“Buy Palestine” narrative under construction
Palestine says it’s open for business.
Ramallah, West Bank
This article was originally published March 20, 2016 on Byline Times
In November 2015, PalTrade, an organization promoting trade in Palestine, held a conference to promote the virtues of export-driven growth and lay the foundations for a “new narrative”.
Tourism is definitely one of the big draws, and one leg of the press tour found me riding the Jericho cable cars to the Mount of Temptation from where you can survey thousands of years of history.
After arriving at the top and bargaining for a Keffiyeh, to the sound of the shopkeeper yelling at a welder to stop dropping sparks from above the entrance, you can climb the stone steps to the Orthodox Christian Monastery of Temptation, where the gatekeeper Mohammed will provide you with a giant metal key as a symbol that you can enter.
The restaurant is amazing.
I’m a financial journalist and am frequently invited to both casual and business events. Big brand name banks and investment fund-types alike are genuinely eager to hear news with an economic slant when I tell them I’ve travelled to Ramallah in the West Bank for a press tour.
The first question I’m asked is: “Really? Exports, Palestine? What do they sell?”
Another leg of the junket visited the Jericho Valley, taking us through an industrial park (run in partnership with the Japanese government) and a date factory, Nakheel Palestine.
Nakheel exports brand-named agricultural products — Jericho Dates, Moon City Dates, and Barhi Dates — to ten markets including Turkey, Russia, Qatar, the UAE, Indonesia, Malaysia, Singapore, the UK and most recently, Lebanon, Norway, the US and New Zealand.
Exports represent 70% of total production, according to data from the company.
Nakheel is on an upswing, increasing production, storage capacity and tree planting over the next season. But one of the major challenges, echoed by the range of companies our group heard from, is transportation.
For some the problems are getting products out through available ports, for others it’s getting supplies in via existing roads, or both, or access to water for agriculture, and the geopolitical situation underpinning such obstacles is likely to remain a risk factor for some time.
20-year cycle of optimism
The cable cars began life in 1997, at a time of relative prosperity. This was an era when “there was more trade than aid”, said Kito de Boer, head of mission at the Office of the Quartet at PalTrade’s conference.
Since then, GDP, investment in business, and exports as a percentage of GDP have all halved, he added. “The only thing that has grown over those last 20 years is unemployment, which has doubled.”
And it’s not a question of ‘fine-tuning’ either. “It’s actually pausing and stopping, and saying, well, if this isn’t the right path to the place that we want the State of Palestine to be, what is?” he said.
That means a rigorous look at the fundamentals of economies: access to land, water, mining rights and minerals, and trade. The five neighbouring countries — Lebanon, Syria, Jordan, Egypt and Israel — he added, have a big part to play.
“The five countries that neighbour (Palestine) have a total GDP of $1.6 trillion, that is 125 times bigger than (Palestine’s) economy. The amount of that they import is $550 billion dollars, just the five countries that neighbour you. That’s five countries, forty-five times your GDP, if you could only get one percent of the inputs, you would be doubling your level of exports,” said de Boer.
But there are signs of improvement as the National Export Strategy, launched in 2014, takes effect. Preliminary figures from the Palestinian Central Bureau of Statistics show 2015 exports are at $1.6 billion, a slight lift from 2014’s $1.5 billion. The unemployment rate has dropped too, from 27.5% in 2014 to 26.6% in 2015.
In moving the strategy forward, the Office of the Quartet is tackling transportation issues by investing time and energy into physical infrastructure, for example, upgrading the Allenby Bridge, the only international crossing point between the West Bank and Jordan, and Kerem Shalom crossing, in Gaza, de Boer added.
Reactions at the conference to the Quartet’s involvement were mixed, with audience questions taking on a “what has the Quartet ever done for us?” tone.
Palestine’s business community talks pragmatism
Considering the way higher costs of transport eat into the profit margins, it is a testament to the resilience of the business community that companies are profitable. There’s also a day-to-day mentality of incremental perseverance.
Speaking at the conference, Maher Masri, board member of the Palestine Investment Fund, said, via a translator: “We are holding onto our land, and we produce with the resources and potential that we have and we export accordingly.
“We can have a step forward — you can increase your exports, you can improve your product to reach other markets, so I am not pessimistic.”
Perhaps the most difficult realities to deal with are the minutiae, things that seem trivial but go straight to the heart of identity. Like bar codes associated with products.
Group COO of the Arab Palestinian Investment Company (APIC), Ali Al-Aggad, said via a translator: “Examine any Palestinian product that you have today, and the code. Can you tell me what bar code this is? I have been living here for 20 years and up to now we don’t have bar codes. Why? I don’t know. Bureaucracy?”
APIC saw net profits after taxes in 2015 at $12.4 million, up 9.4% year-on-year. Aside from Palestine, the firm has subsidiaries in Jordan and Saudi Arabia. Total revenues in 2015 stand at $542.2 million.
“This is a multinational company, our products have Jordanian bar codes, not Palestinian. We don’t have an identity of our products,” he added.
ICT as an emerging sector
Across the board, there is great optimism for Palestine’s Information and Communication Technology (ICT) sector, to a large extent because delivery of products isn’t hampered by the politics of border crossings.
The tech sector was not widely represented at the conference, though there was a visit to Exalt Technologies, one of the largest companies in the sector, employing 120 people, of which 36 are women.
Exalt provides software development for export, mainly to the US. Clients include industry giants such as Cisco and Hewlett Packard. Tareq Maayah, the firm’s CEO, said via email that the company is “always seeking new customers for high tech sector”.
Ibrahim Abu Kteish, a former director of the IT Centre of Excellence at Birzeit University, said that of some 50,000 graduates from university, only 10% find jobs. He is currently a program manager for the Digital Entrepreneurship Program run by Leaders’ Organization, an NGO.
Three years ago, the organization started an “acceleration model”. Every quarter, two or three companies receive an initial investment of $40,000. The 15 companies that have been accelerated so far now hire about 60 employees, Kteish added.
The major challenge is a skills gap, he said, in that would-be entrepreneurs don’t have enough exposure to what’s happening in the age of Uber and Airbnb.
Rawan Abu Ishira, program coordinator for the Digital Entrepreneurship Program, said that while speaking at a university to improve an entrepreneurial pipeline, she asked how many people knew about Uber?
“Out of all the students, nobody knew what Uber was. This is because of the education system and exposure to entrepreneurship in Palestine,” she said.
There are success stories, she is quick to add. Yamsafer, an online accommodation booking website in the Middle East, has finalized foreign investment. The company combines website, mobile app and call centre booking in its service delivery. Other companies, like Webteb and and Batuta have finalized Series B investments.
This proves, said Ishira, that there is potential in the future to create disruptive new ideas in the region.
3G in Palestine set to go
Start-ups, noted Kteish, have been struggling to be connected with clients in an era of 2G, but once 3G takes off it will create new opportunities.
Ammar Aker, CEO of Paltel, a major telecom operator in Palestine, agrees, and is at the forefront of negotiations to implement a recent agreement for 3G access.
“I am very optimistic. I can tell the difference in tone from all the parties involved,” he said. “There is at least a decision at all levels to allow 3G in Palestine, and there are some details (that) need to be captured and worked on, and pushed from different sides to get it done.”
He expects to have 3G by the end of 2016, which he also hopes will create momentum for 4G within the next few years.
Along with APIC, Paltel is listed on the local stock exchange, PEX, another great story to tell financial types about.
Really? Stock Exchange? Palestine?
Palestine’s bourse is largely cash equities, has a listed bond, and is shopping around for technology to start a derivatives market for foreign exchange options, choosing between Millennium IT (London Stock Exchange Group-affiliated), Nasdaq, and India’s Fintech platforms.
Its 2015 aggregated net profits amounted to $273.3 million, up 22% from 2014, according to PEX figures. 36 of 49 companies were in profit. At a time of turmoil in the Arab world, Palestine’s exchange remains one of the most stable in the region and has been recognized by both the MSCI and FTSE Group investable indexes.
In terms of exporting companies, pharmaceuticals dominate, explained Ahmad Aweidah, PEX’s CEO. There are currently five listed pharmaceuticals, all of which export, some to Europe, and a sixth based in Gaza in the pipeline to list this year.
The manufacturing and agricultural sectors tend towards family-owned companies, in which the culture, Aweidah said, can be an impediment to listing. “The exchange is not a primary source of capital…the banks here are very competitive. There are lots of banks willing to give financing to companies and a lot of companies think it is easier, quicker and cheaper to just take bank credit whenever they need it.”
“And you have the old culture issues related to control, transparency and disclosure,” he added. “These are real issues, and they don’t apply to Palestine only.”
The exchange is trialling the onboarding of one family-owned company, Aweidah noted: “Once we do it, and are successful, I believe there will be scope for more, other family-owned companies to consider going public. But it’s an uphill battle. It’s a long-term thing.”
What about the the smaller enterprises?
For the SME (small and medium sized enterprises) community though, financing can be a struggle, said Mohammed Elayyan, project coordinator at The Palestinian Network for Small and Micro Finance.
In both Gaza and the West Bank, rural Palestinians in particular face difficulties in accessing traditional bank loans due to lack of guarantees, he said, the alternatives being credit unions, entrepreneurial programs and savings groups, as well as microfinance.
At the end of 2015, the microfinance sector provided microloans to almost 70,000 clients in the West Bank and Gaza, with an average size of $2,270. Compare this to the average annual salary at $6,000, and it’s not such an insignificant boost.
That there is no local currency is a problem, he noted. Transactions use the Israeli shekel, US dollar, and Jordanian dinar, along with a sprinkling of the euro.
Elayyan was at PalTrade’s exporter week conference to get a clearer picture on trade and regulations: “This is in order for us to improve the conditions of the (microfinance) clients, to upscale them, and expose their goods and services to other countries,” he noted.
Elayyan also explained the role of the Palestine Monetary Authority (PMA) in recognizing a legal status for microfinance institutions: “PMA is the regulator party of microfinance sector, and it’s acting like a central bank. PMA (sets) regulations (that) institutions should follow to get the license from PMA, which allows them to attract local and foreign investors, loans from commercial banks, lets institutions be sustainable financially, and gives opportunity to expand their works.”
Legal identity — of products, of currency, of status — is a recurrent theme during the tour and conference, and a theme punctuated by visits to cultural sites such as Yasser Arafat’s Mausoleum, where a young soldier proudly and earnestly explains the symbolism in every choice of stone and pool of water. National heroes draped in flags are a type of export too.
For a journalist, even a non-political financial type, there’s not much that beats the Mahmoud Darwish museum, which honours the award-winning national poet, rabble rousing editor and seemingly all-round troublemaker.
His resting place is complete with a Speakers Corner platform set against the striking backdrop of a massive flag, which I later learn is identical to that of the former Arab Federation, being photographed by a joyful crowd of admirers.
Ali Hashem contributed to this report. He is a freelance financial journalist interested in UK and international SME financing. He is a Councillor in the London Borough of Hammersmith & Fulham and Co-founder of DeskNinjas, a coworking office space for freelancers and entrepreneurs.
Peter Barker edited this report. He is a journalist specialising in macroeconomics and capital markets, with an emphasis on Europe, Asia and China. Formerly he worked for ITN at its London headquarters on national and international news and now works for Xinhua News Agency and a variety of magazines including the New Statesman.