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West Bank Businesses Seek Growth Amid Uncertainty

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U.S. Secretary of State John Kerry heads back to Israel and the West Bank on Thursday for more talks on restarting peace negotiations between Israelis and Palestinians. When he was there last month, he walked away with at least one agreement — to improve the West Bank economy. Here's how he put it as he left Israel:

"We agreed among us — President Abbas, Prime Minister Netanyahu and ourselves — that we are going to engage in new efforts, very specific efforts, to promote economic development and to remove some of the bottlenecks and barriers that exist with respect to commerce in the West Bank, to move very rapidly toward increased business expansion and private sector investment in the West Bank."

This wasn't designed to replace the political track, Kerry emphasized, but to complement it.

No more details have been publicized. But if Kerry really can succeed in removing "bottlenecks and barriers," some businesspeople in the West Bank say that might go further than cash.

Take stonecutting. So-called Jerusalem stone is famous around the world. Both Israeli and Palestinian companies extract and export it. But West Bank quarries are in an area where Israel, as agreed to in the Oslo Accords, controls permits for any activity on the land.

Ahmed Thwabta, who owns a stone factory in Beit Fajjar, by Bethlehem, says sometimes Israeli soldiers confiscate his workers' tools. Sometimes they deny access to the mine.

"We work according to the Israeli mood," he says. "If the political situation is good, then we are OK. If the political situation is bad, then they come and pick on us and fine us."

That unpredictability hampers all kinds of businesses. Farmers wanting to sell their produce in Jerusalem can't always be sure a crossing will be open in time to keep strawberries, for example, from spoiling. Shoemakers can't guarantee shipments. Even the small-but-growing IT sector faces obstacles.

"For example, Palestine cannot have 3G or 4G because the Israeli authorities are preventing them from accessing these frequencies," says Saed Nashef, a Palestinian-American venture capitalist running a fund with nearly $30 million to invest in Palestinian tech companies.

He also says Israel could make it much easier for people from abroad to come work here.

"It's difficult to bring an expert or senior-level manager to hire in a startup," he says.

Israel says any obstacles it puts in place are for security.

"I know that the crossing points are an obstacle," says Col. Grisha Yakubovich, the head of the Civil Coordination Department of COGAT, the Coordination of Government Activities in the Territories.

COGAT oversees a lot — including mining permits, commercial crossings and travel permits for Palestinian workers seeking employment in Israel or in Israeli settlements in the West Bank.

Yakubovich repeats two points frequently: First, that Israel puts security first. He mentions a 2004 attack on an Israeli port after two suicide bombers hid in a commercial container to leave the West Bank. Second, that COGAT is working to support the Palestinian Authority. Yakubovich says Israel can't find takers to fill all of the permits allowed for Palestinians to work in Israel.

Given logistical obstacles, high unemployment and no clear light at the end of the political tunnel, the International Monetary Fund is predicting that growth in Palestinian areas will drop by half over the next three years. The head of the IMF office here, Udo Kock, says another major problem is that the Palestinian Authority depends on international donors for a quarter of its budget. Recently, those contributions have been inconsistent, which means the Palestinian Authority can't pay its bills.

"There are three main elements that are needed to get the private sector going," Kock says. "One is a relaxation of restrictions — broad-based, all sectors. This is very important. Second is for donors to continue to provide assistance, and to do it in a predictable way. And there is a responsibility on the Palestinian side, of course. The PA has to start working on reforms."

Businessman Rami El-Zogheir says all he needs are assurances that the political situation will at least stay the same, if not improve. His company makes high-end shoes by hand, and business has been booming; during the past three years of relative calm here, Golf & Horse Footwear has tripled the number of pairs it makes.

"I would like to invest more money," Zogheir says. "And I have a good chance to expand into other Arab markets. But I can't guarantee the situation here."

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