Palestinian External Investment Assets and Foreign Liabilities in Q1 2018

-        Date: 4 -7-2018

-        The Palestinian Central Bureau of Statistics (PCBS) and the Palestine Monetary Authority (PMA) issued the preliminary results of the international investment position and external debt for the first quarter of 2018. The data showed that the balances of the Palestinian economy’s investments employed outside Palestine, up to the end of the first quarter of 2018, exceeded the balances of foreign investments employed in the Palestinian economy (foreign assets – foreign liabilities) by $1,054 million, with Palestinian assets invested abroad in the first quarter of 2018 amounting to $6,211 million. Investment in deposits and currencies abroad represented 66.8% of the total value of these assets, while the liabilities of these investments — the foreign liabilities — in the same period amounted to $5,147 million. Investment in the banking sector constituted 37.35% of total foreign liabilities in Palestine. Reserve assets amounted to 9% of the total value of foreign assets.

-        At the end of the fourth quarter of 2017, the value of Palestinian investment assets abroad was $6,455 million, of which direct investment accounted for 6.5%, foreign portfolio investments 16.3%, and 70.3% for other investments — currency and deposits — of the total value of assets invested abroad. Reserve assets amounted to 6.9% of total foreign assets. It is clear that the external investments of the banking sector amounted to 73.6% of the Palestinian economy’s total foreign assets.

-        Statistical data and surveys of the Palestinian Central Bureau of Statistics (PCBS) and the Palestine Monetary Authority (PMA), at the end of 2017 and the end of 2016, indicate that Jordan is among the countries most investing in Palestine, and its investments are concentrated principally in direct investment, in the portfolio, and in other investments such as deposits, loans, transportation and communications services, and wholesale and storage.

-        The volume of foreign investment in Palestine at the end of 2017 amounted to $5,082 million, of which foreign direct investment (which means the investor’s ownership of 10% or more of the capital of the invested enterprise) represented 53.2% of the total value of foreign investment amounts in Palestine. Portfolio investment (meaning that the investor owns less than 10% of the capital of the invested enterprise or trades in bonds) amounted to 13.1% of the total value of foreign investment amounts, while other foreign investment in Palestine (loans and deposits from abroad) represented 33.7%. However, foreign investment in industry and construction in Palestine did not exceed 2%–3% of the total value of foreign investments in Palestine.

-        The balance of external debt in the first quarter of 2018, shown in the external debt register (which is the register of debt balances owed by Palestinian economic sectors to non-residents), for the Palestinian economic sectors, amounted to $1,640 million. The distribution of debt was 63.4% on the government sector, while debt on the banking sector constituted 32% of this amount.

-        The total balance of external debt on Palestinian economic sectors at the end of the fourth quarter of 2017 amounted to $1,720 million, of which 60.5% was on the government sector — which is mostly long-term loans — and 35.1% on the banking sector.
Foreign investment in Palestine is concentrated in sectors related to deposits, loans, financial intermediation, storage, transportation and communications,

-        Jordan ranks first in these investments, and its contribution to investment in Palestine ranges between 50%–80% of total foreign direct and portfolio investments, and these investments are concentrated in financial intermediation, loans and bank deposits, storage services, communications, transportation, and wholesale trade.

-        Jordan’s contribution to foreign direct investment, for example in 2016, was 79.9% of the total foreign direct investment value of $1,701 million, while Qatar’s share was 7.6%, followed by Egypt at 2.8%. Jordan’s share of foreign portfolio investment in 2016 was 48.6% of the portfolio investment value of $660 million. After Jordan came the United Arab Emirates at 14.3%, then Saudi Arabia at 8.7%.

-        Jordan’s contribution to foreign portfolio investment in 2011, for example, was 52.4%, followed by the United Arab Emirates at 7.9%, then Saudi Arabia at 7.7%, then Qatar at 7.5% of the total value of foreign portfolio investments in Palestine, which amounted to $611 million. Jordan’s contribution to foreign direct investment in 2011 amounted to 80.5%, followed by Qatar at 10.9% and Egypt at 4% of total foreign direct investment in Palestine in 2011, which amounted to $1,504 million.

-        Foreign investment in Palestine, together with national savings in Palestine, can contribute to financing investment in many sectors such as industry and agriculture — where foreign investment’s share did not exceed 3% — in addition to other sectors, to develop the Palestinian economy, which is considered a cornerstone for state building, in addition to the necessity of reducing external debt. The Palestinian National Council in its latest (23rd) session on 30-4-2018 called for engaging Palestinian businessmen abroad to encourage them to invest in Palestine, and for activating incentives to encourage their investment, to stimulate and create opportunities for them, noting that the infrastructure for industrial zones has been completed in Bethlehem and Jericho, and work is underway to establish other industrial cities in various parts of Palestine, to cater to their requirements, and to present services and incentive measures in a serious and reassuring manner for their financial interests, especially given that the occupation is present on the ground at all air, land and sea crossings. The issue of granting entry permits to investors by the Israeli occupation authorities is a matter for which a solution to issuance impediments must be reached, in addition to the need to study and review the Paris Economic Protocol of 1995, annexed to the Oslo Accords of 1993, and to create a genuine investment climate in Palestine...
Palestinian-Arab cooperation in the field of investment in Palestine should also be given great importance, because Arab capital as well as Palestinian capital at home and abroad can contribute to creating Arab development in Palestine across all sectors of the national economy, and not be limited to the banking and tourism sectors on which foreign investment focuses, as the statistics above indicated, due to their safety and the speed and assurance of their profits. In addition, the inflow of Arab and foreign capital reduces dependence on conditional external aid and loans and alleviates the harsh economic conditions of Palestinians.!