What it Takes to Do Business in Palestine: Doing Business in Palestine West Bank and Gaza, 2020, Overview

Doing Business recently released its latest Economy Profile of the West Bank and Gaza, 2020 edition. For businesses to thrive, policies and regulations conducive to trade and growth must be in place. This is what Doing Business is all about, identifying and measuring key regulatory indicators that help emerging businesses and stakeholders learn how to do business in 190 economies across the globe.

Before delving into the report findings, it is important to keep in mind that the collected data were analyzed under an assumed standard to evaluate select economies in the MENA region, namely Jordan, Lebanon, Iraq, and Egypt. The report scores the respective economies based on a variety of factors conducive to establishing viable business ventures. Said factors include starting a business, obtaining construction permits, getting electricity, registering property, securing credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency.

When it comes to starting a business, Palestine scored lowest on the scale of selected MENA based economies. This comes down to more restrictive and inefficient procedure methods, which entails preregistration, registration, and post-registration. As a result, setting up in Palestine is more costly, taking twice the time and efforts such as those in OECD high-income economies.

Moving on, obtaining construction permits are essential for businesses that are looking to modify spaces, or even build from the ground-up. In this index, at 58.2 percent, Palestine ranked under the regional average of 61.7 percent. Again, procedures to obtain the required permits, documents, and licenses put Palestine at a disadvantage. Cost was also a major issue for those looking to start a business, as a lack of access to resources needed to secure utilities and ensure building to code stopped potential business owners from becoming established. Despite this, some of the case studies shared in the report managed to overcome said setbacks and obtain the required documents, and licenses on time, and meet building quality control standards.

Coming in third for the electricity index, at 74.9 percent, Palestine ranked above the region’s average of 72.4 percent. The report indicated that efficiency with regards to time and cost is at the heart of this score. However, procedures and reliability of supply were inconsistent due to government shortcomings to meet the needs of local businesses.

In terms of registering property, Palestine scored second on the list with 64.6 percent, right after Jordan, at 66.4 percent. Similar to the electricity index, time and cost did not pose considerable problems for businesses. Although procedures and quality of the land administration index were, which are both determined by the government, ultimately leaving much to be desired for potential business owners on this front.

Credit is essential for emerging self-starters looking to set-up shop and compete in either local or global markets. For the credit indicator, strength of legal rights, depth of credit information, credit bureau, and registry coverage is explored. Based on these indicators, Palestine scored an impressive 80 percent, right on the heels of Jordan with 95 percent. The rest of the evaluated MENA countries lagged with Egypt at 65 percent, Lebanon at 40 percent, Iraq at 0 percent, and the regional average at 65 percent.

The next index, protecting minority investors, was designed to measure the strength of “minority shareholder protections against misuse of corporate assets by directors for their personal gain.” Unfortunately, Palestine scored lowest on this scale, tied with Lebanon at 44 percent, and the highest-scoring economy, Egypt, at 64 percent. This percentage indicates that there is a lack of transparency for investors looking to invest in Palestinian businesses and a lack of regulation to ensure the use and misuse of funds. This is a detriment to the Palestinian economy and causes many potential investors to shy away from choosing to do business in Palestine and support local industry. And at 68.7 percent, the Palestinian economy did reasonably well when it comes to the paying taxes index, following Jordan at 78.7 percent, and the regional average of 75.1 percent.

Trading across borders is unquestionably a contentious issue when discussing the local Palestinian economy. Despite this, Palestine scored the highest at 86.7 percent, far surpassing the region average at 61.8 percent. However, it is important to note that this is based on select case studies analyzed under a set of assumptions as assigned by Doing Business 2020.

The index for enforcing contracts seeks to measure the time and cost of “resolving commercial disputes through a local first-instance court.” In this index, Palestine scored 52.5 percent trailing close behind to Jordan at 55.6 percent, and the regional average of 56.0 percent. The main setback for Palestinian businesses is ascribed to the inefficiency of court dates, higher costs, and the lack of access to quality judicial processes, which is controlled by the local authorities.

The final index measured by Doing Business 2020, studies the time, cost, and outcome of insolvency proceeding involving domestic legal entities. This index is further broken down to the time and cost required to recover from debt, the outcome, and the recovery rate for creditors. Unfortunately, the report indicates that there are no recorded insolvency practices in Palestine, putting the economy at 0 percent of the scale, and at the regional level 34.5 percent.

Ultimately, the report was conducted under a set of assumptions applied to selected case studies, which provided the foundation for the outcomes shared by Doing Business 2020. However, focusing on only a select few case studies provide a somewhat minimalist overview of the local economy and doesn’t explore the nuances that affect emerging self-starters and their diverse needs. 

Today, Palestinians continue to contend with inefficient government regulations, policies, and overall follow-through needed to encourage healthy business-building and thriving businesses in Palestine. The lack of cross-sector collaboration and transparency between stakeholders in the private and public sectors is hurting the viability of SMEs, which at 99 percent are the backbone of the Palestinian economy.