The Palestinian economy may grow 20 percent annually if there is peace with Israel and become less dependent on international donors, said Mohammad Mustafa, who runs the Palestinian Authority’s main investment fund.
In the meantime, Palestinians are pushing ahead with development of a new West Bank financial center and what may become the biggest initial public offering yet when mobile phone operator Wataniya Palestine Telecom sells shares before the end of the year.
“If people see serious negotiations, we can improve the business environment and investment opportunity,” Mustafa, chairman and chief executive officer of the Palestine Investment Fund, said in an Aug. 3 interview at his office in the West Bank city of Ramallah. “If they see an agreement, the sky is the limit. We’ll talk about 15 to 20 percent growth easily.”
Palestinian economic growth accelerated to 6.8 percent last year from 5 percent in 2008, which the World Bank described as impressive though “precarious” because it relied on $1.4 billion in support from foreign donations. The bank said private investment would be crucial to sustain economic expansion.
“Donors have been very generous,” said Mustafa, 56, a former World Bank analyst who is Palestinian Authority President Mahmoud Abbas’s top economic adviser. “I sincerely hope that this financial assistance will be immediately supplemented and hopefully eventually replaced by private-sector activity that will generate enough income for the government to sustain itself from its own resources.”
Michael Singh, former Middle East director for the National Security Council under President George W. Bush, said Mustafa’s projection seems “more of an aspirational goal” and it isn’t likely that annual growth would reach 20 percent.
“He’s absolutely right that it would be a big boon and might get into double digits, but not as high as that,” Singh, now a fellow at the Washington Institute for Near East Policy, said in a telephone interview. “Even with a peace agreement, people will still be wary and the investors won’t all come right away.”
Israeli Prime Minister Benjamin Netanyahu has suggested that Palestinians should work toward an “economic peace” that would eventually lead to an overall peace treaty. Netanyahu has lifted roadblocks and eased other restrictions across the West Bank in an effort to promote Palestinian economic growth. Abbas has rejected a separate economic agreement, saying it would delay an overall settlement.
The U.S. is trying to renew Middle East peace negotiations that were cut off at the end of 2008. President Barack Obama’s envoy, George Mitchell, has been shuttling between Jerusalem and Ramallah to conduct so-called proximity talks as a go-between for Abbas and Netanyahu.
The Palestinian Authority has said it won’t return to direct talks unless Israel freezes all West Bank settlement building. Netanyahu declared a limited moratorium for 10 months that is due to expire at the end of September. Abbas has said the Netanyahu initiative didn’t go far enough in halting construction.
The Palestine Investment Fund is the Palestinian Authority’s primary vehicle for bringing foreign investment to the West Bank and Gaza Strip and has $800 million in assets under management. It holds a 47 percent stake in Wataniya, as the minority partner with Qatar Telecom QSC, which owns 53 percent. Mustafa said in March that Wataniya plans to sell 30 percent of its stake on the Palestine Securities Exchange, which is based in Nablus.
The fund is also a partner in the Ersal financial center, a planned 13-tower project on a hilltop just outside Ramallah with Riyadh-based Land Real Estate Investment and Development Co.
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