Following the signing of the 1993-1994 peace accords between Israel and the PLO and the establishment of the Palestinian Authority, the Palestinian economy achieved remarkable growth rates, especially after 1998, with real GDP growth estimated at 8.8 per cent in 1999.
However, this growth masked the enterprise sector´s structural imbalances and weaknesses inherited from the occupation period, including:
- A stagnant level of private investment and its concentration in construction activities.
- The dominance of micro-enterprises with fewer than five employees (90 per cent of total establishments).
- Small and medium-size enterprises (SMEs) have a paucity of managerial skills and a limited experience in international trade.
- An inward-looking focus of enterprise, with the majority preoccupied with satisfying local demand. (Those involved in export activities are in the minority and are heavily reliant on Israel as the main export market)
- Labour-intensive manufactured goods constitutes the largest segment of merchandise exports.
- Limited absorption capacity: the domestic economy engages only 60 per cent of new entrants into the labour force.
Since October 2000, the deepening economic crisis has further aggravated the Palestinian enterprise sector´s structural problems. UNCTAD also estimates that the Palestinian economy has lost at least one third of its productive capacity since 1998 as a result of the Israeli destruction of infrastructures, overuse and poor maintenance. The situation in Gaza is much worse, as a result of the economic blockade imposed since mid-2007.
Technical assistance activities under this programme cluster seek to contribute to the development of a dynamic Palestinian private sector capable of creating new job opportunities for the growing labour force, and competing in regional and global markets.