West Bank gets 7% Growth as Israel Removes Roadblocks

West Bank Peace Signals 7% Growth as Israel Removes Roadblocks 
By Gwen Ackerman

 

Nov. 2 (Bloomberg) -- Nablus Soap and Detergents Company says its revenue has grown as much as 20 percent since Israel removed three major roadblocks in the area, making it easier for merchants from other parts of the West Bank to visit.

 

"We now have the possibility of finding more customers and sales have improved," said Mojtaba Tubeileh, 41, general manager of Nablus Soap, which had 2008 revenue of about 1 million shekels ($267,000). "We are waiting for more improvement."

 

Economic growth in the West Bank may accelerate to 7 percent this year from 5 percent as Israel eases restrictions, the International Monetary Fund said in a report last month. The lifting of barriers must continue for the expansion to be sustained, the lender said.

 

Prime Minister Benjamin Netanyahu has said he is focusing efforts on boosting the West Bank economy and will continue easing movement restrictions. Palestinian investors say a political process must be launched to bring in the foreign investment needed to turn around an economy that, according to the World Bank, has contracted 13 percent in the eight years between 2000 and 2008.

 

"This is a step forward, but you can't build an investment decision on it because if they have problems, the roadblocks will come back," said Samir Hulileh, chief executive officer of the Ramallah-based Palestine Development and Investment Ltd. Investors have to see "the West Bank and Gaza without the army and tanks and demonstrations."

 

Largest Investor

 

The company is the largest private investor by initial investment in the West Bank and Gaza Strip, according to the Palestine Capital Market Authority.

 

Israeli Vice Premier Silvan Shalom said on Sept. 23 that his country is "committed to economic peace and to focus on ways to ease the lives of Palestinians."

 

Palestinian security forces "are working better against extremists and this makes it possible to cancel more roadblocks in the future," he said.

 

Israel has removed 11 checkpoints this year, including the three around Nablus in the past six months. Some 250 roads that had been completely closed have been reopened since 2007, including 100 in the last six weeks, military spokesman Maj. Peter Lerner said in a phone interview.

 

Netanyahu said Oct. 31 that Israel's decision to dismantle roadblocks and eliminate "a lot of bureaucratic hurdles to daily life and economic activity in the Palestinian Authority's areas," had resulted in "a Palestinian economic boom."

 

Short Time

 

Some 450 blocked roads and 14 checkpoints remain in the West Bank and are necessary to stop Palestinian militants from reaching Israeli towns and cities to carry out attacks, Lerner said.

 

"If the situation turns around into a negative one, we do have the ability to relatively, in a short period of time, re- implement these elements and put them back in place," he said.

 

Tubeileh said the situation was too uncertain to forecast revenue for this year or next.

 

Palestinians, as well as the IMF and the World Bank, say that roadblocks severely limit travel and transport of goods in the West Bank and have strangled the local economy, especially the private sector.

 

"As a result of the Israeli security regime, the Palestinian economy has hollowed out, with the productive sectors declining and the public sector growing," the World Bank said in a report released in June.

 

Palestinian Prime Minister Salam Fayyad told reporters in Ramallah on Oct. 14 that economic growth has been led by the $1.7 billion in international donor money granted to the Palestinian Authority last year and the $1 billion donated so far this year.

 

Solid Waste Investment

 

Imad Al-Hindi, the general manager of Ramallah-based National Beverage Company, the Palestinian franchisee for Coca- Cola Co., said revenue climbed 5 percent since the easing of restrictions as trucks can now more easily travel through the northern West Bank toward Nablus and Jenin. Revenue in 2008 was 200 million shekels, he said.

 

Profit from revenue growth was partly offset after a major checkpoint in the south was closed, increasing the cost of sending goods to that area, Al-Hindi said.

 

"There is a slight improvement but not something that will lead to major changes," he said. "A lot more of that has to happen for there to be a critical mass of change and the economic revival to go forward."

 

Hulileh said PADICO is concentrating investments on "big projects that need a longer period of time to mature" such as power stations and solid waste management. These types of infrastructure projects can be kept going "through wartime and occupation," he said.

 

Unemployment Down

 

While per capita Palestinian GDP has fallen about a third since 1999, it may expand this year due to Israel's lifting of roadblocks and to Palestinian institution building and financial changes, the World Bank said in a Sept. 22 report.

 

Unemployment in the West Bank fell to 16 percent in the second quarter from 20 percent in the previous three months, a drop the bank said may largely be due to a seasonal increase in agricultural employment. Palestinian gross domestic product in 2008 was $6.5 billion, according to the IMF.

 

The Palestine Stock Exchange has gained 11.4 percent this year, compared with a 68.1 percent jump of the Morgan Stanley Emerging Markets Index.

 

Tubeileh said that while conditions in the West Bank have improved, Israeli limits on the flow of goods into the Gaza Strip are undermining potential growth there.

 

"Before 2000, 70 percent of our sales were to Gaza," said Tubeileh, who says his family has been making soap out of olive oil in the West Bank city of Nablus for more than 400 years. "Since then I have sent two containers, and those only in the past three months."

 

To contact the reporter on this story: Gwen Ackerman in Jerusalem at gackerman@bloomberg.net

 

Last Updated: November 1, 2009 17:18 EST