When partisan conflict tore apart the Palestinian Authority in June 2007, economist Salam Fayyad suddenly found himself in the role of prime minister—responsible for security, for basic service delivery, and for recharting Palestine’s path to statehood. Few wanted to serve in the emergency cabinet the president had asked him to form, so great seemed the risk of failure. The cabinet faced competing claims to legitimacy from Hamas, which headed the unity government that had just collapsed. The Basic Law, the territories’ constitution, included specific provisions that both provided clear guidance on how to move forward under the unforeseen conditions and contained enough ambiguity that allowed government legitimacy to be politically contested. As the internationally recognized prime minister, Fayyad persuaded a diverse group of independents and technocrats to accept ministerial posts in the emergency government. To support decision-making and implementation at the center of government, he tasked a close adviser with setting up a prime minister’s office; strengthened the role of the cabinet secretariat; established systems for paying civil servants, including those in Gaza, where his predecessor, Ismail Haniyeh, continued to assert authority; worked with international partners to help meet basic citizen needs in the territory the government could not easily reach; and strengthened communications and transparency. Those steps enabled the cabinet to work more effectively and helped support urgent efforts to restore order, expand economic opportunities, and, ultimately, embark on a more ambitious political agenda toward independent Palestinian statehood.

Henrietta Toivanen, Jennifer Widner, and Gordon LaForge drafted this case study based on interviews conducted by Tristan Dreisbach in Ramallah, Nablus, and Jericho in June and July 2019 and by Dreisbach and others in additional locations during 2019 and 2020. The case is part of a series on state building in Palestine, 2002–05 and 2007–11. Case published April 2024.

Upon assuming office in mid-2007, Palestinian Authority Prime Minister Salam Fayyad faced an economy in shambles. Devastated by a loss of revenues and international aid in the wake of Hamas’s 2006 electoral victory, which brought to power politicians deemed terrorists by some in the international community, average real gross domestic product per capita in the West Bank and Gaza was about 40% below its 1999 level, and the government was broke. To restart the economy and demonstrate that the Palestinian Authority could manage a socioeconomic crisis in a manner befitting a sovereign state, Fayyad and his colleagues created a detailed development plan that helped secure financial resources from international donors. With that money, the government undertook an ambitious community development program, building thousands of small-scale infrastructure projects across the West Bank. It also negotiated an easing of some of the Israeli-imposed movement restrictions that were stifling both commerce and investment. The West Bank then posted two years of double-digit economic growth and expanded, private-sector activity, but the occupation’s political challenges stymied the Fayyad government’s ultimate goal of Palestinian statehood. 

Jennifer Widner, Tristan Dreisbach, and Gordon LaForge drafted this case study based on interviews conducted in Ramallah, Nablus, and Jericho in June and July 2019 and in other locations during 2019 and 2020. The case is part of a series on state building in Palestine, 2002–05 and 2007–11. Case published June 2022.

“Security was the toughest part of the job,” Salam Fayyad said, reflecting on his first two years as prime minister of the Palestinian Authority. The second intifada, a five-year uprising against Israeli occupation, had just wound down, leaving in its wake an epidemic of crime and lawlessness in the West Bank. To restore order and to demonstrate that authority could fulfill this most primary function of a state, Fayyad worked with security chiefs to revive the mission of the Palestinian Security Services and enhance their professionalism, to deploy the civil police, and to get gunmen off the streets. Those steps required strategies for both introducing reform in opaque systems and persuading people that better policing was not tantamount to supporting an occupying state. By the end of 2007, six months after he assumed office, crime rates were down and public perceptions of safety had started to improve. Still, continued Israeli interference in the West Bank’s internal security plus other persistent challenges undermined efforts to maintain a functional and sovereign security apparatus.

Jennifer Widner, Tristan Dreisbach, and Gordon LaForge drafted this case study based on interviews conducted in Ramallah, Nablus, and Jericho in June and July 2019 and in Princeton, New Jersey, and other locations during 2019 and 2020. The case is part of a series on state building in Palestine, 2002–05 and 2007–11. Case published June 2022.

In 2007, Salam Fayyad accepted the dual post of finance minister and prime minister in the Palestinian Authority (PA). The financial management practices he implemented during his first period as finance minister, from 2002 to 2004, had deteriorated. During the preceding two years, from November 2005 to March 2007, the government had resumed dealing largely in cash, had kept poor records of government financial transactions, and had added more employees to an already bloated public payroll. To reinstitute good practices and implement new reforms, Fayyad and his finance ministry colleagues also had to overcome challenges related to the division of the Palestinian territories into two separate areas governed by competing political parties. Fayyad relied heavily on a small group of trusted staff, delegated important responsibilities so he could also take on the demanding job of prime minister, and set clear guidelines to maximize the long-term benefits from any external technical assistance the ministry hired.  Under his guidance, the ministry rehabilitated financial records and quickly created a new financial information system by adapting existing, locally built software; reformed the way the PA used commercial bank accounts to conduct its financial transactions; and filled gaps in capacity.  

Tristan Dreisbach and staff drafted this case study based on multiple conversations with Salam Fayyad in Princeton, New Jersey, during 2019, as well as other interviews conducted in Ramallah, Nablus, Jericho, and Washington, D.C. the same year.  The case is part of a series on state building in Palestine in 2002–05 and 2007–11. Case published June 2022.

When Salam Fayyad became finance minister of the Palestinian Authority in June 2002, the interim government was starved for cash and faced strong internal and external pressure for reform. To ensure the government could manage revenues and expenditures with fidelity, Fayyad had to improve the functioning and the professionalism of the ministry. He moved quickly to revise core procedures and change the organization’s culture. As he did so, he also began to transform the ministry from an organization based on personal allegiances into one based on institutional policies and standards. Success in that arena during the next three years depended on building coalitions to maintain support for reform as well as marshaling capacity within the ministry itself—by reshaping expectations, centralizing control, unifying geographically divided operations, and fostering talent.

Jennifer Widner and Tristan Dreisbach drafted this case study based on multiple conversations with Salam Fayyad in Princeton, New Jersey, during 2019, as well as other interviews conducted in the Palestinian cities of Ramallah, Nablus, and Jericho in June and July of the same year. The case is part of a series on state building in Palestine, 2002–05 and 2007–11. Case published March 2022.

“Could the Palestinian Authority survive?” That was the question on many Palestinians’ minds when Salam Fayyad became finance minister in June 2002 and the cash-strapped government was struggling to pay its civil servants and suppliers. To avert a collapse, Fayyad quickly took steps to increase government revenue. He developed a system that would direct into a single, centralized treasury account all taxes, fees, and other income collected by government offices. He created a fund that consolidated the Palestinian Authority’s tangled and largely opaque commercial and investment assets and contracted with an outside firm to conduct a full audit of those holdings. He also took action to reduce smuggling and assert control over the tobacco authority and petroleum commission—two autonomous PA agencies plagued with management problems. The reforms required Fayyad to navigate political resistance and an entrenched administrative culture wary of financial transparency. Fayyad’s achievements enhanced efficiency, helped restart the flow of tax revenues withheld by Israel, and enabled the PA to attract external support and investment, quashing—at least temporarily—an existential financial crisis.

Tristan Dreisbach drafted this case study based on a series of interviews conducted with Salam Fayyad in Princeton, New Jersey, in 2019. The study also incorporates other interviews conducted in the Palestinian cities of Ramallah, Nablus, and Jericho in June and July 2019. The case is part of a series on state building in Palestine, 2002–05 and 2007–11. Case published March 2022.

When Salam Fayyad became finance minister of the Palestinian Authority (PA) in June 2002, the government was struggling to manage expenditures effectively and to deliver the budget to the legislative council on time. Success in addressing those problems required winning acceptance from President Yasser Arafat and other top officials for new work processes, securing other ministries’ compliance with changes in operations, and instituting radical new levels of transparency. Fayyad focused on fixing the system instead of investigating past malfeasance. Under his watch, the finance ministry began engaging with the council’s budget and finance committee, instituting monthly financial reporting, introducing reliable internal control and audit procedures, and adopting internationally recognized transparency measures. Those reforms enhanced the credibility of the authority’s financial management internationally, restarted the flow of external aid and PA revenues withheld by Israel, and helped temporarily end a financial crisis.

Tristan Dreisbach drafted this case study based on interviews conducted in the Palestinian cities of Ramallah, Nablus, and Jericho in June and July 2019 and on a series of conversations with Salam Fayyad in Princeton, New Jersey, the same year. The case is part of a series on state building in Palestine, 2002–05 and 2007–11. Case published March 2022.

When Salam Fayyad became the Palestinian Authority’s finance minister in June 2002, one of his biggest challenges was to improve financial management in the security sector. To pay police, emergency workers, and other security personnel, commanders handed out cash to subordinates—a practice that was demeaning and that created opportunities for corruption. Procurement of equipment and supplies was neither open nor competitive and took place outside scrutiny by the finance ministry, which had little or no way of knowing where the government’s money ended up. To address the problems, Fayyad, a political outsider, had to take on a deep-rooted culture of secrecy, the reluctance of a powerful president, and resistance from some of the security officials. He began to tighten controls by working with a reform-minded legislature to incorporate procedural changes into the 2003 budget law. He then identified security service chiefs who were open to payroll reform, and he helped them become early adopters. After more than a year of private persuasion, backed by growing public discontent with corruption, Fayyad was able to implement reforms that reduced opportunities to divert funds and that increased security workers’ take-home pay. He also put security forces’ procurement activities under finance ministry oversight, thereby further limiting the risk of corruption.

Tristan Dreisbach drafted this case study based on interviews conducted in the cities of Ramallah, Nablus, and Jericho in June and July 2019 and on a series of conversations with Salam Fayyad in Princeton, New Jersey, the same year. The case is part of a series on state building in Palestine, 2002–05 and 2007–11. Case published March 2022.

            During the opening years of the twenty-first century, Palestinians struggled to establish an independent state, even as Israel continued to occupy the land on which they lived—territory Israel had captured in 1967.

            The hurdles that confronted those who tried to build order and accountable government were familiar to anyone who tried to manage transitional or caretaker governments in Northern Ireland and South Africa, or in Yemen, Libya, and Nepal: contested legitimacy and control over territory, deep suspicions and mistrust among the factions that competed for primacy; a nearly empty treasury; a government that served as employer of last resort; a civil service that mismatched skills and responsibilities; and vulnerability to outside meddling in internal affairs. To make matters more difficult, the occupying power and its allies controlled the goalposts for certifying whether Palestinians had lived up to their commitments under the Oslo Accords and therefore whether Palestine merited statehood.

            Among those who joined the push for self-government was Salam Fayyad, who served as finance minister (2002–05) and prime minister (2007–13) through the volatile early years of the quest for a two-state solution to the conflict with Israel.

This multipart ISS series draws on Fayyad’s recollections and those of others closely involved in helping steer the Palestinians through that turbulent time.

Part 1

Remaking a Ministry: Managing Finance at the Palestinian Authority, 2002 - 2005

Managing Revenue at the Palestinian Authority, 2002 - 2004

Managing Spending at the Palestinian Authority, 2002 - 2005

Controlling Security Spending at the Palestinian Authority 2002 – 2004

Part 2

Restoring Order in the West Bank, 2007−2009

Rebuilding Financial Management in the Palestinian Authority, 2007-2012

Empowerment Through Reform: Restoring Economic Activity in the West Bank, 2007−2009

Into the Breach: Forming a Government in a Crisis, 2007 – 2009