692,900 18.6% 10.9% 70.5% 323,00 32.9% 3.7% 63.4%

15.4% 71.7% 12.9%

13%

40.2% 59.8% 0%

35%

Palestinian territory

1,015 million 23.2% 8.6% 68.2%

22.3% 68.4% 9.3%

N/A

The Gaza Private Sector is at an all time low

•

95% of factories closed

•

Leading to 32,000 job losses.

–

All 600 firms in the local garment and textiles industry have stopped doing business

–

All furniture manufacturers have ceased production

–

All metal and engineering workshops, soft drink producers, chemical factories and paper plants have closed down.

The Portland Trust applies a comprehensive approach, supporting Palestinians to develop the private sector

Physical infrastructure

Affordable housing Regional infrastructure

Trade facilitation

Export support Upgrading handicraft industry Political risk insurance Chamber of Commerce

Financial infrastructure

Pensions Mortgage finance

Finance and entrepreneurship

Loan guarantees Microfinance Business training

Housing is historically a leading sector in the Palestinian economy

•

Substantial decline in construction sector activity

•

Increasing population

•

Severe shortage of affordable housing

•

Increased construction would stimulate and revive the Palestinian economy Population (2007 est.) Population growth (per annum) Existing Housing Units (end 2005) Current Shortage Housing Units Additional Annual Shortage Decline in construction activity (1999 – 2007) PCBS survey results show demand for new housing by 2017 4 million 3.3 % 703,201 30,000 5,000 60 % 70% of Palestinians

The Affordable Housing Programme

A $1 billion Palestinian private sector initiative

• 6

new communities

in the West Bank, outside the main cities of Ramallah (2 sites), Nablus, Jenin, Hebron, Bethlehem • $100 million

infrastructure

investment by donor community • $50 million donor fund for

community facilities

and green spaces • $50 million private sector investment for

retail, commercial

industrial areas and • 15,000 new

housing

units by 2013, construction starting 2008 – Selling price between $38,000 and $70,000 – Affordable housing for working Palestinians on a monthly income of $800 - $1,700

A Palestinian vision

New sustainable communities

The Affordable Housing Programme has the potential to stimulate and revive the Palestinian economy

Palestinians in new homes (over 5 years) Estimated jobs created (annual)

Construction Associated Industries Onsite Services and Retail

Estimated total jobs created (at end of 5 years) Standard economic multiplier effect (US housing) Dependency ratio Estimated number of low-income Palestinians supported (at end of 5 years) Total Investment (over 5 years) Estimated impact on Palestinian GDP 90,000 11,000

7,000 3,000 1,000

17,000 2 6 204,000 $1 billion 8% growth (over 5 years)

Economics in peacemaking: Northern Ireland

Not a parallel but can learn important lessons

• • •

Economic initiatives created incentives to spur political progress…

Equality and fairness legislation introduced International mediation around economic issues with Senator Mitchell – Clinton’s special economic envoy on Northern Ireland Trade across conflict borders • • • •

Private sector voice and institutions pushed for moderation…

Northern Irish “Group of 7” led by Sir George Quigley Northern Ireland Business Alliance CBI - Peace Dividend US based firms operate under “MacBride terms” for equal opportunity • • •

Improved economic conditions created the context for sustained peace…

Inward investment started upon ceasefire 2000 from US firms – $1.5 billion between 1994 to Unemployment down from 17% in 1986 to 4.6% in 2006 Tourism jumped by 20% in the first year following ceasefire (1995)

Northern Ireland

An example of economic disparity creating and sustaining violence Catholics suffered from unemployment rates more than double that of Protestants and violence was high; today gap is less than 4 percentage points and violence is low.

2.40

90% 80% 2.30

2.20

2.10

2.00

1.90

1.80

1.70

20% 10% 1.60

1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 Ratio of Catholic to Protestant unemployment Percentage of total Troubles-related deaths caused by Republicans

Source: Honaker, Unemployment and Violence in Northern Ireland: A Missing Data Model for Ecological Inference (2004)

2001 0% 70% 60% 50% 40% 30%

Middle East Peace Process

Concerted effort by Israeli and Palestinian private sectors is essential

• • Strong private sector voices are important after violence to prevent derailing of peace process Israel is not threatened economically • • Launch of Israeli-Palestinian Business Council at the World Economic Forum Portland Trust to support launch of Israeli-Palestinian Chamber of Commerce

Negotiating the Final Status Agreement

The private sector will have a key role before, during and after

• Over the last 5 years the Portland Trust have learnt that there are things that can be done through the private sector. • Only with the prospect of ongoing prosperity can a political solution become long-lasting peace • Israeli/Palestinian private sector must act as a voice for moderation.

• Israeli Government and PA must support private sector, encourage investment and economic progress

The Portland Trust

42 Portland Place London W1B 1NB Azrieli 3 132 Menachem Begin Road Tel Aviv 67011 P.O. Box Al Bireh 4102 Ramallah Al Masyoun Website: www.portlandtrust.org