HomeReportsBureau of Economic and Business Affairs2019 Investment Climate Statements...West Bank and Gaza

# 					2019 Investment Climate Statements: West Bank and Gaza			

 In this section										/

													Executive Summary											

                -  Executive Summary 
                -  1. Openness To, and Restrictions Upon, Foreign Investment   
                -  2. Bilateral Investment Agreements and Taxation Treaties   
                -  3. Legal Regime   
                -  4. Industrial Policies   
                -  5. Protection of Property Rights   
                -  6. Financial Sector   
                -  7. State-Owned Enterprises   
                -  8. Responsible Business Conduct   
                -  9. Corruption   
                -  10. Political and Security Environment   
                -  11. Labor Policies and Practices   
                -  12. OPIC and Other Investment Insurance Programs   
                -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                -  14. Contact for More Information   

## Executive Summary

The Palestinian economy is in a slow decline, but investment opportunities continue to exist. These can be found in real estate development, light manufacturing, agriculture, and agro-industry.  Information technology, the stone and marble industry and tourism also remain promising areas for growth.

The Palestinian economy is small and relatively open, with several large holding companies dominating certain sectors.  Palestinian businesses have a reputation for professionalism as well as the quality of their products. Large Palestinian enterprises are internationally connected, with partnerships extending to Asia, Europe, the Gulf, and the Americas.  Due to the small size of the local market (about 5 million consumers with relatively low purchasing power), access to foreign markets through trade is essential for private sector growth.

While economic growth slowed in earlier years and experienced an actual decline in 2018, the West Bank’s overall investment climate has slowly improved since 2007– primarily due to Palestinian security, economic, and legal reforms; international donor support; and the easing of some Israeli government restrictions on the movement of people and goods.  Most of the reforms were applicable to business concerns in the roughly 40 percent of the West Bank under the civil control of the Palestinian Authority (PA), commonly referred to as *Area A* and *Area B* following the 1993 Oslo Accords and 1994 economic agreement known commonly as the Paris Protocol.  The Israeli government maintains full administrative and security control of *Area C*, which comprises more than 60 percent of the West Bank.

Israeli government restrictions on the movement and access of goods and people between the West Bank, Gaza, and external markets reflect Israeli security concerns and continue to have a detrimental effect on the Palestinian private sector.  According to a recent study conducted by USAID, high transaction costs stemming from limitations on movement, access and trade are the most immediate impediment to Palestinian economic growth, followed by energy and water insecurity.

Opportunities for meaningful foreign direct investment in Gaza are few, due to the fact that Hamas, (a United States government designated Foreign Terrorist Organization, has controlled the territory since 2007).  This has resulted in de-coupling Gaza’s economy with the West Bank economy and Israeli and Egyptian security restrictions on the flow of people, imports, and exports. There are opportunities within the Gaza Industrial Estate, an industrial zone which has been left alone by Hamas, though imports and exports still face the above-noted restrictions.  Numerous consumer goods enter Gaza through Israel, but there are restrictions in place that limit the import of a number of dual-use items, which Israel has determined represent a security risk. . This is a broad category of items that includes construction materials, which Israel only allows to enter with advance coordination and approval from Israel.  Through the end of February 2019, approximately 380 truckloads of exports per month have exited Gaza, a significant increase over the average of roughly 220 truckloads per month in 2017 and 2018. However, the average monthly volume thus far in 2019 is far below the average monthly volume of 961 truckloads per month in the first half of 2007 – prior to Hamas’ takeover of Gaza.

In 2018, GDP growth in the West Bank and Gaza slowed to 1 percent, and in the medium term, the IMF projects that economic growth will hover around 2.3 percent (under the status-quo scenario).  With population growth at roughly 3 percent per year, real and per capita GDP is projected to decline. Despite the overall improvement in the investment climate, ongoing political, economic, and fiscal uncertainty has generally deterred large-scale internal and foreign direct investment.  The PA ran a current account deficit of nearly USD 1 billion, roughly half of which was covered by direct budget support from foreign donors. The rest was converted into new debt to local banks, private sector suppliers of goods and services, and the PA civil servant’s pension fund. In 2018, donor countries provided the PA with USD 515 million in direct budget support and USD 160 million for development financing, a USD 46 million decrease from 2017.  The PA remained heavily dependent on Israeli transfers of PA clearance revenues – taxes and import duties collected by Israel by agreement on the PA’s behalf, and transferred to the PA on a monthly basis – which comprised 65 percent of all PA revenues in 2018. The PA’s continued practice of paying families of Palestinian security prisoners in Israeli jails and Palestinians killed or seriously injured due to the Israeli-Palestinian conflict – including terrorists – jeopardized these transfers as the United States and Israel both passed legislation in 2018 imposing penalties to deter such payments.  As of March 2019, the PA has refused to accept any clearance revenue transfers from Israel in response to the Israeli government’s implementation of a law mandating the withholding from clearance revenue transfers to the PA an amount equal to that paid by the PA to Palestinian prisoners and those the PA deems “martyrs.”

The Palestinian labor force is well educated, boasting a high literacy rate, with high technology penetration.  That said, an already high level of unemployment worsened in 2018. According to the PA, the combined West Bank/Gaza (WBG) unemployment rate in the fourth quarter of 2018 was 29 percent.  While the unemployment rate has remained stable in the West Bank in recent years, currently at 16 percent, over half of workers are unemployed in Gaza (51 percent), according to the UN’s International Labor Organization (ILO).  The rates were even higher for youth, especially educated youth. The public sector continued to be the largest Palestinian employer, providing 21.3 percent of all jobs.

The manufacturing and agricultural sectors’ contribution to GDP growth remained on a long-term decline: from 19 percent of GDP in 1994 to 12 percent in 2018 for manufacturing and from 12 percent of GDP in 1994 to 2.9 percent in 2018 for agriculture.  To help reverse these trends, the Palestinian Investment Promotion Agency (PIPA) included both sectors in the National Export Strategy for 2014-2018. Target sectors include the following:

- Stone and marble
- Tourism
- Agriculture, including olive oil, fresh fruits, vegetables, and herbs
- Food and beverage, including agro-processed meat
- Textiles and garments
- Manufacturing, including furniture and pharmaceuticals
- Information and communication technology (ICT)
- Renewable energy

Preliminary 2018 export statistics obtained from the Palestinian Central Bureaus of Statistics (PCBS) show total exports of USD 1.098 billion, representing a three percent increase over 2017 (USD 1.064 billion).  The majority of Palestinian exports are sold to Israel, totaling USD 961 million. Remaining exports, or USD 137 million, were sold to other countries including Jordan, the Gulf States, and the United States.

Future economic growth thus depends on a series of factors: further easing of Israeli movement and access restrictions, while balancing Israeli security concerns; expanding external trade and private sector growth; PA approving and implementing long-pending commercial legislative reforms; political stability; increasing the supply of water and energy to the productive sectors while lowering the cost; and PA fiscal stability.  Economic sectors that are not dependent on traditional infrastructure and freedom of movement, such as information and communications technologies (ICT), are able to grow somewhat independent of these factors and therefore have enjoyed greater success in the Palestinian economy during the past decade. The recent introduction of Third Generation (3G) communications technology into the West Bank stimulated further development of businesses that benefitted from real-time GPS/location data. There has also been an uptick in the tourism sector; according to PCBS, approximately 2.76 million domestic and international tourists visited the Palestinian Territories in 2017.

This report focuses on investment issues related to areas under the administrative jurisdiction of the PA, except where explicitly stated.  Where applicable, this report addresses issues related to investment in the Gaza Strip, although Hamas’s implementation of PA legislation and regulations may differ significantly from the West Bank.  In contrast to the West Bank, Gaza was administered by Egypt rather than Jordan from 1948-1967. Israel unilaterally withdrew from Gaza in 2005. For issues where PA law is not applicable, Gazan courts typically refer back to Israeli and Egyptian laws; however, the *de facto* Hamas-led government in Gaza does not consistently apply PA, Egyptian, or Israeli laws.  These inconsistencies in the legal environment are strong deterrents to private investment.

Due to the changing circumstances, potential investors are encouraged to contact the PA Ministry of National Economy (www.mne.gov.ps), Palestinian Investment Promotion Agency (www.PIPA.ps ), the Palestine Trade Center (www.paltrade.org), and the Palestinian-American Chamber of Commerce (www.pal-am.com); as well as the U.S. Embassy in Jerusalem (https://il.usembassy.gov/embassy/ ) and the U.S. Commercial Service (http://export.gov/westbank) for the latest information.

*Table**1*

							1. Openness To, and Restrictions Upon, Foreign Investment					

**Policies Toward Foreign Direct Investment**

The WBG received an overall ranking of 116 out of 190 in the World Bank’s 2019 Ease of Doing Business report (released on October 31, 2018), a slight decrease from 114 out of 190 in 2018. (The World Bank rankings range from 1 to 190 with a lower rank representing greater ease of doing business).  The 2018 ranking was largely driven by the implementation of a new movable assets registry and secured transactions law, which led to a dramatic improvement in the WBG ranking of ease of getting credit score component from 118 to 20 (out of 190). In the 2019 Doing Business Report, the Getting Credit component achieved a score of 22.  However, other areas that continue to rank poorly fall under the categories of Resolving Insolvency (168 of 190), Starting a Business (171 of 190), Protecting Minority Investors (161 of 190) and Dealing with Construction Permits (157 of 190). WBG improved in ease of registering real property, with a score in this component of 84 out of 194 (compared to 94/190 in 2018).  Significant regulatory improvement is still needed in other critical business-enabling categories such as Starting a Business, Protecting Minority Investors, and Resolving Insolvency.

In 2007, the PA began implementing reforms aimed at stimulating growth through private sector investment as well as consolidating public finances.  The PA released its National Policy Agenda (NPA) for 2017-2022 in 2017, which replaced the 2014-2016 National Development Plan (NDP). The NPA is both a national development policy and a political document outlining the PA’s aspirations.  The NPA contains three pillars: the path to independence, government reform, and sustainable development. The latter section highlights the need for economic independence, which includes domestic reform to promote economic growth with fewer regulatory restrictions, supporting business start-ups and micro, small and medium enterprises, as well as looking ahead to economic opportunities following the resolution of the political conflict with Israel.

PA – Israeli government trade relations are governed by the 1994 Paris Protocol, which was meant to last for five years until a final peace agreement was signed.  Many of the stipulations are therefore outdated or are not fully implemented. Since 1995, the PA has taken steps to facilitate and increase foreign trade by signing free trade agreements with the European Union, the European Free Trade Association (EFTA), Canada, and Turkey; however these agreements have not been recognized by Israel and therefore, cannot be implemented.  The PA remained eligible for the benefits of the Free Trade Agreement signed between the United States and Israel. The PA has finalized other trade agreements with Russia, Jordan, Egypt, the Gulf States, Morocco, Tunisia, Mercosur, Vietnam, and Germany and is a member of the Greater Arab Free Trade Area. The PA participated in the 2005, 2009, 2011, 2013, 2015, and 2017 World Trade Organization (WTO) Ministerial meetings as an ad hoc observer.

**Limits on Foreign Control and Right to Private Ownership and Establishment**

The PA’s 2014 amendments to Promotion of Investment in Palestine Law No. 1 of 1998 shifted promotional incentives from a focus on those that benefit from industrial projects providing large capital investments to a focus on employment growth, development of human capital, increased exports, and local sourcing of machinery and raw materials.  (See Investment Incentives below.)

Under the Jordanian Company Law of 1966 (still in effect in the West Bank), the foreign investor should own no more than 49 percent of a company, with a local partner holding at least 51 percent.  However, foreign investors can readily obtain exceptions to this policy by working with PIPA and the Ministry of National Economy (MONE), which issues exceptions promptly. Foreign and domestic private entities may establish and own business enterprises in areas under PA civil control.

The PA is currently finalizing a draft of a new Companies Law, which would replace the outdated 1966 law.  The proposed new law has seen recent traction by the President’s Office – although is still being reviewed.  Once approved, it would introduce best practices from regional models for debt resolution/insolvency, protecting minority investors, and simplify the registration process for starting a business.

Certain investment categories require pre-approval by the Council of Ministers (PA Cabinet).  These include investments involving (1) weapons and ammunition, (2) aviation products and airport construction, (3) electrical power generation/distribution, (4) reprocessing of petroleum and its derivatives, (5) waste and solid waste reprocessing, (6) wired and wireless telecommunication, and (7) radio and television.  Purchase of land by foreigners also requires approval by the Council of Ministers.

U.S. investors are not specifically disadvantaged or singled out by any of the ownership or control mechanisms, sector restrictions, or investment screening mechanisms, relative to other foreign investors.

**Other Investment Policy Reviews**

The Office of the Quartet (OQ), an international organization working to support the Palestinian people on economic development, rule of law and improved movement and access for goods and people, has continued to work on advancing economic development and application of the rule of law.  OQ gives priority to areas where accomplishments are most viable under current conditions. Its current priorities focus on five strategic pillars that represent the fundamental impact areas that contribute to economic growth and capacity building: (i) movement and trade; (ii) investment promotion; (iii) reliable infrastructure; (iv) unlocking value of land and human capital; and (v) strengthening government.  A summary overview of the Initiative for the Palestinian Economy is available at: http://www.quartetrep.org/page.php?id=216fy8559Y216f http://www.quartetrep.org/page.php?id=5da3e3y6136803Y5da3e3 .

The Organization for Economic Cooperation and Development (OECD), the WTO, and the United Nations Conference on Trade and Development (UNCTAD) do not provide investment policy reviews for the West Bank and Gaza.

**Business Facilitation**

Foreign companies may register businesses in the West Bank and Gaza according to the 1966 Companies Law. (Gaza, under Hamas direction, passed a separate Companies Law in 2012).  The MONE and the PIPA provide information online about the business registration process at http://www.mne.gov.ps/compreg.aspx?lng=1&tabindex=100 , but the PA does not offer a business registration website.

Starting a business in the West Bank and Gaza is an area that ranks low on the World Bank Doing Business Report, with a score in 2019 of 171 out of 190. The PA is working to simplify the process of starting a business, which currently requires ten steps and 43 days to complete, according to the World Bank’s 2019 Ease of Doing Business Report.  The timeline includes two days to register the company, one day to pay registration fees, two days to register for taxes, one day to register with the Chamber of Commerce, and 36 days to obtain the required business license from the Municipality. Foreign investors must obtain approval from the MONE and submit the application for registration through a local attorney.  The process requires 11 steps for firms and takes 44 days to complete. The procedures required to register this form of company are as follows (and available online here http://www.mne.gov.ps/compreg.aspx?lng=1&tabindex=100 ):

- Search for company name and reserve proposed name via MONE’s website at  http://www.mne.gov.ps 
- Submit company incorporation papers to MONE and sign document pledging to deposit initial capital within four years, if applicable (Jordanian Dinars (JD) 250,000 for a public shareholding company, JD 10,000 for a private shareholding company, or JD 10,000 for a nonprofit; other companies are exempt from this requirement).  Obtain certificate of registration from the MONE.
- Register with the Companies Registry and pay registration fee.
- Register for income tax and value added tax.
- Register with the Chamber of Commerce.
- Obtain business license from the municipality.
- Obtain approval from fire department and Ministry of Health.

In addition to applicable fees, public and private companies must submit the following documents to the Companies Registry:

- Articles of Association (3 copies)
- Company Bylaws (3 copies)
- Shareholders Identification  (copies)
- Verified company name
- Registration application (3 copies)
- Powers of attorney

Foreign companies may work with PIPA to obtain the investment registration certificate and investment confirmation certificate.  See http://pipa.ps/page.php?id=1c395fy1849695Y1c395f  and http://pipa.ps/page.php?id=1c1ba7y1842087Y1c1ba7 .  In addition, foreign companies seeking to open branches in the West Bank or Gaza must submit registration documents certified by the Palestinian Liberation Organization (PLO) representative in their home country.  According to PIPA, the majority of Palestinian companies are small- and medium-sized enterprises (SMEs), and the PA has sought to support SME development and financing. SMEs are categorized according to staff size: small enterprises employ up to nine people, while medium enterprises employ 10-19 people.

**Outward Investment**

The PA does not have any mechanism for tracking outward private investment.

							2. Bilateral Investment Agreements and Taxation Treaties					

The PA recognizes the international trade agreements listed below, which refer implicitly or explicitly to WTO rules.  These include:

- Paris Protocol Agreement with Israel (1994) – free trade in products between Israel and Palestinian markets
- Technical and Economic Cooperation Accord with Egypt (1994)
- Trade Agreement between the PA and Jordan (1995)
- Duty Free Arrangements with the United States (1996)
- The EuroMed Interim Association Agreement on Trade and Co-operation (1997)
- Interim Agreement between European Free Trade Area (EFTA) states and the PLO (1997)
- Joint Canadian-Palestinian Framework for Economic Cooperation and Trade (1999)
- Agreement on Commercial Cooperation with Russia – extends MFN status
- Greater Arab Free Trade Area, to which PA is a party (2001)
- Free Trade Agreement with Turkey (2004)
- Trade Agreement with the EU – duty free access for Palestinian agricultural and fishery goods (2011)
- Free Trade Agreement with Mercosur (2011)
- Unilateral acts by other Arab trade partners extending preferential treatment to trade with the Palestinians.

Since 1996, duty-free treatment has been available for all goods exported from the West Bank and Gaza to the United States, provided they meet qualifying criteria as spelled out in the U.S. – Israel Free Trade Area (FTA) Implementation Act of 1985, as amended.  The duty-free benefits accorded under the FTA exceed those benefits which would be provided under the Generalized System of Preferences (GSP). It is worth noting that the benefits for imports provided in all of the trade agreements listed above are subject to application by the Israeli government, since all goods destined for the West Bank or Gaza must enter through Israeli-controlled crossings or ports.  The Israeli government generally applies duties and tariffs consistent with its trade agreements, not with the PA’s trade agreements.

The West Bank and Gaza do not have a bilateral taxation treaty with the United States.

							3. Legal Regime					

**Transparency of the Regulatory System**

The PA has worked to erect a sound legislative framework for business and other economic activity in the areas under its jurisdiction since its creation in 1994; however, implementation and monitoring of implementation needs to be strengthened, according to many observers.  The PA Ministry of National Economy (MONE) is in the process of drafting key pieces of economic legislation to improve business and commercial regulation, including an updated Companies Law (already under consideration by the President’s Office), new intellectual property rights protections, a Competition Law, and procedures for resolving bankruptcy.  Recent legislative interventions have had a positive economic impact: in May 2016, the President’s approval of the Secure Transactions Law, Leasing Law, and Moveable Assets Regulations, greatly improved Palestinians’ access to credit.

The MONE holds stakeholder meetings for draft commercial legislation to gather input from the private sector, and publishes drafts of the proposed law.  Because the Palestinian Legislative Council (PLC) has not met in the West Bank since 2007, each law must be approved by the Cabinet and adopted as a Presidential decree, an effort that often delays reform efforts. The proposed laws will likely need to be approved by the Palestinian Legislative Council (PLC), should it reconvene in the future.  On December 22, 2018, PA President Abbas announced that the PA Constitutional Court had issued a decision dissolving the PLC and calling for PLC elections within six months. The PA Ministry of Justice, in cooperation with Birzeit University, publishes online the Official Gazette of all PA legislation since 1994 at http://muqtafi.birzeit.edu/en/index.aspx .

The PA budget is publicly available, including on the Ministry of Finance website (http://www.pmof.ps/pmof/index.php ).  A regulatory body governs the insurance sector, and the PA has adopted a telecommunications law that calls for establishment of an independent regulator.  Establishment of the telecommunications regulator remained stalled, however.

The Palestinian Standards Institution (PSI) also has a website with information on standards for the business community (http://www.psi.pna.ps/en  ).

**International Regulatory Considerations**

The PA is not a member of the WTO, but has consistently expressed an interest in Permanent Observer status, having participated in the 2005, 2009, 2011, 2013, 2015, and 2017 WTO Ministerial meetings as an ad hoc observer.

**Legal System and Judicial Independence**

Commercial disputes can be resolved by way of conciliation, mediation, or domestic arbitration.  Arbitration in the Palestinian territories is governed by Law No. 3 of 2000. International arbitration is accepted.  The law sets out the basis for court recognition and enforcement of arbitral awards. Generally, every dispute may be referred to arbitration by agreement of the parties, unless prohibited by the law.  Article 4 of the law states that certain disputes cannot be referred to arbitration, including those involving marital status, public order issues, and cases where no conciliation is permitted. In the event that parties do not agree on the formation of the arbitration tribunal, each party may choose one arbitrator and arbitrators shall then choose a presiding arbitrator, unless the parties agree to do otherwise.

Judgments made in other countries that need to be enforced in the West Bank/Gaza are honored, according to the prevailing law in the West Bank, mainly Jordanian Law No. 8 of 1952 as amended by the PA in 2005.  Gazan courts refer back to Israeli and Egyptian laws, which were in force prior to 1993, for matters not covered by PA law; however, the *de facto* Hamas-led government in Gaza does not consistently apply PA, Egyptian, or Israeli laws.  The law covers many issues in relation to the enforcement of foreign judgments.

**Laws and Regulations on Foreign Direct Investment**

As mentioned above, there are laws that govern foreign direct investment, overseen by the Ministry of National Economy.

**Competition and Anti-Trust Laws**

There is no Competition Law for the Palestinian territories at this time.  The PA drafted a law in 2003 that was not enacted. A project to develop, draft and implement a new Competition Law began in 2017 with the assistance of the U.S. Department of Commerce’s Commercial Law Development Program (CLDP).  In 2017, the PA prepared a revised draft law that has not yet been issued and is currently undergoing review and re-drafting before it can go to the cabinet. Because of the geographic division between the West Bank and Gaza, many firms in disparate geographic locations have little to no competition, causing variations in both pricing and firm productivity between regions and sometimes cities within a region.

**Expropriation and Compensation**

The Investment Law, as amended in 2014, prohibits expropriation and nationalization of approved foreign investments, except in exceptional cases for a public purpose with due process of law, which shall be in return for fair compensation based on market prices and for losses suffered because of such expropriation.  The PA must secure a court decision before proceeding with expropriation.

PA sources and independent lawyers say that any Palestinian citizen can file a petition or a lawsuit against the PA.  In 2011, the PA established independent, specialized courts for labor, chambers, customs, and anti-corruption. These courts are composed of judges and representatives from the Ministries of National Economy and Finance.  There is general confidence in the judicial system and businesses rely on the courts and police to enforce contracts and seek redress, though alternative means of arbitration are still used to resolve some disputes.

**Dispute Settlement**

*ICSID Convention and New York Convention*

The PA signed the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) in January 2015, and the Convention entered into force in April 2015.  The PA is not a member of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention).

In 2014, the IMF reported an average of 540 days to resolve a standardized commercial dispute through the courts, with 44 separate procedures required for a dispute resolution.  Litigants suggested that the decisions at different levels of the courts were inconsistent, prompting more appeals and a larger overall caseload.

*Investor-State Dispute Settlement*

The Investment Law, as amended in 2014, provides for dispute resolution between the investor and official agencies by binding independent arbitration or in Palestinian courts.  It has been reported that some contracts contain clauses referring dispute resolutions to the London Court of Arbitration. The Jerusalem Arbitration Center (JAC) provides a forum to resolve business disputes between Palestinian and Israeli companies.  Commercial disputes may be resolved by way of conciliation, mediation, or arbitration.

*International Commercial Arbitration and Foreign Courts*

International arbitration is permitted and governed by Law No. 3 of 2000.  The law sets out the basis for court recognition and enforcement of awards.  Generally, every dispute may be referred to arbitration by the agreement of the parties, unless prohibited by the law.  Article 4 of the law states that certain disputes cannot be referred to arbitration, including those involving marital status, public order issues, and cases where no conciliation is permitted.  In the event that parties do not agree on the formation of the arbitration panel, each party may choose an arbitrator and arbitrators shall choose a casting arbitrator unless the parties agree to proceed otherwise.  Arbitral awards made in other countries that need to be enforced in the West Bank/Gaza are honored, according to the prevailing law in the West Bank, mainly Jordanian Law Number 8 of 1952 as amended by the PA in 2005.  The law covers many issues in relation to the enforcement of foreign judgments.

**Bankruptcy Regulations**

The World Bank’s 2019 Doing Business Report did not cite any cases involving a foreclosure, liquidation or reorganization proceedings filed in the last 12 months. According to that report, no priority is assigned to post-commencement creditors, and debtors may file for liquidation only.  The PA Ministry of National Economy, with the assistance of international donors, is in the process of drafting a number of proposed laws related to bankruptcy, but no bankruptcy reform has been enacted. In the updated Companies Law, there will also be a chapter on insolvency.

							4. Industrial Policies					

**Investment Incentives**

In 2014, by presidential decree, PA President Abbas, in order to align the PA’s development priorities with the investment incentives provided by Palestinian law, enacted amendments to the Promotion of Investment in Palestine Law No. 1 of 1998, the investment and tax law.  These amendments extended tax incentives to small and medium sized enterprises, exporters, and agriculture and tourist businesses; and shifted the focus towards incentives on human capital instead of fixed assets. The amendments add tourism and agricultural projects to qualifying industries, and removed real estate development projects from the industries promoted through the incentives.  The amendments also gave additional authority to the Palestine Investment Promotion Agency (PIPA) to create incentive packages targeted to individual business needs (www.pipa.ps ).  PIPA expects the changes to create streamlined investment and incentive processes to circumvent some PA bureaucratic red tape to obtain investment project licenses.  For example, if any step in the business registration process takes longer than 30 days, PIPA can intervene and issue a business license or registration on its own authority.  The PA is also currently working on a package of incentives in the Information and Communications Technology (ICT), industrial, and energy sectors, in addition to those focused on development in *Area C*.

The 2014 amendment to Article 23 of the Promotion of Investment in Palestine Law No. 1 of 1998 granted the following incentives and exemptions for projects approved by PIPA:

- Income tax of zero percent for producers of agricultural products whose income is directly generated from land cultivation or livestock.
- Income tax of five percent for a period of five years commencing from the date of realizing profit but not exceeding four years, whichever is earlier.
- Income tax of ten percent for a period of three years commencing from the end of the first phase.  It will thereafter be calculated based on the applicable and in-effect percentages and segments.

Projects that may be targeted for taxation incentives and support services include the following:

- Industrial sector projects;
- Tourism sector projects;
- New projects within any sector that employ at least 25 workers during the period of benefit;
- Projects that increase their production exports ratio by more than 40 percent;
- Projects within any sector which use approximately 70 percent locally-sourced machinery and raw materials;
- Any existing project that adds 25 workers to the number of already existing workers;
- Developmental expansions of projects (to be based on percentage of paid-in capital but not land value);
- Projects in which the PIPA Board of Directors provides specific incentive packages that comply with special criteria, meet international environment conditions or alternative energy services, or are projects located within areas of developmental priorities.
- Any project determined by PIPA’s Board of Directors to advance the public interest (subject to the nature of a project’s activity, geographical location, the extent to which the project contributes to increasing exports, creating job opportunities, advancing development, transferring knowledge, and supporting research and development for the purposes of enhancing the public benefit).

Excluded from the incentives are:

- Commercial projects;
- Insurance companies;
- Banks;
- Money changers;
- Real estate projects;
- Some electricity projects;
- Telecommunication services;
- Commercial services;
- Crushers;
- Quarries;
- Any companies that obtained concessions contracts from the Council of Ministers and operate as monopolistic companies.

In cooperation with the Palestinian Industrial Estates & Free Zones (PIEFZA), PIPA in 2017 introduced incentive packages targeting investors in the Bethlehem Industrial Park and Jericho Agro Industrial Park.  The packages extend incentives for three extra years, reducing income tax by 66 percent for eight years, followed by a 33 percent reduction for three years. Tax incentives are also included for financial institutions that provide financing for the enterprises within the industrial zones.

**Foreign Trade Zones/Free Ports/Trade Facilitation**

There are no foreign trade zones or free ports in the West Bank or Gaza, although there are plans to establish one near Jenin in the future.

**Performance and Data Localization Requirements**

The current performance requirements for investment incentives have reduced the focus on a capital investment requirement and now focus on job growth and locally-sourced production.

There are no data storage requirements under PA law for IT companies.  The PA does not follow a forced localization policy, and there are no requirements for foreign IT providers to turn over source code or provide access to surveillance.

United States citizens traveling to Israel, the West Bank and Gaza should read the Department of State’s travel information section on “Entry, Exit and Visa Requirements” for Israel, the West Bank and Gaza to be aware of the complexities regarding entry, exit and permission to stay in Israel, the West Bank and Gaza. The relevant section is available at:   https://travel.state.gov/content/travel/en/international-travel/International-Travel-Country-Information-Pages/IsraeltheWestBankandGaza.html

							5. Protection of Property Rights					

**Real Property**

The Acquisition Law in the West Bank, which regulates foreign acquisition and the rental or lease of immovable properties, classifies foreigners into three categories:

- Foreigners who formerly possessed Palestinian or Jordanian passports shall have the right to own certain properties sufficient to erect buildings and/or for their agricultural projects.
- Foreigners who hold other Arab passports have the right to own certain property that suffices for their living and business needs only.
- Other foreigners, including Jerusalem ID holders, must receive permission from the PA Cabinet to own buildings or purchase land.

The permission process can be lengthy and includes clearances from the intelligence and preventive security agencies.  It is critical that potential purchasers of land or buildings perform a title search to ensure that no outstanding violations or unpaid penalties exist on the properties.  Under current law, outstanding violations and penalties are transferred to the new owners.

Title searches can only be obtained from the PA Land Authority (al-Taboh).  Land registration is done through the Land Registries in Hebron, Ramallah, Qalqilya, Tulkarem, Nablus, Bethlehem, Jericho, Jenin, and Gaza City.  In order to purchase land in the West Bank or Gaza, an application that includes supporting documents, such as deeds to the property and powers of attorney, should be submitted to the land registry office having jurisdiction over the land.  The 2019 World Bank Doing Business report noted improvement in registering real property with a component score of 84 (compared to 94/190 in 2018), that it in part attributed to the online publishing of official statistics on property transactions at the Palestinian land registry that increased information transparency.

The issue of land registration in the West Bank is complicated by overlapping, and sometimes conflicting, laws and customs derived from the Ottoman, British Mandate, and Jordanian periods of rule.  In addition, there is no comprehensive registry of land ownership for the West Bank, and efforts to complete one are expected to take decades at the current pace. The majority of the land has not been registered; even where land is registered, titles are often more than a generation old, with unresolved rights to numerous inheritors, which affects the mortgage market.  Israeli administrative control over 60 percent of the West Bank designated as “Area C” adds an additional layer of bureaucracy and restrictions with respect to sale and use of privately held lands in those areas.

**Intellectual Property Rights**

The West Bank and Gaza do not have modern intellectual property rights (IPR) regimes in place, and IPR legislation originates from a combination of Ottoman era, British Mandate, and pre-1967 Jordanian laws.  In 2012, USAID helped the PA draft a modern IPR law that has been recently reviewed by WIPO. In 2017, the U.S. Department of Commerce’s Commercial Law Development Program (CLDP) and U.S. Patent and Trademark Office worked with the PA and other Palestinian stakeholders to raise capacity for implementing IPR processes.  Given local procedures for drafting, reviewing and approving new legislation, a new IPR law is not expected to be enacted until 2019-20. The PA was indirectly committed to the General Agreement on Tariffs and Trade and the agreement of Trade Related Aspects of Intellectual Property Rights (GATT-TRIPS) when it signed the 1995 Interim Agreement on West Bank/Gaza according to Annex III (Protocol Concerning Civil Affairs), Appendix 1, Article 23.

Currently, intellectual property is governed by the Civil Claims Law of 1933, the Palestinian Trademark and Patent Laws of 1938 in Gaza, the Commercial Law No. 19 of 1953 and the Patent Law No. 22 of 1953 in the West Bank.  Registration is very similar and, despite different authorizing legislation, there are few substantive differences between IPR laws in the West Bank and Gaza.

To register a trademark, four copies of the proposed trademark must be attached to the application, one of them in color, along with a copy of the company’s Certificate of Registration.  A foreign company is entitled to register its trademark in the Palestinian territories by giving power of attorney in this regard either to a trademark agent or to a lawyer. Trademarks can be registered unless they fall within the recognized prohibition, such as being similar or identical to an already registered trademark, are likely to lead to deception of the public, or are contrary to public morality.  Trademark protection is available for registered trademarks for a period of seven years, which may be extended for additional periods of 14 years. The proprietor of a trademark in the West Bank/Gaza owns the sole right to the use of the trademark in association with the goods with which the trademark is registered. The trademark is open for opposition after being published in the Gazette for a period of three months.  The holder of a trademark retains the right to bring civil action against any perpetrator in addition to criminal proceedings.

Trade names are registered by the PA according to specific procedures and conditions that are laid out in the Jordanian Trade Names Registration Law No. 30 of 1953, which is still applicable in the West Bank, and Law No. 1 of 1929 in Gaza.

The Patents and Design Law No. 22 of 1953 is applicable in the West Bank and the Patents Design Law No. 64 of 1947 is applicable in Gaza.  A foreign company is allowed to have a patent or design registered by giving power of attorney to a patent agent or to a lawyer, with the requisite documents.  Patent protection is provided for a period of 16 years from the date of filing the patent application.

Copyright in the West Bank and Gaza is governed by the Copyright Laws of 1911 and 1924.  The protection lasts for a period of 50 years after the death of the author of the work. The law also deals with infringements, compulsory licenses, and many other procedural issues as well.

The law prescribes imprisonment for a maximum period of one year or a fine not exceeding 100 Jordanian dinars for infringement of a registered mark.

There is minimal enforcement of IPR laws for music and movies in the West Bank/Gaza, while the PA has enforced some of these laws to protect the Palestinian pharmaceutical industry.  The PA has drafted a modern law that will encompass international regulations for IPR, including copyright, patents and designs, trademarks, and merchandise branding, but the law has not yet been adopted in the absence of a functioning legislature.  The PA is keen to obtain membership in the different organizations and agreements concerned with intellectual property, such as the WTO and the World Intellectual Property Organization; it has held observer status in the latter since 2005.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

							6. Financial Sector					

**Capital Markets and Portfolio Investment**

In 2004, the PA enacted the Capital Markets Authority Law and the Securities Commission Law, and created the Capital Market Authority to regulate the stock exchange, insurance, leasing, and mortgage industries.  In 2010, a Banking Law was adopted to bring the Palestinian Monetary Authority’s (PMA) regulatory capabilities in line with the Basel Accords, a set of recommendations for regulations in the banking industry. The 2010 law provides a legal framework for the establishment of deposit insurance, management of the Real Time Gross Settlement (RTGS) system, and treatment of weak banks in areas such as merger, liquidation, and guardianship.  It also gives the PMA regulatory authority over the microfinance sector. In 2013, the PA passed a Commercial Leasing Law and in 2015 the MONE finalized a registry for moveable assets, intended to facilitate secured transactions, especially for small and medium-sized businesses.

In April 2016, the PA passed the Secured Transactions Law, which established the legal grounds and modern systems to regulate the use of movable assets as collateral.  This law, and the Companies Law, which is currently under review by interagency panels will help improve the investment climate and the ease of doing business.  The World Bank 2017 Doing Business report assigned the West Bank and Gaza a particularly low score for protecting minority investors, resolving insolvency, and obtaining credit.  Founders of new SMEs complain that loan terms from Palestinian creditors are often too short in that they fail to allow the borrower enough time to establish a sustainable business.  The new Moveable Assets Registry, coupled with the Secured Transactions Law and Commercial Leasing Law, led to a substantial improvement in the Getting Credit ranking in the 2018 Doing Business report, from 118 in 2017 to 20 in 2018.

The Palestine Exchange (PEX) was established in 1995 to promote investment in the West Bank and Gaza.  Launched as a private shareholding company, it was transformed into a public shareholding company in February 2010.  The PEX was fully automated upon establishment – the first fully automated stock exchange in the Arab world, and the only Arab exchange that is publicly traded and fully owned by the private sector.  The PEX operates under the supervision of the Palestinian Capital Market Authority. There are 49 listed companies on the PEX, which as of 2016 had a market capitalization of about USD 3.556 billion across five main economic sectors: banking and financial services, insurance, investments, industry, and services.

**Money and Banking System**

The Palestinian banking sector continues to perform well under the supervision of the PMA.  The World Bank’s reports to the Ad Hoc Liaison Committee (AHLC) have consistently noted that the PMA is effectively supervising the banking sector.  The PMA continues to enhance its institutional capacity and is steadily building many of the capabilities of a central bank. It provides rigorous supervision and regulation of the banking sector, consistent with international practice.  An Anti-Money Laundering Law that was prepared in line with international standards with technical assistance from the International Monetary Fund (IMF) and USAID came into force in October 2007. In December 2015, the PA President signed the Anti-Money Laundering and Terrorism Financing Decree Law Number 20 for the PA to join the Middle East and North Africa Financial Action Task Force (MENAFATF), a voluntary organization of regional governments focused on combating money laundering and the financing of terrorism and proliferation.  Among the new law’s many improvements over the 2007 decree was to make terrorist financing a criminal offense and to define terrorists, terrorist acts, terrorist organizations, foreign terrorist fighters, and terrorist financing (AML/CFT). It also makes terrorism and terrorist acts an initial justification to seek conviction under the money laundering statute. The PMA completed a National Risk Assessment (NRA), an AML/CTF self-assessment. It is implementing the ensuing recommendations in preparation for a MENAFATF member state review of the Palestinian economy’s AML/CFT safeguards in 2020.  The PMA is considered a regional leader in AML/CTF safeguards and its representatives provide training to other Arab governments.

Credit is limited by uncertain political and economic conditions and by the limited availability of real estate collateral due to non-registration of most West Bank land.  Despite these challenges, the sector’s loan-to-deposit ratio continues to increase towards parity, moving from 58 percent at the end of 2015 to 68 percent at the end of 2018.  The PMA has achieved this in part by encouraging banks to participate in loan guarantee programs sponsored by the United States and international financial institutions, by supporting a national strategy on microfinance, and by imposing restrictions on foreign placements.  The MONE’s enactment of the Secured Transactions Law in April 2016 allows for use of moveable assets, such as equipment, as collateral for loans.  Non-performing loans are less than three percent of total loans, due to credit bureau assessments of borrowers’ credit worthiness and a heavy collateral system.

Palestinian banks have remained stable despite the global economic crisis, but have suffered from deteriorated relations with Israeli correspondent banks since the Hamas takeover of Gaza in 2007, at which time Israeli banks cut ties with Gaza branches and gradually restricted cash services provided to West Bank branches.  All Palestinian banks were required to move their headquarters to Ramallah in 2008.  Israeli restrictions on the movement of cash between West Bank and Gaza branches of Palestinian banks have caused intermittent liquidity crises in Gaza and for all major currencies — U.S. dollars, Jordanian dinars, and Israeli shekels (ILS).  The West Bank faced a problem of excess cash liquidity of Israeli Shekels. However, an Israeli government decision in late 2018 to increase the deposit transfer amount from Palestinian banks to the Bank of Israel to NIS 1 billion monthly (an increase from NIS 350 million per month) helped reduce the excess amount of Shekels significantly.

The PMA regulates and supervises 14 banks (6 Palestinian, 7 Jordanian, and 1 Egyptian) with 349 branches and offices in the West Bank and Gaza, with USD 15.6 billion net assets.  No Palestinian currency exists and, as a result, the PA places no restrictions on foreign currency accounts.  The PMA is responsible for bank regulation in both the West Bank and Gaza.  Palestinian banks are some of the most liquid in the region, with net, total deposits of USD 13 billion and gross credit of USD 8.4 billion as of the end of 2018.

**Foreign Exchange and Remittances**

*Foreign Exchange*

The PA does not have its own currency.  According to the 1995 Interim Agreement, the Israeli Shekel (NIS/ILS) freely circulates in the Palestinian territories and serves as means of payment for all purposes including official transactions.  The exchange of foreign currency for NIS and vice-versa by the Palestinian Monetary Authority (PMA) is carried out through the Bank of Israel Dealing Room, at market exchange rates.

*Remittance Policies*

The Investment Law guarantees investors the free transfer of all financial resources out of the Palestinian territories, including capital, profits, dividends, wages, salaries, and interest and principal payments on debts.  Most remittances under USD 10,000 can be processed within a week. In addition to the Israeli Shekel (ILS), U.S. dollars (USD) and Jordanian dinars (JD) are widely used in business transactions. There are no other PA restrictions governing foreign currency accounts and currency transfer policies.  Banks operating in the Palestinian territories, however, are subject to Israeli restrictions on correspondent relations with Israeli banks and the ability to transfer shekels into Israel, which occasionally limit services such as wire transfers and foreign exchange transactions.

**Sovereign Wealth Funds**

The privately-run Palestine Investment Fund (PIF) acts as a sovereign wealth fund, owned by the Palestinian people.  According to PIF’s 2017 annual report (the most recent available), its assets reached USD 990 million and net income was USD 39.4 million.  PIF’s investments in 2017 were concentrated in infrastructure, energy, telecommunications, real estate and hospitality, micro/small/medium enterprises, large caps, and capital market investments.  The overwhelming majority of PIF investments are domestic, but excess liquidity is invested in international and regional fixed income and equity markets.  In 2014, the fund established the Palestine for Development Foundation, a separate not-for-profit foundation managing PIF’s corporate social responsibility initiatives, which are primarily focused on support to Palestinians in the West Bank, Gaza, Jerusalem, and abroad.  Since 2003, PIF has transferred over USD 795.6 million to the PA in annual dividends, but the PIF leadership does not report to the PA per PIF bylaws.  International auditing firms conduct both internal and external annual audits of the PIF.

							7. State-Owned Enterprises					

Although there are no state-owned enterprises (SOEs), some observers have noted that the Palestine Investment Fund (PIF), an investment fund that essentially acts as a sovereign wealth fund for the PA, enjoys a competitive advantage in some sectors, including housing and telecommunications, due to its close ties with the PA.  The import of petroleum products falls solely under the mandate of the Ministry of Finance’s General Petroleum Corporation, which then re-sells the products to private distributors at fixed prices.

**Privatization Program**

There is no PA privatization program for industries within the Palestinian Territories.

							8. Responsible Business Conduct					

Most large or multinational businesses in the West Bank include corporate social responsibility (CSR) in their business plans, mainly focusing on philanthropy related to education, health, and youth.  Some medium sized enterprises, particularly in healthcare and the food industry, started CSR initiatives to create goodwill for their products. CSR engagement remains relatively low because most companies (over 90 percent) are small, family-run businesses.

							9. Corruption					

The Anti-Graft Law (AGL) of 2005 criminalizes corruption, and the State Audit and Administrative Control Law and the Civil Service Law both aim to prevent favoritism, conflict of interest, or exploitation of position for personal gain.  The AGL was amended in 2010 to establish a specialized anti-graft court and the Palestinian Anti-Corruption Commission, which was tasked with collecting, investigating, and prosecuting allegations of public corruption. The Anti-Corruption Commission, appointed in 2010, has indicted several high-profile PA officials; these cases are now pending before the courts.  However, the PLC, which is responsible for oversight of the PA’s executive branch, has not met since April 2007. Palestinian civil society and media are active advocates of anti-corruption measures, and there are international and Palestinian non-governmental organizations that work to raise public awareness and promote anti-corruption initiatives. The most active of these is the AMAN Coalition for Integrity and Accountability (AMAN), which is the Palestinian chapter of Transparency International.  According to the World Bank 2014 Investment Climate Assessment report, Palestinian firms do not consider corruption to be one of the most serious problems they face. Seven percent of the firms surveyed reported having experienced a request from a government official for a bribe. Please see the AMAN website (http://www.aman-palestine.org/eng/index.htm ) for further information.

Private sector businesses assert that the PA has been successful in reducing institutional corruption and local perceptions of line ministries and PA agencies are generally favorable in this regard.

*UN Anticorruption Convention, OECD Convention on Combatting Bribery*

In April 2014 the PA acceded to the UN Anticorruption Convention.  The PA is not a party to the OECD Convention on Combatting Bribery.

*Resources to Report Corruption:*

Contact at U.S. Embassy in Jerusalem:

Palestinian Affairs UnitEconomic SectionTelephone: +972 2 622 6952Email: JerusalemECON@State.Gov

Contact at government agency or agencies responsible for combating corruption:

The Coalition for Accountability and Integrity – AMANTelephone: +972-2-298-9506Email: info@aman-palestine.orghttp://www.aman-palestine.org 

							10. Political and Security Environment					

The security environment remains complex in the West Bank, and Gaza.  The security situation can change day to day, depending on the political situation, recent events, and geographic area.  Potential investors should consult the State Department’s latest travel warnings available at https://travel.state.gov.

Violent clashes between security forces and Palestinian residents of the West Bank and Gaza, and between Israeli settlers and Palestinians have resulted in numerous deaths and injuries.  During periods of unrest, the Government of Israel may restrict access to and within the West Bank, and may place some areas under curfew. In June 2007, Hamas, a designated Foreign Terrorist Organization (FTO), violently seized control of the Gaza Strip.  The security environment within Gaza and on its borders is dangerous and volatile. Violent demonstrations and shootings occur on a frequent basis and the collateral risks are high. While Israel and Hamas continue to observe the temporary cease-fire that ended the latest Gaza conflict in 2014, periodic mortar and rocket fire and Israeli military responses continue to occur.  Following Hamas’ takeover, the Israeli government implemented a closure policy that restricted imports to limited humanitarian and commercial shipments and effectively blocked exports from Gaza until 2015 when exports rebounded to an average of 115 truckloads per month. The economic situation and investment outlook in Gaza have continuously deteriorated since that time, especially following Israeli combat operations there in December 2008-January 2009 (Operation Cast Lead), November 2012 (Operation Pillar of Defense) and July-August 2014 (Operation Protective Edge).  The Israeli government has at times eased its closure policy by lifting some restrictions on goods imported into and exported out of Gaza. The Israeli government allows limited exports to overseas markets, Israel and some sales to the West Bank. According to a comprehensive USAID study published in 2017, restrictions on movement and access to resource and markets – reflecting Israeli security concerns – remained the key obstacles to investment.

							11. Labor Policies and Practices					

With its growing youth population, the West Bank and Gaza have an abundant labor supply with a high level of education and skills.  According to the Palestinian Central Bureau of Statistics (PCBS), the total population of the West Bank and Gaza in December 2018 was approximately 5 million, including 3 million in the West Bank and 2 million in the Gaza Strip.

PCBS estimated there were 1.416 million people in the labor force as of the end of 2018, effectively 882,300 in the West Bank and 534,000 in Gaza.  An estimated 131,000 Palestinians from the West Bank work in Israel and Israeli settlements. Large numbers of Palestinians from Gaza worked in Israel as day laborers until Israel eliminated work permits for Gaza in 2001.

The most recent PCBS labor statistics estimate 2018 unemployment was at 16 percent in the West Bank and 51percent in Gaza.  Unemployment disproportionately affects youth: when broken down, the highest unemployment rate in 2018 was 50 percent among youth aged 20-24 years.  According to PCBS, at the end of 2018, the service sector was the largest employer in the local market with more than one-third in the West Bank and more than half in Gaza.  The public sector employed 20.3 percent of the workforce in 2018 (15.3 percent in the West Bank and 35.1percent in Gaza Strip). The average daily wage in the West Bank was NIS 110.4 (USD 30), compared with NIS 60.2 (USD 16.5) in the Gaza Strip.  The Palestinian minimum wage remains legally mandated at NIS 1,450 (USD 381.57) per month. The ILO reported in 2017 that 39 percent of all private sector workers earned less than the statutory minimum wage, including 76 percent of workers in Gaza and 47 percent of women overall.  The average daily wage for persons employed in Israel and Israeli settlements was NIS 238 (USD 65.5).

According to the most recent Labor Force Survey, private sector labor distribution in the West Bank and Gaza, by sector, is as follows:

- 35.8 percent – Services and Other Branches
- 20.9 percent – Commerce, Hotels, Restaurants
- 18.2 percent – Construction
- 13.3 percent – Mining, Quarrying, Manufacturing
- 6 percent – Agriculture, Forestry, Fishing, Hunting
- 5.8 percent – Transportation, Storage, Communication

PA labor law does not explicitly prohibit forced or compulsory labor, but does forbid the use of child labor, in accordance with international standards.  However, there are reports of forced labor and child labor in the West Bank and Gaza, particularly in agricultural work and the informal economy. Despite widespread informality in the economy, most large Palestinian employers rely on standard, long-term employment contracts with minimal use of temporary workers.  Israeli labor law applies to settlements in the West Bank, but authorities did not enforce it uniformly.

PA law provides for the rights of workers to form and join independent unions and conduct legal strikes.  The law requires conducting collective bargaining without any pressure or influence but does not explicitly provide for the right to collective bargaining.  Anti-union discrimination and employer interference in union functions are illegal, but the law does not specifically prohibit termination due to union activity.  Labor unions were not considered by non-governmental organizations to be independent of authorities and political parties in 2017.

The requirements for legal strikes are cumbersome, and strikers had little protection from retribution.  The PA Ministry of Labor can impose arbitration; in such cases, workers or their trade unions faced disciplinary action if they rejected the result.  If the ministry cannot resolve a dispute, it can be referred first to a committee chaired by a delegate from the ministry and composed of an equal number of members designated by the workers and the employer, and finally to a specialized labor court.  Teachers, who comprise the most significant portion of the public sector work force, participated in a large-scale strike with demonstrations in early 2016 protesting partial pay.

In early 2016, the PA President approved a new Social Security Law, and in October 2018 announced its effective implementation date to be November 1, 2018.  The Social Security Law mandates compulsory social security contributions from private sector employees and their employers to a new Palestinian Social Security Fund.  Large-scale protests against the law’s implementation in late 2018 resulted in the PA President’s decision to postpone its implementation indefinitely.

							12. OPIC and Other Investment Insurance Programs					

The Overseas Private Investment Corporation (OPIC) provides a variety of services to qualified investors with either U.S. partners and/or subsidiaries in emerging economies and developing nations.  During the early stages of investment planning, U.S. investors may contact OPIC for insurance against political violence, inconvertibility of currency, and expropriation in the form of an insurance registration letter.  OPIC has initiated a number of programs in the West Bank and Gaza to support private sector development, including successful loan guarantee facilities. Building on previous programs that disbursed over USD 117 million in loans from July 2007 to September 2015, OPIC, in cooperation with USAID, launched a new Loan Guarantee Facility (LGF) in April 2016 enabling pre-approved lenders to provide up to USD 143 million in loans to eligible SMEs.  The new facility expands the parameters of its predecessor programs to broaden the range of guaranty products and technical assistance. These loan guarantee facilities have expanded access to finance for Palestinian small and medium-sized enterprises (SMEs) significantly and have stimulated the growth of lending by participating Palestinian banks to this previously underserved market. In addition to the LGF programs, OPIC has contributed to investment funds, such as the Siraj Fund I (via a USD 30 million contribution), that focused on development of Palestinian SMEs and startups, particularly in the agriculture and technology sectors.

							13. Foreign Direct Investment and Foreign Portfolio Investment Statistics					

According to the PCBS, the stock of foreign investment in the Palestinian territories at the end of 2016 (most recent data available) amounted USD 2.660 billion – a slight decrease from 2015.  This includes foreign direct investment, portfolio investments, and other investments.

*Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy*

*Host source: PCBS, Major National Accounts  http://www.pcbs.gov.ps/Portals/_Rainbow/Documents/E.QNA_Current.htm 

Note:  Preliminary PCBS data – not final and Basis Year for GDP calculations was changed by PCBS from 2004 to 2015

**Host Source: PCBS Foreign Investment Survey of Palestinian Enterprises (stocks) at the end of 2016 available at: http://www.pcbs.gov.ps/Portals/_Rainbow/Documents/e-IIP-2016.html 

*Table 3: Sources and Destination of FDI*

Data not available. The private Palestine Development and Investment Company (PADICO), has invested over USD 250 million in telecommunications, housing, and the establishment of the Palestinian Securities Exchange.  The Arab Palestinian Investment Company (APIC), headquartered in Ramallah, is a large foreign investment group with authorized capital of over USD 100 million. There are four private equity funds operating in the West Bank/Gaza, largely comprised of foreign investors: Riyada, Siraj, Sharakat, and Sadara.  Other significant foreign investments include Qatari mobile operator QTel’s projected USD 600 million investment in Wataniya Mobile over a 10-year period, and Qatari Diar’s projected USD 1 billion investment in Rawabi, a mixed use/affordable housing real estate development. The largest U.S. investment is Coca Cola’s 15 percent stake in the local bottler, Palestine National Beverage Company (PNBC), a company valued at USD 70 million.  PNBC opened a USD 20 million bottling facility in Gaza in December 2016, in addition to its three West Bank-based plants.

*Table 4: Sources of Portfolio Investment*

Data not available.

							14. Contact for More Information					

U.S. Embassy JerusalemPalestinian Affairs Unit, Economic SectionTelephone: +972 2 622 6952Email: JerusalemECON@state.gov

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### On This Page

                    -  Executive Summary 
                    -  1. Openness To, and Restrictions Upon, Foreign Investment   
                    -  2. Bilateral Investment Agreements and Taxation Treaties   
                    -  3. Legal Regime   
                    -  4. Industrial Policies   
                    -  5. Protection of Property Rights   
                    -  6. Financial Sector   
                    -  7. State-Owned Enterprises   
                    -  8. Responsible Business Conduct   
                    -  9. Corruption   
                    -  10. Political and Security Environment   
                    -  11. Labor Policies and Practices   
                    -  12. OPIC and Other Investment Insurance Programs   
                    -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                    -  14. Contact for More Information   

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#### The Lessons of 1989: Freedom and Our Future