This presentation offers an outline of the impact of non-governmental and governmental funding on theatre with additional examples from the visual arts and music in the Occupied Palestinian Territories. Foreign aid to both the Palestinian Authority through the Ministry of Culture as well as non-governmental organizations has played a key role in determining the ways in which the Palestinian cultural sector has developed over the last two decades. However, this transformation has not been viewed by local actors as an unmixed good. By using the arts as a means of promoting development, international donor agencies contributed towards the ‘NGOization’ of the Palestinian cultural sector. In the aftermath of the Oslo agreement, the sudden and enormous influx of foreign funding impelled a race amongst local associations to secure public grants and private endowments. This lead not only to a proliferation of minor organizations working with smaller budgets and staff but also to the transformation of informal fine arts companies into NGOs executing short-term programs based on social inclusion, democracy building, gender equality, and children and youth activities. By tracing this development through the differential influence of three organizations: SIDA (the Swedish International Development Cooperation Agency), NORAD (the Norwegian Agency for Development Cooperation) and the European Union, this presentation delineates how the inflow of international aid has come at the expense of not only longer term, sustainable strategies that promote the arts for the sake of the arts but also the economic stability and social acceptance of the sector as a whole.