Overseas Business Risk – Palestinian Territories

The Overseas Business Risk report provides information on key security and political risks which UK businesses may face when operating in the Occupied Palestinian Territories.

Political and Economic

The British Government defines the Occupied Palestinian Territories (OPTs) as consisting of two separate land areas: the West Bank, including East Jerusalem, and the Gaza Strip.  Together these territories cover an area of 6,165 sq. km: the West Bank 5,800 sq. km (130 km long and 40-65 km in width); Gaza Strip 365 sq. km (45 km long and 5-12 km in width). 

Political Overview

The Palestine Liberation Organisation (PLO) is the representative body for the Palestinian people.  Its chairman is Mahmoud Abbas, who is also President of the Palestinian National Authority (PA), the executive body of the PLO. The PA was formed after the 1993 Oslo Accords with Israel, to govern the West Bank and Gaza until the conclusion of permanent status negotiations with Israel. In practice, the PA has administrative control over Areas A and B of the West Bank, whilst Israel retains control over Area C of the West Bank and East Jerusalem, and Hamas has de facto control in Gaza.

East Jerusalem

East Jerusalem, including the Old City, was annexed unilaterally by Israel and separated from the remainder of the West Bank by the Separation Barrier.  Israel has placed East Jerusalem under the law, jurisdiction and administration of the State of Israel.  The UK, with the rest of the international community, views East Jerusalem as Occupied Territory.

West Bank

The West Bank was split into three administrative divisions following the Oslo Accords (Areas A, B and C) as an interim measure pending the establishment of a Palestinian State.  These interim measures are still in place.  Area A (16%) is under the civil and security control by the Palestinian Authority; Area B (22%) is under Palestinian civil control and Israeli security control; Area C (62%) is under full Israeli civil and security control. Israeli security forces enter all three Areas of the West Bank at will.

Gaza

Following elections in 2006, Hamas took full control of the Gaza Strip illegally in June 2007, where they have since operated as the de facto authorityHamas has also established its own security force in Gaza.  The Ramallah-based PA remains the sole legitimate authority for Gaza in the eyes of the international community.  Hamas has been designated by the EU as a terrorist organisation under Common Position 931, and the Hamas military wing was proscribed in the UK in 2001. Therefore those contemplating any economic or financial involvement in Gaza should seek appropriate legal advice. Although Israel withdrew its citizens from settlements in Gaza in 2005, Israel retains control of the land borders, movement and access to Israel (and via Israel to the rest of the OPTs), airspace, and the maritime border.  Thus Israel remains the Occupying Power in Gaza, as in the rest of the OPTs. The extensive restrictions on imports and exports into Gaza (including transfers between the West Bank and Gaza) have had a major detrimental effect on Gaza’s economy and make investment in Gaza particularly difficult.

Israeli settlements in the OPTs

The UK has a clear position on Israeli settlements: The West Bank, including East Jerusalem, Gaza and the Golan Heights are territories which have been occupied by Israel since 1967. Settlements are illegal under international law, constitute an obstacle to peace and threaten to make a two-state solution to the Israeli-Palestinian conflict impossible. We will not recognise any changes to the pre-1967 borders, including with regard to Jerusalem, other than those agreed by the parties.

There are therefore clear risks related to economic and financial activities in the settlements, and we do not encourage or offer support to such activity. Financial transactions, investments, purchases, procurements as well as other economic activities (including in services like tourism) in Israeli settlements or benefiting Israeli settlements, entail legal and economic risks stemming from the fact that the Israeli settlements, according to international law, are built on occupied land and are not recognised as a legitimate part of Israel’s territory. This may result in disputed titles to the land, water, mineral or other natural resources which might be the subject of purchase or investment.

EU citizens and businesses should also be aware of the potential reputational implications of getting involved in economic and financial activities in settlements, as well as possible abuses of the rights of individuals. Those contemplating any economic or financial involvement in settlements should seek appropriate legal advice.

We understand the concerns of people who do not wish to purchase goods exported from Israeli settlements in the Occupied Palestinian Territories. It was in order to enable consumers to make a more fully informed decision concerning the products they buy that, in December 2009, the Department for Environment, Food and Rural Affairs (Defra) introduced voluntary guidelines to enable produce from Israeli settlements in the Occupied Territories to be specifically labelled as such. See Defra’s technical advice on the labelling of produce grown in the Occupied Palestinian Territories.

Since 1 February 2005, products produced in Israeli settlements are not entitled to benefit from preferential tariff treatment under the EU-Israel Association. On 3 August 2012, the European Commission published a revised Notice to Importers (see OJ C 232 page 5) concerning imports from Israel into the Union, including a revised list of non-eligible locations.

The UK Government is deeply committed to promoting our trade and business ties with Israel and strongly opposes boycotts.

Economic overview

The Palestinian economy and the Palestinian private sector are heavily constrained by the conduct of the Israeli occupation.  This includes restrictions on movement and access for goods and people (including between the West Bank, Gaza and East Jerusalem), extensive and bureaucratic permit systems, and import/export restrictions (particularly in relation to Gaza).

These make it hard for the PA to achieve greater economic integration with their neighbours or the EU. Economic relations between the PA and Israel are governed by the Paris Protocol (1994), which allows the PA to establish trade relations with third countries, provided that such agreements conform with Israel’s own import policy. An Interim Association Agreement on Trade and Cooperation was concluded between the EU and the Palestine Liberation Organisation (PLO) on behalf of the Palestinian Authority in 1997. The agreement provides for duty-free access to EU markets for Palestinian industrial goods, and the phasing out of tariffs on EU exports to Palestine over five years.  An Agreement for further liberalisation of agricultural products, processed agricultural products and fish and fishery products entered into force on 1 January 2012.

Business and Human Rights

Business

The Palestinian business community is highly entrepreneurial; businesses aspire to a high level of professionalism and product quality. Large enterprises are internationally connected, with global partnerships, despite the restrictions in place. The labour force is highly educated, multilingual, and well versed in the technologies and practices needed to do business successfully on a global level.  There are donor-funded credit guarantee facilities and political risk insurance schemes to mitigate risks. The World Bank’s Multilateral Investment Guarantee Agency (MIGA) operates in the market with a mission to promote foreign direct investment (FDI) to help support economic growth, reduce poverty, and improve people’s lives. For more details see www.miga.org.

Most Palestinian enterprises are traditional family-run businesses, in light industry and consumer goods – especially food, beverages, clothing, minerals and furniture, with marketing of products targeting the domestic market. One of the main obstacles facing these SMEs is the lack of reasonably priced technical support. SMEs find it hard to access financing. Some producers also have weak marketing capacity, especially when marketing internationally. The UK’s Department for International Development has launched a programme, with EU support, to address these challenges. The Secretary of State has approved up to £15.3 million over six years to implement a market development programme which will:

  • Help Palestinian businesses to reduce the risk associated with product development and entry into new markets;

  • Identify market failures and facilitate market players to respond to market opportunities;

  • Strengthen foreign and domestic investment and transfer of ‘know how’ through technical assistance to investment promotion institution, mobilisation of Palestinian Diaspora and training of commercial representatives.

The International Chamber of Commerce (ICC Palestine) was founded in 2011 by a group of the top Palestinian business leaders who aim to boost the Palestinian economy by opening new markets, and introducing local businesses to international expertise, encouraging two way trade. ICC Palestine’s Board is diverse and covers sectors including banking, construction, insurance, pharmaceuticals, food and beverage, mining and the services sector. For more details see www.iccpalestine.com.

Workers’ Rights

The Palestinian Basic Law protects a number of key rights in the sphere of work. It provides for the right to form trade unions and to strike, in accordance with the law. It also provides for the right (and duty) to work, and for organisation of work in a way that provides justice to all and ensures the welfare and safety of workers, while also ensuring that they have social benefits. The Labour Law implements some, but not all of these provisions (including basic provisions for collective bargaining and dispute resolution). The International Labour Organisation sees a need to amend the Labour Law so that the minimum age of work is raised from 15 to 16 years, as foreseen in the Ministry of Social Affair’s National Strategic Plan for Child Protection.

Bribery and Corruption

The PA has made significant efforts to strengthen its legal and institutional framework against corruption. A number of anti-corruption laws have been enacted by the Palestinian authorities and institutions created, such as the Anti-Corruption Commission and Corruption Crimes Court, an external audit bureau, the State Audit and Administrative Control Bureau, and the Economic Crimes and Support Unit in the Attorney General’s office. Nevertheless, nepotism or wasta in public appointments has not yet been eradicated.

Visit the Business Anti-Corruption portal page providing advice and guidance about corruption in Israel and some basic effective procedures you can establish to protect your company from them.

Read the information provided on our Bribery and corruption page.

Terrorism Threat

For the latest advice on the risk of terrorism in Israel, please see the Foreign and Commonwealth Office travel advice.

Protective Security Advice

There are important security risks, particularly in Gaza and as a result the Foreign and Commonwealth Office currently advise against all travel to Gaza. For the latest travel and security advice, please visit

For the latest travel and security advice, please see the Foreign and Commonwealth Office’s travel advice.

The Centre for the Protection of National Infrastructure also provides protective security advice to businesses

Read the information provided on our Protective security advice page

Intellectual Property

The Palestinian Protection of Intellectual Property Rights Law is in draft. It includes copyright and related rights, intellectual property including patent rights, licences, publishing rights, and other rights that distinguish between publishing rights and copyrights. Currently, the Civil Complaints Law of 1933 regulates intellectual property in Gaza and the Commercial Law No.19 of 1953 and the Patents Law No. 22 of 1953 in the West Bank. The Palestinian Authority has observer status at the World Intellectual Property Organization.

Read the information provided on our Intellectual Property page.

Organised Crime

There is very limited evidence of serious organised crime in the West Bank. There is some evidence of organised vehicle thefts being committed in Israel with the stolen vehicles being recycled in the West Bank, and the associated insurance pay-offs occurring in Israel.

As elsewhere, there is a drugs problem in the West Bank and Gaza. These are generally cannabis based drugs and to a lesser degree ‘designer’ drugs, such as ecstasy, and some harder drugs e.g. cocaine and heroin. This is reflected in the Palestinian prison population, whose drug-related inmate ratio is comparable to Europe.

Read the information provided on our Organised crime page.

More information is available on overseas business risk in a range of markets.

UK Trade & Investment Contact:

British Consulate General Jerusalem

UK Trade & Investment

Email: britain.jerusalem@fco.gov.uk

Tel: +972-2-5414151/8

Fax: +972-2-5322368

Countries: Palestinian Territories
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