Overview of Palestinian Private Sector

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Overview of The Palestinian Private Sector
June, 2011
Chronological development of the Palestinian
private sector
• The Palestinian private sector is a recent phenomenon.
• The business community was nascent in the period
between 1967 until the Oslo agreements and deeply
connected with Israeli suppliers .
• The number of private Palestinian companies was low
and the depth of know- how was shallow.
• Export-focused activities were almost non-existent given
Israeli restrictions and constraints.
• Nevertheless, the seeds of the locally grown private
sector, which was able to maintain itself through the
hardest times became the foundation on which the
Palestinian business community was built.
• With the advent of the Oslo Peace Accords the
Palestinian private sector took on a new complex
dynamic.
• A handful of investment firms were established thus
facilitating the flow of capital into the economy.
• Many Palestinians returned to Palestine to work,
bringing skills and expertise into the market.
• New private sector firms were established: the first
Palestinian telecommunications company, new hotels,
banks, an information technology sector&more.
• The Palestinian economy, although tiny, was a rapidly
shifting economy. It started moving from traditional
practices to modern ones, from an agricultural base to a
service sector and became more export-orientated.
• Donors assisted in the creation of sector associations and
provided firm level assistance to some extent, but a
strategic approach to the private sector never
materialized.
• The Second Intifada which started in 2000 and the
unilateral Israeli implementation of separation lead to
the deterioration of the Palestinian private sector.
General Economical Indicators
•
•
•
•
•
•
•
•
GDP (2009): 5,147.2 M. USD
GDP per Capita: 1,389.9 USD
GNI (2008): 5,249.0 M. USD
GNI per Capita: 1,459.4 USD
GDI (2008): 2,271.3 M. USD
GNP (2007): 1925.8 M. USD
Total Palestinian Deposits in Banks (2009): 6295.29 M. USD
Population(2008): 3,937,309
Private Sector Overview
Services
44.1% of GDP
63.6% of total employment
Internal Trade, Tourism, Transportation, ICT, Financial
Agriculture, Forestry,
Fishing
5.6% of GDP
13.4% of total employment
Livestock production, Fruits & Vegetables, Olive
Oil, Cut Flowers, Export Oriented cash Crops
Construction
6.2% of GDP
10.9% of total employment
Around 116 000 operating
establishments
The vast majority (over 95%) of
the private firms operating in the
private sector are small firms
with less than 10 employees;
most are family owned and run.
Manufacturing &
Mining
13.8% of GDP
12.1% of total employment
Quarrying and stone, Textile & Garments, Chemical Industries,
Pharmaceuticals, Food Processing, Furniture
Palestinian Export Markets & Sectors
Destinations of Palestinian Exports
1.
2.
3.
4.
5.
Israel (90%) “Most of Palestinian
exports to Israel are re-exported to 3rd
countries;mainly Europe and USA”
Arab Countries: Jordan, Saudi Arabia,
Yemen, Oman, Bahrain.
EU: France, Netherlands, UK,
Germany, Italy, Belgium, Spain,
Austria, Greece, Cyprus, Ireland.
USA
Other: Switzerland, Turkey, Japan,
China
Export Sectors / Investment Opportunities
Stone & Marble
Processed Food
Garments & Textile
Furniture
Cash Crops
Olive Oil
Pharmaceuticals
Handicrafts
Leather & Shoes
Services : Tourism, Construction,
Industrial Estates, ICT.
Bethlehem Industrial Zone
Key Strengths
Services:
Industrial Export Products:
Agricultural Export Products:
• High potential and capabilities in IT,
outsourcing to major international
companies
• Attractive tourism sites and products.
• Strong construction / real estate
potentials, high demand and rapid
expansion in WB, rebuilding Gaza
• Cumulative
experience
of
production for international brands.
• Subcontracting.
• High quality, competitive costs, and
good factory conditions.
• Availability of skilled laborers and
workmanship skills.
• Newly emerged Palestinian original
designs.
• New production methods and
products.
• Off-season cultivation.
• Proximity to major markets.
• High quality of crops in terms of
taste, scent and shape.
• Global GAP quality standards.
Trade Agreements
• The PNA benefits from preferential trade arrangements with:
–
–
–
–
–
–
–
United States of America
Canada
European Union (EU)
European Free Trade Association (EFTA)
Turkey
Russia
GAFTA
Why Invest in Palestine?
• Exemptions on custom duties on the fixed assets of an enterprise
needed for developing, establishing or enlarging an existing
enterprise.
• Special exemptions or incentives for investments in hospitals or
hotels.
• Exemptions and incentives may be granted to enterprises engaged
in export activities.
• Income tax exemptions granted for investments exceeding US
100,000$, with nominal tax rates charged on net profit thereafter,
for a given period.
Why Invest in Palestine?
US$ 100,000 – million
US$ 1 – 5 million
Over US$ 5 million
 5 years tax holiday
 10% income tax on net profits for an additional 8 year
period
 5 years tax holiday
 10% income tax on net profits for an additional 12
year period
5 years tax holiday
 10% income tax on net profits for an additional 16
years period
Special Investment
Approved by the council of
ministries
5 years tax holiday
 10% income tax on net profits for an additional 20
year period
Special Incentives for Investment – MIGA
The Multilateral Investment Guarantee Agency (MIGA) is
a member of the World Bank group. It promotes foreign
direct investment in emerging economies to support
economic growth, reduce poverty and improve people's
lives by providing guarantees (Political risk insurance) to
investors and lenders.
Thank You
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