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Bringing the gap of hatred through commerce – Middle East case study

29 May 2013
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Categories: Afternoon Tea in Jerusalem, Business, Israel, Palestinians

Many a government will claim that it utilises commerce and overseas aid to close the gap with less than friendly nationalities. A classic example is USAID, whose annual budget extends in to the billions and reaches dozens of less-wealthy countries.

There have been numerous commercial efforts to mobilise trade in order to bring the Israelis and Palestinians together. President Peres has been particularly active over the years in trying to set up joint industrial and agricultural facilities near the border with Gaza, although persistent Hamas rocket fire has ensured that the results have been minimalistic.

So, it was encouraging to read in the Palestinian media that earlier this week representatives of Israeli and Palestinian high tech came together in Tel Aviv. Significantly, this drew the support of the tech multinationals like Microsoft as well as Cisco, whose boss is known to be close to Peres.

It is not just that Palestinians are considered an educated community and relatively cheap compared to their Israeli counterparts.

During the last few years more than 500 Palestinian engineers and analysts have been employed in Palestinian companies working with Israeli IT companies. There are 4,000 working in the Palestinian private IT sector and another 3,000 in telecoms. Beyond that, 1,500 to 2,200 more graduate into the field every year from the 13 universities in the Palestinian territories.

With some irony and sadness, the downside to all this came from the office of the Palestinian chairman, which described the meeting as “unacceptable“. This is the direct opposite of the comments from one of my business colleagues, who recently attended a forum in New York where both Jews and Muslims were prominent. To paraphrase: they had never before learnt so much about each other and thus come away with a greater feeling of mutual understanding, even if some of the Arab delegates were forced to speak in a different tone form the public podium.

Israel has earned its reputation as the start-up nation of the Middle East. Two days ago, the CEO of Intel in Israel, where they have three plants, noted that his company had already invested over US$10 billion in the Holy Land. The Dutch are now following a London-based example and setting up a technology centre deliberately based on Israeli concepts. In the Israeli high-tech each of the past three financial quarters, companies have raised nearly US$500 million dollars from local and foreign based investors, a staggering amount for a country of barely 8 million people and where 50% is a desert.

It would be a shame for Israel’s neighbours to miss out on such benefits due to misguided and historical hatred amongst its leaders. It really is time to learn how to talk the language of understanding.

Two pointers on the Palestinian economy – May 2013

14 May 2013
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Categories: Afternoon Tea in Jerusalem, Business, Israel, Palestinian Society, Palestinians

Gross Domestic Product (GDP) in Palestine witnessed remarkable growth of 5.9% during 2012, Palestinian Central Bureau of Statistics (PCBS) said in its report.

That is certainly progress for an economy that was set back for a decade by the Intifada. Accordingly, there are encouraging signs in multiple sectors. Government revenues have risen marginally.

In parallel, some international aid is having a positive impact. For example, last month the UK’s International Development Minister Alan Duncan announced to an audience of the Hebron Chamber of Commerce the details of a new £15 million Palestinian Market Development Programme. The previous grant had “helped hundreds of businesses turn over £80 million in sales and exports, enter 87 new export markets, develop 129 new products, create 3,400 jobs and increase their exports by 52%.”

That said, all is not rosy. Just look at the unemployment rate that seems pegged around 25%. With a young population, that raises ominous social questions for the immediate future and stability of any governing party in Gaza and in the West Bank. So here are two suggestions that should help to make a positive change and relatively quickly.

First, to paraphrase a detailed report from the International Monetary Fund, ‘better governance’ would make fundamental difference. In fact, the report makes for more depressing than the official Palestinian stats I have cited above.  The key recommendations are hidden on pages 17 and 18. While it no longer blames Israel for all the economic woes in the Palestinian territories, there is a demand for halting pay rises to a bloated public sector, implementing better tax revenue collection systems, and reducing capital outlays on dubious public sector projects.

However, second, in order for this to happen, the Palestinian people will need a leadership that is…….well, capable. Unfortunately, after weeks of internal haggling, the Palestinian Prime Minister, Salam Fayyad, resigned on April 24th. Texas-educated, IMF-trained and one of the few that was determined to introoduce transparency in the system, Fayyad had had enough.

According to some observers, Fayyad could see that the Palestinian economy under President Abbas may be heading for a dive. Not only has substantial donor aid from Arab countries effectively dried up. Just as pertinent is the fact that corruption and graft amongst the leaders in Ramallah and in Gaza have rarely seen better times.

An analysis prepared by a Gaza journalist, details how money is leaking out of the official Palestinian financial system, which lacks accountability . It is near unbelievable to read how “the report criticised the murkiness surrounding the PA’s security budget, which  accounts for nearly one third of the Palestinian public budget, because it was  comprised of only one figure, without details….”

The truly worrying aspect is when one links that statement with the policies of Western governments. Less than two weeks ago, on May 6th, the European Union released a further €20 million to help fund the payment of the April salaries and pensions of nearly 76,000 Palestinian civil servants and pensioners in the West Bank and the Gaza Strip. Totally funding in this field has reached around €1.5 billion since 2008. If the corruption is so widespread, you have to ask what has European taxpayers money actually been spent on?

There are countless micro examples, which illustrate the lack of open government, at least from the point of view of Western standards. Even when the UN is supposed to hand resources and aid out to Palestinian refugees, the money slips away unguardedly from the hands of those who need it.

The Palestinians deserve a better economy. For that to happen, they require a true leadership, neither laden by the demands of corruption nor beholden to violent ideologies.

Controlling your finances – a Palestinian perspective

14 February 2013
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Categories: Blog, Business, Israel, Palestinian Society, Palestinians

All finance directors need to control their budgets and cash flows. Otherwise, your shop, your corporation or your country enters the world of bankruptcy.

Palestinian Treasury officials have never been able to plan future positions from a position of stability. Blame Israel, internal politics, donors not fulfilling pledges, etc, but their excel spreadsheets have often lacked substance.

The draft budget for 2013 was presented this week in Ramallah. As noted by Finance Minister, Qassis, Israel has not transferred funds for January. Further, Arab countries have yet again defaulted on promises of support. Palestinian Monetary Authority (PMA) chairman, Jihad Al Wazir, says that from 2008 to 2012, handouts have dropped by two-thirds to a paltry US$600 million.

I am sure that the irony was not lost on the cabinet when a seminar, hosted by Transparency International the previous week, had noted how there was a need to take “measures to improve oversight of PA financial controls at the borders and increase coordination between the border and finance authorities.”  To put it diplomatically, money is simply going astray.

There are clear positives, which give room for cautious optimism. A feature posted on CNBC noted that while the public sector debt was moving dangerously upwards to over 12% of gdp, the PMA has ensured that the banks have been protected from financial harm.

The banking system’s Tier 1 capital, its main benchmark of health, stood at a remarkably robust 24 percent of assets last year, according to the IMF. Struggling European banks’ Tier 1 ratios generally hover between 7 and 10 percent, and at around 8 percent for Israeli banks. Non-performing loans at Palestinian banks stand at less than 3 percent of total loans, and debt-to-deposit ratios remain far healthier than in neighbouring Jordan and Israel.

In parallel to this island of stability has been the slow but detectable rise of a new middle class. Rawabi is a fascinating new town, located near the city of Ramallah. Its development has been encouraged by Israel. Intriguingly, much of the properties are slated for young couples with ‘new money’. And that trend is matched by the growth of Palestinian women in employment, and more specifically as entrepreneurs. Their numbers may now be as high as 30% of the labour force.

Personally, I have found it interesting to read a Palestinian blog describing the “flood of Israeli goods” entering Gaza. While the author clearly believes that this is not a healthy situation, they also failed to note that Egypt has began to waste smuggling tunnels on its border with Gaza. This vital lifeline “brings in an estimated 30 percent of all goods that reach the enclave.”

And of course, if the Palestinians cannot rely on their Arab neighbours for donations, the good news is that the contributions from the relatively affluent EU taxpayer have not seized up. It is difficult to assess accurately the level of payments that the EU devolves to each citizen in Gaza and in the West Bank, as Brussels conceals the statistics. However, the direct directives added up to almost €200 million in 2012. This not only went to financing salaries of civil servants. As confirmed by leading local politicians, the money financed the living standards of convicted terrorists.

For all these positives and their starts, significant change will not come for sometime. The geopolitical dynamics will see to that. In addition, tunnel destruction, rising debt and continuing corruption do not facilitate a mass Palestinian socio-economic revival. As one Palestinian commentator indicated, when the wife of a senior PLO official spends $20,000 for dental treatment in Tel Aviv at a time when there is no shortage of renowned Palestinian dentists in Ramallah, Bethlehem and Nablus, the average citizen is forced to deals with inconvenient truths.

Over the next few months, UN committees, the World Bank, the EU and others are due to release reports blaming continuing Palestinian government poverty on the punishing measures of the Israeli government. There is no space to discuss here what is “punishing”, but even one roadblock has a limiting effect on the surrounding economy.

However, as an economist, I am forced to ask if these international bodies have considered whether the actions of Palestinian leaders are responsible for their own financial mess. Once all the mud-slinging and spin is eliminated from the Palestinian playing field, the regimes in Gaza and in Ramallah are just that – regimes, dictatorships. Historically, these types of government rarely to deliver economic freedom for their voters………….which is why the economists in Ramallah find themsleves ruling over a bankrupt treasury.

Buses, a holy city, and our moral responsibilities

30 November 2012
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Categories: Israel, Jerusalem, Palestinians

Here is a story posted this week on Facebook by a friend of mine. He quotes a lady called Sarah B, who was riding a bus in Jerusalem.

On the number 13 bus this morning. An ultra-Orthodox lady entered the bus from the back door, because she had a stroller with her. She needed to get to the front of the bus to pay, and needed someone to hold her baby so she’d have the use of both hands. She asked the elderly Muslim woman across from me to please hold her baby. The baby continued sleeping, and the Muslim woman was extremely pleased. “I have 31 grandchildren!” she told all those of us around her, and we smiled. The Jewish woman came back and thanked the Muslim woman profusely, and brought the baby back to the middle of the bus where the stroller was, and the Muslim woman got off the bus a couple stops later.

In most other cities around the world, that incident would barely command a snort of interest. However, this is Jerusalem. This is a city where the only known issue that the leaders of the three great religions cooperated in recent years was when they protested of a gay rights’ march. This is a city where its unity is opposed by most world leaders. And it is the place that journalists flock to in order to learn how Jews, Christians and Muslims bicker with each other, while ignoring the often larger divisions within each individual community.

For all the simplicity of the above tale and the hope it raises, it is not a solitary incident. This spirit can be found elsewhere in Israel, daily. Consider the micro-algae educational project at Kibbutz Ein Shemer, where school children of different backgrounds learn together in order to protect the environment. There was the programme sponsored by the Prime Minister’s office in June 2012 to encourage employers to hire workers from minority groupings. And the Max Rayne  School in Jerusalem is one of three bilingual schools in the project, ensuring how kids of all religions can learn together in this challenging city.

Last night, President Mahmoud Abbas secured Palestine’s upgraded status at the United Nations.  Analysing the text of his speech in the Palestinian media, at no stage did the Palestinian accept the State of Israel, under any borders or circumstances. The Jewish state was referred to hate and loathing.

It is not just that Abbas has now effectively rejected these successful projects of cooperation. The UN exists to encourage mankind to welcome each other. The international body demands that all members actively embrace such a responsibility. Yet the means and  the language of Abbas reveal how and why he rejects the core raison-d’etre of the United Nations.

C’est la vie for the proponents of peace and for safe bus journeys in Jerusalem.

Economic cost of war (2) – Gaza

25 November 2012
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Categories: Business, Israel, Palestinian Society, Palestinians

Initial estimates suggest that Israel’s economy will shrink by 0.2% as a result of the recent fighting with Gaza. Last week, I detailed some of that potential impact. But what of Gaza? How can over 1.5 million people recover from the severe pounding (literally) handed out by Israel?

A recent IMF report detailed that unemployment was still over 30% in the strip of land, locked between the Bedouin of Sinai and Israel. Much of the Gaza economy is supported by external sources, often smuggled in via the tunnel system. A  video from AlJazeera illustrates this very well, filmed shortly after the current fightng had stopped. Palestinian sources imply that 140, maybe two-thirds of all operating tunnels, were destroyed. Not only does this limit the supply of goods, it removes Hamas from a very healthy supply of revenue from permits for these activities.

However, in some ways, these sketchy details highlight a deeper problem. Obtaining reliable and professional figures for Gaza in most fields is consistently difficult. Just one simple example – the number of minors killed in last week’s fighting: It will take an expert to point out that whatever the stat, and even one death is a tragedy too many, Hamas recruits fighters to its ranks from the age of 16. Thus are these deaths to be recorded as military or civilian?

Now consider the on-going poverty in Gaza, which many people take for granted. The same IMF report also mentions that the Gaza economy grew at a “high rate” in early 2012,“mainly on account of a booming construction sector that benefits from lifting of some Israeli restrictions on imports and Gaza’s tunnel trade that benefits from easing of restrictions owing to political change in Egypt“.

Statistics from the Israeli press and based on information from military sources confirm this trend. Hamas probably benefits by around US$500 million annually from the tunnel economy. While the GDP per person stands at a paltry US$1,500, it has leapt upwards by 30% since 2010. And the Israeli army has ensured that building materials, food and medica supplies continue to enter Gaza in quantity, even during the fighting.

I have commented in the past how Gaza has seen a new millionaire elite emerge in the past couple of years. New cars, often imported from China, are now common in the area. An interesting item from Eric Cunningham and dated from the beginning of the recent hostilities observed how Gaza has much wealthier base than in previous hostilities.

While thousands of Gazans flocked to the territory’s short but stunning coastline this summer, when relative peace still reigned, the abrupt bang of hammers and whir of power-drills could be heard on almost every corner of the capital, Gaza City.

Sky-scraping apartment complexes, glitzy new shopping malls and extravagant hotel retreats were sprouting up amid the rubble, and unemployment had dropped to 28 percent from a record-high of 45 percent at the height of the blockade.

Cunningham’s piece even displays a picture of the new funfair. Pointedly, he concludes by citing a second IMF analysis, posted this October. Gaza’s economy is set to grow by 7% in 2013 and 6.5% in 2014.

You are left wondering. Why does Hamas and its allies would want to jeopardise this prosperity that benefits for the Palestinians and replace it with an on-going bloody fight with Israel?

Hamas or Israel? The answer is in the economy

19 November 2012
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Categories: Business, Israel, Palestinians

Pick up any UN analysis or a report from a relevant NGO, you will find details of how Gaza’s economy is struggling. The facts seem overwhelming – how unemployment, low exports, little private sector growth.

For all the pages of statistics, something does not add up. According to the World Bank, under 30 years of Israeli sovereignty, the Palestinian economy grew by 5.5% annually in real terms until 1999. That is phenomenal by any standards, and Gaza was part of that achievement.

If you look for current information about Gaza, which has not been tampered by officials with an agenda to grind, then there is much anecdotal evidence. I have reported on the new cars from China that have become very popular in recent months. These have probably been purchased by the new elite of millionaires club, identified by the Arab media. And all this has been reported by corporate journalists staying in some very comfortable boutique hotels.

Life for people in Gaza is not simple. Israel limits travel on its side, although even in times of war passage is not totally closed off. The Egyptian border is open, but Bedouin tribes control the territory beyond. And the Hamas government runs an agenda that bothers little with principles of democracy and pluralism.

If the citizens of Gaza complain that Israelis live in a secluded paradise, one can understand their frustration. Since freeing up the economy from tariffs in the mid 1980s, Israelis has experienced a leap forward in standards of living. Today, the economy is growing at around 3% annually, one of the better performers in the OECD. JVP in Jerusalem is one of the world’s most successful venture capital groups in the world, reinvesting profits in cross-ethnic projects. to take a specific industry, the biotech sector has boomed in the past decade, creating thousands of jobs and billions in wealth.

Historically, Gaza has been known as a fertile territory with an educated populace. When Israel departed in 2005, it left behind and intact a thriving greenhouse industry. Not only has that been ransacked and confined to the sand dunes or converted to military training grounds. The leading export in 2012 has been the 1,200 rockets hurtled towards Israeli civilian areas.

The Palestinian leadership in Gaza would have the world believe that the poverty of the territory is caused by the Israeli military. The pain of that fallacy is most felt by the residents themselves. However, if only the problem was a few gross inexactitudes over economic policy.

As Hamas has proven, if you can lie during peacetime, it does not take too much effort to cover up the self-inflicted horrors of war.

If the Palestinians had their own “Arab Spring”…..

12 October 2012
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Categories: Business, Israel, Palestinians

Earlier this month, a most unusual iten appeared in the Arab media. Abdulateef Al-Mulhim, commenting on the “Arab Spring and the Israeli enemy”, observed that:

Many Arabs don’t know that the life expectancy of the Palestinians living in Israel is far longer than many Arab states and they enjoy far better political and social freedom than many of their Arab brothers. Even the Palestinians living under Israeli occupation in the West Bank and Gaza Strip enjoy more political and social rights than some places in the Arab World. Wasn’t one of the judges who sent a former Israeli president to jail is an Israeli-Palestinian? The Arab Spring showed the world that the Palestinians are happier and in better situation than their Arab brothers who fought to liberate them from the Israelis.

The item came after a series of economic demonstrations during August in the West Bank. Whether these acts were a genuine outburst of distress or Hamas trying to wrestle power away from the Palestinian Authority (PA), I will not debate. The key issue is how strong is the Palestinian economy. Does the populace of Ramallah and Gaza need its own protest movement? And if so, who would be on the receiving end of the complaints?

It has long been accepted that the Gaza and the West Bank are two separate economies. Even the ruling powers – Hamas and the PA – appear more united by the hatred of Israel rather than a common political plan.

Gaza’s immediate progress is hampered by Egypt’t battles in the Sinai with various Bedouin tribes. It is not just that Egypt is Gaza’s route to global trade, Cairo supplies around 70% of the power for people in the fertile costal strip. Yet despite such geopolitics and Israeli security restrictions, I have observed previously that evidence suggests that the area now boasts over 600 millionaires.

The BBC news service has confirmed this economic improvement. At a primary level, the tunnel economy has created a new elite, specifically people close to the Hamas regime. In tandem, there has been “a surge in the value of land with prices more than doubling in the past two years.”

There many who argue that if Israel were to withdraw most of its security regulations, then this new wealth would spread to others. Almost by definition, this is a given, although the process could be kickstarted if Hamas were to cease daily rocket attacks in to southern Israel. An additional factor that impedes progress are the social limitations imposed and dictated by Hamas on its own people, measures which have now led to a daming report by Human Rights Watch.

The situation in the West Bank has similarities to Gaza. As the IMF reported, an economic boom is in progress. The 9% increase in growth for early 2012 is a direct continuation from the achievements of 2011.

That said, the PA is till crying poverty. Civil servant salaries for August were only delivered in early October. Although the Ramallah government does not expect to emerge from the economic crisis soon and begs for assistance from overseas, an analysis from the Palestinian Central Bureau of Statistics reveals that there is still a lot of money around.

Stocks of Palestinian assets invested abroad in 2011 were about $5,233 million, while stocks of foreign liabilities on the Palestinian economy were about $4,512 million……primary results of the International Investment Position (IIP) for the Palestinian Territory by the end of 2011 revealed that the net IIP had amounted to about $721.0 million,  which means that the Palestinian economy of its various sectors had invested outside Palestinian Territory by more than the investment amount in the Palestinian Territory from abroad.

So what next? It would seem that both in Gaza and in the West Bank, money is around but not flowing to those positioned at the end of the food chain, about 95% of the population. And that raises the old and recurring issue of corruption and graft. Only recently, a former aide of President Arafat was convicted for embezzlement. If I was a Palestinian, I know that I would be protesting to my leaders about such vast distortions.

Is that a more serious problem than resolving the issues with Israel, I am not to judge. However, it does leave a question for European and American donor countries to the Palestinians – where and how should they continue to transfer money?

Ealier this month, the European Union agreed to a further 11 Million Euro of assistance to UNRWA. What is significant is that for all the murderous troubles facing the Palestinians in Syria, barely 10% of the money will go to lending then support. Most of the money will go……elsewhere.

When will the donors wake up? When will the Palestinians really open their mouths of distress against all of these distortions?

Will the real Gaza economy stand up and be counted?

31 August 2012
5 Comments
Categories: Business, Israel, Palestinian Society, Palestinians

The headline from the New York Times made for a simple summary of a UN report: “U.N. Sees Bleak Outlook for Gaza Unless Services Are Improved”

The UN describes how this narrow fertile strip of land, which has been run by Hamas since 2007, may not be fit for habitation by 2020. Education, health and other basic services are on the point of collapse. Unemployment is high. It is sandwiched between geopolitical tensions of Egypt and Israel. Life is very difficult.

To emphasise the point, Maan News service, based in Ramallah, reports that yet again Palestinian Authority (PA) employees in Gaza may not be paid their salaries. The background appears to be a combination of reasons; lack of funds within the PA and also a dispute between the Palestinian Government and its supposed Hamas allies in Gaza.

So how does one reconcile this gloomy picture with new investigative journalism from Arab sources that of the 1.6 million people in Gaza, there are at least 600 millionaires. In fact, on the ground witnesses reveal a very different kind of Gaza than the one depicted in the UN report.

Informed Palestinian sources revealed that every day, in addition to weapons, thousands of tons of fuel, medicine, various types of merchandise, vehicles, electrical appliances, drugs, medicine and cigarettes are smuggled into the Gaza Strip through more than 400 tunnels. A former Sudanese government official who visited the Gaza Strip lately was quoted as saying that he found basic goods that were not available in Sudan. Almost all the tunnels are controlled by the Hamas government, which has established a special commission to oversee the smuggling business, which makes the Hamas government the biggest benefactor of the smuggling industry.

So what’s the truth? The bottom line of the UN report is that 99% of Gaza’s troubles are the fault of Israel. Well, nobody can argue that Israel finds Gaza a welcome neighbour. Daily rocket fire from the Hamas territory did not cease even as schools started up again this week. The problem was that this context was omitted by the authors of the UN document.

The UN also is correct to underemphasise the large role that Egypt plays in the Gaza economy, such as providing much of its electricity. More recently, because of the increasing terrorism in Sinai, of which Hamas affiliated groups have a significant part, Egypt has been clamping down on its border with Gaza. Only 24 hours ago, CNN detailed how many smuggling tunnels, a core of Hamas’ revenue stream, have been shut down by Cairo.

For the record, I was talking to a journalist last week, who had recently been through some of these tunnels. He described what seemed to be large and growing centres of commerce, which would do proud any transportation highway around the world.

At the end of the day, the economies of Gaza and Ramallah may share a common trend. Life may not be comfortable for all, while there are still many who are doing well – in fact, really well. However,for the UN to argue that life is unbearable in the Palestinian territories and that is all the fault of Israel’s reminds one of those who print such racist tractates as the “Protocols of Zion”. Both contain the same level of hatred and distortion.

Investing in the Palestinian economy – who gets what?

12 June 2012
1 Comment
Categories: Business, Israel, Palestinian Society, Palestinians

It was recently pointed out to me by a blogger friend that American federal agencies are encouraging those willing to listen that they should place greater investment in the infrastructure of the Palestinian economy. The aim is to move away from the traditional support given to UNRWA or non commercial elements.

A World Bank report in September 2011 describes “the necessity of both sustainable economic growth and effective institutions for a future viable [Palestinian] state. (And)……investment opportunities have arisen in Palestine. For example, in 2011 the Rasmala Investment Bank established the Ras­mala Palestine Equity Fund, which seeks to “achieve long-term capital appreciation by investing in a diversified portfolio of growth and value stocks listed on the Palestine Stock Exchange in securities anticipated to undergo initial public offerings as well as securities at their initial public offering.

One reason for this encouraging change of approach is that the senior Palestinian leadership has yet to shake off the whiff and evil of corruption that pervaded the Arafat dictatorship. To paraphrase a second blogger, Arnold Roth:

Muhammad Rashid, Arafat’s money-carrier (literally), has been arrested. He has been running the Palestine Investment Fund, which in turn controls the Arab Palestinian Investment Company. This organisation is dominated by Tareq and Yasser, the sons of President Abbas.

May not look good to outsiders. The Palestinian Authority (PA) has reserves. Reuters recently observed that:

The Western-backed PA ….says it has poured around $7 billion into the Gaza Strip since its rival Hamas seized control in 2007, but complains that the Islamist group is stymieing its efforts to balance its books……The PA says it spends $120 million a month, or more than 40 percent of its whole budget, on salaries and services in Gaza. 

Remember, those salaries includes dosh for those people launching rockets daily into Israel. And they more than likely funded the “security” provided to a journalist friend as he toured Hamas smuggling tunnels last month. It is also useful to recall that much of this funding comes from the generosity of European taxpayers – over 1 billion dollars since 2008.

Maybe Western leaders are finally aware that this displacement of resources is adversely effecting the average “man on the street” in Ramallah or Jenin. For example, Palestinian sources note that hospitals are facing closure, as they are starved of income. And because the PA has consistently ignored its water obligations under the Oslo Agreement with Israel, villages in the Bethlehem district are now running dry.

Where next? Difficult to say. Palestinian banks are also in a precarious position as they have been struggling to feed the needs of central government. One thing for sure – if you want to invest in the Palestinian economy, make sure that central sources are nowhere near the distribution table.

4 updates on the Palestinian economy

10 March 2012
1 Comment
Categories: Business, Israel, Palestinians

The Palestinian economy may still dwarf in size compared to its Israeli neighbour. It still looks to the international community – particularly the World Bank and the EU – for taxpayers handouts. That said, times are a changing.

1. Exports

The security situation has finally eased enough for Israel to enable trade to recommence between Gaza and the West Bank. On 6 March, after negotiations with the World Food Programme (WFP), 13 lorry loads of date bars from Gaza were transferred to the West Bank, the first such transfer since 2007.

2. Business Development Loans

Thousands of young Palestinians will receive access to financial loans to support their new businesses through a United Nations-backed initiative, which seeks to stimulate the creation of new jobs. The “Mubadarati” loan programme will be carried out by the UN Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) in collaboration with Silatech, a social enterprise company that focuses on creating opportunities for youth in the Arab world.

3. Energy

On a slightly negative note, one problem which continues to plague the Palestinian economy is the lack of continuous energy in Gaza, most of which is supplied via Egypt. Ismail Haniyeh, the Hamas Prime Minister in Gaza, has been quoted as blaming his friends in Cairo. Although a temporary solution has been found, it looks as if factories will be operating on a shortened working week for sometime to come.

4. Israeli involvement – Healthcare

While Palestinians and Israelis are not known for being the best of friends, in the medical sphere the story is often different. Palestinian journalist, Abu Khaled Toameh reported this week that the Palestinian Health Minister, Fathi Abu Mughli, organised a tour of Ramallah by an Israeli team of professionals – although the visit was cut short after strong local protests.

This is no new phenomenon. Israel has consistently proved its willingness to cooperate in the medical arena. Official stats show that in December 2011 and again in January 2012, around 1,400 humanitarian permits were issued to allow Palestinian patients and accompanying relatives into Israel. Back in May 2011, the Sheba hospital near Tel Aviv had supported a project to enable 1,000 Palestinians in the Tulkarm area to receive hearing aids.

Just how large are economies in the Middle East? The World Factbook puts the Palestinian GDP per person at US$2,800. Israel’s figure is over US$31,000. The countries of Qatar, UAE and Saudi Arabia leave everyone way behind.

Yet you have to wonder if these kingdoms invest in their Palestinian friends as Israel does.

World economic gloom and Middle East anomalies 2

10 October 2011
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Categories: Business, Israel, Palestinians

A couple of weeks ago, I wondered why if G8 economies are plunging into a debt-driven recession, they are handing over US$80 billion dollars to Libya, the world’s sixth largest oil producer. Non comprende on my part.

Yesterday, I learnt of another Eastern absurdity that is fooling Western politicians.

The European Parliament (EP) budget committee proposed to increase financial aid to the Palestinians by €100 million in 2012.

Let me be clear. There is nothing wrong in giving to the Palestinians per se. The ec onomy of the West Bank may have picked up. A lovely new mall has opened in Gaza. But the economic base is still very limited.

That said, the question is whether in a time of severe economic instability, foreign monies – extra cash at that – is to be handed out to a grouping, which has a poor record in abiding by the principles of accountability and transparency?

ITEM 1: For years, the Funding for Peace Coalition (FPC) provided an excellent job, monitoring European transfers to Palestinian organisations. The report card for Brussels was so poor that the EU was not even able to publish its own investigation into the issue.

It is nearly a decade since Nigel Roberts, the previous World Bank’s top official in the region, described global financial support for Palestinians as “the highest per capita aid transfer in the history of foreign aid anywhere”. And still the questions remain. Where has it gone to? What has it achieved?

ITEM 2: Numerous UK-based investigative groups over the past few years have posed similar questions to the FPC. The Daily Express newspaper was forced to post the headline: “How 100m of your cash goes to fund terror.” A year later, The Taxpayers Alliance pressure group similarly wondered why aid is distributed without reasonable scrutiny. And I have seen similar articles in Germany, Australia, et al.

ITEM 3: NGO Monitor is an academic group, based in Jerusalem. Over the past decade, it has forced several governments to reconsider their funding efforts of teams, supposedly advocating peaceful change on behalf of Palestinians. In fact, on many occasions, a more deceitful agenda has been hidden from the national Treasuries concerned.

One excellent example is the Dutch government. Over the past 18 months, it has realised the need either to downgraded or to eliminate support for NGOs that have effectively encouraged a policy of incitement against Israel, while purportedly focusing on bettering the lives of ordinary Palestinian citizens. 

And so on.

All of the above have no small share of their critiques. They are despised as right-wing with a narrow – even Zionist – agenda. Even if all this was true or partially true – and in many cases that is inaccurate – , “so what“?

Public taxpayers money is being distributed without due regard. That is unacceptable!

These are not empty words. Just google the phrase “Palestinians + corruption”, and see what you end up with. Abbas, Arafat, Arafat’s family – the list is endless of top people associated with creaming off money. And as Palestinian tax revenues are weak, most of those funds must have come from………… Deja vu!

Will the next load of European dosh support the peace process? “Tawfik Tirawi, former commander of the Palestinian Authority’s General Intelligence Force in the West Bank, has said (last week) that Fatah has not abandoned the armed struggle option against Israel.” Can this threat be interpreted as a case of ‘give me the money or I start blowing up the peace process’?

What next? I quote a very simple line of thought from Laima Andrikiene, MEP and vice chairperson of the European Parliament’s Subcommittee on Human Rights:

It was about time the European Parliament showed some common sense and demonstrated that it can base its policy with countries beyond the EU on clear-cut strategy and reason.

The real poverty in Gaza

1 July 2011
2 Comments
Categories: Business, Israel, Palestinians

One year after Israel naval commandos stormed a Turkish aid ship bound for Gaza, a second flotilla is now setting off with the same aim.

Last year’s attempt to break the Israeli naval blockade of Gaza ended in farce, each side with their own spin. Did Israel break international law? On the other hand, why were some of the participants up for a very violent fight and why was much of the so-called aid out of date? Strange.

As for this time round, let’s move past the rhetoric and ask if Gaza really needs an armada of aid. Was David Cameron correct when he said earlier this year that Gaza is a “prison camp”?

Israelis will argue that Gaza is not what the BBC or New York Times try to portray it as. While not exactly the Bahrain of the Near East, neither is Gaza totally a basket case. For example, the Hebrew newspaper “Yediot” had a 2-page feature with colour photos, detailing how Gaza is developing. The beaches look full and the shops are busy.

The Israeli army issued a video this week of a typical convey of luxury goods passing into the Gaza Strip from Israel. Similarly, a snappy 80 second utube clip clearly reviews how many parts of Gaza have long since abandoned poverty levels quoted by politicians. (You have to wonder who posted the original video.)

OK, so for more objective reporting, I turned to overseas correspondents. A Japanese writer had observed a few months ago that “Gaza and the West Bank are the only places in the world where I have seen refugees drive Mercedes.”

This week, a syndicated article from Ethan Bonner looked in depth at the emerging tunnel economy of Gaza. A powerful opening paragraph observes how: –

Two luxury hotels are opening in Gaza this month. Thousands of new cars are plying the roads. A second shopping mall – with escalators imported from Israel – will open next month. Hundreds of homes and two dozen schools are about to go up. A Hamas-run farm where Jewish settlements once stood is producing enough fruit that Israeli imports are tapering off.

Kevin Myers in a brave analysis in the Irish Independent asks: –

how can anyone possibly think that Gaza is the primary centre of injustice in the Middle East? According to Mathilde Redmatn, deputy director of the International Red Cross in Gaza, there is in fact no humanitarian crisis there at all. But by God, there is one in Syria, where possibly thousands have died in the past month.

After all, if the Palestinian news agency, Ma’an, is to be trusted, there is no shortage of cars in Gaza. The reason for the lowish number of new items is due to the local tax regulations imposed by Hamas.

An interesting blog summed up the forked approach to Gaza’s economy very succinctly:

While violence continues in Syria, Libya, Egypt and Yemen, there is one place in the Arab world where stability is growing as factories and farms multiply, construction booms and unemployment drops.  Ironically, that place is Gaza – the place singled out for international attention as the next flotilla prepares to sail, staffed by leftist loonies bearing solidarity, love and concern for people who are better off than many Americans living in Newark, Detroit, Washington D.C. and New York.  These pusillanimous rescuers are not floating off to Darfur, Congo or Sudan where photo-ops are hard to come by and marauding thugs are unfazed by such concerns as respect for interfering faux do-gooders.  They are not trudging to Afghanistan where sick people and the medical staff who tend them are marked for murder, nor will they insist on seeing Gilad Shalit, the Israeli soldier held captive by Hamas for five years without a single visit by the Red Cross.  Their outpouring of compassion exists only for the purported victims of Israeli aggression – there is no credence given to the barbaric tactics of Hamas planting its military operations in the midst of their own civilian populations, or murdering its own domestic opposition, much less targeting Israeli children on school buses for demolition.

So is the latest flotilla designed to help the people of Gaza or satisfy the dubious ranting of those people claiming to be supporters of peace?

The Israeli army and society – a personal viewpoint

27 April 2011
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Categories: Israel, Palestinians

My son is just finishing basic training in an infantry unit in the Israeli army. When I explain this to colleagues around the world, a wave of enforced silence hits the conversation.

Am I mad? Is he mad? Can’t you send him off to university? Isn’t it dangerous? etc etc

Well, yes Israel is surrounded by enemies. Our democracy needs defending. There is talk of the next Gaza campaign. And that’s before you mention the possibilites of Egypt worming its way out of peace treaty or the Iranian threat or Syrian unrest …..

There again, this is not Syria. Nobody sends soldiers up on rooftops to fire at protesters in Tel Aviv, nor in the West Bank for that matter. For all the complaints raised by international protest groups over the January 2009 battle in Gaza, no soldier was found guilty of issuing immoral orders.

This is very much a people’s army, where your commanding officer can often be your neighbour.

Mere words? I think not. Have a look at recent postings on the website of the army, the IDF, Israel Defence Force.

1) “There is a 200% increase of minorities volunteering to join the IDF”. This includes Bedouin, Druze, and Arabs of different religions. The report does not mention the many immigrants, who are able to complete their voluntary conversion process to Judaism through the army.

2) Over the past 4 months, the IDF has helped Druze farmers transfer 12,000 tons of produce to their fellow religionists in Syria. This has become an annual process, facilitated by the Red Cross. Fortunately, this year’s crop was completed before the Syrians closed the border as part of their clampdown.

3) The IDF was one of the first teams to send a field unit to Japan. This follows on its success in Haiti and other countries, which have suffered from a natural disasater in recent years. 

Many elements of the ultra orthodox continue to ignore the importance of the Israeli army as a motivator, as a builder of society, as a provider of skills for life, and much more. In truth the IDF remains far more than just a big bully as frequently projected by the likes of the New York Times or the BBC.

And if my son is part of that process, I am proud of that.

Pls sir, can I have another US$5 billion?

14 April 2011
No comments
Categories: Business, Israel, Palestinians

Palestinian Prime Minister, Salim Fayyad, is canvassing Western support for a US$5 billion investment package spread over three years.

Compared to the needs of Portugal ($113b) or Ireland ($50b), that ain’t so much. And nobody can argue that the Palestinian economy is one of the richest in the world. So, in the context of an era when despite open persecutions in Syria, Yemen, Iran or wherever, the Palestinian issue is still considered the cause of unrest in the Middle East, Fayyad’s plan has a real chance of going through.

In my private capacity, I deal with small investors, who always have questions before they throw their money at a new project. So here are my three questions, under the bold assumption that a Western taxpayer might be interested.

1) Is so much money needed?

The World Bank report, “Building the Palestinian State” from 13th April 2011, is highly informative. The press release implies that future growth via overseas help will depend on the relaxation of Israeli restrictions.

Well, nobody can deny that. Before the violence of the second Intifada and the ensuing clampdown, World Bank researchers showed that the economy grew under Israeli governanceby over 5% annually since 1968 . Yet just two weeks ago, a British tourist was killed by a Palestinian bomb in Jerusalem, not allowing a removal of all security measures. 

Yet in parallel, there are signs that the Palestinian economy is actually doing very well. In the executive summary on page 5, the report notes:

Education and health in the West Bank and Gaza (WB&G) are highly developed, comparing favorably to the performance of countries in the region as well as globally. For example, enrollment in secondary education is roughly 20 percentage points higher than the rate in the average middle income country, and levels of malnutrition are 7 times lower.

A week previously, Reuters had described how:

The hilly city of Ramallah, which lies just to the north of Jerusalem, has undergone a massive boom in recent years on the back of Western donor support, with new smart eateries and bars mushrooming alongside a plethora of pristine office blocks.

Significant is the contradiction in the World Bank report, which concentrates on the importance of donor aid. However, as the IMF noted and then cited by Forbes, the need for donor aid is dropping all the time, down to under US$1 billion for 2011.

2) Where is the accountability and transparency?

If the aid or investment is to be given, who will track that it is to be put to correct use? Despite the best efforts of the World Bank and the use of interim mechanisms, money is still transferred via Ramallah to pay for the salaries of thousands of Hamas supporters and operatives in Gaza.

Of equal concern is the opinion of Palestinian President, Mahmoud Abbas. Back in January, he was quoted in Al Hayat al Jadida that “the US is assisting us in the amount of $460 million annually. This does not mean that they dictate to us whatever they want, because we do what we view as beneficial to our cause.”

In a period of international economic instability, with governments cutting billions from their budgets, US$5 billion is no small sum to let go of and wander off on its ownsome.

3) What about other countries?

Fayyad’s appeal is to the West. He specifically started the ball rolling at a conference in Brussels. Yet, in the past month alone, the price of crude oil has jumped by around 20% or US$20 per barrel. Now that is one heck of a lot of extra revenue, which sure ain’t going to the protesters on the streets in Bahrain or Damascus.

So tell me again; just why are Western governments going to accept the brunt of this call from Fayyad? Is anyone going to challenge the figures?

The Middle East peace exercise

13 March 2011
3 Comments
Categories: Israel, Palestinians

Yesterday evening, my regular keep-fit routine was disturbed. I could not get out of my head that 5 people had been slaughtered in their sleep, just a 2 hours drive away. That includes a 3 month old baby. Even now, it keeps buzzing in my mind – how can anybody be driven by such manic hate to do that?

 According to initial reports, a couple of people had climbed over a fence, which had set off an alarm. The security team treated it as a false alert. 2.5 hours later, 5 bodies, and time for the perpetrators to celebrate.

Most readers of this blog will not have heard of the incident. Drowned in the information avalanche from Japan’s awful tragedy and hidden by the news of the no-fly zone re Libya, there was no space left for coverage on Sky TV. (There was just room for Charlie Sheen on its website.)

And of course, these were 5 humans who lived in Itamar, known as a right-wing hot house in Israel’s West Bank. So, in the politically correct spin of 2011, the media can afford to ignore the story.

Obama was disgusted. Hague, France and others were similarly shocked. The Quartet condemned the incident “in the strongest possible terms”.

I am not an expert on the peace process and rarely comment about it directly, but it seems to me that it will take a mix of 4 elements to get it to work.

Israeli compromise: Israel has already ceded land to Egypt and to Jordan in return for peace. It had offers on the table to both the Palestinians and to Syria a decade ago,which were ignored.  And I dare say that while Netanyahu is most reluctant to give up anything else, he has declared repeatedly his willingness for a two-state solution.

Palestinian compromise: The Palestinians have pulled out of peace talks twice in the past decade, as they were approaching decision time. Chairman Arafat ran away from Clinton and Barak at Camp David in August 2000, seeking the path of Intifada. And two years ago, President Abbas could not bring himself to announce an agreement with Olmert. In fact, since the details were leaked, the Palestinian team has denied the whole story.

Support from Arab states: Former President Mubarak is no saint. As ruler of the strongest military regime in the Arab League, he kept the peace process alive with Israel. He enabled King Hussain of Jordan to join in, etc. He is now gone. Israel’s gas supply from Egypt has been “temporarily” shut off on a continuous basis. Iranian ships have sailed through the Suez Canal for the first time in years.

Western encouragement and neutrality: The commitment of Europe to find a just peace cannot be argued. Only last week, the EU’s most senior foreign affairs diplomat, Catherine Ashton issued another statement, demanding increased Israeli flexibility. Hague, Clinton et al did the same. However, as at Munich, it was difficult to find a similar demand from the other side.

Tragically, this flexibility has now been reflected in some poor patrolling and the death of five civilians. No generous comments of sympathy from Arab states and no return to the peace table by the Palestinians.

Meanwhile, I continue share something in common with Western diplomats. We have both put on a few kilos this week for lack of effort. I gave up on my exercises, and they have been sitting around again with the wrong peace formulas for the Holy Land.

Libya – a temporary distraction for the West in the Middle East

28 February 2011
1 Comment
Categories: Israel, Palestinians

Sky News TV is leading a brilliant expose of Colonel Ghaddafi’s reign of torture. The UN has rushed to declare wide-ranging sanctions. Obama is appalled.

But where have these hordes of self-righteous protesters been until now? It is only a few months ago that CNN and Human Rights Watch were praising the regime in Tripoli.  In January 2003, Libya was elected to head the UN body on human rights and nobody muttered a word. The world was too busy condemning Israel, defending itself from Palestinian homicide bombers.

Back at Sky, they have issued an easy-to-understand map of the Middle East, explaining why so many people are revolting. No mention of the Palestinian territories. The economy in Gaza is clearly on the up, which ironically is damaging Hamas’s financial stranglehold. With amazing irony, the tourism industry in the West Bank has benefitted by the Egyptian turmoil.

So where is the West going to focus its attention next week? Well, actually if you look beyond the headlines, they are desperately trying to get back to the Palestinian Issue. Apparently, this is the main cause of instability in the Middle East, a unique spin designed to help decision makers ignore torture and riots in Algeria, Tunisia, Libya, Egypt, Jordan, Oman, Iran, and Yemen………to name but a few. 

Tony Blair has arrived in Jerusalem to help prepare for the next round of Quartet meetings and pressure Israel. Obama needs to balance helping Israel recently at the UN. According to a report in the Israeli newspaper, Yediot, the British Foreign Minister is considering recognising the state of Palestine, even if this is in direct contradiction to the commitment of both parties not to take unilateral one-sided measures.

But here’s that all misses the point.

Mohammad Bouazizi didn’t set himself on fire in December, thereby triggering Tunisia’s Jasmine Revolution, to express solidarity with Palestinians. Instead, his suicide was a direct response to the economic and social strictures in his own country…..The conventional wisdom that the Palestinian-Israeli conflict is the mother of all problems in the region has now been exposed as nothing but a myth.

What gets me is that all the efforts of the West are based on the support of moderate regimes like Egypt and Oman and Jordan, which are supposed to help convince Israel that they will ensure that no Arab country will attack it again, once Palestinian land has been given up. But these governments no longer exist or have had to back track.

Be it Hague or Blair or Ashton or Obama or Clinton, can we believe that the word “oops” – with a large O – is in their vocabulary? Or does the Libya fiasco merely provide another distraction to learn how the Middle East really works?

Arab unrest: The shoe thrower’s index and Israel

17 February 2011
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Categories: Business, Israel, Palestinians

The Economist magazine has made great efforts to predict which Arab country might be the next to fall after Egypt. Syria? An emirate?

More intriguing is the “Shoe Thrower’s index, which aims to predict where the scent of jasmine may spread next.” Simply using factors such as youth ratios, unemployment and corruption, the Economist has attempted to which autocracy could go next, assuming that the bug spreads.

It is interesting how Egypt, Libya and Yemen figured at the top. There again, Tunisia is placed in the middle, close to Jordan, another potential time bomb, and Bahrain below that. So, the index makes for a cute exercise, but it is not complete.

Marxists and co are having a field day. Do the violent street protests signify a return of proletarian revolutions, with the proverbial spark spreading virally via facebook? A man burns himself in a backwater town in Tunisia and within a month, billions of petrodollars become meaningless, as leaders in Iran, Bahrain and Algeria hurry to learn the art of damage limitation. 

So where are the protests from the Palestinians? Without claiming that Israel is the perfect country – who is? – it is all very quiet inside the Ramallah/Gaza axis. True, Abu Mazen’s cabinet reshuffle is seen as a defensive response rather than a move from strength. And the Palestinian Independent Commission for Human Rights issued a statement on 6th February:

concerned by the restrictions on freedom of expression and peaceful assembly by Palestinian security agencies, which have banned peaceful protests by Palestinian citizens in solidarity with the people of Tunisia and Egypt.  On 2/2/2011, the Palestinian police banned a peaceful protest which was organized in the city of Ramallah and arrested a number of journalists and participants for a short period of time.

In Gaza, it is possible that the situation is still too raw for change. “The new wealthy class — many associated with Hamas — as well as established capital owners are concerned about keeping their money inside Gaza, preferring to move it abroad….even to Israel”

As for the Jewish State, the Netanyahu government has backed down on some price rises. There may be a general strike in two weeks. But there are no mass demos, coloured by riot police. Why?

Dr Robert Brookes is leading blogger in the field of psychology. With amazing irony, his latest monthly posting is titled “we all want out voices to be heard“. He concludes that: –

Self-determination and autonomy are basic needs that exist throughout our lives, …… Intrinsic motivation and democratic ideals flourish when environments encourage and support one’s voice being heard. In all of our institutions, whether in schools or in various organizations or businesses, those in leadership positions must ask if all members truly believe their opinion is respected and that they are afforded a certain level of choice and autonomy. This kind of respect does not imply a loss of authority on the part of leadership, but rather the cultivation of a climate in which leadership will be honored for validating the input and voices of others.

For all its faults, and despite of a very real existential threat for all of its modern history, Israel has a free press, freedom of worship and a secret vote for all. The country is at the heart of the industrial revolution in telecommunications, with over 50 companies at this week’s World Mobile Congress in Barcelona. Open source tech and apps are everywhere, near impossible to block. 

I know that many, possibly even most, of these demonstrators in the Arab World do not like Israel. But for all their hatred, are they telling their leaders that they are actually envious of the way the Holy Land is ruled? Israel is a democracy.

And maybe there is another message here for world leaders. They have often thrown shoes at Israel, claiming that Jerusalem’s intransigence on the Palestinian issue is the core of instability in the Middle East. The Economist’s index is telling you that it is time for a review of your mindset.

Reasons to invest 100m Euro in a Palestinian start up

4 January 2011
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Categories: Blog, Business, Israel, Palestinians

The European Commission decided today (22.12.10) to provide an initial financial package worth €100 million for the Occupied Palestinian Territory under the 2011 budget.

Now that is a pretty cool donation, especially from an international organisation also financing at least 4 economies suffering meltdown. And this public money is going to end up in an economy that does not officially exist, at least as a member of the UN.

This is not the only set of Western taxpayers funds ending up in the Treasury of the Palestinian Authority. The UK recently confirmed that it had contributed approx US$45 in 2010 to the World Bank Trust Fund, which “pays the salaries of public sector workers in both Gaza and the West Bank”. Japan gave US$12m in early December. Mrs H Clinton came up with US$150m. And so the list seems to go on.

Conglomerates from the private sector have also joined the game:

  • Cisco will invest $5 million in a venture capital fund for Palestinian startups.
  • Google is investing $2 million which will include contributions to the same VC fund and to the local operations of NGO Mercy Corps.
  • A long term commitment by HP to expanding business operations in Palestine and local collaborations with USAID.
  • Intel will expand cooperation with Palestinian IT/software firm Asal Technologies.

Is this a wise bet on the future or just politically correct? SKY TV recently reported on the new strengths of the Palestinian economy. Google Bethlehem at Christmas and you will find plenty of info on how Manger Square has been full of tourists this year.

According to David Makovsky of the Washington institute for Near East Policy, Prime Minister Salam Fayyad claims that 120 schools have been built in the last decade. Those and 3 new hospitals, 50 health clinics, hundreds of new or resurfaced roads, etc, etc. And tax collection was up 50% in 2010, although starting from a meager base.

Bottom line for Fayyad is that poverty is down a third as are expected contributions from foreign assistance.

 It’s all looking very positive….that is until you start to ask a few questions.

1) The European press release above recognises that “the EU now fulfils by far the pledges made at the Paris Donors’ Conference in December 2007.” Good. Encouraging. So where are the equivalent donations from Arab countries. What do they know that is stopping them from fulfilling their pledges and thus investing?

2) If the World Bank Trust Fund is asking the UK and others to contribute to salaries of public workers in Gaza, they are effectively paying the wages of Hamas officials. Hamas is listed as a terrorist organisation. As I write, news came through that Hamas has illegally arrested over 3000 political opponents in 2010 alone.

3) If the Palestinian economy is improving so much, why is so much aid needed in the first place.  The World Bank talks about 8% annual growth. New luxury hotels are to be seen in Gaza and in the West Bank. Israel is no longer withholding tax revenues as all debts by the Palestinian Authority are accounted for. Even the number of manned Israeli roadblocks in the West Bank is only 14 in number, thus allowing for easier commerce.

So here’s my issue: When an investor or venture capital group seeks to become involved with a new project, they look at the skills available, the team, transparency, history, and future accountability. They consider who else will share the risk. Above all, is it possible to assess the true need.

Would you invest 100m Euro in one go under such conditions? There again, in this case, it was signed off by those who are not necessarily accountable.

Christmas cheer and Bethlehem’s economy

20 December 2010
3 Comments
Categories: Israel, Palestinians

How do you know it is Christmas time?

The Europeans always complain that the amount of snow is wrong, whatever the quantity. The shopkeepers are never happy with either the pre or post festivity purchasing stats. And the “spinners” in the Israel-Palestinian conflict begin to bombard the gullible with slanted stats about life in Bethlehem.

Here’s what I mean:

In “New Christmas Story: Bethlehem under Occupation“, the reader is asked to believe that Israel has effectively banned Christianity from Manger Square. Published almost on the same day, Human Rights Watch (HRW) in New York called for a boycott of Israeli products manufactured in the West Bank, as the Jerusalem government must be seen as a brutal occupying force.

Israelis will reply that economic growth in the West Bank is bouncing along at about 8-9%, now that the Palestinian Authority is directing more resources towards proper government and away from violence. And the HRW report can only be described as a pathetic or dangerous whitewash, as “the manufactured allegations erase the context of a protracted and intense conflict, and ignore the legitimate security needs of Israel.”

So what is happening in Bethlehem, Christmas 2010?

The Catholic News Service has just reported that:

With five new hotels in the works, a handful of new souvenir shops opening recently and nearly 40 restaurants able to serve crowds from 100 to 1,000, the Bethlehem economy is showing signs of recovery following the desperate intifada years. For the first time in years, shop owners and tourist industry workers in the birthplace of Christ are optimistic and have confidence in the economy. For most, 2010 was the best year for business in a decade.

And it is an established fact that Israeli and Palestinian tour guides are cooperating, bring trade to each other under a new scheme. In fact, as Israel is completing a boom year in tourism and as around 2/3 of the visitors are Christians, it can be assumed that many have ended up visiting Bethlehem.

Start crawling the net and the evidence from non-partisan sources is that life ain’t too bad in Bethlehem these days. By the way, it should be emphasised that every since the municipal boundaries were reorganised by Chairman Arafat in 1996, the city has been predominantly Muslim.

Led on by the Palestinian PM, the Christmas preparations near their climax. Meanwhile, 15 miles away in Israel, two Christian tourists were attacked , probably by terrorists. One died of her wounds.

The financial media discovers Gaza

29 October 2010
6 Comments
Categories: Business, Israel, Palestinian Society, Palestinians

Writing 2 weeks ago in the UK newspaper, The Mail on Sunday, Peter Hitchens summarised an extensive visit to Gaza, which he described as “world’s most misrepresented location“.

Hitchens coverage was the first amongst several similar stories in the international, all with a similar theme.

I don’t think it (Gaza) is a paradise, or remotely normal………..There are dispiriting slums that should have been cleared decades ago, people living on the edge of subsistence. There is danger. And most of the people cannot get out. But it is a lot more complicated, and a lot more interesting, than that………

But if you think Israel is the only problem, or that Israelis are the only oppressors hereabouts, think again. Realise, for a start, that Israel no longer rules Gaza. Its (former) settlements are ruins.

Even when, as in Gaza, there is no way out, morality patrols sweep through restaurants in search of illicit beer and women smoking in public, affronting the 14th Century values of Hamas.

Hitchens is going against a decade or so of politically correct wisdom. Two years ago, Time Magazine pleaded: “Please spare a thought for the starving Palestinians of Gaza. There are 1.5 million of them”. In parallel, and industry of NGOs has arisen, although they seem content to criticise Israel but never the excesses of Palestinian rule.

So what is the truth? was there ever hunger? Has Gaza suddenly discovered gold? Has it been wealthy all the time, but nobody really reported the facts? As Hitchens also commented, the truth in the Middle East is rarely what you see on the surface, so let’s dig a bit more.

Go to any IMF or World Bank report on the Palestinian economy  – and Gaza in particular – and you will find a depressing set of economic statistics. Every since September 2000 when Yassir Arafat and the Palestinian Authority launched the Second Intifada, the economy has nose dived.

But if financial growth in Gaza went backwards, then previously it must have achieved a “higher” level from which to fall. And this is where the work of Sebastien Dessus for the World Bank is so valuable. Professionally, he has been tracking the Palestinian economy for over a decade. Note what he says about the period from the onset of Israeli rule to the start of the Intifada.

While real GDP grew by 5.5 percent on average in West Bank and Gaza from 1968 to 2000, it only grew by 4.2 percent in Israel. During the same time, population grew by 2.9 percent in WBG and 2.4 percent in Israel.

Does that put the Palestinians as one of the most successful economies in the last quarter of the twentieth century? Bring on the Intifada, suicide bombings and attacks from Gaza, and the Palestinian population suddenly found themselves without 125,000 jobs in Israel. And these were considered relatively well paid positions. Couple this with Israeli defensive measures – justified and  / or repressive – and you have the recipe for a mega economic dip.

For the Palestinian leadership, the question was did the political uplift justify the financial turmoil, a debate I will not deal with. Certainly, key personalities did not suffer. Fatah strongman, Mohammed Dahlan amassed a personal fortune since his PA career began in the late 1980s, organising youth mobs in Gaza City. Hamas has collected a wealth of taxes from the smuggling industry, leading to “unprecedented social mobility” according to one local source.

And today? As Hitchens writes, life in Gaza is not a picnic, but neither is it a disaster. Further recent evidence?

  • The Financial Times has described the al-Deira luxury hotel, which has remained open despite Israeli measures and the repressive practices of the Hamas government.
  • Mai Yaghi, a local Gaza reporter has detailed how the old smuggling tunnels have a completely new and ironic purpose , because “lifting of restrictions (by Israel) in recent months has seen consumer goods pour into the Hamas-run territory through Israeli crossings, transforming the tunnels that once served as a lifeline for Gaza into its sole export channel.”
  • The EU’s representative to the West Bank, Gaza and UNRWA, Christian Berger, not considered a friend of Israel, has been quoted as saying that the area is “full of consumer goods”. 
  • And if Berger feels that there is not enough ready cash and actual purchases, he should recall that the largest employer in Gaza is the civil service. The Palestinian Authority is still paying the salaries of these 67,000 people, even if many are paid up Hamas officials.

Is Gaza rich? No. It still needs the tons of daily aid, which Israel facilitates. On the other hand, a utube video from an unknown source shows beyond doubt just what multiple resources are available in wide parts of the territory.

And is there a lesson for the future? Look what is happening in the West Bank. Hatred of Israel may still predominate. But much of the violence has been laid to one side. As Time Magazine now observes.

Ramallah’s first five-star hotel, a Mövenpick, is opening this month. Across the West Bank, similar scenes are unfolding. Building cranes pierce the sky. Outside Nablus, new car dealerships sell everything from BMWs to Hyundais. Inside the ancient city, the first movie house to open in 20 years, Cinema City, is hugely popular. Last year the Hirbawi Home Center, a five-story shopping mall selling luxury items like plasma TVs, opened just outside Jenin.

Indeed, the IMF has reported that the Palestinian economy is on track to grow 8% in 2010.

So, the international media have confirmed that Gaza is not an economic prison. One question remains. As Tom Gross, a leading commentator, pondered; why does the BBC, possibly the world’s largest communicator, seem determined to ignore this story?

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