News Analysis: Palestinians challenge Israeli restrictions to attract investors

While foreign investors refrain from taking their businesses to Palestine citing discouraging investment climate, the Palestinian National Authority (PNA) is challenging the difficult situation by holding investment conferences, offering investors' tax exemptions and eased measures to attract investors to the nation burdened by the Israeli occupation.

Several investment conferences have been held inside and outside Palestine but they didn't attract much investment into the local market. The country troubled with political instability suffers also from Israeli restrictions and measures that hinder development opportunities.

"Closures, clashes, wars, restrictions, checkpoint and other measures by the occupation make investment more risky," Nasr Abdul Karim, an economics professor at Birzeit University, told Xinhua, explaining that in such circumstances there's a need for a high profit margin to encourage investors to take the risk.

Israel still prevents development in Area C which covers more than 62 percent of the West Bank, poses limitations on freedom of movement for investors and workers, controls access of people and goods, employs military laws in some areas and takes other measures that discourage private investors.

In a report published earlier this month, the World Bank said that the continued Israeli military occupation of the West Bank prevents construction of power network in the area, and the absence of peace and stability has also discouraged private investment in the energy sector.

However, the Palestinian government is trying to facilitate investors' mission and attract them to benefit from the opportunities the local market offers.

The government established the Palestinian Investment Promotion Agency to encourage investors. Aside from easing the registration and licensing process, the agency's policies include a total exemption from income tax for seven years and more than 20 percent exemption for the following three years for foreign investors working in Palestine.

"In the industrial sector, if you use more than 70 percent of raw material from Palestine, then you will have a complete tax exemption for 10 years," Jawad Al-Naji, the Prime Minister's Advisor for Islamic and Arab Funds and former Economic Minister, told Xinhua.

Investors will also get free tax exemption if they export their production from Palestine, and enjoy a seven-year exemption if they create more than 25 new job opportunities in the market.

Al-Naji said that Palestine has signed free trade agreements with a number of countries, like the United States, as part of the government's efforts to integrate with regional and international economies.

The Palestinian government is pushing plans for implementing investment areas in the West Bank: three industrial zones are under construction in the West Bank cities of Bethlehem, Jericho and Jenin, which have a possibility for regional involvement because of their geographical closeness to Israel and Jordan.

Nasr Abdul Karim, an economics professor at Birzeit University, said that there are various investment opportunities in the Palestinian market, including the agriculture, industry, IT, energy, finance, infrastructure, real estate and services sectors.

"There are many opportunities in these sectors and hidden potentials, yet the risk remains high mainly due to the political situation," he told Xinhua.

Most of the international role in the Palestinian economy comes in the form of financial assistance, either by budget support or other projects. Palestinian officials hope to see a presence by local companies as part of their plan to decrease dependency on foreign aid and pave the way for a strong economy for the future independent state.

Mohammed Shtayyeh, president of the Palestinian Economic Council for Development and Reconstruction (PECDAR), told Xinhua that the international community gives Palestinians around 1.3 billion U.S. dollars of grants every year. The largest two donation countries are the United States and Saudi Arabia, which pay 300 million and 150 million dollars respectively.

While economists say that the foreign direct investment (FDI) is still marginal in the Palestinian economy, Shtayyeh expected the fluctuating number of FDI to increase because there are huge opportunities in the Palestinian market.

"Most of those who are interested are (overseas) Palestinians but most Palestinian expats who carry other passports are not allowed to live for long periods in Palestine because Israel controls the access to Palestine," Shtayyeh said.

"The Israelis, however, won't be able to do the same with other passport holders," he continued, explaining that international embassies in Israel have the benefit of helping their nationals invest in Palestine and use their diplomatic relation with Israel to ease any problems that erupt. Endit