Open for Business: Mideast Sees New Markets in Peace

YESTERDAY'S historic signing in Cairo of an agreement to extend Palestinian autonomy over the West Bank town of Jericho and the Gaza Strip was a big boost for those anxious to reap economic dividends from peace.

The accord, reached after six months of intense bargaining between Palestinian and Israeli leaders, activates the flow of multilateral aid already in the pipeline and sends a strong signal to both the local and international business communities about investment opportunities that transcend borders.

With international assistance now available from a $2.1 billion fund managed by the World Bank, ``the Palestinians can turn their attention from the negotiating process to economic management,'' Caio Koch-Weser, World Bank vice president for the Middle East and North Africa, said in an interview here before he left for the signing ceremony in Cairo.

In the next three years, the Bank intends to disperse $1.2 billion:

* To repair and build infrastructure such as road, waterworks, and electrical grids.

* To extend credit lines for fledgling Palestinian entrepreneurs.

* To help cover start-up municipal costs, from trash collection to the formation of a 9,000 member police force.

* To assist in building institutions, such as a central banking system and a tax authority.

``This is a $3 billion economy,'' Mr. Koch-Weser says, noting that the balance of the money will be extended only after the West Bank and Gaza have properly absorbed the first three years of assistance. The European Union is the single largest donor to the fund, followed by the United States, Japan, Norway, Saudi Arabia, Italy, and Israel.

Although financing sources are external, Koch-Weser stresses the importance of indigenous management. ``The key organization is the Palestinian Economic Council for Development and Reconstruction, which is almost up and running.''

While the money was pledged last October, and the Bank was scheduled to begin outlays in December, ongoing violence between Israeli settlers and Palestinians in the territories postponed the disbursement date. Koch-Weser says the fund's purveyors are also asking, ``Is this going to be stable, in terms of Hamas [Palestinian radicals opposed to the Gaza-Jericho autonomy agreement], and others.''

Business outreach suggests that the private sector has not waited for official signatures on Palestinian-Israeli agreements. Unheard of in the recent past, for example, there have been Saudi Arabian delegations in Jerusalem to explore investment and trade opportunities in Israel, the West Bank, and Gaza. Trading houses, construction firms, and other commercial enterprises from North Africa to Lebanon are exploring joint-venture agreements directly related to Palestinian development and its expected spillover growth in neighboring economies such as Jordan's.

`PEACE and stability will not remain without mutually successful cross-border businesses,'' says Egyptian Shafik Gabr, a prominent businessman who founded the Egyptian-American Chamber of Commerce. He views the new spotlight on Palestinian development as a way to illuminate the broader prospects for a vibrant Middle Eastern economy. Sharing Koch-Weser's view, Mr. Gabr says the region will only achieve economic betterment if the means toward that end are homegrown.

``We want our region to be fully integrated into the world economy, but from the vantage point of being strong on the inside first. The present economic trend in the world is one of intra-regional trade and economic cooperation,'' says Gabr, who is called a visionary by a top US State Department official involved with the Middle East.

With skilled workers, a combined annual economic output of $400 billion, a relatively modern infrastructure, a diversified industrial base (from low-cost, labor intensive Egypt to high-tech Israel), and its proximity to Europe, Asia, and Africa, the Middle East can be every bit as robust as the European, North American, or South American markets.

One Israeli warned against assumptions about an economic transformation. Economist Eliyahu Kanovsky points to Egypt's economy, which has remained stagnant since the 1978 Camp David accord. The tourism industry, which both Gabr and Koch-Weser say hold the greatest promise, is highly sensitive to the slightest regional tension, Mr. Kanovsky said.

``Jews and Muslims have lived in the same vicinity and worked together for many years,'' insists Gabr, adding that ``Israel and Egypt can take the next pioneering step and establish a Middle Eastern Development Bank,'' which would help cement cooperation by financing regional projects and trade.

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