TEL AVIV // In the wake of the biggest financial crisis faced by the Palestinian Authority, Ibrahim Barham has grown worried about the future of his computer wholesale business.
After all, the companies to which Mr Barham's firm, Safad, distributes products such as laptops and desktop computers have not been paid in months by a major client - the West Bank-based government.
About half of Safad's revenue depends on purchases by the Palestinian Authority, so the government's financial woes are a major blow to its operations. In 2011, client orders have dropped as much as 10 per cent. Revenue is expected to stagnate in 2012 for the second straight year. Furthermore, Safad is freezing recruitment and new investments and halving its marketing costs.
"Our clients are hesitant to participate in government tenders for fear of a long delay in payments, and this is badly affecting our business," said Mr Barham, the 46-year-old founder and chief executive of his Ramallah-based company.
Safad, one of the biggest information technology companies in the West Bank, is hardly alone.
Dozens of Palestinian companies from sectors including technology, construction and pharmaceuticals that do business with the Palestinian Authority are scaling back expansion plans and reducing their budgets because their biggest client can't pay them.
The Palestinian Authority, which is dependent on foreign aid to fill a deficit projected at US$1.1 billion (Dh4bn) in 2011, has blamed its crisis on donors - especially Arab states - failing to provide promised funds. The biggest Arab donors to the Palestinian Authority in recent years have been the UAE, Saudi Arabia and Kuwait.
Israel has also worsened the Palestinian government's financial condition by several times suspending monthly transfers of some US$100 million (Dh368m) in tax revenues that it collects on behalf of the Palestinians and that are mainly used to pay for salaries. The transfers were stopped as punishment for the Palestinian's successful bid for admission to the United Nations' cultural agency Unesco, which was part of a larger effort to gain admission as a state in the world body.
As a result, the Palestinian Authority now owes its suppliers from the private sector more than US$400 million and companies have said the government had more than halved its spending on some private sector goods and services. Additionally, the 150,000-strong staff of the Palestinian Authority - the West Bank's biggest single employer - were also spending less because they have not been paid on time or in full three times in the past year.
While the Palestinian government has owed the private sector similar amounts several times in the past few years, the current crisis is especially acute because most Arab countries are filling the gap, as they have in the past, according to economists.
Analysts said Arab countries were not giving more money to the Palestinian government partly because they were facing their own domestic pressures for financial resources. The Palestinians also face competition for Gulf funds from other Middle East countries in need, such as Tunisia.
For a private sector already stifled by Israeli restrictions on access to land, water, raw materials and export markets, the financial crisis "adds insult to injury," said Samir Abdullah, head of the Palestine Economic Policy Research Institute and an ex-Palestinian minister of planning and labour.
Indeed, it is the Israeli limitations that have made Palestinian companies overwhelmingly reliant on government spending, which has driven the territory's economy in recent years.
Economists said the government's troubles were likely to prompt more corporate losses and shutdowns, spur banks to be reluctant to grant loans to financially strapped firms and turn away private and foreign investors.
But the financial difficulties may also have a wider effect. Palestinian leaders have hoped that the private sector would eventually drive an economic expansion that would bolster their efforts to build a state in the West Bank, Gaza Strip and East Jerusalem.
However, the effects of the government's financial crisis were likely to delay such growth.
"The danger is that more private sector entities will shut down or reduce their investments and employment and not contribute to remove our reliance on donors and on Israel," said Sam Bahour, a prominent Palestinian-American entrepreneur in Ramallah.
Iyad Masrouji, a board member at Masrouji Group, a maker of pharmaceutical products, said his firm has so far failed to get the Palestinian Authority to pay its debt of 15 million shekels (Dh14.3 million) despite efforts to negotiate with officials and publicise the company's plight in the media.
About a fifth of Masrouji's revenue comes from the Palestinian Authority, which has taken as long as 18 months to pay some of the bills to the company, much surpassing the agreed three-month limit. As a result, the company's growth plans - including expanding into new lines such as cancer products - have been on hold for two years.
"We are not reaching our potential and are losing our opportunity," Mr Masrouji said in an interview. He added that the company was mulling cutting its supplies to the Palestinian Authority.
Non-governmental hospitals face similar woes, and some have warned that the financial crisis may have life-threatening consequences.
Tawfiq Nasser, head of Augusta Victoria Hospital, the second-biggest in East Jerusalem, said the Palestinian Authority owes his hospital 33 million shekels (Dh31 million) from referring thousands of patients to the institution but failing to pay for their treatment.
The debts have led the hospital, which depends on the Palestinian Authority for about 85 per cent of its revenue, to pay staff salaries late at least three times in 2011 and partly halt payments to suppliers.
Mr Nasser has also warned that the hospital - a key Palestinian cancer treatment centre - may stop admitting new patients and may run out of some medicines if it does not get paid within weeks.
"It is tormenting because it's me and not [the Palestinian prime minister Salam] Fayyad who has to face a mother of a child with leukaemia and tell her we cannot treat her," said Mr Nasser.
Entrepreneurs said that with the Palestinian Authority's financial troubles and the Israeli restrictions in the West Bank, they were taking a beating from all sides.
"We cannot forecast in the short term because of the government's crisis, but we also cannot forecast in the long term because of the political situation with Israel," said Mr Ibrahim.
foreign.desk@thenational.ae
At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
'HIJRAH%3A%20IN%20THE%20FOOTSTEPS%20OF%20THE%20PROPHET'
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Guns N’ Roses’s last gig before Abu Dhabi was in Hong Kong on November 21. We were there – and here’s what they played, and in what order. You were warned.
- It’s So Easy
- Mr Brownstone
- Chinese Democracy
- Welcome to the Jungle
- Double Talkin’ Jive
- Better
- Estranged
- Live and Let Die (Wings cover)
- Slither (Velvet Revolver cover)
- Rocket Queen
- You Could Be Mine
- Shadow of Your Love
- Attitude (Misfits cover)
- Civil War
- Coma
- Love Theme from The Godfather (movie cover)
- Sweet Child O’ Mine
- Wichita Lineman (Jimmy Webb cover)
- Wish You Were Here (instrumental Pink Floyd cover)
- November Rain
- Black Hole Sun (Soundgarden cover)
- Knockin’ on Heaven’s Door (Bob Dylan cover)
- Nightrain
Encore:
- Patience
- Don’t Cry
- The Seeker (The Who cover)
- Paradise City
Killing of Qassem Suleimani
The Perfect Couple
Starring: Nicole Kidman, Liev Schreiber, Jack Reynor
Creator: Jenna Lamia
Rating: 3/5
Fixtures
%3Cp%3E%3Cstrong%3EWednesday%2C%20April%203%3C%2Fstrong%3E%3C%2Fp%3E%0A%3Cp%3EArsenal%20v%20Luton%20Town%2C%2010.30pm%20(UAE)%3C%2Fp%3E%0A%3Cp%3EManchester%20City%20v%20Aston%20Villa%2C%2011.15pm%20(UAE)%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EThursday%2C%20April%204%3C%2Fstrong%3E%3C%2Fp%3E%0A%3Cp%3ELiverpool%20v%20Sheffield%20United%2C%2010.30pm%20(UAE)%3C%2Fp%3E%0A
COMPANY%20PROFILE
%3Cp%3E%3Cstrong%3ECompany%20name%3A%3C%2Fstrong%3E%20Alaan%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%202021%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20Dubai%3Cbr%3E%3Cstrong%3EFounders%3A%3C%2Fstrong%3E%20Parthi%20Duraisamy%20and%20Karun%20Kurien%3Cbr%3E%3Cstrong%3ESector%3A%3C%2Fstrong%3E%20FinTech%3Cbr%3E%3Cstrong%3EInvestment%20stage%3A%3C%2Fstrong%3E%20%247%20million%20raised%20in%20total%20%E2%80%94%20%242.5%20million%20in%20a%20seed%20round%20and%20%244.5%20million%20in%20a%20pre-series%20A%20round%3Cbr%3E%3Cbr%3E%3C%2Fp%3E%0A
A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
FIXTURES
UAE’s remaining fixtures in World Cup qualification R2
Oct 8: Malaysia (h)
Oct 13: Indonesia (a)
Nov 12: Thailand (h)
Nov 17: Vietnam (h)
2025 Fifa Club World Cup groups
Group A: Palmeiras, Porto, Al Ahly, Inter Miami.
Group B: Paris Saint-Germain, Atletico Madrid, Botafogo, Seattle.
Group C: Bayern Munich, Auckland City, Boca Juniors, Benfica.
Group D: Flamengo, ES Tunis, Chelsea, Leon.
Group E: River Plate, Urawa, Monterrey, Inter Milan.
Group F: Fluminense, Borussia Dortmund, Ulsan, Mamelodi Sundowns.
Group G: Manchester City, Wydad, Al Ain, Juventus.
Group H: Real Madrid, Al Hilal, Pachuca, Salzburg.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
SQUADS
South Africa:
JP Duminy (capt), Hashim Amla, Farhaan Behardien, Quinton de Kock (wkt), AB de Villiers, Robbie Frylinck, Beuran Hendricks, David Miller, Mangaliso Mosehle (wkt), Dane Paterson, Aaron Phangiso, Andile Phehlukwayo, Dwaine Pretorius, Tabraiz Shamsi
Bangladesh
Shakib Al Hasan (capt), Imrul Kayes, Liton Das (wkt), Mahmudullah, Mehidy Hasan, Mohammad Saifuddin, Mominul Haque, Mushfiqur Rahim (wkt), Nasir Hossain, Rubel Hossain, Sabbir Rahman, Shafiul Islam, Soumya Sarkar, Taskin Ahmed
Fixtures
Oct 26: Bloemfontein
Oct 29: Potchefstroom
KEY%20DATES%20IN%20AMAZON'S%20HISTORY
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'The Woman in the House Across the Street from the Girl in the Window'
Director:Michael Lehmann
Stars:Kristen Bell
Rating: 1/5
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COMPANY%20PROFILE
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UAE SQUAD FOR ASIAN JIU-JITSU CHAMPIONSHIP
Men’s squad: Faisal Al Ketbi, Omar Al Fadhli, Zayed Al Kathiri, Thiab Al Nuaimi, Khaled Al Shehhi, Mohamed Ali Al Suwaidi, Farraj Khaled Al Awlaqi, Muhammad Al Ameri, Mahdi Al Awlaqi, Saeed Al Qubaisi, Abdullah Al Qubaisi and Hazaa Farhan
Women's squad: Hamda Al Shekheili, Shouq Al Dhanhani, Balqis Abdullah, Sharifa Al Namani, Asma Al Hosani, Maitha Sultan, Bashayer Al Matrooshi, Maha Al Hanaei, Shamma Al Kalbani, Haya Al Jahuri, Mahra Mahfouz, Marwa Al Hosani, Tasneem Al Jahoori and Maryam Al Amri
Indoor cricket in a nutshell
Indoor Cricket World Cup – Sep 16-20, Insportz, Dubai
16 Indoor cricket matches are 16 overs per side
8 There are eight players per team
9 There have been nine Indoor Cricket World Cups for men. Australia have won every one.
5 Five runs are deducted from the score when a wickets falls
4 Batsmen bat in pairs, facing four overs per partnership
Scoring In indoor cricket, runs are scored by way of both physical and bonus runs. Physical runs are scored by both batsmen completing a run from one crease to the other. Bonus runs are scored when the ball hits a net in different zones, but only when at least one physical run is score.
Zones
A Front net, behind the striker and wicketkeeper: 0 runs
B Side nets, between the striker and halfway down the pitch: 1 run
C Side nets between halfway and the bowlers end: 2 runs
D Back net: 4 runs on the bounce, 6 runs on the full