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UNCLAS JERUSALEM 000148 
 
SIPDIS 
 
STATE FOR EEB/IFD/OIA AND NEA/IPA; PASS OPIC, TDA, AND USTR 
 
E.O. 12958: N/A 
TAGS: EINV EFIN ETRD ELAB KTDB PGOV USTR OPIC KWBG
KPAL, IS 
SUBJECT: 2010 INVESTMENT CLIMATE STATEMENT FOR THE WEST 
BANK AND GAZA 
 
REF: 09 STATE 124006 
 
A.1 OVERVIEW OF FOREIGN INVESTMENT CLIMATE 
 
The Palestinian private sector is talented and 
entrepreneurial, yet faces numerous obstacles to reaching its 
full potential.  Palestinian businesses have a reputation for 
a high-level of professionalism and product quality, and 
large Palestinian enterprises are internationally connected, 
with partnerships extending to Asia, Europe, the Gulf, and 
the Americas.  However, political instability resulting from 
the Israeli-Palestinian conflict, restrictions on the 
movement and access of goods and people within the West Bank 
and between the West Bank and Israel and Jordan, and import 
and export restrictions imposed by the Government of Israel 
(GOI) continue have a deleterious effect on the private 
sector and limit economic growth.  The de facto rule in Gaza 
of Hamas, a designated Foreign Terrorist Organization (FTO), 
combined with GOI restrictions on imports and exports, 
severely constrains private sector opportunities in Gaza. 
 
There have been some notable improvements in the West Bank's 
economic outlook over the past two years, driven primarily by 
improved security, economic reforms implemented under 
Palestinian Authority (PA) Prime Minister Salam Fayyad, and 
international donor support that has enabled the PA to pay 
salaries and arrears.  Additionally, the GOI eased 
restrictions on the movement and access of people and goods 
within the West Bank over the past year and allowed Arab 
Israelis to enter and shop in a greater number of cities in 
the West Bank.  Foreign investment has increased 
substantially over the last several years and the IMF 
predicts baseline growth of 6.5% in 2010 and 7.5% in 2011, 
although this scenario is dependent on continued easing of 
movement and access restrictions and the facilitation of 
external trade. 
 
Palestinians have a young population, and the work force in 
the West Bank/Gaza is expected to expand significantly over 
the next several decades.  Much of this labor force is highly 
educated, multilingual, and well-versed in the technologies 
and practices conducive to doing business on a global level. 
The services sector is the largest contributor to the economy 
(largely driven by government expansion), representing 55% of 
GDP, according to 2008 statistics.  The information and 
communications technology sector is one of the fastest 
growing sectors in the Palestinian Territories, with an 
average growth rate of 25-30% since 2000, according to PA 
statistics.  With a growing number of high tech-focused 
college graduates, one of the highest Internet penetration 
rates in the Middle East, and competitive salaries, software 
development, and outsourcing are considered attractive 
sectors for potential investors. 
 
Since June 2007, the PA has demonstrated a renewed 
determination to improve the investment climate and to 
attract foreign investment.  The PA undertook a number of 
significant reforms and prepared the 2008-2010 Palestinian 
Development and Reform Plan (PDRP) in December 2007, a set of 
broad economic policies that focus on stimulating growth 
through private sector investment and consolidating public 
finances.  Fayyad then expanded on the PDRP through his 
two-year plan for statehood in August 2009, which also 
emphasized the role of the private sector and the importance 
of an enabling investment environment.  A revised multi-year 
reform and development framework for 2011-2013 is in draft 
form as of January 2010 and is expected to focus on the same 
themes.  The PA has also focused on legal reforms as a means 
of improving the investment environment, and is currently 
drafting a new competition law, a trademark/copyright law, a 
company law, a bankruptcy law, and various amendments to the 
investment law. 
 
Since 1995, the PA has taken steps to facilitate and increase 
foreign trade by signing free trade agreements with the 
European Union, the European Free Trade Association (EFTA), 
the United States, Canada, and Turkey. The PA has finalized 
other trade agreements with Russia, Jordan, Egypt, the Gulf 
States, Morocco, and Tunisia.  The PA has also expressed 
interest in obtaining observer status in the World Trade 
Organization (WTO), and participated in the 2005 and 2009 WTO 
Ministerial meetings as an ad hoc observer.  In 2008, the PA 
 
hosted a successful investment conference in Bethlehem, and 
subsequently participated in numerous follow-up trade and 
investment promotion events, including in London, Tokyo, and 
Washington, D.C. 
 
Measure                             Year        Index/Ranking 
TI Corruption Index                             N/A 
Heritage Economic Freedom                       N/A 
World Bank Doing Business Index     2010        139/183 
MCC Rankings                                    N/A 
 
This report focuses on investment issues related to areas 
under the administrative jurisdiction of the PA, except where 
explicitly stated.  Given the changing circumstances on the 
ground, potential investors are encouraged to contact the 
Palestinian Investment Promotion Agency (www.pipa.gov.ps), 
the Palestine Trade Center (www.paltrade.org), and the 
Palestinian-American Chamber of Commerce (www.pal-am.com), as 
well as the U.S. Consulate General in Jerusalem and the 
Foreign Commercial Service for the latest information. 
 
Where applicable, this report addresses issues related to 
investment in the Gaza Strip, although there are currently no 
opportunities for meaningful private investment in Gaza due 
to Hamas's control and Israeli restrictions on the flow of 
imports and exports, as of the time of this writing. 
 
The legal framework for foreign investment in the West 
Bank/Gaza is based on the PA Investment Promotion Law, as 
amended in 1998.  All business entities must be registered 
with the Palestinian Investment Promotion Agency's registry 
of investments either in the West Bank or Gaza.  According to 
existing PA company laws, there are three different types of 
companies which may be incorporated: 
 
- General Partnership:  The liability of each partner in a 
general partnership is unlimited.  All partners are 
personally responsible for the liabilities of the 
partnership. The name of at least one of the partners must be 
included in the title of the General Partnership. 
 
- Limited Partnership:  This includes two different types of 
partners:  general and limited. A limited partnership must 
have at least one general partner who is personally 
responsible for the liabilities of the company. There is also 
at least one limited partner whose liability is limited to 
the amount of the capital. 
 
- Local Companies (Limited Liability Company (LLC) and Public 
Liability):  Most investors prefer to use LLCs for the 
purposes of conducting commercial affairs. The procedures 
that have to be followed to register this form of company are 
as follows: 
 
¶1. Obtain temporary copy of certificate of registration from 
the Ministry. 
¶2. Deposit initial capital, which is 25 percent of the 
capital plus official bank fees (1/1000 of stated capital). 
¶3. Obtain signature of the required documents by a local 
lawyer. 
¶4. Register with the commercial Registry. 
¶5. Pay registration fee. 
¶6. Register for income and VAT. 
¶7. Register with Chamber of Commerce. 
¶8. Obtain business license from the Municipality. 
¶9. Obtain and legalize special company books. 
 
Certain investment categories require the Council of 
Ministers' pre-approval.  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 the approval of the Council 
of Ministers. 
 
A.2 CONVERSION AND TRANSFER POLICIES 
 
The 1998 Investment Law guarantees investors the free 
transfer of all financial resources out of the Palestinian 
Territories, including capital, profits, dividends, wages, 
 
salaries, and interest and principal payments on debts.  No 
Palestinian currency exists, but the New Israeli Shekel (NIS) 
is the accepted currency, and U.S. dollars and Jordanian 
dinars (JD) are widely used in business transactions.  There 
are no other PA restrictions governing foreign currency 
accounts and currency transfer policies. 
 
A.3  EXPROPRIATION AND COMPENSATION 
 
The 1998 Investment Law prohibits expropriation and 
nationalization of approved foreign investments, except in 
exceptional cases for a public purpose with due process of 
law, which shall be in return for fair compensation based on 
market prices and for losses suffered because of such 
expropriation.  The PA must secure a court decision before 
proceeding with expropriation. 
 
PA sources and independent lawyers say that any Palestinian 
citizen can file a petition or a lawsuit against the PA. 
There are on-going court cases involving illegal confiscation 
of property by senior PA officials; however, there has been 
no ruling on many of these cases.  A general lack of 
confidence in the judicial system has prompted citizens to 
look for alternative means of arbitration to resolve such 
disputes, though this situation is slowly improving. 
 
A.4  DISPUTE SETTLEMENT 
 
The 1998 Investment Law provides for dispute resolution 
between the investor and official agencies by binding 
independent arbitration or in Palestinian courts.  It has 
been reported that some contracts contain clauses referring 
dispute resolutions to the London Court of Arbitration. 
 
The PA is not a member of the Convention on the Settlement of 
Investment Disputes between States and Nationals of Other 
States (ICSID Convention). 
 
Commercial disputes are resolved by way of conciliation, 
mediation, or arbitration. Arbitration in the Palestinian 
Territories is governed by Law No. (3) of 2000. 
International arbitration is permitted.  The law sets out the 
basis for court recognition and enforcement of awards.  As a 
general rule, every dispute may be referred to arbitration by 
the agreement of the parties, unless prohibited by the 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 arbitrators shall choose a casting arbitrator 
unless the parties agree to proceed otherwise. 
 
Judgments made in other countries that need to be enforced in 
the West Bank/Gaza are honored, according to the prevailing 
law in the West Bank, mainly Jordanian Law No 8 of 1952.  The 
law covers many issues in relation to the enforcement of 
foreign judgments. 
 
A.5  PERFORMANCE REQUIREMENTS AND INCENTIVES 
 
The 1998 Investment Law provides a number of incentives, 
including exemptions from value added and income taxes, for 
certain categories of PA-approved domestic and foreign 
investment.  An amendment currently awaiting the PA 
President's signature would extend these incentives to new 
development on existing projects and, in an effort to attract 
business in the information and communication technology 
sector, all companies that employ at least five college 
graduates.  To benefit from these incentives, investors must 
apply to the Palestinian Investment Promotion Agency (PIPA), 
a department of the PA Ministry of National Economy, and 
present it with a completed investment application and 
feasibility study.  PIPA is composed of both public and 
private sector members.  As of January 2010, PIPA has 
announced efforts to increase incentives to foreign 
investors, though the details and timing of implementation 
were not known at the time of writing. 
 
The PA income tax law is intended to incorporate both West 
Bank and Gaza.  The corporate tax rate is 15 percent. 
Personal income tax is specified according to the following 
 
(though additional factors such as dependents and exemptions 
affect the base rate): 
 
- 5 percent for income up to NIS 10,000; 
- 10 percent for income between NIS 10,001 - 25,000; and 
- 15 percent for all incomes above NIS 25,001. 
 
Custom duties - The Palestinian Territories are in the same 
customs envelope as Israel, so all customs and tariffs are in 
line with Israeli rates: 
Base:  On the value of imports. 
Rates:  From zero to 340 percent for food, animal and 
agriculture products; and zero to 22 percent for all other 
products. 
 
Purchase tax: 
Base:  Value of imports plus customs fees. 
Rates:  five to 200 percent. 
 
Value added tax: 
Base:  all imported goods. 
Rates:  16 percent. 
 
A 20 percent tax is withheld at source from dividends 
distributed in the West Bank/Gaza to shareholders of a 
foreign company.  There are no taxes due on dividends 
distributed to shareholders of Palestinian companies 
regardless of where they live or their nationality, and 
regardless of whether they are an individual or a company. 
An automatic deduction at the source of 25 percent is 
withheld from companies, unless they obtain a "Deduction at 
the Source Certificate," which grants a reduced rate that 
ranges between zero and five percent.  Applications for these 
certificates are available from PA district tax offices. 
 
Article 22 of the PA investment law provides that fixed 
assets are given the following exemptions: 
 
a. The project's fixed assets shall be exempted from customs 
duties and taxes provided that they are brought in within a 
period specified by the Authority's decision approving the 
lists of fixed assets of the project. 
 
b. The spare parts imported for the project shall be exempted 
from customs duties and taxes, provided that the value of 
such spare parts does not exceed 15 percent of the value of 
the fixed assets and that they are brought in or used in the 
project within a period specified by the Authority. 
 
Article 23 of the law provides that the projects approved by 
the PA and which have obtained the licenses required under 
the law shall be granted the incentives mentioned in this law 
in the following manner: 
 
a. Any investment with a value ranging from USD 100,000 to 
USD one million shall be granted an exemption from income tax 
for a period of five years beginning from the date of 
commencement of production or commencement of activity and 
shall be subject to income tax on the net profit at a nominal 
rate of 10 percent for an additional period of eight years. 
 
b. Any investment with a value from USD one million to USD 
five million shall be granted an exemption from income tax 
for a period of five years beginning from the date of 
commencement of production or activity and shall be subject 
to income tax on the net profit at a nominal rate of 10 
percent for an additional period of 12 years.  Any investment 
with value of USD five million and above shall be granted an 
exemption from income tax for a period of five years 
beginning from the date of commencement of production or 
activity and shall be subject to income tax on the net profit 
at a nominal rate of 10 percent for an additional period of 
16 years. 
 
Article 24 of the Law provides that the Palestinian Council 
of Ministers may extend the exemption periods up to five 
years, depending on the nature and location of the 
enterprise.  The exemption period may be extended an 
additional two years if the local input in equipment, 
machines, and fixtures exceeds 60%. 
 
While the PA does not require foreign nationals working in 
 
the West Bank to seek work permits, the GOI does require 
foreigners to obtain Israeli visas.  According to the GOI, 
foreign nationals should either apply to Israeli Embassies in 
their country of origin, or through the Israeli Coordinator 
of Government Affairs in the Territories (COGAT) after their 
arrival in the West Bank.  Recently, there have been cases of 
foreign nationals working in the West Bank who have been 
prohibited from traveling to Israel and Jerusalem from the 
West Bank because of their ties to the Palestinian 
Territories. 
 
A.6  RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT 
 
Jordanian law in the West Bank, as amended by PA regulations, 
guarantees the right to private ownership.  Similarly, the 
right to private ownership in Gaza is guaranteed by British 
Mandate law, as amended by regulations issued by the PA. 
Foreigners must obtain permission from the PA before 
purchasing property in areas under PA civil authority and 
from the appropriate Israeli authorities before purchasing 
property in West Bank areas under Israeli control ("Area C"). 
 PIPA outlines the following concerning foreign ownership of 
property: 
 
The Acquisition Law in the West Bank, which regulates foreign 
acquisition and the rental or lease of immovable properties, 
classifies foreigners into three categories: 
 
-- 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 nationality passports have 
the right to own certain property that suffices for their 
living and business needs only. 
 
-- Other foreigners must receive permission from the PA 
Cabinet to own buildings or purchase land. 
 
It is critical that potential purchasers of land or buildings 
perform a title search to be assured that no outstanding 
violations or unpaid penalties exist on the property.  Under 
current law, violations and penalties are transferred to the 
new owner. 
 
Accurate title search 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. 
 
A.7  PROTECTION OF PROPERTY RIGHTS 
 
The West Bank and Gaza do not have a modern intellectual 
property rights (IPR) regime in place.  The PA was indirectly 
committed to the GATT-TRIPS agreement when it signed the 
Interim Agreement on West Bank/Gaza according to Annex III 
(Protocol Concerning Civil Affairs), Appendix 1, Article 23. 
All IPR legislation originates from British Mandate Law 
regardless of the change in control over the years.  Pre-1967 
era Jordanian laws concerning trademarks, patents, and 
designs are applicable in the West Bank.  In Gaza, the 
Palestinian Trademark and Patent Laws of 1938, adopted during 
the British Mandate, are applicable.  Registration under the 
two laws is very similar, and, despite different authorizing 
legislation, there are few substantive differences between 
IPR laws in the West Bank and Gaza Strip.  According to PA 
contacts, the PA is working on a modern law that will 
encompass intellectual property rights, including copyright, 
patents and designs, trademarks, and merchandise branding. 
 
Currently, intellectual property is governed by the Civil 
Claims Law of 1933 in Gaza, and the Commercial Law No. 19 of 
1953 and the Patent Law No. 22 of 1953 in the West Bank. 
 
Trademarks are governed by Law No 33 of 1952 in the West Bank 
and Trademark Law No. 35 of 1938 in Gaza.  The period of 
initial protection of trademarks is seven years, and 
 
trademarks may be renewed for successive periods of time. 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.  A foreign company is entitled to have a 
patent or design registered by giving power of attorney in 
this regard to a patent agent or to a lawyer, with the 
requisite documents.  In order 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. 
 
Copyright in the Palestinian Territories is governed by the 
Copyrights 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 wQh infringements, compulsory licenses, 
and many other procedural issues as well. 
 
The law prescribes imprisonment for a maximum period of one 
year or a fine not exceeding 100 Jordanian dinars for 
infringement of a registered mark.  A foreign company is 
entitled to register its trademark in the Palestinian 
Territories by giving power of attorney in this regard either 
to a trademark agent or to a lawyer.  Trademarks can be 
registered unless they fall within the recognized 
prohibition, such as being similar to or identical to an 
already registered trademark, are likely to lead to deception 
of the public, or are contrary to public morality. 
 
Patent protection is provided for a period of 16 years from 
the date of filing the patent application.  Furthermore, both 
systems require licensing of anything already patented if the 
reasonable requirements have not been met.  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 WB/G 
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. 
There is minimal enforcement of IPR laws for music and movies 
in the West Bank/Gaza, while the PA has enforced some of 
these laws to protect the Palestinian pharmaceutical industry. 
 
The PA is keen to obtain membership in the different 
organizations and agreements concerned with intellectual 
property such as the World Trade Organization (WTO) and the 
World Intellectual Property Organization, where it has held 
observer status since 2005.  It should be noted that trade 
names are registered in the Palestinian Territories 
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. 
 
A.8  TRANSPARENCY OF THE REGULATORY SYSTEM 
 
The PA has worked to erect a sound legislative framework for 
business and other economic activity in the areas under its 
jurisdiction since its creation in 1994; however, 
implementation and monitoring of implementation needs to be 
strengthened, according to many observers.  The PA Ministry 
of National Economy, with the assistance of international 
donors, is in the process of drafting a number of proposed 
laws related to business and commercial regulation, 
including regulation of competition, bankruptcy, trademark 
and copyright, and amendments to the investment law.   The 
Ministry of National Economy regularly holds stakeholder 
meetings for draft commercial legislation to gather input 
from the private sector and published drafts of the proposed 
law.  It is worth noting, however, that the continued 
inability of the Palestinian Legislative Council (PLC) to 
meet its quorum means that each law must be adopted as a 
presidential decree, which often delays reform efforts.  The 
laws and amendments will need to be approved by the PLC, 
should it reconvene in the future. 
 
There is a regulatory body that governs the insurance sector, 
and the PA, with donor assistance, has made progress on 
setting up an independent telecom regulator. 
 
A.9  EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENT 
 
Major progress was achieved in 2004 with the passage by the 
PLC of the Capital Markets Authority Law, the Securities 
Commission Law, and the establishment of the Capital Market 
Authority, the regulator of the stock exchange and insurance 
industries. 
 
Twenty banks operate in the Palestinian Territories, several 
of which are foreign banks, mostly Jordanian; the top three 
banks have assets of more than USD4 billion combined.  No 
Palestinian currency exists, and, as a result, the PA places 
no restrictions on foreign currency accounts.  The 
Palestinian Monetary Authority (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 more than USD7 
billion in assets at the end of 2008 and credit exposure of 
only USD1.7 billion.  Palestinian banks have remained stable 
despite the global economic crisis, but have suffered from 
deteriorated relations with Israeli correspondents since the 
Hamas takeover in Gaza in 2007, at which time Israeli banks 
cut ties with Gaza branches and have gradually restricted 
cash services provided to West Bank branches.  More recently, 
Israeli restrictions on the movement of cash between West 
Bank and Gaza branches of Palestinian banks have caused 
intermittent liquidity crises in Gaza for all major 
currencies - U.S. dollars, Jordanian dinars and Israeli 
shekels. 
 
Credit is limited by concerns over uncertain political and 
economic conditions and limited availability of real estate 
collateral due to non-registration of most West Bank land. 
The PMA has taken steps to improve the sector's loan to 
deposit ratio in 2009 from 28% to 38% by encouraging banks to 
participate in loan guarantee programs sponsored by the 
United States and international financial institutions, 
supporting a national strategy on microfinance, and putting 
in restrictions on foreign placements.  The Ministry of 
National Economy has drafted legislation that would allow the 
use of moveable assets, such as equipment, as collateral for 
loans. 
 
In early 1997, the Palestinian Securities Exchange (PSE) 
started operations on a limited scale in the West Bank city 
of Nablus.  Thirty-nine shareholding companies have been 
approved for listing, spanning a wide range of sectors, 
including banking, services, and insurance, and more are 
expected to be listed soon as the Securities Law and the 
Capital Markets Authority strengthen the legal framework of 
the PSE.  There are currently an estimated 40 Palestinian 
companies eligible to be listed on the Exchange with a market 
capitalization of over USD one billion. 
 
A.10  COMPETITION FROM STATE-OWNED ENTERPRISES 
 
Although there are no state owned enterprises, some contacts 
have noted that the Palestine Investment Fund (PIF), an 
investment fund that essentially acts as a sovereign wealth 
fund, enjoys a competitive advantage in some sectors, 
including housing and telecom, due to its close ties with the 
PA. 
 
A.11  CORPORATE SOCIAL RESPONSIBILITY (CSR) 
 
There is a growing awareness of corporate social 
responsibility among both producers and consumers in the 
Palestinian Territories.  While CSR is not mandated by law or 
regulation, some of the largest corporations have set up or 
funded foundations to promote educational opportunities, 
economic and social development, and protect the environment. 
 Several local companies have recently qualified for fair 
trade certifications, which entail community involvement and 
economic sustainability initiatives. 
 
A.12 POLITICAL VIOLENCE 
 
In June 2007, Hamas violently seized control of Gaza, 
effectively removing the PA from government facilities. 
Since that time, crossings between Israel and Gaza have been 
closed by Israel, with only limited humanitarian shipments 
and certain commercial shipments allowed to enter Gaza.  The 
economic situation and investment outlook in Gaza further 
 
deteriorated following Israeli combat operations there during 
December 2008 and January 2009 ("Operation Cast Lead"). 
Even before the substantial physical damage sustained by the 
private sector during the military operation, the World Bank 
estimated as many as 90% of private sector businesses had 
closed.  Exports from Gaza are now almost entirely restricted 
and economic activity in Gaza has fallen precipitously. 
While some limited reconstruction materials have been allowed 
into Gaza to assist with rebuilding infrastructure, the 
private sector has increasingly turned to the illicit tunnel 
economy to procure commercial goods and reconstruction 
materials. 
 
The State Department, at the time of this writing, has in 
place a travel warning that urges American citizens to avoid 
all travel in the Gaza Strip and to exercise caution when 
traveling in the West Bank. 
 
A.13  CORRUPTION 
 
Corruption is criminalized under the Anti-Graft Law (AGL) of 
2005, and the State Audit and Administrative Control Law and 
Civil Service Law both aim to prevent favoritism, conflict of 
interest, or exploitation of position for personal gain.  The 
Attorney General's office is tasked with following up on the 
issue of corruption and corrupt officials.  However, the PLC, 
which is the body responsible for oversight of the PA's 
executive branch, has not met since mid-2007.  This lack of 
oversight and accountability of the executive branch has 
raised transparency concerns.  Palestinian civil society and 
media are active advocates of anti-corruption measures, and 
there are also international and Palestinian non-governmental 
organizations that work to raise public awareness and promote 
anti-corruption initiatives.  The most active of these is as 
the AMAN Coalition for Integrity and Accountability, the 
Palestinian chapter of Transparency International. 
 
The U.S. Consulate General in Jerusalem has received reports 
of potential foreign and domestic investors being asked to 
provide inducement fees or to include well-connected persons 
in their business arrangements to help secure a contract. 
There are no reliable means of determining where or to what 
extent this kind of activity occurs. 
 
A.14  BILATERAL INVESTMENT AGREEMENTS 
 
The PLO, on behalf of the PA, has signed international trade 
agreements, which refer implicitly or explicitly to WTO 
rules.  These include: 
 
1)  Paris Protocol Agreement with Israel (1994) - free trade 
in products between Israel and Palestinian markets 
2)  Technical and Economic Cooperation Accord with Egypt 
(1994) 
3)  Trade Agreement between the PA and Jordan (1995) 
3)  Duty Free Arrangements with the United States (1996) 
4)  The EuroMed Interim Association Agreement on Trade and 
Co-operation (1997) 
5)  Interim Agreement between European Free Trade Area (EFTA) 
states and the PLO (1997) 
6)  Joint Canadian-Palestinian Framework for Economic 
Cooperation and Trade (1999) 
7)  Agreement on Commercial Cooperation with Russia - extends 
MFN status 
8)  Greater Arab Free Trade Area, to which PA is a party 
(2001) 
9)  Free Trade Agreement with Turkey (2004) 
10)  Unilateral acts by other Arab trade partners extending 
preferential treatment to trade with Palestine 
 
Since 1996, duty-free treatment has been available to all 
goods exported from the West Bank/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 duty-free benefits accorded under the FTA 
exceed those benefits which would be provided under the 
Generalized System of Preferences (GSP). 
 
A.15  OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS 
 
OPIC provides a variety of services to qualified U.S. 
investors in emerging economies and developing nations. 
 
During the early stages of investment planning, U.S. 
investors may contact OPIC for insurance against political 
violence, inconvertibility of currency, and expropriation in 
the form of an insurance registration letter.  OPIC insurance 
is not available after the investment has been irrevocably 
committed.  OPIC has initiated a number of programs in the 
West Bank and Gaza to support private sector development, 
including a loan guarantee facility. 
 
The World Bank, via a USD 20 million fund administered by its 
Multilateral Investment Guarantee Agency (MIGA), provides 
guarantees in the form of insurance against political risk 
for private investments in the West Bank and Gaza.  Under the 
terms of the Fund, investors who are nationals of or 
companies incorporated in a MIGA member country, or who are 
Palestinian residents of the West Bank or Gaza, are eligible 
to obtain guarantees for up to 15 years.  The Fund currently 
has the capacity to issue guarantees for up to USD five 
million per project. 
 
A.16  LABOR 
 
With its growing youth population, the Palestinian 
Territories have an abundant labor supply with a high level 
of education and skills.  Despite the political obstacles 
caused by Israeli permit restrictions, the separation 
barrier, closures, and the difficulty of moving within and 
between the West Bank/Gaza and Israel, the labor market has 
been successful in creating more employment locally.  The 
dependency ratio remains high, with each worker supporting 
5.6 people in 2008 (compared to 4.8 in the third quarter of 
2000).  As the GOI has restricted the number of labor permits 
available to Palestinians, border areas such as Jenin, 
Tulkarem, and Qalqilya have seen their unemployment rates 
increase substantially above the West Bank average. 
 
PCBS reported in December 2009 the following unemployment 
levels: 
West Bank - 25.8 percent 
Gaza Strip - 42.3 percent 
 
As of December 2009, PCBS reported that 25 percent of jobs in 
the West Bank/Gaza were in the public sector (16.3 percent in 
the West Bank and 48.4 percent in Gaza Strip.)  The results 
showed that the highest percentage of unemployment was 
concentrated among youth aged 15-29 years. 
 
The working age population (over the age of 15) reached 
2,298,700 (56 percent of the Palestinian population) in 
December 2009, according to PCBS. 
 
Labor force distribution (percentage) by sector is as follows: 
(Source: PCBS labor report in December 2009) 
 
West Bank 
12.8 percent - Agriculture, Forestry, Fishing, Hunting 
13.6 percent - Mining, Quarrying, Manufacturing 
10 percent - Construction 
21.4 percent - Commerce, Hotels, Restaurants 
6.1 percent - Transportation, Storage, Communication 
36.1 percent - Services and other 
 
Gaza 
4.9 percent - Agriculture, Forestry, Fishing, Hunting 
6.0 percent - Mining, Quarrying, Manufacturing 
0.9 percent - Construction 
18.6 percent - Commerce, Hotels, Restaurants 
6.4 percent - Transportation, Storage, Communication 
63.2 percent - Services and other 
 
A.17  FOREIGN TRADE ZONES/FREE PORTS 
 
There are no foreign trade zones or free ports in West Bank 
or Gaza. 
 
A.18  FOREIGN DIRECT INVESTMENT (FDI) STATISTICS 
 
The PA has not yet compiled a complete listing of foreign 
direct investments, but PCBS statistics indicate that 2008 
FDI amounted to USD 59.8 million, up from USD 38 million in 
¶2006.  Limited foreign investment flows began in 1994-95, 
with the majority of funds coming from Palestinian investors. 
 
 The largest foreign company in the West Bank/Gaza is the 
Palestine Development and Investment Company (PADICO), which 
has invested over USD 500 million in the economy.  Key PADICO 
investors include Diaspora Palestinians from Jordan, Great 
Britain, and the Gulf.  PADICO has made significant 
investments in telecommunications, housing, and the 
establishment of the Palestinian Securities Exchange. 
Another large foreign investment group active in West Bank 
with authorized capital of over USD 100 million is the Arab 
Palestinian Investment Company (APIC), which is headquartered 
in Ramallah.  Other significant potential foreign investments 
include Qatari mobile operator QTel's projected USD 600 
million investment in Wataniya Mobile over a 10-year period, 
and Qatari Diar's projected USD 500 million investment in 
Rawabi, a mixed use/affordable housing real estate 
development. 
 
RUBINSTEIN