1. Update: Palestinian Economic Study September, 2015

2. Objective of Study
Find practical steps to grow the Palestinian private sector in support of statehood

3. 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

4. 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)

6. 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)

7. 3. Major economic sectors
Energy
Water
Tourism
Light manufacturing
Agriculture
Construction
Building materials

8. Sectors by contribution to GDP and Employment

9. 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

11. 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.

12. 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.

14. 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.

15. 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

16. 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

17. 9. Way Forward
Next phase of literature review
Trip to Jordan and Palestine
Interviews in Washington DC and New York
Meeting in Athens