Things feel different these days in Ramallah, the de facto and economic capital of the Palestinian Authority, and its seat of government. The markets are crowded with shoppers. Stores are well-stocked with goods, dozens of brand new cars have appeared on the streets. And all over downtown Ramallah are banners and posters heralding the launching of new businesses—like flowers after rain.
These signs of increasing prosperity reflected in businesses all along the high street reflect a recent boost in the economy, which has been growing ever since the Western countries resumed financial support to the Palestinians.
The foreign money supply, the gas that keeps the Palestinian economy chugging, was frozen when Hamas won the elections in 2006, and then released when Hamas took over in Gaza last June.
In retaliation, it will be recalled, P.A. Chairman Mahmoud ‘Abbas sacked the short-lived Hamas government, and installed a new one in Ramallah to function as a caretaker until the next elections.
Recent developments have helped the private sector, the economy’s driving force, to recover and generate double-digit growth, estimated as 10 percent at the end of 2007.
Now, many ordinary people as well as entrepreneurs feel quietly optimistic about the state of their economy. They hope this growth can be maintained at 10 percent for the next three years according to government plans.
After years of stagnation, the economy now gives hope and courage to local entrepreneurs to invest more in local markets, says Bassam Hamadan, owner of the city’s American multinational “Best Buy” electronic store.
“I think the key to economic prosperity is security and stability” he explained, “the government has a promising development plan and is determined to foster the climate for its implementation.”
Based on a medium-term expenditure forecast, the P.A.’s three-year Palestinian Reform and Development Plan (PRDP), is a major step towards linking policies, planning, and budgeting.
Designed to create a significant improvement in living standards, at first the plan projected a modest growth target of 6 percent a year, says Issa Ashour, an economic expert living in the city.
The plan envisions a series of practical reforms centered on containing spending. This, along with a set of across the board medium-term policies, aims to steer the P.A onto the path of financial sustainability.
The P.A.’s international sponsors have backed its program, pledging $7.4 billion over three years to support Salam Fayyad’s government’s economic goals, explains a former World Bank official.
"These generous donations underscore the international community's trust in the current government led by Fayyad, who really wants to help his people and improve their lives," said economic expert Issa Ashour.
The $7.4 billion pledged exceeds the sums requested by the government, but it is less than the $8.4 billion that the World Bank reckons the Israeli curbs on movement have cost Palestinians in lost income over the past five years.
Determining whether this turning point will bring about serious improvement en route to real stability in the region can only be determined if a genuine shift takes place in how the international community deals with continued Israeli constraints on PA development, says Sami Bahour, a prominent business consultant.
Center stage should be the Palestinian private sector, the only place where sustainable development can be realized. As such, an integral part of any donor intervention should include support for the Palestinian private sector, asserts Bahour.
However, it will be impossible to reach the P.A.'s predicted economic growth if Israel maintains its stranglehold on Palestinian mobility, says Abdul Hafez Muharib, an economic and political expert.
"If the roadblocks, closures, and travel restrictions are kept in place, the economic outlook will be mediocre and we won’t achieve any tangible results," he added.
Citing security concerns, Israel refuses to dismantle the more than 600 checkpoints that paralyze Palestinian movement in the West Bank, which is as vital for boosting their weak economy.
The recent economic growth has encouraged large companies such as the Padico and Paltel groups, to plan major investment in the local market and restore the economy’s prospects.
The Padico group belongs to Palestinian magnate, Munib Al-Ma’sri, and the five companies of the Paltel Group, which owns the Palestinian telecom monopoly, is run by Sabih Al-Ma’sri.
The group’s annual report shows that Paltel achieved astronomical profits of $200 million in the third quarter of 2007, an increase of 13% over 2006.
Recently, Paltel, which accounts for 12% of Palestinian GDP, allocated $ 400 million for new projects in the West Bank. The new projects include the creation of several commercial and technological companies.
The new breakthrough in the peace process and the possibility of the sides achieving a final status agreement by the end of the year is the main reason for this boost in the economy.
“I think the conditions are ripe for it. Both sides are sick of the violence and look forward to peace and stability,” said Abed Ayyasi, 28-year old journalist living in Ramallah.
Palestinians hope that the latest American intervention will lead to a peace agreement. As they see it, the alternative is more frustration and violence that lead nowhere.
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