A few weeks ago, I attended the launch ceremony of the new Palestine Capital Growth Fund, a subsidiary of the multibillion-dollar, Dubai-based private equity fund Abraaj. I found that many people questioned why Abraaj would operate in the Palestinian Territories. Some would even describe such a move as a pure act of social responsibility. But it is not. At least this is what Tom Speechly , a partner at Abraaj, confirmed during the event. He noted that there are many successful companies in the West Bank and Gaza and they are invested for the profit!
Coming from the Palestinian private sector, I couldn’t agree more with Mr. Speechly. During my years of work with the private sector I had the privilege of meeting many Palestinian businessmen and women with strong entrepreneurial skills, some of whom had survived the second Intifada of the year 2000 and adapted to the resultant harsh conditions.
The latest Ad Hoc Liaison Committee report Stagnation or Revival? Palestinian Economic Prospects by the World Bank notes that “ultimately, sustainable economic growth and an end to the fiscal crisis will require unleashing of the Palestinian private sector’s potential. This in turn necessitates a lifting of Israeli restrictions on access to land, water, a range of raw materials, and export markets. But it also requires that the Palestinian Authority improves the business environment and attracts needed investment through such measures as expanding land registration in the West Bank; reforming the current collection of laws governing business; and building its own capacity to regulate the economy and ensure competition.”
Especially given the current financial crisis of the Palestinian Authority, I cannot emphasize enough how vital the private sector is for developing the economy and supporting the Palestinian people. In particular, small and medium enterprises constitute 90% of the operating private sector in the West Bank and Gaza and are the backbone of the economy where they employ around 60% of the labor force.
As an investment officer based in the region, my work is to promote the MIGA-administered West Bank and Gaza Investment Guarantee Trust Fund, which offers political risk insurance and guarantees and is viewed as an important element to hedge against political uncertainties facing the private sector. Many companies and entrepreneurs are still holding back on expansions or delaying venturing into new business opportunities. Similarly, many international investors and foreign traders are reluctant to invest or partner with locally operating companies. MIGA guarantees, especially its war and civil disturbance coverage, offer local and foreign investors (under the provisions of the trust fund, both local and foreign investors are eligible for MIGA insurance—an anomaly as MIGA typically only covers foreign investments) a sense of security that enables them to fulfill their operational strategies. As we achieve greater awareness of the trust fund, project sponsors in agriculture, retail, manufacturing and infrastructure are applying for MIGA coverage. We have already signed contracts of guarantee in support of a Medjool date plantation in Jericho and a soft drink manufacturer in Gaza and I feel thrilled to be able to assist investors in building the Palestinian market and economy.
And as we often say here, if Palestinian companies are able to make profits under the current conditions, imagine the potential if they were operating under normal circumstances.