West Bank & Gaza

Warning signs in Palestine

Published in MEED, 13 December 2015

The West Bank leadership look as vulnerable and weak as the economy it oversees.

With so many crises in the region, from Syria to Libya to Yemen, one long-standing problem is in danger of being ignored. Yet the situation in the Palestinian territories is deeply worrying, with warnings that the Palestinian Authority (PA), led by Mahmoud Abbas, could be close to collapse.

US Secretary of State John Kerry raised the possibility in an ominous speech to a US-Israeli forum in Washington on 5 December. “There are valid questions as to how long the PA will survive if the current situation continues,” he said.

The situation he was referring to is one of increasing violence and mutual distrust. Over the course of this year, Israel has continued to expand its illegal settlements in the West Bank and there have been sporadic but increasingly regular attacks by Palestinians in Jerusalem and the West Bank and occasional rocket launches from Gaza.

“I’ve had a lot of discussions with both sides over the past three years, and let me tell you the level of distrust between them has never been more profound,” said Kerry. “I am concerned that unless significant efforts are made to change the dynamic – and I mean significant – it will only bring more violence, more heartbreak, and more despair.”

If the PA does collapse, Israel would have to deploy large numbers of security forces to the West Bank and take over services such as schools, hospitals and policing, all of which would only increase the likelihood of violence.

Given the weakness of the Palestinian leadership and the intransigence of the Israeli government, there is no easy way out of the current situation. Kerry, however, reached for a familiar potential solution to at least some of the problems, saying that “strengthening the Palestinian economy will enhance security for Israelis and Palestinians alike”.

International actors have been trying to turn the Palestinian economy around for years without success. Sami Abdel-Shafi, an academy associate at London-based think-tank Chatham House, points out that the biggest donor, the EU, has had little to show for its beneficence. 

“For more than 20 years, the EU has spent more than €6bn to try to assist Palestinians with their economic development and with their other needs, but the results on the ground don’t really testify to that very much,” he says.

He describes the notion of a viable Palestinian economy as a “myth” these days. “In many publications out there, the GDP of Gaza in the past few years is listed as being in the modest billions of dollars per year. I live in Gaza and I can tell you that there isn’t productivity that amounts to even $1m per year,” Abdel-Shafi says.

It is hard to see the economy improving without a comprehensive political situation. In the meantime, the value of lost opportunities continue to mount. A study earlier this year by the Rand Corporation, a US think-tank, suggested that a peaceful two-state solution would lead to a $173bn boost to the economies of Israel and Palestine over 10 years, with a $123bn windfall for the Israelis and a $50bn boost for the Palestinians.

By contrast, a full-scale violent uprising would lead to their economies losing $296bn over the decade, with $250bn lost from the Israeli economy and $46bn from the Palestinian.

The potential benefits and costs are greater in absolute terms for the Israelis, but in proportional terms it is the Palestinians who have the most at stake, as their economy is just a fraction of the size of Israel’s. “The Palestinians have a much greater incentive to move from the present situation than the Israelis,” says Ross Anthony, a co-author of the study.

Certainly, the Palestinian territories could do with an economic lift. Overall unemployment is running at about 27 per cent, according to the Washington-based IMF, but some observers say it is as high as 67 per cent among young Palestinians in Gaza.

The IMF is predicting GDP growth this year of about 2.9 per cent for the West Bank and Gaza, which it says represents stagnation given the rate of population growth.

The problem is that the economic and the political spheres cannot be easily separated and it is political problems that are causing the Palestinian economy to under-perform so badly. Abdel-Shafi says donors should try to decouple Palestinian economic development from the political process.

“If the Palestinians do achieve a sovereign state, they will definitely need a viable economy to support their state,” he says. “If they don’t achieve sovereignty soon, they are still entitled to a dignified life.”

However, separating the two strands is a hard and potentially impossible task to achieve. In the meantime, the situation is becoming ever more fragile. Unless some progress is made soon, the prospects look bleak, something that was evident in the warning Kerry issued to Israel when he said it needs to do more to assist the Palestinian President Mahmoud Abbas, also known as Abu Mazen.

“How is Israel advantaged to have chaos in the West Bank or to have another war with Gaza?” he asked the audience in Washington. “Strengthening Abu Mazen is now and has been for years – and it hasn’t happened sufficiently for years – critical, because if you don’t strength the one person who is most committed to non-violence you send an incredibly negative message to all the rest of the people who are frustrated.”

Palestine's economic revival to be delayed

The dire economic situation in the Palestinian territories could well lead to another bout of conflict, compounded by the potential emergence of a right-leaning cabinet in Israel. Published in MEED, 31 March 2015

This year’s general election in Israel has provided a stark reminder to Palestinians of how little control they have over their own destiny.

During the campaign, Benjamin Netanyahu tacked hard to the right in an effort to win enough votes to secure a fourth term as prime minister. Among the casualties of that manoeuvre was the cause of Palestinian statehood. On the eve of the election, he disavowed his previous support for a two-state solution and said he would further expand Israel’s illegal settlements in the West Bank.

He has since tried to row back on some of these things, but in the short-term, the tactics worked and Netanyahu’s Likud Party secured the largest number of seats in the Knesset (parliament). The precise make-up of the next Israeli government was not clear as MEED was going to press, but the most likely scenario was that Netanyahu would stitch together a right-wing coalition to secure his fourth term in office.

On the face of it, this spells bad news for anyone in Gaza or the West Bank who had been hoping a change in leadership in Israel might have enhanced the chances of peace or Palestinian statehood. Some seasoned observers in the region, however, are stoical about the result.

“I don’t think Mr Netanyahu really changed much with his statement [on Palestinian statehood] because ever since he has been prime minister, he has resisted the idea of a Palestinian state coming into being,” said Prince Turki bin Faisal al-Saud, a veteran Saudi diplomat, speaking at the Chatham House think-tank in London on 18 March.

Whether or not Netanyahu or his supporters believe a Palestinian state is likely or desirable, his re-election is likely to put further pressure on the Palestinian economy and its political environment.

The economy is already suffering from a crisis triggered by the decision of the Palestinian Authority (PA) on 2 January to seek membership of the International Criminal Court and to get it to investigate alleged crimes by Israel in the occupied Palestinian Territories. On 16 January, Fatou Bensouda, the prosecutor of the court, opened a preliminary examination into the situation in Gaza and the West Bank – standard practice at the court whenever a valid referral is made.

It remains to be seen whether a formal court investigation will follow, but Israel has not wasted any time in retaliating against the possibility of a war crimes investigation. On 4 January, Tel Aviv suspended the transfer of tax and customs revenues to the PA. Such revenues are collected by Israel on behalf of the PA, accounting for about two-thirds of the latter’s revenues. In a speech to the Palestinian Liberation Organisation (PLO) Central Council on 5 March, Mahmood Abbas, president of the PA, said Israel owed the Palestinian government some NIS1.8bn ($460m).

The health of the Palestinian economy was in any case already fairly poor. According to the Washington-based IMF, GDP across the Palestinian Territories fell last year by almost 1 per cent, its first contraction since 2006.

The problems are worst in Gaza, as a result of the conflict between Palestinian Islamic organisation Hamas and Israel last summer, and the long-running blockade by Tel Aviv of the territory. GDP in Gaza contracted by 32 per cent in the third quarter of last year and by an estimated 15 per cent for the year as a whole. In contrast, the West Bank economy grew by about 4.5 per cent last year, but it also decelerated sharply in the third quarter.

Unemployment levels remain extremely high, at 41 per cent in Gaza and 19 per cent in the West Bank. More than 60 per cent of the youth in Gaza are jobless, according to the IMF, and the current and predicted economic growth rates will not be sufficient to create enough new jobs.

There is little hope of a meaningful recovery this year, according to Christoph Duenwald, head of the IMF’s mission to Palestine.

“A high degree of uncertainty and various headwinds will likely prevent a strong economic recovery in 2015,” said Duenwald, following a visit to Ramallah and East Jerusalem in late January. “Most notable is the non-transfer to the PA of clearance revenues collected by Israel. Reduced wage payments and other public spending cuts necessitated by the suspension of clearance revenues … will likely cause a sharp reduction in private consumption and investment.”

Overall, the IMF is predicting that the Gaza economy will post a modest level of growth this year, as post-war reconstruction efforts continue, but the story is different in the West Bank, where it believes the economy is likely to contract by 2 per cent. While the West Bank does not suffer from a full-on Israeli blockade, it is hampered by the fact that the majority of the area, including the border crossings with Jordan, is directly controlled by Israel.

“Medium-term growth will remain modest, unless there is an improvement in the political climate that would lead to a lifting of restrictions in the West Bank and the blockade in Gaza,” said Duenwald.

The situation is being partly ameliorated by international donors coming forward to help the Palestinian government. Several Arab states have stepped in to help fill the void in the PA’s revenues. For example, Iraq and Qatar handed over a total of $54.7m in January to support its budget.

Other governments have also made promises of aid. In February, Japan announced a $32.2m contribution to the UN’s Palestinian refugee agency, UNRWA, much of which will go to relief and recovery operations in Gaza. In the same month, the EU announced a $5.7m package to help with job creation in Gaza.

But promises of assistance are not always matched with action. That has certainly been the case following a conference in Cairo on 12 October, which was held to coordinate international aid for Gaza. Billions of dollars were pledged, but a group of 30 international aid agencies, including ActionAid, Oxfam and the World Food Programme, issued a statement on 26 February in which they complained that “the international community is not providing Gaza with adequate assistance. Little of the $5.4bn pledged in Cairo has reached Gaza”.

In the meantime, the pressures continue to build. The IMF has calculated that, if the transfer of clearance revenues is resumed in the next few months, the PA will run a budget deficit of 15 per cent of GDP, three percentage points higher than last year, and there will be a financing gap of about $450m. Any delays to the resumption of clearance revenues mean the figures will look much worse.

The situation is being exacerbated by the continued lack of progress in the reconciliation efforts between Hamas, which controls Gaza, and political party Fatah, which rules in the West Bank. Many observers are predicting that it is only a matter of time before further violence erupts.

Speaking at an event in Brussels on 4 March, Pierre Krahenbuhl, commissioner-general of UNRWA, said he had “a very strong sense of alarm” about the position of Palestinians, and that conditions were particularly fraught in Gaza. “It is a time bomb,” he said. “Nobody will be able to say when the next conflict happens that we were taken by surprise, that we didn’t see this coming. … Leaving this situation unattended politically is a risk too high to consider.”

Prince Turki also suggested the situation was getting dangerous, in his comments in London after the Israeli election. “Denying the Palestinians the right to self-determination and all that comes with that is a dangerous prospect, and I think on both sides the extremists now are taking advantage of this,” he said.

“On the Arab side, the extremists are very happy Netanyahu has come out the way that he has, because now they can turn to the rest of us and say: ‘You see, we told you he is not serious; Israel is not going to give up anything and it is going to continue the settlement policy, and therefore we have been justified all this time not to come into the peace process.’

“And on the Israeli side, of course, I’m sure the settlers and all the other extreme right wingers are also happy, because it shows from their point of view that they’re equally justified in what they have been doing in the past. So the danger is there; it is going to continue.”

Frederica Mogherini, the EU’s high representative for foreign affairs, has said she thinks a new round of peace talks needs to start as soon as possible.

“The protracted stalemate in the talks can only strengthen forces that oppose an agreement, in both Israeli and Palestinian communities,” she said in a speech in London on 24 February. “The status quo is not an option: if we don’t move towards peace, we will move towards more violence.”

But whether there will be any real appetite to launch a new peace initiative once the latest Israeli government is formed remains to be seen. US Secretary of State John Kerry failed in his previous efforts and, at the very least, Netanyahu appears to have severely limited his room for negotiation or compromise. In the meantime, the Palestinian authorities have suggested they might withdraw security cooperation with Israel, which would make the situation even more volatile.

“Progress on the peace process with the Palestinians is very unlikely,” says Firas Abi Ali, head of Middle East country risk analysis at IHS, a UK-based consultancy. “Netanyahu is likely to form a right-leaning cabinet, which would significantly raise the risk of civil unrest among the Arab-Israeli and West Bank Palestinian populations, and which would increase the risk of another war.”

Without any new political initiatives, the prospects for the Palestinian economy also look extremely dim.

The race to harness Mediterranean gas resources

In the past 15 years, a number of significant gas discoveries have been made in the Eastern Mediterranean. The first countries to exploit these resources will have their pick of customers. Published in MEED, 3 June 2014

In early May, the operators of Israel’s Tamar gas field signed a letter of intent to supply up to 2.5 trillion cubic feet of natural gas to a plant run by Spain’s Union Fenosa Gas in Egypt. For now, it remains a non-binding deal, but the field’s operators, led by the US’ Nobel Energy, say they hope to sign a full agreement within six months.

It was the third export deal involving gas from the offshore Tamar field this year, following an agreement in January to sell gas to Palestinian Power Generation Company and another in February to supply two customers in Jordan – Arab Potash Company and Jordan Bromine Company.

Israeli finds

These deals are a sign of the shifting balance of energy power in the Eastern Mediterranean and, for now at least, there is one clear leader. Since 1999, there have been at least 12 gas discoveries in the region and all but two of them have been in Israeli waters. The most significant finds came in 2009 and 2010 with the Tamar and Leviathan fields, which are thought to hold 10 trillion cubic feet and 19 trillion cubic feet respectively.

Cyprus is some way behind in a promising, if distant, second place, having made one large discovery in 2011 with the 5 trillion-cubic-feet Aphrodite field. The other countries are trailing even further behind, however. There has been a discovery of 1 trillion cubic feet in the waters off the Gaza Strip, but it has yet to be exploited, while Lebanon is struggling to move ahead with its first licensing round and the civil war in Syria means activity is on hold indefinitely in its territorial waters.

If they can catch up with Israel, the potential gains for these countries are obvious, both in terms of secure energy supplies for their own economies and revenues from nearby export markets.

Countries such as Jordan, for example, are energy poor and keen to find new sources of fuel at a time when gas supplies from Egypt have become unreliable due to the political instability there. Governments in Southeast Europe are equally keen to diversify their sources of energy so they can reduce their reliance on Russian gas.

So with a ready supply of customers on their doorstep, the challenge for the countries that border the Eastern Mediterranean is to see if they can match Israel’s success. Cyprus seems the most likely to be able to make the jump from hope to reality.

In a speech to a conference in Limassol on 28 April, Cyprus’ energy minister, Yiorgos Lakkotrypis, confirmed that further drilling work is due later this year on Block 12, which is where the Aphrodite field was discovered. Exploration drilling is also expected to start in five other offshore blocks in the third quarter.

Cyprus faces a dilemma in dealing with the gas it has already found, however. The initial euphoria over the first discoveries at the Aphrodite field in December 2011 had to be tempered when the initial estimate of 7 trillion cubic feet proved to be over-optimistic. The revised total of 5 trillion cubic feet meant the original plans to develop an onshore liquefied natural gas (LNG) terminal have had to be reviewed.

LNG terminal

The Cypriot government appears convinced an onshore LNG terminal is still the best way to go, but it has yet to prove that the numbers add up. However, the country is also keen to act as a hub for other gas producers in the region, which could help to make an LNG facility economically viable.

“A scalable LNG export terminal will bring by far the greatest overall economic benefits to Cyprus and is the most suited for multiple discoveries as it can be easily expanded,” said Lakkotrypis in his April speech. “It also opens up the way for Cyprus to become an energy hub in the Eastern Mediterranean and provides a secure option for the export of gas reserves from neighbouring countries.”

Cyprus recently signed a deal with Greece and Israel to cooperate on energy and water resources and this could offer the foundation for further collaboration. The memorandum of understanding agreed in August 2013 covers items such as an electricity interconnection and provides a framework for further joint initiatives in energy infrastructure, but it remains to be seen how far this will go.

In Lebanon, the situation is far less promising, with the country’s first offshore licensing round hit by a series of delays. In April, 12 companies were prequalified as operators and a further 34 firms were prequalified as non-operators, but the actual bidding deadline has been postponed from 10 April to 14 August. It is the fourth extension to the licensing round, which was meant to happen in November last year.

Lebanon is currently at a political impasse in trying to elect a new president, and several vital decrees and a petroleum tax law have yet to be approved, so further delays are a real possibility. The continual setbacks are a cause for concern, according to Mona Sukkarieh, co-founder of Middle East Strategic Perspectives, a Beirut-based consultancy.

Time factor

“The fact that Lebanon is behind its neighbours in exploiting its resources means that these countries will be eating up parts of what Lebanese officials consider as Lebanon’s natural markets,” says Sukkarieh. “This is part of the reason why the time factor is essential and should not be disregarded by the Lebanese authorities.”

Nassib Ghobril, chief economist at Lebanon’s Byblos Bank, says he is not hopeful that the August deadline can be met.

“I’ve learnt to be very cautious and not have high expectations on anything related to reforms and major economic and financial decisions, especially about oil and gas,” he says. “Now that we have a vacuum at the presidential level, there’s a question mark over whether the cabinet will go ahead with the bidding process in August. Constitutionally, it has the authority to do so, but I don’t think they will take a major decision like that in the absence of a president.”

There is some evidence that, if it can get things moving, Lebanon might also be able to find large quantities of gas in its waters. More than 70 per cent of the country’s offshore area has already been covered with 3D surveys of excellent quality, according to Sukkarieh, and estimates of the quantity of natural gas that may be there range from 25-30 trillion cubic feet.

The most comprehensive assessment of the wider region was made by the US Geological Survey in 2010. It estimated there is about 1.7 billion barrels of recoverable oil and 122 trillion cubic feet of recoverable gas across the Levant Basin, an area that takes in the territorial waters of Israel, Cyprus, Lebanon, Syria and the Gaza Strip. Another US body, the Energy Information Administration, says this amount of oil would meet domestic demand in these countries for about 20 years at current levels of consumption, while the natural gas resources “could meet current regional demand almost indefinitely”.

The countries in the region could certainly do with the fillip. Cyprus was one of the hardest hit in Europe by the global financial crisis, with its economy contracting in four of the past six years, while Lebanon is buckling under pressure from 1.4 million Syrians seeking refuge from their civil war. Israel’s economy is in better shape, but it is growing relatively slowly – the Washington-based IMF estimates that, excluding contributions from gas, it expanded by just 2.5 per cent last year.

All three countries are also energy poor and have to rely on imported fuels, so big finds in the Mediterranean could be transformative. But there are plenty of issues that could yet disrupt their hopes. For example, the territorial waters of Lebanon and Israel are not properly demarcated, and the historic problem of a divided Cyprus and its lack of diplomatic relations with Turkey appear to preclude pipelines taking the most direct route to Europe.

Other territories are also affected by political problems, not least the Gaza Strip. Gas was discovered in the waters off Gaza in 1999/2000, but progress since then has been extremely slow. The UK’s BG Group has a 90 per cent interest in the field, with the remaining 10 per cent held by Athens-based Consolidated Contractors Company.

Two wells were successfully drilled at the Gaza Marine field in 2000 and a technical review conducted the following year recommended that a pipeline be built to an onshore processing terminal. In 2002, an outline development plan was approved by the Palestinian Authority, but the project has not moved forward since then.

Differences in opinion

Even some of the schemes that are moving ahead in Israel are suffering hiccups. On 21 May, Australia’s Woodside Petroleum pulled out of talks to take a stake in the Leviathan field, apparently because the existing operators wanted to concentrate on exporting to regional customers via pipelines rather than through an LNG terminal that Woodside would have helped with. Despite this, Nobel Energy, the largest shareholder in the field, says development work is continuing and the first production is scheduled for 2017.

In the meantime, Nobel Energy is pressing ahead with negotiations to secure more customers for the gas from both the Tamar field and, once it comes on stream, the Leviathan field. The company says about 40 per cent of the discovered resources in Israeli waters are exportable.

“We are in a number of additional negotiations to sell significant quantities of natural gas from both fields [Tamar and Leviathan] to multiple customers,” said Keith Elliott, senior vice-president for the Eastern Mediterranean at Nobel Energy, in February.

By the time gas from the Leviathan field comes on stream, some of Israel’s neighbours will be hoping they too have made some meaningful progress on their own fields. If they do make significant discoveries, the competition for export customers in the years ahead could become an intense, political affair.

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.

West Bank to get first solar power plant

Japanese-funded solar power scheme to provide energy to Jericho industrial park. Published in MEED, 27 March 2012

The installation of solar panels at Jericho Agro-Industrial Park (JAIP) is due to start before the end of March, according to sources involved in the project. The solar energy plant is the first of its kind in the Occupied Palestinian Territories and, once in place, will allow for the development of the industrial park itself.

The solar power plant has been financed by ¥600m ($7.2m) in grant aid from Japan, provided through the Japan International Cooperation Agency (JICA). According to the sources the installation of the panels has been delayed until now by Israeli reluctance to allow the panels to be imported from Japan.

Once installed, the plant will provide 422,000 kWh per year, and reduce potential carbon dioxide emissions by more than 290 tonnes a year. The photovoltaic (PV) panels will cover an area of 13,000 square metres.

The system is designed to supply electricity to tenants in the first phase of the industrial park. However, until tenants begin their operations it will direct the power to the Jerusalem District Electricity Company to supplement the current electricity supply to Jericho.

JAIP is one of three industrial parks being developed by the Palestinian Industrial Estates & Free Zone Authority (PIEFZA), with others at Jenin and Bethlehem. According to Reem Najjar, acting general director of PIEFZA, a joint venture of the Palestinian Investment Fund (PIF) and Palestine Real Estate Investment Company (Prico) is due to be confirmed as the developer of JAIP in the coming days. Prico is a subsidiary of the local Padico Holding company.

Alaa Melhim, JAIP project director, says that 25 companies have already committed to taking space at JAIP, including firms involved in the production of dates, herbs and caviar. Most are likely to target export markets via the King Hussein Bridge crossing to Jordan.

“We are trying our best to have industries operating by October this year, but by the end of this year at the latest,” adds Najjar.

The consultants on the solar power plant are Oriental Consultants Company. The contractor is Toyota Tsusho Corporation and the construction and procurement work is being carried out by Tsuchiya Corporation. All three companies are Japanese.