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Cablegate: West Bank Businesses Capitalizing On Improved

VZCZCXRO8808
PP RUEHROV
DE RUEHJM #1990/01 3081339
ZNR UUUUU ZZH
P 041339Z NOV 09
FM AMCONSUL JERUSALEM
TO RUEHC/SECSTATE WASHDC PRIORITY 6566
INFO RUEHXK/ARAB ISRAELI COLLECTIVE
RHEHNSC/NSC WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEKJCS/JOINT STAFF WASHDC

UNCLAS SECTION 01 OF 02 JERUSALEM 001990

SENSITIVE
SIPDIS

NEA FOR NEA/IPA AND NEA/PPD; JOINT STAFF FOR LTGEN SELVA;
PLEASE PASS TO USAID FOR ANE/MEA:SBORODIN; NSC FOR
SHAPIRO/KUMAR

E.O. 12958: N/A
TAGS: ECON ETRD EAID PGOV KWBG IS
SUBJECT: WEST BANK BUSINESSES CAPITALIZING ON IMPROVED
CONDITIONS

1. (SBU) Summary: West Bank businesses are expanding, based
on improved security conditions, greater internal freedom of
movement, and an uptick in consumer spending. Business
owners claim continued growth is dependent on easier movement
of goods and people within the West Bank, as well as between
the West Bank and Israel and Jerusalem. Some of the largest
West Bank businesses, such as National Beverage Company,
NAPCO, and Wataniya, continue to suffer from Israeli)imposed
constraints that restrict employment and growth. End summary.

Improved Conditions Bring Growth,
With Ramallah as Retail Flagship
---------------------------------

2. (SBU) In conversations throughout October 2009, a number
of West Bank business owners expressed increasing confidence
in the local economy. EconOffs met separately with
representatives from more than a dozen enterprises from Jenin
at the northern end of the West Bank to Hebron in the south,
almost all of whom are expanding business or investing in new
sectors. New investments are most noticeable in Ramallah: a
longtime marble and ceramic importer recently opened a
high-end men's suit shop; an established electronics retailer
opened a pilot "big box" store; and a family that made money
in cosmetics invested USD 4 million in a boutique hotel,
conference center, and spa facility. The owners of
Ramallah's newest and trendiest coffee shop noted that while
it is easy to vent about the political situation, the reality
is "it's now safe to invest here."

Consumer Confidence and Spending Drive Profits
--------------------------------------------- -

3. (SBU) Nidal Juneidi, general manager of the West Bank's
largest dairy, located in Hebron, said demand for his
products has increased this year. West Bank economic
conditions he said are "more stable than any time since the
signing of the Oslo Accords." While battling a range of
Israeli restrictions, including the prohibition of dairy
exports from the West Bank to East Jerusalem and Gaza and a
ban on hydrogen peroxide required for sterilization purposes,
Juneidi's profits are increasing.

4. (SBU) Juneidi attributes the gains to improved access and
movement, better security, and a society that has more money
to spend. "West Bank Palestinians feel secure, so they're
buying things," he said. Juneidi has recently invested USD
2.5 million in Ultra-High Temperature technology that
generates longer shelf-life in order to extend the range of
his goods. Similar good news stories include West Bank
importer Unipal's sales of consumer products, which have
increased 14 percent over the last year, despite the loss of
the Gaza market; and electronic goods distributor Safad,
which reported growth as a result of increased consumer
spending.

5. (SBU) These same business owners were quick to note that
continued movement and access restrictions -- in particular,
difficulty exporting goods to or through Israel -) limit
their growth. Retailers in Ramallah noted that continued
restrictions on movement to and from Ramallah limit their
consumer base to relatively small geographic areas.

Checkpoint Removal Brings More Tourists to Jericho
--------------------------------------------- -----

6. (SBU) Kamel Sinokrot, owner of the Jericho "Mount of
Temptation" cable car, said that the removal of Jericho's
main checkpoint resulted in an increase in visitors to the
city and more tourist-related business. As a result, he has
resumed construction halted since the Second Intifada, of a
hotel. Sinokrot and his brothers also are expanding their
family-owned packing plant to increase the variety and amount
of produce for export from the Jordan Valley.

7. (SBU) The owner of the West Bank's largest tourist center
(located in Jericho) said he has begun construction on "one
of the largest tourist sites in the West Bank." The site
will be called "Ancient Jericho," and will include several
structures replicating ancient homes and craftsmanship, as
well as a self-guided tour depicting Jericho's history.
(Palestinian tour operators and hotel owners have organized a
visit by more than 80 Israeli tour guides to Jericho during
the week of November 2 in order to encourage them to add

JERUSALEM 00001990 002 OF 002


Jericho sites to established tours that, until recently, have
driven past the city on the way to Masada or Jordan.)

Better Security, Rule of Law Affecting Business
--------------------------------------------- --

8. (SBU) Palestinian businessmen also report that
improvements in law and order are positively impacting the
business climate. Officials from a large steel company in
Jenin credited improved security and a court system that
"goes after those who bounce checks." They said the PA now
penalizes perpetrators bouncing checks "on a daily basis,"
and a stronger legal system increases the confidence of
companies to make large transactions. Ramallah-based
distributor Ibrahim Barham said that the private sector was
beginning to benefit from improvements in the rule of law.
"The court system is starting to work," he said.

9. (SBU) A Hebron rice trader, who plans to invest in the
West Bank's soybean oil trade, told Econoffs that the PA's
crackdown on traders and retail outfits operating without
licenses was a key cause of lower rice sales this year.
Despite the setback to his sales, he admitted that such
oversight will create a more stable investment climate in the
long run.

But Some of the Largest
Enterprises Still Suffering
---------------------------

10. (SBU) Despite general improvements, manufacturers
continue to experience Israeli rejection of their requests to
import inputs essential to their production lines. The
National Beverage Company (NBC), one of the leading U.S.
investments in the West Bank and bottler for Coca Cola, has
closed down its TetraPak production line due to lack of
hydrogen peroxide for machine sterilization. NAPCO, the West
Bank's only aluminum producer with annual sales of USD 10
million, has been unable to import sulfuric acid, essential
to its anodizing production line. Although NAPCO's sales are
up, it is barely breaking even as a result of the heavy debt
it is carrying from its unused line. Though Wataniya has
launched its mobile telephone operation, the lack of
certainty regarding its frequency allocation has hindered its
marketing campaign and significantly delayed its roll-out.

11. (U) Business owners also complain about an overly
cautious banking sector that provides loans only against
sufficient collateral and does not take risks to support
entrepreneurs or innovation. In each of the cases of
expansion above, the capital for new investments came from
established, family businesses. One entrepreneur (who used
family connections and property to secure the loan for his
first, successful store) noted wryly, "now that I don't need
them," banks have become eager to support his expansion
plans.
RUBINSTEIN

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