Poor Governance, Israeli Occupation Causing Palestinians To Invest Abroad
Poor governance, high taxes and the Israeli occupation driving Palestinians to ship their finances abroad
According to new data, Palestinians are increasingly investing and opening businesses outside of the West Bank. The Palestinian Central Bureau of Statistics, in conjunction with the Monetary Authority, reported that the outflow of Palestinian capital abroad exceeded foreign investments in the West Bank by $1.4 billion in 2017.
Atta, a Palestinian investor who asked that his last name not be revealed, explained to The Media Line that “in most countries I get incentives as a foreign investor, much more than what I get here in the West Bank,” adding that taxes in the Palestinian territories are extremely high. Moreover, he elaborated, Israeli control over the borders and customs requires that Palestinian goods undergo rigorous security checks that make it more difficult to operate companies located in the West Bank than it is to base them in other countries and run them remotely.
“Investing in Palestine is really risky because of the conflict with Israel—it’s a war zone and there is no cash flow,” Atta expounded, noting that for him there is an 80 percent risk attached to each investment in the West Bank.
Sam Bahour, a Palestinian economic analyst, agrees that political uncertainty and the unstable security situation in the West Bank has contributed to a lack of capital. “The situation in Palestine has become dangerous given the risk of the collapse of the peace process and the [upcoming] relocation of the U.S. Embassy to Jerusalem,” he contended to The Media Line.
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“I don’t think it’s unnatural that people are looking to invest outside of the country,” Bahour continued, “but many people are looking to diversify so they may want to invest in Palestine at the same time.” He also highlighted the fact that foreigners willing to invest in the West Bank are generally well-off, thus the funds they bring into the Palestinian territories usually dwarfs the total sum of local investments.
Many analysts believe that changes must be implemented in order to encourage Palestinians to keep their money at home. The most commonly cited is the need to end the Israeli occupation; second, that the Palestinian Authority must do a better job in managing the economy, including reducing corruption and streamlining business processes; and third, the PA needs to provide incentives to attract investors. Above all, the Palestinian economy is donor-driven, with foreign aid making up the bulk of the wealth, a scenario that Bahour believes “is hindering our ability to grow properly and naturally.”
In fact, a senior official at the Palestinian Ministry of Economy reinforced the notion that the West Bank—not to mention the Gaza Strip—is overly-dependent on international aid. “Early in 2013, there was a drop in assistance to Palestine for the first time in a decade, causing the GDP to shrink dramatically,” he revealed to The Media Line.
Nevertheless, the West Bank economy has grown by a remarkable 64 percent since 2008, albeit the population is still plagued by both high unemployment rates and strict Israeli restrictions on trade. In 2017, the Gross Domestic Product in the West Bank was $8 billion, but living standards remain low with many unable to obtain the funds required to create businesses and workers lacking the skill sets to fill those jobs that are available.