Transcript The Portland Trust

Herzliya Conference – 3 February 2009
Down to Business: Boosting the
Palestinian Private Sector
Sir Ronald Cohen
Economics in Peacemaking: Northern Ireland
Not a parallel but we can learn important lessons
•
Catholics suffered from unemployment rates more than double that of
Protestants and violence was high;
Today unemployment and violence are both low.
•
2.40
90%
80%
2.30
70%
2.20
60%
2.10
50%
2.00
40%
1.90
30%
1.80
20%
1.70
10%
1.60
0%
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
Ratio of Catholic to Protestant unemployment
Percentage of total Troubles-related deaths caused by Republicans
Source: Honaker, Unemployment and Violence in Northern Ireland: A Missing Data Model for Ecological Inference (2004)
Economics in Peacemaking: Northern Ireland
Not a parallel but we can learn important lessons
•
•
•
•
Senator George Mitchell appointed as Clinton’s special envoy in 1993.
Economic discussions became a platform for political settlement.
Private sector voice and institutions pushed for moderation.
Substantial inward investment, from the US in particular, improved
economic conditions.
1,800
12%
1,600
US FDI (US$M) cummulative
11%
Unemployment Rate
1,400
10%
1,200
9%
$M
1,000
8%
800
7%
600
6%
400
5%
200
0
4%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Economics in Peacemaking: Northern Ireland
Not a parallel but we can learn important lessons
During difficult periods of the conflict, public sector financial support and
employment underpinned the economy
Economics in Peacemaking: Bosnia and Herzegovina
Not a parallel but we can learn important lessons
Because inward investment was difficult to attract, the economy remains
weak with high unemployment.
Economics in Peacemaking: Bosnia and Herzegovina
Not a parallel but we can learn important lessons
•
•
1995 Dayton Peace Accords ended the war by creating two ethnic entities.
Despite $6 billion + of international assistance (1996 – 2003) real level of GDP is 20% lower than 1989.
Challenges to the Palestinian Economy in 2009
•
•
High population growth and a shrinking economy means real GDP per
capita is a third less than 1999.
The economy is becoming increasingly aid dependent, investment is low
and unemployment is high.
Creating the right economic environment
•
Palestinian Authority has made significant progress in its reform effort:
– Reduced budget deficit from 27% of GDP in 2007 to 23% in 2008
– Reduced government employment by 22% from 180,000 in 2007 to 141,000 in
2008.
•
The donor community has provided approx $2.5 billion of support to the
Palestinians in 2008 of which 70% is in budget support
•
An investment agenda has been pursued:
-
•
International investment conference held in Bethlehem, Nablus and London
Over $1 billion of investment announced including a 5,000 unit new town outside
Ramallah and the launch of the second mobile phone operator Wataniya.
There has been a significant increase in tourism in the West Bank, with 1.2
million visitors to Bethlehem and Jericho in 2008, double 2007 for Bethlehem a
40% increase for Jericho.
Palestinian Economy: A Coiled Spring
• The Palestinian economy is like a coiled spring, ready to
spring back.
• It could grow to three times its current size and quickly.
• The foundations for telecommunications,
pharmaceuticals and finance are established.
• Donor money can attract capital into the private sector
by improving the risk/return profile and underpinning the
debt and equity capital needed.
Private Sector Development
The Portland Trust has been supporting Palestinian efforts to develop
the private sector in these areas:
• Loan Guarantee Scheme: capacity of $300 million of loans to the
private sector to fund SME expansion
• Microfinance: support for the Microfinance Network
• Private Sector Pensions: draft legislation for a modern scheme to
provide long term capital
• Affordable Housing – $1bn programme to build 15,000 affordable
homes in six new West Bank communities:
– Increases GDP by 1.5% p.a. for each of 5 years
– Thousands of new jobs
– Improves the lives of over 200,000 Palestinians
The Private Sector Challenge in Gaza
• 95-97% of firms have closed and more than 65,000 jobs have been lost.
• Finance for private sector recovery needed from the outset.
• Soft loans rather than grants are best way to inject funds for a business
driven recovery.
• A package for the Gazan private sector should include, at the right time:
- Compensation packages for businesses and factories
- Capital provision into the banking sector
- Microfinance
- An investment fund
Openness to trade and investment
• 2008 GDP growth is estimated at 0.8% and expected to be negative in 2009
• No future for economy without an openness to trade and investment
• Israel remains the main trading partner of the Palestinians.
Exports
US$m
3000
Imports
US$m
Total Palestinian Exports
3000
Total Palestinian Exports to Israel
Total Palestinian Imports
Total Palestinian Imports From Israel
2500
2500
2000
2000
1500
1500
1000
1000
500
500
0
0
2000
2001
2002
2003
2004
2005
2006
2000
2001
2002
2003
2004
2005
2006
Openness to trade and investment (cont.)
• Palestinian economy has a number of Free Trade Agreements
(FTAs) with Arab states, the EU, US, Canada, Turkey – effectively
75% of the world’s economy.
• However, there are two constraints on Palestinian trade:
– Access to market through low volume checkpoints.
– Capacity of Palestinian exporters.
• Portland Trust with others has recently established IsraeliPalestinian Chamber of Commerce to promote business and
facilitate trade.
The Portland Trust
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London W1B 1NB
Azrieli 3
132 Menachem Begin Road
Tel Aviv 67023
P.O. Box Al Bireh 4102
Ramallah Al Masyoun
Website: www.portlandtrust.org