During the last two years, Industrial Estates & Free Zones (IE
& FZ) has become an important topic on the agenda of
Palestinian-Israeli negotiations on both the economic and political
levels. The issue was even raised during the Wye River
negotiations, prompting Secretary of State Madeleine Albright to
write Dr. Saeb Erekat a letter confirming American support of the
smooth operation of the Gaza Industrial Estates (GIE).
Originally, the issue of IE was linked to the unemployment problem
in the West Bank and the Gaza Strip and the closure imposed by
Israel there, forcing thousands of Palestinian workers to stay
home. The international community was faced with the serious
challenges posed by the fact that the aid money given for
Palestinian R&D was rarely covering the losses caused by the
Israeli closure. The idea was to build joint industrial estates on
the borders, mainly inside Israel, to bring work to the workers
rather than bringing workers to work in Israel. It is a fact that
this idea did not receive the support of the international
community, since it meant the continuation of Israeli control and
domination, albeit in a new method.
Attracting Investment
The Palestinian National Authority (PNA), for its part, viewed the
IE & FZ from a different angle. One consideration was related
to the attraction of foreign investors to do business in Palestine.
Since the onset of the peace process, investors were hardly
encouraged by an infrastructure that was neither attractive, nor
capable of satisfying their needs. What is referred to here is both
the physical and the legal infrastructure. It was, therefore, not
realistic to wait for the rehabilitation and readiness of the
infrastructure in Palestine, as 30 years of occupation have taken
their toll on it. Also, in the wake of the Oslo agreement and the
Paris Protocol, the legal framework needed to attract investors was
not formulated, and it was difficult to apply any such framework,
given the existing barriers imposed by Israel and the division of
Palestinian territory into zones A, B, and C. The solution came
through the designation of certain regions as IE/FZ. These
constitute around 700 to 1,000 dunums where it is possible to
provide investors with the best infrastructure services, as well as
the most attractive incentives and benefits, on par with any of the
advanced IE & FZ in the world.
If we take the GIE as an example, the Palestinian Industrial Estate
Authority (PIEFZA) provides highly developed infrastructure
services there, including potable water connected to the national
water system, a power plant connected to the national electric
grid, more than 1,000 telephone lines, a sewage treatment plant,
etc.... This has elicited a very positive response from investors
who visited the GIE and many of them have decided to set up
business on the site. There are, currently, 33 new companies
registered to operate in the GIE and 13 factories already
operational, employing more than 700 workers.
The IE/FZ program has another strategic aspect, especially that
dealing with evolving an open and free market system. The PNA has
already signed free trade agreements with the United States,
Europe, Canada, and other countries. The Palestinian industrial
sector is facing great challenges, since it cannot compete with
products and goods imported from China and the Far East. Some
parties are asking the PNA to adopt a protectionist policy by
barring products from these countries from the Palestinian market;
others claim that this solution is neither right nor viable.
Export-Oriented Industry
The IE/FZ program tackles the problem from a different angle: we
are starting new industries and new projects that do have
competitive and comparative advantages vis-à-vis products
coming from such markets as China. We are focusing on certain
sub-sectors that we know can compete, not only locally, but also in
regional and international markets. It is only through
export-oriented industries that we can increase our income
per-capita and our gross domestic and national products to levels
close to those of developing countries. This is why PIEFZA has
decided to have its second Industrial Estate as a high-tech
industrial park, focusing only on information technology and
electronic industries. This has the added advantage of requiring
and facilitating the establishment of joint ventures with foreign
investors.
The above objective is guaranteed through the law for Industrial
Estates and Free Zones, which is considered among the most liberal
laws regionally and internationally. It provides many incentives
regarding taxation, registration, movement of people and products,
and so on. The law also creates the "one-stop shop," which enables
the completion of the permitting process within 21 days, as it
gives PIEFZA full authority regarding licensing, permitting and the
processing of all investment applications, including building and
environmental permitting, tax exemption, export and import
procedures, etc....
The IE/FZ program presents a long-term strategic solution to the
employment problem in Palestine. Through this program, more than
100,000 new direct jobs will be created and double that number as
indirect jobs. This is an important number and will ease the
pressure on the government regarding public employment and that
created by the Israeli closure policy. Thus, the IE/FZ program is
considered one of the most important national projects. It is
recognized as such on all levels of the Palestinian leadership, as
well as by the donor community that has committed to providing it
with the needed financial backing.
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