October 14, 2008
HP-1210

Deputy Secretary Robert M. Kimmitt
Remarks at the Palestinian Business and Investment Forum

Washington - It is a pleasure to be here today with my friends and colleagues, Jim Jones and Rob Mosbacher. The fact that Jim is on the panel with two economic policy officials demonstrates the inextricable link among the political, security, and economic dimensions of U.S. Government support of the Annapolis process and peace between Palestinians and Israelis.

We meet today in the midst of historic transformation in the global economy. The United States and other countries are taking steps to: provide much needed liquidity to the financial system; strengthen financial institutions; protect investors; and enhance market stability. This past weekend, the G-7 countries committed to a plan of action, and in accordance with the G-7 plan, just this morning the President's Working Group on Financial Markets announced the details of a coordinated, comprehensive plan to address the current financial market turmoil. The U.S. Government is purchasing equity in financial institutions so they can provide credit to our economy; guaranteeing certain obligations of financial institutions to restore confidence in our financial system; and purchasing commercial paper to further increase access to funding for businesses in all sectors of our economy. The actions taken today are a powerful step toward restoring the health of the global financial system.

Even as we seek to stabilize the major economies' financial markets, we continue to focus priority attention on supporting emerging markets, including the Palestinian territories, at this time of global stress. Without economic progress and sound financial practices, political and security gains will remain temporary. This is why the U.S. Government and the Treasury Department are committed to work alongside the Palestinian leadership in helping create a stable macroeconomic environment, strengthen their financial system, and build a solid foundation for economic growth.

In addition, the U.S. Government is also increasingly working with business communities to support private sector development within the Palestinian territories. In May, I had the honor of leading the U.S. delegation to the Palestine Investment Conference, hosted in Bethlehem by President Abbas and Prime Minister Fayyad. That conference showed the strong interest of both the regional and global private sectors in investments in the Palestinian territories. Today's conference builds upon that success to include the involvement of even more interested parties, including the newly formed Palestinian-American Chamber of Commerce.

Often, we at Treasury have to push emerging markets to accept free and open markets. That is not the case with the Palestinian leadership, which has readily embraced free-market practices, with the well-crafted Palestinian Reform and Development Plan providing just one example. This plan to modernize and strengthen the financial sector is critical to catalyzing private investment flows, which are the lifeblood of broad-based, sustainable growth in any economy. As a result, one critical component of our partnership has been to help provide tools to promote a vibrant market economy, including small- and medium-sized enterprises' access to credit.

The Palestinian territories have made progress in improving their business climate over the past year, as demonstrated by the recent release of the World Bank's Doing Business Indicators. In the latest report, the Palestinian territories excelled at protecting investors and simplifying the process for business to pay taxes, particularly when compared to others in their region.

And the Palestinian leadership is taking steps to improve other areas of administration that are not quite as advanced. For instance, in the Palestinian territories, there is credit information for less than ten percent of adults. The leadership has made progress in addressing this challenge by initiatives such as introducing a new credit registry. In addition to allowing banks to better evaluate risks, this action can lead to improved credit flows to small- and medium-sized businesses. As credit access improves, a virtuous cycle can develop, with increased revenues reinforcing the government's ability to provide for its people. As the Palestinian Authority continues to increase its effectiveness and efficiency in public financial management, security services, and the justice system, the private sector, too, will have a greater opportunity to improve and grow.

Beyond government-to-government activities, close cooperation between government and industry can have a significant impact on private sector development. This is especially the case with the unique challenges of doing business in the Palestinian territories. Under the leadership of Prime Minister Fayyad, the PA has made great strides to reduce red tape, and its efforts since 2006 are laudable. The Prime Minister and I spoke on Sunday about ideas he has for further progress in this area.

The U.S. Government also supports a number of initiatives to encourage private sector investment in the territories. Due to the wealth of speakers addressing you today, I will only highlight a few:

First, along with the OPIC initiatives about which Rob Mosbacher will speak, the U.S. Government promotes investment in human capital and economic governance within the Palestinian territories. For instance, in 2008, the U.S. Government has provided almost $600 million to the Palestinians to support economic growth and good governance, promote infrastructure development, provide food assistance, improve education, and increase access to healthcare and water.  A large portion of this funding is specifically directed to encouraging private sector development, channeled through the U.S. Agency for International Development, which has provided approximately $2 billion in such assistance to the Palestinians over the past fifteen years.

Second, as Deputy Secretary John Sullivan will discuss in more detail later today, the Commerce Department's Foreign Commercial Service has been assisting the Palestinian-American Chamber of Commerce to promote Palestinian business linkages and U.S.-Palestinian trade. The Commercial Law Development Program has also worked since 2007 with lawyers in the public and private sector to modernize and harmonize Palestinian commercial and competition laws.

Third, and of equal importance with U.S. Government initiatives, the United States also strongly endorses private initiatives, such as the U.S.-Palestinian Public Private Partnership.  This Partnership is developing quick-impact projects to promote job creation in the West Bank.  Its leadership – Walter Isaacson, Ziad Asali, Jean Case, Sandy Weill, Lester Crown, – as well as the U.S. Government lead, AID Administrator Henrietta Fore – deserve again to be recognized for their significant contributions. This Partnership's ability to establish business opportunities as well as youth development and resource centers throughout the West Bank is already producing tangible results for the Palestinian society and economy.

Fourth and finally, the U.S. Government and Treasury encourage international support for the Palestinian territories, including through the multilateral development institutions. For instance, the World Bank, Canada, Kuwait, and the United Kingdom have provided $269 million to assist in providing education, health care, and other vital social services for the Palestinian people. The International Finance Corporation of the World Bank has also been active in the Palestinian territories for over a decade, investing in companies and providing advisory services to the private sector to support entrepreneurs and small companies. In spite of the challenging political situation, since 2006 IFC partner banks have reached thousands of active borrowers. One IFC-partner microfinance bank has extended almost 3,000 loans, averaging about $4,000 each, and a third of these loans went to women.

Today's Forum is one more step toward developing economic self-sufficiency in the Palestinian territories. We need to combine the expertise and business experience of those in this room with the assistance and political support of governments. By helping to build a vibrant economy led by the private sector in the Palestinian territories, we will help improve the lives of people, enhance stability, and bolster prospects for lasting peace. Together, we can achieve much more than could ever be done separately, ultimately helping leverage the innate ingenuity and entrepreneurship spirit of the Palestinian and American business communities.

Thank you for your kind attention and also your continued commitment to such an important effort for us all.