Palestinians get 1st private equity fund designed to boost economy

Two Arab investment companies on Sunday announced the launch of the first private equity fund designed to boost the Palestinian economy.

The semiofficial Palestine Investment Fund and Dubai-based private equity firm Abraaj Capital will provide an initial $15 million, they said in a statement, hoping to raise the total to $50 million this year. The investments would target small-and medium-sized businesses in the Palestinian territories.

The cash is a welcome infusion into the battered Palestinian economy which has been hobbled by the ongoing conflict with Israel, internal conflicts and restrictions on trade and cross-border traffic imposed by the Jewish state, citing security.

Palestinian Prime Minister Salam Fayyad, a Western-backed, internationally respected economist, has said his government would work on boosting the economic and legal infrastructure needed for statehood in two years.

Fayyad has said he would move along with those plans irrespective of progress in peace talks with Israel. The fund could be significant in stimulating the kind of growth needed to bolster self-sufficiency for a government that relies on foreign aid for its revenues.

Bassim Khoury, a former Palestinian economy minister, said the fund would represent a little less than 1 per cent of the Palestinian gross domestic product of $4.5 billion.

About 40 per cent of the government's revenue comes in the form of direct foreign aid, he said.

Khoury said the fund could benefit the economy, assuming it is managed well and sustainable.

"If you can ensure it is properly invested in the Palestinian economy, it can have a big effect," he said.

The Palestine Investment Fund focuses on investments in the Palestinian territories. Dubai-based Abraaj Capital, which will manage the fund, works throughout the Middle East and North Africa, with offices in six countries.