WASHINGTON -- Fourteen months ago when the world was cheering the Israeli-Palestinian peace accord, the Clinton administration corralled 46 rich governments and international donors who pledged to pump $2 billion over five years into the West Bank and Gaza.
Now, less than half the first-year's pledge of $700 million has been committed, a number of projects are only just starting to get under way, and the area run by the new Palestinian Authority is descending into the sort of violence and anarchy that scarred Beirut, Lebanon, in an earlier generation.
Hopes that Palestinians in Gaza and Jericho -- but especially the seething, densely populated Gaza Strip -- would be won over by a large number of jobs and visible rewards of peace have been --ed.
The delays have brought loud complaints from Palestinians, whose continued high unemployment feeds support for extremist opponents of peace with Israel.
"At this time last year everyone was almost euphoric," said Hisham Sharabi, who heads a Washington think tank on Palestinian affairs.
But because of mounting frustration with the peace process and continued economic hardship, "The situation on the ground is very explosive, very volatile," he says.
The blame lies in many places. Mideast politics intervened; Palestinians have been slow to create a government capable of receiving money and accounting for it properly; donors, in response, have tightened their fists; and the United States' aid agency had to scramble to beef up its staff.
Perhaps more important, no one is clearly in charge of the variegated effort. The result is that even the World Bank gets incomplete information, even though it is key coordinator for much of the aid.
The Palestinian complaints also highlight the way a big chunk of Washington's foreign aid dollar is distributed: not directly into job-creating bricks and mortar projects but into an array of different types of "technical assistance" using both nonprofit agencies and profit-making companies as middlemen.
The Palestinian experience is bound to draw scrutiny as a GOP-controlled Congress looks for ways to trim further a U.S. foreign-aid program that has already been squeezed in recent years.
Opening the donors' conference at the State Department Oct. 1, Vice President Al Gore said the United States' $500 million, five-year pledge would "fund a range of activities on which we can begin quickly, and in some cases we will start almost immediately. These include school reconstruction, hospital renovation and housing."
"We're not alone," he added.
Of the first-year pledge, $200 million to $250 million has been delivered, including about $77 million from the United States Agency for International Development (AID). The Overseas Private Investment Corp. has started to finance five projects totaling $90 million.
The first problem was the delay in setting up any sort of Palestinian entity to receive the money. Yasser Arafat, the chairman of the ruling Palestine Liberation Organization, didn't arrive until mid-July, and most of the people hired early on were policemen.
"Most ministries are empty shells," a ranking official of an international donor agency said this week.
Most international donors wanted to subsidize actual projects, while the Palestinians' immediate need was for government start-up money. The need to create a trust fund for this purpose created additional delays.
Disputes between donors and Mr. Arafat erupted early over how to account for the money, with the donors refusing to subsidize the leader's longtime practice of keeping huge sums in his own hands and doling it out as patronage.
Donors became annoyed by the fact that taxes collected from Palestinians and reimbursements from Israel of sales taxes and income taxes collected from Palestinian workers have fallen far short of projections.
Although the Palestinians created an Economic Council to disburse money to their own agencies, they have yet to contract with a consulting firm to help manage it.
The donor agency official, while assigning some of the blame to Mr. Arafat, adds that, "All donors have been finding reasons -- legitimate reasons -- not to support him."
The United States, which in the past aided only small projects administered by private agencies in the West Bank and Gaza, suddenly had to transfer staff temporarily from other Middle RTC Eastern countries to offices in Tel Aviv and trailers in West Jerusalem.
About $18 million has been paid out in salaries and other expenses, and officials estimate U.S. aid so far has created 5,000 Palestinian jobs, primarily in construction and cleanup of the Gaza Strip.
Several visible projects have resulted: Ground was broken in July for a 192-unit housing project in Gaza; existing housing units have been renovated and repairs made to clinics, schools, playgrounds and a nursing school. Forty "farm to market roads," some of them formerly paths, have been paved.
In addition, OPIC has provided $50 million for five actual construction and manufacturing projects estimated to create 1,800 temporary and permanent jobs.
But contracts and agreements for many of the U.S.-financed projects were only signed in September, after the bureaucratic approval process required by Congress.
And the big infrastructure projects -- schools, major roads, wastewater and sanitation projects -- are being handled through the World Bank. These weren't even approved before May, and an agreement was only signed with Palestinian authorities in September allowing work to start on streets and schools.
This agreement covers only projects in the Gaza Strip. West Bank projects outside of the city of Jericho require Israeli approval, which hasn't been given.
One reason the already committed aid hasn't made a noticeable difference in the Palestinian territories is that much of it is aimed at training Palestinians to develop democratic institutions and build a private economy.
This is being done by nonprofit groups, such as Amideast, which have been working in the Palestinian territories for decades, and also by private firms that competitively bid for U.S. government contracts and are allowed up to 10 percent profit.
For instance, a Bethesda, Md.-based company, Development Alternatives Inc., has been hired by AID for $6 million over three years to help raise management skills and production capabilities of small businesses.
At the time of the donors' conference last year, there was a "frenzy" among consultants to get in on Palestinian development, says Sherif Gamal, Amideast spokesman. "The American Colony Hotel [in Arab East Jerusalem] was the 'American consultants hotel,' " he said.
The idea of aid money being siphoned off by American contractors has angered Palestinians and their supporters here.
"They needed jobs. They didn't need consultancies and training programs," said James Zogby, who heads the Arab-American Institute and is one of the leaders of Builders for Peace, which promotes private investment in the territories.
But Margaret Carpenter, AID's assistant director for Asia, who runs her agency's projects in the territories, counters, "In many cases, what the Palestinians need is knowledge."
She defends the speed of the aid effort, saying it has operated faster in the territories than in similar projects elsewhere: "We've been treating it with great urgency."
Over the long term, both international donors and nongovernment firms and agencies involved in the aid effort are bullish on chances of making the West Bank and Gaza a success story.