Behind the Headlines: a Move to Bring Prosperity Along with Palestinian Peace

A decade ago, Yousef Abuleil left his home in eastern Jerusalem and moved to Saudi Arabia in search of a better life. For the most part, he found it.

A successful insurance agent, he enjoyed a high standard of living, until the outbreak of the Persian Gulf War in January 1991. Like many Palestinians living in Arab countries, Abuleil suddenly found himself unwelcome in his adopted home.

He packed up his wife and children and moved back to Jerusalem.

A tall, dapper man in his 30s, Abuleil hopes to capitalize on recent strides in the peace process and expand the small wholesale business he started two years ago.

He is far from alone. Palestinians from throughout the territories – and many living abroad – think the time is ripe to invest in the West Bank and Gaza Strip.

Though Palestinians and Israelis have yet to agree on many issues related to the Palestinian autonomy plan set forth last September, both sides stress that a healthy Palestinian economy based on local enterprise is an important key to the success of the agreement.

“Grass-roots entrepreneurship is the backbone of any real economic growth,” said Ruth Klinov, a professor of economics at the Hebrew University. “If the Palestinian economy is to succeed – and peace won’t succeed without some form of economic stability – it will have to develop local businesses.”

In the future, she said, the Palestinian economy will have to be founded less on exporting labor and more on manufacturing.

Even before 1967, the Palestinians had a tiny industrial base. In 1993, 40 percent of the Palestinian work force was employed in Israel.

Opinions vary widely when it comes to assessing the economy. According to a study published by the Bethlehem-based Data Center for Studies and Consultation, the unemployment rate among Arabs in the territories is about 30 percent. Israel’s Labor Ministry, on the other hand, puts the number of unemployed Palestinians at about 9 percent – lower than the Israeli unemployment rate of 11 percent.

The Data Center said the gross national product in the territories totaled $3.148 billion, compared to $6 billion in Jordan and $60 billion in Israel proper.

While no one could claim that the economy of the territories was thriving before 1967, most Israeli and Palestinian financial experts concur that Israel has done little to encourage free enterprise during its 26-year rule over the West Bank and Gaza. Some go further, maintaining that Israeli restrictions on Palestinian trade and commerce have impeded investment and business growth.

Klinov asserted that Israel put severe limits on the establishment of new enterprises. “Until recently, licensing of new businesses has been very strict, and in many cases the license isn’t given at all.”

The economist attributed these restrictions to a number of factors, including pressure by groups within Israel that feared the competition. In addition, she said, Israel has had “some genuine security concerns,” which, when translated into curfews and closings of the territories, have hurt economic growth.

“It’s difficult to do business when people can’t move around freely,” she said.

Omer Nashef, a professor of Arab affairs at the Hebrew University and the director of a new program for Arab entrepreneurs, noted that “one of the biggest problems in the territories has been cash flow.”

“Until a year ago, when the Cairo-Amman Bank set up a branch (in the West Bank), it was extremely difficult to transfer money from other countries into the territories. Israel has recently eased its restrictions, and we’re seeing the first results,” he said.

“Things are improving slightly,” said Samir Hazboun, a Palestinian economist who, along with an Israeli team of financial experts, has been analyzing the potential impact of peace on the territories.

Since the Madrid peace conference in 1991, “Palestinians in the territories have begun to explore investing in the private sector,” he said.

One positive sign, said Hazboun, “is the fact that since Madrid, Israel has granted 120 licenses to factories. Of course, some had already been operating without licenses.”

Hazboun believes that the autonomy plan, once implemented, will “jump-start” the stalled Palestinian economy, which is also being aided by $5.5 billion pledged by donor countries.

He estimated that unemployment will shrink as construction workers start building 120,000 urgently needed housing units, plus another 10,000 units annually. He also foresees a rise in the number of industrial establishments, from 4,255 in 1993 to nearly 5,000 in 1999.

Yet according to Arik Gordin, the spokesman of Israel’s economic delegation to the peace talks, little progress will be made until Israel and the Palestinians work out a system that both can live with.

“For many years we have been living together and operating as one economy. Now we are trying to make two economies, and it’s a bit like trying to unscramble an egg,” he said.

Important details still to be worked out include currency regulations, banking supervision, licensing of small businesses, customs and other taxes. The last two items are especially tricky because the Palestinian and Israeli economies will soon be competing with each other.

Competition is fine, Gordin said, “provided that both economies share the same basic conditions, such as Value Added Tax and customs.”

For Abuleil and others wishing to do business in the territories, wading through these details has been a nightmare.

To help ease the way, the Martin Buber Institute of the Hebrew University recently established its first-ever Arabic-language course designed to teach people how to start a business.

Co-sponsored by the Jerusalem municipality, the Jewish-Arab Center for Economic Development and Bank Hapoalim, the program provided 43 young Palestinians with hands on information related to opening and building a business.

The studies included seminars on the Israeli economy and on the development of economic ties with Arab markets outside of Israel.

“It’s very difficult to wade through the Israeli system of taxes, imports and exports,” says Nashef, the program director.

Nashef, a Palestinian who is fluent in Arabic, Hebrew and English, believes that “in the future, the two systems will work best together, and those Palestinian entrepreneurs can act as a bridge between Israel and the Arab countries.”

That is the hope of Abuleil, who enrolled in the program “to make contacts in the Israeli sector and to learn about the tax system, customs, import and export taxes.” Though he had hoped to learn more about the Palestinian economic system, he admits that “until things are more settled, there isn’t much to learn.”

There is not much difference between Israeli and Palestinian business people, he said.

“We’ve lived together for decades, and we have experienced the market together. It is true, though, that the Israeli government favors Israeli businessmen over Palestinians when it comes to things like business loans and the amount of interest it charges. There are also business incentives the Palestinians can’t take advantage of. Still, the Israeli economy has a lot to teach us.”

As for the peace process, Abuleil said. “I think this situation will benefit everyone, both Palestinians and Israelis. Peace will bring prosperity, something everyone wants.”

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