Can Palestine be transformed into investment hub?

Foreign investments in Palestine accounted in 2017 for $1.5 billion, mostly in the tourism and banking sectors, with Palestine offering a range of encouraging incentives.

al-monitor Palestinian President Mahmoud Abbas (C) chairs a Palestinian National Council meeting, Ramallah, West Bank, April 30, 2018. Photo by ABBAS MOMANI/AFP/Getty Images.

Jun 7, 2018

GAZA CITY, Gaza Strip — Palestinians officials are planning to meet soon to address ideas for attracting more foreign investment and working to make Palestine an investment hub.

Saleh Rafat, a member of the Palestinian Liberation Organization's (PLO) executive committee, confirmed June 4 to Voice of Palestine that the PLO Central Council would meet after Eid al-Fitr to discuss the economic disengagement from Israel.

The Executive Committee had originally been scheduled to meet June 3 to implement the decisions taken during the 23rd session of the four-day Palestinian National Council (PNC) meeting April 30, on developing mechanisms to define relations with Israel, supporting national products and increasing investments in Palestine. No new date has been set for the next Executive Committee meeting.

For the first time, the PNC had allowed the participation of Palestinian businessmen abroad to discuss investments in Palestine, including how to develop the economic situation in the country and ideas on how to support and strengthen the economy and national products.

Israeli media outlets reported June 3 that Israel had begun advanced negotiations to allow 400 Arab-Israeli businessmen to enter the Gaza Strip in order to invest in the local economy. On May 31, the businessmen were granted travel permits to enter the besieged enclave.

Palestine accords great importance to encouraging investments by providing a range of incentives through the Palestinian Investment Promotion Agency (PIPA). In 2017, foreign direct investments represented 6% of total investments in Palestine with a value of $1.5 billion. Most of these investments were concentrated in the tourism sector as well as in the banking sector in the form of stocks and bonds. These sectors are seen as the most profitable and secure sectors in Palestine.

Economists believe Palestine needs more investments in the industrial and agricultural sectors, and demand that these sectors be allocated greater investment incentives.

In this context, PNC member Hatem Abu Shaaban told Al-Monitor, “A number of new members have been included in the PNC, most of whom are businessmen and investors.”

He said that the PNC, in a bid to boost the deteriorating economic and financial situation in the country, encourages businessmen to consider investing in Palestine and has taken a number of decisions that encourage businessmen to invest in all sectors in the West Bank and the Gaza Strip.

Ahmed Abu Houli, a deputy in the Fatah Legislative Council and a member of the National Assembly's Executive Committee, told Al-Monitor that the PNC vision for the economy and investments in Palestine is very broad. “We are working to develop plans for the implementation of the PNC economic decisions and launch practical steps for bringing in more investments,” he said.

The spokesman for the Ministry of National Economy in Ramallah, Azmi Abdul Rahman, told Al-Monitor that Palestine has poor economic resources, most of them in Area C, which is under Israel’s control. He expressed hope that the national economic agenda and incentive packages would bring in more investments to all sectors.

He noted that the Palestinian government had approved on July 18, 2017, a package of incentives to encourage investments in renewable and alternative energy technologies in order to encourage investments in these fields in such a way that fulfills the requirements of sustainable development in Palestine. The government also issued on Aug. 1, 2017, a package of incentives for projects in industrial cities and free trade zones in a bid to encourage investments.

Abdul Rahman stressed that the Palestinian Authority (PA) provided the necessary infrastructure for investment in the Palestinian territories through the establishment of industrial zones in cities such as Jericho and Bethlehem, as well as ones that are under construction in Hebron and Jenin.

In addition, the PA provided the required legislative environment for the investors and the incentive package offered.

Abdul Rahman said that most foreign investments in Palestine are owned by Arab businessmen or Palestinians based abroad, stressing that Arab and non-Arab investors are treated on an equal footing. He noted that the political instability makes it difficult to draw new investments to Palestine, especially the agricultural sector that is plagued by several challenges due to Israel controlling the water supply and lands. He added that investment is mainly focused on the tourism and banking sectors because they are safer compared to the agricultural and industrial sectors, due to the unstable economic and political situation.

In regard to how the ministry organizes investment priorities in Palestine, he said, “Investors cannot risk investing in sectors that may entail losses, especially under the unstable political conditions in Palestine. We cannot impose a specific sector on investors.”

Abdul Rahman pointed out that all sectors in Palestine need investments, to varying degrees. The ministry's priorities are to support national products and increase its market share locally and abroad, by imposing customs duties on products that have a competing national alternative. He added, however, that “the Palestine Standards Institution must keep pace with international standards.”

Nur Eddin Abu Alrub, a professor of economic sciences at the Arab American University in Jenin, told Al-Monitor that the country must focus on attracting Palestinian funds instead of allowing these funds to be invested abroad. It must also focus on attracting foreign and Arab funds in order to turn Palestine into an investment hub. Increasing investments will require manpower and support national products, thus raising the income of the Palestinian citizens. “Palestine is still under occupation and therefore incentives and facilities provided by the government remain hindered by obstacles,” he said.

Talking about investment in the tourism and banking sectors, Abu Alrub noted that the Palestinian banking sector is secure, integrated and encouraging for foreign investors. He noted, “The Palestinian tourism sector has thrived in light of the influx of tourists, with Jerusalem named as the 2018 capital of Arab tourism.”

The incentives offered to investors in renewable energy that were approved by the government have recently been hindered by several obstacles pushing the investors to take a step back. Abu Alrub said in this regard that “the obstacles may include disputes over land ownership, the ban on the entry of some equipment, and the lack of political and economic stability.”

Asserting that PIPA should remove all obstacles and hindrances to investors in all sectors, he urged the government to “follow up on incentives offered to investors, create local and international marketing outlets for Palestinian goods and services, benefit from Arab and European customs facilities on Palestinian products and allocate greater incentives to sectors facing greater risks.”

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