Attachment_J_12_-_West_Bank_Trade_Project_Close-out_Report.pdf

The Trade Project

Regional Initiative Concept Paper

Overview of International Donors' Programs on Access to Finance for Small and Medium Enterprises r

September, 2010

March 26, 2015

Close-out Report March 1, 2013 – February 28, 2015 Contract No. AID-294-C-13-00001-00

Close Out Report March 1, 2013 – February 28, 2015

Contract No. AID-294-C-13-00001-00

March 26, 2015

DISCLAIMER

This report is made possible by the support of the American people through the United States Agency for International Development (USAID). The contents of this report are the sole responsibility of Deloitte Consulting, LLP and do not necessarily reflect the views of USAID or the United States Government.

The Trade Project | Close Out Report (March 1, 2013 – February 28, 2015)

TABLE OF CONTENTS

1 INTRODUCTION

2 EXECUTIVE SUMMARY

2.2 PROJECT GOALS AND OBJECTIVES

2.2.1 Brief outline of project purpose

2.2.2 Brief outline of project approach

3 KEY RESULT AREAS

3.1 PROGRESS ON RESULT 1

3.1.1 Commercial Crossing Points

3.1.2 Market Information and Business Linkages

3.1.3 Dual Use and Import Licensing

3.1.4 Standards and certification

3.1.5 Training

3.2 PROGRESS ON RESULT 2

3.2.1 Accomplishments / Deliverables

3.3 GRANTS PROGRAM

3.3.1 Accomplishments / Deliverables

4 IMPLEMENTATION CHALLENGES

5 PERFORMANCE MANAGEMENT PLAN PROGRESS REPORT

5.1 STATUS OF OVERALL PROJECT PROGRESS PER THE APPROVED INDICATORS AS DEFINED IN THE PMP. 29

5.2 STATUS OF OVERALL PROJECT PROGRESS PER THE APPROVED INDICATORS AS DEFINED IN THE PMP. 29

5.3 USE OF DATA SOURCES TO VERIFY ASSUMPTIONS AND ESTIMATES

6 ADMINISTRATIVE REPORTING

6.1 STATUS OF BUDGET EXPENDITURES

6.2 STATUS OF REQUIRED AUDIT PROCESSES INCLUDING FOR SUB-AWARDEES

APPENDIX A- GEO-MIS/TRAINET PARTNER’S UPDATE REPORT THE TRADE PROJECT

A.1. NUMBER OF ACTIVITIES ADDED/UPDATED:

A.2. PROGRAM UPDATES:

A.3. PARTICIPANT TRAINING:

APPENDIX B - PPR & PMP INDICATORS

APPENDIX C – SUCCESS STORIES: TELLING OUR STORY

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ACRONYMS

ACRP Association of Clinical Research Professionals

AI Advocacy Index

B2B Business To Business

BCCI Bethlehem Chamber of Commerce and Industries

CGE Computable General Equilibrium

CPA Crossing Points Authority

COGAT Coordination of Government Activities in the Territories

FY Fiscal Year

GCC Gulf Cooperation Council

ICC International Chamber of Commerce Palestine

ICA Israeli Civil Administration

KM Kibbutzim Movement

M&E Monitoring and Evaluation

MOA Ministry of Agricultural

MOH Ministry of Health

MONE Ministry of National Economy

MOU Memorandum of Understanding

PalTrade Palestinian Trade Center

PFI Palestinian Federation of Industries

PIEC Palestinian Import and Export Council

PITA Palestinian Information Technology Association

PMP Performance Monitoring Plan

P2P Port to Port

PPR Program Performance Plan

PSC Palestinian Shippers Council

PSI Palestinian Standards Institute

SII Standards Institute of Israel

SLA Service Level Arrangement

TTP The Trade Project

USAID United States Agency for International Development

VAT Value Added Tax

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1 Introduction

The USAID Trade Project (TTP) was terminated for convenience by USAID on January 30, 2015. This Project Closeout Report (Report) addresses the terms of Contract No. AID-294-C-13-00001-00 signed between the United States Agency for International Development (USAID) and Deloitte Consulting LLP on March 21, 2013. The Report documents TTP’s activities during March 2013 to February 2015. TTP navigated through challenging times not atypical to other projects of its kind, and successfully overcame those challenges. The Project drove towards significant results that were projected to meet and exceed the following stipulated contractual results:

• Result 1: $75 million in annual, recurring cost savings and/or additional revenues for the Palestinian private sector for the base period (with at least half from cost savings); and $50 million in annual, recurring cost savings and/or additional revenues for the Palestinian private sector for the option period (with at least half from cost savings).

• Result 2: At least six Palestinian private and/or public sector organizations scored more than 90 percent on the Advocacy Index in terms of capacity to effectively and sustainably advocate for the removal of constraints to trade and investment in the base period, and at least two additional organizations in the option years.

By January 30, 2015, when USAID terminated the project, TTP had achieved $32.7 million in cost savings and revenue increases under Result 1 and had a pipeline of activities that put it on track to achieve its base period target of $75 million. During the first year of the project, both TTP and USAID management identified difficulties in achieving Result 2 activities. As part of the turnaround plan, Result 2 activities were revisited and strategically redefined as a complement to Result 1 activities. The goal of Result 2 activities was not only assisting key Palestinian trade association in strengthening their institutions, but also providing sustainability to Result 1 achievements, which ultimately allowed the Project to build and expand upon its existing efforts.

It is important to point out that the Project introduced innovative approaches to trade facilitation in the West Bank that will have important and long-lasting impact on major activities, including:

• Providing Palestinian traders with information about customs and freight forwarding services so they can make well-informed decisions when choosing service providers;

• Mobilizing key Israeli trade officials to deliver training that will help Palestinian traders comply more easily with Israeli requirements, saving traders time and money;

• Facilitating cooperation between Israel and Palestinian trade authorities to reach agreements that facilitate trade and reduce costs;

• Engaging with the ports to enhance movement of goods through their facilities while complementing the latter by introducing more value in their service;

• Streamlining the movement of goods through crossing points; and

• Facilitating the removal of selected non-tariff barriers to imports.

Each of these ongoing activities is important to promoting Palestinian trade and needs active follow-up and support in order to remain effective. The major risk of terminating TTP for convenience is that there will no longer be a project supporting these activities, resulting in a loss of momentum and the failure to realize millions in savings to the strategically important Palestinian trade economy.

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2 Executive Summary

2.1 Major Accomplishments

During the course of its implementation, the USAID Trade Project delivered an estimated $32.79 million in cost savings and revenue generation by working with Israeli and Palestinian counterpart and partner entities to successfully streamline the movement of goods at points of arrival and departure as well as commercial crossing points, mitigate the information gap by providing traders with relevant information to clear goods faster and at a lower cost at the ports, and streamline regulations and standards requirements for Palestinian importers and exporters. The Project prioritized a series of activities to achieve its contractual target of $75 million in cost savings and revenue increases. The Project focused on the following activities, culminating in the accomplishments listed below:

Cost Savings/ Revenue

Generation

Small-Scale Survey of Traders to Estimate Increases in Exports

6,654,667

Container Drop-off Area at Sha'ar Ephraim

2,471,691

Cost Savings

Direct Fuel and Wear and Tear Savings

1,259,963

Export Containerization for Canaan Fair Trade

75,133

Increase the number of free days of port storage offered at Haifa

5,069,471

Increased Pallet Height From Sha'ar Ephraim to Gaza

4,122,318

Jalameh Inbound Containerization

2,502,064

Unipal Notarization 2,301,432

Pinar Logistics Improvements 43,092

Revenue Generation

Bisan Crossing

463,680 Bisan Crossing Revenues (Exports)

6,528,320

Gaza Exports

1,300,000

TOTAL $ 32,791,830

Under Result 2, the Project focused on the following:

• Integrated long-term sustainability and capacity-building considerations in all activities with the goal of preparing Palestinian trade and industry associations and traders to reduce barriers to trade in the absence of donor support. For example, the project trained Palestinian Chambers of Commerce to help member organizations review shipping invoices and identify unnecessary payments.

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• Toward the middle of the first year, a common agreement with USAID slowed down activities in Result 2, but the Project developed three policy papers in conjunction with a coalition of Palestinian organizations.

• As part of the turnaround plan, the project engaged two subcontractors to raise the USAID Advocacy Index ratings of 7-10 Palestinian trade and industry associations.

In addition, the Project’s grants program supported and complemented both Result 1 and Result 2 activities. The total value of the grants program was estimated at $600,000 over the base period of the Project. During the life of the Project, an estimated $170,000 of grants was awarded to five organizations.

PROJECT ACTIVITIES IN THE PIPELINE: During January and February 2015, the Project increased momentum by building on the achievements secured up to December of 2014. Salient among these were:

Secure an agreement between SII and PSI on notarization

The Project worked with the Standards Institute of Israel (SII) and the Palestinian Standards Institute (PSI) to sign a memorandum of understanding (MOU) defining the roles and responsibilities each partner brings to implementing the notarization process that could reduce the amount of time a trader’s cargo spends at port. Palestinian traders will save approximately $17 million in direct and indirect costs for each single day reduction in the time cargo spends at port.

Increase free storage days at Ashdod Port

Based on the Haifa Port’s increase of two free days of storage, the Project generated discussion with the Ashdod Port Administration to also secure two days of free storage. In addition, the Project supported the Israeli Civil Administration (ICA) in conducting a workshop at the Port on February 18, 2015, with the active participation of Israeli authorities, such as Customs, Coordination of Government Activities in the Territories (COGAT), and Port representatives, and approximately 60 Palestinian traders. This event was a milestone that, with proper follow-up, will translate into substantial cost savings for Palestinian traders.

Securing two additional days of storage at Ashdod Port will translate into an estimated $25 million of cost savings.

Improve Trade Facilitation at Jalameh Crossing

A meeting was organized by the Project for March 2 between the Crossing Points Authority (CPA) and ICA representatives, Jenin business community, Haifa Port and the Jenin Industrial Estate representatives to further facilitate the movement of goods through the checkpoint. Expectations were that this encounter would be an honest dialogue that would result in further trade facilitation and considerably impact cost saving and revenue for Palestinian traders.

Meeting with CPA representatives

On February 23, 2015 the Project organized a meeting with the CPA senior team, USAID and Project representatives. The discussion included detailed aspects of crossing points expansion, operation, infrastructure development, the need to upgrade scanners, the identification of two additional commercial crossings to service the business community in the south of the West Bank (Mitar and Jaba) and the important need to develop additional commercial crossing in order to increase the labor from Gaza and the West Bank, the expansion of the Kerem Shalom crossing in Gaza, the possibility of using Eretz in Gaza for commercial traffic, and the use of ply boxes by fish exporters as opposed to plastic boxes.

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One key part of the discussions was the CPA’s announcement that the COGAT policy was under revision with a view of introducing substantial changes in the area of trade. For example, COGAT would allow for exports from Gaza to Israel for the first time in 10-15 years. These discussions pointed to major changes in the area of trade facilitation and complimented the Project’s achievements. Follow-up should be conducted in these areas to ensure the operationalization of these initiatives.

Meeting with Israeli Ministry of Health

A meeting was held in February 2015 with the Israeli Ministry of Health to define and agree on mechanism that would expedite the food shipments of Palestinian traders. The goal was to apply the SII-PSI model of certification, allowing shipments to be transported to the Palestinian trader’s warehouses before testing was performed. This mechanism would report considerable savings to Palestinian traders and should be actively followed up until the latter is enabled. This initiative represents approximately $17-20 million in savings for the Palestinian traders.

Easing dual use restrictions

By February 2015, a number of additional company-specific initiatives are pending final resolution by Israeli authorities that would result in substantial cost-savings. Specific cases:

• Al-Jebrini Dairy Company requested approval from the Israeli Civil Administration (ICA) to begin procuring 2000 liters of hydrogen peroxide every two months, which the ICA granted.

• Coca Cola requested 8 tons of hydrogen peroxide during the first quarter, and agreed on a first pilot shipment of 4 tons upon acquiring the ICA approval.

• Al-Juneidi Diary Company in Hebron submitted an official request for approval of 1,100 liters/month of hydrogen peroxide to the ICA towards the end November 2014. The ICA conducted a site visit of the facility during the first week of January to assess the storage and security systems of the company. On February 6, the Company met with the ICA representative in Hebron, who informed the Company that the official request was under examination.

SII Green Line Status Training

On December 13, 2015, the Project hosted the Green Line Status training that was conducted by Shuki Kaplan from SII and attended by 15 West Bank import companies at the Ambassador Hotel in Jerusalem. SII has established a Special Status Membership for reliable importers, who regularly import from manufacturers monitored by the International Organization for Standardization's guidelines for quality management systems (ISO 9000). This Special Status Membership reduces the number of times goods are inspected by the SII by more than half, saving the importer time and money. The workshop taught importers how to apply for the Special Status Membership with SII. Mr. Kaplan guided the traders through the application process and discussed the

On February 25, 2015, Near East Distribution & Marketing Co. Ltd advised TTP that they had formally entered the Green Line Status with the following message from Mr. Ziad Hamarsheh, Logistics Supervisor: “Please note that we got the confirmation from SII that our company has joined to the green line. Kindly allow us to thank you for all your efforts.”

In late February 2015, Israeli authorities approved Al-Jebrini’s purchase of hydrogen peroxide with high concentration (35%) from Israeli suppliers.

This approval represents an important milestone that can be built on to further increase Palestinian production efficiencies and expand trade.

Page |4 required documents. The Project also followed up with the traders and provided additional assistance and guidance.

Towards the end of the Project, three companies had applied for Green Line Status, with one of the companies receiving Green Line Status approval. The estimated savings for Palestinian traders in this area represents approximately $176,000 per company, assuming 200 twenty-foot equivalent units annually per company.

2.2 Project Goals and Objectives

2.2.1 Brief outline of project purpose

PURPOSE: The purpose of the Project was to expand Palestinian private sector growth through increased trade and investment. By easing constraints to trade and investment, the Project was to make it faster and less expensive to move goods into and from the West Bank and expand markets for West Bank exporters. In addition, the Project was to reduce the cost of moving goods into the West Bank through the publication and application of data that helped businesses understand and utilize faster, simpler, and lower cost shipping and freight forwarding options. The Project was to expand markets for exporters by defining and making available, in partnership with businesses and counterpart offices in the Palestinian National Authority, clear and effective market entry procedures for Saudi Arabia and other strategic markets.

RESULTS: The Project focused on high impact interventions that affected the growth of the Palestinian economy. Throughout its duration, the Project prioritized interventions based on their potential to achieve systemic contributions to increasing trade and investment, in order to achieve the following results during the base and option periods:

1. $75 million in annual, recurring cost savings and/or additional revenues for the Palestinian private sector for the base period (with at least half from cost savings); and $50 million in annual, recurring cost savings and/or additional revenues for the Palestinian private sector for the option period (with at least half from cost savings).

2. At least six Palestinian private and/or public sector organizations scoring more than 90 percent on the Advocacy Index in terms of capacity to effectively and sustainably advocate for the removal of constraints to trade and investment in the base period, and at least two additional organizations in the option years.

2.2.2 Brief outline of project approach

STRATEGIC APPROACH: To maximize its results, the Project took a strategic approach to trade facilitation that went beyond tactical interventions focusing on individual barriers to a unified approach to improving trade efficiencies from end-to-end. The Project worked through partner organizations to ensure that interventions resulted in sustainable and recurring cost savings and revenues to the Palestinian traders.

2.3 Project Overview

Deloitte Consulting LLP signed a contract with USAID on March 21, 2013 to start project implementation, after which time Project staff secured an office, mobilized expatriate personnel, and began hiring full-time local personnel. Previous USAID support to the Palestinian trade sector had focused on addressing movement and access restrictions and reducing delays at commercial crossing points, with considerable

Page |5 success. The Project sought to build on these efforts and look elsewhere in the trade value chain to identify opportunities for large-scale changes that would yield significant cost savings to the Palestinian economy.

During late 2013, the Project initiated a series of diagnostic efforts to learn more about the nature and severity of trade inefficiencies throughout the trade value chain. The diagnostics were intended to give project management enough information to prioritize the Project’s activities in order to achieve its contractual targets within the base period. These included a supply chain mapping assessment, gender assessment, seaport clearance assessment, and small-scale survey of exporters.

After reviewing the results of these diagnostics, the Project learned that Israeli importers spend 45 minutes, on average, to obtain clearance at seaports and move cargo to their warehouses, compared with 12 days for Palestinian importers. The Project determined that reducing cargo clearance time at ports would be a major source of cost savings and, thus, should be a high-priority activity for the Project.

During the late fall 2013, the Project met with freight forwarders and customs brokers to negotiate advantageous arrangements on behalf of Palestinian traders that provided benefits such as 28 days of free container demurrage and reduced rates for port storage, container deposit, and other basic services.

Concurrently, the Project continued the efforts of the previous USAID Trade Facilitation Project to streamline the movement of goods at the commercial crossing points. In September 2013, the Jalameh Crossing Point opened to incoming container traffic. The Project worked with the Crossing Points Authority to open Jalameh to outgoing commercial container traffic in December and to increase the permissible height of pallets from 1.6 to 1.9 meters. The Project also started promoting the use of containerized exports, which enabled an exporter to move a full container from its warehouse directly to port, saving money on container stuffing at port and reducing damages associated with back-to-back pallet transfer at the crossing points.

In August 2014, the Project underwent management changes and revised its direction with new staff and results methodology. Tania Revault d’Allonnes resigned from her post as Chief of Party, and Deputy Chief of Party Renata Petrusevska was reassigned to her post in the Deloitte home office. José M. Cerón joined the Project as Acting Chief of Party, Madeline Turin joined as the Deputy Chief of Party, and Christopher Donahoe joined as Engagement Director and turnaround advisor during the critical September/October 2014 transition period. As a result of this new leadership, the Project developed a turnaround plan and submitted a new work plan for the following year. The Project hired two technical leads, Suleiman Aref and Hatem Yousef; a short-term Trade Specialist, Mohamed Khader; a communication specialist, Shireen Dabbah; a project coordinator, Mary Khalil; and a new grants manager, Raja Tutunji. The Project also developed a methodology to capture direct and indirect cost savings and revenue increases. As a result of these changes in methodology, the Project revised its PMP and began capturing holistically the results of the Project activities.

In August 2014, as part of its new direction, the Project conducted an initial survey of 1,000 West Bank importers to gather data on how much companies paid for freight forwarding and customs clearance, how long cargo spent at port, and the problems traders experienced in the process. By late August and early September, the Project had discovered four key points:

1. Survey results validated that the Project was correct to focus on reducing clearance time at the ports, as delays imposed tremendous costs on Palestinian traders.

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2. Survey results also indicated that traders had a very poor understanding of how long cargo spent at port before it was cleared and how much traders should pay for certain services. Surveyors reported that most importers were unable to allocate certain customs clearance costs to a particular problem, event, or unit of cargo, or identify the purpose of certain payments.

3. Information provided by the ports about how long cargo should dwell in port prior to clearance conflicted with information reported by companies. Cargo clearance information was published in Hebrew, so a company’s only source for the information was its customs broker. This led the Project to conclude that a lack of transparency in the customs clearance market, which was exacerbated by a lack of critical information in Arabic, left many importers vulnerable to unnecessary or inflated fees.

4. Efforts to negotiate arrangements with freight forwarders were slow to scale. Many importers were hesitant to engage a new service provider, because they had a personal relationship with their current provider or had no visibility into the costs they paid for freight forwarding and customs clearance and were willing to accept them as the cost of doing business.

These conclusions led the Project to reevaluate its approach to reducing clearance time and associated costs at the ports. Rather than acting as an intermediary between service providers and traders, which was time consuming, risky, and unsustainable, the Project started to focus on holding trainings and distributing information that would empower traders to understand how much they should pay for basic services at the port, how to navigate inspection processes (e.g., SII, Ministry of Health, Ministry of Telecommunications and IT) with the right documentation, and how to reduce time and cost at each step in the import chain through tools like telex release or processes like notarization.

The Project also facilitated greater coordination among ministries that conducted inspections at ports.

For example, the Project worked with the SII and PSI to sign an MOU defining the roles and responsibilities each partner brought to implementing the notarization process that would reduce the amount of time a trader’s cargo spends at port. This new sustainable approach increased transparency in the marketplace for trade services and helped traders understand how to negotiate for reasonable costs for the trade services they needed.

On January 30, 2015, the Project received notice of its termination for convenience. The Project halted all activities and immediately began the close out process. Staff received termination letters on February 5, 2015 and were told that the Project’s last working day would be March 6, 2015. Prior to the termination notice, the Project was moving forward with its renewed technical direction and was starting to see success. Due to the termination, the Project was unable to complete its activities and was unable to meet its contractual goals.

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3 Key Result Areas

3.1 Progress on Result 1

3.1.1 Commercial Crossing Points

Support for Agricultural Exporters through Extended Hours at the Bisan Crossing

The Bisan crossing in the northern West Bank allows for the movement of fresh agricultural products from the Jordan Valley to Israel. Since November 2013, the crossing has been closed due to a lack of traffic volume and unclear operating hours. Because 2014 was a Shmita year in Israel, most of the vegetables grown in the Jordan Valley were exported to Israel. During that year’s season, exporting agricultural products through Bisan crossing would save both time and money for Jordan Valley farmers and the Israeli buyers. The Shmita season allowed the Project the opportunity to meet with the CPA and Israeli government officials to discuss the opening of the crossing as well as increasing its operating hours. The Project was able to facilitate the opening of the crossing to traffic three days a week with operating hours between 10 am and 4 pm.

Towards the end of the Project, the crossing was open to traffic four days a week.

The Project commemorated the opening of the crossing on October 19, 2014 with a walk-through. The USAID Deputy Mission Director and Israeli representatives were present at the opening, including the rabbinical Shmita authority, who verified produce transiting through Bisan and Jalameh as compliant with Shmita cultural requirements.

In order to monitor the effects of opening the Bisan crossing on the farmers’ ability to deliver their products in a timely manner, the Project contracted a local firm to conduct daily monitoring of the trucks passing through the crossing. By the time the Project was terminated, 710 trucks passed through the crossing, carrying more than 4,268 pallets of fresh vegetables. To date, the Project has saved traders an estimated $400,000 in direct and indirect costs from improved logistics and increased revenue by an estimated $6.5 million dollars.

Next Steps

Further work conducted in this area should focus on continuing to work with the CPA and Israeli counterparts to maintain extended operating hours at Bisan Crossing.

Ten trucks of West Bank produce passed through the Bisan checkpoint on Oct 19, 2014

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3.1.2 Market Information and Business Linkages

Gaza Initiative

The Project organized a meeting with COGAT, CPA, Border Police, USAID, and the Kerem Shalom Crossing Point Authority on the border with Gaza to discuss improving the flow of humanitarian goods from the West Bank to Gaza, specifically goods coming from the Allenby crossing and trade from the West Bank to Gaza through the Betunia crossing. As a result of this meeting, the Project was able to ease some restrictions of humanitarian goods that were passing through the Betunia checkpoint and the Tarqumia crossing in Hebron. In addition, the Israeli authorities agreed to open the Kerem Shalom crossing for the shipment of fresh produce and fish from Gaza to the West Bank.

The Project was proud to facilitate the first shipment of fresh marine fish from Gaza to the West Bank in seven years. This accomplishment was the result of an extensive coordination effort by the Project to ensure the smooth exit from Gaza. The shipment was an important step in a series of efforts to facilitate the transport of products from Gaza to the West Bank and strengthen exports from the Palestinian territories to the world.

To date, 738 kg of fresh fish, including shrimp, crab, calamari, malita, farida, and lux, has passed through Karem Abu Salam / Kerem Shalom.

Additionally, the Project helped facilitate the shipment of fresh produce from Gaza to the West Bank.

Produce farmers in Gaza shipped cartons of cucumbers, tomatoes, marrow, dates, and strawberries to the West Bank. To date, 1,652 tons of fish and produce, totaling an estimated $1 million, crossed through Karem Abu Salam / Kerem Shalom.

Finally, the Project introduced a weekly tracker that allowed a weekly monitoring of shipments from Gaza and provided USAID with a mechanism to determine values, types, and frequency of shipments

Next steps

Further work conducted in this area should focus on facilitating the shipment of fresh fish to Jordan and working with Gaza produce farmers to ship herbs, strawberries, and cherry tomatoes to Europe. In

Gaza fisherman prepare to ship fresh fish to the West Bank

Munir Abu Hasirah, the fish trader who sold his shipment to a Ramallah buyer, said, “I did not find any difficulties finding a buyer in the West Bank; in fact, Gaza fish is known for its quality and rivals many of the marine products sold in neighboring countries”. The buyer, Alaa Dana, from Ramallah, said, “This fish shipment was in great demand in the West Bank markets, since it is from the sea and not farmed.” He expects an increase in the demand for this fresh fish in the coming period.

Fresh fish from Gaza arrives in Ramallah

Page |9 addition, work could focus on continuing to facilitate shipments from Gaza to the West Bank and help ease trade constraints for Gaza exporters.

Business to Business (B2B)

In the late summer 2013, the Project identified three major areas for promoting B2B efforts: the Israeli market, the Arab-Israeli market, and the Palestinian diaspora. As part of its market research, the Project identified a recent business agreement between the Kibbutzim Movement (KM) and the Palestinian Authority as a potential initiative to create business linkages and increase trade with Israel. The KM passed a decision to source an increasing proportion of its consumption from the West Bank.

In early March 2014, the Project hired a short-term consultant to work on the Kibbutzim and other B2B initiatives. The Project identified local Palestinian suppliers and made contact with the KM in order to clarify orders and facilitate business transactions between the two groups. Of the products discussed, below is a list of products identified for export from the West Bank to the Israeli market:

List of potential products for Kibbutzim Movement

High Potential Good Potential Limited Potential

• Shoes

• Cartons

• Nylon

• Construction and furniture

• Aluminum

• Wooden pallets

• Nylon for butcheries

Mr. Dov Weisglass, the Israeli facilitator of the KM initiative, informed the Project that he was preparing a business plan for a startup company that could act as a marketing and consolidation office for the KM.

Mr. Weisglass stressed that similar initiatives could be extended to other businesses in Israel if the KM initiative was a successful pilot.

The Project also reached out to other partners for the B2B initiative. In order to explore the potential of increasing Palestinian sales to the Arab-Israeli market and community in Israel, the Project and B2B Advisor Mr. Remer Lane met with the Nazareth Chamber of Commerce in March 2014. The Chamber informed the Project that Arab-Israeli merchants would be interested in a supply of wholesale products that they can further process or sell directly themselves, but were wary of market competition from Palestinian merchants. Products of interest to the Arab-Israeli market included shoes, stone, clothes, and plastics. The Project held a series of B2B meetings, each concentrating on specific sectors, and began discussions to host its first B2B event.

Although the Project’s B2B initiative began as a way to help increase revenue for Palestinian business, the Project was unable to bring the initiative to scale due to a number of challenges, including the need for bank guarantees from Israeli counterparts when purchasing products from the West Bank. The Project stopped pursuing the B2B initiative in July 2014 as it was unlikely to yield increased revenue.

The Saudi Market Entry Initiative

With 70 percent of the Gulf Cooperation Council (GCC) member population, imports totaling $120 billion, and a young and affluent population, Saudi Arabia represents one of the largest unreached markets for West Bank goods, especially food products. Many West Bank food products are already aligned to market

Page |10 trends in Saudi Arabia and have been recently prepared for expanded exports through updated production lines. Advantages notwithstanding, few West Bank companies have succeeded in entering the market. The Project conducted a study to identify obstacles to Saudi Arabia market entry, and found that these obstacles included: (a) extensive requirements for commercial visas; (b) product and company registration; (c) an international boycott of Israeli goods that resulted in rejection of West Bank goods due to perceived or incorrect information about product origin; and (d) inspection requirements that were impossible for West Bank companies to meet, because Saudi inspectors would not travel to the West Bank.

The Project launched the Saudi Arabia market entry initiative as a way to expand exports from the West Bank to Saudi Arabia by establishing faster and easier means of meeting Saudi import requirements, positioning people and resources to overcome bureaucratic obstacles, and increasing the availability of information on market entry. With the Ministry of National Economy (MONE), PSI, PalTrade, and other partners, the Project sought to:

• Define and publish entity roles and procedures for market entry, including registration, certification, commercial visas, packaging, labeling, and shipping;

• Establish a full-time trade attaché in Riyadh to assist with visas, information access, and registration of West Bank suppliers;

• Create an online portal for Saudi Arabian buyers to locate and contact West Bank suppliers;

• Organize sales meetings in Riyadh and Jeddah between Saudi Arabian buyers and West Bank producers;

• Expand coverage of West Bank products in relevant trade media and news media; and

• Provide West Bank companies with media monitoring relevant to Saudi Arabian markets.

The Project took several steps toward laying the ground work for the Saudi B2B initiative:

• Met with the Embassy of Saudi Arabia in Amman to discuss efforts to increase availability of West Bank products in Saudi Arabia. The Saudi Embassy expressed support and provided practical guidance on visas, registration, and transport. At least one representative reiterated concern that products presented as Palestinian in international markets were actually Israeli goods labeled as Palestinian.

• Consulted with Samer Zalloum of the Zalloum Group in Amman, Jordan to discuss their experience in exporting to Saudi Arabia and to encourage their ingredient sourcing from the West Bank. Mr.

Zalloum reported that the Saudi Arabia market could be lucrative, but also a difficult place to conduct business due to the fact that bureaucratic laws and regulations could change quickly and without notice. The Zalloum Group closed their offices in Saudi Arabia and now sells through an importer/distributor. Mr. Zalloum provided the Project with key contacts in Saudi Arabia and cautioned the Project about challenges with market perception of Palestinian products in Saudi Arabia. The Project sought to address these concerns in part through an online trade portal and in cooperation with Palestinian Standards Institution.

West Bank food companies review Saudi Arabia market data and potential opportunities for market entry

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• Consulted with Sabih and Khaled Masri of the Astra Group, who expressed their interest in supporting exports of Palestinian products to Saudi Arabia. The Astra Group offered to introduce the Project to their company’s offices in Saudi Arabia to determine the possibility of handling imports and distribution on behalf of Palestinian exporters. Mr. Sabih and Khaled Masri said that company and product registrations could be difficult to obtain in Saudi Arabia and that the Project should expect market concern from buyers about Israeli products. They also noted obstacles to exporting goods through the Allenby (King Hussein) Bridge crossing.

• The Project met with Imal Al Jalad, the Director of Programs and Foreign Aid at the Ministry of National Economy and Trade, to determine participation of the ministry in the Saudi market entry.

Al Jalad confirmed the ministry could:

o Manage the visa process;

o Assure companies and their products are registered;

o Attain Saudi buy-in on the governmental level;

o Support arranging the buyer meetings through the Palestinian Embassy in Saudi Arabia;

and o Support the identification of the venue.

The Project also undertook verification of West Bank origin of goods, quality, and certification requirements. The Project met with Director General Haidar Hajjeh, the Director of Technical Service Department, and Ahmed Al Ahmad of the PSI to define procedures for standards recognition for West Bank firms exporting to Saudi Arabia. PSI arranged for companies to be recognized by the Saudi Arabia food and drug authority by verifying testing data, site inspections and quality control. The approach meant that Saudi inspectors did not have to physically inspect plants, a requirement that previously might have prevented some companies from exporting. PSI proposed formalizing procedures with Saudi authorities and making them available to West Bank exporters.

In addition, the Project conducted a market analysis and trade development planning session in Ramallah with marketing directors of fifteen West Bank food companies currently positioning for entry or expansion into the Saudi Arabia market. The product lines represented included palm dates, dairy, meat, olive oil, salads, fresh produce, and processed foods. Siniora, the largest West Bank exporter of meat products, who currently exports to Saudi Arabian groceries, led the session with lessons learned in market entry and client service in Saudi Arabia. Company representatives at the meeting indicated a need for efficiencies of joint marketing identity and in improving awareness and understanding of West Bank food products.

In preparation for Saudi Arabia market entry, the project reviewed the production and export capabilities of manufactures in the Hebron area, including footwear, dairy, and food products:

• Leather and footwear: According to Tareq Abu Fealat of the Palestinian Leather Industries Union, Hebron’s shoe and leather industry was devastated by the lifting of WTO quota restrictions in

Designer Fathi al Jubeh’s studio crafts up to 100 pair of luxury shoes daily, all of which are sold by shops in Israel

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2004, which saw manufacturing moving to China. A few specialty designers and more than 100 production facilities remain. Of note, designer Fathi Al Jubeh’s studio produces up to 100 pair of luxury women’s shoes daily. Made from top quality Italian leather, the shoes are sold mostly in shops in Israel. Mid-range lines in Hebron produce up to 500 pair of casual shoes daily, some of which are exported to GCC buyers.

• Dairy: With a capacity of 70,000 liters daily and more than 100 product lines, Al-Jebrini dairy in Hebron has invested in state-of-the-art UHT and packaging equipment specifically to extend shelf life to increase exports. The company is actively pursuing options for export to Saudi Arabia and will travel to Riyadh for initial and buyer meetings.

• Food: Qasrawi Snackfoods in Hebron has interested buyers in GCC and wishes to participate in business-to-business activity in Riyadh and Jeddah.

The Project also looked at other sectors, such as pharmaceuticals, for potential export. At the request of Awad Abu Alaya of the Union of Palestinian Pharmaceutical Manufacturers, the Project consulted on export and clinical research opportunities for the pharmaceutical sector. The association represents four manufacturers in the West Bank and one in Gaza, with a total of 1,240 registered products distributed to 21 export markets with total annual revenue of approximately $15 million. Members perform contract manufacturing for clients in the highly regulated German market and meet or exceed international standards. Facilities are at half capacity. The Union would like to increase production and sales.

Mr. Alaya indicated that the greatest obstacles to growth were: (a) GCC market access; and (b) lack of experience and knowledge of pharmaceutical marketing. Access to a pharmaceutical marketing expert with high-level experience in a major pharmaceutical firm (e.g., Johnson & Johnson, Pfizer, Bayer) to train staff in sales, client servicing, and pharmaceutical supply chain management, and develop a strategy to strengthen positions in GCC and other markets, pending market analysis and business planning, could position the sector to increase significantly or double production.

As Mr. Alaya informed the Project, the West Bank does not have a significant clinical research community or membership in bodies such as the Association of Clinical Research Professionals (ACRP). Desk research indicates some participation in clinical trials by the Faculty of Medicine at Al-Quds University in Abu-Dis.

Based on population, size of economy, and comparative growth of clinical research in European countries as a result of development support, the West Bank might expect 40 trials annually valued at $15 million and employing up to 100 researchers within 26 months. Should USAID wish to pursue development of the sector, the effort would require further discussion with local experts, Birzeit University, Al Quds University, and the Ministry of Health, as well as the engagement of a short-term expert, a full-time organizer and potential discussion with the GCC chapter of the ACRP.

Toward the end of project implementation, the Project worked with MONE to coordinate a scoping mission to Saudi Arabia, where the MONE, PSI, and Ministry of Agriculture (MOA) would participate in a dialogue with their Saudi counterparts to address current constraints to Palestinian trade with Saudi Arabia, such as free trade agreements, certificates of origin, and standards.

Next steps

Further work conducted in this area should focus on carrying out a scoping mission to Saudi Arabia attended by the MONE, MOA, PSI, PalTrade, and Ministry of Finance.

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Media Training

In an effort to increase the marketing capacity of West Bank businesses, the Project trained various companies and marketing personnel in earned media strategies, including representatives of NuFarm, Al Ard, PalGaz and the pharmaceutical sector, as well as the marketing personnel of Naheel and Sinocrot.

Cost Savings Website

The Project developed a draft website to promote awareness and understanding of cost savings options for West Bank importers. The website features a cost savings calculator and quick links to Project contacts on every page (see right for site prototype). The Project was in the process of selecting a subcontractor to finalize the website’s development when the Project was terminated.

West Bank - Saudi Arabia Trade Portal

The Project developed a draft B2B trade portal to link West Bank suppliers to Saudi Arabia markets. The trade portal would provide Saudi buyers with confidence in the origin and vetting of suppliers, which makes contacting suppliers easier. The online database would have been placed online and maintained in cooperation with a local counterpart, such as chambers of commerce.

Medjool Date Production

The Project reviewed market data and international models for managed growth with West Bank Medjool date growers and handlers, which provided a venue for industry participants to plan and organize a projected 500 percent increase in Medjool date production. The West Bank is one of the few significant international suppliers of Medjool dates, which command a premium price over other varieties of palm dates and represent only about 1 percent of the world’s market for dates.

Having sold out production in recent years without extensive planning and marketing, West Bank growers plan to increase production of Medjool from about 3,000 tons per year to more than 15,000 tons within about five years. At current prices, the increase would bring in an additional $84 million annually, mostly to farmers and exporters in the Jericho (Jordan Valley) area. At that rate, by revenue, Medjool dates would account for about a sixth of all West Bank exports.

Managing growth across the industry is essential to maintaining prices and markets. The Project brought together the MOA and growers and processors for the first time to review market data and learn more about international practices that might benefit the industry. Outcomes of the discussions included an international conference, the formation of an official council and a private association, and the creation of a development plan with industry experts.

Cost Savings Website

SOURCE: New York Terminal Market, May 2014

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• International Conference: As a result of dialogue promoted by the Project, West Bank Medjool date handlers will host an international conference of the Medjool date industry in September 2015 at the Intercontinental Hotel in Jericho. Representatives from seven Medjool producing nations will be invited to attend, including Israel, the United States, Saudi Arabia, Australia, South Africa, Jordan, and Morocco. The conference aims to expand markets, increase knowledge and awareness among potential buyers and consumers, improve data collection and availability of information on production, pricing and markets, and improve the availability of information on pest control, food safety, and quality control.

• Date council: Producers and handlers agree the sector warrants special treatment due to its importance to the West Bank economy, including recognition in the form of an agricultural council established by law that would: (a) promote policies, laws, and regulations favorable to the industry; (b) provide auspices for research and development on issues such as productivity, pest control, and product development; (c) provide official recognition and easier access to government officials and international fora; and (d) facilitate joint planning and marketing.

• Palestinian Date Council: The project reviewed model legal code with sector participants and provided translations in Arabic. The (inactive) Palestinian Date Council, headed by former Minister of Agriculture, Dr. Ismail Deeq, may serve as a basis for the organization.

• Private association: A voluntary private association may be established to promote the development of the sector and marketing of goods, to include existing grower cooperatives and Medjool date handlers.

• Development plan: The Project led a roundtable discussion with USAID and leading Medjool exporters, including Al Ard, Il Mares, VTCO, Sinokrot, Emirates Delights, Naheel and El Wadi, on challenges faced by the sector and the potential role of the development community in managing projected growth. Sector participants, led by Dr. Ismail Deeq, will produce a development plan, with recommendations for the role of USAID and other donors.

• Organizational models: The Project facilitated continued dialogue on organizational models at the Palestinian General Federation of Trade Unions in Jericho with Medjool date growers, exporters, and handlers. Topics included funding, allocation of resources, international promotion, policy and advocacy, grassroots, fees, and membership criteria.

More than dates

In the Middle East and North Africa, palm dates enjoy a special place of cultural and historic significance.

Leaders of Gulf countries, sometimes with vast economic resources, have sought to build national palm date industries as a source of jobs, income and national prestige. To be the international leader in a select category, and to do so under such unfavorable economic and geopolitical circumstances, should be a source of national pride to Palestinians.

The domestic benefits of success of West Bank dates in terms of national dignity, identity and perceptions of place, belonging, and integration in the international community could exceed the value measured in money earned by sales. The Medjool date industry reflects a potentially positive area of cooperation for the United States. As a result of industry dialogue initiated by the project, local experts, including a former

Minister of Agriculture, are preparing a comprehensive development plan that could make Medjool dates the most profitable and successful economic sector of the West Bank economy.

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Jalameh Crossing Point

The Project met with agriculture exporters at the Jalameh crossing throughout the period of performance.

Farmers in the northern West Bank had recently faced logistical difficulties at the crossing due to shipments sent back by the Crossing operators, resulting in long delays and increased costs.