Home > Middle East > Palestinian Economy May Grow 20% With Peace Agreement, Abbas Adviser Says

Palestinian Economy May Grow 20% With Peace Agreement, Abbas Adviser Says


By Jonathan Ferziger –
Aug 4, 2010 10:21 AM PT Wed Aug 04 17:21:34 GMT 2010

The Palestinian economy may grow 20 percent annually if there is peace with Israel, helping to wean it from dependence on international donors, said Mohammad Mustafa, the Palestinian president’s top economic adviser.

In the meantime, Palestinians are pushing ahead with development of a new West Bank financial center and what may be the biggest initial public offering yet when mobile phone operator Wataniya Palestine Telecom sells shares before the end of the year.

“If people see serious negotiations, we can improve the business environment and investment opportunity,” Mustafa, chairman and chief executive officer of the Palestine Investment Fund, said in an interview yesterday at his office in the West Bank city of Ramallah. “If they see an agreement, the sky is the limit. We’ll talk about 15 to 20 percent growth easily.”

Palestinian economic growth accelerated to 6.8 percent last year from 5 percent in 2008, which the World Bank described as impressive though “precarious” because it relied on $1.4 billion in support from foreign donations. The bank said private investment would be crucial to sustain economic expansion.

“Donors have been very generous,” said Mustafa, 56, a former World Bank analyst who holds a Cabinet-level position as Palestinian Authority President Mahmoud Abbas’s economic adviser. “I sincerely hope that this financial assistance will be immediately supplemented and hopefully eventually replaced by private sector activity that will generate enough income for the government to sustain itself from its own resources.”

Expansion Potential

Part of the potential for expansion stems from the degree of backsliding in the Palestinian economy amid the violent 2000 uprising against Israel and Israel’s tightened security measures that choked growth, he said.

“We’re starting from a very low base,” in which the economy contracted 32 percent from 2002 to 2007, Mustafa said. “We’re still trying to recover what we lost.”

Israeli Prime Minister Benjamin Netanyahu has suggested that Palestinians should work toward an “economic peace” that would eventually lead to an overall peace treaty. Netanyahu has lifted roadblocks and eased other restrictions across the West Bank in an effort to promote Palestinian economic growth. Abbas has rejected a separate economic agreement, saying it would delay an overall settlement.

Shuttle Diplomacy

The U.S. is trying to renew Middle East peace negotiations that were cut off at the end of 2008. President Barack Obama’s envoy, George Mitchell, has been shuttling between Jerusalem and Ramallah to conduct so-called proximity talks between Abbas and Netanyahu. The Palestinian Authority has said it won’t return to direct talks unless Israel freezes all West Bank settlement building. Netanyahu declared a limited settlement-building moratorium for 10 months that is due to expire at the end of September. Abbas has said the Netanyahu initiative didn’t go far enough in halting construction.

The Palestine Investment Fund is the Palestinian Authority’s primary vehicle for bringing foreign investment to the West Bank and Gaza Strip and has $800 million in assets under management. It holds a 47 percent stake in Wataniya, as the minority partner with Wataniya Telecom of Kuwait, which owns 53 percent and is controlled by Qatar Telecom QSC. Mustafa said in March that Wataniya plans to sell 30 percent of its stake on the Palestine Securities Exchange, which is based in Nablus. The fund is also a partner in the Ersal financial center, a planned 13-tower project on a hilltop just outside Ramallah with Riyadh- based Land Real Estate Investment and Development Co.

World Bank Veteran

Mustafa, born in the northern West Bank city of Tulkarm, holds a bachelor’s degree in engineering from Baghdad University. He earned a master’s degree and doctorate in economics from George Washington University in Washington D.C. Mustafa spent 15 years in various positions at the World Bank.

Returning to the West Bank, he was founder and CEO of Palestine Telecommunications Co., which has become the largest phone company in the West Bank and Gaza. Mustafa also served as an economic adviser to both Saudi Arabia and Kuwait.

Persuading foreign investors to put their money in Palestinian businesses has been a challenge on many levels, including the enduring conflict with Israel and schism with Hamas, the militant Islamic movement that broke off its power- sharing arrangement with Abbas’s Fatah party and violently seized control of Gaza in 2007.

“People think we live in a violent place with all sorts of problems,” Mustafa said. “If they see peace, if they see security as we have today, I think the level of inflow of capital will be unbelievable, extremely positive.”

To contact the reporters on this story: Jonathan Ferziger in Ramallah, through Tel Aviv newsroom at jferziger@bloomberg.net;

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Categories: Middle East
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