PALESTINE I. PROFILE II. ECONOMIC SECTORS:

Transcription

1 PALESTINE I. PROFILE Location Palestine is located in southwest Asia and is in the heart of the Middle East, on the Eastern coast of the Mediterranean sea. To its north are Syria and Lebanon, to its south the Gulf of Aqaba and the Sinai Peninsula, and on its east is Jordan. Official name State of Palestine Area 27,000 sq.km Population 7,8 million inhabitants Capital Jerusalem Major cities Nablus, Al-Khalil (Hebron), Gaza City and Ramallah. Language Arabic (Official), a large percentage of the population speak English. Currency US$, Jordanian Dinar (JD) and New Israeli Shekel (NIS). Climate The climate is temperate in the West Bank. Winter is short and Mild, in August temperature between 35 to 40 The rainy season is between November and February. The climate in Gaza is less cold in Winter and less hot in summer thanks to the influence of the Mediterranean Main holidays Eid-UL-Adha*, Eid UL-Fitr* 1st Mouharram Eid* Al Mawlid*, 25 December, 31 March and 15 November (Declaration of independence) Weekly Holidays Thursday evening and Friday Local time GMT +2 hours Working hours * Government offices : From 8h to 14h30 Banks and business: From 8H to 13h and from 15h to 17H Principle Growth Housing Construction, Manufacturing, Agriculture and Services. Sectors (*) Variable dates II. ECONOMIC SECTORS: II.1 AGRICULTURE AND FISHING Agriculture has played a very important role in the Palestinian economy, contributing 30% of GNP in 1991 and employing approximately 25% of the labour force in the West Bank and Gaza Strip. Although the Israeli occupation has hampered agricultural development, the sector continues to grow despite frequent border closures. Traditional crops include citrus fruit, olives, vegetables, grapes, bananas, figs, plums, melons, almonds, and field crops. Olive culture, the cornerstone of West Bank agriculture, is one of major Palestinian agro-industries. Over 50% of cultivated land is devoted to olive growing and since local production exceeds consumption, olives and olive oil is exported to Jordan and Israel. Problems with salinity in the ground water supply have begun to affect the citrus crop in Gaza. Water deficit problems will also negatively affect this sector. Livestock husbandry accounts for more than one-third of agricultural output in the territories as a whole, 50% in the West Bank and nearly 30% in the Gaza strip. Prior to 1979, the fishing industry was an important element of Gaza s economy. However, production fell due to restrictions placed on the length of coastline from which Palestinians were allowed to fish. Following Palestinian self-rule unrestricted access to the sea was regained, but the 1

2 fishing industry needs improvements in boat building, handling and processing and maintenance for the industry to develop. Excellent fishing is found for sardines, mullet, codfish, flounder and shrimp off the coast of Gaza. II.2. INDUSTRY AND MANUFACTURING Due to political and economic restrictions during the years of Israeli occupation, the industrial sector is the least developed sector of the Palestinian economy. In 1993, this sector contributed only 8% of GDP at factor cost in the West Bank and Gaza Strip. By 1994, the situation took a turn for the worse. Due the frequency of border closures by Israel, consumer demand fell. The rising price of imports caused a downswing in manufacturing output. Because of the difficulties of working under the occupation, this sector, despite a long history, is still in its early development stage. Manufacturing patterns have changed little since the 1960 s with producers focusing on textiles, food processing, clothing, and leather. The economic protocol initiated between Israel and the Palestinian National Authority carries provisions for free trade with Israel and access for Palestinian goods to outside markets. However, frequent border closures from Israeli troops have curtailed many efforts to export. To enhance industrial development, international investment is a priority. These capital inflows are not likely to occur until further progress is made on the peace progress. II.3. TOURISM The development of the tourism sector has been severely curtailed by the political circumstances of the area; The Israeli occupation, tight border closures, and the Intifada have all made it difficult for this sector to develop. Yet, potential for tourism to become a vital hard currency earner in a new Palestinian State, that includes East Jerusalem as Palestinian Capital, is enormous. Should a final status agreement be reached with the Israeli government, the Palestinian tourism planners have many new markets upon which to draw for potential visitors. These markets include Palestinians in the Diaspora and Arab and Muslim tourists previously unable to visit the Palestinian territories and Jerusalem. In the short term, tourism could increase upon the long tradition of providing for pilgrim traffic to Muslim and Christian sites. However, travel restrictions must be relaxed on movement coming from and going to Jordan and the infrastructure must be put in place and personnel trained for development to occur in this sector. III. INFRASTRUCTURES Since Oslo agreements in September 1993, Palestinian Authority has accorded more than 1 billion US$ in its territories to put in place an international standards infrastructures. That includes sectors of transport, water supply and reserves, electricity and telecommunications... The Gaza International Airport was build with Moroccan technical assistance, and the Gaza port is under construction. IV. FOREIGN TRADE REGULATIONS: IV.1. LEGAL FRAMEWORK OF TRADE RELATIONS: Palestine is a member of the following international organizations: Organization of the Islamic Conference (O.I.C); League of the Arab States; 2

3 Observer status at the United Nations Organization (UN); G77; Palestine has also signed economic and commercial co-operation agreements; Partnership agreement with the European Union; Free Trade Agreement with the United States of America; Trade agreements with Egypt and Jordan; Free Trade Agreement with Canada and soon with EFTA. IV.2. TRADE STRUCTURE: IV.2.1. Main imported products: * Building Materials * Metallic products; * Antibiotics and products thereof * Paints * Cigarettes. * Wheat. IV.2.2. Main exported products: * Textiles and clothing * Food products (olive oil, almonds, honey, cheese ); * Agricultural products;(citrus fruit, vegetables); * Shoes and leather; * Handicrafts; * Pharmaceuticals; * Plastic articles, plates and cardboard. IV.2.3. Trading partners: Main suppliers Main customers - The European Union countries - Israel - Jordan - Jordan - Egypt - Other countries - China The European Union - Russia IV.3. FOREIGN TRADE REGULATIONS: IV.3.1. Imports regulations: * Prohibited import products must comply with Israeli standards. * Products for which import licenses are required are as follows: Heavy equipment; Cosmetics Industrial raw materials; Agricultural products; Products appearing in Lists A1, A2, and B (available at the Ministry of Trade). 3

4 IV.3.2 Exports regulations: To be entitled to export transactions, the exporter must: Be holder of an import-export card and an import-export license issued by the Ministry of Economy and Trade; Be member of the Chamber of Commerce and Industry; Registered with the agricultural department if the exporter is specialized in agricultural products. * At export level the following documents are required: A pro-forma invoice; issued by the Chamber of Commerce; (Palestinian receipts must at least account for 40% of the total cost of a product subject to a certificate of origin delivered by the Palestinian authorities, * Either under the form of a special form for Arab countries or * 2 EUR. 1 or the equivalent for other countries. A Health Certificate: delivered by the Ministry of Health for foodstuffs and chemicals products, or a certificate delivered by the agricultural department for agricultural products. A packing certificate: it must be certified; The re-export of a products requires an authorization of the Ministry of Trade, which is delivered upon the consideration of the request made by the exporter. In case the exporter encounters some difficulties during goods shipment, it would be advisable to contact the Export Department of the Ministry of Trade or the forwarding agent. IV.4. FINANCIAL REGULATIONS OF FOREIGN TRADE OPERATIONS IV.4.3. Methods and means for international settlement: International settlement of foreign trade transactions is made through the banking system. Which is based on a liberal system. Therefore, there are no restrictions as far as transfer operations are concerned. Three currencies are used in the Palestinian territory/ The US Dollar, The Jordanian Dinar and the Israeli Shekel. Foreign trade operators use current means such as: Bank transfer, check and documentary credit. There are fifteen operational banks in Palestine of which: Bank of Palestine; Palestine International Bank; Palestine Investment Bank; Arab Islamic Bank; The Commercial Bank of Palestine; Arab Bank. IV.5.CUSTOMS TAXATION: IV.5.1. Applicable duties and taxes: 4

5 The duties and taxes imposed on imports in Palestine are classified according to the Harmonized system (HS). The classification of several products is made on the basis of customs tariffs and purchase taxes enforced in Israel, in compliance with Paris Trade Protocol Signed between the Palestinian Authority and Israel. Products imported from Israel and the European Union are exempt from customs duties. Such a preferential treatment is the result of the implementation of the Partnership Agreement with the European Union and the Free Trade Agreement with the USA. V. FOREIGN INVESTMENT V.1. OPENNESS TO FOREIGN INVESTMENT The Palestinian Authority (PA) places a high priority on encouraging foreign investment in the West Bank and Gaza in order to promote growth, reduce unemployment, and support reconstruction efforts begun in The Current Investment Law (Law on the encouragement of investment in Palestine No 1 of 1998, Final Draft May 1999), guarantees the repatriation of foreign capital, and there are no restrictions governing foreign currency accounts or official currency transfer policies. This law also prohibits expropriation and nationalisation of approved foreign investment. All new foreign investments in Palestinian territories must be registered with the Palestinian Authority and be approved by the relevant ministry or ministries. Under this law, the Palestinian Investment Promotion Agency ( Agency ) should be established. The Agency is an autonomous institution of the Authority, and the main functions of its board of directors convene to: Oversee and evaluate policies and Investment. Attract investors to Palestine. Issue confirmation of Investment. Supervise enterprises benefiting from the Incentives. Submit recommendations to the Council of Ministers and propose needed changes in the criteria for granting the incentives and exemptions. V.2 INCENTIVES OFFERED TO FOREIGN INVESTORS Palestine and the United States have mutually advantageous investment programs. The U.S. extends preferential status on Palestinian products entering the U.S. with this benefit, the import are duty free under the Generalised System of Preferences program (GSP) to assist economic development in emergent markets. With the same end in mind, the PNA encourages industry development by permitting the establishment of wholly owned foreign companies in Palestine, and it has promised foreign investors that nationalisation and company seizures will not be future surprises for those who invest in Palestine. The Agency shall grant Incentives to Investments that meet the requirements of the Law of Encouragement of Investment as follows: (A) Any Investment between One Hundred Thousand and One Million Dollars shall entitle the enterprise to an exemption from income taxation for a period of five (5) years. The enterprise shall be subject to the payment of income tax on net profit at the nominal rate of 10% for a period of eight (8) additional years. (B) - Any Investment between One Million Dollars and Five Million Dollars shall entitle the enterprise to an exemption from income taxation for a period of Five (5) years. And for a period 5

6 of Twelve (12) additional years, the enterprise shall be subject to the payment of income tax on net profit at the nominal rate of 10%. (C) - Any Investment exceeding Five (5) Million Dollars shall entitle the enterprise to an exemption from income taxation for a period of Five (5) years. The enterprise shall be subject to the payment of income tax on net profit at the nominal rate of 10% for a period of Sixteen (16) additional years. (D) - Any special Investment in type and capital may, as approved by the council of Ministers, upon the recommendation of the Agency, entitle the enterprise to an exemption from income taxation for a period of Five (5) years. The enterprise shall be subject to the payment of income tax on net profit at the nominal rate of 10% for a period of twenty (20) additional years. VI. CONVERSION AND TRANSFER POLICIES: The current investment encouragement law guarantees the repatriation of foreign capital. There are no other PA restrictions governing foreign currency accounts and currency transfer policies. VII. FINANCIAL AND BANKING SYSTEM: VII.1. BANKING SYSTEM In 1996, the Bank of Israel gave the Palestinian Monetary Authority (PMA) control over all 11 banks located in the Palestinian territories. The PMA acts as the Palestinian Central Bank and it will be charged to issue its own currency. Currently, the US Dollar, the Jordanian Dinar and the Israeli Shekel are used in Palestine. News that Bank of Palestine will open its eleventh branch its third in the West Bank and That it will link all of the branches together via satellite, give good reason for optimism. Together, the International Finance Corporation (IFC) and the Arab Bank will establish a 15.2US$ million Arab Palestine Investment Bank in Ramallah, the first in its kind in Palestine. Palestine is the site of one of the world s newest stock markets. VII.2 PALESTINIAN SECURITIES EXCHANGE (PSE) Called the Palestinian Securities Exchange (PSE), this nascent bourse has the most modern communications equipment and technology. The new Palestinian exchange is a joint venture project by Samed Establishment and the Palestinian Development and Investment Company (PADECO). The Palestinian bourse acts as the cornerstone of the embryonic Palestinian capital markets. Twenty-eight shareholding companies have been approved for listing so far with additional companies expected to be listed in the coming future. The current list of companies span a wild range of sectors including pharmaceuticals, utilities, telecommunications, and financial services. There are currently an estimated forty Palestinian companies eligible to be listed on the Exchange with a market capitalisation of over 1 billion USD. The creation of the Palestinian Security Exchange (PSE), as the foundation block of the Palestinian capital market, is critical to the success of the country s economic development. Given the dispersal of the Palestinian people and the concentration of personal wealth abroad, Palestine has a special and urgent need for an effective intermediary to facilitate and maximise the repatriation of longterm investment capital to the economy. Due to the inability of Palestine expatriates to actively manage or monitor their potential equity investments in Palestine, they require a vehicle for passive investments, namely the public shareholding company. Perhaps more than any other economy, Palestine needs to encourage the formations of such companies; to broaden their ownership base (to 6

7 make them truly public in line with global practices); to protect their monitory stockholders; to enhance their ability to raise financing from the public; and to facilitate efficient, liquid and transparent trading conditions for their securities. Thus the need to establish a well-regulated capital market with strong and effective intermediaries linking together the providers and the users of capital was established. The increased mobility of capital is accomplished through the securitisation and trading of financial liabilities. By increasing the flow of investment capital from both domestic and overseas sources to the productive agents in the economy, the securization of liabilities will also allow for the spreading and diversification of risk, thus increasing the total equity capital available for each individual project and in the economy as a whole. VIII. TRADE AGREEMENTS The Palestinian Liberation Organisation (PLO) has signed many trade agreements and protocols for the benefit of Palestinian Authority (PA). The main agreements signed are: 1- US-PLO Free Trade Arrangement: This Arrangement gives a duty free access of US products to the West Bank and Gaza strip market, and a duty free access of Palestinian product to the US market. 2- EURO Mediterranean Interim Association Agreement on Trade and Co-operation: The agreement stipulates that European Union industrial products benefit from a duty free access to the Palestinian market, same preferences are granted to Palestinian products in European markets. It includes also a Duty free or reduced tariff quota for some agricultural exports of the West Bank and Gaza strip to the European Union s markets. 3- Interim Free Trade Agreement: Parties to the agreement are the European Free Trade Association (Switzerland, Iceland, Liechtenstein and Norway) and the Palestine Liberation Organisation for the benefit of the Palestinian Authority. Preferences granted by this Agreement are a duty free access of EFTA industrial products to the West Bank and Gaza Strip market and of Palestinian products to the EFTA market. 4- Protocols on trade in Agricultural products: This protocols signed with the governments of Norway, Iceland and Switzerland granted specific Palestinian agricultural exports reduced or duty free access to their markets for specific quantities (quotas) or in some cases for all items exports regardless of the quantity. 5- Trade Agreement between PA, Jordan and Egypt: The agreements provide preferential tax and customs exemption for goods traded between Palestine and the two other sides. The list of items has been progressively expanded so that it will reach a full free trade agreement. The agreements recognise the significance of transit trade crosswise each country s territory. IX. USEFUL ADRESSES ORGANISATIONS AND PUBLIC ESTABLISHMENTS Ministry of Economy, Trade and Industry ADDRESS PO. BOX 1629 Ramallah Palestine Trade Center POBox 883 Ramallah TEL/Fax/ /Website Tel: (9722) /5 Fax: /07 met@palnet.com Tel: (9722) Fax: (9722) info@paltrade.org 7

8 The Federation of Palestinian Chambers of Commerce and Industry and Agriculture The Palestinian Businessmen Association Al-Rashid St. P.O.Box Jerusalem P.O.Box Ramallah Tel: (9722) Fax: (9722) Tel: (9722) / Fax: (9722) Tel: (9722) /84 Fax: Ministry of Finance PO. BOX 795 Ramallah Ministry of Industry Ramallah Tel: (9722) /41/ Fax: Ministry of Civil Affairs Ramallah Tel:(9722) /38 Fax: PSIU/Orient House PO. BOX 20479, East Jerusalem Tel: Fax: