Reading the Palestinian Economic Situation in 2019

·       Reading.... Part One - the banking sector

-        I listed the banking sector data as they were at the end of 2018, with some reference to certain statistics for the first and second quarters of 2019, in two posts on my Facebook page... Part One and Part Two on Friday, 20-9-2019. Additional parts will follow later, after the figures are audited, and I intended to comment on them when I finish transferring all parts to you via my posts on my Facebook page.. but some dear friends who honored me with their comments asked for some economic explanations and analyses, and other dear friends corrected me regarding some banking data in Part One and Part Two concerning the statistics of some banks that have subsidiary companies... I had noted that; I had included it in my next post in Part Three on the topic "Comparing Bank Performance in Palestine"... and it is taken into account regarding the statistics of the subsidiary companies of some banks.. but I was very pleased when there were professional comments or interventions as I mentioned... where we must not be satisfied with admiration only, and to those I also thank them from all my heart.. but we must disclose, if we can, what crosses our minds of questions and inquiries that the concerned parties did not address..................I will not be long..!!!

-        The first and second parts of my posts yesterday dealt with the activity of the banking sector at the end of 2018..... I list below some of my observations regarding them as follows:

-        The picture of the banking data for 2018 undeniably reflects the gloom and severity of the hateful division among Palestinians.. The published statistics practically represent the banking activity statistics in the West Bank in general.. As for the Gaza Strip, despite the number of Palestinian inhabitants who constitute more than 40% of the population of the territories occupied in 1967, as reported in the 2017 population statistics.. they constitute an important and primary complementary economic lever.. and we have come to read the customer deposit statistics in the West Bank at the end of 2018 to find they amounted to about $11.051 billion, while in the Gaza Strip for the same period they amounted to $1.176 billion... which constitutes about 10% of total deposits with banks in Palestine at the end of 2018.... These numbers are not acceptable to justify by saying that the Israeli occupation mainly hinders Palestinian economic and monetary integration.. Yes, it is true that we are occupied.. alike.. but we harbor tribal, organizational and political resentments in our souls.. and we are subject to many internal and external occupations... we did not correct some people’s wrong courses... but we entrenched division in our activities, our daily lives and our data.. The general budget, when it is issued, is issued in a deficient manner.. we do not know the extent of our planning—whether it is limited only to the West Bank and we point to the Gaza Strip by saying the statistics are not available and the picture is unclear... and matters end there.. both sides invent excuses ... for the inability to communicate and reweave the fabric.... Banking data are sad, unhealthy and unrealistic.. and do not represent the capabilities of the Palestinian people without presenting the Gaza Strip’s data, the important part of the homeland.... Politics leads the economy in our tribal societies.. while the economy guides politics in stable and content societies.

-        The published banking data on the activity of the banking sector at the end of 2018 did not reflect the emergency state of the Palestinian economy, especially the Israeli occupation’s control of the clearance revenues, which are the funds of the Palestinian people... and which occurred in early 2019. Customer deposit growth in banks operating in Palestine at the end of 2018 was acceptable, as these deposits amounted to about $12.2 billion US, an increase over 2017 of $245 million, or 2%.... However, at the same time, customer deposits with banks in 2019 up to 30-6-2019 did not experience any shocks such as withdrawals or cash volatility; rather they grew and the value of customer deposits in mid-2019 reached $12.6 billion.. i.e., an increase over deposits at the end of 2018 of about $400 million.. where customer deposits in the West Bank were more than 92% of total deposits... and we do not want to go into more detail about the structure of deposits of savings, current and time deposits.. which increased in the first half of 2019 according to the statistics issued in this regard.. due to the limited space in this means of communication among everyone.. and thus customer deposits were not affected in the first half of 2019 by the financial crisis of the Palestinian National Authority with the occupation authorities... this is in the private sector.. As for public-sector deposits, especially those of the Palestinian National Authority with the banks, the Authority’s deposits declined from $458 million at the end of 2018 to $290 million on 31-7-2019... and thus the Palestinian National Authority’s deposits, one of the most important components of the public sector, were affected and declined to the figures shown above... In contrast, the facilities granted by banks to the private sector were not affected, as they amounted at the end of 2018 to $7.115 billion.. to $7.301 billion at the end of the first quarter of 2019 (31-3-2019).. an increase of $186 million... This increase in banking facilities for the first quarter of 2019 was reflected, for example, in the real estate sector with an increase of $124 million.... In addition to an increase in facilities in the land development sector in the first quarter of 2019 over the end of 2018 by $32 million... and $11 million in the mining and industry sector.. and $108 million... in the domestic and foreign trade sector... an increase in the first quarter of 2019 over the end of 2018.. but they decreased for the tourism and hotels sector at the end of the first quarter of 2019 compared with the end of 2018 by about $1 million... Banking facilities in the transport and ports sector decreased by $9 million at the end of the first quarter of 2019 compared with the end of 2018... while facilities granted to the business services and consumer services sector increased at the end of the first quarter of 2019 by $12 million over the end-of-2018 figures... As for car and vehicle financing, it increased by $1 million at the end of the first quarter of 2019 compared with the end of 2018.... Consumer loans increased at the end of the first quarter of 2019 over the end of 2018 by $10 million... As for public sector facilities, the facilities provided to the Palestinian National Authority decreased by $51 million at the end of the first quarter of 2019 compared with the end of 2018...

-        It is clear from the banking data at the end of 2018 that the inclinations of banks in Palestine in investment lean toward the services and consumer sectors..mainly..and this is evident from the figures of banking facilities granted to various sectors of the economy, where the real estate sector received from bank investment funds at the end of 2018 the amount of 1.6 billion dollars...and it was preceded by the domestic and foreign trade sector..which received at the end of 2018 from banking facilities the amount of 1.57 billion dollars..And it is known that domestic and foreign trade, mostly with and via Israel by about more than 80% of the total domestic and foreign trade, and this sector saw increased facilities as previously indicated at the end of the first quarter of 2019..by an increase over the end of 2018 of 108 million dollars..and therefore the private sector, individuals and companies..remain active in domestic and foreign trade with Israelis and via Israel..and no indicators have been obtained suggesting a contraction in this type of services..with the Israelis due to the financial squeeze that the occupation authorities imposed on the funds of the Palestinian people as political and financial punishment..because of the allowances for the families of martyrs and prisoners with the occupation...and which showed the Palestinian Authority in it a refusal to receive the conditioned Palestinian funds..and consequently liquidity crises occurred at the national authority to meet public expenditure, primarily salaries...
• We return to the policy of the banks operating in Palestine, it is clear that they choose the economic sector that is most profitable and returns the most to them, to include it in expanding the granting of banking facilities. Which is dominated by the consumer and real estate sector..and consumer financing much more than the industry, mining and capital production sectors....And we can fully understand that the banks operating in Palestine are joint-stock companies seeking to maximize the profitability of their shareholders...and that is their primary concern...and other sectors of the economy neglected for investment by the banks, where the banks face the problem of the unclear delimitation of the legal jurisdiction of the Palestinian Authority, as the division of the Palestinian territories occupied in 1967 is divided under the Oslo Accords..into Areas A, B and C...and in which it is difficult for banks to obtain guarantees regarding the recovery of funds granted under banking facilities..to areas where the enforcement of law is not secured...and therefore most banking facilities and loans were concentrated in the areas of the main governorate centers, especially Ramallah and Al-Bireh..and consequently, banks stayed away from financing the agriculture sector and other neglected sectors..It was also observed that even the tourism and hotels sector did not receive banking financing at a rate that reflects its importance in Palestine, which it owns and which constitutes an advantage for obtaining large revenues......

·       Reading the Palestinian economic score ......the banking sector..... reading ....part two

-       The distribution of banking facilities to the northern and southern governorates..was not fair and did not correspond to the deposits of these governorates in the total public deposits at the banks operating in Palestine..and you can compare that from the publication specific to that by governorates whether for deposits or banking facilities...

-       The social responsibility of the banks operating in Palestine at the end of 2018 appeared low and weak...in relation to the banks' profits after paying taxes..whose net profit at the end of 2018 amounted to 176 million dollars...and we know that the amounts of social responsibility of the banks and the donations made by them which do not exceed tens of thousands of dollars, appear negligible in front of advertising campaigns and prizes for depositors at the banks which exceed tens of millions of dollars whether in cash or in kind..and are given by lottery to an individual whose luck before the machine produced his win. And they are not given to a group of citizens...(I did not obtain, certainly, the value of the banks' social responsibility amounts at the end of 2018...).

-       We respect the private sector and banks are one of its most important elements...and we need the efforts of the private sector in developing the national economy..and we join our voice to the voices of economic experts in granting banks in Palestine special tax incentives for some investment programs such as facilities granted to small projects...with a specific tax exemption for such financings and agricultural and productive financings...However the private sector, including banks despite being subject to supervisory laws by the Palestine Monetary Authority, the pricing system for interest and banking commissions must be reconsidered...For we sometimes see that commercial and Islamic banks alike..excessively charge interest on dollar facilities linked to LIBOR..thus widening their profit margin..to reach 5-6% additionally sometimes. This is not positive..And some Islamic banks adopt a pricing policy that confuses the borrower..even though he is hopeful and reassured by the fact that the lender's title is an Islamic bank and past banking statistics showed that part of the Palestinian public is gradually turning to financing from Islamic banks, as they feel reassured by the banners raised by these banks, which include terms based on Islamic Shari'a and the Islamic banking concept...Knowing that I do not differentiate between the nature of this bank and that one; they are all banks and joint-stock companies..charging interest or call it a fee or any other name...and seeking profitability...with the lowest costs..Meanwhile customer deposits at Islamic banks at the end of 2018 amounted to 1.8 billion dollars..having increased by 199 million dollars from the end of 2017..and net direct financings of Islamic banks at the end of 2018 amounted to 1.4 billion dollars..an increase over 2017 of 216 million dollars.

-       Private sector deposits increased by 375 million dollars or 3% to reach 11.6 billion dollars at the end of 2018, and public sector deposits decreased by 130 million at the end of 2018..And private sector savings deposits increased by 167 million dollars or 4% to become 4.1 billion dollars..As for the deposits of Islamic banks' customers, they increased by 152 million dollars or 9% to reach 1.8 billion dollars..Deposits of West Bank customers increased by 197 million dollars or 2% to reach 11 billion dollars..As for deposits of Gaza Strip customers, their deposits increased by 48 million dollars to reach 1.2 billion dollars..It is clear that the private sector in aggregate was not affected by the current financial crisis of the Authority...nor is there a sense that components of the private sector, especially traders, have taken steps to reduce profit margins in their pricing of goods and services...they do not truly sympathize with the dire economic situation in this year 2019 and we do not feel that they are inclined to contribute and assist in solving the escalating unemployment crisis..in Palestinian society..Banks' capacity for employment is limited, as the number of employees in the banking sector does not exceed less than eight thousand employees..at the end of 2018..and we hear of the small number of vacancies in the banking sector especially if job turnover is low and most banks enjoy job stability, for example to hear that there are 3 vacant positions to which 3,500 applicants apply...However, as I pointed out previously and in light of the growth of deposits in the banking sector..one can begin to adjust its investment policy to finance productive, industrial and touristic projects..in exchange for receiving at the same time incentive encouragements from the government regarding taxes and exemptions...And do not say that the private sector is greedy because without the private sector we will not grow in a way that properly addresses the country's economic crises..

-       Direct facilities granted to the private sector increased by 566 million dollars to reach at the end of 2018 the amount of 7.1 billion dollars. While direct facilities granted to the public sector decreased by 159 million dollars to reach 1.3 billion dollars at the end of 2018

-       No data were issued in 2019 regarding the value and number of bounced checks for insufficient funds..noting that the number of bounced checks at the end of 2018 for insufficient funds numbered 661 thousand checks, an increase of 13,000 checks or 2%..and their value reached one billion dollars, a decrease from the end of 2017 by 8 million dollars...

- All that does not mean that we are hostile to the banks... for banks of all kinds are necessary for the economic development of the country. And they are at the same time a support to the government and the public sector... by financing it at times.... Therefore the problem also lies with the government, which can spend on productive and strategic projects in its society... not simply limit itself to collecting taxes and financing public salaries... It is responsible for arrears and dues owed to the private sector that provides services and goods and raw materials and equipment to the public sector... but without payment... One must look at the private sector as any individual investor: if you see that you are selling to others without receiving payment for goods and services from the government through its various institutions, and these form a continuing pattern that may take years... can you continue to remain in the market? I do not think so..!!
In my reading of the data related to the banking geography regarding deposits and banking facilities in the governorates, it appears that the governorate of Ramallah and Al-Bireh had granted banking facilities at almost the end of 2018 in the amount of 4.121 billion dollars.. while its deposits at the same date were 4.474 billion dollars.. meaning it obtained facilities equal to more than 92% of its deposits.. As for the Nablus governorate, its deposits at the end of 2018 amounted to 1.59 billion dollars, and it obtained banking facilities at the same date in the amount of 1.015 billion dollars, i.e., about 64% of its deposits.. As for Jenin governorate, the ratio of its facilities to its deposits at the end of 2018 was 45%.. and likewise in Tulkarm governorate, its facilities at the end of 2018 amounted to 36% of its deposits. In Hebron governorate the matter is different: the facilities granted in the governorate at the end of 2018 as a percentage of its deposits amounted to about 45%... despite the high population density in this governorate, which has the highest population percentage.. and a high percentage of the population practices trade as an occupation... yet the ratio of facilities to deposits there is disproportionate...

- The unequal distribution regarding banking facilities relative to deposits.. and their concentration in a governorate that captures more than 50% of total banking facilities.. while its deposits do not constitute more than 30% of total deposits.. this will lead to internal migration of citizens from other areas to be present in the governorate of Ramallah and Al-Bireh... i.e., moving from rural areas hypothetically to that governorate, which creates many obstacles in citizens’ lives. In addition to the injustice in the financial distribution of banking financing, which is a shared matter for which the private sector and the government are responsible — the government bears the duty of achieving justice among citizens and of operating and establishing facilities and projects in all areas as much as it can to halt the terror of internal population migration

- Note: "The data of Bank of Palestine include the data of the Arab Islamic Bank as one of its subsidiary companies, and the data of the National Bank in 2018 include the data of the Palestine Islamic Bank as one of its subsidiary companies. Therefore the data of the Arab Islamic Bank and the Palestine Islamic Bank in 2018 were excluded from the data of the banking sector and local banks.. in addition to the merger of Jordan Kuwait Bank into Bank of Jerusalem in 2018"

- The share of local banks in the market share of net profit after tax decreased to reach 49% at the end of 2018, a decline from their market share at the end of 2017 by -4.3%... in the amount of 86 million dollars. As for the foreign banks, their share in the market share of net profits advanced to become 51% in the amount of 90 million dollars... an increase from their share at the end of 2017 by 14.9%...

- The share of local banks in the market share of banking facilities increased at the end of 2018 to become 61.3% in the amount of 5.017 billion dollars.....(local commercial banks share 60.2% and local Islamic banks 17.7%), and the share of these local banks in the market share of deposits at the end of 2018 also increased to become 55.7%--- amounting to 6.790 billion dollars (55.1% for local commercial banks, and 15% for local Islamic banks..)

The share of foreign banks in their share of banking facilities decreased at the end of 2018.. where it reached 38.7%... As for the share of foreign banks and their market share in deposits at the end of 2018, their share amounted to 44.3%.. in the amount of 5.403 billion dollars ..!
• Greater effort and growth by local banks is required to contribute more broadly to economic development in Palestine