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The jobs crisis in Palestine needs an innovative response

Ceyla Pazarbasioglu's picture
Also available in: العربية
Hebrew (pdf)

 Ahed IzhimanLanding a job after college can be difficult anywhere, but it is especially hard in conflict-affected economies, such as Palestine. Joblessness and job insecurity are an unfortunate reality for too many young Palestinians. Unemployment is now approaching 30 percent on average, and remains stubbornly high especially for youth and women.  A young person growing up in Palestine has just one-third of the likelihood of gaining employment compared to a young person in Israel.

In Gaza, job prospects are even more grim. In that area, electricity is available for only four to six hours a day, and draconian movement restrictions limit what goods can move across borders. Economic activity is severely restricted, driving the youth unemployment rate to about 60 percent. 
 
Women face even higher barriers. The jobs available to women are more limited than those available to men. In addition to social constraints, restrictions on travel, including the uncertainty faced at checkpoints, further contribute to the low female labor-force participation rate, which stands at only 19 percent. A recent World Bank report finds that the probability of joining the labor market for a man who holds a secondary degree is 65 percent, while for a woman this likelihood is only 8 percent.  
 
In short, Palestine is experiencing a worsening jobs crisis. The private sector, which is usually an engine for job growth, has been unable to generate enough jobs to keep pace with the growing population. Despite a highly educated and youthful population, the fragile and conflict-affected environment often scares off private companies from investing in the small territory of nearly 4.5 million people.  An investor in search of a supportive environment for doing business would likely opt to invest in a more secure location with lower political risks and greater access to international markets – say, in Dubai as opposed to Ramallah or Gaza City.

In an environment where achieving sustainable results can seem elusive and the myriad of constraints is complex, what can be done to mobilize more private investment to create jobs?
  • More trust and better partnerships between the government and private sector
  • A significant shift in strategy by donors, like the World Bank Group, to support innovative approaches and instruments that can help catalyze private investment
As the World Bank Group, we are working on three innovative financing approaches to leverage private capital to jumpstart job creation in Palestine:
  1. Startups along the early-stage-financing journey: While the entrepreneurial spirit is alive and well in Palestine, many promising startups fail prematurely, before reaching the doorstep of early-stage investors, due to challenging market conditions. More support is needed to build the pipelines of early-stage investors and get startups investment-ready.
  2. Larger private-sector investments in key sectors: Spurring more traditional employment in medium-sized and larger companies is just as important as supporting jobs at startups.  Co-financing partnerships with the private sector, IFC and MIGA can help incentivize investment and mitigate risks. We are looking at testing this approach with a project to support job creation in Gaza.
  3. Training, skill development and job-matching for youth and women: It is also critical to ensure that graduates have the skills needed to gain access to the jobs that are created. This will be supported through a new instrument – a Development Impact Bond (DIB) – in which private investors help finance the intervention and are repaid if positive outcomes are achieved.  Because investors are only repaid if the outcomes are achieved, the incentive structure focuses on outcomes rather than on program expenditures and inputs. 
The World Bank Group is supporting these efforts through its Finance for Jobs series of projects – which was launched in 2015 with an anchor contribution of $5 million. An additional $9.5 million was recently approved to continue this work.
 
There are no “silver bullets” in development – especially in fragile and conflict-affected economies. Our responsibility, as the World Bank Group, is to encourage new approaches and risk-taking and promote collaboration between the public and private sectors. This is critical to “crowd in” the private capital that is needed to achieve sustainable job creation, poverty reduction and shared prosperity.  
 
Innovation through financing instruments offers an important opportunity to address the jobs challenge and to generate more learning about what works.
________
 
The World Bank Group would like to acknowledge the generous support of the State and Peacebuilding Fund (SPF), which is financing part of this project. The multi-donor SPF, administered by the World Bank Group, has been the institution’s primary vehicle since 2008 for supporting state and local governance peace-building efforts in fragile and conflict-affected regions. The SPF aims to scale up international engagement in fragile and conflict-affected countries, to promote cross-cutting and innovative approaches, and to foster strategic partnerships.
 

Comments

Submitted by Raj Raina on

Thanks for this very important conversation. Agreed that things to need to happen differently to make a dent in unemployment figure.

Startup by their very nature fail. Is there evidence that Palestinian start-ups have a higher failure rate? And if so what "conditions" are leading to that? And would it not be better to address the conditions than "get startups investment ready" only for them to fail given the underlying conditions have not been addressed?

Submitted by Stefanie on

Many thanks for raising this point. Reforming the enabling environment for doing business is certainly critical in order to ensure that startups (and all firms) can grow and flourish. At the World Bank we are working with the Palestinian Authority on several priority areas to reform the business environment. At the same time however we need to go beyond ‘business as usual’ approaches and tackle issues more directly affecting the private sector. Within the entrepreneurship ecosystem, the quality of startups in the pipeline including the experience and balance of skills, as well as the ability to meet due diligence requirements of investors, has been reported as a major hurdle by key stakeholders. This project will thus support the number and quality of the start-up pipeline particularly at the early growth stages, while other World Bank engagements will continue to target enabling environment reforms.

Submitted by Samer Abdelnour on

The absence of any mention of the crippling role of the military occupation of the West Bank and siege of Gaza is an irresponsible omission. When will the World Bank stop pretending that the Palestine is just another 'fragile and conflict-afflicted country' whose problems will be solved by finance and start-ups?

Submitted by Marina on

The World Bank has released several analyses of the restrictions and closures confronting the West Bank and Gaza, including assessing the economic and financial losses. However, the World Bank believes that the lack of political horizon should not lead to complacency and several actions can be considered to revitalize the economy and improve the living conditions, including the engagement of the private sector for job creation.

Submitted by Jeremy Wildeman on

If you were a doctor and you had a patient with a debilitating, potentially terminal illness, would your response be for them to ignore that illness and instead tell them to be optimistic, to get exercise and to live a healthy lifestyle, maybe taking some courses to improve their career prospects in the future?

A good doctor would focus on the illness first.

Intervention in a conflict makes you an actor in it, and any intervention can lead to unintended consequences. The gravest mistake you can make in a conflict situation is to intervene and to specifically make a point of ignoring the political context (the illness) for that conflict. In such an instance, your intervention can be expected to make the conflict worse by exacerbating the underlying conditions for violence. This is precisely why the original model the Bank has been trying since 1993 to set in place has failed with great repetition, during which time a sharp decline in living standards and regional peace has taken place.

Good intervention means addressing the political context for violence and instability first.

Submitted by Alaa Tartir on

It is truly unfortunate, to put it mildly, to see the World Bank fixated to its position that it holds since its 1993 Investment in Peace despite all the available evidence that its model had failed badly and miserably. It is precisely the case because the World Bank keeps in dismissing the big elephant in the room (the Israeli military occupation, can you see it?) and dismisses the political construct of poverty, unemployment, inequality etc. This apolitical approach, using the WB mandate as an excuse, is not only problematic, but it is also dangerous, irresponsible, and destructive to the potential of the Palestine economy. On this blog, I have written a piece in 2015 that I would like to share with you to consider.
http://blogs.worldbank.org/arabvoices/can-fragility-countries-be-addressed-outside-politics

Submitted by Amer on

The WB's own analyses (ICA for example) strongly suggest (even explicitly state at times) that development outcomes wilm not improve and private sector investment will not happen so long the Israel occupation and it's closure policies presist. Investment in impact bonds and entrepreneurship and SME growth seems to miss the big picture, and will most likely lead to elite capture of development assistance yet again. The World Bank should be helping Palestine develop its productive and tradable sectors in a meaningful way, and in accordance with a national vision for the Palestinian national economy which currenntly (and conveniently for many donors including the bank) does not exist.

Submitted by Samer Abdelnour on

I have read the (very good) World Bank reports detailing economic losses of the occupation and the potential gains political freedom might have for the Palestinian economy. However, my point is that the generic promotion of a start-up/enterprise discourse fails to take any recognition of the occupation/siege into consideration. Indeed, there is nothing in the initial blog that is Palestine specific (try replacing Palestine with Kenya, Chechnya or Ferguson for that matter). Is it not irresponsible to disregard a structural analysis of the socioeconomic and political context when making policy recommendations? Do apolitical (context-void) development policies perpetuate ethnic cleansing by ignoring the political factors that create poverty? More importantly, is the World Bank aware of the potential implications for this omission, including perpetuating the occupation? Does creating jobs for people who have been forced off their land mask the very act of ethnic cleansing? A progressive and context-specific World Bank would explores ways to use its leverage to support Palestinian livelihoods in the face of ethnic cleansing and occupation (e.g. to remain on their land and in their homes in an economically viable way). Using the discourse of the initial blog, what forms of start-ups can help Palestinians challenge apartheid, ethnic cleansing, occupation and settler-colonization?

Submitted by Marina on

Many thanks for your comments. Please refer to my earlier response.

https://blogs.worldbank.org/arabvoices/comment/3440#comment-3440

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