2022 Investment Climate Statements: West Bank and Gaza

Policies on Foreign Direct Investment

The West Bank and Gaza received an overall ranking of 117 out of 190 in the World Bank’s 2020 Ease of Doing Business report (the latest available), a slight decrease from 116 out of 190 in 2019. (World Bank rankings range from 1 to 190, with a lower rank representing greater ease of doing business. In the 2020 Doing Business Report, the Getting Credit component achieved a score of 25. However, the West Bank continues to rank poorly and needs significant regulatory improvement in the critical business-enabling categories of Resolving Insolvency (168 of 190), Starting a Business (173 of 190), Protecting Minority Investors (114 of 190), and Dealing with Construction Permits (148 of 190). The ease of registering real property score fell from 84 to 91 out of 190.

The 2017-2022 National Policy Agenda is both a national development policy and a political document outlining the PA’s aspirations in three pillars: the path to independence; government reform; and sustainable development. The last section highlights the need for economic independence, including domestic reform to promote economic growth with fewer regulatory restrictions, supporting business start-ups and micro, small, and medium enterprises, as well as looking ahead to economic opportunities following the resolution of the political conflict with Israel.

PA-Israeli government trade relations are governed by the 1994 Paris Protocol, which was intended to endure for five years until a final peace agreement was signed. Many of the stipulations are outdated or not fully implemented. Since 1995, the PA has taken steps to facilitate and increase foreign trade by signing free trade agreements independently with Russia, Jordan, Egypt, the Gulf States, Morocco, Tunisia, Mercosur, Vietnam, and Germany, and it is a member of the Greater Arab Free Trade Area. Israel does not recognize the PA’s signed trade agreements with the European Union, the European Free Trade Association (EFTA), Canada, and Turkey which therefore cannot be implemented; however, the West Bank and Gaza remain eligible for the benefits of the U.S.-Israel Free Trade Agreement The PA participates roughly every other year in the World Trade Organization (WTO) Ministerial meetings as an ad hoc observer, most recently in 2017 as more recent WTO Ministerial meetings have been delayed since 2020 due to COVID-19 but are currently scheduled to take place on June 13, 2022.

Limits on Foreign Control and Right to Private Ownership and Establishment

The PA’s 2014 amendments to the Promotion of Investment in Palestine Law No. 1 of 1998 shifted promotional incentives from a focus on those that benefit from providing large capital investments to industrial projects to a focus on employment growth, development of human capital, increased exports, and local sourcing of machinery and raw materials (see Investment Incentives section below).

The updated Companies Law enacted on December 30, 2021, removes restrictions to foreign investors, such as foreign equity limits and local partner requirements, making it easier for multinational corporations to open a branch or subsidiary in the West Bank. The updated law provides improved regulations for larger businesses with multiple shareholders. It introduces legal frameworks for mergers, divisions, and transformation, that will allow businesses to adapt their business models as they grow. In addition, the new law allows sole proprietorship, and individual entrepreneurs can take advantage of limited liability and can build their businesses in a way that responds to their needs. The law also introduces stronger protections for minority shareholders, including clear rules to mitigate conflicts of interest and priority rights to existing shareholders when new shares are issued.

Certain investment categories require pre-approval by the Council of Ministers (PA Cabinet). These include investments involving (1) weapons and ammunition, (2) aviation products and airport construction, (3) electrical power generation/distribution, (4) reprocessing of petroleum and its derivatives, (5) waste and solid waste reprocessing, (6) wired and wireless telecommunication, and (7) radio and television. Purchase of land by foreigners also requires approval by the Council of Ministers. U.S. investors are not specifically disadvantaged or singled out by any of the ownership or control mechanisms, sector restrictions, or investment screening mechanisms, relative to other foreign investors.

Other Investment Policy Reviews

The Office of the Quartet (OQ), an organization under the UN working to support Palestinian economic development, rule of law, and improved movement and access for goods and people, has continued to work on advancing economic initiatives and the application of the rule of law. The OQ gives priority to areas where accomplishments are most viable under current conditions. Its current priorities are: (1) energy; (2) water; (3) rule of law; (4) movement and trade; and (5) telecommunications. The Organization for Economic Cooperation and Development (OECD), the WTO, and the United Nations Conference on Trade and Development (UNCTAD) do not provide investment policy reviews for the West Bank and Gaza.

Business Facilitation

Foreign companies may register businesses in the West Bank and Gaza according to the new Companies Law enacted in December 2021 (in practice, Hamas-controlled Gaza continues to apply a separate 2012 Companies Law). The IPIEA provides information online about the business registration process, at http://www.pipa.ps/page.php?id=1c1ba7y1842087Y1c1ba7  but the PA does not offer a business registration website.

The West Bank and Gaza rank low in Starting a Business on the World Bank’s Ease of Doing Business Report, with a score in 2020 of 173 out of 190. The PA simplified the process of starting a business, which now can be done online according to the new Companies Law. Foreign investors must obtain a required business license from the Municipality and approval from the MONE and the relevant ministries. Foreign companies may work with IPIEA to obtain the investment registration certificate and investment confirmation certificate. See http://pipa.ps/page.php?id=1c395fy1849695Y1c395f  and http://pipa.ps/page.php?id=1c1ba7y1842087Y1c1ba7 . In addition, foreign companies seeking to open branches in the West Bank or Gaza must submit registration documents certified by the Palestinian Liberation Organization (PLO) representative in their home country. Due to the closure of the PLO office in New York in 2018, U.S. investors can use the PLO office in Canada. According to IPIEAA, the majority of Palestinian companies are small- and medium-sized enterprises (SMEs); consequently, the PA has sought to support SME development and financing. The PA categorizes SMEs according to staff size: small enterprises employ up to nine people, while medium enterprises employ 10-19 people.

Outward Investment

The PA does not have any mechanism for tracking outward private investment.

The PA recognizes the international trade agreements listed below, which refer implicitly or explicitly to WTO rules. These include:

Paris Protocol Agreement with Israel (1994) – free trade in products between Israel and Palestinian markets

Technical and Economic Cooperation Accord with Egypt (1994)

Trade Agreement between the PA and Jordan (1995)

Duty Free Arrangements with the United States (1996)

The EuroMed Interim Association Agreement on Trade and Co-operation (1997)

Interim Agreement between European Free Trade Area (EFTA) states and the PLO (1997)

Joint Canadian-Palestinian Framework for Economic Cooperation and Trade (1999)

Agreement on Commercial Cooperation with Russia – extends MFN status

Greater Arab Free Trade Area, to which the PA is a party (2001)

Free Trade Agreement with Turkey (2004)

Trade Agreement with the EU – duty-free access for Palestinian agricultural and fishery goods (2011)

Free Trade Agreement with Mercosur (2011)

Unilateral acts by other Arab trade partners extending preferential treatment to trade with the Palestinians.

Since 1996, duty-free treatment has been available for all goods exported from the West Bank and Gaza to the United States, provided they meet qualifying criteria as spelled out in the U.S.-Israel Free Trade Area (FTA) Implementation Act of 1985, as amended. The benefits for imports provided by all of the trade agreements listed above are subject to the Israeli government’s application of the terms, since all goods destined for the West Bank or Gaza must enter through Israeli-controlled crossings or ports. The Israeli government generally applies duties and tariffs consistent with its trade agreements, not with the PA’s trade agreements.

There is no bilateral taxation treaty with the United States that covers the West Bank and Gaza. The Palestinian Authority is not a member of the OECD Inclusive Framework on Base Erosion and Profit Shifting.

Transparency of the Regulatory System

The PA Ministry of Justice, in cooperation with Birzeit University, publishes online the Official Gazette of all PA legislation since 1994 at http://muqtafi.birzeit.edu/en/index.aspx .

The PA established a legislative framework for business and other economic activity in the areas under its jurisdiction in 1994; however, implementation and monitoring of implementation needs to be strengthened, according to many observers. The PA Ministry of National Economy is in the process of drafting key pieces of economic legislation to improve business and commercial regulation, including new intellectual property rights protections, a Competition Law, and procedures for resolving bankruptcy.

The PA Ministry of National Economy holds stakeholder meetings for draft commercial legislation to gather input from the private sector and publishes drafts of the proposed laws. Because the Palestinian Legislative Council (PLC) has not met since 2007, each law must be approved by the Cabinet and adopted as a Presidential decree, an effort that often delays reform efforts. The laws will likely need to be approved by the PLC also, should it reconvene in the future. The PA budget execution reports are publicly available, including on the Ministry of Finance website ( http://www.pmof.ps/pmof/index.php ). A regulatory body governs the insurance sector, and the PA has adopted a telecommunications law that calls for establishment of an independent regulator. Establishment of the telecommunications regulator remains stalled, however.

The Palestinian Standards Institution (PSI) also has a website with information on standards for the business community ( http://www.psi.pna.ps/en  ).

International Regulatory Considerations

The PA is not a member of the WTO but has consistently expressed an interest in Permanent Observer status, having participated in the 2005, 2009, 2011, 2013, 2015, and 2017 WTO Ministerial meetings as an ad hoc observer.

Legal System and Judicial Independence

Commercial disputes can be resolved by way of conciliation, mediation, or domestic arbitration. Arbitration in the Palestinian territories is governed by PA Law No. 3 of 2000. International arbitration is accepted. The law sets out the basis for court recognition and enforcement of arbitral awards. Generally, every dispute may be referred to arbitration by agreement of the parties, unless prohibited by the law’s Article 4, including disputes involving marital status, public order issues, and cases where no conciliation is permitted. If the parties do not agree on the formation of the arbitration tribunal, each party may choose one arbitrator and those arbitrators shall then choose a presiding arbitrator, unless the parties agree to do otherwise.

Judgments made in other countries that need to be enforced in the West Bank and Gaza are honored, according to the prevailing law in the West Bank, primarily Jordanian Law No. 8 of 1952 as amended by the PA in 2005. Gazan courts refer back to Israeli and Egyptian laws, which were in force prior to 1993, for matters not covered by PA law; however, the de facto Hamas-led government in Gaza does not consistently apply PA, Egyptian, or Israeli laws, and has previously acted outside of existing legal frameworks, including to coerce private businesses.

Laws and Regulations on Foreign Direct Investment

Laws that govern foreign direct investment are overseen by the PA Ministry of National Economy.

Competition and Antitrust Laws

There is no current Competition Law for the West Bank and Gaza. The PA drafted a law in 2003 that was not enacted. An effort to develop, draft, and implement a new Competition Law began in 2017 with the assistance of the U.S. Department of Commerce’s Commercial Law Development Program (CLDP). The PA’s resulting revised draft law has not yet been issued and is currently undergoing review by the President’s Office and must be approved and published in the official gazette to be enacted. Because of the geographic divisions between and within the West Bank and Gaza anwd strict Israeli controls on the movement of people as well as goods between the West Bank and Gaza, many firms have little to no competition, causing variations in both pricing and firm productivity between regions and sometimes between cities within a region.

Expropriation and Compensation

The Investment Law, as amended in 2014, prohibits expropriation and nationalization of approved foreign investments, other than in exceptional cases for a public purpose with a court decision and in return for fair compensation based on market prices and for losses suffered because of such expropriation.

PA sources and independent lawyers say that any Palestinian citizen can file a petition or a lawsuit against the PA. In 2011, the PA established specialized courts for labor, chambers, customs, and anti-corruption. These courts are composed of judges and representatives from the Ministries of National Economy and Finance. There is a lack of confidence in the judicial system, though businesses sometimes rely on the courts and police to enforce contracts and seek redress. Alternative means of arbitration, including through familial or tribal mechanisms, are still used to resolve many disputes.

Dispute Settlement

ICSID Convention and New York Convention

The PA signed the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) in January 2015, and the Convention entered into force in April 2015. The PA is not a member of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention). In 2014, the IMF reported an average of 540 days to resolve a standard commercial dispute through the courts, with 44 separate procedures required for dispute resolution. Litigants suggested that inconsistent decisions at different levels of the courts prompt more appeals and a larger overall caseload.

Investor-State Dispute Settlement

The Investment Law, as amended in 2014, provides for dispute resolution between the investor and official agencies either via binding independent arbitration or by a Palestinian court decision. Some contracts reportedly contain clauses referring dispute resolutions to the London Court of Arbitration. The Jerusalem Arbitration Center (JAC) provides a forum for resolving business disputes between Palestinian and Israeli companies.

International Commercial Arbitration and Foreign Courts

International arbitration is permitted and governed by Law No. 3 of 2000 (see section on Legal System and Judicial Independence above). Generally, every dispute may be referred to arbitration by the agreement of the parties, unless prohibited by law. Article 4 of the law states that certain disputes cannot be referred to arbitration, including those involving marital status, public order issues, and cases where no conciliation is permitted. In the event that parties do not agree on the formation of the arbitration panel, each party may choose an arbitrator and those arbitrators shall choose a presiding arbitrator unless the parties agree to proceed otherwise. Arbitral awards made in other countries that need to be enforced in the West Bank and Gaza are honored, according to the prevailing law in the West Bank, mainly Jordanian Law No. 8 of 1952 as amended by the PA in 2005. The law covers many issues in relation to the enforcement of foreign judgments.

Bankruptcy Regulations

The World Bank’s 2020 Doing Business Report (latest available) did not cite any cases involving foreclosure, liquidation, or reorganization proceedings filed during that year. According to that report, no priority is assigned to post-commencement creditors, and debtors may only file for liquidation. The PA Ministry of National Economy, with the assistance of international donors, is in the process of drafting several proposed laws related to bankruptcy, but no bankruptcy reform has been enacted. The newly enacted Companies Law includes a chapter on insolvency.

Investment Incentives

To align the PA’s development priorities with the investment incentives provided by Palestinian law, in 2014, PA President Abbas enacted by decree amendments to the Promotion of Investment in Palestine Law No. 1 of 1998, also known as the investment and tax law. These amendments extended tax incentives to small and medium-sized enterprises, exporters, and agriculture and tourism businesses, and shifted the focus toward incentives on human capital instead of fixed assets. The amendments added tourism and agricultural projects to qualifying industries and removed real estate development projects from the industries promoted through the incentives. The amendments also provided additional authority to the IPIEA to create incentive packages targeted to individual business needs ( www.pipa.ps ). The PA is also currently working on a package of incentives in the information and communications technology (ICT), industrial, and energy sectors, in addition to those focused on development in Area C.

The 2014 amendment to Article 23 of the Promotion of Investment in Palestine Law No. 1 of 1998 granted the following incentives and exemptions for projects approved by IPIEA:

• Income tax of zero percent for producers of agricultural products whose income is directly generated from land cultivation or livestock.
• Income tax of 5 percent commencing from the date of realizing profit, but not exceeding four years of operation, whichever is earlier.
• Income tax of 10 percent for a period of three years commencing from the end of the first phase. It will thereafter be calculated based on the applicable and in-effect percentages and segments.

Projects that may be targeted for taxation incentives and support services include the following:

• Industrial sector projects;
• Tourism sector projects;
• New projects within any sector that employ at least 25 workers during the period of benefit;
• Projects that increase their production exports ratio by more than 40 percent;
• Projects within any sector that use approximately 70 percent locally sourced machinery and raw materials;
• Any existing project that adds 25 workers to the number of existing workers;
• Developmental expansions of projects (to be based on percentage of paid-in capital but not land value);
• Projects in which the IPIEA Board of Directors provides specific incentive packages that comply with special criteria, meet international environment conditions or alternative energy services, or are projects located within areas of developmental priorities.
• Any project determined by IPIEA’s Board of Directors to advance the public interest (subject to the nature of a project’s activity, geographical location, the extent to which the project contributes to increasing exports, creating job opportunities, advancing development, transferring knowledge, and supporting research and development for the purposes of enhancing the public benefit).

Excluded from the incentives are:

• Commercial projects;
• Insurance companies;
• Banks;
• Money changers;
• Real estate projects;
• Some electricity projects;
• Telecommunication services;
• Commercial services;
• Crushers;
• Quarries;
• Any companies that obtained concessions contracts from the Council of Ministers and operate as monopolistic companies.

In cooperation with the Palestinian Industrial Estates & Free Zones (PIEFZA), IPIEA (then PIPA) in 2017 introduced incentive packages targeting investors in the Bethlehem Industrial Park and Jericho Agro Industrial Park. The packages extend incentives for three extra years, reducing income tax by 66 percent for eight years, followed by a 33 percent reduction for three years. Tax incentives are also included for financial institutions that provide financing for the enterprises within the industrial zones.

Foreign Trade Zones/Free Ports/Trade Facilitation

There are no foreign trade zones or free ports in the West Bank or Gaza.

Performance and Data Localization Requirements

The current performance requirements for investment incentives focus on job growth and locally sourced production. Under PA law, there are no data storage requirements for IT companies. The PA does not follow a forced localization policy and there are no requirements for foreign IT providers to turn over source code or provide access to surveillance.

Real Property

The Acquisition Law in the West Bank, which regulates foreign acquisition and rental or lease of immovable properties, classifies foreigners into three categories with differing rights:

Foreigners who formerly possessed Palestinian or Jordanian passports shall have the right to own certain properties sufficient to erect buildings and/or for their agricultural projects.

Foreigners who hold other Arab passports have the right to own certain property that suffices for their living and business needs only.

Other foreigners, including Jerusalem ID holders, must receive permission from the PA Cabinet to own buildings or purchase land.

The permit process can be lengthy and includes clearances from the intelligence and preventive security agencies. It is critical that potential purchasers of land or buildings perform a title search to ensure that no outstanding violations or unpaid penalties exist on the properties. Under current law, outstanding violations and penalties are transferred to the new owners.

Title searches can only be obtained from the PA Land Authority (al-Taboh). Land registration is done through the Land Registries in Hebron, Ramallah, Qalqilya, Tulkarem, Nablus, Bethlehem, Jericho, Jenin, and Gaza City. In order to purchase land in the West Bank or Gaza, an application that includes supporting documents such as deeds to the property and powers of attorney, should be submitted to the land registry office having jurisdiction over the land. The 2020 World Bank Doing Business report gave Registering Property a score of 91 out of 190 and in 2019 the PA made the process easier by removing the requirement to obtain a security check when issuing a purchase permit and by publishing official statistics on property transactions at the land registry.

The issue of land registration in the West Bank is complicated by overlapping, and sometimes conflicting, laws and customs derived from the Ottoman, British Mandate, and Jordanian periods of rule. In addition, there is no comprehensive registry of land ownership for the West Bank, and efforts to complete one are expected to take years at the current pace. The majority of the land has not been registered; even where land is registered, titles are often more than a generation old, with unresolved rights to numerous inheritors. Israeli administrative control over 60 percent of the West Bank, designated as Area C, adds an additional layer of bureaucracy and restrictions with respect to sale and use of privately held lands in those areas.

Intellectual Property Rights

The West Bank and Gaza do not have modern intellectual property rights (IPR) regimes in place; existing IPR legislation originates from a combination of Ottoman era, British Mandate, and pre-1967 Jordanian laws. Currently, intellectual property is governed by the Civil Claims Law of 1933 for the West Bank and Gaza, the Palestinian Trademark and Patent Laws of 1938 in Gaza, the Commercial Law No. 19 of 1953 for the West Bank and Gaza, and the Patent Law No. 22 of 1953 in the West Bank.

The PA was indirectly committed to the General Agreement on Tariffs and Trade and the agreement of Trade Related Aspects of Intellectual Property Rights (GATT-TRIPS) when it signed the 1995 Interim Agreement on West Bank/Gaza according to Annex III (Protocol Concerning Civil Affairs), Appendix 1, Article 23. Despite different authorizing legislation, there are few substantive differences between IPR laws in the West Bank and Gaza. To register a trademark, four copies of the proposed trademark must be attached to the application, one of them in color, along with a copy of the company’s Certificate of Registration. A foreign company is entitled to register its trademark in the West Bank or Gaza by giving power of attorney either to a trademark agent or to a lawyer. Trademarks can be registered unless they fall within a recognized prohibition, such as being similar or identical to an already registered trademark, are likely to lead to deception of the public, or are contrary to public morality.

Trademark protection is available for registered trademarks for a period of seven years, which may be extended for additional periods of 14 years. The proprietor of a trademark in the West Bank or Gaza owns the sole right to the use of the trademark in association with the goods with which the trademark is registered. The trademark is open for opposition after being published in the Gazette for a period of three months. The holder of a trademark retains the right to bring civil action against any perpetrator in addition to criminal proceedings. Trade names are registered by the PA according to specific procedures and conditions that are laid out in the Jordanian Trade Names Registration Law No. 30 of 1953, which is still applicable in the West Bank, and Law No. 1 of 1929 in Gaza.

The Patents and Design Law No. 22 of 1953 is applicable in the West Bank and the Patents Design Law No. 64 of 1947 is applicable in Gaza. With the requisite documents, a foreign company can register a patent or design by giving power of attorney to a patent agent or to a lawyer. Patent protection is provided for a period of 16 years from the date of filing the patent application. Copyright in the West Bank and Gaza is governed by the Copyright Laws of 1911 and 1924. The protection lasts for a period of 50 years after the death of the author of the work. The law also deals with infringements, compulsory licenses, and procedural issues. The law prescribes imprisonment for a maximum period of one year or a fine not exceeding 100 Jordanian dinars for infringement of a registered trademark. There are no commercial or IPR courts in the Palestinian legal system. The lack of IPR protection and enforcement allows some small businesses to display trademarks without authorization. As a result, there is inconsistency in upholding U.S. trademarks and unpredictability of legal challenges to infringement.

There is minimal enforcement of IPR laws for music and movies in the West Bank and Gaza, but the PA has enforced some IPR laws to protect the Palestinian pharmaceutical industry. The PA has drafted a modern law to encompass international regulations for IPR, including copyright, patents and designs, trademarks, and merchandise branding, but the law has not yet been adopted in the absence of a functioning legislature. The PA is eager to obtain membership in various organizations and accede to agreements concerning intellectual property, such as the WTO and the World Intellectual Property Organization (WIPO); it has held observer status in WIPO since 2005.

In 2012, USAID helped the PA draft a modern IPR law that has been reviewed by WIPO. In 2017, the U.S. Department of Commerce’s Commercial Law Development Program (CLDP) and U.S. Patent and Trademark Office worked with the PA and other Palestinian stakeholders to raise capacity for implementing IPR processes. Given local procedures for drafting, reviewing, and approving new legislation, a new IPR law is not expected to be enacted in 2022 according to the MONE.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Resources for Intellectual Property Rights Holders:

Peter Mehravari
Patent Attorney
Intellectual Property Attaché for the Middle East & North Africa
U.S. Embassy Abu Dhabi | U.S. Department of Commerce U.S. Patent & Trademark Office
Tel: +965 2259 1455
Peter.Mehravari@trade.gov 

Capital Markets and Portfolio Investment

In 2004, the PA enacted the Capital Markets Authority Law and the Securities Commission Law and created the Capital Market Authority to regulate the stock exchange, insurance, leasing, and mortgage industries. In 2010, a Banking Law was adopted to bring the Palestinian Monetary Authority’s (PMA) regulatory capabilities in line with the Basel Accords, a set of recommendations for regulating the banking industry. The 2010 law provides a legal framework for the establishment of deposit insurance, management of the Real Time Gross Settlement (RTGS) system, and treatment of weak banks in areas such as merger, liquidation, and guardianship. It also gives the PMA regulatory authority over the microfinance sector. In 2013, the PA passed a Commercial Leasing Law and in 2015 the MONE finalized a registry for moveable assets, intended to facilitate secured transactions, especially for small and medium-sized businesses. In April 2016, the PA passed the Secured Transactions Law, which established the legal grounds and modern systems to regulate the use of movable assets as collateral.

Notwithstanding this regulatory environment, the World Bank’s 2020 Ease of Doing Business report assigned the West Bank and Gaza a particularly low score for Protecting Minority Investors (114 out of 190) and Resolving Insolvency (168 out of 190). Founders of recently established SMEs complain that loan terms from Palestinian creditors fail to allow the borrower sufficient time to establish a sustainable business, although the new Moveable Assets Registry, coupled with the Secured Transactions Law and Commercial Leasing Law, led to a substantial improvement in the Getting Credit ranking (25 out of 190) from 2018.

The Palestine Exchange (PEX) was established in 1995 to promote investment in the West Bank and Gaza. Launched as a private shareholding company, it was transformed into a public shareholding company in February 2010. The PEX was fully automated upon establishment – the first fully automated stock exchange in the Arab world, and the only Arab exchange that is publicly traded and fully owned by the private sector. The PEX is registered with the Companies Controller at the Ministry of National Economy and it operates under the supervision of the Palestinian Capital Market Authority. PEX’s 49 listed companies are divided into five sectors: banking and financial services, insurance, investment, industry, and services, with a USD 3.5 billion market capitalization. Shares trade in Jordanian dinars and U.S. dollars. PEX member securities companies (brokerage firms) operations are found across the West Bank and Gaza and authorized custodians are available to work on behalf of foreign investors.

Money and Banking System

The Palestinian banking sector continues to perform well under the supervision of the PMA. World Bank reports to the Ad Hoc Liaison Committee (AHLC) have consistently noted that the PMA is supervising the banking sector effectively. The PMA continues to enhance its institutional capacity and provides rigorous supervision and regulation of the banking sector, consistent with international practice.

The PMA regulates and supervises 13 banks (6 Palestinian, 6 Jordanian, and 1 Egyptian) with 379 branches and offices in the West Bank and Gaza, with $ 20.9 billion net assets.  No Palestinian currency exists and, as a result, the PA places no restrictions on foreign currency accounts.  The PMA is responsible for bank regulation in both the West Bank and Gaza.  Palestinian banks are some of the most liquid in the region, with customers deposits of USD 11.5billion and gross credit of USD 10.7 billion as of the end of 2021.

An Anti-Money Laundering Law that was prepared in line with international standards with technical assistance from the International Monetary Fund (IMF) and USAID came into force in October 2007. In December 2015, the PA President signed the Anti-Money Laundering and Terrorism Financing (AML/CFT) Decree Law Number 20 for the PA to join the Middle East and North Africa Financial Action Task Force (MENA/FATF), a voluntary organization of regional governments focused on combating money laundering and the financing of terrorism and proliferation. Improvements contained in the 2015 law make terrorist financing a criminal offense and defines terrorists, terrorist acts, terrorist organizations, foreign terrorist fighters, and terrorist financing. The PMA completed a National Risk Assessment (NRA) — an AML/CTF self-assessment — in 2018. The PMA is implementing the recommendations from the self-assessment to strengthen the AML/CTF regime in preparation for a MENA/FATF member review of the Palestinian economy’s AML/CFT safeguards, initially scheduled for August 2020 but postponed at the PA’s request to August 2022 due to the COVID-19 pandemic. The Swedish Riks Bank completed its assessment of the financial sector in preparation for the upcoming MENA/FATF mutual evaluation. Credit is affected by uncertain political and economic conditions and by the limited availability of real estate collateral due to non-registration of most West Bank land.  Despite these challenges, the sector’s loan-to-deposit ratio continues to increase towards parity, moving from 58 percent at the end of 2015 to 68 percent at the end of 2019. However, in 2020 and 2021, the loan to deposit ratio slightly declined to 66.6 percent and 65.1 percent respectively due to reduced lending to businesses because of COVID-19. The increase in the loan to deposit ratio in the past was in part because of the PMA’s encouragement to banks to participate in loan guarantee programs sponsored by the United States and international financial institutions, by supporting a national strategy on microfinance, and by imposing restrictions on foreign placements.  The PA Ministry of National Economy’s enactment of the Secured Transactions Law in April 2016 allows for use of moveable assets, such as equipment, as collateral for loans.  Non-performing loans in 2021 were 4.15 percent of total loans, due to credit bureau assessments of borrowers’ credit worthiness and a heavy collateral system. In addition, in 2021 banks continued to avoided default by restructuring and rescheduling loans to help customers cope with the impact of COVID-19.

Palestinian banks have remained stable in general but have suffered from a deterioration in relations with Israeli correspondent banks since the 2007 Hamas takeover of Gaza when Israeli banks cut ties with Gazan branches and gradually restricted cash services provided to West Bank branches.  In 2008, all Palestinian banks were required to move their headquarters to Ramallah.  Israeli restrictions on the movement of cash between West Bank and Gaza branches of Palestinian banks have caused intermittent liquidity crises in Gaza and for all commonly used major currencies, including U.S. dollars, Jordanian dinars, and Israeli shekels. An Israeli government decision in the first quarter of 2021 increased the cash deposit transfer amount from Palestinian banks to the Bank of Israel to NIS 1.2 billion monthly. However, banks still say that this increase is not enough to mitigate the problem of a surplus of shekel bank notes stranded in the West Bank, and the PMA requested the BOI increase the quota to NIS 2.75 billion per month. Despite Hamas’s control of the Gaza Strip, Palestinian banks operating in Gaza follow strict PMA measures in order to maintain their operations and avoid running afoul of AML/CFT regulations.

Foreign Exchange and Remittances

Foreign Exchange

The PA does not have its own currency. According to the 1995 Interim Agreement, the Israeli shekel (NIS) freely circulates in the West Bank and Gaza and serves as means of payment for all purposes, including official transactions. The PMA’s exchange of foreign currency for NIS and vice-versa is carried out through the Bank of Israel Dealing Room at market exchange rates.

Remittance Policies

The Investment Law guarantees investors transfer out of the Palestinian territories freely all financial resources, including capital, profits, dividends, wages, salaries, and interest and principal payments on debts. Most remittances under USD 10,000 can be processed within a week. Travelers must declare if they are carrying 50,000 shekels or more when entering or exiting Israel by air and 12,000 shekels if entering or exiting by land. In addition to the Israeli shekel (NIS), U.S. dollars (USD) and Jordanian dinars (JD) are widely used in business transactions. There are no other PA restrictions governing foreign currency accounts and currency transfer policies. Banks operating in the West Bank and Gaza, however, are subject to Israeli restrictions on correspondent relations with Israeli banks and the ability to transfer shekels into Israel, which occasionally limit services such as cash deposits into Palestinian banks, wire transfers, and foreign exchange transactions.

Sovereign Wealth Funds

The privately-run Palestine Investment Fund (PIF) acts as a sovereign wealth fund, owned by the Palestinian people.  According to PIF’s 2020 annual report (the most recent available), its assets reached $ 934 million and a net income of $ 8.6 million. These investments covered strategic economic sectors, and focused on high added-value productive sectors, such as the energy sector, both traditional and renewable, health, telecommunication and infrastructure, technology and education, agriculture, industry, commerce, construction, and small enterprises.  90 percent of PIF investments are domestic, but excess liquidity is invested in international and regional fixed income and equity markets.  In 2014, the fund established the Palestine for Development Foundation, a separate not-for-profit foundation managing PIF’s corporate social responsibility initiatives, which are primarily focused on support to Palestinians in the West Bank, Gaza, Jerusalem, and abroad.  Since 2003, PIF has transferred over $ 850 million to the PA in annual dividends, but PIF leadership does not report to the PA per PIF bylaws.  International auditing firms conduct both internal and external annual audits of the PIF.

Although there are no state-owned enterprises (SOEs), some observers have noted that the PIF essentially acts as a sovereign wealth fund for the PA, and enjoys a competitive advantage in some sectors, including housing and telecommunications, due to its close ties with the PA. The import of petroleum products falls solely under the mandate of the Ministry of Finance’s General Petroleum Corporation, which then re-sells the products to private distributors at fixed prices.

Privatization Program

There is no PA privatization program for industries within the West Bank and Gaza.

Most large or multinational businesses in the West Bank include corporate social responsibility (CSR) in their business plans, mainly focusing on philanthropy related to education, health, and youth. Some medium-sized enterprises, particularly in healthcare and the food industry, started CSR initiatives to create goodwill for their products. CSR engagement remains relatively low overall, because over 90 percent of companies are small, family-run businesses.

Additional Resources

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

The Palestinian public views corruption as the most important issue in their daily lives according to an October 2021 poll by the Coalition for Integrity and Accountability (AMAN), the Palestinian chapter of Transparency International According to USAID’s West Bank and Gaza Inclusive Growth Diagnostic Study conducted in 2017, only 11 percent of the Palestinian firms surveyed reported ever being asked to pay a bribe, compared to 48 percent in Egypt. Private sector businesses assert that the PA has been successful in reducing institutional corruption and local perceptions of line ministries and PA agencies are generally favorable.

The Anti-Graft Law (AGL) of 2005 criminalizes corruption, and the State Audit and Administrative Control Law and the Civil Service Law both aim to prevent favoritism, conflict of interest, or exploitation of position for personal gain. Despite the AGL, the perception that access to power is needed to succeed in business is pervasive according to contacts. The AGL was amended in 2010 to establish both a specialized anti-graft court and the Palestinian Anti-Corruption Commission, which was tasked with collecting, investigating, and prosecuting allegations of public corruption. The Anti-Corruption Commission, first appointed in 2010, has indicted several high-profile PA officials. Palestinian civil society and media are active advocates of anti-corruption measures and there are international and Palestinian non-governmental organizations that work to raise public awareness and promote anti-corruption initiatives. The most active of these is the Coalition for Integrity and Accountability (AMAN), which is the Palestinian chapter of Transparency International ( http://www.aman-palestine.org/eng/index.htm ).

UN Anticorruption Convention, OECD Convention on Combatting Bribery

In April 2014, the PA acceded to the UN Anticorruption Convention. The PA is not a party to the OECD Convention on Combatting Bribery.

Resources to Report Corruption

Contact at U.S. Embassy in Jerusalem:

Palestinian Affairs Unit
Economic Section
+972 2 622 6952
JerusalemECON@State.Gov 

Contact at government agency or agencies responsible for combating corruption:

The Coalition for Accountability and Integrity – AMAN
+972-2-298-9506
info@aman-palestine.org
http://www.aman-palestine.org 

Israeli government restrictions on the movement and access of goods and people between the West Bank, Gaza, and external markets – which Israel states are necessary to address its security concerns – continue to limit Palestinian private sector growth. Israeli Defense Forces under the Israeli Ministry of Defense are responsible for the West Bank, but PA Security Forces were granted security control of 17.5 percent (called Area A) under the 1993 Oslo Accords. Area A and Area B together make up the 36 percent of the West Bank and fall under PA civil control. Pending a final negotiated peace agreement defining borders and control of territory, Israel maintains all administrative and security control of Area C, which comprises 61 percent of the West Bank. A 2017 USAID study found that high transaction costs stemming from limitations on movement, access, and trade are the most immediate impediment to Palestinian economic growth, followed by energy and water insecurity. The security situation can change rapidly. Potential investors should regularly consult the State Department’s latest travel warnings, available at https://travel.state.gov.

Clashes between security forces and Palestinians in the West Bank as well as between Israeli settlers and Palestinians have resulted in deaths and injuries. The Israeli government may restrict access to and within the West Bank and may place some areas under curfew. In June 2007, Hamas, a designated Foreign Terrorist Organization (FTO), seized control of the Gaza. The security environment within Gaza and on its borders is volatile. Violent demonstrations and shootings occur sporadically and with little warning, and the collateral risks are high. While the situation remains calm following a large escalation in May 2021, periodic mortar and rocket fire and Israeli military responses continue to occur. Following the 2007 Hamas takeover, the Israeli government implemented a closure policy that restricted imports to limited humanitarian and commercial shipments, effectively blocking exports from Gaza until 2015, when exports rebounded to an average of 115 truckloads per month.

The economic situation and investment outlook in Gaza have deteriorated since the 2007 takeover, with especially challenging periods following Israeli combat operations there: December 2008-January 2009; November 2012; and July-August 2014; and May 2021. The Israeli government has at times eased its closure policy by lifting some restrictions on goods imported into and exported out of Gaza, most recently following the May 2021 escalation. However, businesses continue to face opaque restrictions on delays in importing and exporting goods, spare parts, and through Israeli-controlled Kerem Shalom crossing, the sole entry and exit point for goods traveling between Israel and Gaza. The Israeli government allows limited exports (transshipments) to overseas markets and to Israel, and some sales to the West Bank.

With its growing youth population and high rates of attendance across the schooling systems, the West Bank and Gaza have an abundant supply of educated and skilled labor. According to the Palestinian Central Bureau of Statistics (PCBS), the total population of the West Bank and Gaza in December 2020 was approximately 5 million, including 3 million in the West Bank and 2 million in the Gaza. PCBS estimated there were 1,443,000 people in the Palestinian labor force as of the end of 2021, with 939,700 in the West Bank and 503,300 in Gaza. An estimated 143,000 Palestinians from the West Bank worked in Israel and Israeli settlements and an estimated 10,000 from Gaza worked in Israel at the end of 2021.

The most recent PCBS labor statistics estimate 20201unemployment was at 13.2 percent in the West Bank and 44.7 percent in Gaza. According to PCBS, at the end of 2021, the service sector was the largest employer in the local market with more than one-third in the West Bank and more than half in Gaza. The public sector employed 33.9 percent of the employed in 2021(32.6 percent in the West Bank and 52.8percent in Gaza). According to the most recent Labor Force Survey (Q4, 2021), private sector labor distribution in the West Bank and Gaza, by sector, is as follows:

33.9 percent – Services and Other Branches

21.9percent – Commerce, Hotels, Restaurants

18.7percent – Construction

13percent – Mining, Quarrying, Manufacturing

6.7percent – Agriculture, Forestry, Fishing, Hunting

5.8 percent – Transportation, Storage, Communication

Women face additional obstacles to employment opportunities and experience higher unemployment rates and lower labor force participation rates than men, despite comparable education levels. Only 17 percent of Palestinian women, compared to 69 percent of Palestinian men, participate in the labor force, according to a December 2021 PCBS report. The report also estimated that women’s unemployment rate (39 percent) is double that of men’s (20 percent), and female post-secondary graduates experienced 66 percent unemployment compared to the 39 percent experienced by their male counterparts. Many factors contribute to this phenomenon including lacking legal protections against discrimination and sexual harassment; labor regulations prohibiting women’s participation in certain jobs or shift times; cultural attitudes about appropriate work for women and household responsibility expectations; and men’s greater freedom of movement and willingness to take lower wage jobs.

The Palestinian minimum wage remained legally mandated at NIS 1,450 ($381.57) per month throughout 2020. In January 2022 the PA cabinet implemented an increase of the minimum wage to NIS 1,880 ($570) per month. However, according to the PCBS, at the end of 2021, 30 percent of the private sector wage employees received less than the minimum wage. The average daily wage in the West Bank was NIS 123 ($38), compared with NIS 65.6 ($20) in Gaza while for the workers in Israel it was NIS 269 ($84).

PA labor law does not explicitly prohibit forced or compulsory labor, but does forbid the use of child labor, in accordance with international standards. However, there are reports of forced labor and child labor in the West Bank and Gaza, particularly in agricultural work and the informal economy. According to the PCBS, in 2021, 3 percent of children (aged 10-15 years) were employed (4percent in the West Bank and one percent in Gaza). Despite the widespread informal economy, most large Palestinian employers rely on standard, long-term employment contracts with minimal use of temporary workers. Israeli labor law applies to settlements in the West Bank, but authorities do not enforce it uniformly.

PA law provides for the rights of workers to form and join independent unions and conduct legal strikes. The law requires conducting collective bargaining without any pressure or influence but does not explicitly provide for the right to collective bargaining. Anti-union discrimination and employer interference in union functions are illegal, but the law does not specifically prohibit termination due to union activity. Non-governmental organizations do not consider labor unions to be independent of authorities and political parties. The requirements for legal strikes are cumbersome and strikers have little protection from retribution. The PA Ministry of Labor can impose arbitration; in such cases, workers or their trade unions face disciplinary action if they reject the result. If the ministry cannot resolve a dispute, it can be referred first to a committee chaired by a delegate from the ministry and composed of an equal number of members designated by the workers and by the employer, and, if the committee is unsuccessful, it can be referred to a specialized labor court. Teachers, who comprise the most significant portion of the public sector work force, participated in a large-scale strike with demonstrations in early 2016 protesting partial pay.

In early 2016, the PA President approved a new Social Security Law mandating compulsory social security contributions from private sector employees and their employers to a new Palestinian Social Security Fund. It was to be implemented on November 1, 2018; however, in late 2018, the PA President postponed implementation indefinitely due to large-scale private sector opposition. The ILO together with the PA Ministry of Labor, civil society organizations, and the private sector plan continue to hold social dialogue sessions to address specific points of contention. A report to the PA on these points is due by end of March 2022 but contacts tell us they do not expect the PA to resurrect the law.

The U.S International Development Finance Corporation (DFC), formerly the Overseas Private Investment Corporation (OPIC), provides a variety of services to qualified investors with either U.S. partners and/or subsidiaries in emerging economies and developing nations. During the early stages of investment planning, U.S. investors may contact DFC for insurance against political violence, inconvertibility of currency, and expropriation in the form of an insurance registration letter. OPIC initiated several programs in the West Bank and Gaza to support private sector development, including successful loan guarantee facilities. DFC’s Joint Investment for Peace Initiative, funded by the Nita M. Lowey Middle East Partnership for Peace Act of 2020, is designed to increase cooperation between Israelis and Palestinians by promoting investments and financial tools that advance the development of the Palestinian private sector economy. DFC will focus on increasing investment in small- and medium-sized enterprises owned by Palestinians in high value-added or emerging industries.

According to the PCBS, the total foreign direct investment stock in resident enterprises in Palestine amounted to USD 1,671 million at the end of 2020 mostly in the banking sector.

* Host source: http://www.pcbs.gov.ps/statisticsIndicatorsTables.aspx?lang=en&table_id=377  and http://www.pcbs.gov.ps/Portals/_Rainbow/Documents/E.QNA_Curret.htm 

Note:

Preliminary PCBS data – note final and Basis Year for GDP calculations was changed by PCBS from 2004 to 2015

Estimated GDP for 2020 is $12.97 billion

**Host Source: PCBS Foreign Investment Survey of Palestinian Enterprises (stocks) at the end of 2018 available at: http://www.pcbs.gov.ps/Portals/_Rainbow/Documents/e-IIP-2018%20sector.html 

The private Palestine Development and Investment Company (PADICO) has invested over USD 250 million in telecommunications, housing, and the establishment of the Palestine Exchange (PEX). The Ramallah-based Arab Palestinian Investment Company (APIC) is a large foreign investment group with authorized capital of over USD 100 million. Four private equity funds operate in the West Bank/Gaza, largely comprised of foreign investors: Riyada, Siraj, Sharakat, and Sadara. Other significant foreign investments include Qatari mobile operator Ooredoo’s projected USD 600 million investment in Ooredoo Palestine (formerly Wataniya Mobile) over a 10-year period, and Qatari Diar’s USD 1 billion investment in Rawabi, a mixed use/affordable housing real estate development. The largest U.S. investment is Coca-Cola’s 15 percent stake in the local bottler, Palestine National Beverage Company (PNBC), a company valued at USD 70 million. PNBC opened a USD 20 million bottling facility in Gaza in December 2016, in addition to its three West Bank-based plants.

U.S. Embassy Jerusalem
Palestinian Affairs Unit, Economic Section
+972 2 622 6952
JerusalemECON@state.gov