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	Palestinian Authority		Info-Prod Country Guide
CHARACTERISTICS   INDICATORS   THE ECONOMY   GROWTH PROSPECTS   INVESTMENT ISSUES   PROJECTS   PROSPECTS

Principal Commercial and Political Characteristics Yasser Arafat and the fledgling Palestinian Authority face serious challenges to their economic and political development. High unemployment, a continued fundamentalist threat and dependency on the Israeli economy are just a few of the significant problems that must be addressed. In addition, the recent signing of the Hebron Agreement is just the first of a series of difficult issues that will determine the future status of the Palestinian Authority. Commercial Outlook The Palestinian Authority has pledged to promote the private sector, and to allow private management of major infrastructure systems, such as power and telecommunications. The private sector accounts for over 90 percent of West Bank/Gaza GDP. Unlike other developing regions, the West Bank and Gaza do not have a history of government ownership of large sectors of the economy. But some signs suggest this maybe changing. The PA has signed monopoly deals to control sales of fuel and cement, and discussions regarding a steel monopoly are also underway. Additionally, the Palestinian Authority, including Chairman Arafat and various ministers, plays a major role in the approval process for private commercial projects. Responsibility for major projects is often shared by several ministries, and foreign businesses must be sure to talk to all relevant ministries when competing for contracts. The PA's new Investment Law requires that all new investments be approved by an investment board to be eligible for incentives such as tax holidays. This has lead to some skepticism regarding a tainted investment approval process. Accordingly, many investment proposals submitted by Israeli investors have not been approved. This has discouraged other foreign investors from investing as they fear the region may not be as politically stable as its leaders purport it to be. Political Outlook The controversy surrounding the Hebron Agreement at first concerned only the future status of one West Bank town but over many months evolved into a stop or go referendum on the peace process in its entirety. According to the Agreement, the PNA is to gain authority over 80 percent of Hebron. But more importantly, the agreement sets a mid-1998 deadline for the completion of Israeli re-deployment from all remaining agreed-upon areas of the West Bank, and for the completion of final status negotiations regarding East Jerusalem and the fate of Jewish settlers and Palestinian refugees. The economy of the PA self rule areas is presently in a shambles. The Palestinian Monetary Authority estimated that 1996 GDP for the West Bank and Gaza Strip reached just US$ 1.86 billion with per capita income of US$ 650, although these estimates are considered low. Recent World Bank estimates place 1996 per capita GDP in the West Bank and Gaza Strip at US$ 1,230, a drop of nearly US$ 300 from the previous year. An additional factor that has further exacerbated the economic problems of the PA is the vast corruption that has penetrated most of the higher echelons of the Palestinian government. This has caused concern among many of the donor countries who have demanded transparency on behalf of Arafat before they release any funds. Indeed, a substantial amount of the money earmarked for the Palestinian areas has yet to be delivered because of this issue of financial accountability. Following the Hebron Agreement, the Israeli imposed border closure on the West Bank and Gaza is likely to be lifted. Whether large numbers of Palestinians will ever again be permitted to work in Israel is not known. But a lifting of the closure would at least allow trade, supplies and capital to flow through the territories, and this would do much to grow the Palestinian economy, a development that would push the peace process even further. Contents Menu Next Chapter

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