The ChamberPost

Back From Bethlehem: "The Bethlehem Declaration"

by Daeman Harris

(Editor’s Note: Previous posts in the series are available here.)

The final day of the conference consisted of two morning panels, it was a Friday and they wanted to ensure that the attendees would have time to make it to Friday prayers.  The first was an early morning panel on investment in East Jerusalem and then the conference concluded with a final session whose participants included France's Foreign Minister, several of the Bethlehem-based conference organizers and the Prime Minister.

The French Minister scored a number of points with audience as he stressed the importance of creating a "Palestinian state" and in scolding the Israeli government for creating obstacles to access and mobility of the Palestinian business community such as closing the East Jerusalem Chamber of Commerce; to be fair, the Israelis did grant approximately 500 visas to allow foreigners to attend the conference.  Politics aside, the Minister's attendance seemed to underscore the commitments made at the Paris Donor Conference last December and at the very least was calculated to keep the momentum of those talks moving forward.

Prime Minster Al Fayyad closed by reading aloud a statement entitled "The Bethlehem Declaration".  The declaration focused on the importance of the Palestinian government to continue to create laws and legislation that would encourage investors from abroad and enable Palestinian entrepreneurs.  It also addressed the tactical issues the Palestinian authorities need to deal with in order achieve these goals.  In addition there was complaint of Israeli impediments to the flow of goods and services to the territories.

Back From Bethlehem: Optimism and Sober Analysis

by Daeman Harris

(Editor’s Note: Previous posts in the series are available here.)

Despite the rough start to the opening session, Adris and I made our way through the checkpoints leading to Bethlehem on Thursday morning.  What was clear from the opening panel that day, which was moderated quite fluidly by Prime Minister Blair, was that there would be no "sugar coating" of the obstacles facing investors in the Palestinian economy. 

The most interesting presentation of the morning, in my opinion, was that of Sir Ronald Cohen, a leading global figure in venture capital, and British political insider.  Cohen described the Palestinian economy as a "spring" that had been recoiled over the years, but, was poised to expand.  The Harvard Business School alum went on to note that the economy had lost 40% of its GDP over the course of the last several decades.  But Cohen, quite convincingly, explained the value proposition for investors.  In particular, he cited tourism and finance as extremely accessible spaces for outside investors in the Palestinian economy.  I learned later in a session on Palestine's finance sector that only 1 of the 21 banks operating in Palestine is considered to be a "foreign bank". The presenter contended that capital investments in Palestine will contribute to a GDP increase of 1.5% per annum over the next 5 years. Cohen, who is also known for his philanthropy, concluded that the Palestinian economy is a place for "doing good as well as doing well."

A number of speakers shared the stage with Cohen and Blair including the Managing Director of the World Bank, Juan-Jose Daboub.  Daboub, whose grandparents were actually born in Bethlehem but migrated to El Salvador, cited some impressive figures about the ability to conduct business in Palestine.  For example, the World Bank ranks the Palestinian tax regime as the 22nd best in the world.  Additionally, the bank ranks the territory's legal framework for doing business 33rd in the world.  Daboub encouraged continued reforms in Palestine and suggested that potential investors should move quickly to "get in on the ground floor".

The morning's panel went on with an interesting mix of optimism tempered by sober analysis.  We learned about a $7 billion dollar commitment in aid from donor nations that would supplement, and possibly inspire, anticipated private sector investment over the next three years - the $7 billion was committed at the Paris Donors Conference last year.  Walter Isaacson of the Aspen Institute announced the planned establishment of call centers in Palestine that will service both English and Arabic speaking consumers.

But, there was something that didn't quite fit for me. For all of the talk about Palestine's economy no one had yet discussed the 800 pound gorilla in the room: the politics of Palestine and its challenge to attracting foreign investors.

Back From Bethlehem: A Rough Beginning

by Daeman Harris

(Editor’s Note: Previous posts in the series are available here.)

The conference was held under the auspices of Palestine's Prime Minister, Salam Fayyad, and was sponsored by a host of international development agencies, to include USAID, and a number of private firms, to include Intel and Cisco. Things got off to a rocky start.

The opening ceremony had 800 seats for its reported 1500 attendees and it took about 30 minutes to establish an overflow room and convince those standing to relocate to the alternate venue (I, unfortunately, had to forfeit my seat to make room for the entry of the official delegation). 

Having left the main hall I proceeded to the alternate viewing room to watch the opening session via closed-circuit TV.  But, I quickly came to the realization that the overflow room, had itself, overflowed.  A bit frustrated, I was finally able to settle down in a seat and peruse the conference agenda and listen in to the President of Palestine, Mahmoud Abbas, provide opening remarks.  To my chagrin, I discovered the plenary session I was attending had no less than 16 speakers which included the U.S. Deputy Secretary of Treasury, Robert Kimmitt, and former UK Prime Minster Tony Blair.  Incredulously, the agenda purported that all 16 speakers would finish within the span of two hours.  Given the fact that we were already 30 minutes behind schedule and my deep skepticism that 16 current and former government officials had the oratory discipline to meet the ambitious time table, my hopes for taking any substance away from the opening session waned.

In all honesty, I was no match for the crowd, the jetlag, the poorly planned logistics and the heat that accompanies springtime, with no A/C, in Palestine.  Frustrated, I listened to several of the opening speeches and then decided to make my way back to the hotel in Jerusalem where I was staying.  Bethlehem's hotels were fully booked for the conference, in other words, there weren’t any rooms in the inn.

Although I was uncertain of what the rest of the forum had in store, I was comforted by the thought that, despite some of the logistical and technical hiccups (English translation was interrupted after the third speaker), the audience took the distractions in stride and the overall mood of the opening session was quite optimistic.

I relay my first impressions not to denigrate the conference's organizers.  In fact, I later learned that the conference was put together over the course of three months.  Given that knowledge, and having organized a number of conferences myself, I instantly forgave the organizers and indeed admired their work under the time constraints.  Rather, I mention the challenges posed to the conference on the opening afternoon because, in retrospect, they are somewhat of a metaphor for the potential investment opportunities facing investors in Palestine:  Investment in the territories is likely to be a somewhat frustrating environment for investors seeking to close deals quickly and uneventfully. Things don't always run on time or proceed as planned and one must be able to adapt to a changing environment with flexibility if returns are to be achieved.

However, the Palestinian government and private sector are resilient and appear to be committed to moving forward on a focused investment agenda. In addition, the economy and government have some heavy hitters as supporters.  Serious people are taking the Palestinian economy seriously and there is money to be made in that fact alone.

Back From Bethlehem: A Little History

by Daeman Harris

(Editor’s Note: The previous post is available here.)

To some, the Palestinian territories might seem like an odd place to spend 72 hours discussing commercial and real estate law, capital markets, deregulation, and private equity. However, that was exactly what I what I was there to do. In some sense, my attendance at the conference was an extension of a trip I took with the Chamber's President and CEO, Tom Donohue, last January when we visited both Tel Aviv and Jerusalem. On that trip we had the chance to briefly interact with a number of Palestinian businessmen and women.  During our visit Tom and I had dinner with a Palestinian business group seeking to become the Palestinian American Chamber of Commerce. The group was adamant about creating more opportunities for U.S. firms in Palestine. So in March, when General (RET) James Jones, President of Chamber's Institute For Energy in the 21st Century, suggested that I attend a conference in Palestine it struck me as a good follow on action from my trip with Tom.

Initially, I did have some skepticism about attending the conference and the value it would provide to the Chamber's member-companies. So, I asked my team to help prepare me for the trip with a background on the investment climate in Palestine. What I found were some interesting facts and figures.  For instance, did you know that Palestine has a Sovereign Wealth Fund? Yes, that is correct, a Sovereign Wealth Fund.  Now, it's obviously not the mega-funds we are used to envisioning such as those in Abu Dhabi or Doha (The Financial Times estimates the fund's assets total about $850 million which is paltry compared to the commodity-driven funds in the Gulf), but, it is a dedicated investment vehicle with about 75% of its money invested abroad.

I also learn that Palestine has a securities exchange.  And not just any exchange.  The Al Quds Exchange (the Arabic word for Jerusalem), based in the West Bank city of Nablus, is the best performing exchange in the Arab world so far this year. As of the date of writing, the exchange, comprised of over 30 companies, has risen 40% this year. That is better than the exchange in Dubai. But, despite the impressive returns so far this year, the exchange has had a volatile existence since it inception in the mid-1990's and its inconsistent performance surely leaves doubts in many investors' minds.

Armed with just enough information to get me into trouble I had increasingly become intrigued in the prospects for investment opportunities in Palestine and was anxious to see who would be attending the conference. To my great surprise the conference enjoyed the attendance of what one conference organizer estimated to be over a thousand people. The participants presented a collection of Japanese investors, Swedish development officials, Israeli businesswomen, a former UK Prime Minister, the current French Minister of Foreign Affairs, Palestinian poultry producers, and a myriad of government officials and private sector investors from abroad. As investment forums go, this is about as eclectic as it gets. My interest was definitely piqued.

Back From Bethlehem: For Three Days The Palestinian National Authority Meant Business

by Daeman Harris

I have just returned from Bethlehem where I participated in what is being described as the first ever Palestinian Investment Conference. 

It was interesting, driving along the borders that divide Israel from the Palestinian West Bank; one gets the sense of how, at times, territorial demarcations can seem so arbitrary. The religious and ethnic demographics hardly seemed to change as I presented my passport to a twenty-something Israeli guard at a checkpoint and proceeded towards Bethlehem. But, demographics aside, I had left Israel and entered the West Bank of Palestine which is controlled by the Palestinian National Authority.

My driver, Adris, explained that the checkpoints leading in and out of the West Bank and their sporadic closures, present a significant obstacle to the free flow of goods and services and to the entrepreneurial aspirations of both the Palestinians and their potential Israeli counterparts. This is a theme I heard repeatedly through my trip.

Adris, a Palestinian who lives in Jerusalem with his family, says that he would like to start up a tourism business where he could shuffle wide-eyed tourists back and forth from the historical religious sites which pepper the landscape. But, he is dissuaded from establishing a company because the ability to enter and exit the West Bank can change daily based on security conditions. This inconsistency does not bode well for his business model. Quite inversely, as we passed mosques and churches, the structures seem indifferent to the concept of borders or the ostensible security they provide - residing impeccably on both sides of the Israeli and Palestinian checkpoints.

Over the course of several days I discussed entrepreneurial ambitions and a number of other issues with my well-read driver (he is a Barack Obama fan; believes that most of the problems in the Middle East start with the inability to resolve the Israeli/Palestinian Peace Process; and has serious concerns over the current dollar valuation). I also had a number of very interesting encounters and discussions with others about Palestine, Israel, and the investment opportunities in the West Bank and Gaza strip.  More on those to come.