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World Bank: Palestine private sector hostage to Israeli restrictions

Sept. 11, 2014 1:03 A.M. (Updated: Sept. 18, 2014 10:13 A.M.)
BETHLEHEM (Ma'an) -- The Palestinian private sector is hostage to instability and Israel's restrictions on movement, access and trade in the occupied territories, according to a new World Bank report.

The report, Investment Climate Assessment: Fragmentation and Uncertainty, which was released Thursday, blames Israel's restrictions and the Mideast conflict for holding Palestinian enterprises back.

“An active private sector is much needed to fuel economic and social progress in the Palestinian territories already faced with declining income and increasing unemployment,” said Steen Jorgensen, World Bank country director for West Bank and Gaza.

“Allowing mobility and access to resources is crucial to building investor confidence and developing industry and high value-added service sectors that would support a prosperous Palestinian economy and protect against future violence.”

The World Bank says its new report provides "empirical evidence" that instability, military rule, violence, political division, and lack of free movement and access to resources and markets are Palestine's key obstacles to growth.

"The multiple layers of restrictions and complex rules imposed by Israeli authorities govern business activities. The severe fragmentation of the Palestinian markets, turned into 'micro-climates' has led to different conditions and constraints depending on the location within the Palestinian territories,” the report said.

It added: "The business activities are burdened with additional time, financial resources, and capacity to navigate."

The World Bank says Israel's control of multiple forms of movement impede business and trade, while in Gaza, exports are almost all banned and when they are permitted, they are significantly delayed.

It said data from Palestinian firms surveyed twice over the last decade show no significant growth in capital investment or employment.

PA should do more

While the report said Israel's restrictions were primarily to blame, it also said the Palestinian Authority needed to do more in the meantime to improve the situation.

The primary recommendation for the PA was for unified legislation between the West Bank and Gaza, which are controlled by separate parties despite a months-old reconciliation deal.

The report points out a few positive signs such as the growing IT and pharmaceutical sectors. It also describes petty corruption as low and the financial sector as stable.

“The report paints a gloomy situation of the investment climate but the productivity data and emergence of high-value sectors such as pharmaceuticals and information technology demonstrate the potential for growth that builds on the Palestinian entrepreneurial spirit,” said Nabila Assaf, the lead author of the report.

“Although the political instability is the binding constraint to investment and business, it is crucial to identify ways of improving aspects of the business climate in the short term.”
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