evidence yet in the right direction? MR. FAYYAD: I think it is important that now we're not speculating any longer about whether or not we accept the two-state solution. I mean, that's overdue. And I would like to remind everybody that that's something that was acknowledged by the government of Israel in June of 0, years ago, by government headed by Ariel Sharon and on which Benjamin Netanyahu sat as finance minister. Nevertheless, we are where we are today. And by the way, it was a much more forthcoming endorsement of the George W. Bush's vision, than what we have recently. Nevertheless, I'm pleased that we do not have to speculate any longer on whether or not the government of Israel

43 accepts the two-state solution. But now that we have got them to this point of it not being a matter of speculation, I think the issue is what are we going to do in order to fulfill that, in order to actually translate that into reality. Mr. Netanyahu is right to, you know, look at us and say, what are you doing Palestinians to live up to your obligations. I'm happy to answer that which we're doing right, and that we're doing half right, that which we're not delivering, and what it is we're going to do about that. At the same time, I hope he'll spend equal time, you know, looking at what his government has to do in order to deliver. But I hope will be uniformly wellunderstood is the following. I do not want -- and I think it will be devastating if this international drive led by the United States to achieve at long last, durable and just peace in the region. I hope it will not be seen as the United States taking sides with this side or that side. I hope this would be seen for what it is. The United States decided that taking sides with the notion of maintaining the viability of the two-state solution; a solution concept

44 that has become a matter of international consensus, the oldest solution concept that makes sense, that's what this is about. And I think we all should unite behind that effort, and everyone should contribute in that direction. MR. FRIEDMAN: Thank you. One -- I know we've a lot of -- (Applause) MR. FRIEDMAN: We have questions and I'm going to go to them with one last one. There has been a big earthquake in the region in the last month, I mean, that is the attempted revolution, whatever it was in Iran and the shaking of the Iranian Islamic republic. What shockwaves if any have hit Gaza, West Bank, Palestine because of that revolution? Do you sense Hamas being weakened, tempered by it? What's been the impact? MR. FAYYAD: It's an event of interest. I can tell you for sure, and -- (Laughter) MR. FAYYAD: But it will be certainly, at least that's my sense. MR. FRIEDMAN: Yeah. MR. FAYYAD: You know, one of those events in

45 history that later in life I do not know how long it will take, when it will happen, it will prove to have been extremely significant in the history of the region. I think it's important. You know, I wish the Iranian people all the justice and democracy they deserve, like all nations around the world. And I think it's very important for the government of Iran to understand fully well that it is important for it, first and foremost, to look after the interest of its citizens -- real interests of its citizens, and leave the rest of us alone. (Applause) MR. FRIEDMAN: Well said. Kareem Qawar, the former Jordanian ambassador to Washington. MR. QAWAR: Thank you, Tom. Mr. Prime Minister, in follow-up to Tom's question regarding elections, months is not a very long time. My question is what would you specifically ask of the stakeholders in the peace process and the regional players to do that towards help the Palestinian people see that there is improvement and there is deliverables from your moderate government side that can help change Palestinian public opinion to

46 continue to support moderate leadership in the upcoming elections. (Applause) MR. FAYYAD: Well, thank you. MR. FRIEDMAN: Thanks, Kareem, good question. MR. FAYYAD: There are several things. One is to continue to help us do which we have been able to do over the past couple of years over the next months. For the next months to be a continuation of a period in which we actually -- in the public's perception, to the way they see and assess things as a period of considerable success and turning things around particularly in security, but also bringing about elements, beginning of an economic recovery. On the strength of government intervention, yes, but also helped with some important initiatives like the public-private initiative sponsored the Aspen Institute. And I'm grateful to them. Being here especially, I should mention that. Several other things happen actually to make this begin to happen. I think it's important to maintain the support that made that possible. At the same time, to deal with our other elements of weakness, elements that

47 produce the outcome of elections in 0 they produced -- people have to really begin to see this political process deliver because that's -- in other words, the horizon thing, beginning with deliverables on the ground. You know, people talk about -- for example, when we say stop settlement activity, you know, where it to someone who really has not seen what settlement activity is or is about, look, built-up area of settlements -- the built-up -- the actually built-up area of settlements in the West Bank depending on who's doing the counting, we say. percent of the landmass, Israel says a little bit more, not much more -- SPEAKER:. percent? MR. FAYYAD:. percent of the landmass of West Bank. But guess how much of the West Bank is off-limit to the Palestinian population because of settlements, 0 percent because security and what has to happen and all of that. I know and I invite those of you who actually visit there to go out and see neighborhoods, to see rural areas that have been deprived completely of access to their farmland, to livelihood. The people actually begin to see seriousness in

48 the direction of ensuring that requirements for success, obligations, commitments are being fulfilled both by their government, our government, but also importantly, by Israel. They begin to believe that this path is going to take us some place. You know, compare that and contrast it with a period when people have to wait endlessly; hour, hours, patiently and not impatiently, but certainly enduring a lot of humiliation in the process. You know, contrast this context against a context where there is a breakup in this, there is change for the better, I think this will contribute to beginning to put -- to contribute putting people back in a better state of mind about the future. That's what we really need. You need other elements you need for us to really actually do more in the governance sphere. And that's why I recently called for stepping up the effort for reinvigorating it, to really actually get it over with for the government to deliver competently, fairly improve governance wherever we can. So if they see all of these things, you know, I think chances are they'll vote differently. Do I know

49 this for sure? I don't know that for sure. But I think it gives us much better context in which to operate. MR. FRIEDMAN: And thank you. Let's try to get to as many questions as we can. MR. FAYYAD: Okay. MR. FRIEDMAN: Jim Woolsey, former CIA director. MR. WOOLSEY: Mr. Prime Minister, thank you for your remarks, especially those about the rule of law in a future Palestinian state. Avigdor Lieberman, the foreign minister, the new foreign minister of Israel called for, not long ago, a special loyalty oath for Israel's Arab citizens. And I think that's been retreated from but nonetheless that produced, understandably, a great deal of negative reaction probably almost everybody here and certainly myself. But it calls to mind the situation of the Israeli Arabs. There are about a million of them, citizens of Israel, within the borders, about a sixth of the population. They are not treated in always, I think, as equivalent to Jewish or other citizens of Israel but generally they enjoy the guarantees that Americans look for in the Bill of Rights.

50 0 They have freedom of religion, they can build mosques. You hear the Muslims calling from the minarets in Jaffa, as you walk around Tel Aviv. They have freedom of speech. They have freedom of press. They have representatives in the Knesset. They have a Supreme Court justice. Until recently they had a cabinet member and most importantly they can go to bed at night without worrying that someone's going to kick down the door and kill them. Now if there is to be the rule of law in a Palestinian state, and if Jews want to live in some place like Hebron or any place else in the Palestinian state for whatever personal reasons or historical attachments, why should they not be treated the same way Israeli Arabs are? That would be that there could be a sixth of the population consisting of them. They could vote for real representatives in a real Palestinian legislature, freedom of religion, freedom of speech, and most importantly, able to go to sleep at night without worrying that someone's going to kick down the door and kill them. Any other treatment of them, I would suggest, would be what Pat Moynihan used to call "defining deviancy