BERF Occupied Palestinan Territories Diagnostic Review and Stakeholder Engagement

Objectives

This study looked at the business environment in the Occupied Palestinian Territories with a special focus on women and youth. The poor performance of the economy, not least due to conflict and occupation, represents the major barrier to job creation for Palestinians, including women and young people. Promotion of opportunities for women and youth would be at the expense of others unless new opportunities for growth can be created and exploited.

To understand the business environment for women and young people it is important to understand the roles played (i) by formal legislation and regulation (ii) by markets and institutions, which includes an appreciation of the political economy and (iii) by social and cultural norms.

Context

The poor performance of the economy represents the major impediment to employment creation for all Palestinians.  Due to long-term restrictions on movement, access and trade, private sector activity has been severely constrained and private investment levels are among the lowest in the world. Donor aid supported consumption-led growth throughout 2007-2011 but the level of donor support has since fallen. This reduction in donor support, in conjunction with the Gaza war, led to stagnating economic growth in 2012 and a contracting economy in 2014. Since 2015, there have been modest signs of economic recovery But with the growth of the population, and real incomes, have been declining since 2013.

Unemployment remains high: in 2014, unemployment was higher among females (37%) than males (24%) and in Gaza, female youth unemployment was 79%. Female participation rates in the labour force are far lower for women (19%) than men (72%). Average incomes for women ($1,651) are only about a fifth of those of men ($8,580).25% of Palestinians live in poverty. 41.7% of youth aged 15-24 are unemployed, with higher rates among young women (58%), and urban youth (42%).

Recommendations

In terms of formal legislation and regulation, the report recommended that DFID invite the World Bank to increase the specificity of its analysis relating to the formal business environment. This is especially important in respect of Doing Business and Investment Climate Assessments.  The Bank could usefully provide additional analysis of the constraints facing women and young people.

It was suggested that DFID could usefully encourage donor programmes to look holistically at the operation of labour markets and financial markets, especially the extent to which these markets meet the needs of women and young people, the nature of the market failures, and actions necessary to mitigate the failures.

There is scope for increased work with Civil Society Organisations that promote women’s and young peoples’ economic role. There is limited clarity about how change has been achieved and limited confidence in how change can be encouraged in future. DFID could constructively encourage experimentation and learning and adaptive programming.

The report recommends a “making markets work for the poor” approach.  This requires donor programmes to mindfully expand and build markets without unduly distorting them through unsustainable subsidies and inappropriate interventions.

The report emphasises the importance of political economy analysis.  A previously undertaken detailed analysis should be updated.