Tech sector can be a catalyst for growth in the Palestinian economy – OQR speech/Non-UN document

ICT as a catalyst for growth

Sunday, Mar 02, 2014 in Office of the Quartet Representative 

Mr. Singleton outlined the Initiative for the Palestinian Economy, in particular the strategy for developing the ICT sector and its potential as a catalyst for growth in the Palestinian economy.

Full text of speech:

Deputy Prime Minister, Minister, distinguished guests, ladies and gentlemen. Thank you for inviting me to attend this year’s Technology Conference. It is a great honour and privilege to be given the opportunity to address such a distinguished audience. On behalf of Mr. Tony Blair, the Quartet Representative, allow me to say a few words about the Initiative for the Palestinian Economy, with a focus on the ICT sector.

First, by way of introduction, I should say a few words about the work of the Quartet Representative Tony Blair and his office in Jerusalem, the OQR.

You will all recall that the Quartet was established in 2002, to harness international efforts in support of the Middle East Peace Process. In June 2007, former Prime Minister Tony Blair was appointed Quartet Representative, with a mandate to:

§ Develop plans to promote Palestinian economic development, including private sector partnerships;

§ Mobilise international assistance; and

§ Help identify and secure the international support required for addressing the institutional governance needs of the Palestinian State.

§ The work is implemented by the Office of the Quartet Representative in Jerusalem, consisting of a team of experts, working directly with the Palestinian Government, the Government of Israel, international organisations, donors, NGOs and the private sector.

I mentioned the importance of promoting Palestinian economic development. For the peace process to succeed, it is extremely important – especially now. We are all well aware of the state of the economy. In its September 2013 AHLC report, the IMF concluded that “the situation is not sustainable and implies risks to both macro-economic and social stability.”

We are also well aware of the causes and constraints. The World Bank’s most recent AHLC report is very clear, stating that “the most significant impediment to economic viability in the Palestinian Territories is the multi-layered system of restrictions imposed by the Government of Israel. Restrictions on access and movement constrain investment, raise costs for doing business, and hinder economic cohesion. Despite some relaxation of certain measures, stronger measures are required, coupled with enhanced domestic reforms.”

This brings me to the peace process and the Initiative for the Palestinian Economy. From the moment he became Quartet Representative, Tony Blair consistently argued the case for greater synergy between the political and economic tracks. Just as the economics cannot take precedence over the politics, so a successful political negotiation has to be supported and boosted by economic growth and development. In other words: there can be no such thing as “economic peace”; but economic development can support peace-building.

This represents one of the key lessons of the past two decades: instead of viewing Palestinian economic development as a bargaining chip, for which political concessions should be paid, the challenge today is to transform the Palestinian economy in a way that supports the political track.

And so, with the aim to resume direct negotiations, came the need for an Economic Initiative – but a different one this time. Last April, Secretary of State John Kerry and Tony Blair agreed that the OQR would develop a bold and ambitious medium-term Initiative for the Palestinian Economy that was unprecedented in terms of its depth, scope, ambition and emphasis on the private sector.

The investment plan was drawn up in consultation with Palestinians and Israelis, the international investment community and international donors. Consultations with the Government of Israel and the Palestinian Government are on-going and constructive.

The Economic Initiative looks to replace incremental change with transformative change. We have analysed eight sectors of the Palestinian economy and prepared detailed plans for implementation of such change. The eight key sectors include construction, building materials, agriculture, tourism, telecommunications and IT, power, water, and light manufacturing.

The economic initiative will rely on private Palestinian businesses, large and small, as well as multi-national companies. Government and other international financing organisations will be called upon to help with investment through facilities such as guarantees and insurance, but the emphasis will be on private business arrangements that can succeed and endure in the marketplace.

This is the first time that such a fresh, comprehensive, innovative and broad approach has been taken: fresh in its reliance on the private sector rather than just public support; comprehensive in its involvement of nations and agencies from around the world; and broad in the support it can garner from both the Palestinian and Israeli sides.

Of course a benign political environment is pre-conditional to the success of the Initiative. Some measures can take effect quickly. Others will take time. Implementing the economic initiative will require real commitment from both the Palestinian Authority and the Government of Israel. Its success inevitably relies on implementing a comprehensive set of immediate and medium-term Israeli easing measures, as well as a combination of boosted capacity within the Palestinian Authority and large new financing flows into the Palestinian economy.

Many of these enablers are on their own significant and meaningful. Combined and sequenced, implementation of the full set of enablers is transformative. To this end, we are engaged in intensive talks with all sides, and both the Palestinian and Israeli governments have indicated their broad support for the plan.

We are engaging the donors too. We want to use donor assistance to leverage greater private sector investment in key Palestinian economic sectors, as well as to continue funding critical Palestinian infrastructure in the water and energy sectors. This donor assistance could come in different forms including grant financing, concessional loans, political risk insurance and bank guarantees.

But the bulk of investments should and will be Palestinian, especially as we know that the Palestinian banking sector is very well capitalized and has a relatively low loan-to-deposits ratio. That is why we reached out to the Palestinian banks in December last year.

The plan is ambitious and far-reaching. And also requires Israel to play an active role. That is why we are engaging in in-depth discussions too with the Government of Israel – at all levels, from the PM onwards – on the next steps (or enablers) necessary for the implementation of the IPE. Some of these measures are already in place; others will follow.

To facilitate the IPE’s implementation, the Government of Israel established a working group with comprised of all relevant ministries dedicated to implementation. We meet regularly to discuss detailed progress on a number of important IPE projects which,  if facilitated and implemented in 2014, will show the positive direction which the IPE has set out.

So you see that we’re working very closely with the key stakeholders to make the IPE move from a strategy to a reality. It’s a challenging environment, to say the least, with so many different stakeholders and interests; and politics are the elephant in the room. That is why we’re ramping up our own capacity bringing in experts from the Private Sector to work alongside our other experts on e.g. Access & Movement, Governance, political analysis, media and others. The IPE is becoming a common platform, aligning various different efforts to create greater synergy and impact. Our role is to facilitate and accelerate, to bring parties together around a common goal, and get things done.

Over the coming months, we will be participating in a number of conferences aimed at bringing the IPE directly to interested potential investors. In Prague next weekend, at the first major conference dedicated to this issue, investors, financiers, the PA, and Palestinian private sector will come together to discuss implementing the IPE. Our objective is to match industries and projects with companies and financiers that are prepared to act. Another major conference will take place in Brussels later this spring. And no doubt more will follow.

This brings me to the ICT sector.

ICT includes both Telecommunications and Information Technology and both sub-sectors are very much part of our Initiative. And like all our other seven sectors, our plan for ICT covers East Jerusalem, all of the West Bank and the Gaza Strip.

This sector is not the largest of the 8 sectors we have looked at, but it affects every one of the other sectors because of its cross-cutting nature. With every new ICT employment opportunity you create, you can potentially generate an additional two to three indirect jobs in other sectors. Raise the standard of ICT in a country and you raise the standard of all its other industries. Overall, ICT was estimated at $637M in GDP last year, which corresponds with 6 % of GDP.

We will look briefly at both the Telecom and Information Technology sub-sectors.  

For Telecom, our Strategy is straight forward and comprises three main points;

§ First, we are asking for the release of Spectrum for mobile, fixed networks and services so that we can create a level playing field between Palestinian and Israeli telecom operators (e.g., 3G/4G),

§ Second, we are also looking to free the procurement of telecom equipment, the construction and the operation of telecommunications services in Palestine; and

§ Third, we seek to reinforce the clear demarcation of service areas for different telecommunication providers inside Palestine and Israel.

This brings me to Information Technology

Our strategy for IT is to attract international and domestic investments in targeted IT services through leveraging the quality of labor force and relative regional wage competitiveness  

 To implement this strategy, we have identified a series of projects or ideas that we believe, if implemented correctly, would lead to a significant increase in GDP and employment in the IT sector.

§ We look to attract international and domestic investments in targeted IT services, leveraging the quality of the labor force and relative regional wage competitiveness – mainly in mid-skilled software development – especially in software programming and Specialized Business Process Outsourcing needs.

§ We look to set up and support existing investment bodies such as accelerators and seed funds to bridge the gap between start-ups and capital.

§ We look at creating a number of trade promotion agencies in major tech markets to attract investments in mid-skilled software development, specialized BPO needs but also to create the necessary links for Palestine to outside market places in the IT world.

§ We look at the development of special economic zones with an attractive business environment for IT companies both local and international to come and do business in Palestine.

§ And we aspire for the creation of a specialized IT training “top-up” curriculum for Palestinian IT students and work force that will teach Palestinians the specific needs of prospective employers and outsourced contractors created by MNCs and local Palestinian minds.

The OQR has been in this line of business for quite some time now. Our experience over the past seven years has shown that improvements on the ground actually do contribute to stability and security – for all. Access and movement within the West Bank improved significantly. And the policy change we negotiated with Israel in 2010, from a positive list system to a negative list system for products into Gaza, has had a significant impact.

What we are now recommending, is based on that experience. We know that implementing the plans will be difficult. Plans that are this fundamental do not unfold neatly or quickly. But they are a critical enabler for real progress to be made in the region. The more progress we see politically, the greater the chances of success. The stakes are high, and there is much to be gained, to the benefit of all – and Palestinians in particular.

Thank you.

Document Type: Article, Remarks, Speech
Document Sources: Office of the Quartet Representative (OQR), Quartet
Subject: Assistance, Economic issues, Peace process
Publication Date: 02/03/2014

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