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Investment Opportunities
With a total of approximately 4 million Palestinians living in Gaza and the West Bank, the potential of investment opportunities to serve even the domestic market is certainly there.
Take the Fast-Moving Consumer Goods (FMCG) sector which includes processed food, beverages, personal care and household consumables. According to a 2007 report by an initiative named Intajuna to enhance the local FMCG sector, the estimated market size in the Palestinian territories is $1.7 billion. |
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What's to be noted is that 34% of this market is being served by local manufacturers while 50% is served by Israeli products and 16% by other foreign products. There is certainly an opportunity for the existing competing local Palestinian players to gain a larger market share here.
Intajuna is an initiative to help identify and raise the competitiveness and profile of 10-15 such local company products. The project is supported by the Swiss Agency for Development and Cooperation and is being executed by a local consulting firm Solutions for Development Consulting Co.
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Fast Moving Consumer Goods (FMCG) Market Share |
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Potential for Local Companies to Grab Market Share? |
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Similarly, Palestine 's pharmaceutical industry is a unique opportunity and a symbol of innovation within its private sector. According to the Palestinian Investment Promotion Agency, the total value of the annual pharmaceutical's supply is $65 million in the Palestinian territories. Currently there are six major Palestinian pharmaceutical companies, with revenues of $25 million. The balance of $40 million in sales is covered by Israeli and Foreign manufacturers. Even besides the export potential, the local players have an opportunity to expand their domestic market share.
Beyond the above two examples, a quick look at company listings on the Palestinian Stock Exchange also gives a good view of the diversity of the Palestinian corporate sector. The stock exchange which just completed its tenth year in existence has 35 companies listed with a total market capitalization of $2.1 billion (as of Aug 2007.) The market has certainly suffered in the last two years but has showcased a steady mix of profitable business enterprises from the services, investment, banking, manufacturing and insurance sector.
To facilitate investments, the Palestinian Authority in 2005 launched a one-stop-shop, The Palestinian Investment Promotion Agency (PIPA), which simplifies the registration and facilitation of new private sector investment. Indeed, credible structures now exist to support investments as evidenced by a positive Doing Business Report on the Palestinian territories as well as endorsement by the World Bank of a competitive business process. A 1998 Investment law even guarantees investors the right to repatriate all financial resources, including capital, profits, dividends, wages and salaries
Foreign Investment
Foreign Investment in the Palestinian economy isn't completely an unchartered affair and shouldn't deter first time investors. In September 2006, Kuwait based Wataniya International won the bid ($356 million worth) to build and operate a second mobile network in Palestine and in December 2006, Wataniya International signed a partnership agreement with the Palestine Investment Fund (PIF) to form Wataniya Telecom in Palestine . Wataniya expects mobile penetration in Palestine is to grow by 70% in the next 10 years and it hopes to be the driver behind that growth.
According to a 2005 FDI report by the Euro-Mediterranean Network of Investment Promotion Agencies (ANIMA) other recent investments have included, Kuwait based Global Investment House's 5% take over of the Al-Quds Development & Investment Bank. Similarly, the largest MENA region logistical and overnight delivery services company Aramex bought Al Khazen Distribution in Palestine in 2005 expanding the number of point-of-sale outlets to 150 compared to the earlier 40. Also, the emerging global real-estate developoer Emaar Properties has setup Emaar Palestine.
Major infrastructure related investments have also been undertaken. A $500 million infrastructure investment by CCC Consolidated Contractors Company ( Saudi Arabia ) aims to rehabilitate and construction strategic Palestinian projects. It also planned on constructing of a 800 to 1000 MW electric power station at Gaza using natural gas. The electricity produced would be transported by the Israeli network on the West Bank . Any eventual surplus would be sold on the Israeli market.
An Export oriented private sector
The Palestinian economy has also strategically been setup as an export oriented industry. In 2003, the total estimated private sector output from the Palestinian territories was a little over $3 billion (PCBS economic statistics).
Stone/ Marble and Agricultural produce were Palestinian territories largest export categories (see below). However, a healthy set of value added product categories also exist and are key growth sectors. According to the Palestinian Investment Promotion Agency, Information Technology is the fastest growing sector of the Palestinian economy. Mr. Sam Bahour's company, Applied Information Management, is part of this sector which is benefiting from a sophisticated telecom infrastructure, the existence of an educated labor pool and adoption of international quality standards such as CMM and ISO and supportive international trade agreements.
The Palestinian Information Technology Association (PITA) represents 56 companies in this sector and is a good place to start in engaging with qualified vendors. In addition to serving local market needs, these IT service providers are poised to tap into the regional IT services boom specially using their English/Arabic proficiency as a regional advantage.
Mr. Sam Bahour however provides a sobering reminder of the challenges on the ground saying, "To remotely service clients many traditional services are required, access to enter and exit country to be able to visit clients, removal of Israeli occupation from the provisioning of basic services, like telecom, and a working postal system, among others. So this sector remains to have more potential than it currently has impact on the ground."
At the same time, as Mr. Bahour points out, the private sector has also built a unique crisis management capability. "The ability for private sector firms to remain operational after so many decades of strife, and in specific the last 7 years of Israeli battering of our economy, is proof that our private sector is hyper resilient and this characteristic is one that can be utilized across the globe, especially in troubled areas."
For those interested in engaging with Palestinian companies but didn't know where to start, can either contact industry specific trade associations or utilize the services of the Palestine Trade Center (PalTrade) which serves as a one-stop-shop for all trade related needs. Its recently released Export Directory is also a great resource to identify vendor and partners from the Palestinian territories.
Foundation of future state
With all the promising private sector signs, the harsh reality is that the much of the Palestinian population is living in poverty and under a crushing occupation. Short of a political solution, the responsibility of the global community, especially in the Muslim world, is to go beyond humanitarian aid and support the resilience of the Private sector to survive and build sustainable development.
Mr. Sam Bahour makes a pointed remark that, "The donor community has a historic responsibility to Palestinians, especially after so many years of observing the Israeli occupation from afar and a decade of footing the bill as Israeli actions continue unabated. The challenge to donors today is to convert assistance to the Palestinians to sustainable assistance, equal in priority to relief and humanitarian assistance, but sustainable in a way that creates an enabling environment allowing the private sector to assume its natural role of becoming the foundation of a future state."
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