Investment and Trade Opportunities in the Occupied Palestinian Territory

The General Delegation of Palestine to Australia

New Zealand and the Pacific

Contents

• An Overview of the Palestinian Economy • Investment and Trade

• Sectoral Priorities and Focus

• Business Organisations and Networks

• How to Conduct Business in Palestine

• New Initiatives

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Trade Environment in the The Occupied Palestinian Territory is a singular political entity, made up of 3 areas: East Jerusalem, the West Bank and the Gaza Strip.

The West Bank is around 5,800 sq. km – including East Jerusalem, and the Gaza Strip is around 360 sq. km.

The total population of the West Bank and Gaza Strip or WBGS, is about 4.01 million persons. 3

Perceptions and Reality • The common perception is that

it is impossible to do business in, or with Palestine

• The common perception is that the Israeli occupation overrides all Palestinian economic activity and progress

• The common perception is that all Palestinian people exist on humanitarian aid

• These common perceptions often stop investors from investigating and recognising the real and growing commercial opportunities within Palestine

• There are real and multiple economic opportunities in Palestine

• Opportunities exist for export, import and investment

• The Israel occupation places genuine restrictions on the Palestinian economy

• The Palestinian economy is growing and the growing Palestinian population provides a predictable growth pathway

• Economic independence is a central priority of the Palestinian Authority

• The Palestinian Authority has created a stable environment for economic growth by creating a clear legislative framework, good governance, and conformity to international standards

A Growing Economy The Palestinian economy grew by 9.3% in 2010 compared to 6.8%

in 2009

The growth of the Palestinian economy is due to: • Significant amounts of donor assistance

• Donor assistance directed specifically at establishing and growing Palestinian economic independence

• Improvement on restrictions on the movement of goods and people within the West Bank including greater predictability of movement for commercial goods

• Lifting of certain import controls in the Gaza Strip

• A relatively low growth base which offers more opportunities for expansion, investment and growth

• Population growth

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Reform and Development

The Palestinian Authority Reform and Development Plan has focused on:

• Stable fiscal performance and reduction of deficit• Good governance• Public infrastructure such as education, hospitals,

municipal services, justice system, water networks, electricity, waste treatment, tourism infrastructure

• Structural Reform, particularly in the areas of improved financial accountability and sound public management

• An environment of public and private stability 6

• Declining unemployment overall – 26.6% in 2009 to 24.5% in 2010

• Real GDP growth – 5,147million in 2009 to 5,560 million in 2010

• Growing economic stability and confidence

• Increased international recognition that the Israeli occupation is profoundly detrimental to the Palestinian economy

• Increased recognition that a stable independent economy is vital to a stable, independent, sovereign, democratic Palestinian state

• Growing international advocacy for the lifting of restrictions to enable an independent Palestinian economy

Palestinian Minister for the National Economy the Hon Hussan Abu Libdeh

and the Vietnamese Minister for Industry and Trade the Hon Vu Huy

Hoang sign a bilateral trade agreement, 22 September 2010

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Results

Challenges Remaining

1. Palestine remains under Israeli occupation and the ability of the Palestinian Authority to alter certain external constraints, is limited

2. Direct trade with international and regional partners remains problematic as all goods must pass through 2 layers of restrictions

Examples• Livestock imports must satisfy both Israeli and Palestinian import

and quarantine controls and restrictions• Due to the difficulty of direct Palestinian trade, Palestinian

products and particularly agricultural products are often purchased by Israeli companies and sold as Israeli products.

• This results in lower actual and documented returns to the Palestinian economy

• The sale of Jordan Valley dates to Israeli companies is one example of this practice

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Challenges Remaining cont.

3. Two-layered import and export restrictions are under discussion between Palestine and Israel

4. Israel has a vested interest in constraining the Palestinian economy

5. The international community and international bodies are focused on freeing the Palestinian economy and ensuring its independence and stability

• The World Bank Private Sector Working Group which includes members from Palestine and Israel is working to increase the reliability of movement of goods and people, protect investors and businesses, and reduce the legal and regulatory obstacles facing private investors

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Opportunities

Increased aid has increased financial stability and opportunities

• Aid is providing direct humanitarian funding to low or no-income groups

• Aid is targeting development skills such as income generation education, microfinancing and community projects. An example is community education for income generation and the provision of micro-loans to start-up competitive gas supply businesses in small villages. Projects are intended to create income, break monopolies and introduce competition, thus stimulating the Palestinian economy at a micro-level

• Increased financial stability and business expansion for the private sector, is creating demand for educated and experienced middle managers

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Challenges and Opportunities

• The transition to an independent economy is providing real opportunities for trade, investment and growth

• The Palestinian Authority is seeking investment in core economic areas and projects and is supporting trade expansion

• Palestinian businesses want to expand their exports and the export of niche products is a market that is highly relevant and open to Australian importers

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Challenges and Opportunities

• Business expansion within Palestine is creating demand for high quality tertiary level middle management business education

• The economies of the West Bank and Gaza are still recovering from the multiple effects of the 2nd Intifada, international boycott, Israel’s attack on Gaza, the loss of movement in and out of the OPT, and between the West Bank and Gaza

• Recovery means constraints are present, while also creating opportunities for growth.

Importing into Palestine

3 core groups of products imported into Palestine • Energy products - oil, gas and electricity• Foodstuffs and livestock• Manufactured goods e.g. Footwear, household items,

machinery, cars etc

• These products constitute approximately 73.6% of imports in 2008, the most recent consolidated figures available

• Israel is the primary Palestinian trading partner, providing 80.6% of the total of Palestinian imports in 2008 and receiving 89.4% of the total exports

• The Palestinian Authority is supporting diversification and reducing dependence on Israel 13

Current Australian Trade into Palestine

• Manufactured foodstuffs

• Livestock

• Manufactured goods

• Education

• Pharmaceuticals

• Tourists and tourism services

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Current Palestinian Trade into Australia

Niche products • Specialty crafts: Holy Land carvings,

religious memorabilia, ceramic tiles

• Fair Trade Products e.g. Olives and Olive Oil

• Organic Products e.g. Olive Oil, seasonings, teas, grain products, niche dairy products

• Stone and Marble

• Specialty textiles and embroideries

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• In reforming and developing the Palestinian economy, the Palestinian Authority is designating priority sectors and areas of focus within priority sectors

• Priority sectors are infrastructure areas deemed to be most critical to on-going economic, social, educational and development and transition

• Priority sectors are also areas of particular influence

• Priority sectors are receiving funding priority from the Palestinian Authority and investment support

• Sectoral priorities and focus areas provide opportunities for Australian engagement

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Sectoral Priorities and Focuses

Sectoral Priorities and Focuses

Public Sector Governance and Accountability • Independent and effective judiciary, public safety, media

freedom Social Priorities• Poverty alleviation, health care, disability services, youth and

sports, education reform e.g. teaching profession reform, school building

Infrastructure Priorities • Energy e.g. solar energy, environment e.g. sustainable waste

disposal, low-cost housing, transportation, wastewater management

Economic Focuses• Agriculture, telecommunications and IT, tourism e.g. hotels,

antiquities

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Small-Medium Enterprises – SME’sInvestment opportunities through SME’s

• SME’s deliver services quickly to areas of immediate need and engage the goals of medium term reforms

• SME engagement is supported by the World Bank and Palestinian Authority

• Projects that can be undertaken by SME’s are supported and provide significant, immediate and medium term commercial opportunities over minimum 3 year periods

• SME’s provide opportunities for investment in Palestinian companies and companies operating in Palestine 18

SME Projects

• Construction - High density housing projects e.g. Rawabi (Ramallah), low cost, high-quality housing

• • Agriculture – Greening Palestine land rehabilitation and tree

planting of 1.25m trees

• Tourism and Antiquities – protection of cultural heritage sites

• Education - 134 new schools and expanded 312 schools in the past 3 years = 1,449 new classrooms and 1,438 expanded classrooms and facilities

• Health – rehabilitation of 50 health care centres and 3 new hospitals 19

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Business Organizations

and Networks

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Trade Bodies - Overall

Ministry of National Economy• Macro-economic management including guarantees, bilateral

agreements, regulations and registrations

Palestinian Investment Promotion Agency• One-stop-shop for investors, to assist in understanding and

conforming to regulations, gaining licences and ensuring taxation incentives are accessed

PalTrade

• Promotion and support for Palestinian exports, provision of export support

Palestine Standards Institution• Ensures Palestinian conformity with International Standards

Agreements

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Private or Public/Private Trade

• Palestinian Federation of Industries

• Federation of Palestinian Chambers of Commerce, Industry and Agriculture

• Palestinian Businessmen’s Association

Sectoral Organisations - a few• The Palestinian Information

Technology Association

• Palestinian Fair Trade Association

• Regional Chambers of Commerce 22

Conducting Business in Palestine

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Steps 1, 2 & 3

First Step• Palestinian Investment Promotion Agency - guidance on

company registration, regulations, taxation, licences, locations, financial requirements, customs

Second Step • Registration at the Ministry of National Economy

Third Step • Support from specific sectoral and municipal bodies

e.g. Customs and Tolls within the Ministry of Finance, Palestinian Capital Market Authority, Regional Chambers of Commerce 24

Legal Framework

1998 Investment Promotion Law •Supports the development of industrial zones•Gives tax incentives for investors, including income and customs tax exemptions.•Income tax for individuals and companies is capped at 16%

•Trade Agreements •Preferential treatment e.g. Reduced duties for Palestinian exports in the European Union, USA, Canada and Turkey•Reciprocal ‘Most Favored Nation’ agreement with Russia•Bilateral Trade agreements with Jordan and Egypt allowing•customs exemptions and reduced duties•Cooperation agreements with Morocco, Tunisia, Vietnam

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Australian Initiatives

Australian Leadership Award Fellowships - accessed through AusAid for professional middle career development in a broad range of areas including trade and commercial expertise

• A key aspect of the ALA Fellowships is the development of relationships between Australian and Palestinian organisations

AACCI Forum - Promotion of trade and investment in Palestine

Palestine Trade Expos - held regularly in Palestine

• The most recent was the Palestinian Food Producers Expo in Hebron, opened by Prime Minister Salam Fayyad. Fair Trade and organic products are a large and unexploited market area for Australia

General Delegation support for bilateral Trade Delegations

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The General Delegation of Palestine to Australia, New Zealand and the Pacific

Emailauemb@mofa-gov.ps

Telephone: 61+(0)2+62869193Fax: 61+(0)2+62869405

Mailing AddressPO Box 4646 Kingston ACT AUSTRALIA 2604

Street Address2/44 Dalman CrescentO'Malley ACT 2606AUSTRALIA

Consular Services including Registry Go to http://www.palestine-australia.com and click on Consular Tab