Priority Economic Sectors
 Table of contents
Stone and Marble Sector
Food Processing Sector
Pharmaceuticals Sector
Leather and Shoes Sector
Textiles and Garments Sector
Handicrafts Sector
Tourism Sector
Information and Communication Technology (ICT) Sector

The Current Status of Industrial Sectors in Palestine report by PALESTINIAN FEDERATION OF INDUSTRIES/USAID ,2009

Stone and Marble Sector

 

Stone and Marble Sector Contribution to the Palestinian Industry (2015)

Total Exports 2015

$145,782,000

Percentage of Employment 2015

13.4%

Percentage of Exports

19.1%

The stone and marble sector is one of the largest and most active industries in Palestine. Palestine's abundance in natural limestone caters to international demands. Both stone and marble products are produced locally using available raw materials. Palestine has a variety of natural stones; these vary by type and quality according to their location and source. Therefore, the industry is able to provide a wide range of stone and marble products in different colors and textures including blocks, slabs, tiles, building stones, decorative, and ornamental products. 


  According to the Union of Stone and Marble (USM) there are 1,650 companies involved in this industry including cutting factories, quarries, crushers, and workshops. 658 of these companies are located in Hebron and Bethlehem, which are the two main industrial stone and marble centers in Palestine. Although it is a usually an automated industry, the stone and marble industry is one of the largest employer of labor force in Palestine with about 8,500 (approximately 13.4% of total workforce) workers employed in this sector.


Source: trademap.org


Palestinian exports of stone and marble followed an upward trend over the years 2011-2014, moving from US$ 142 million in 2011 to US$ 195 million in 2014. However, the sector’s exports retracted in the next year to reach US$ 183 million in 2015 which indicate a decline of 5.9%.         

 

                                                                                                                                                                                                                                                                       Source: trademap.org

 

Source: trademap.org

 

Food Processing Sector

 

Food manufacturing and agricultural industry is the oldest, yet one of the fastest growing sectors in Palestine. With 16% of the tota

Food Processing Sector Contribution to the Palestinian Industry (2015)

Total Exports (USD Thousand)

$199,837

Percentage of Employment (Agriculture)

8.7%

Contribution to total GDP  (Agriculture)

3.3%

Percentage of Exports

21%

l area of the West Bank and Gaza being cultivated land, this sector is vital for maintaining food security in Palestine and for economic growth.


The industry’s most active processing efforts consist of three major categories: the conservation of fruits and vegetables, meat and dairy, and the conversion, purification, and distilling of animal and vegetable fats. There are various food products manufactured in Palestine including but not limited to: confectioneries and sweets, dairies and milk products, processed meat, beverages, pasta and other grains products, canned food, oils, and traditional products (particularly tahini, hummus, halaweh, za'atar, freekeh, etc.), and animal feeds industry.

 

 


Source: trademap.org

Palestinian exports of Agro-food products followed an upward trend over the years 2011-2015, moving from US$ 117 million in 2011 to US$ 200 million in 2015 which also represents its peak exports value. Such an increase signifies a growth level of  71% over the past 5 years.

Food products output is approximated at $400 million with a continuous increase in the local market share. This sector employs 16.8% of the to

tal workforce. There are more than 1,500 operating firms in this sector, and many of them have acquired the necessary certifications of ISO versions and HACCP. Although the majority of the exports within the food processing industry, about 63% go to Israel, and approximately 37% of the products are sold to international markets in Jordan, the Gulf, the USA and Netherlands.

 

 

                                                                                                                                                                                                                                         Source: trademap.org

The figure below highlights the top 10 export destinations for Palestinian Agro-food products in the year 2015:

The food processing industry greatly supports the agricultural industry. Agricultural products in specific represent approximately 3.3% of the Palestinian Gross Domestic Product (GDP), employ 8.7% of the total Palestinian workforce, and form 21% of export trade from Palestine (the value of  total exports at the end of year 2015 amounted to approximately $957 million).

 

Olive oil is a very significant contributor to this sector (19.61% of the total output). With exports reaching US$ 39.2 million in 2015. Usually, 30% of the oil is consumed locally and 70% is exported.

On the other hand, the dairy-processing sub-sector relies on Palestinian fresh milk used in all dairy manufacturing. There are about 10 large farms that use modern farming technology and encourage the investment in dairy-cow breeding. Finally the meat-processing sector includes 15 factories producing processed meat (luncheon meat, sausage, hamburger, and canned meat). These products are sold to the local market, but are also exported to the Jordanian and Gulf markets.

 

Pharmaceuticals Sector

The Current Status of Industrial Sectors in Palestine report by PALESTINIAN FEDERATION OF INDUSTRIES/USAID ,2009

Pharmaceutical Sector Contribution to the Palestinian Industry (2015)

Total Exports (USD Thousand)

$13,395

Percentage of Exports

1.4%

The Palestinian pharmaceutical sector differs from other economic sectors in terms of innovation and development. This industry mostly targets the local market where 45% of the Palestinian pharmaceutical market consists of 1,118 registered and Palestinian-made pharmaceutical products. There are six major companies mainly located in Ramallah generating 2.43% of the total national output, with approximately $40 million annual sales, and employing around 1,100 employees (2% of total employment).

 

This industry provides the local Palestinian market with a variety of products that tailor people’s usual needs in terms of medicinal products. However, these products are mostly generic resulting in homogenous production lines thus creating inter-industry competition and limiting the development and innovation of this sector. This prevents the sector from significant economic improvement by restricting potential investments, research and development prospects, as well as the utilization of economies of scale. 


Aiming to focus on the quality of its production, the industry invested over $30 million to meet the Good Manufacturing Practices (GMP) requirements. Consequently, all Palestinian pharmaceutical manufacturers follow GMP and are ISO 9000 and ISO 14000 certified. Over 1,000 products are produced and registered with the Palestinian Ministry of Health.

Palestinian pharmaceutical exports have been following a downward trend between the years 2011-2014, moving from US$ 16.7 million in 2011 to US$ 9.8 million in 2014. The main reason behind this decline is the retraction of Palestine’s exports levels to most of its importing partners for pharmaceutical products such as, Poland, Algeria, Malta, Jordan, and Slovakia. Only exports to Israel remained at a constant level over the years while exports to Germany increased from US$ 361 thousand in 2011 to US$ 1.3 million in 2014.

However, in 2015 Palestinian exports of Pharmaceutical products increased to reach US$ 13.4 million. Palestinian pharmaceuticals products are exported mainly to Algeria and Eastern Europe with Italy, Korea, Greece, Japan and USA being potential markets. This sector forms 1.4% of total Palestinian exports with an export value of $13.4 million.

The figure below highlights the top 10 export destinations for Palestinian pharmaceuticals in the year 2015:

Moreover, 66% of the sector’s exports go to Israel ($6.4 million) while the remaining exports go directly to international markets such as: Poland, Algeria, Malta, and Jordan…etc. Thereby forming 34% of the total pharmaceutical exports. Internationally, Palestine is considered the 90th largest pharmaceutical exporter in the world.

Leather and Shoes Sector

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The Palestinian shoes and leather industry dates back to a few decades. It is one of the most important and established industries. This sector flourished in the 1970’s, but international imports specifically from China after the year 2000 dynamically hindered further development of this sector decreasing the investment in the sector from $220 million to $70 million.

 

This industry mainly operates in leather tanning (10.6%) and footwear manufacturing (89.4%). The manufacturing of footwear is mostly centered in Hebron, but it is present in Bethlehem and Nablus as well. Currently there are around 200 enterprises and 12 tanneries in this industry employing about 3,000 employees. Although the sector’s production capacity is about 13 million pairs, less than 20% is actually utilized. Products are directly exported to UAE, KSA, Qatar, Jordan, Turkey, Germany and Belgium, and indirectly (via Israel) exported to Canada and EU.

 

The Palestinian shoes and leather industry dates back to a few decades. It is one of the most important and established industries. This sector flourished in the 1970’s, but international imports specifically from China after the year 2000 dynamically hindered further development of this sector decreasing the investment in the sector from $220 million to $70 million.

 

This industry mainly operates in leather tanning (10.6%) and footwear manufacturing (89.4%). The manufacturing of footwear is mostly centered in Hebron, but it is present in Bethlehem and Nablus as well. Currently there are around 200 enterprises and 12 tanneries in this industry employing about 3,000 employees. Although the sector’s production capacity is about 13 million pairs, less than 20% is actually utilized. Products are directly exported to UAE, KSA, Qatar, Jordan, Turkey, Germany and Belgium, and indirectly (via Israel) exported to Canada and EU.

Textiles and Garments Sector

Textile Sector Contribution to the Palestinian Industry

Percentage of Output

6%

Percentage of Employment

20% (12000 employee)

Contribution to total GDP

<2%

Percentage of Exports

--

The textile and garment sector in Palestine is one of the important sectors in terms of production, investment, employment and exports. People working in the sector have established experience in producing high quality products for international brands as well as high quality local products at competitive prices.

This sector forms 6% of the industrial sector as a whole in Palestine, with 1,942 manufacturers and 12,000 workers. The market size of this sector is continuously growing at an average annual rate of 2.3%. The main categories of products are fabrics and garments. Products include knitwear, denim, terry cloth, bed linens and various home textiles.

 

 

Raw materials are imported from different countries including Turkey, China and India. Products are sold in the local market (locally consumed) albeit most of the products of this sector are exported (mainly to the Israeli market). Notably, there exists attractive opportunities in countries with high per capita GDP such as Italy, Sweden, Finland, Thailand and the United States. Palestine enjoys several Free Trade Agreements with many countries including: Israel, Arab States, Turkey, USA, EU, EFTA states, and Canada; this facilitates importing raw materials and exporting finished products.

 

 

Handicrafts Sector

 

Handicraft products are a Palestinian tradition that has been passed down for generations. Products relate to the historical, cultural and religious background of Palestine. Considering the experiences and resources available in Palestine, this sector provides a wide spectrum of unique products. Most oriental handicrafts are composed of olive wood carvings, mother of pearl, ceramics, glass works, pottery, embroidery, knitting, and others. The originality and authenticity of the products that are sold at competitive prices make this sector quite distinctive compared to the other, more generic, economic sectors.

For the most part, the handicrafts in Palestine are made in small shops. Because it is a labor-intensive sector, thousands of workers in around 1,000 workshops around the West Bank are employed, 19% of the producers are in the Gaza Strip, and the remaining 81% are located in the Bethlehem and Hebron areas with a very small percentage in Jericho.

Olive wood covers 35% of handicraft products, stone and mosaics 22% embroidery 17% ceramic 12% and the rest of the silver, candles, carpets, bamboo and others 14%. The exported value in 2015 was  $1.7 million, the market share was  21% to the Israeli market and 30% exported to Europe, USA and Arab countries. The rest is sold domestically, but these local sales are highly dependent on tourists. Sales increase during various religious holidays and in the summertime. 

 

Tourism Sector

 

The tourism sector in Palestine is consistently growing as the investments in the infrastructure for tourists are increasing.

Palestine’s historical, religious and cultural sites present a huge potential for tourism in Palestine to expand. By the middle of 2016, the number of visitors to tourist sites in the West Bank was 2.07 million visitors, 952 thousand tourist and 1.12 local visitors.

Income, investment and employment related to the tourism sector are highly dependent on the hotel industry which represents 25% of the sector’s revenues and generates 46% of its employments. By the end of 2016, according to PCBS, there were 125 operating hotels in the West Bank. Also, the presence of international brand hotels in Palestine like the Intercontinental chain and the Mövenpick hotel added value to the potential growth of this sector. Tour guides and operator services as well as transportation companies, souvenir shops, restaurants and handicraft exemplify sub-sectors supporting the Palestinian tourism industry. 

 

Information and Communication Technology (ICT) Sector

The Palestinian ICT sector is a rapidly and continuously growing economic sector and is significantly contributing to the development of the Palestinian economy with an annual market growth of about 25% and an estimated market size of $500 millionز There are about 250 ICT companies in Palestine employing approximately 6,400 employees these include 124 core companies registered at PITA (Palestine’s Information Technology Association). Furthermore, 50% of the Palestinian ICT companies operate in software development and online services whereas the other 50% include hardware distributors, office automation vendors, telecommunications companies, and ICT consulting and training. Notably, 50.9% of Palestinian households own a computer and 39.6% of individuals use the Internet.

The support of multinational companies and international aid are two driving forces facilitating the development and improvement of the ICT sector in Palestine Furthermore, 50% of the ICT companies have partnerships outside Palestine, and 30% export to international markets including USA, Europe, Middle East and the Gulf. ICT exports majorly consist of R&D (research and development) including projects with CISCO, Intel, HP and Microsoft.