Regional Integration Framework: Industry for Peace Initiative in Palestine
Ankara, 20 March 2006
e c o n o m i c p o l i c y r e s e a r c h i n s t i t u t ee k o n o m i p o l i t i k a l a r ı a r a ş t ı r m a e n s t i t ü s ü
Regional Economic Integration Framework Slide 2
Overview
Business Association Networks Ankara Forum Process Industrial Estate Project
Local Capacity Building in Palestine Chamber Development Project Industrial Park Management
Capacity in Turkey TEPAV-Economic Policy Research
Institute
Regional Economic Integration Framework Slide 3
How it got started? What is in it for Turkey?
Time for regional integration of our economy for sustainable growth. (not only to foster EU process).
Need for stability in the region for enhanced trade and investment relations.
Trade is the basis of sustainable peace. Why in Palestine?
Oldest and basic conflict in the region. Why now?
A new process has started with Israeli disengagement.
Regional Economic Integration Framework Slide 4
What can be done? It is best to think through concrete projects
and create examples. Grand projects falter. Best to think small. An example: our efforts for the revitalization
of an industrial estate in Palestine Problems of the Palestinian Economy
Closure Problems Integration issues:
• Israeli economy requires Israeli cooperation• World economy (a re-exporting base?) requires the
support of the international community The need for job creation (especially in Gaza to
create a positive expectations process.)
Regional Economic Integration Framework Slide 5
The Estate Project We started with the most difficult area Idea came at one of the Ankara Forum meetings
Forum first started as a network of businessmen for cooperation
A concrete project was needed to monitor and test the words of politicians
An opportunity to leverage the know-how of Turkish Chambers in: public-private dialogue Industrial park management Doing business under extraordinary circumstances
A microcosm of all political and economic problems
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Progress Recap: Where We Are Now Political decisions certified official support,
Joint Declarations signed with both Palestine and Israel on January 4 and 5, 2006
The Developer Company (TOBB-BIS) established in Turkey and registered in Palestine
Investment Promotion Activities started Task Force established for trade facilitation
and security arrangements Engineering Team on the ground, projects to
be completed by March 2006 Constructions to be finished by July 2006 March 2006 elections in Israel ?
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Palestinian Industrial Free Zone
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A Unique & Exemplary Project It is not an ordinary business project.
requires effective coordination among the two not-so-friendly sides – PA and Israel
private-public dialogue is key throughout the entire process
But, it is still a business project. If we want it to be sustainable, it must generate
profits. Under appropriate security conditions. If there’s fresh air for the investors, business
prospects don’t seem too bad (especially, given the resources ready to flow into the region and generous FTAs.)
Regional Economic Integration Framework Slide 9
Political support is now certified Joint Declarations were signed with Israel and
PA on January 4 -5, 2006 This was no easy task. We saw that many people have the tendency to
reflect big political problems on very small steps. Profit opportunities can easily fall prey to this
tendency. Lessons learned:
Effective public-private dialogue mechanisms have to be in place for protecting the small steps. (Ankara Forum as an enabling mechanism)
Steps must be small to avoid castles to be built upon, and also technical to avoid political fights.
Regional Economic Integration FrameworkSlide 10
Support of the International Community James Wolfensohn (Former President
of the World Bank President and Quarter’s Special Envoy for Palestine)
Paul Wolfowitz (President of the World Bank)
Mark Otte (EU’s representative for the MidEast Peace Process)
Olli Rehn (EU’s Enlargement Commissioner)
Javier Solana (EU’s Common Foreign Policy Commissioner)
US Agency for International Development (USAID)
The World Bank Group (MIGA, IFC) East West Institute Chicago 10 Group
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Political Decisions Declared Israel has officially shown that
Job creation in Gaza is in the interest of Israel• Israel is ready to contribute to the economic growth of Gaza
It is possible to go beyond the Rafah Agreement (i.e. Movement of goods via Israel / not only the movement of outputs but also inputs)
• “ practical arrangements for the facilitation of operation of the PIFZ, including the usage of the Israeli maritime ports for exports and imports to and from the PIFZ would be coordinated between the two sides”
• Requirement of an Environmental Impact Assessment Report! PA has officially shown that
Special economic zone status will be provided• A regulatory coordination unit will be established• Concessions can be given in taxes and customs• Free Zone Status
Security issues can be handled by a third party Now the task is to transform all these possibilities and the good
will into concrete steps. Operationalize the good will statements.
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Formulating the most feasible framework: Ordinary tasks, extraordinary mechanisms
Movement of Goods market access customs regulations
Security arrangements Infrastructure +
construction Investment promotion Effective service delivery
Infrastructure Regulations
Require special status and special arrangements
=
Special Economic Zone ( A SEZ for Gaza)
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The need to create interim solutions Trade facilitation will not be smooth First best options are not available, at least
for the medium term i.e. Ports and airport in Gaza
Second-best and interim solutions need to be realized Access via Israel Logistic center at the border Support of the international community can
make the efforts workable (testing of the good will)
Access via South?
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Investment Promotion Providing incentives (fresh air)
Security package (Overhead costs lower profitability) Incentive package (Necessary to compensate overhead
costs).• Loan guarantees• Market guarantees: contracts• Investment guarantees• Regulation – enforcement guarantees• Tax exemptions.
Resources are available, donors are willing to let them flow into the region what is needed is a concrete and doable project to
mobilize the resources we wanted not another extra well-written report, but an
initiative that can channel the resources effectively, also where we can leverage our organizational capabilities in doing business under extraordinary circumstances
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Industrial activities at the Estate (before disengagement)
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Services & Infrastructure Services to be provided
Physical infrastructure quality will be at highest standards
Electricity Telecom (ISDN lines, hosting and internet) Easy access to major highway and to
Ashdod Logistics center Banking and Insurance Special Security Unit
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Trade Facilitation PIFZ will be extra-territorial
Industrial Free Zone Status Immune from Palestinian & Israeli regulations Customs unit will be established at the Zone Qualified Industrial Zone Privileges
• Duty and Quota Free Access to the US market– 35% Local content requirement (can be from Israel &
Jordan) Free Trade Agreements with the EU
Goods will move to/from the Ashdod Port 25 km North of PIFZ (in Israel) Transit Passage en route to the Estate
Plans to build airport and seaport in Gaza
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Potential Investors New investors:
Those who want to re-export their Gaza production to third countries (Arab markets, EU, and the US)
Those who want to target the Israeli market
Incumbent investors: Palestinians Israelis with partners from third countries
(i.e. American, Turkish)
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Our approach We are learning that there are two types of
approaches to private sector development Approach of international organizations:
Problems are big. Too many impediments to doing business. So develop big projects, target big problems, allocate big resources.
Our approach is different. Making profits is key for sustainability of any endeavor. Finding creative shortcuts for removing the big impediments to doing business. (Save the day, create hope for tomorrow)
• Well-functioning public-private dialogue mechanisms• Concrete and local projects. Interim solutions. (often
times, interim is eternal)• Engage in “transformational diplomacy”
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Lessons being learned
This is a region where ideal options are rarely feasible. (confidence gap and a whole range of political, ideological, historical reasons).
Small steps are essential instead of long range plans. Thinking through stages makes you focus on
technical issues. (less political etc.) Local solutions are essential.
The ideal, then, is to look for interim solutions agreeable to all parties at every stage.
Interim solutions strengthen confidence and bridge the gap.
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Investment Process Flow Contact TOBB-BIS
offices to be established in Gaza & Israel soon
currently TEPAV is the executive agency Obtain a license from PIEFZA Two ways to start:
Lease land & build own facility & start Lease facility & start
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Capacity Building in Palestine Capacity building programs for the
Palestinian chamber-system and organized industrial estate-related personnel in Turkey- 4-10 September, 2005. Training on issues such as: Chamber management and income
resources of the chambers Turkish Chamber Quality System and
Chamber Accreditation System TOBB-Eurochambres Joint Projects Promotion of International Trade Services Arbitration and Chambers Management of Organized Industrial Zones
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TEPAV- Economic Policy Research Institute
TEPAV became operational in December 2004
The objective is to create an independent research capacity for PSD and PPSD.
Organized around three programs,Economic StudiesGovernance StudiesForeign Policy Studies
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Focus on the transformation process Developing policy tools for dialogues with
the government Investment Climate Assessment Competition Environment Assessment EU Impact Analysis (TurkMod)
Raising the capacity of the local stakeholders to have more active roles Local communication network for academics and
journalists Enhancing the policy making ability of local
chambers Regional Integration
Industry for Peace Initiative Eurasia Project
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Contribution of TEPAV|EPRI to the economic transformation process Investment Climate Assessment (jointly with the
World Bank) determining the binding constraints to firm performance providing policy recommendations for removing barriers to
private investment Industrial Policy Document (jointly with the State
Planning Organization) Formulating Turkey’s industrial policy in accordance with
the EU accession process Labor Market Studies (jointly with the Brookings
Institution) policy choices for converting the skills of the unemployed
workforce realigning the skills of labor with the needs of the private
sector
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To sum up Both Turkey and the region is undergoing a
very important transformation process Private sector has important roles (different
from those of the past) There is the need to manage the process
effectively. We need: Know what the process is about Capacity to manage it
Well functioning and integrated private sectors are central to peace