GENEVA (ILO News) – The Geneva-based International Labour Organization in appealing to the international community to fund a three-year, US$ 20 million programme with the goal of strengthening the job- and income-generating capacity of small- and micro-enterprises in the West Bank and Gaza strip.
In a report released in Geneva today, the ILO says that the economies of the West Bank and Gaza face "an enormous problem of labour absorption" due to high unemployment, a sluggish economy and a demographic boom that will bring hundreds of thousands of job seekers into the labour market in coming years.
The ILO says that while small-scale enterprises constitute "the backbone of the Palestinian economy" their capacity to expand and provide productive employment to the large number of job seekers is limited by a wide array of economic, social and institutional shortcomings which the proposed programme seeks to tackle via improved labour market policies and support services for entrepreneurs.
The report targets traditional sectors such as clothing and textiles, food processing and handicrafts where existing enterprises have considerable export potential. But it also seeks to strengthen resources in new areas, such as data processing, electronics, manufacturing and travel and tourism, which are expected to expand with the spread of new information and communications technology.
The ILO report says that the private sector is the dominant economic force in the West Bank and Gaza, accounting for approximately 85% of the GDP and two thirds of total employment. About 97% of all firms are small, usually family-owned enterprises, employing less than ten workers. The relative isolation of these firms during years of conflict has severely restricted their growth and led to generally low levels of productivity and product quality and to low levels of capacity utilization, which is currently estimated to average around 50%.
The ILO report finds that with the labour force growing at a rate of over 5% annually, the Palestinian work force is projected to grow from 688,000 this year to over 1 million by the year 2010. "The economy must generate 37,000 jobs each year just to employ the new entrants into the labour market before it can even start to make a dent on the existing high levels of unemployment," the report concludes.
The report also notes that economic growth, while essential, will not be sufficient if the emerging Palestinian economy is to avoid an unemployment crisis. Nor can growth expect to provide tangible benefits for socially excluded, vulnerable and disadvantaged groups, such as the rural poor, women and young people. Women in particular are at a disadvantage, facing restricted access to employment and training opportunities and the ILO proposal seeks to remedy this situation with two projects designed to promote gender equality and provide micro-credit and technical support to female entrepreneurs.
The ILO estimates that overall economic growth rates of at least 8% annually would be necessary to employ the expected growth in the labour force, a condition which is not likely to be met under current forecasts. Moreover, the outlook of the Palestinian economy will continue to rest on progress in the peace process. The ILO warns that "the existing high levels of unemployment, poverty and rising youth unemployment all point to a very fragile socio-economic situation which can only resolve itself if the economic environment and conditions exist for stimulating economic growth in the Palestinian economy."
At the end of 1999, the level of official unemployment was 10% in the West Bank and over 16% in Gaza, according to the ILO. But underemployment is widespread, with much work taking the form of unpaid or poorly paid labour in small shops and family enterprises. The poverty rate in 1997 was 15.6% of the population in the West Bank and 38.2% for Gaza strip. As many as 35,000 families, accounting for 140,000 people, receive regular income assistance from the Palestinian Ministry for Social Affairs.
About 22% of the Palestinian workforce was employed in Israel and Israeli settlements in 1999. However, "the threat of border closures makes the labour market vulnerable to extreme shocks which can almost double the unemployment rate, dramatically slow down economic growth and lead to a significant fall in incomes and increase in the number of those living below the poverty line," the report says.
Unemployment rates are particularly high amongst young people, reaching as high as 27% for young women aged 20-24 and 15% for males of the same age group. Youth unemployment levels in the Gaza strip are double those in the West Bank.
The report is based on a mission of ILO experts to the West Bank and Gaza undertaken in January this year which concluded that "Palestinian enterprises have a considerable development potential." However, it noted that these enterprises face serious constraints on their growth, including:
1. the lack of a comprehensive small-enterprise development policy;
2. the absence of an autonomous body, such as a business association, to represent small business interests and establish business linkages;
3. difficult access to finance, with most SME’s unable to borrow from commercial banks for want of collateral;
4. poor working conditions, with salaries often below the poverty line, unstructured relations between employers and workers and labour legislation that is outdated.
5. insufficient availability and quality of business development services, including information services, marketing and export assistance and management services.
The ILO proposals, developed in conjunction with the Ministry of Labour and in consultation with tripartite partners in the region, aim to redress these shortcomings by establishing a comprehensive employment and development strategy for enterprises in West Bank and Gaza, including programmes to improve human resources via networks of vocational training centres. The education and training efforts will be focused in key sectors, such as construction, hotels and tourism and developing rural cooperatives, with a special emphasis on disfavoured groups, including women entrepreneurs.
The ILO proposals seeking to strengthen labour market institutions include training and advisory services in such areas as occupational safety and health, social security and unemployment benefits systems and the establishment of projects to combat child labour, a problem which has become increasingly visible with the deterioration of the general economic and social situation in the West Bank and Gaza.
The ILO mission and proposals were undertaken at the initiative of the Organization’s Director- General, Mr. Juan Somavia, to enhance, upgrade and expand ILO technical cooperation activities with the Palestinian Authority. The ILO advice and proposals are formulated in a manner consistent with the basic rights formulated in the ILO’s Declaration of fundamental principles and rights at work and labour standards.