Border delays hit industrial park in Jericho

An agro-industrial park in Jericho could provide a template for reviving the West Bank economy, but access rights from the Israeli government will be critical to the success of the scheme. Published in MEED, 6 April 2012

It does not look very promising at the moment, but a barren patch of land on the outskirts of Jericho could provide the basis for some much-needed economic rejuvenation in the West Bank. If all goes to plan, the 115,000-square-metre site will emerge later this year as a cluster of businesses based around the local agriculture sector.

The Jericho Agro-Industrial Park (JAIP) is expected to be up and running by October, processing and packaging local produce for sale to Palestinians, as well as to export markets. It is one of three parks being planned by the Palestinian Industrial Estates & Free Zone Authority (PIEFZA), alongside others in Jenin to the north and Bethlehem to the south.

The land has been levelled and a solar power plant is in the process of being assembled, but the hurdles that have been put in the project’s way encapsulate the difficulties in getting any scheme off the ground in the Occupied Territories. According to those working on the project, vital materials and people have been delayed at the border by Israel. Soon the concerns will shift to the process of getting raw materials past Israeli customs.

Economic regeneration for Palestine

For those involved, optimism is a necessity rather than an option, but if they are successful the project could act as a template for economic regeneration in the wider area.

“We are trying to put Palestine back on the map in a positive, productive way, through industry and the economy,” says Reem Najjar, acting general director of PIEFZA. “Industry is very important for Palestinians.”

The park has been funded by the Japan International Cooperation Agency (JICA), Tokyo’s overseas development agency, and is a cornerstone of its efforts to promote peace and stability in the region. JICA has played an important role in getting the project this far, helping to bridge differences between the Palestinians, Israelis and Jordanian authorities, but the scheme continues to present tests for all those involved.

The first hurdle was convincing the Israelis to allow photovoltaic (PV) solar panels to be imported from Japan. This took some time, but by March they were on site, and, at the time of writing, the installation work was due to start.

Signing up a private sector developer to promote the park has also been troublesome. Najjar says that one potential developer changed his mind about the viability of the project after it took him a whole day to pass from Jordan through the Israeli border controls into the West Bank.

“We lost one very important developer because [Israel] didn’t want to give him permission to enter,” she says. “He was a Palestinian from Jordan. They made him wait from 6am to 6pm at the border, even though there was previous coordination between Palestinian authorities, Israel and Japan. For him it was shocking and he was convinced he would not be able to come freely from Jordan, so he changed his mind.”

In his place, PIEFZA has lined up a new developer: a joint venture of the Palestinian Investment Fund and Palestine Real Estate Investment Company (Prico), a subsidiary of the local Padico Holding.

But it is not just people and PV cells that can have a problem getting through the checkpoint. Importing raw materials is also difficult.

“The challenge is not only for individuals,” says Najjar. “The challenge is also for raw materials. Israel claims that any raw materials need very strict examination because Palestinians might use these materials to bomb Israel. We want to prove, through JAIP, that having a corridor of peace and prosperity will enhance the economy of Palestine, raise our economic capacity and leave peace not violence.”

Access issues for the import of raw materials

The difficulties in importing raw materials should be eased once a container scanner paid for by the Dutch government is installed at the nearest border crossing to Jordan at the King Hussein Bridge. The scanner should be in place later this year, although the various authorities have yet to agree on who will operate it.

Even getting goods to and from the crossing point is proving to be a problem. The ideal route would be via a new access road connected to the nearby Route 90, which passes close to the border. However, the Israeli government is refusing to allow the access road to be built, instead insisting that anything coming in and out of the industrial park will have to travel along a more circuitous 30-kilometre route instead.

The Japanese backers of the scheme do a good job of hiding whatever frustrations they might have at the slow progress, but the Palestinians feel less need to be diplomatic. “This is the Israeli contribution to the project,” says one Palestinian of the argument over the access road, with a hint of sarcasm in his voice.

The problem of the access road arises because of the way control over land in the West Bank is divided up. Under the 1995 Oslo Accords, the territory is separated into three zones. Area A covers 17 per cent and is wholly controlled by the Palestinians. Area B is under joint control and covers a further 24 per cent, while Area C, which is controlled by the Israelis, accounts for the remaining 59 per cent.

Israeli permission

The first phase of the industrial park is on Area A land, as is a potential second phase covering 500,000 sq m, while a third phase of a similar size in is Area C. The planned access road would also cross over Area C land. The Japanese and Palestinian authorities have both been pushing for the Israelis to change their policy about the road, but as yet there has been no movement.

“We need Israeli permission to construct the access road, but until now they [have been] reluctant,” says Hideaki Yamamoto, Japan’s deputy representative to the Palestinian National Authority. “They have raised many issues, but we couldn’t stop the whole process because of one or two issues on the Israeli side. So we’ve been continuously working on whatever we could deal with. We cannot force them to give permission to construct the access road in Area C. We have to show them that there is a real need for the road and there should be ways to [deal with] their security concerns.”

Despite all the problems, the park seems to have proved attractive to investors. Alaa Melhim, project director at PIEFZA, says it already has received commitments from 25 tenants to fill the first phase of the park. The companies are involved in everything from packaging dates and herbs, to hydroponics and producing caviar. They include Palestinian, Jordanian and Arab Israeli businesses.

International involvement is also a feature of the other two parks planned by PIEFZA. The Bethlehem site is being developed by a French-Palestinian joint venture, Bethlehem Multidisciplinary Industrial Park, while Jenin Industrial Estate is being developed by Turkey’s Tobb-Biss with backing from the German development bank KfW.

Together, the three parks could make an important contribution to the Palestinian economy, but industries based around agriculture which JAIP is targeting, are perhaps the most natural fit. Agriculture accounts for an estimated 6 per cent of Palestinian gross domestic product (GDP). In 1967, it made up 60 per cent of the local economy, according to PIEFZA.

There is no doubt that the economy could do with the help. According to a recent World Bank report, ‘Stagnation or Revival? Palestinian Economic Prospects’, GDP growth has been slowing in the West Bank since 2008. This year it is expected to be just 5 per cent – well below the level needed to provide opportunities for the local population, especially given that unemployment among the young is about 26 per cent.

Part of the attraction for potential tenants at JAIP is the set of incentives that PIEFZA has been putting together. This includes a grant of up to 35 per cent of a tenant’s initial investment and tax exemptions, which are due to be finalised by May. Perhaps most importantly, there will also be an insurance scheme backed by the Multilateral Investment Guarantee Agency, part of the World Bank group, which will cover up to 80 per cent of the value of any investment in the event of war.

Bridge of peace

Whether the ambitions of all those involved in the scheme come to fruition remains to be seen. There are plenty or reasons for caution, not least the experience of the Palestinian authorities in developing industrial parks in the past. PIEFZA was set up in 1998 and decided to establish one of its first parks in Gaza. Despite some early promise, it is now all but defunct due to the Israeli blockade on the Gaza Strip.

“It is not working any more as an industrial park because of the closure,” says Najjar. “It is used as UN storage. We have 400,000 sq m of land with infrastructure, but we have only two industries inside the zone: one textile company and one soft drinks company. The others were totally destroyed. The Israelis do not allow us free movement and access.

“The most crucial problem facing Palestinians in general and investors in particular is movement and access for individuals and goods, coming in and out. Israel sets very strict conditions. From our experience, this will be the most important challenge that faces us.”

The issue of access is one that all those involved recognise as being crucial to the success or otherwise of JAIP.

It is also one of the main reasons why JICA paid for the new King Hussein Bridge over the River Jordan, which opened in 2001. But despite the improved infrastructure, reliable access has proved as elusive as a long-term peace deal in the region.

“When we implemented that project we called the bridge the Bridge for Peace, but unfortunately peace is not yet realised,” says Yamamoto.