Country Profile (About Palestine)

Table of contents
Introduction
Economic and Political Outline
Business Practices
Tax System
Legal Environment

I.    Introduction

Population

POPULATION: 4,97 million (2015) [1]

POPULATION GROWTH: 2.8 % annual(2016) [2]

URBAN POPULATION:  73.9% (as of mid of 2016) [3]

LANGUAGE: Arabic, English

MEDIAN AGE: 20.8 years West Bank, 16.9 years Gaza Strip  [4]

Country Overview

AREA:  27,000 km2

GOVERNMENT SYSTEM: elected president, appointed cabinet and legislative council

HDI: 0.677 (2015)[5]*

HDI world rank: 113 /187 [6]

*The Human Development Index (HDI) is a composite statistic used by the United Nations composed of life expectancy, education, and income indices and aims at ranking countries into four tiers of human development. The index ranges between the value of 0 and 1 where 1 represents the highest level of human development.

Telecommunication

INTERNATIONAL DIALING CODE:  +970/2       INTERNET SUFFIX: .ps

 

II.    Economic and Political Outline

International Trade

  2011 2012 2013 2014 2015
Palestinian Exports
745,661
 782,369 900,618 943,717 957,811
Palestinian Imports
4,737,647
 4,697,356 5,163,897 5,683,199 5,225,467

source : international trade center

Economic Outline

Preliminary estimates indicated a decrease in GDP in Palestine by 3.5% during 2015 compared with 2014; GDP per capita has decreased by more than 0.5% during 2015 compared with 2014.

The largest contributor to the increase in GDP in 2015 was the services and other items activity, which rose by 3.1% and the total number of employees increased by 6.1%. The second contributor was the construction activity with a gross value added rising by 2.1% compared to 2014. The total number of employees in the construction activity also increased by 9.7%.7

 

Main economic indicators (2011-15)

  2011 2012 2013 2014 2015
Real GDP (USD Million)  6,882 7,314 7,477 7,463.4 7,724.6
Real GDP per capita 1,752.5 1,807.5 1,793.3 1,7937.8 1,746.8
Real GDP annual percentage change (2004  market prices ) 8.66 8.09 12.41 6.28 2.22
Inflation Rate (period average,  %) 2.8 3.8 2.9 2.8 1.7
Unemployement Rate (average in percent of labor force) 24.5 23.7 21.0 23.0 23.4

Source :Palestine Monetary Authority (PMA) and PCBS

 

1.    Percentage Contribution to GDP by Economic Activity in Palestine for the year 2014

Employment per sector (%) 2015

Agriculture, Fishing & Forestry

8.7

Mining, Quarrying & Manufacturing

13.0

Construction

15.5

Commerce, Restaurants & Hotels

20.6

Transportation, Storage & Communication

5.8

Services & Other Branches

36.4

ٍsource: PCBS,2016

According to the Labour Force Survey, 2015 conducted by the PCBS, it was found that in Palestine 68.7% are wage employees; 18.2% are self-employed; and 6.9% are unpaid family members.

 

Sector contribution to GDP (2014)
 

 


 

Source: PCBS, 2015

 

The Services & Other Branches sector is the biggest employer in Palestine with 36.4% as of 2015.

The public sector employed 22% of the workforce (36.9% in Gaza Strip and 16% in the West Bank). The average daily wage for employees in the private sector was 23.34 USD in the West Bank and 13.44 USD in the Gaza Strip.

 

2.    Sources of general economic Information Ministries:

Political Outline

TYPE OF STATE: Semi-presidential republic, elected president, appointed government cabinet led by the Prime minister and a legislative council.

EXECUTIVE POWER:  The President of the State of Palestine is the leader of the State. The President is chosen by the Palestinian Central Council (Parliament) and directly appoints the Prime Minister who leads the cabinet.

LEGISLATIVE POWER:  The Palestinian Legislative Council is composed of 132 elected members who confirm the appointment of the Prime Minister by the president as well as all positions of the cabinet.

Trade Profile

The state of Palestine is open to trade as its trade value represents more than 50% of its GDP.  Moreover, customs duties are comparatively low. Despite a negative trade balance, the Palestinian economy is promoting exports and integrates itself into the regional and international economy framework thanks to many free-trade agreements (Please See: Trade Agreements).

 

Trade indicators (2013 -2015)

Foreign Trade Indicators 2013 2014 2015
Exports of Goods (thousand USD) 900,618 943,717 957,811
Imports of Goods (thousand USD) 5,163,897 5,683,199 5,225,467
Exports of Services (thousand USD) 876,559 190,750 175,843
Imports of Services (thousands USD) 1,203,657 150,156 142,705
Trade Balance products (thousands USD) -4,263,280 -4,739,482 -4,267,656

Source: PCBS. and ITC database, own computation

 

Major exports and imports

In 2015, Palestine’s major export products were building stone;  ; olive oil, virgin; cigarettes; marble and travertine ; fresh cucumber ; footwear ; mattresses; wooden furniture for bedrooms; and upholstered seats.

The industrial sector dominates in terms export activity. The stone and marble industry is the flagship of Palestinian exported goods. More than 10 companies from that industry export at high levels –between 91-100% of their annual turnovers. In 2015, the stone and marble industry exported goods valued at US$183 million, the agro-food processing at US$200 million, and the furniture industry’s exports were valued at almost at US$101 million (Trademap, 2015).

Growth of national supply and international demand for export products of Palestine (2010-2014)

Source: International Trade Centre (ITC)

 

Main Trading partners 

Main customer (% of exports) 2015 Main supplier (% of imports) 2015
Israel 83.9 Israel 58.3
Jordan 6.3 Turkey 7.3
UAE 2 China 7
Saudi Arabia 1.5 Germany 2.8
Kuwait 1.3 Jordan 2.7
Others 5 Others 21.9

Source: COMTRADE

Exchange Rate System 

CURRENCY:  New Israel Shekel (NIS). Jordanian dinars (JOD) and US dollars (USD) are also used in many business transactions.

EXCHANGE RATE REGIME: Floating exchange rate

Economic Cooperation

Bilateral Trade Agreements with the following countries / entities:

Standards

NATIONAL: Palestinian Standards Institution, memorandum of understanding signed with  ASTM International

INTERNATIONAL: International Standards organization (ISO) 

 

III.    Business Practices

Business etiquettes in the Arab world in general could be assumed as follow:

  • Politeness is a key element- Make sure to  be polite with your partners. While this is good practice anywhere you go it is critical in the Arab world.
  • The concept of saving face- People, out of respect, may seem to agree to something even if they don't just to make sure that the other person does not lose face; so that paying attention to the context of the discussion is crucial.   
  • Being critical- You should particularly be vigilant while formulating critical opinions; expressing them too frankly and in an animated and passionate manner could make your business interlocutor feel uncomfortable
  • Dress code- Business suits or semi-formal attire is considered to be appropriate for most business setting. In general, showing too much skin is considered to  be inappropriate especially in a business environment.

For more information about business practices in Palestine click here:  Doing Business in Palestine 2014 PALTRADE DOCUMENT

IV.    Tax System

A.    Corporate Taxation:

Tax rate

Palestinian companies and businesses  15%
Excluding telecommunication companies and pure monopolistic companies 20%

Source: PIPA

 

TAX YEAR: From January 1 to December 31

RESIDENCE: A corporation is resident if it is incorporated in Palestine or managed and controlled in Palestine.

BASIS: Residents and legal entities, including branches of foreign entities, are taxed on their taxable income in Palestine computed in accordance with the tax law.

TAXABLE INCOME: Corporate tax is imposed on a company’s net profits, which consist of business/trading income, passive income (except for dividends received from resident companies), and 75% of the gains realized from trading in equity securities and bonds.

Taxable income of resident persons and companies includes foreign income derived from their funds or deposits in Palestine.

Taxable income is computed on an accrual basis, except for interest and commissions on doubtful debts of financial institutions, which are taxable on a cash basis.

TAXATION OF DIVIDENDS: Dividends received from resident entities are exempt from tax.

CAPITAL GAINS: Capital gains are taxed at regular rates; however, 25% of the capital gains derived from the sale of investments in equity securities and bonds are exempt

B.    Value added Tax:

RATES: The standard VAT rate is 15% as from 1 October 2012.

This rate also applies on imported goods but the VAT can be deducted as input tax  if declared at the VAT authority.

Small companies with annual revenue less than USD 12 000 are exempt from taxes

International comparison (2016)*

  West-bank and Gaza Middle-East OECD
Number of Payments of Taxes per Year 28 17.8 10.9
Time Taken For Administrative Formalities (Hours) 162 208.2 136.4
Total Share of Taxes (% of Profit) 15.3 32.3 40.9

Source: Doing business data
 

For more Information on the Palestinian tax system:

C.    Accounting System

No specific accounting standards are required by statute except in regulated sectors. In practice IFRS are the standards of reference. All companies are required to file annual financial statements with their Registrars within four months of the year-end.

Non-audit activities, including bookkeeping and preparation of tax returns are unregulated; PACPA membership is required only for firms or individuals issuing independent audit reports.
The external audit must be performed by a licensed member of the PACPA (Palestinian Association of Certified Public Accountants).


LISTED COMPANIES REQUIREMENTS: Submit audited financial statements—comprising a balance sheet, income changes in equity and cash flow statement—on an annual basis to the Palestinian Stock Exchange (PSE) and the Palestinian Capital Market Authority (PCMA).

  • Annual financial statements, audited by an external auditor, must be submitted within three month before the year-end.
  • Semi-annual financial statements reviewed by the external auditor must be submitted within 45 days of the semester-end.
  • Quarterly financial audited by the company’s internal auditor, if applicable, must be submitted within 45 days of the end of the first and third quarters.

D.    Accountants:

The Palestinian Association of Certified Public Accountants (PACPA) is the professional association of auditors, which currently consists of 200 members PACPA is a member of International Federation of Accountants IFAC

Summary of regulations

  Listed companies Non-listed companies
Regulatory Agency Palestine Capital Markets Authority (PCMA) &  Palestine Stock Exchange (PSE) Companies registrar &  Palestine Capital Markets Authority
Financial Reporting Standards IAS (International Accounting
Standards )		 not specified
Audit requirement yes yes
Publication & others Publication on PSE, audit staff rotation every 5 years Financial Statement via the Companies Registrar
Deadlines 3 months (annual), 45 days (interim)  4 months from year-end
Basic Law Securities law of  2004 , PCMA regulation 5 (2008) , PSE Disclosure
regulations of 2006		 West Bank: Jordanian Companies Law (1964) 

Source: World Bank report 56402. West Bank and Gaza: Report on the Observance of Standards and Codes (ROSC) Accounting and Auditing. July, 2010.

V.    Legal Environment

The Palestinian legal system is in the process of reforming to become mature and well built based on international legal standards.
Until the adoption of the new company registration law, the Companies Registration Department of the Ministry of National Economy, who is responsible for company registration of legal entities permitted to do business in Palestine, handles the registration process.
Business in the West Bank is regulated by the Jordanian Law No.12 of 1964 which classifies and regulates companies as follow:

Companies’ classification

  Name Number of founders Capital Legal obligation Managing rights
WEST BANK: Jordanian Law No.12 of 1964  Regular Public Company (Solidarity company) 2-20 Not specified  All partnersare jointly liable for covering the debts of the company and for all of their contracts and obligations All partners can participate in managing the company without having the right to receive any benefits and rewards as compensation unless all partners agree otherwise.
Regular Limited Liability Company 2-20 Not specified 2 types of partners:                 - General type of partners jointly liable for the compan'y debts, contracts and obligations                - Partners with limited liability up to the ammount of capital their invested Partners with limited liability may not have managing rights
Public Shareholding Limited Liability Company Min. of 7 Min. of 30 000 JOD of tradable shares to the public Limited Liability up to the capital invested Board of directors of 5 to 11 members elected for 4 years are managing
Private Limited Liability Corporation 2-50 Min. 2000 JOD splited as shares; not publicly traded Limited Liability up to the capital invested Number of shareholders <20:  the partners decide how to manage the company.  Number of shareholders >20: Board of directors of 2-5 members elected every 4 years
Foreign company: regular or shareholding Should register within the Company Registrar. Shareholding company, must present a report on their business within 3 months of the end of every financial years
their business within 3 months of the end of every financial
year and a copy of their financial reports prepared by a
certified audit firm.

Source :  Palestinie Trade Center- PalTrade

INTELLECTUAL PROPERTY

The Palestinian National Authority is an observer member of the World Intellectual Property Organization since 2005 and is in the process of drafting a protection of Intellectual Property Rights Law.

Since 1997 the State of Palestine has been adhering to WTO standards and regulations. High efforts are put forth to preserve WTO standards especially in term of Intellectual Property in the framework of the Trade Related Intellectual Property (TRIPS).  The TRIPS sets minimum standards regarding property rights such as patents, copyrights and trademarks as well as enforcement mechanisms such as civil judicial procedures, deterrent mechanisms and borders measures

Intellectual property rights overview

  Length
Trademark 7 years  renewable
Patents  20 years
Utility Model or Design Application 15 years
Copyrights 50 years after the death of  the author of  the work

Labor law

Labor regulations overview

Issues Policies
Work Day / Week Max 45hrs/ week; no daily limit
Weekly holiday One day per week; any day
Overtime Paid at 150% of the salary
Annual leave Min. 14 days for the first 5 days of employement; 21 days thereafter
Serverance pay 1 month of salary (excluding overtime hours)
accrued per year, with no accumulation limit.
Worker's accident insurance All employers are required to carry insurance for employees
Sick leave Days 1-14=100% of salary; Days 15 -28=50% of salary.
Minimum wage 1450 NIS
Transportation reimbursement Not required
Maternity leave 100% of pay for a total leave period of 10 weeks, providing that 6 weeks are taken after the delivery day
Social security and medical insurance None

Source: Palestine Labor law

Temporary work contracts

Temporary work contracts cannot exceed a maximum of two consecutive years with the same employer. If work continues for longer than this period then the contract is considered a long-term contract of unlimited duration. Additionally, the law limits the trial period of employment to no more than three months. Individual contracts may be terminated under any of the following circumstances: the agreement of both parties, the end of its duration for ad hoc, temporary or seasonal business, at the expressed wish of any of the two parties during the trial period or at the expressed wish of the employee on the condition that the employee informs the employer one month in advance if he/she is paid a monthly wage, or one week in advance if he/she is paid on a daily/weekly/or by contract.

The law permits employers to unilaterally terminate a contract without prior notification in case of grave breaches. Regular dismissal related to either redundancy or to the economic  situation of the company requires a notice of one month and  payment of severance pay, the equivalent of one month per year worked in the establishment.

Labor Disputes

Labor disputes are solved by negotiation within each establishment. If a dispute cannot be resolved within the establishment, either one or both parties have the right to resort to the reconciliation office at the Ministry of Labor. If the reconciliation officer fails to resolve the conflict within 10 days,the minister is obliged to refer this dispute to a reconciliation committee consisting of a ministry staff member who heads the committee and an equal number of members selected by both the employer and the employees. If this committee fails  to resolve the dispute within two weeks, the parties are free to resort to court.

Juvenile Work

It is forbidden to employ children under the age of 15. Juveniles aged 15 – 18 who are eligible to work, need to be subjected to a medical examination prior to employment, to be repeated every 6 months. Those under the age of 18 cannot be employed in dangerous industries or industries that damage health, nor are they allowed to work at night.

The daily working hours must be reduced for juveniles by no less than one hour daily. The annual holiday for juveniles is 21 days and it cannot be postponed to the following year.

 

References

[1] PCBS

[2] PCBS

[3] PCBS

[4] CIA  fact book

[5] UNDP

[6] UNDP

(7) PCBS