Question

How does the absence of a competitive insurance market in Palestine affect development and progress?

Answer 1

The Palestinian economy faces many challenges. Firstly, it is highly dependent on the Israeli economy – more than 73% of Palestinian imports of goods and services originated in Israel in 2010 (PCBS, 2012). Secondly, the restrictions imposed upon it by Israel impede the development of a viable Palestinian economy. These restrictions take several forms: control over raw materials, control over the borders of Palestinian areas and prevention of the construction of industrial zones. They result in political instability, and they distort the investment climate. Thirdly, the productive sector suffers from a lack of competences and financial resources in both public and private sectors. The Palestinian Authority mainly depends on foreign aid to support its budget. The final challenge results from the technological revolution and strong growth in ICTs seen over the past two decades; this has accelerated economic openness and trade liberalization, creating a high competitive pressure on the Palestinian fragile economy.

Over the course of the past twenty years, Palestine has experienced a high increase in the significance of the service sector, in comparison with other productive sectors (manufacturing and agriculture). The service sector’s share of GDP grew steadily from 50% in 1995 to 60% in 2009, while manufacturing sector’s share fell from 21.3% in 1994 to 13.8% in 2009. Value added grew by 14.3% between 1995 and 2010, production by 13.3%, and labor by 7.3%. This confirms the fact that the Palestinian economy is a service economy, and that service sectors will be playing a leading role in the Palestinian economy in the coming years, strengthening its competitive power at both local and national levels