Mideast World Economic Forum - Progress towards peace

May 27, 2006

Over 1,100 participants met at the World Economic Forum on the Middle East last week in Sharm el-Sheikh, Egypt. The most important outcomes include:

• The highest-level talks in 11 months between Israel and the Palestinian Authority. Tzipi Livni, Minister of Foreign Affairs of Israel, and Mahmoud Abbas, President of the Palestinian Authority, both agreed that this was the first of more to come.
• Israel agreed to release a part of the frozen tax revenue due to the Palestinians.
• The European Union also agreed to release funds to the Palestinians, but bypass Hamas, said Alvaro De Soto, United Nations Special Coordinator for the Middle East Peace Process.
• Abbas and Livni both called on the Hamas-led Palestinian government to recognize Israel’s right to exist, to renounce violence and to recognize the international peace agreements of their predecessors.
• Munib Masri, Chairman, PADICO (Palestinian Territories), unveiled a new private sector initiative to push for a Palestinian government of national unity.
• Mohammad A. Mustafa, Chief Executive Officer, Palestine Investment Fund (PIF), said that public investments in the Palestinian private sector, like telecommunications and infrastructure projects in Gaza sea- and airports, are needed. Palestinian businesses, with cooperation with the global business community, could then get the economy back on its feet.
• Shimon Peres, Vice-Premier of Israel, proposed a "triangle of cooperation" involving Israel, a future Palestinian state and Jordan, that would boost the development of the whole region through joint economic projects. This could include irrigation and desalination projects, saving the Dead Sea, developing copper deposits and creating an economic zone along the border regions.

Isaac Herzog, Minister of Tourism of Israel, gave a concise summary of recent Israeli politics.

• Israel currently lacks one major political party to act as an anchor. The result is a ruling coalition that is stable for the moment, but fragile for the longer term;
• Has a parliament focused on social programs, much less concentrated on war and peace issues;
• Must face an immediate challenge to pass the national budget. This will grant parliament a six-month grace period of "tranquillity," before the electorate will expect results.

What it Means:
There has been violent fighting for power within Palestine between Hamas and Fatah, President Abbas’ party. As a result, hope for continued negotiations between Palestine and Israel is further complicated by the lack of clear representation. To this end, Abbas is courting world leaders to reinforce his value to the electorate. In addition to the Forum, he recently met with Russia’s President Putin to look at ways to restore negotiations.

The world community is trying to use funding to pressure Hamas to adopt a more conciliatory position towards Israel, but Hamas is concerned they will lose their mandate from their voters if they veer too far from their traditional militant approach.

The recent elections in Israel and Palestine have led to tremendous uncertainty, both in terms of leadership and the will of the people. However, it seems clear throughout the WEF discussions that, although there are tremendous differences of opinion on how it could be done, the clear desire for all is economic growth that benefits the region.

Action Steps:
Unfortunately, simply wait and see. Despite the huge political and financial influence this oil-rich area has on the global economy, it is still a young and emerging market that is very definitely still feeling its growing pains...and is too volatile for the average investor.

Source: World Economic Forum Discussion Topics

Providing Hope for the Palestinian Economy
Israeli Politics