CARE Palestine Workshop

Palestinians harvest strawberries in a field in Beit Lahia, Northern Gaza Strip, December 30, 2015. (Emad Nassar/Flash 90)

The first three days of this internship were dominated by a workshop covering the private sector in Palestine. The speakers presented on a variety of topics including the landscape of the private sector in Palestine, strategies for increasing private sector engagement, building corporate partnerships, sustainably scaling for small and medium enterprises (SMEs), women's entrepreneurship, market-based approaches, results-based financing, project branding and the role of gender in development bank projects.

I was asked to listen in on this workshop and take careful notes with the goal of creating of a recommendation plan for development of the private sector in Palestine under Israeli restrictions. This recommendation plan was presented to the CARE Palestine team to further tailor to the goals of the private sector development program in Palestine.

One of the most affirming aspects of this internship has been the overlap between my assignments from CARE and my master's program curriculum. I presented my recommendation plan for the CARE Palestine team in the form of a slide deck. The organization of this presentation was adapted from the framework we learned in the HKS class on Policy Delivery and Design (PDD). I included slides for stakeholders, objectives and key results, analysis and critical drivers, criteria, options, risks and resources. These are all categories we have covered extensively in our PDD class and it was very rewarding to be able to put the lessons into practice.

Market Research on the Landscape of the Private Sector in Palestine

Palestinians shop for fresh produce in a fruit and vegetable market in the West Bank city of Ramallah / David Silverman / Getty Images

After the workshop, I was asked to expand on existing market research for the landscape of the private sector in Palestine as well as the challenges the SMEs in Palestine face when trying to scale operations.

Introduction

Prior to the breakout of COVID-19, the Palestinian economy was stagnant and facing severe socio-economic challenges. These difficulties can be attributed to restrictions on trade, movement and access by Israel, recurring hostilities, internal divide and falling aid influxes. Since the pandemic, Palestinian poverty rates are around 27.3%[i] and are expected to decline to 26.1% in 2024. The Gaza Strip faces the highest poverty rates with a reported 59% poverty rate in 2021 and 45% unemployment.[ii] Palestinian overall unemployment sits at 24.9% in 2021 with labor underutilization at 34%.[iii]

Longstanding Israeli restrictions on imports, exports, and movement of goods and people continue to disrupt labor and trade flows and the territory’s industrial capacity and constrain private sector development.[iv]

In 2021, only 23% of Palestinian women between the ages of 25-49 were employed. The obstacles to progress in female labor force participation in Palestine existed prior to the pandemic. According to the International Labor Organization, they were “registering higher unemployment rates, lower wages, while also being subject to increased discrimination and gender-based segregation.”[v]

Challenges faced by the Palestinian Economy

The inadequate provision of public goods including road infrastructure, utility networks, and health provision across municipalities affect the welfare of the Palestinian economy. The West Bank and Gaza remain highly dependent on Israeli supplies and export opportunities. Almost all Palestinian exports must go through Israel or Israeli-controlled checkpoints. The Israeli government regularly adjusts operations on short notice in response to major security incidents. Routine Israeli security checks can also result in lengthy delays. The Second Intifada that began in the fall of 2000 significantly damaged the West Bank and Gazan economic and commercial environment. Movement of goods into and out of Palestinian markets has been heavily restricted ever since, despite the end of the intifada in 2005.

The June 2007 takeover of the Gaza Strip by Hamas has resulted in the closure of borders with Israel and Egypt and the cessation of most trade between Gaza and the outside world, including the West Bank. In addition, Israeli security restrictions on the movement and access of goods and people between the West Bank, Gaza, and external markets continue to have a damaging effect on the private sector and limit economic growth. Periodically, tensions escalate between Hamas and Israel that affect the Gaza Strip and opportunities in this market.[vi]

Landscape of the Private Sector

Agriculture

Agriculture is one of the most important and oldest sectors of the Palestinian economy, as many crops are produced to fulfil the needs of the population and achieve food security and economic growth. Agriculture covers about 1.854 million acres or 31% of the total area of the West Bank and the Gaza Strip, 91% of which is in the West Bank and 9% in the Gaza Strip. Some 62.9% of the agricultural land is located in Area C, which is under Israel’s administrative and security control. The agricultural sector’s role is not limited to economic and social aspects; it is also a key player in protecting the land from confiscation and settlement activities and guaranteeing the protection and the legal right to the use of water. The agricultural sector is also a major source of jobs, accounting for about 15.2% of the workforce, with a large percentage of workers, especially women, working in this sector unofficially. The agricultural sector in Palestine faces many problems and obstacles, including those caused by the Israeli occupation and related to natural resources and administrative laws.

Palestinian Farmer’s Union | Palestinian Farmers Association | Palestinian Agricultural Organizations

Industrial

The industrial sector—including the extractive, processing, and handicrafts branches—is the second most important sector. It contributes 13.1% to the GDP, amounting to nearly one billion dollars, and it comes second after the services sector in GDP. Handicrafts are the largest industrial sector and include trades such as textiles, footwear, ceramics, pottery, olive wood, seashells, colored glass, soap, leather tanning, embroidery, and manufacturing bamboo products. The food and agricultural industry is the largest and most important industrial sector related to processing. It includes the production of confectionery, dairy products, processed meats, beverages, pasta, cereals, canned food, oils, and animal feed. The food sector constitutes about 24% of the total industrial sector, amounting to about 400 million US dollars and employs about 16.8% of the total Palestinian workforce. In order to create a healthy investment environment in Palestine, a legal system has been established to attract Palestinian expatriates and foreign investors by providing tariff and tax exemptions for new investors for up to five years, under the Investment Promotion Law. Like the agricultural sector, the industrial sector suffers from a wide variety of challenges, including the Israeli obstacles mentioned above. The competitiveness of Palestinian industries is modest, compared to regional and international markets, and heritage-focused handicraft industries prosper only where tourism is active in Palestinian areas; the lack of stability caused by the volatile political situation has affected the situation for more than a decade.

Palestinian Food Industries Union Overview | Palestinian Apparel Brands and Handicrafts

Services

The Palestinian services sector has grown substantially recently, contributing greatly to the Palestinian economy. The sector covers all real-estate activities, banking, telecommunications, insurance, transportation and distribution services, and hotels and restaurants, among others.

Tourism | Telecommunications | Banking | Insurance | Arab Hotel Association

Construction

The construction sector constitutes one of the key Palestinian economic activities, in terms of contribution to GDP and employment and in term of its direct impact on many other economic activities. Most economic reports indicate a significant growth in the construction and real-estate investment sectors in Palestine. This clearly shows in the construction of new residential suburbs around several Palestinian cities. This is not surprising, as the construction sector in the field of infrastructure and housing has been growing since the establishment of the PNA, which has sought to create a solid infrastructure for a future Palestinian state and provide sufficient housing for its citizens. The significant rise in the construction sector in Palestine, especially in the Gaza Strip, is due to the destruction wrought by Israel during past wars.

Arab Brothers Construction | Palestinian Construction Products Co Ltd. | The Arab Contractors

Corporate Social Responsibilities in the Private Sector

A research study published in 2020 by the International Journal of Business and digital economy examines corporate and social responsibility (CSR) of Palestinian companies. The empirical findings suggest that social enterprise model is still in its embryonic stages in Palestine. Their social mission of community development and sustainability is not completely sincere. The social entrepreneurs were willing to compromise social mission for economic surplus. The national structure, political framework, legal environment, social, cultural and the economic conditions of Palestine have served as suitable launching pads for social enterprises with not so authentic mission of serving the society. It has encouraged entrepreneurial philosophy and behavior, which has masked hidden economic and political agendas with exterior goals of social welfare and community development.[vii]

Status of Women in Palestine Significant change has occurred over the past 20 years regarding women’s educational status, with female educational attainment surpassing that of their male counterparts in the occupied Palestinian territory. The high number of women completing post-secondary education still does not translate into economic participation. In 2019, nearly 82 per cent of women remained outside the labor force, meaning that they were not seeking or engaged in employment, compared with 30 per cent of men. One reason may be that fields of study continue to be heavily influenced by gender perceptions, with women disproportionately represented in humanities. However, women, especially young women, remain largely excluded from a stagnant labor market, stymied by Israel-imposed restrictions on trade, movement and access. Low labor force participation hinders women’s economic advancement and also harms potential economic growth through a reduction of women’s human capital.

Further, unlike men, high-skilled women are more likely to be unemployed than low-skilled women. Qualitative evidence reveals that men are viewed as family breadwinners and thus more deserving of jobs when competing directly with skilled women. The research highlights the extent to which the conventional gender division of labor is strongly anchored in society; even when a woman works, this is usually considered temporary due to circumstances preventing her husband from working and fulfilling his role as breadwinner, while she is also expected to continue with all the unpaid care work.

Wage differentials between women and men persisted during the reporting period. In 2019, the average daily wage for women was 73 per cent that of men. A key factor behind the gender gap is that workers employed in Israel and in Israeli settlements, where wages are notably higher than in the West Bank and Gaza, are predominantly men. Further, in the Palestinian private sector, the incidence of low pay has an unambiguous gender dimension, with 60 per cent of women earning less than the minimum wage, more than double the corresponding share of men.

Legislative gaps are some of the obstacles to women’s economic advancement and empowerment. These include the absence of comprehensive provisions in relation to non-discrimination, equal pay for work of equal value, prohibition of gender-based violence (GBV) including sexual harassment in the workplace, and legal coverage for domestic workers. The occupied Palestinian territory ranks lowest globally in the World Bank’s Women, Business and the Law index for 2020. While scoring high in female entrepreneurship, it lags behind vis-à-vis narrowing legal differences between men and women with regard to pay (for example, restrictions on women’s ability to work at night), parenthood (including maternity benefits and parental leave), and marriage (for instance, protection from violence).[viii]

Global View

Any private sector development program in Palestine needs to consider the challenges posed by the Israeli restrictions, the struggling economy, decrease in foreign aid and the socio-economic barriers to women’s participation in the labor force. However, there is a great capacity for social impact to be had with social enterprise development in the region. High levels of education among women, a history of advocacy and resiliency as well as a fierce loyalty for community provides opportunities for socioeconomic advancement and growth. The stagnant economy can be stimulated by working with corporate partners to fund private sector development in Palestine, expand exporting opportunities for existing business and invest in women and social enterprises in the region. The greatest barriers to growth are the restrictions placed on Palestine by the Israeli government. Key partners for development will be Israeli leftists and a strong legal team to work on circumnavigating export and movement barriers.

Quick Facts for the West Bank and Gaza[ix]

GDP: 15.56 billion USD

GDP per Capita: 3,239 USD

Annual GDP Annual Growth: -11.5%

Unemployment: 24.9%

Unemployment by Gender: 37% of women unemployed, 20% of men unemployed

Median Daily Wages: Women $21.2 USD, Men $27.8 USD (wage gap of 76% in 2015)[x]

Population: 4.8 million

Annual Population Growth: 2.5%

Life expectancy at Birth: 74 years

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[i] https://www.worldbank.org/en/country/westbankandgaza/publication/economic-update-april-2022#:~:text=The%20poverty%20rate%20is%20projected,decrease%20to%2026.1%25%20by%202024. [ii] https://www.worldbank.org/en/news/press-release/2021/11/09/palestinian-economy-experiences-growth-but-prospects-remain-uncertain [iii]https://pcbs.gov.ps/site/512/default.aspx?lang=en&ItemID=4177#:~:text=The%20unemployment%20rate%20among%20labour,16%25%20in%20the%20West%20Bank. [iv] https://fanack.com/palestine/economy-of-palestine/palestinian-economic-sectors/ [v] https://reliefweb.int/report/occupied-palestinian-territory/women-work-and-covid-19-palestine#:~:text=This%20is%20particularly%20disconcerting%20given,aged%2025%2D49%20were%20employed. [vi] https://www.trade.gov/country-commercial-guides/west-bank-and-gaza-market-challenges [vii]https://www.researchgate.net/publication/344189213_Corporate_Social_Responsibility_in_Palestinian_Companies_An_Empirical_Study [viii] https://reliefweb.int/report/occupied-palestinian-territory/social-and-economic-situation-palestinian-women-and-girls-1 [ix] https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=PS [x] https://www.ilo.org/wcmsp5/groups/public/---arabstates/---ro-beirut/documents/publication/wcms_542472.pdf

The Legal Ecosystem and Local Businesses in Palestine

Credit: Deborah Grace Photography. openpalestine.com

After providing research on the landscape of the private sector in Palestine, I was asked to conduct more research on businesses in Palestine, specifically how the local legal ecosystem supports local businesses. In my research, I took a deeper look into how businesses are run and regulated in Palestine and how legal decisions are made in communities. The below information is a short overview of the process of local arbitration courts in Palestinian communities.

Overview

Most businesses in Palestine are small or medium-sized, family-run enterprises. Typically, decisions about the business are made consensus in the family with a heavy weight placed on the patriarchs and sometimes the matriarchs. The regulatory frameworks and legal system surrounding business practices in Palestine are primarily conducted at the local level. The Palestinian Authority’s lack of control over the territories and low approval ratings contribute to a preference for informal adjudication of disputes. Disputes regarding businesses are often considered family matters and are taken to local arbitration courts. These informal justice systems go by a number of titles, but most are run by the local elders and rulings are often decided in favor of the patriarchs of the family.

Business in Palestine

The Palestinian economy is small and relatively open. While 95 percent of firms in the West Bank and Gaza are family owned small- and medium-sized enterprises employing less than 20 people, large holding companies dominate certain sectors. The private sector is mostly firms with moderate productivity, low investment, and limited competition, the majority of which are operating in retail and wholesale trade activities. Due to the small size of the local market (about 5 million consumers with relatively low purchasing power), access to foreign markets through trade is essential for private sector growth. Enterprises are highly dependent on Israel for either inputs or as a market, and 90 percent of Palestinian exports are sold to Israel.

Palestinian Authority Regulatory System

The PA established a sound legislative framework for business and other economic activity in the areas under its jurisdiction in 1994; however, implementation and monitoring of implementation needs to be strengthened, according to many observers. The PA Ministry of National Economy is in the process of drafting key pieces of economic legislation to improve business and commercial regulation, including an updated Companies Law (already under consideration by the President’s Office), new intellectual property rights protections, a Competition Law, and procedures for resolving bankruptcy. The PA President’s approval in May 2016 of the Secure Transactions Law, Leasing Law, and Moveable Assets Regulations, greatly improved Palestinians’ access to credit.

Legal System and Judicial Independence

Commercial disputes can be resolved by way of conciliation, mediation, or domestic arbitration. Arbitration in the Palestinian territories is governed by PA Law No. 3 of 2000. International arbitration is accepted. The law sets out the basis for court recognition and enforcement of arbitral awards. Generally, every dispute may be referred to arbitration by agreement of the parties, unless prohibited by the law’s Article 4, including disputes involving marital status, public order issues, and cases where no conciliation is permitted. In the event that the parties do not agree on the formation of the arbitration tribunal, each party may choose one arbitrator and those arbitrators shall then choose a presiding arbitrator, unless the parties agree to do otherwise.

The Palestinian Authority is under direct control of just 39% of the West Bank and due citizen’s low approval ratings of the PA and a tradition of using informal models of justice, many legal disputes regarding family and business matters are resolved at the local level.

Informal Justice Systems

Throughout the modern period, Palestinians—particularly those outside of urban settings—have used various models of informal or extralegal justice to adjudicate disputes and address transgressions of social norms without turning to state institutions like police and courts. These non-state avenues of justice vary according to time, place, and community. They are described by different terms—customary law (‘urf), tribal adjudication (al-qada' al-‘asha'iri), communal reconciliation (sulh)—but in all cases they share the characteristics of maintaining social order in communities that have tense or tenuous relationships with state authority. Although informal justice in Palestine (as in other Arab societies) is often associated with nomadic communities of Bedouin, it is also common among settled Bedouin and non-Bedouin communities. Palestinians seeking to resist or overturn colonial authority have sought in such practices a model of indigenous justice; in general, however, informal justice privileges male authority within extended kinship groups and thus reflects and reinforces patriarchal social norms.

Personal Status Laws in Gaza

By the twentieth century, nearly all laws in Gaza related to contracts, criminal proceedings, and commercial transactions had been removed from the shari’a courts and incorporated into a secular civil law. The sole exception was the personal status laws, which remained governed by Islamic shari’a.

Personal status laws encompass nearly all legal areas that most acutely affect women, including marriage, divorce, child custody, maintenance, and inheritance. The following section outlines each of these legal areas under personal status laws and describes the application of the laws by the shari’a courts in Gaza.

Shari’a rules regarding inheritance generally provide that women receive half the amount given to a comparable male relative. In practice in Gaza, women often do not even receive this amount of inheritance and may be pressured or even threatened by male relatives not to file a claim for the inheritance to which they are entitled at all. As a result of these discriminatory inheritance practices, the financial resources available to a woman are even more limited in an environment where female employment is already at significantly low levels.9

Sources

https://www.state.gov/reports/2020-investment-climate-statements/west-bank-and-gaza/

https://www.palquest.org/en/node/24314

https://www.nrc.no/globalassets/pdf/reports/the-sharia-courts-and-personal-status-laws-in-the-gaza-strip.pdf

https://www.alaslah.org/sulha/

https://palestine.unwomen.org/en/news-and-events/stories/2017/02/sharia-judges-meeting

https://tbinternet.ohchr.org/Treaties/CEDAW/Shared%20Documents/PSE/INT_CEDAW_NGO_PSE_31669_E.pdf