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In a parliamentary report published on Wednesday, the International Development Committee of the British Parliament questioned the international community's decision to isolate Hamas, which they referred to as "a democratically elected government"
"We understand the reasons for this decision but doubt whether it is in fact the most effective response. Indeed, the withholding of revenues by Israel and the boycott of the Hamas-led Palestinian Authority by existing donors has led the Hamas government increasingly to look elsewhere for financial support. As a result, Hamas now has closer links to governments like that of Iran than it had two years ago."
The report, entitled Development, Assistance and the Occupied Palestinian Territories, recommends that Western governments open dialogue with Hamas to further the peace process: "We believe that the international community is right to place pressure on Hamas to change those policies which militate against a peace process. However, this would best be achieved through dialogue and engagement, rather than isolation."
Speaking to The Jerusalem Post, MP Malcolm Bruce, chairman of the International Development Committee, said: "What we have said is that the consequences of the withholding of funding, with restrictions of action and movement, led poverty to rocket up. Although aid has increased, the situation has got worse."
The study also concluded that despite receiving more humanitarian assistance per capita than anywhere else in the world, the situation for people living in the Palestinian Authority is worse than it was in 2004, and could set back the peace process and lead to further violence.
According to the report, the Hamas election victory in January 2006 prompted foreign governments to cut donations to the Palestinian Authority. The combined effect of the withholding of revenues and budget support has placed the Palestinian Authority under severe fiscal pressure. It has increased poverty and hardship among most Palestinians with two-thirds living below the poverty line and salaries of public servants not paid since March.
"Many, including schoolteachers and health workers, have been on strike and public services, particularly health services, are in a state of near collapse," the report says.
The committee maintains that withholding funding to the authority in the region was counter-productive, it says it "doubts whether this is a development the international community would have intended." As a result, the report contends that international community is in danger of preventing the creation of a viable Palestinian state.
It put the onus on Israel saying: "While the end of occupation will provide the best opportunity for development, ways must be found now to influence the actions of the government of Israel and to create in the territories a government capable of self-rule and peace with its neighbor. The current approach of waiting for something to turn up militates against this."
"Under conditions of occupation, their development prospects are being eroded largely by the actions of the government of Israel, although the government of Israel disputes that it is an occupying power."
However, the report does not contend that the answer lies in increasing donor assistance, as the Palestinian territories are the largest per capita recipients of aid in the world.
The report also said Israeli moves to "expand settlements on occupied territory, build barriers and restrict Palestinian access and movement continued to harm the economic prospects of a future Palestinian state".
"These actions - the expansion of settlements on occupied territory and the accompanying security infrastructure, including the construction of a security barrier, a system of separate roads, road blocks, checkpoints, permits as well as the restrictions on Palestinian commerce and trade, especially from Gaza - are justified by Israel on the grounds of security.
"Every state has a duty to protect its citizens and Israel has genuine security concerns. However, we question the proportionality of many of the measures it takes, their human cost and their effectiveness in achieving the long-term peace and security that the peoples of Israel and Palestine deserve."
Commenting on the report, Professor Gerald Steinberg, executive director of the NGO Monitor, said: "The report is more of an ideologically motivated attack on Israel that repeats tired slogans, rather than a serious analysis of the impact, if any, of massive British aid to the Palestinians. The text relies heavily on false allegations made by highly politicized NGOs, many of whom are funded by DFID, thereby undermining the objectivity and credibility of the committee's investigation.
"For example, War on Want is quoted as calling for suspending Israel's Association Agreement with the EU, using false human rights accusations in which the context of massive Palestinian terror is erased.
"Similarly, the report gives legitimacy to BADIL, an NGO that promotes extremist Palestinian refugee claims that extend the conflict and prevent compromise. And Christian Aid, whose campaigns with Sabeel promote boycotts, divestment and demonization, repeats the slogans that blame Israel for Palestinian poverty, ignoring the corruption and internal violence."
The International Development Committee is appointed by the House of Commons to examine the expenditure, administration and policy of the Department for International Development and its associated public bodies. It is made up of 11 cross-party MPs.
"Submissions to the committee that presented alternatives analyses and important facts were ignored in the report, including NGO Monitor's detailed evidence on the biases of the pro-Palestinian NGOs. When the committee members visited Israel in November, they primarily met with groups that enforced their prejudices, further reducing the value of this report."