West Bank and Gaza
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U.S. Department of State FY 2000 Country Commercial Guide: West Bank and Gaza The Country Commercial Guide for West Bank and Gaza was prepared by U.S. Embassy Tel Aviv and released by the Bureau of Economic and Business in July 1999 for Fiscal Year 2000. TABLE OF CONTENTS I. EXECUTIVE SUMMARY II. ECONOMIC TRENDS AND OUTLOOK Major Trends and Outlook Principal Growth Sectors Government Role in the Economy Balance of Payments Situation Infrastructure Situation III. POLITICAL ENVIRONMENT Nature of the Political Relationship with the United States Major Political Issues Affecting Business Climate Brief Synopsis of Political System IV. MARKETING U.S. PRODUCTS AND SERVICES Distribution and Sales Channels Product Pricing Use of Agents and Distributors; Finding a Partner Franchising Direct Marketing 2 Joint Ventures/Licensing Steps in Establishing an Office Selling Factors/Techniques Advertising and Trade Promotion Pricing Product Sales Service/Customer Support Selling to the Government Protecting Your Product from IPR Infringement Need for a Local Attorney Due Diligence V. LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT Best Prospects for Non-Agricultural Goods and Services Best Prospects for Agricultural Goods and Services Significant Investment Opportunities VI. TRADE REGULATIONS AND STANDARDS Trade Barriers: Tariffs, Non-Tariff Barriers, and Import Taxes Customs Regulations Import Licenses Temporary Entry of Goods Import/Export Controls and Documentation Labeling and Marking Requirements Prohibited Imports Standards Free Trade Zones/Warehouses Special Import Provisions Membership in Free Trade Arrangements VII. INVESTMENT CLIMATE Openness to Foreign Investment Right to Private Ownership Protection of Property Rights Transparency of the Regulatory System Corruption Labor Efficiency of Capital Markets and Portfolio Investment Palestinian Securities Exchange Conversion and Transfer Policies Expropriation and Compensation 3 Dispute Settlement Political Violence Bilateral Investment Agreements OPIC and Other Investment Insurance Programs Foreign Direct Investment Statistics VIII.TRADE AND PROJECT FINANCING Brief Description of the Banking System Foreign Exchange Controls General Financing Availability How to Finance Exports/Methods of Payment Types of Available Export Financing and Insurance Project Financing List of Banks with Correspondent U.S. Banking Arrangements IX. BUSINESS TRAVEL Business Customs Travel Advisories and Visas Holidays Business Infrastructure APPENDICES Appendix A. Basic Data Appendix B. Domestic Economy Appendix C. Trade Data Appendix D. Palestinian Authority and Local Contacts Appendix E. U.S. Embassy, U.S. Consulate General, and Trade-related Contacts Appendix F. Market Research I. EXECUTIVE SUMMARY Ongoing reconciliation between Israel and the Palestinians and growing control by the Palestinian Authority (PA) over 4 economic and commercial policy have contributed to the creation of a distinct and increasingly separate market among Palestinians in the West Bank and Gaza Strip (WB/G). This evolving Palestinian responsibility on the economic and commercial fronts has led to greater cooperation between Israeli and Palestinian trade ministries, with trade officials from both sides meeting regularly to address outstanding issues. Many high- profile U.S. companies such as Coca-Cola, Procter and Gamble, and Hewlett Packard have responded to the changing commercial situation by creating distinct operations in the WB/G. The PA has encouraged this commercial orientation through regulations mandating the creation of direct agencies and distributorships for the WB/G. While major issues, such as conflicting import standards and the movement of goods through Israeli ports, continue to inhibit foreign trade, the enhanced communication developed over the last few years between Palestinian and Israeli authorities bodes well for the future of trade in the region. The U.S. Government (USG) supports the development of the Palestinian economy and strongly encourages U.S. companies to explore commercial opportunities in the WB/G. It has pledged to do everything it can to ensure the success of the peace process, firmly believing that a strong Palestinian economy is key to that success. To strengthen U.S.-Palestinian business ties and to promote Palestinian economic development, the U.S. allows duty-free entry of items produced in or imported from the West Bank, Gaza Strip, and qualifying industrial zones. Correspondingly, the PA has pledged to the U.S. that it would provide, to the extent of its authority, duty-free entry for all U.S. products into WB/G. An exchange of letters between the governments of the United States and Israel has affirmed Israeli support for the U.S. decision to provide duty-free treatment to WB/G. WB/G are home to approximately 2.8 million Palestinians, with population growth estimated at about 3.9 percent. Despite relatively low incomes, a growing middle/upper- middle class is developing there, due in large part to the recent influx of formerly diaspora-based Palestinian investors and technocrats. This class seeks high-quality consumer goods and is very familiar with specific American products, brands, and franchises. The influence of these 5 returning Palestinians opens the door to substantial opportunities for U.S. companies in developing franchising, distributorship and sales relationships with WB/G companies, particularly in the areas of fast food, hardware, hospitality, and office supplies. International donor investment in basic and social infrastructure in WB/G presents considerable opportunities for U.S. contractors in these fields. The international donor community has pledged several billion dollars over the next five years. The U.S. Agency for International Development (USAID) is slated to receive approximately $775 million in funding for WB/G over the next five years. Projects focus primarily on the provision of basic infrastructure and supporting the private sector through investment and policy interventions. Priority projects include, but are not limited to, large-scale water drilling and distribution, and construction and management of industrial parks throughout the WB/G. The opening of the Gaza Industrial Estate offers investment incentives for U.S. companies interested in greater accessibility to regional, Gulf, and European markets, and related exports of U.S. products. Given complex jurisdiction arrangements over some areas of the West Bank and related differing investment, trade, and customs regulations, U.S. companies who wish to trade with or invest in WB/G should contact the U.S. Commercial Service in Tel Aviv and Jerusalem to discuss specific arrangements. American businesses seeking to establish either investment and/or joint venture arrangements should work with a local partner and the U.S. Commercial Service throughout the approval process. CCGs are available on the National Trade Data Bank on CD- ROM or through the Internet. Please contact Stat-USA at 1- 800-STAT-USA for more information. To locate Country Commercial Guides through the Internet, please use the following worldwide web address: www.stat-usa.gov. CCGs can also be ordered in hard copy or on diskette from the National Technical Information Service (NTIS) at 1-800-553- NTIS. 6 II. ECONOMIC TRENDS AND OUTLOOK This is a guide on export and investment opportunities in the WB/G. As the peace process between Israelis and Palestinians evolves, so, too, does the commercial and economic environment in the WB/G. U.S. firms should be aware that various Israeli and Palestinian responsibilities are likely to change, based on ongoing bilateral discussions at both the technical and political levels. U.S. business representatives should contact the U.S. Embassy in Tel Aviv or the Consulate General in Jerusalem (see Appendix E) for the latest information on Palestinian economic and trade regulations and procedures. Major Trends and Outlook With the White House signing of the “Declaration of Principles on Interim Self-Government Arrangements” in September, 1993, Palestinians in WB/G began a new era of increasing political and economic responsibilities. Subsequent Israeli redeployment from most of the Gaza Strip and the major West Bank urban areas of Jericho, Nablus, Jenin, Tulkarem, Ramallah, Bethlehem, and most of Hebron extended PA control over a majority of the Palestinian population in WB/G. In democratic elections in January, 1996, Yasser Arafat won 90% of the vote for the position of Ra’ees (which can be translated variously as “chairman” or “president”). His political party, Fatah, won more than 80 percent of the vote for seats in the 88-member Council, which now meets weekly and is usually filled with lively, sometimes even raucous, debate. Under the terms of the Protocol on Economic Relations (“Paris Economic Protocol” or “Paris Agreement”) signed on April 29, 1994, the PA has responsibility for key economic spheres. Within certain parameters, the Paris Protocol gives the PA the lead on trade, investment, internal transportation and infrastructure, banking, industry, taxation, and other economic and commercial issues. The PA inherited a hodge-podge of Jordanian, Egyptian, and Israeli laws and even regulations dating from the period of the British Mandate but has made some progress in drafting and instituting a modern, unified legal and regulatory structure to stimulate private-sector activity and investment. 7 Despite the markedly enhanced responsibilities and capabilities of PA ministries and other institutions, WB/G remain