Doing Business in Palestine: Status of Palestinian Economy

Interview with Mr Wafa Dajani, webmaster of PalTrade (Palestinian Trade Development Center)

Cafe Palestine Digital (CPD) travelled electronically to Jerusalem and met Mr Dajani whom we met first over the Internet. We came back with greetings from Jerusalem and this wonderful conversation about doing business in Palestine, the status of our economy and how it can be developed.
Interview was completed on December, 12, 1996.

CPD: Mr Dajani, thank you for joining us electronically. Ahlan wa sahlan! It's really a great feeling to be back in Jerusalem. Let's get started. May I ask you to introduce yourself to our visitors in your own words ... please ..

Mr Dajani:

It is a real pleasure to be participating in this digital interview. This is a novel and a very welcome opportunity to put your readers in the picture of what is happening in Palestine, and may I add that your site, Palestine-net, provides an excellent mo del for other Palestinian sites.
My name is Wafa Izzeddin Dajani, aged 41, born and grew up in Arab Jerusalem, I hold a BSc and an MSc in electronic and electrical engineering from Loughborough University of Technology, England in 1979. I am currently on contract to work on setting up th e information system for USAID's Small Business Support Project in Palestine, which is currently financing and maintaining Paltrade's web site. That's how I came to be webmaster for the time being at least.

CPD:Thank you. I'll link to Paltrade at the end of our talk, but for now, could you please say a few words about the center, its mission and functionality ....

Mr Dajani:

The idea for the center has been around for a long time. All 'normal' countries have set up business centers to promote their businesses to the outside world. Israel has one, Jordan has one, Egypt has one, but we, the Palestinians did not have anything th at even comes close to that. Our chambers of commerce are now undergoing major changes but still cannot provide the services necessary for our business community to reach out to the world. In most cases, entrepreneurial Palestinian businessmen (incidently they are not few) had to find their own way, individually, to break from the traditional Israeli monopolistic business channels and have succeeded in this endeavour. With the hopefully changing political climate, the need therefore arose to provide an in stitution to take up this challenge and provide the necessary support structure to the business community, by providing information, linkages and trade promotion services to name but a few. Believe it or not, the center started in virtual space i.e. as www.paltrade.org as part of a project known as the Market Access Network which is undertaken by the Small Business Support Project. Now it is evolving into a physical entity under the auspices of the PNA Ministry of Economy and Trade. Premises have been rented in Ramallah and staff are in the process of being recruited to run the center. The center will be run independently from PNA departments as a quasi-governmental organization and will have a board of directors with 70% representation from the private sector and 30% from the PNA. The center's mission is basically to promote direct trade with Palestine, both for imports and exports, to promote investment and joint ventures and to provide dir ect links for the Palestinian business community to the outside world in order to break away from the stranglehold of the Israelis. Also it will provide a measure of confidence to the international businessmen who want to deal with Palestine but hesitate because of one reason or another. The center will provide a platform for direct exchange of views and ideas between the private sector and the PNA.

Paltrade services will include the following:

As regards the functionality, the center has produced a directory of Palestinian exporters (which is on the web now) and as I mentioned earlier, it is organizing the trade exhibition in Dubai. This is all happening even prior to having the center's own pr emises and full time staff, which shows the seriousness with which it is being taken.

CPD:We wish you success. You know, when I was thinking about our digital meeting, my memory took me to the far east. Probably some readers would've guessed it. Taiwan. Taiwan is not recognized as a sovereign and political state by countries like the USA, yet, Made in Taiwan is a well known tag and America buys it. Of course, Taiwan is not under occupation and it controls its own borde rs. We will come to border control later, but I'm sure you studied different models of economic growth and development. One can name a few more examples, but I can't find one that fits the Palestinian case and I am against importing canned models. What do economists in Palestine (or those interested) think? What's the closest model and how it can be adapted - briefly.

Mr Dajani:

I think the Paletinians do have a model of their own which should be called the 'Oslo Model' (I am only joking). Currently, I cannot see any model that really befits us in view of the many uncertainties that exist. Any plans for economic growth that we put forward require stability, freedom of movement, the ability to legistlate, control of borders ...etc. Sadly, many of these elements are missing. In the foreseeable future, any economic plans or model we care to think of will be ultimately governed by Israel's dictate and to a lesser extent by our relationship with Jordan and Egypt who are our immediate neighbors. You said you are against importing canned models, but somehow we are being pushed into the 'canton' model or to be blunt the 'reservatio ns' model. This is apparent from the trend of events, the way most donor funding is channelled and the crazy investment in non-productive real-estate and construction.

CPD:Mr Dajani, let's look at the bright side of the picture first. We have the world's best human resource: education, skills, dedication ... you name it (and this is despite our continuous hardship). There is need to train some of our workforc e but experience is at our fingertips through our resources in Diaspora. Not much is being done right now and there are obvious and obscured reasons. Again, let's leave the negative aspects for an upcoming question. Suppose this Palestinian investor (or any other) is reading this, s/he gets interested on both moral and economic grounds to invest in Palestine. Let's be specific and offer our client a sample of interesting and appealing projects. You can also identify services or products ready to ship .... please ...

Mr Dajani:

I have to pick up on the issue of Palestinian resources. All what you're saying is true, but the impact of this on Palestine has been minimal. The highly skilled resources are SCATTERED outside Palestine. They are either unable or unwilling (or even afrai d) to risk coming to Palestine. Personally, I do not blame them. However, a major problem is that these resources are not organized or even able to organize themselves. As individuals, the Palestinians have made their mark in the Diaspora. Individualism i s fine when survival is at stake, but now they have to rethink their attitudes and start organizing in the Diaspora into effective groups, whether as businessmen, scientists and technologists, administrators or educators. This makes it easier to open comm unication channels between Palestine and the Diaspora at all levels. Many Palestinian manufacturers are really starved for technical support and exposure to new technologies. (This has been Israeli policy all along). Access to markets, knowing how to deal with international markets, issues of standards, quality and proper packaging, environmental issues ..etc. We in Palestine need extensive training and more exposure to these issues. Who better than our Palestinian brethren to provide it. Just look at wha t the diaspora Jews are doing for Israel and the support they provide at all levels.

Let us talk about our would be investor. Rather than saying what investment opportunities there are, I would like to take a different approach. Most investors that invested in Palestine bought land and constructed office and apartment buildings. Normally this is a very safe investment but it has had a devastating inflationery impact on the fragile Palestinian economy. The price of land shot up to astronomical levels, ordinary people could not afford the high prices and what happens? Lots of empty or unfin ished construction. The investor who had lots of money paid a high price for the land and the cost of construction and ended up with empty buildings. This is a result of the emotional and sentimental approach to investment. On the other hand it did provid e employment to construction workers for a limited period of time and business for the stone quarries. I believe that when we suggest or talk about investment, we should examine the market first. Our local market in Palestine is very small and purchasing power is dwindling. We should be looking for the international market for our products. Our esteemed diaspora investor should be investing in this field - finding market channels for Palestinian products. Diaspora Palestinians would develop commercial rel ationships with their brothers in Palestine, market the products, provide technical assistance and information about market preferences, specifications, prices, whatever it takes to ensure good results. This is essential to the future success of the Pales tinian economy. We need to strengthen the bonds between inside and outside first and develop a strategic relationship. The kind of direct investment everybody is thinking about will come later when the time is ripe. That's when we find that the local Pale stinian capacity to meet export demand needs to be expanded, improved and upgraded. Then we'll say to our diaspora partner, bring in the cash, this is a guaranteed safe investment for you.

What I want to say is : we should set our priorities right as individuals, as groups and as a people. Investment opportunities do exist in tourism, industry, agriculture. But the market remains the big issue.


CPD:Ok. Our investor is encouraged and wants to take the issue seriously. Obviously, there are questions and concerns as well as studies to be made. For one thing, there is a need for accessible resources and we hope this will come soon on the Internet (Paltrade, palestine-net, individual businesses and so on). Let's address the concerns. People may mention the Paris Protocol of 1995. Can you sum up, on the back of a business card, what it is and how much has been implimented of it?

Mr Dajani:

Yes. Once Paltrade becomes a physical entity, it will act as the credible conduit or channel between Palestine and the diaspora. Paltrade on the internet will be the source of CREDIBLE business information for all interested.
But as I said earlier, the diaspora needs to organize into groups and associations to be both efficient and effective and this will make it easier for Paltrade to communicate business and investment opportunities. As regards the Paris Protocol, everyone agrees that it did not provide anything tangible to the Palestinians. On the contrary, it serves Israel's interesets. At the time, it gave Israel the ultimate say in all economic matters. Israel imposed import quota s on the Palestinians in such a way not to harm its own trade. Israel has to approve all import licences. The Israelis have also reneged on issues like free flow of trade, the safe passage between Gaza and the West Bank, the airport and Gaza port. There a re loud calls amongst Palestinians to review the Paris Protocol and rectify all its drawbacks since it was 'negotiated' in difficult circumstances. And even so, Israel is not abiding by it. All these issue have had their toll on the Palestinian economy. A nd hovering above all that is the continuous closure and blockade of the Palestinian enclaves in the name of security, which really neutralizes all agreements with the Palestinians, however unbalanced and unfavorable they are!

CPD:Thank you. Let's identify other bright spots and encourage our potential investor even further. I believe there is a preferred status granted to Palestine by the EC (European Community) and I'd like you to comment on this as part of your answer to the main question. USA is a major market (imports and exports) and there is, at least on paper, a signed reciprocal preferential status with the PA to exempt goods imported and exported from customs. The other day , I called the local chamber of commerce in the USA and asked if they have info on trade with the PA (and I used a number of political alternatives). The answer was they even don't know of PA, Palestinians, Gaza ...anything I threw at them. They suggested I get in touch with exporters to Israel. What is the current status of this preferential status? Anyone already benefiting from it? What taxes are imposed on imports/ exports from/to the USA? And where do they go? PA, or Israeli middlepersons?

Mr Dajani:

* Definitely this is a very important issue to benefit from. Trade agreements exist between the PNA and various countries and blocs. Two prominent agreements are the free trade agreement with the European Union and the recent decision by the US government t o grant Palestinian goods duty free access to US markets. No duties, no quotas, no limits. If an American (also of Palestinian origin) wants to penetrate the European market, what better way of doing that than through Palestine. I think for American inves tors this is a bandwagon to jump on. As regards the free trade status with the US, a meeting will be held this Friday, 13th Decemeber 1996 between Palestinian businessmen and representatives of the various US Government departments to discuss how to benefit from this status. We should be hav ing more information about it then. I'll keep you posted, and I'll publish it on the web as well. As regards your statement that the local chamber of commerce do not know anything about Palestine, PNA ..etc, just proves the point that the Palestinians in the USA are not doing enough.

CPD:Ok, our investor decides to test the market, so s/he works on a joint venture to export and import, say, agricultural products - we are taking a difficult scenario here - we worked the standards, labels, financial transactions and a re ready to ship/receive. I suppose the Paris protocol makes things easy, but there are two sharp pins ready to burst your bubble: there are no Palestinian ports, borders are all controlled by the Israelis and there is security: anytime they can fl ash this card and knock you dead. According to Israeli sources, there were more than 5000 cases of "illegal" entry into the green line during closures and in fact, closures increase tention and cause serious security challenges, so security is not the iss ue. I see it rather as collective punishment and economic suffocation. Now back to our investor, how are things handled and how can we assure a pleasant transaction? The ultimate answer is no one is supposed to talk business with you and encircle you like this, but what can be done now? I once thought of international forwarding service with economic VIP privilege. Comments?

Mr Dajani:

The Israelis do put obstacles in the way of Palestinian exporters, they want our trade to go through them so they can take their cut and its a hefty one. However, our exporters have learned to live with them and to find ways round them. Yes it does means putting in more work and might cost a little more but eventually the product does get out. This brings me back to the issue of diaspora Palestinians having to organize themselves better and form pressure groups to lobby their governments when Israel imped es the shipment of goods from Palestine. I remember a case with the Gaza carnations. The Gazan producers made a direct deal with Dutch importers, bypassing the Israeli agricultural export company, Agrexco. Agrexco pulled strings with the Israeli governmen t and hence the military and closed off Erez checkpoint through which the carnations were transported and from then on via Tel Aviv airport to Holland. The Gaza producers lobbied the PNA ministry of agriculture who in turn got in touch with the Egyptian A uthorities and got the necessary permits to ship the carnations from Rafah to Cairo airport and from there to Holland. The carnations got to Holland in time. Our Palestinian producers can get blood out of a stone if the situation requires it. The issue of freedom of movement of goods is always brought up with the Americans and the Europeans. In fairness the Europeans have threatened Israel with certain economic measures. However, you in the USA should bring pressure to bear on the US government to push th e Israelis to change their policies towards the Palestinians.

CPD:Mr Dajani, you've been to the Cairo economic conference and had the opportunity to meet with business people from around the world. The Cairo conference came at a very difficult time. Palestinians and their economy were under seige, per cap ita income dropped by more than 15% since we were blessed with Oslo and many people already lost faith in the Israeli version of peace. Some even decided to boycott the Cairo conference and on the eve of the conference, banana farmers in Jericho dumped their produce in protest: they can't export it, yet the Palestinian market is flooded with foreign banana. In th e final statement, the Cairo conference failed to even assign blame for our economic suffering on those who still cause it. Well, you've been there and I thought you could give our visitors some idea about the general atmosphere there, how much do partici pants know about the Palestinian market, and how much interest they had. Out of the few Palestinian projects that were presented, how many got wed? I always look at it the same way professional panhandlers do: get a poor looking kid in your lap and generate sympathy (for yourself). At the end of the day, the poor kid returns almost empty handed. Was it different this time?

Mr Dajani:

The Cairo conference was more of a political show than an economic one. I do not feel such conferences are the right place to do business. They may be a place to air views, meet others, put our case forward, suggest infrastructure projects ..etc. It is re ally a big boys gathering. But it does no harm in participating, on the contrary, I found many sympathetic and even encouraging people who were keen on helping Palestine stand on its feet. I've met with business people and representatives of large multina tional companies who were keen on attending the Palestinian presentations to hear directly from the horse's mouth what the STRATEGIC view of the Palestinians is. They were in fact looking for opportunities in the long run. Somehow that gave me a feeling o f optimism about the future. I wish that others can share with me that optimism. On the other hand, the fact that most of the Palestinian businessmen boycotted the conference should be viewed as a new way of thinking by the Palestinians. The Palestinian b usinessmen (and people) are not looking for charity any more. They are demanding above all the lifting of all the artificial barriers imposed by Israel and demanding that the international community shoulder its responsibility and do something about it. A s regards the Palestinian projects, as far as I know, none got wed in Cairo and that was expected. However, the PNA meeting with donors in Paris after the Cairo conference was successful.

CPD:So, we are not expected to get much help from official bodies, but we don't give up that easily. We do possess the seeds of success and we are pretty sure the current status won't last. The way I see things to be advanced is through awareness, networking and cooperation. We have to put our own economic house in order first, then we ha ve to channel first hand info to our potential partners ... We have to build and we need to sacrifice at the beginning (a break even that leads to growth rather than making profit overnight) and those who are ready for such ventures are people with hearts closer to Palestine than their pockets i.e Palestinians and those who support our cause with passion. Of course, for Diaspora Palestinians, we need them back home, not only their $s and we would like to send a message on behalf of the Palestin ians in Diaspora, to those who wrote/signed Oslo, loud and clear ..."we want to go home, those who still have the keys to their apartments in Palestine are more entitled to return than those who came uninvited". There will always be Palestinian businesses outside and there is enough business connections to build a strong economy. We just have to work a little harder and there are many things that can be taken care of easily. On this note, I'd like to ask you about the current status of the inves tment law - is it still different between Gaza and, say, Ramallah? Is there an up-to-date business guide (not just a directory) for Palestine? And what is the current status of the banking system, Palestinian currency? If client X in Germany wants to pay for goods or services sold/furnished in Nablus using a credit card (over the phone from Germany), is this posssible for a typical Palestinian business? Will it be in the future?

Mr Dajani:

I do agree with you for the need to sacrifice now. The Palestinians have inherited from the Israelis a shattered economy that is very much dependent on Israel for its survival, a non-existent infrastructure, cut up territory, no legal system, you name it. .. We are now in the process of building from below zero. People's expectations were very high but the reality is different. Everything takes time, lots of work and money but we'll get there eventually. The PNA has introduced a new investment law. The law is by no means complete and it is being improved by the experts before being ratified by the Palestinian legistlative council. The commercial legal system is being overhauled. The banking system is being organized and brought under the direct supervision of the newly set up Palestinian Monetary Authority. So if you ask me if a German client can pay for services over the phone, I would say may be it is still early but the banks in Palestine do handle electronic money transfers, letters of guarantee, letter s of credit ... in fact the banking sector is one of the fastest growing in terms of doing business and providing services. The Palestinian stock exchange will start its operation in early January of 1997. This will be a fully computerized operation where investors can deal in it from remote locations. So, there is progress but it is ultimately governed by the political turn of events. By the way, there is a business guide for Palestine which was produced by the Small Business Support Project, you can get to it through Paltrade.org.

CPD:Well, I am sure you have something to add from your own standpoint, so I'd like to hand you this digital microphone to get your message across and re-sketch the picture as you experience it ...

Mr Dajani:

Well, it is very important to re-establish the links between the Palestinians inside and those in the Diaspora. We need all kinds of help. If we put ourselves in the place of the Jews at the turn of the century, where they were, what they have done, then you'll appreciate what I am would like to say without really saying anything else.

CPD:Mr Dajani, We'd like to thank you so much for your time. Of course, visitors can point their browsers to http://www.paltrade.org to learn more about the Palestinian Trade Development Center.

Mr Dajani:

Thanks for this opportunity.

CPD Note: Mr Dajani provided extra personal info for our visitors but preferred to keep the introduction part short, so here's more about him:
" I worked as an engineer in natural gas pumping plant, power generation, glass fiber pipe manufacturing and paint manufacture. I also lectured at the College of Science and Technology in Abu Dis, Jerusalem, in electronics in 1986-1987. I started my ow n business in computers software in September 1987, just 3 months before the Intifada broke out. I was forced to close down the business and then worked as a freelance maintenance engineer and computer consultant. Later on, I then teamed up with two frien ds of mine and set up a consulting business in Jerusalem in 1993. "
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