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Update: Palestinian Economic Study September, 2015
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Objective of Study Find practical steps to grow the Palestinian private sector in support of statehood
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Presentation Overview Labor force Economic Sectors
Composition of private sector Foreign direct investment Doing business in Palestine Restrictions on goods and people Areas to be explored Way forward
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1. Overview Palestinian economy has experienced episodic growth in recent decades But the economy remains small and dependent on foreign markets Growth fell from 10% to below zero in 2013 Hamas de facto rule in Gaza has constrained private sector Movement restrictions imposed by Israel limit growth and exports (see next slide)
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2. Labor force Unemployment rate is 26% but 47% for youth (20-24)
Labor force set to expanding – 47% of population under 18 West Bank: 68% work in private sector, 15.8% in public sector and 13.8% in Israel and settlements Gaza Strip: 55% in public sector & 39% in private sector Abundant labor supply with a high education & skill level Female labor participation is low at 17% (26% for the region)
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3. Major economic sectors
Energy Water Tourism Light manufacturing Agriculture Construction Building materials
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Sectors by contribution to GDP and Employment
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4. Composition of private sector
Moderate productivity, low investment, & limited competition Enterprises reliant on Israel for imports and exports Private sector has not evolved significantly since Oslo But modest improvement in diversification of export markets Exports of goods are dominated by agricultural produce, limestone, and scrap metal Palestinian firms small - 1% of firms bigger than 20 workers
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5. Foreign direct investment
The stock of foreign investment in the Palestinian territories equaled $2.625 billion at the end of 2012. Over 70% from Jordan, 11% Qatar, 4% Egypt, and 1% Saudi Arabia Palestine Development and Investment Company (PADICO) - one of the largest foreign companies. Investors include diaspora Palestinians from Jordan, UK, & the Gulf. Over $250 million telecommunications, housing, and the Palestinian Securities Exchange.
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Foreign direct investment (continued)
Arab Palestinian Investment Company - large foreign investment group with authorized capital of over $100 million. The largest U.S. investment is Coca Cola’s $11 million stake in the National Beverage Company Qatar has a projected $1.6 Billion invested over ten years in telcoms & real estate 3 private equity and 1 venture capital fund in the Palestinian territories Total capital exceeding $206 million & estimated investments of $45 million Investments in housing, agribusiness and other sectors.
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6. Ease of doing business in Palestine
162 out of 189 economies on the ease of starting a business. Time and cost of preregistration, registration in the economy’s largest business city, social security registration. 116 out of 189 on entrepreneurs’ access to credit. Lack of strong legal rights of lenders and borrowers under collateral and bankruptcy laws. 130 out of 189 in ease of trading across borders category. Excessive document requirements, unnecessary customs procedures, and inadequate infrastructure.
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7. Restrictions goods & people
5 Barrier Terminals and King Hussein Bridge can be used for exports X-ray scanning installed only at 3 of 5 crossings 2% of West Bank exports (mainly uncut stone) exported into Jordan 11 Barrier Crossing Points open to laborers Permits issued for 3 months with strict requirements: 35 or older & married with at least one child, No security record with Israeli security service, Nave an employer in Israel willing to apply and pay for permit
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8. Areas for additional exploration
Simplify registration process for starting a business Expand access to credit by improving rights of lenders and borrowers Improve movement logistics and checkpoints into Israel Improve procedures at King Hussein Bridge Crossing into Jordan Arrange meetings between Palestinians and Israeli-Arab businesses Create a protocol for expedited security process for businessmen Focus on stone, marble, olive oil, dates, textile and steel products Power and water for Gaza
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9. Way Forward Next phase of literature review Trip to Jordan and Palestine Interviews in Washington DC and New York Meeting in Athens
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