RAMALLAH, November 11 (JMCC) - In the grand conference hall of Ramallah’s new five-star Movenpick hotel, Palestinian and foreign businessmen, investors and political delegates gathered Tuesday to discuss ways to improve the Palestinian economy.

This year’s Annual Palestinian Capital Forum, attended by Palestinian Prime Minister Salam Fayyad, trained its focus upon investor relations. Palestine Exchange (PEX), the first fully automated public shareholding company in the Arab world, ran the conference.

A BOOMING ECONOMY

There was booming growth in the Palestinian economy in the last year-- nine percent, according to Prime Minister Salam Fayyad.

“Palestinians undergo much human suffering from unjust control [which inflicts] much harm on the national economy through occupation,” said the prime minister in his speech. “But there are many success stories in the banking and business sector. We have modern markets.”

“The capital market has witnessed remarkable progress in transparency, inflation has gone down and unemployment has reduced by one-third since 2007,” said Fayyad, listing successes. So optimistic is the prime minister that, in line with declaring an independent Palestinian state in 2011, he aims for “no reliance on external support by 2013”.

“A lot of people say this growth is all in bars, restaurants and nightclubs in Ramallah,” says Bashar Masri, Chairman of Massar International. “But some of the best companies on PEX are not based in Ramallah--for example Padico industrial investment.”

Samir Hulileh, CEO of Padico Holding, agrees that the West Bank has seen increasing integration. “There is not such a huge difference now in unemployment rates between Ramallah and Nablus or Tulkarem; in Ramallah it is at about 14 percent, and in Nablus it is closer to 17 percent.

Eighty percent of the 41 companies listed on PEX until have achieved profits, reflecting the overall growth of the Palestinian economy.

RISK AVERSE INVESTORS

“But,” says Maher al-Masri, chairman of the Palestinian Capital Markets Authority, “the size of trading in the capital market doesn’t correspond with these indicators; it is lower than expected in the PEX.”

“We are all suffering from lack of confidence between investors, shareholders and other financial actors,” says Hulileh. “People are not behaving speculatively. They not jumping on investments,” says Bashar Masri.

“Foreign investors are very interested, and see that the regulators are good. But foreign investment wants to see depth, a certain amount of trading,” says al-Masri.

The main reason for this he thinks is fear that the political situation will change. “All this boom is sitting, as we say in Arabic, in the devil’s palm. And the devil here is the political situation. I don’t know how long it will last.”

POLITICAL SITUATION

The political situation remains the biggest obstacle to business, says Hulileh. “We have three major investments in Gaza; a five-star Movenpick hotel finished in July 2007, 220 chalets built on the Gaza beach, and an industrial zone on the border with Gaza. These investments are worth about $100 million, but lie unused, as Israel would not issue permits for Padico employees to go to Gaza.

In the West Bank, says Hulileh, “the main obstacle remains permits to allow investors to come to the West Bank.”

Despite these obstacles there have been increasing business relations between Israeli and Palestinian firms. “Increasing numbers of Israeli investors are coming to Palestine despite the restrictions,” says Bashar Masri.

He lists businessman Edan Ofer and Shimon Peres' son as among those Israelis who have visited the West Bank to check out the political and business climate. Increasingly they are open to joint business operations, should the chance arrive.”

FOREIGN INVESTMENT

The global economic crisis has helped level the financial playing field. Investing in the occupied Palestinian territories has become increasingly attractive as western markets collapsed in the global economic crisis.

“The Palestinian stock exchange has been a great place to hide during the financial crises,” says Hashim Shawa, Chairman of the Bank of Palestine. “While other banks lost as much as 50 percent of the value of their stocks, ours remained stable.”

Shawa recently presented Bank of Palestine figures at an investor conference in New York. Fund managers are increasingly looking at opportunities from diverging markets. “Big companies, like Morgan Stanley, are seriously considering investing”.

Diaspora Palestinians are also being recruited. The Tel Aviv stock exchange has been going up, says Martin, because many overseas Israelis are investing in their home country.  Palestinians are also adopting this approach. “We gathered the Palestinian community in Washington to discuss investment opportunities and promote Palestine,” says Shawa.

The Palestinian economy is still an emerging market. However, if domestic and foreign investor relations improve, and the political situation maintains stable, it is pitched for success.