During the last two years, Industrial Estates & Free Zones (IE & FZ) has become an important topic on the agenda of Palestinian-Israeli negotiations on both the economic and political levels. The issue was even raised during the Wye River negotiations, prompting Secretary of State Madeleine Albright to write Dr. Saeb Erekat a letter confirming American support of the smooth operation of the Gaza Industrial Estates (GIE).
Originally, the issue of IE was linked to the unemployment problem in the West Bank and the Gaza Strip and the closure imposed by Israel there, forcing thousands of Palestinian workers to stay home. The international community was faced with the serious challenges posed by the fact that the aid money given for Palestinian R&D was rarely covering the losses caused by the Israeli closure. The idea was to build joint industrial estates on the borders, mainly inside Israel, to bring work to the workers rather than bringing workers to work in Israel. It is a fact that this idea did not receive the support of the international community, since it meant the continuation of Israeli control and domination, albeit in a new method.

Attracting Investment

The Palestinian National Authority (PNA), for its part, viewed the IE & FZ from a different angle. One consideration was related to the attraction of foreign investors to do business in Palestine. Since the onset of the peace process, investors were hardly encouraged by an infrastructure that was neither attractive, nor capable of satisfying their needs. What is referred to here is both the physical and the legal infrastructure. It was, therefore, not realistic to wait for the rehabilitation and readiness of the infrastructure in Palestine, as 30 years of occupation have taken their toll on it. Also, in the wake of the Oslo agreement and the Paris Protocol, the legal framework needed to attract investors was not formulated, and it was difficult to apply any such framework, given the existing barriers imposed by Israel and the division of Palestinian territory into zones A, B, and C. The solution came through the designation of certain regions as IE/FZ. These constitute around 700 to 1,000 dunums where it is possible to provide investors with the best infrastructure services, as well as the most attractive incentives and benefits, on par with any of the advanced IE & FZ in the world.
If we take the GIE as an example, the Palestinian Industrial Estate Authority (PIEFZA) provides highly developed infrastructure services there, including potable water connected to the national water system, a power plant connected to the national electric grid, more than 1,000 telephone lines, a sewage treatment plant, etc.... This has elicited a very positive response from investors who visited the GIE and many of them have decided to set up business on the site. There are, currently, 33 new companies registered to operate in the GIE and 13 factories already operational, employing more than 700 workers.
The IE/FZ program has another strategic aspect, especially that dealing with evolving an open and free market system. The PNA has already signed free trade agreements with the United States, Europe, Canada, and other countries. The Palestinian industrial sector is facing great challenges, since it cannot compete with products and goods imported from China and the Far East. Some parties are asking the PNA to adopt a protectionist policy by barring products from these countries from the Palestinian market; others claim that this solution is neither right nor viable.

Export-Oriented Industry

The IE/FZ program tackles the problem from a different angle: we are starting new industries and new projects that do have competitive and comparative advantages vis-à-vis products coming from such markets as China. We are focusing on certain sub-sectors that we know can compete, not only locally, but also in regional and international markets. It is only through export-oriented industries that we can increase our income per-capita and our gross domestic and national products to levels close to those of developing countries. This is why PIEFZA has decided to have its second Industrial Estate as a high-tech industrial park, focusing only on information technology and electronic industries. This has the added advantage of requiring and facilitating the establishment of joint ventures with foreign investors.
The above objective is guaranteed through the law for Industrial Estates and Free Zones, which is considered among the most liberal laws regionally and internationally. It provides many incentives regarding taxation, registration, movement of people and products, and so on. The law also creates the "one-stop shop," which enables the completion of the permitting process within 21 days, as it gives PIEFZA full authority regarding licensing, permitting and the processing of all investment applications, including building and environmental permitting, tax exemption, export and import procedures, etc....
The IE/FZ program presents a long-term strategic solution to the employment problem in Palestine. Through this program, more than 100,000 new direct jobs will be created and double that number as indirect jobs. This is an important number and will ease the pressure on the government regarding public employment and that created by the Israeli closure policy. Thus, the IE/FZ program is considered one of the most important national projects. It is recognized as such on all levels of the Palestinian leadership, as well as by the donor community that has committed to providing it with the needed financial backing. <