OPT socio-economic report (March 2010) – UNSCO

Since 1996 UNSCO has continually monitored and reported on socio-economic conditions in the occupied Palestinian territory and in the process established an extensive socio-economic database. UNSCO does not create raw data but rather uses available data which, in the occupied Palestinian territory (oPt) is relatively abundant. However, the data that is available tends to remain dispersed and is not always automatically shared between institutions. The objective of the database is to bring together in one place a wide variety of data on socio-economic conditions and by doing so present a broader, more detailed perspective on socio-economic conditions. The purpose of this report is to: 1) broaden the access to this database through publication of the most recent data gathered; and 2) provide readers with up to date information on socio-economic conditions in the occupied Palestinian territory.

This report is divided into four sections:

Section 1 consists of a one-page fact sheet which provides a snapshot view of the socio-economic situation for the current and previous reporting period and it provides, for reference purposes, base line figures for the period just prior to the outbreak of the second Intifada.

Sections 2 and 3 report on the macro-economic situation and the economic activity throughout the oPt, including private sector and banking activity. Section 4 focuses on access of goods in and out of the Gaza strip. All 4 sections provide data on the last six reporting periods for each indicator as well as base line data, which is pre-Al-Aqsa intifada. In addition, summary analysis on observed trends is presented below each table.

In addition, this report includes a brief analysis of new company registrations in Gaza over the last 3 months, based on review of recent reports and interviews with relevant actors in Gaza.

"This month, the Socio-Economic Report includes an additional section focusing on the recent increase of new company registrations in Gaza. It provides a summary analysis of the trend, based on recent reports and interviews with relevant actors in Gaza.

Similar summary analyses on relevant themes will be included in the Socio-Economic report on a quarterly basis."

For further information please contact:

Gaza Strip: Raed Raqeb raqeb@un.org

The Palestinian CPI reached 127.44 in March 2010, a decline of 0.03% compared to February 2010.  Increases were recorded in the Food and soft drinks sector (0.06%), in Miscellaneous goods and services (0.05 %) housing (0.16 %) and in Transportation (0.65% each) while the Restaurants and cafes sector experienced a 0.37% price decline.

The overall unemployment rate decreased from 25.8% in the 3rd quarter 2009 to 24.8% in the 4th quarter 2009, as compared with 27.9% in the 4th quarter 2008. The Gaza Strip experienced a decline from 42.3% in the 3rd quarter 2009 to 39.3% in the 4th quarter 2009 while the rate in the West Bank increased from 17.8% to 18.1%. The Hebron governorate registered the highest unemployment rate among the West Bank governorates (23.6%) followed by Qalqilia governorate at (23.4) while Jericho and Aghwar governorate registered the lowest unemployment rate (7.1%). For Gaza Strip, Khan Younis governorate registered the highest unemployment rate (50.4%) followed by Rafah governorate (39.1%), and the Gaza city governorate (38.2%).

The number of new company registrations is used as a proxy indicator for the vitality of the local economy as well as the ability of the local economy to create new employment. New company registrations in the West Bank declined by 69.92% compared to February 2010. When compared to pre-Intifada levels, new company registrations have dropped by approximately 70.80 %.The reason behind this decrease is the introduction by the Ministry of National Economy of a new registry system; whereby registrations were stopped for two weeks

As for Gaza, data from the Ministry of Economy in Gaza indicate 37 new registered companies for March 2010. If considering data from Ministry of Economy in Gaza, the number of newly registered companies in Gaza increased by approximately 76.19% compared to February 2010.

There was a significant increase in the amount of imported cooking gas, with 3,811 tonnes allowed in through Kerem Shalom. (33.11% increased compared to the volume allowed in February 2010).

On 01 Jan 2010, Israel declared that Nahal Oz fuel pipelines closed with fuel being transferred to Gaza only via Kerem Shalom.

In March 2010, 34 trucks of carnations were exported. March 2010 data indicates an increase in the total number of imported truckloads to the Gaza Strip by approximately 20%, compared to January 2009 (2,674.5 vs. 2,236). Karni crossing has remained closed since 12 June 2007 for the movement of goods in and out of Gaza. The single conveyor belt/chute for cereals and animal feed at Karni was open for a total of 9 days. 785 truckloads of animal feed (43.69%), wheat (56.05%), and gravel (0.25%) for the Water Authority entered Gaza via the conveyor belt. Of the 1,728.5 truckloads entering Gaza during the month through Karem Shalom (Karm Abu Salem), 323.5 (or 18.72%) were designated for humanitarian aid agencies and the remaining 1,405 (or 81.28%) were for the private sector. Food items made up the majority of imported goods (1,206 truckloads, or 70%) while 522.5 truckloads, or 30%, were for non food items.

Quarterly Analysis: New Company Registrations in Gaza

Data received from the Minister of National Economy in Gaza indicates a robust increase in new company registrations in the Strip since the beginning of the year (see page 6). This trend seems to validate recent reports highlighting renewed economic activity. In addition, since these numbers only relate to company registrations with the Ministry, they may understate the overall volume of new registrations since many small businesses register directly, and only with local municipalities.

However, a closer look at the nature and type of companies offers a more sobering outlook on Gaza’s economic situation. Most of these new companies operate in the service and retail sectors, including rubble crushing, food and groceries, logistics and accounting. The number of new registrations in the commercial – industry category is extremely low. Various factors call into question the potential for a sustained contribution that the trend currently observed can make to Gaza’s long term economic development.

Most if not all of these newly registered businesses tend to be of limited size, ranging from micro-businesses to very small companies mostly family businesses with no more than 10 to 15 people. The employment impact for now remains negligible. In addition, initial capitalization of these companies seems to come exclusively from personal reserves, private sources and informal channels, with formal bank credit being virtually absent from the process. Such absence will severely undermine the long term expansion potential of these companies.

Instead, the recent decline in the unemployment rate in Gaza seems to be driven mostly by job creations associated with the tunnel economy, the growth of the local public sector and the increasing opportunities in the rubble crushing business, with none of these options providing reliable venues for longer term economic development. Short term employment is also sustained by the various cash for work programs implemented by the aid community.

Furthermore, recent policy changes related to taxation of companies in Gaza may also have influenced business decisions to create, or dissolve businesses, and may continue in the foreseeable future to provide artificial incentive for registration or dissolution.

Beyond the uncertainty around those numbers, one telling proxy indicator of business confidence can be extracted from the preparations for the upcoming investment conference in Bethlehem. While two years ago, the Gaza business community presented over 160 projects worth $1.8 billion, the proposals this year will hover around 30 projects for $40 million. The significant change in size and scale of what is being presented to the world as viable investment opportunities seems to give credence to notion that Gaza’s economic potential has been reduced to rubble.

Endnotes

¹ The base year for GDP is 2004

² These numbers may be adjusted

³ No available baseline data on the year 2000.

⁴ These numbers may be adjusted

⁵ For a more detailed report on sections C (Macro-economy) and D (Private sector), see data below.

⁶ CPI Base year for 2004 = 100

⁸ MoNE data does not include aggregates or aid flows in Aug 2000.¹88 On indicators measured on quarter basis, 2nd quarter of 2000 was used as a baseline since Intifada broke up in the third quarter.

⁹ * Please note that data for Q3-2008 has been adjusted by the PMA for all bank credit categories.

¹⁰ Adjusted unemployment is calculated by adding discouraged workers (i.e. unemployed but no longer seeking work) to the ILO standard.

¹¹ Effective closure days are calculated by adding all days when a crossing was fully or partially closed excluding weekend and holiday. Partial closure means that crossing was partially closed for more than one hour but not for a full day where it is considered full closure. Karni – conveyor belt/chute -The conveyor belt/chute for cereals and animal feed at Karni is the only operational one. Rafah Crossing for passengers is partially opened for humanitarian purposes.

12 Adjusted unemployment is the total number of unemployed in addition to those who are unemployed and don’t seek any employment.