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The World Bank Group: Supporting the Palestinian Private Sector

Available in: العربي

Editorial David June08The Palestinian private sector has a unique potential to exploit growth opportunities and attract international investment. The World Bank’s analysis of the Palestinian business environment concluded that it compared favorably with much of the rest of the region. The Bank’s Doing Business report in June, 2007 ranked West Bank and Gaza (WBG) as comparable with countries like India, Indonesia or Honduras. In particular, WBG ranked 22nd in the world in terms of the Palestinian Authority’s (PA) tax regime for business, and 33rd in the world in terms of the legal framework to protect investors. In terms of the PA’s policy framework, the Palestinian economy ranks among the top half of all economies in regard to import and export costs and procedures. Indeed, export potential is enormous. The PA enjoys generous trade arrangements with the European Union and with countries in the region. In addition, there is a readymade market among the five million strong Palestinian Diaspora worldwide.
Given these facts, it is not surprising that recent World Bank analysis has shown that while Palestinian economic growth will be modestly positive this year, this trend would have been much higher if the private sector were allowed to realize its potential through the removal of movement and access restrictions by Israel. At the recent Palestinian Investor Conference in Bethlehem, the Bank’s Managing Director, Juan Jose Daboub, reaffirmed the commitment of the entire World Bank Group to contribute to the international community’s efforts to support private businesses with the tools they need to surmount these obstacles.
In addition to its work on development projects and in support of the PA budget, the World Bank is focused on tackling the hurdles facing Palestinian businesses, particularly the comprehensive system of movement and access restrictions currently in place inside the West Bank and on the Gaza Strip’s borders. The World Bank remains firmly committed to advocating for the removal of these obstacles to trade and industrialization and is cooperating closely with the Quartet Representative, Tony Blair, in this effort. Recently, some progress has been made. However, if a virtuous cycle of growth is to be initiated and sustained, these improvements must be scaled-up and expanded upon. In parallel, the World Bank is working closely with the PA to reform the telecommunications and energy sectors, and to strengthen the legal and regulatory environment to provide better financial instruments for small businesses.
The World Bank’s International Finance Corporation (IFC) is increasing its efforts to provide Palestinian businesses with the investments required to kick-start promising ventures. In addition to the $130 million invested in 16 companies over the past decade, the IFC signed a commitment last month to invest $75 million in a new $500 million Affordable Housing Initiative. This will increase access for housing finance in the Palestinian territories, which will create over 3,000 jobs and ensure thousands of people can better afford houses. Further investments are being explored to provide loans to over 10,000 students on a commercial basis, and to develop trade finance facilities for commercial banks.
With a keen understanding of the risks facing potential investors in the WB&G, the World Bank’s Multilateral Investment Guarantee Association (MIGA is finalizing an expansion of a $30 million Investment Guarantee Fund. The fund will provide insurance for investors against risks such as war and civil disturbance, expropriation, or restrictions on repatriating profits. It is now being expanded to provide insurance not just for new foreign investors, but for local investors and for existing projects. The availability of insurance can give comfort to those investors looking for partners to share risks, encouraging both new investors and those considering scaling up current activities.
In December last year, donors pledged over $7.7 billion to support the Palestinian Reform and Development Plan (PRDP) and the PA has taken dramatic steps to put that plan in motion. However, the World Bank Group is aware that the long-term success of these positive steps is dependent on the ability of the Palestinian private sector to fully exploit the opportunities they provide. Palestinian businesses have the craftsmanship, ingenuity, and entrepreneurial spirit to succeed. They are reliable, committed, and hard working suppliers of high quality products. The IBRD, IFC and MIGA are determined to provide them with the support necessary to take the lead in establishing a prosperous Palestinian economy as a central foundation of the Palestinian State.






























June 2008

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