Marketplace Middle East - Blog
5/29/08
Prosperity before peace?


There is an old saying in the financial community that one has to measure the risk and reward ratio each time you value an investment opportunity.

Listening to some of the participants at the Palestine Investment Conference in Bethlehem last week, one can easily hear the risks. Mideast envoy Tony Blair, in an interview with Marketplace Middle East said, “The difficulties are very obvious.”


U.S. Treasury Deputy Secretary Robert Kimmit said investing in the Palestinian Territories offered “some unique challenges.”


Both were referring to the obvious security challenges posed by roadblocks, security checkpoints and the isolation of Gaza. As one Palestinian businessman from the West Bank noted, “we feel suffocated” by the lack of movement.

We had a taste of that when we tried to cross over one of the checkpoints and the police did not think we had the right accreditation. Short of clear instructions we travelled ten minutes down the road and went through another checkpoint minus the hassle.

This is life -- this is the challenge of doing business in the West Bank and Gaza. Despite that “challenging” backdrop, there was a strong show of force in Bethlehem. As one private equity executive from Dubai aptly noted, “We need to show our support, even if it does not lead to business.”

600 delegates showed up to the first Palestine Investment Conference. It was a healthy mix of Eastern and Western players. The Arabian Gulf investment houses were in full force and in a positive signal of support signed some pretty sizable deals.

Real estate giant Qatari Diar inked a $350 million deal to build a full community. Saudi group Al Ard Al Qabeda chipped in with a $200 million agreement to construct office towers, shopping malls and a hotel, also in the West Bank. The CEO of that group summed up his risk/reward outlook by declaring, “Palestine is not the worst in the world.”

Maybe not, but it is not far off. It is difficult to do business if you cannot get your goods past a roadblock or determine whether a drive to the factory will take two hours or eight hours.

The reality is investors smell peace in the air and they are being enticed by a whole bucket full of cash committed at the Paris Donors Conference in December. Governments pledged $7.7 billion over the next three years. Ten percent of that has been released so far, with an obvious eye on whether peace talks will progress.

The early movers see opportunity and a large Palestinian diaspora ready to play its part. Three million people live in the Palestinian territories now; five million live everywhere else. They are solid business people and they want to see their homeland take off and sustain economic altitude.

It helps for example that the managing director for the World Bank in the region, Juan Daboub is one of the members of the broader Palestinian community. His grandparents came from Bethlehem. Consolidated Contractors Company (CCC) is based in Athens, Greece and is one of the top twenty construction companies in the world but the family is Palestinian. The owners of CCC, the Khourys can always be found assisting in the cause for their ancestral homeland.

They are supported by Western players who are seeking to “do good” for the Palestinian territories. Sir Ronald Cohen, formerly of private equity group Apax Partners, started the Portland Trust. He sees the territories as a “coiled up spring” ready to release energy if governments, the diaspora and investors come together to lay the foundation for lasting peace and lasting growth.

In our interview in a beautiful reconstructed palace in Bethlehem, Blair drew parallels to the peace process in Northern Ireland. His said peace and development have to run on dual tracks, “I think the two things go together, but actually what we did in Northern Ireland was we did create the breathing space.”

What Blair and the others were trying to convey is a sense of hope. If peace can be delivered it will be good for Israel and the Palestinian territories. If it can be sustained, investors from the East and West will come. Blair added: “Yes, of course you've got major political problems. You've got problems of movement, restrictions and so on, on the West Bank. But also you've got amazing tourist potential, some great industry here and a very intelligent, capable and creative workforce.”

That is all true and right now the region has the wind at its back. Lebanon is moving in the right direction. Israel is holding indirect talks with Syria and Palestinian businessmen are ready to play.

This investment conference was scheduled to take place two years ago but was called off when violence flared.

Deferred but not thrown off, the local businessmen and the diaspora pulled together for another try. Deals are happening and governments have committed funds. Now let’s hope that lasting peace will follow.

Excellant article. In this modern world the art of Management has become a part and parcel of everyday life, be it at home, in the office or factory and in Government. In all organizations, where a group of human beings assemble for a common purpose irrespective of caste, creed, and religion, management principles come into play through the management of resources, finance and planning, priorities, policies and practice. Management is a systematic way of carrying out activities in any field of human effort. Management need to focus more on leadership skills, e.g., establishing vision and goals, communicating the vision and goals, and guiding others to accomplish them. It also assert that leadership must be more facilitative, participative and empowering in how visions and goals are established and carried out. Some people assert that this really isn't a change in the management functions, rather it's re-emphasizing certain aspects of management.
Its task is to make people capable of joint performance, to make their weaknesses irrelevant, says the Management Guru Peter Drucker. It creates harmony in working together - equilibrium in thoughts and actions, goals and achievements, plans and performance, products and markets. It resolves situations of scarcity, be they in the physical, technical or human fields, through maximum utilization with the minimum available processes to achieve the goal. Lack of management causes disorder, confusion, wastage, delay, destruction and even depression. Managing men, money and materials in the best possible way, according to circumstances and environment, is the most important and essential factor for a successful management.
While economic investment is the way to go, it will all be useless unless the israelis buy into it and allow the open passage of goods. Investment in the Gaza greenhouses were a complete failure because Israel was able to close the Eretz border crossing at will under the guise of "security concerns:. Loads of trucks full of vegetables were stuck at the border for days,until all the produce was ruined.
Many years ago when Yasser Arafat came to Frankfurt Germany to speak to potential investors, some where asking about the leve of risk and how think can be secured, how certain things might be etc.

At this meeting I stood up and apologized to Mr. Araft who was standing at the podium and I addressed the audience.

I told them that Iunderstood their questions and concerns, but reality is that there is no gurantee. Either you take the risk or you do not. Everyone can measure the current risks to invest in Palestine / Israel. At the same time everyone knows that things can go wrong, but the trues is that if more investments come in the economy will improve. When the economy improves lives Palestinians will get better. All this eventually will lead to positive results.

After all it can be a positive circle or a negative circle. No investmens, no eonomy, no money, no food this leads to increased violance / hatred. Or you can turn it into a positive circle.

The investors are a hug factor to the success in Palestine. They can be a bigger factor than the different party leaders.
ABOUT THIS BLOG
John Defterios’ blog accompanies the weekly business program, Marketplace Middle East (MME) that is dedicated to the latest financial news from the Middle East. As MME anchor, John Defterios talks to the people in the know, finding out their opinions on the big business moves in the region, he provides his views via this weekly blog. We hope you will join the discussion around the issues raised.
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