Palestinian prime minister Salam Fayyad has called on US investors to step up support for the Palestinian Territories, in a bold effort to build much-needed momentum for the faltering economy.
Speaking following last month’s landmark three-day investment summit in Bethlehem, Fayyad told Emerging Markets the gathering – the first of its kind in Palestine – had sent “a clear signal of support and confidence which I believe should encourage the business community in the United States to show greater interest in the prospects of the Palestinian economy to investing here.”
The prime minister said he was confident that US political support for Palestine would continue in the run-up to US presidential elections in November, though he refused to be drawn on implications of either a new Republican or Democratic administration. “We have a situation now in terms of the political process that is underway with the sponsorship of the United States, and we expect them to continue for sure,” he said.
But the prime minister nevertheless addressed “the need for Israel to comply with the requirements” of that process. “We are concerned with that – it’s not the elections per se or the change of administration.”
His comments came as US deputy Treasury secretary Robert Kimmitt noted “a significantly accelerating number of contacts from US business people asking about investment opportunities in the West Bank.
“What we have here is a very positive business climate. There are businesses here that are very successful,” he said, adding that “smart financiers from the US” were already “sensing that something is happening here”.
OPIC, a US government agency, recently signed a deal – worth up to $20 million – with Palestine-based National Insurance Company, to provide political risk cover for trade ventures.
Much rides on the success luring fresh investment, since a functioning Palestinian economy is seen as pivotal to ensuring peace in the region and, ultimately, an independent Palestinian state.
The commitment of $7.1 billion of donor funding to the Palestinian government earlier this year, due to be disbursed over the next three years, suggests a degree of international commitment to revive Palestine’s economy, which has declined by up to 40% in the past seven years.
The World Bank says that, since 2000, the Palestinian economy has turned from one driven by investment and private-sector productivity to one sustained by government spending and donor aid. The bank said economic growth would be stagnant in 2008.
While there is some optimism for progress in the West Bank, the situation in Gaza, where the Fatah government has effectively ceded control to Hamas, is vastly different. As Fayyad put it, Gaza is “in a state of complete siege. Nothing enters and nothing exits. That cannot be the basis for any economy or developmental work.”
Analysts doubt any meaningful progress in Gaza, and certainly no easing by Israel, in the present circumstances. The area accounts for half of Palestine’s population and has its only opportunity for a port for exports and imports.
Restrictions on the movement of both people and goods have also taken their toll on the economy. “All of our private sector is suffering from the movement of people and the movement of goods,” Palestine’s economy minister Kamal Hassouneh told Emerging Markets in an interview. “If there is some change in policy it would be good for our business. But now, it’s damaging us.” He added that easing restrictions could increase business by 30%.
His comments followed the announcement of a $1.4 billion of private-sector investment boost for Palestine. Local operator Wataniya Mobile has also been awarded radio frequencies to become the state’s second mobile operator, following an assurance from Middle East Quartet envoy Tony Blair that the frequencies would be released by the Israeli government.
The investment is expected to total $650 million and create 2,500 jobs; Wataniya Mobile is owned 57% by Wataniya International (itself majority owned by Qatar Telecommunications Company, or Q-Tel) and 43% by the Palestine Investment Fund.