Focus on Palestine

Open for Business

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.

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45% of Israel's textile production is from West Bank and Gaza.

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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.

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A synchronized relationship exists between peace and trade.

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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?

The best prospects for the consumer market range from western fast food restaurants to car repair and computer equipment.

Household Expenditures
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?

• 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.