FEATURE ARTICLE: November 1996 (No. 8.1)
See Related Upcoming Event -- June 5, 1997
See Related Books & Videos
Edited and published by PANGAEACommunications(tm)
Anyone remotely acquainted with world affairs knows that Palestine -- also referred to as "West Bank and Gaza" -- is not the most predictable of places. But like Vietnam which was featured here a year ago, Palestine is one of the least understood markets in the world, yet it represents an effective gateway for doing business in the Middle East.
Palestine offers one of the most effective ways into the Middle East marketplace.
Table of Contents
ORDER Full Report
Introduction(the following summary highlights major insights covered in the full report )
In spite of surface appearances to the contrary, however, it is possible to do business there and there are convincing reasons for doing so. In the long run, much depends on the progress of discussions between Israel and the Palestinian Authority (PA), and it's no secret that these have been somewhat bumpy of late. But then, few foresaw the progress of the past three years since the advent of the Oslo Accords. Businesspeople with a desire to source from or sell to the Middle East may be surprised to learn about the opportunities that Palestine offers.
Open for BusinessWhen companies consider doing business in the Middle East, Palestine is generally not the first place that comes to mind. But the reality is that many of us have already conducted business with Palestinian firms, albeit indirectly through Israeli companies and middlemen.
Since it was only recently that West Bank and Gaza became a recognized country of origin, goods from Palestine have traditionally been sold with "Made in Israel" labels. If you have ever purchased fresh produce, flowers, clothing, shoes, handicrafts, or stone and marble from Israel, the chances are good that you actually bought products from Palestine.
45% of Israel's textile production is from West Bank and Gaza.
Likewise, if you have ever exported to Israel, there's a reasonable chance that your final customer was a Palestinian company or consumer.
In spite of their relative anonymity, then, many Palestinian businesses are not new to the rigors of world trade.
Aside from this, for those who believe that the raison d'etre of business should at least occasionally extend beyond the realm of profit-making, there is the matter of the closely synchronized relationship that exists between peace and economic circumstances.
A synchronized relationship exists between peace and trade.
Robert Pelletreau, Assistant Secretary of State for Near Eastern Affairs, recently summed this up with a simple statement: "When goods move, soldiers don't."
There are also a number of other purely business reasons for looking into this market:
- Key role in the region: The Palestinian Authority will be one of the "core four" (along with Egypt, Jordan, and Israel) at the upcoming Middle East-North Africa Economic Summit, planned for Cairo in November 1996. More than 600 U.S. businesses have registered for this summit, despite recent events. It should also be noted that other companies, ranging from General Mills to England's Marks and Spencers, are already doing business in Palestine.
- Strategic Location: It is strategically located to serve as a door to the Middle Eastern market as a whole, and makes use of the stable Israeli shekel as its currency (The Jordanian Dinar is also legal tender, but not as widely used).
- Trade Agreements: As a result of the free trade agreement signed by President Clinton on October 3, 1996, all goods exported from West Bank and Gaza to the U.S. will enter free of duties, and vice versa. The European Union also has a preferential trade agreement with Palestine. In addition, the 1994 Paris Economic Agreement between Israel and the PA and the PA's agreements with Jordan and Egypt facilitate trade in the region, making Palestine more attractive for those seeking to enter the Middle East.
- Language and Cultural Ties: Even a brief visit to Palestine leaves one surprised at how widely English is spoken and the substantial number of people who have obtained their degrees abroad. The U.S. State Department's Fiscal Year 1996 Commercial Guide notes that "many have trained outside the area and are familiar with foreign business practices," and further states that Palestinians are "westernized and well-educated and seek American goods, know-how and services." Because so many have studied abroad or have relatives overseas, there is strong affinity with Western culture and products.
- Demand for Quality Goods: There is also an appreciation for high-quality goods, and a preference for non-Israeli goods which are the most readily available.
- Cheap Advertising: The promotion-related costs of entering this market are very low. Advertising is almost a new art in Palestine, and quite inexpensive. Most advertising is now done through local Arabic newspapers, but this is changing with the introduction of newly established Palestinian television and radio services. A few companies have begun billboard advertising, which a periodic visitor to the region can see are already becoming more prevalent. If looking for advertising bargains, how does a prime-time radio announcement for $35 per minute sound?
Best Industry Prospects: What Consumer Goods Should You Be Selling?
The best prospects for the consumer market range from western fast food restaurants to car repair and computer equipment.
SEE: [fast food] [processed foods] [health and hygiene] [PCs/Office Equipment] [auto parts/repair]
High-potential consumer products include fast food, processed foods, health and beauty care items, computers and office equipment, and car parts.
Fast Food: The fast food business is booming in both Israel and Palestine. Palestinians who can travel in Israel have a growing appetite for McDonald's, Burger King, Pizza Hut, and Dunkin' Donuts. Those who have lived abroad bring home foreign foods and recipes as is evidenced by the growing number of ethnic restaurants (especially Indian, Italian, and Chinese). The author of this report was once treated to "Maryland Fried Chicken" in Nablus. Those foods which offer the greatest opportunity at present are pizza, ice cream, and inexpensive hamburger and chicken meals.
Processed Foods: The winner in this category seems to be snack foods which can be found in most corner grocery stores. General Mills now sells "American Bugles" (pronounced "buggles" in Palestine) through a Hebron-based snack food producer and distributor. Cereals, condiments, sauces, and other foods not requiring refrigeration during transit are also likely candidates.
Health and Hygiene Personal and Household Goods: Given that the competition is usually fairly high-priced Israeli goods, household cleaning items, dental care goods, toiletries, and hair care products should all do well in the Palestinian market.
Computers and Office Equipment: Computer and office supplies are notoriously hard to come by in Palestine. Growth of both the public and private sectors in recent years has created high demand for a full range of office equipment, including computers, software, copiers, faxes and supplies.
Automotive Parts and Service Equipment: The number of cars on the road in Palestine and Israel has mushroomed over the last decade. It's virtually impossible to go for a drive without spotting several student driver symbols on the backs of other cars in traffic. Because cars are heavily taxed at Customs, they are largely out of the reach of most Palestinians, so the tendency is for them to buy used cars from Israelis. Once purchased, they are then made to last in spite of rough road conditions. As a result, the automotive services industry has blossomed.
Consumer and Market ProfileGNP
Depending on one's choice of sources, 1994 estimates place GNP per capita for West Bank and Gaza at either $1,715 (according to the World Bank) or $2,800 for the West Bank and $2,400 for Gaza (according to the CIA World Factbook).
A 1996 report issued by the Palestinian Central Bureau of Statistics reveals that the typical Palestinian household divides its consumption as follows:
36% to food
19% to housing
12% to communication and transportation
8% to clothing
25% to "other"
West Bank households consume slightly more ($878/month) than comparable ones in Gaza ($757).
Western Products Popular
Anyone who has been to Palestine is struck by the ready availability and extreme popularity of Western products. Major brand soft drinks, snack foods, cosmetics, and other consumables are easily found at prices above the local competition. Durables, such as cellular phones, are seen in greater numbers than North America and Europe. Unlike some countries, there is no apparent resistance to foreign products. The information below, taken from the Commercial Guide, sheds some additional light on consumer preferences:
"Despite relatively low reported annual incomes, there is a growing middle/ upper-middle class in the West Bank and Gaza, due in large part to the recent influx of diaspora Palestinian investors and technocrats who staff PA ministries. This class seeks high quality consumer goods. American-made food and consumer items are popular, as is electronic equipment such as personal computers."
"Local consumers are price conscious, although quality ... is more important than price for the more westernized upper-middle class. Moreover, even with shipping costs, American-made consumer products may be cheaper than relatively high-priced comparable Israeli items which are currently sold in Palestinian stores."
As increasing numbers of the emerging middle-to-upper class obtain satellite dishes and gain access to the internet (which has been soaring since about June 1996), it is reasonable to expect that demand for non-local products will only grow.
What Problems Will Your Face?As was alluded to at the outset, doing business in Palestine is not without its challenges. The most critical of these are:
- Political Situation: When relations are strained between Israel and Palestine, everything becomes a little harder to do. For example, during the closure initiated in February of 1996, many Palestinians found themselves unable to get to their banks in East Jerusalem. After a while, many simply closed their accounts and shifted to banks in their home towns, but foreign firms doing business with them in the interim undoubtedly experienced delays in financial transactions.
- Movement of Goods: Due to sporadic Israeli security measures, the movement of Palestinian goods and people is occasionally curtailed, or at least, slowed down. During such times, Palestinian firms find it difficult to import or export. While they are accustomed to these circumstances and have learned to work with them, time-sensitive shipments should be expected to be a problem.
Additional Information Resources:To conduct business with Palestine, it is important to keep up on current events. Follow the peace process, the progress of the Cairo economic summit, and any modifications to Palestine's GSP and free trade status. If interested in learning more, a good starting point would be to contact one of the 600 American firms participating in November's summit to ask about their perceptions, experiences, and plans. Other sources of information include:
- PALTRADE's Homepage -- http://www.paltrade.org/
- Welcome to Palestine -- http://www.palestine-net.com/
- Palnet Communications Ltd. Homepage -- http://www.palnet.com
- CIA World Factbook ( West Bank) -- http://www.odci.gov/cia/publications/95fact/we.html
- CIA World Factbook (Gaza) -- http://www.odci.gov/cia/publications/95fact/gz.html
- Journal of Commerce, January 29, 1997, page 4C.
Opinions expressed are those of the author and not necessarily those of the operator of this network or site. PANGAEA makes no claims with regard to the accuracy of the information contained in this or any other report on the site.
(c) 1996 PANGAEACommunications. All rights reserved. No part of this file may be copied, distributed or disseminated in part or in whole without the express prior written permission of PANGAEACommunications Reprints are available for US$10.00 per copy, payable to "PANGAEA(tm)." Full report is also available for US$100.00.This article is published by PANGAEACommunications(tm) 372 Central Park West/Suite 16L New York, New York 10025 USA. Phone: 212-678-8500 Fax: 212-662-9560 Email: email@example.com