|Wikileaks:||View 02AMMAN4086 at Wikileaks.org|
|Classification:||UNCLASSIFIED//FOR OFFICIAL USE ONLY|
|Tags:||KPAL EINV EAID PREL IS JO|
|Redacted:||This cable was not redacted by Wikileaks.|
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 03 AMMAN 004086 SIPDIS SENSITIVE DEPARTMENT PASS USAID FOR MSCOVILL E.O. 12958: N/A TAGS: KPAL, EINV, EAID, PREL, IS, JO SUBJECT: PALESTINIAN-JORDANIAN BUSINESSMEN PONDER ROLE IN PALESTINE'S ECONOMIC FUTURE ------------ Summary ------------ 1. (SBU) A group of Palestinian-Jordanian businesspeople met with econoffs July 11, to discuss what they believe might be the leading investment opportunities and economic prospects following the establishment of a Palestinian state, as well as the role of Palestinian-Jordanians in promoting development in Palestine. The businesspeople outlined which sectors were of interest to them, what conditions would be needed to facilitate business, and what obstacles would need to be overcome. The meeting demonstrates that despite the ongoing conflict in Israel and the Palestinian territories, Palestinian-Jordanian businesspeople are still convinced that a future settlement is attainable and would provide substantial economic opportunities ------------------ Opportunities ------------------ 2. (SBU) Palestinian-Jordanian businesspeople representing a variety of sectors (pharmaceuticals, paints, poultry, olive oil, QIZ textiles, real estate development, etc.) highlighted several investment opportunities they were looking into within Palestine, prospectively based on cooperation between Palestine and Jordan following the establishment of an independent Palestinian state and reduction of violence in Israel and the West Bank. Following months of one-on-one commentary on the matter from contacts within the Jordanian-Palestinian business community, Econoffs arranged for a roundtable discussion among key contacts to spark a broader dialogue on long-term business prospects in the West Bank and a frank discussion of internal impediments to investment. The assembled businessmen included owners of both commercial and industrial concerns, landholding and shareholding companies, and a number of licensees and distributors of U.S. products/companies, with individual business assets ranging between USD 1 million and USD 10 million both within Jordan and in the West Bank. 3. (SBU) Several of the businesspeople pointed to opportunities they had identified in food processing, chemicals and paints, housing, and private education which were hampered by the ongoing conflict, infrastructure limitations, and transportation difficulties, but which would again become attractive following establishment of a Palestinian state. Moreover, they saw opportunities for cooperation between Jordan and Palestine in the tourism sector and through export-oriented mergers in the agriculture sector. The businesspeople claimed that high wage expectations (a result of years of enjoying the benefit of Israeli minimum wage laws) might hinder international competitiveness until investments in education and productive capital bring the economy up to speed with wage expectations. --Real Estate/Construction: The businesspeople were enthusiastic about the real estate sector, stating that even now the demand and resources are there for the sector to take off. One attendee claimed that land could be acquired for development in exchange for a stake in anticipated returns following construction. They claimed that with the onset of peace and the adoption of legal instruments conducive to long term financing and mortgages, real estate will be an instantaneously profitable sector. --Agriculture/Food Processing: When discussing food related industries, the businesspeople emphasized processing over production, given the small scale of agriculture. One businessman with experience in poultry suggested that with minimal electrical infrastructure to support refrigeration, meat processing would gain a more secure foothold in the Palestinian market. Moreover, many saw potential for "cottage industries" in high-end, specialty food products such as tahini or quality olive oil and its byproducts, including soap. --Private Education: Several businesspeople stated that private education would be a major target of investment. As a business, they said it would be supported by the Palestinian cultural emphasis on education, families from abroad wanting to send children back to the homeland, and a lack of serious competition from the severely embattled established institutions. They also mentioned partnerships with U.S. private universities as a potentially profitable avenue for development. --Tourism: Many businesspeople felt that both the West Bank and Jordanian tourism sectors would benefit immensely from coordinating traditional religious tours of West Bank holy sites with tours of Jordanian destinations. Increased traffic to Jordan,s own famous holy sites at Mount Nebo and the newly revitalized baptism site would have knock-on benefits for other Jordanian tourism draws like Petra and Jerash. --Pharmaceuticals: In one of their more improbable schemes, they talked about the opportunity posed by the lag between the establishment of the Palestinian state and accession to international intellectual property agreements. Given this window to profiteer from the production of patented medications, one businesswoman suggested that the infrastructure for a legitimate pharmaceuticals industry could be financed though the profits of illicit production (sic!). 4. (SBU) Beyond identifying opportunities sector by sector, the businesspeople suggested that the Palestinian-Jordanian community would serve as an eager source of venture capital for the fledgling state economy. They claimed that financial flows from Palestinian Jordanians would mirror those of Palestinians worldwide waiting to take money out of bank accounts in the Caymans and Switzerland and put it into Palestinian development. They pointed to the flood of funds from abroad in the early days of the Oslo Agreement, suggesting that this extreme enthusiasm for investing that followed a temporary peace agreement would be far outstripped by the outpouring of financial support for a newly established state. Several businessmen even expressed an interest in relocating current Jordanian operations to the West Bank, moving entire businesses, not just dinars, into the new state. 5. (SBU) Looking at a broader trading picture, the businesspeople expressed their desire to keep IFTA benefits and to extend existing US tax incentives for investment in Israel to a new Palestinian state. They also expressed hope that the Palestinian territories could be brought under the US-Jordan FTA umbrella. The businessmen see an opportunity to use the incentives for investment and special trade relationships provided under the free trade framework to consolidate businesses currently competing within Jordan and the West Bank (stone, olive oil, glassware, vegetables, etc.) into export industries targeted at the US and Israeli markets. Additionally, they look forward to the development of the Gaza port as an alternative to Haifa, movement into upper-end textile production (through use of Palestinian skilled/semi-skilled labor developed largely through past employment in Israel), and displacing Israeli goods both within the West Bank and in US export markets. ------------- Obstacles ------------- 6. (SBU) Having set aside fundamental issues of achieving a peaceful settlement to the Palestinian-Israeli conflict and the subsequent establishment of a Palestinian state for purposes of this discussion, the businesspeople focused primarily on their visions for private investment and relations between the private sector and the new state. However, even after theoretically removing the primary obstacles to Palestinian statehood, several additional obstacles to economic development were identified. 7. (SBU) The businesspeople made clear that the development of a business friendly environment in the new state would be critical to its success in attracting private investment. Anecdotes of the costs of PNA and municipal intrusions into privately identified business opportunities (in dairy, cement, and poultry) helped to drive home the central theme of the night, the need for a strictly limited public sector. 8. (SBU) The businesspeople were highly cynical about government involvement in the economy beyond the development of "minimal" infrastructure (water, electricity, roads, Gaza port etc.), going so far as to envision a new state with no currency, a constitutional upper limit on taxation (taking advantage of its status as a new and debtless nation), and a transparency-inducing monitory board representing/composed of businesspeople, NGO members, and international agencies. More modest goals included active business associations, government focus on fiscal soundness, and the adoption of accounting standards to allow some degree of transparency, at least in business. 9. (SBU) In terms of cooperation between Jordan and Palestine, Jordanian hostility to the acquisition of prominent Jordanian industries by Palestinian investors and insistence on a partial (through a currency basket) adoption of the Jordanian dinar pose a threat to the environment of cooperation between the two nations which will be essential to future bilateral flows of investment, according to the businesspeople. -------------------------- The Aid Conundrum -------------------------- 10. (SBU) The businesspeople argue that within Palestine the need to develop infrastructure and the demand for basic social services are immense, and the corresponding pressure to raise state revenues will threaten the ability of private businesses to keep the public sector at bay. The businesspeople recommended that aid to the new state should be targeted at addressing these initial hurdles rather than at servicing future debts, so as to reduce pressures for early growth of the public sector. These requests for public sector aid seemed at odds with earlier statements imploring econoffs that all future aid to the new state target the private sector. The inconsistency suggests a disconnect between their understanding of a fundamental demand upon the new state to help business by supplying infrastructure and their gut-aversion to putting any funds into the public sector, whether through aid or taxes. ------------- Comment ------------- 11. (SBU) This meeting was seen as the first in a series to identify opportunities, mobilize investors, and address barriers to development in a future Palestinian state. This discussion was an encouraging sign that Palestinian-Jordanians are ready to look beyond the barriers to a peaceful settlement in the short term, and have identified ways to invest their own capital and their own businesses in the economic future of an independent Palestinian state. Gnehm
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