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PROJECT DOCUMENT

DRAFT 9

Title: Export Development in occupied Palestinian territory

Time of the project: 3 years (October 2010 – October 2013)

Site of the project: Occupied Palestinian territory (oPt)

Start date: October, 2010

Partner organization: Palestinian Trade Center (PalTrade)

Associated institutions: International Trade Centre (ITC)

Executing agency: United Nations Development Program/Program of Assistance to

the Palestinian People (UNDP/PAPP)

01.07.2010

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ABBREVIATIONS ACCESS! ACCESS! for African businesswomen in International Trade AfD Agence française de developpement ASTAP Administrative Services for Tourism Agencies in Palestine BDS Business development services CIDA Canadian International Development Agency

CSO Civil society organization DAC Development Assistance Committee DEEP Deprived Families’ Economic Empowerment Programme

EC European Commission

EFTA European Free Trade Association

EU European Union

FTA Free trade agreements GAFTA Greater Arab Free Trade Area

GTZ German Agency for Technical Cooperation ICT Information and communication technologies

ITC International Trade Centre

MDGs Millenium Development Goals

MSMEs Palestinian micro, small and medium enterprises

NGO Non-Governmental organization

ODA Overseas Development Assistance oPt Occupied Palestinian territory

PalTrade Palestine Trade Centre

PARC Agricultural Development Association PCBS Palestinian Central Bureau of Statistics PCU Palestinan Contractors Union

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PFI Palestine Federation of Industries

PITA Palestinian Information Technology Association PSC Palestinian Shippers Council

PSCC Private Sector Coordinating Council

RBM Results-based management SMEs Small and medium-sized enterprises SPU Strategic Planning Unit SQAM Standardisation, quality assurance, accreditation and certification, and metrology TRTA Trade-related technical assistance UNCTAD United Nations Conference on Trade and Development

UNDP/PAPP United Nations Development Program / Program of Assistance to the Palestinian People

UNIDO United Nations Industrial Organization USAID United States Agency for International Development

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TABLE OF CONTENTS

Executive Summary .................................................................................................... vi

I. Introduction ........................................................................................................ 1

II. The development context and problematique ................................................. 2

II.1 Importance of trade .............................................................................................. 2

II.2 Economic development challenges ...................................................................... 4

II.3 Business environment .......................................................................................... 5

II.4 Enterprise structure .............................................................................................. 6

II.5 Sectors with export potential ................................................................................ 3

II.6 Technology .......................................................................................................... 4

II.7 Gender issues ...................................................................................................... 5

II.8 Environmental issues ........................................................................................... 6

III. The project rationale ......................................................................................... 7

III.1 Export development needs .................................................................................. 7

III.2 Strategic Business Planning and Management Capacity Development ................ 8

III.3 Trade Policy ......................................................................................................... 9

III.4 Trade Information ................................................................................................ 9

III.5 Trade Development ............................................................................................10

IV. The Project ....................................................................................................... 11

IV.1 Expected results ..............................................................................................11

IV.2 Description of the Project ................................................................................13

IV.3 Project beneficiaries ........................................................................................22

IV.4 Project proponents ..........................................................................................23

IV.5 Management strategy ......................................................................................29

V. Lessons learned .............................................................................................. 35

VI. Environmental and Gender Considerations .................................................. 37

VI.1 Environmental considerations 37

VI.2 Equality between Women and Men 38

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VII. Risks ................................................................................................................. 39

VIII. Expected benefits and sustainability ............................................................. 43

VIII.1 Expected benefits ............................................................................................43

VIII.2 Sustainability ...................................................................................................44

IX. CIDA Development Priorities .......................................................................... 46

X. Recipient Country / Authorities Support ....................................................... 47

List of annexes ........................................................................................................... 48

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Executive Summary

As its ultimate outcome, the present trade development project is aimed at increasing

employment opportunities and income in the occupied Palestinian territory (oPt). Human

development goals like this, providing not only poverty reduction as such but also meaningful

work under decent conditions, improved health and safety, a greater role for women, and

readiness to address environmental concerns, can be reached through sustainable private

sector development, with increased trade contributing significantly to this process.

In oPt, the internal market is clearly not large enough to support sustainable private sector

growth. Apart from the current physical restrictions on the movement of goods within oPt and

across its borders, the economy is very open to international competition. Enterprises therefore

have to learn to become internationally competitive and to sell their goods and services abroad

already in order to survive at all in the domestic market. However, doing so, export ready

enterprises will find that they can increase their sales and profitability. Progressively, this

development allows them to engage and train new staff and to put other, smaller firms to work

as sub-contractors. In turn, greater exposure to foreign markets and increased capacity help

them further improve their competitiveness. In this way, the beneficial effects of increased

exports continue spreading throughout the economy.

The importance of increasing Palestinian exports cannot be underestimated. According to data provided by UNCTAD (2009) the total trade deficit of oPt stood at $3.8 billion, constituting around 78% of the GDP. Over half of this deficit has been in trade with Israel, where the deficit exceeded $2.6 billion. At the same time, there is great potential for closing the trade gap. Already for reasons of geographical proximity, even micro enterprises would in principle be able to reach the Israeli or Jordanian markets, if not directly, then at least as subcontractors. With internationally competitive products and improved marketing know-how and means, they could also successfully reach more distant markets, as well as take market share from imported products in oPt. Improving the performance of the MSMEs therefore has an immediate potential to significantly reduce the trade deficit through increased exports and import substitution. The oPt Government and the Ministry of National Economy (MNE) take a clear stance on the importance of trade development and diversification as a means for increasing prosperity and thus as a priority for private sector development. The private sector itself requires and requests support for enhancing its competitiveness and allowing it to better reach foreign markets, through the provision of trade information, capacity building activities, and practical help with finding clients. In this situation, the project’s ultimate objective will be reached in two steps; (i) by enhancing the quality, quantity and relevance of sustainable trade support services and information provided by Pal-Trade and its public and private partner organisations to Palestinian micro, small and medium enterprises (MSMEs) with exporting potential, and (ii) by increasing the readiness of the private sector to identify potential foreign markets and to compete in them. The main beneficiaries of the project are thus the Palestinian MSMEs.

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With the support provided by the project, export ready MSMEs in oPt, as well as their local sub-contractors and suppliers, are expected to become more competitive in the international market, hence raising their capacity to expand their workforce, contribute to economic development and growth, and improve the standard of living of their employees and their families, thereby significantly contributing to poverty reduction. The project is articulated around the five immediate outcomes set out below. In turn, these outcomes are intended to be obtained through the specific outputs of the major activities to be carried out under the project. Each successive outcome and output will build on the preceding ones. Together, they will create synergies between each other and with programmes and activities carried out by other parties. In this way, they will both provide tangible results in the shorter term and create a lasting ability to continue generating benefits for the economy. Outcome 1: Increased ability of PalTrade to fulfill its national mandate as the national trade development organisation, supporting SMEs with strategically selected, effective and efficient trade support services. This outcome will be achieved by delivering the following eight outputs:

Output 110: Strategic Planning Unit (SPU) established and working;

Output 120: PalTrade institutional assessment/benchmarking completed;

Output 130: Strategic HR capacity needs addressed;

Output 140: Private sector trade development demands identified;

Output 150: Business sectors assessed in terms of potential for export development and contribution to poverty reduction, etc., including environmental and gender aspects;

Output 160: Corresponding sector export development plans updated or developed;

Output 170: A 5-year strategic plan and a three-year rolling action plan adopted, also ensuring PalTrade’s sustainability;

Output 180: RBM system established at PalTrade. As a result, PalTrade will have become able to take on its full share of the work with achieving the next four outcomes and will have secured its ability to manage its business and continue providing market oriented trade development services in the long run. The basis will also have been laid for keeping future trade support suitably focussed and thereby effective and efficient, Outcome 2: Enhanced ability of the private sector to actively shape oPt trade policy and benefit from trade agreements. This outcome will be achieved by delivering the following three outputs:

Output 210: A comprehensive assessment of six major trade agreements prepared, with conclusions on actions to take;

Output 220: 4-5 trade policy position papers prepared, including recommendations for action by MSMEs, the competent authorities and other parties;

Output 230: One successful trade policy advocacy event organised with international participation.

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With this, the private sector will have received immediately applicable guidance and support for better use of existing free trade agreements and a mechanism will have been put in place for continued, effective trade policy work by the private sector. Outcome 3: Improved access to and use of trade information for export related decisions by the private sector. This outcome will be achieved by delivering the following four outputs:

Output 310: Trade information management capacity built in order to fill gaps identified in PalTrade’s strategy and action plan;

Output 320: General purpose trade information available on-line, including links giving access to external sources of trade information;

Output 330: Customised, sector specific trade information products and services available on demand to local and international users;

Output 340: Information provided to MSMEs about trade information and its use. The future supply of trade information will thereby have been secured in a way that provides continued, direct benefits to exporters and ensures appropriate adaption to changing trade information needs. Outcome 4: Increased access to and use of effective capacity building and advisory services by oPt MSMEs. This outcome will be achieved by delivering the following four outputs:

Output 410: Sustainable capacities built among BDS providers through the training and certification of selected practitioners to carry out enterprise diagnostics, assist with export strategy design, and to design and provide firm level advisory services and technical assistance to MSMEs;

Output 420: Specific training needs of women entrepreneurs identified, tools adapted, and training delivered;

Output 430: PalTrade staff prepared for the management of a business advisory services programme for export development;

Output 440: A business advisory services programme for export development delivered on a cost sharing basis under PalTrade’s management.

As a result of stepwise, continuous training and coaching over a considerable time, the trade support skills and experience obtained through the project will become firmly embedded in the minds of trade development practitioners and documented in the form of standard approaches, analytical and advisory tools and manuals. Likewise, MSMEs will have seen both the immediate and the longer term benefits of using quality services and come to appreciate their full value. In this way, sustainable supply of and demand for trade development services will have been established. Outcome 5: Increased access of oPt SMEs in the selected sectors to international business opportunities in targeted markets, and to contacts with the Palestinian business diaspora. This outcome will be achieved by delivering the following five outputs:

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Output 510: Market entry plans established for selected external markets for the key sectors identified;

Output 520: Trade show organised in oPt for local enterprises with export potential;

Output 530: Participation in three international exhibitions for selected sectors organised to allow export ready firms to exhibit successfully and not yet export ready firms to obtain the market exposure necessary for future business success;

Output 540: Participation of (groups of) local businesses in international trade missions and business to business meetings facilitated;

Output 550: Enhanced market and trade linkages between local firms and Palestinian diaspora businesses.

Bringing together exporters and their foreign clients in various ways, while building the ability to continue working successfully in the international market, the project will give immediate benefits in the form of new export deals and will also help establish lasting business relations and secure the long term growth of Palestinian exports. The project will be carried out in over a three-year period. Given the nature of the project, in particular, the importance of exposure to foreign markets for ensuring sustainable export development, local MSMEs will also be given the opportunity to participate, on a cost-sharing basis, in well targeted business development activities. The main partner in the recipient country will be the Palestine Trade Centre (PalTrade). With its knowledge and experience of working in trade development for the benefit of local MSMEs, its good standing and reputation, and its staff, PalTrade will further enhance its skills and capacity in the project’s inception phase and be the key implementation partner for the project. PalTrade’s capacities will be strengthened to enable it to provide better services to its clients: it will improve its planning and management capacity; its staff will become even more proficient in delivering services; new or improved services will be introduced; improved quality, greater flexibility and a wider range of services will allow it to segment its clients and start charging those who receive tailor made support; its role and status will be enhanced, attracting new members and sponsors; and it will thus become more successful and sustainable as a trade development organisation. The International Trade Centre (ITC) will bring its eminent expertise in export promotion and trade development to bear, and the United Nations Development Program / Program of Assistance to the Palestinian People (UNDP/PAPP) will use its resources, know-how, position and influence to manage the project, ensure proper dovetailing with other programmes and projects, contribute its specific expertise in results based management and ensure that the project contributes both to human development at large and to the MDGs in particular. The project will work with the trade associations grouping enterprises in specific sectors, business women’s associations, business development service providers, the chambers of commerce, and the Palestine Federation of Industries. As co-beneficiaries of the project, these partners will take up the specific recommendations which the project will provide, and will engage in follow-up activities in related fields to help ensure broad-based and long-term project impact. Finally, during the project, local providers of trade development services, both enterprises and individuals, will graduate from being beneficiaries to becoming implementation

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partners, delivering services to MSMEs and thus helping to ensure the sustainability of the project’s achievements. Throughout the project, key cross-cutting issues like environment and gender will receive particular attention, since trade development has a strong potential for addressing these fields. The awareness of private sector companies and associations regarding environmental sustainability and environmental quality management will be raised, highlighting the commercial benefits of attention to the environment.The promotion of women’s empowerment and gender equality will be considered within each component of the project, and will be complemented by a gender specific programme for women entrepreneurs. The project budget is articulated as indicated in the following table. It provides a summary breakdown, while further details are found in Annex II.

Summary project budget in USD Component ITC UNDP PalTrade Total Cost-

sharing CIDA contrib.

Component 1: Setting The Stage For Trade Development 709,500 200,000 672,328 1,581,828 1,581,828

Component 2: Supporting Trade Policy Effectiveness 98,000 302,678 400,678 400,678

Component 3: Enhancing Trade Information 185,000 557,314 742,314 742,314

Component 4: Developing Export Readiness 164,000 680,229 844,229 175,000 669,229

Component 5: Reaching International Markets 30,000 1,342,874 1,372,874 371,708 1,001,166

Total Components 1-5 1,186,500 200,000 3,555,423 4,941,923 546,708 4,395,215

PalTrade overheads (12% ) 426,651 426,651 426,651

Project Coordination

200,000 200,000 200,000

Fixed Assets (Equipment) 36,000 36,000 36,000

Miscellaneous*

30,000 30,000 30,000

TOTAL project cost 1,186,500 466,000 3,982,074 5,634,574 546,708 5,087,865

UNDP general managemt (7%) 356,151 356,151 356,151

Total 1,186,500 822,151 3,982,074 5,990,724 546,708 5,444,016

(*) this item includes all costs related to communications, security, travel expenses, etc.

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I. Introduction As its ultimate outcome, the present trade development project is aimed at increasing employment opportunities and income in the occupied Palestinian territory (oPt). Human development goals like this, providing not only poverty reduction as such but also meaningful work under decent conditions, improved health and safety, a greater role for women, and readiness to address environmental concerns, can be reached through sustainable private sector development, with increased trade contributing significantly to this process. In oPt, the internal market is clearly not large enough to support sustainable private sector growth. Apart from the current physical restrictions on the movement of goods within oPt and across its borders, the economy is very open to international competition. Enterprises therefore have to learn to become internationally competitive and to sell their goods and services abroad already in order to survive at all in the domestic market. However, doing so, export ready enterprises will find that they can increase their sales and profitability. Progressively, this development allows them to engage and train new staff and to put other, smaller firms to work as sub-contractors. In turn, greater exposure to foreign markets and increased capacity help them further improve their competitiveness. In this way, the beneficial effects of increased exports continue spreading throughout the economy. In order to start and to sustain this virtuous circle, it is crucial to make high quality trade support services available to micro, small and medium enterprises (MSMEs) for export development and to create conditions which are conducive to meeting the needs of growing numbers of enterprise clients. This is why the project focuses on strengthening PalTrade and then, together with PalTrade, other trade support institutions, which in turn will enhance the export performance of an increasingly large number of micro, small and medium enterprises. The present project thus creates human development impact by mobilising participants in the private sector, empowering them through ‘learning by doing’, and enabling them to grow trade sustainably. This approach and the project’s trade development focus reflect CIDA’s priorities as well as the needs and interests of the Palestinian side. At the December 2007 Paris Conference of Donors for the Palestinian Territory, Canada pledged 300 million dollars over a five year period to support Palestinian efforts to increase security, strengthen governance and promote prosperity. One area for CIDA’s potential intervention is the improvement of the trade competitiveness of the Palestinian private sector. Consequently, in March 2009, CIDA mandated two consultants experienced in private sector development, trade and evaluation to undertake an Organizational Development Assessment of PalTrade. The primary objective of this assessment was to determine how CIDA could assist PalTrade in fulfilling its mission and mandate, particularly in meeting some or all its objectives, and how the assistance could best complement CIDA’s prosperity and economic growth programme in oPt. The main conclusion was that a trade readiness capacity building programme which CIDA could support would be appropriate and feasible. The present project is based on this key recommendation . Similarly, the current strategy of the Ministry of National Economy highlights the importance of creating “a thriving and sustainable economy”:

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“Increasing Market Access both locally and externally through the support of enterprise in reaching external markets, as well as through introduction of potential international trade partners to local producers or clusters of producers, as well as through the introduction of export promotion mechanisms through the National Export Promotion Organization (PalTrade)” and

“building the competitive capacity of producers in order to introduce them to external markets”.

Both these aims are fully supported by the present project.

II. The development context and problematique

II.1 Importance of trade OPt is a small and underdeveloped economy next to a much larger and more developed one, namely Israel. Consequently, its growth depends on maintaining open trade with its neighbours. Trade flows are nearly 85% of GDP, with imports of goods and services representing over 80% of total flows and exports around 20%. The vast majority of trade - around 90% - is with Israel. However, because of the deteriorating political situation, Israel has increasingly imposed restrictions on the movement of goods and people, making it more difficult for enterprises to conduct business. In addition, changes in the Israeli economy have reduced the market for traditional Palestinian products. Thus, future growth will depend upon Palestinian enterprises being able to reach markets beyond Israel, accessing new markets in the rest of the world and building the skills base of potential Palestinian workers to find new job opportunities. While recognising the very real and significant restrictions Israeli measures have imposed on the Palestinian economy and its ability to export, oPt’s existing trade patterns demonstrate a need to reinforce its domestic market, diversify its international markets and expand the number of export-ready firms, if trade is going to contribute to the development of the local economy. The importance of increasing Palestinian exports cannot be underestimated. According to data provided by UNCTAD (2009) the total trade deficit of oPt stood at $3.8 billion, constituting around 78% of the GDP. Over half of this deficit has been in trade with Israel where the deficit exceeded $2.6 billion. Israel is clearly the primary trading partner, with most Palestinian trade being to, from or through Israel. Jordan is the key Arab trading partner, while Germany stands out from among other trading partners in imports, as well as exports, to some extent.

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Exhibit 1 Reported Exports by Destination (USD Million)

2004 2005 2006 2007 2008

Israel 281 290 326 455 499

Arab States 18 25 31 32 42

Rest of World 14 20 9 26 17

Total 313 335 366 513 558

Main Arab export partners: Jordan, UAE, Egypt, and Qatar (Source: ITC; UN COMTRADE) Main "Rest of World" export partners: USA, Belgium, UK, France, Italy, the Netherlands (Source; ITC, UN COMTRADE)

Exhibit 2 Reported Imports by Destination (USD Million)

2004 2005 2006 2007 2008

Israel 1,748 1,873 2,002 2,308 2,767

Arab States 65 68 65 75 79

Rest of World 561 725 691 758 722

Total 2,374 2,666 2,758 3,141 3,568

Main Arab import partners: Egypt, Jordan (Source: ITC, UN COMTRADE) Main "Rest of World" import partners: Germany, China, Turkey, and Netherlands (Source: ITC, UN COMTRADE)

The Palestinian economy benefits from bilateral trade agreements with the United States of America, Canada, the European Union (EU), the European Free Trade Association (EFTA), the Arab States (GAFTA), Russia, Turkey and Israel. Unfortunately, experience shows that the private sector is not fully utilising the opportunities provided by these agreements and many enterprises are not well positioned to take advantage of these opportunities; however, they are interested in improving their capacity in this respect. There is a good potential for closing the trade gap. Already for reasons of geographical proximity, even micro enterprises would in principle be able to reach the Israeli or Jordanian markets, if not directly, then at least as subcontractors. With internationally competitive products and improved marketing know-how and means, they could also successfully reach more distant markets, as well as take market share from imported products in oPt. Improving the performance of the MSMEs therefore has an immediate potential to significantly reduce the trade deficit through increased exports and import substitution.

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For similar reasons of geographical proximity, their obvious, individual disadvantages in terms of output capacity and economies of scale in design, marketing, production and physical distribution are possible to overcome by marketing and production cooperation with other, similar firms in oPt or by vertical integration into specialised value chains led by larger oPt or foreign enterprises. Indeed, one of the beneficial effects of trade development is the increased scope for participation also by MSMEs in international value chains.

II.2 Economic development challenges The World Bank estimates that real GDP in oPt increased by 2.3% in 2008, continuing the modest recovery that began four years ago. Reflecting on the past seven years, three distinct periods are discernable: (i) October 2000 through 2002, the period of severe crisis, in which real GDP per capita declined by about 36 percent, (ii) 2003 through 2005, a period of stabilisation and gradual recovery, in which real GDP growth averaged about 6 percent per annum, and (iii) 2006 through 2008, a period of modest GDP recovery after a severe slump in the economy in 2006 as a result of the political instability.

Exhibit 1: Palestinian Economy (West Bank and Gaza Strip): Macroeconomic Performance

2007 2006 2005 2004 2003 2002 1999 1995

Real GDP growth (%) 0.0 -4.8 6.0 6.0 5.8 -3.8 8.6 6.1

Gross domestic 5 045 4 533 4 478 4 077 3 624 3 156 4 517 3 276 Product -GDP (US$m)

Gross national 5 620 5 068 5 017 4 534 4 105 3 546 5 454 3 779 income - GNI (US$m)

Gross disposable 8001 7 108 6 583 5 951 5 395 985 4 5 853 4 200 income - GDI (US$m)

GDP per capita (US$) 1 261 1 165 1 191 1 203 1 108 999 1 590 1 400

GNI per capita (US$) 1 405 1 303 1 334 1 337 1 255 1 122 1 920 1 615

Real GNI per capita -0.7 -14.9 -1.0 1.5 6.2 -8.9 4.1 7.9 growth (%)

Source: PCBS (2007)

Nevertheless, today’s Palestinian economy still operates at well below its potential, with real GDP per capita almost 30 percent lower than in 1999. At the pace of economic growth witnessed since 2003, pre-Intifada per capita income levels may not be restored before 2012 and women’s economic participation, in particular, will not rise at rates that will support greater gender parity. Also in other respects, the socio-economic situation is precarious. Unemployment levels remain high. The third quarter data for 2008 show unemployment at 26 percent (19 percent in the West Bank and 40 percent in Gaza). Youth unemployment is most acute, with unemployment among

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20-24 year-olds at some 24 percent overall. Around 57 percent of the Palestinian population still falls below the poverty line. The economy in oPt lacks sovereignty and is contained and fragmented. Territorial fragmentation curbs the performance of the private sector in the West Bank and Gaza. It inhibits the expansion of businesses beyond urban centres, chokes off markets in areas that are physically and administratively contained, separates sellers from consumers, and prevents small businesses from achieving economies of scale because of increased transaction costs. The separation of the West Bank and Gaza in another issue. Coupled with the increasing disagreement between the Palestinian factions, the geography of the division aggravates the political discord. Despite major structural challenges and the damage done by years of political instability and conflict, the Palestinian economy has still potential for future growth, and a revival is urgently needed to reduce poverty levels and dependence on aid. The sustainable, long-term growth of the Palestinian economy depends on political progress and stability as well as on the ability of enterprises to better reach out to local, regional and international markets with more competitive, higher value-added products. The challenge identified by CIDA during its mission in oPt in November, 2008 is to shape the revival of growth in a way that promotes a sustainable private sector and the creation of productive and decent employment for a broadly inclusive range of Palestinians. To do this, there is a need to strengthen the foundations of the Palestinian economy by:

Creating a conducive business environment;

Strengthening public and private sector institutions and the cooperation among them;

Developing stronger and more competitive business enterprises; and

Enhancing trade with existing partners and diversifying domestic, regional and international markets.

The proposed project will address all of the above, with focus on the last three areas.

II.3 Business environment The private sector in oPt has thus operated in a very difficult business environment where the difficulties in accessing and moving goods and services compound the already high existing costs of doing business. OPt has a rank of 139 out of 183 countries according to the World Bank’s “Doing Business” 2010 report. Ongoing political uncertainty combined with deteriorating conditions on the ground due to continued settlement expansion and accompanying violence, and restrictions on movement, trade and access to resources have led to a dwindling of private sector investment and have stripped the economy of the bulk of its earlier productive capacity. These factors have increasingly made Palestinian businesses less competitive in both local and international markets. This has, in turn, resulted in increases in poverty levels and made the Palestinian economy more aid-dependent, triggering relief-based provision of aid that perpetuates a cycle of de-development and dependency that could ultimately exacerbate the humanitarian crisis. The inability of the Palestinian economy to fully use its productive potential is indeed to an important extent the result of restrictions on the movement of people and goods within oPt and

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across its borders. At a meeting in Madrid, the Ad Hoc Liaison Committee (chaired by Norway and co-sponsored by the United States and the European Union) coordinating aid to the Palestinians said that their dependence on assistance is slowly declining but that Israel must lift restrictions blocking their territories' economic development. Palestinian businesses need free movement of goods and services not only to export their products but also to import the necessary raw materials, packaging, equipment and technologies, to upgrade tools and equipments, and to access business development services not available locally. Palestinian businesses also need unrestricted movement of people to expand their worker base and take advantage of the most skilled human resources, including fresh graduates, and to deliver services by performing them at the client’s premises. At the same time, other issues must also be addressed in order to make enterprises better able to benefit from future business opportunities and adapt themselves to changes in the economic environment.

II.4 Enterprise structure The enterprise structure is still unfavourable. The Palestinian private sector is composed mainly of micro and small enterprises: 91 percent have 0 – 4 employees while another six percent have 5 – 9 employees. (The categorisation is the one adopted by the Palestine Central Bureau of Statistics: micro – 4 employees or less; small – 5-9 employees; medium – 10-19 employees.) The following table gives an overview of the enterprises by sector and size group. Exhibit 3: Enterprise Establishments West Bank and Gaza, 2007 Economic Activity Agriculture, Hunting and Forestry Mining and Quarrying Manufacturing Electricity and Water Supply Construction Wholesale, Retail and Repairs Hotels and Restaurants Transport, storage and communications Financial intermediation Real Estate, Renting and Business Activities Education Health and Social Work Other community, social and personal services Total

Total Employment 1-4 5-9 6,969 6,538 398 299 140 121 15,287 12,055 2,090 460 418 21 623 363 140 59,177 56,639 2,097 4,632 4,248 297 1,206 775 248 821 564 99 4,223 3,809 320 1,790 1,126 459 3,705 3,529 107 6,688 6,424 210 105,880 96,628 6,607

Size Group 10-19 20-49 50-99 100+

31 2 0 0 28 8 2 0 804 275 37 26 7 3 4 7 86 23 8 3 351 78 10 2 65 19 2 1 118 47 10 8 87 52 12 7 72 16 5 1 130 58 13 4 53 12 3 1 41 12 1 0

1,873 605 107 60

Nevertheless, micro, small and medium enterprises are widely recognised as an engine of economic growth due to their ability to mobilise otherwise idle savings and engage considerable

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numbers of people in economic activities. As an example, MSMEs’ contribution to GDP in 2008 was estimated to be around USD 1,000 million in services and 600 million in mining, manufacturing and utilities. Despite the deterioration in the economic situation in oPt brought about by the ongoing conflict, small and medium enterprises are the major employer. The 2007 census indicates that 56.8% of workers are employed in micro enterprises, while 15.5% of workers work in small enterprises. The following table presents some statistics illustrating the significance of MSMEs as main contributors to employment. Exhibit 4: Private Sector Employment by Enterprise Size, Area and Sex Area West Bank Gaza

Sex Total Micro 1-4

Male 156,871 97,844

Female 33,148 16,779 Sum 190,019 114,623 Male 67,095 45,643

Female 7,023 3,624 Sum 74,118 49,267

Small Medium MSMEs 5-9 10-19 total

24,277 13,992 136,113 4,959 3,848 25,586

29,236 17,840 161,699 9,905 5,360 60,908 1,598 740 5,962

11,503 6,100 66,870

Large Large 20-49 99 100+ total 9,605 4,143 7,010 20,758 3,855 1,484 2,223 7,562

13,460 5,627 9,233 28,320 2,842 1,140 2,205 6,187 528 269 264 1,061

3,370 1,409 2,469 7,248

Total oPt 264,137 163,890 40,739 23,940 228,569 16,830 7,036 11,702 35,568 Source: PCBS (2007)

This information illustrates the importance of the development of MSMEs to the Palestinian economy. Improving the economic performance of enterprises in this sector and opening new markets for them would constitute an effective means for improving the economic performance of the Palestinian economy and contributing to combating poverty as a result of the increased employment of the poor in these enterprises. It also illustrates the importance of providing more employment opportunities for women and, indirectly the scope for growth in total output, as will be further discussed below under II.7 Gender issues and VI.2 Equality between women and men . While these MSMEs form the core of the Palestinian private sector, they have still only limited capacity to compete in the regional and global markets. The majority of these enterprises is involved in labour-intensive, low productivity activities, and is mainly focused on adapting to survive. The functional capacity of these MSMEs is typically limited to production and operations. Most are family owned and run, and have few middle management resources to develop their managerial, financial, marketing, and complex operational capacities. However, facing increasing competition from foreign suppliers, they are often eager to improve their situation and capitalise on new opportunities. The contribution of MSMEs products and services to meeting total demand in the local market remains low compared to larger enterprises and imports, but opening pathways for engaging these enterprises in exporting activities can have a significant impact on enhancing their international competitiveness, strengthening their economic standing and contributing to channelling the benefits of economic development to the poorer segments of the population. Whether starting to export directly or indirectly, or simply competing more successfully against imports to begin with, MSMEs which become able to meet the requirements of the international

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market are likely to increase their productivity by raising output and value added rather than by shedding staff while keeping output constant. Enterprises involved in foreign trade still form a minority, and show a concentration of transactions with one partner, Israel. However, this is to a significant extent a result of the current restrictions on the movement of people and goods. Many Palestinian enterprises have successfully provided and often still provide goods and services as subcontractors to Israeli firms for re-export to international markets. This suggests that there remains a potential for export development and that the bottlenecks may be more on the marketing than on the production side.

II.5 Sectors with export potential Enterprise activities in oPt are spread over several sectors. Internal commerce, which includes wholesale and retail trade, makes up the largest sector in terms of employment with over 77,000 workers representing 31% of formal private sector employment. Internal commerce is also carried out in a large informal sector which is estimated to employ another 60,800 workers. The vast majority (97%) of these enterprises, which include wholesalers, retailers, repair shops, catering, and the like, are small enterprises with less than five employees.

Exhibit 5: Economic Sectors Contribution to GDP (1985-2007; %)

Sector 1985 1994 1999 2002 2007

Industry 8 12 17 12 16

Services 11.5 21 62.6 70.2 65

Agriculture 29 14 10 10 8

Construction 17 22 8.5 5.5 2.5

Others 34.5 31 2 2.3 8.5

Source: Palestinian Federation of Industries (2009)

The Palestine economy is dominated by services. The consumption value of this sector in GDP shows that in 2000-2004 the social and productive services proportion of the GDP ranged from 68.9 to 71.5 %. By 2005, social services contributed US$2.17 billion (50.92% of GDP) and was growing by 8.22 %.

UNDP’s work with the Deprived Families’ Economic Empowerment Programme (DEEP) is

evidence both of the difficult situation of micro enterprises and of their development

potential, given adequate, initial support.

In the programme, approximately 3520 of the 4000 targeted household level entrepreneurs

originally dependent on aid are now able to accumulate monthly savings that exceed the

size of the cash assistance received previously from humanitarian aid. They are also able

to put all their capital, not only financial, to good use and turn all they have into a production

capital: people became encouraged to tap into family savings, physical assets and other

unutilized capital to support further growth. The value of the investments thus made in the

newly established enterprises significantly exceeds the project’s costs.

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The industrial sector in Palestine includes some 14,000 registered companies in oPt. The majority of these are small family-owned businesses. Only about 100 of the manufacturing, mining and construction enterprises in Palestine have a workforce of more than 100 employees. The contribution of the industrial sector to GDP is approximately 17%, and the industrial sector absorbs around 16% of the total work force. The informal sector provides employment and income to an important extent, although its actual size and importance are difficult to establish with precision. Estimates from 2003 by Massar Associates indicate that it employs some 180,000 people and generates some USD 300 million. However, although often providing sorely needed revenues, it may not protect from poverty and deprivation in the longer term and often lays additional burdens on women and other vulnerable individuals. Trade development measures would provide valuable opportunities for such enterprises and individuals to enter the formal economy and draw benefits from it. Looking at the sectors with export potential, based on PalTrade’s market analyses and the lessons learned from trade development over the past decade, the following ones are seen as most promising in the short and medium term, due to their recent performance and their current contribution to the Palestinian economy, including their role for maintaining and increasing employment: agribusiness and processed food, construction, stone and marble, pharmaceuticals, tourism, handicrafts, leather goods, garments, and information and communication technology. The more important of these sectors are presented in Annex VII. However, the situation is continuously developing both on the supply and the demand side. It is therefore envisaged to update the market potential and exporter competitiveness analyses during the inception phase of the project, in order to confirm the selection of priority sectors for the project. At the same time, the project will improve the conditions also for other sectors and the ability of new enterprises at large to develop their international competitiveness. In this way, also the long term export development needs will be considered.

II.6 Technology The majority of Palestinian economic sectors have limited application of advanced production technology, with a predominance of non-automated or semi-automated equipment. Larger enterprises such as most producers of pharmaceuticals, large quarries and large food manufacturers tend to be more capital intensive. However, the vast majority of enterprises being MSMEs, the estimated average fixed capital is only USD 8,331 per worker, though enterprises involved in e.g. quarrying and food processing have fixed capital of USD 18,839 and 16,096 per worker, respectively. At the same time, the low fixed costs and the availability of low cost labour can be a competitive advantage for labour intensive production in the short and medium term, at least if MSMEs pay due attention to issues of design, quality and standards. Use of information and communications technology tends to be limited predominantly to the few medium and large enterprises. According to the International Telecommunication Union, the average internet penetration in West Bank was about 14.4 % in 2009, but increasing rapidly. The internet penetration in the oPt is thus above the average in the LDCs and some Arab States, like Irak. The rate is even higher for SMEs, in particular those exporting. While office functions such as accounting tend to be the first application of computer systems, integration of information technology into manufacturing and sales is still rare. At the same time,

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several ICT firms have made good progress in international markets, selling a range of development and outsourcing services to foreign customers. There is also a growing ICT enabled industry in the form of e.g. consulting engineering firms providing their services to foreign partners. This way of overcoming the current restrictions on the physical movement of goods and people shows how also other service providers may become successful abroad. PalTrade has played an important role in promoting ICT development through its yearly, specialised exhibition in the field. It assisted companies to the participation in international exhibitions, Business to Business meetings, as well as promotional and development efforts.

II.7 Gender issues The role of women in trade is crucial and strengthening their capacity to successfully engage in trade related activities is among the key means for achieving lasting development success. Some trade related highlights are given below, with further information provided in Annex VIII. As noted by the World Bank, among others, the reduction in trade in the years 2000 – 2007 was accompanied by a dramatic retreat of men from the labour market. The effect on female employment was that some women were able to take, or remain longer in, salaried positions in the public and services sector. Many more were forced to take on menial and unprotected work, while some of the remainder had to turn to informal activities not easily captured statistically –agriculture, petty trade, and crafts such as sewing and embroidery. This rise of female employment, from around 10 – 11 percent to 16 percent, came at a high cost, culturally, socially and medically as well as economically, given the typically low salaries involved: it often strained family relations, health and safety issues were not always given due attention by employers, and the additional money income was often insufficient to compensate for the revenue loss of the former bread-winner in the family. Exhibit 4 above provides an overview of female employment in the private sector. Around 40,000 women are employed, out of a total of 264,000. It may be noted that, although the private sector employs considerably more men than women, MSMEs have slightly more women employed than large ones, relatively speaking. The official statistics do not cover employment and conditions of women in the informal sector. However, ILO estimates that six out of ten women workers are informally employed. Although women have made considerable achievements in education in oPt and in many areas have reached parity with men, those gains are not yet being translated into jobs in the formal labour market, where women’s participation rate is still one of the lowest in the region and the world. Moreover, the labour market in the oPt is gendered and highly segmented: most working women are found in non-growth areas of the formal labour market, in the informal labour market, or they are ‘hidden’ workers. Some women with higher education have found relatively well placed jobs in the public service sector; women with little or no education are found in agriculture; but both these groups have a higher level of labour force participation than those with only 10 – 12 years of school. In this situation, it is expected that an increase in trade will have beneficial effects on the situation of women in several ways. Growing exports will require more of skilled staff for enterprise management and more of skilled labour for the production of goods and services meeting the requirements of international markets, in both cases improving the match between the skills required in growth areas of the economy and the level of education of women. Working

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in enterprises active in foreign markets may also have the additional benefit of exposing women to international practices and thus further raising their ability to improve their status in the economy. Consequently, a range of gender issues could favourably be addressed by suitable mainstreaming into the various activities of the present, export oriented project, combined with specific measures targeting in particular the women entrepreneurs and their organisations. However, certain other gender issues in oPt, e.g. related to their social and legal status, cannot readily be directly addressed by a trade development programme.

II.8 Environmental issues Despite increasing awareness of environmental issues and a readiness to address them, there is a scarcity of hard data on the environmental situation in oPt, particularly from a trade development point of view. Nevertheless, some pertinent observations can be made. In the field of environmental protection, out of the most promising Palestinian trade and economic sectors identified above, three, 1) stone and marble, 2) agribusiness and food processing, and 3) pharmaceutical production, can be considered as emitters of pollution. These industries are operating in a context were green and cleaner technologies are not yet commonly used, where economic instruments, such as taxation systems and fees based on pollution loads are not in place, and where enforcement and compliance of environmental laws and regulations are weak. Such an operating context distort incentives and disincentives for better environmental management practices and corporate environmental responsibility. The agriculture sector in oPt is a source of environmental pollution from the use of pesticides, herbicides and fertilizers which pollute the air, soil and water, although considerable efforts are now being made to focus more on organic agriculture. With only 1.6 % of the area covered by forest, erosion is another important problem. However, the earlier effects of over-grazing are being abated by holding animals in pens instead of letting them roam freely. The widespread use of terraces has had beneficial effects on erosion and helped improve water retention. However, since most of them are extremely small and hardly accessible for mechanised farming implements, the costs of using and maintaining them are relatively high and increasingly difficult to cover by the revenues from traditional crops. In the medium and long term, social, commercial and environmental interests could be served by increased production and trade of e.g. almonds or other produce suited to local conditions, mirroring the favourable experience of the recent reactivation of the olive oil value chain, where Paltrade has played an instrumnetal role in the value chain approach. Wastewater outflows from food processing and pharmaceuticals industries are also important sources of pollution. The marble and stone industry requires the consumption of a considerable amount of cooling water, and the slurry and dust produced as by-products require treatment and abatement. Increased production in any of these sectors without integrating the need for improve environmental management practices in the planning and development processes will lead to important adverse environmental impacts with effects on biodiversity and human health. This is all the more important in view of the general scarcity of water and the effects of recent settlements on water and waste water management. Climate change may further exacerbate the problems and will receive due attention. At the same time, the project will bear in mind the

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possibilities for enterprises to access climate change related financing in order to enhance their productive capacity and facilitate green technology transfers. Trade development would therefore have to go hand in hand with increasing the level of environmental awareness and addressing the issues identified. In fact, trade development gives the opportunity to make local producers better understand the importance of environmental management for cost and quality control, for ensuring conformity with regulations and standards and for marketing purposes. In addition, ‘green technology’ could be a sector as such to develop for meeting demand in the international market. These challenges and opportunities are reflected in the present project through activities aimed at assessing the situation in the priority sectors for export development, raising awareness among exporters and identifying measures to be taken. See also section VI.1 below.

III. The project rationale

III.1 Export development needs The preceding description of the development context and the challenges for economic development has highlighted a number of key issues relating to trade, and made clear that suitable trade development measures could address them successfully. Supporting this view, the oPt Government and the Ministry of National Economy (MNE) take a clear stance on the importance of trade development and diversification as a means for increasing prosperity and thus as a priority for private sector development (see further below in X. Recipient Country / Authorities Support). The case for the trade development as a key means for economic recovery and sustainable growth in oPt has also been very strongly confirmed by the World Bank:

"Ending the Palestinian economic crisis depends on the ability of the private sector to trade in international markets. That means the opening of external borders. A small developing economy cannot rely on domestic demand for long-term sustainable growth. Palestinian (and Israeli) businesses need international markets to sell their products and to acquire inputs and production technologies at competitive prices."

The private sector companies’ own, specific positions, development priorities and preferences with respect to trade development were recently assessed, through a comprehensive Needs Assessment Survey done by PalTrade in 2007 (see further Annex IX.). Although the nature of the needs may not have changed greatly, there is certainly a need to update and complement the enterprise survey in order to determine the current and future export development needs. Such an update would not only allow to further clarify the needs and the gaps in the access to and use of trade information, support services and training, but would have the added benefit of allowing other data to be collected as required for improving future export development. It would thus serve a benchmarking purpose and would later on be repeated regularly for monitoring the development of the needs, how they are met and what effects this is having. The Palestinian private sector is supported by a number of private sector institutions with a mandate for private sector and trade development, PalTrade being the single most important one by far and the one with the potential to help attain the project objectives (see further below

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under IV.4.2.). However, the Needs Assessment Survey found that a number of gaps remain to be filled in order to meet the needs of MSMEs for trade development services such as market share assessments, marketing training programmes, trade information services, marketing-oriented business development services and other market development and promotion initiatives. In particular, enterprises confirmed the need for more and better market information, capacity building in export related skills, and practical assistance with reaching potential clients. Although responsive to the demands from enterprises and having a firm, official mandate, PalTrade has had limited means to address the full range of trade development needs. Other agencies, both national and international, have carried out a number of specific projects, certainly useful but either not focussed on export development and promotion or very limited in scope, whether in terms of beneficiaries or products. At the same time, these and other recent, on-going or envisaged development assistance initiatives would provide a useful complement to a comprehensive set of trade development actions. Reflecting the gaps still to be filled in the field of trade development, and especially in the supply of trade development services, it is possible to identify some key fields for oPt export capacity development which could be met by a CIDA-funded programme for PalTrade and Palestine MSMEs. They can be grouped in the following five areas: 1) Strategic Business Planning and Management Capacity Development 2) Trade Policy 3) Trade Information 4) Trade Development 5) Trade Promotion The rationale behind the five areas is briefly set out below. Properly coordinated and sequenced, and with appropriate links to other programmes and activities, they would constitute the comprehensive trade development programme now missing.

III.2 Strategic Business Planning and Management Capacity Development Among oPt enterprises, efforts have been made at developing export strategies for some sectors. In parallel, under the guidance of PalTrade, the olive oil sub-sector has successfully taken a value chain approach to export development. It would be advantageous to build on these initiatives for working out or updating export development plans for the key sectors, identifying expansion opportunities in terms of products and markets and the measures required to exploit target markets. This would help identify the capacity gaps to be filled, focus and prioritise the work of PalTrade and other trade support institutions as well as of the enterprises themselves, and set the framework for dovetailing with other agencies and programmes engaged in supply side enhancement, environmental protection and gender issues. In 2005, PalTrade undertook a comprehensive review of its own activities and developed, with the help of outside expertise, a strategic plan for the next five years. It is now urgent that this plan be reviewed and updated. As a key complement, the ability of PalTrade to implement and update its strategic plan would be greatly enhanced by introducing a results based management (RBM) system. The creation of a small Strategic Planning Unit (SPU) in PalTrade would contribute to the institutional capacity building of the organisation, in addition to becoming the resource centre for RBM reporting and monitoring. PalTrade has itself again requested the assistance of international expertise to develop a new strategic plan and introduce RBM. The

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new SPU and strengthened capacity of PalTrade at large to provide market oriented services would largely contribute to its sustainability and thereby to the long-term support for trade development in oPt.

III.3 Trade Policy As oPt firms seek to expand and diversify their markets – an official and widely accepted policy objective – it is vital that PalTrade and the private sector understand how the existing free trade agreements (FTA) may help focus trade development efforts and how future ones should be framed. It is important that there be input from the trading community in oPt to ensure that negotiators are cognisant of the private sector’s needs and that Ministry officials are aware of the private sector’s views about how the agreements are working and how they might be improved. In fact, MNE specifically highlghts the need to take trade policy measures in order to improve market access, particularly through activation of existing free trade agreements and improved ability of the private sector to make use of them. T; see Chapter X. below. Trade policy is also about agreements, policies and procedures for faclitating imports and exports, especially border crossing procedures and transit through neighbouring countries. ITC’s experience shows that such issues are usefully identified during sector specific value chain analyses. PalTrade has already engaged itself in this field in cooperation with foreign agencies and in close consultation with the competent authorities. These activities will remain extremely important for the foreseeable future and any export oriented technical assistance programme would need to dovetail with them in order to help secure the physical access to external markets. PalTrade would thus be the natural vehicle to be the private sector advocate on trade policy but would need to build its skills in the field. In fact, in light of the aforementioned, Pal Trade shares the view that adoption and development of specific trade policies are the best strategic approach for oPt. Taking into consideration the private sector priorities and requirements, such policies would transform the Palestinian economy from a dependent, fragmented and supply constrained economy into a free, competitive, integrated and export-oriented economy, The focus would be on increasing the productivity of Palestinian sectors through regional and global integration, with full and effective participation of the business sector in shaping trade policy and benefiting from the multilateral trading system. Accordingly, it would be useful to provide PalTrade with the skills needed for trade policy advocacy, involving the private sector in the process as appropriate, and for initating a number of actions in the field while securing the ability to continue addressing trade policy issues on behalf of the private sector in the longer term.

III.4 Trade Information As evidenced in the survey of enterprise needs, export oriented MSMEs require access to a range of sources of information as well as skills in using them for obtaining market intelligence and using it for taking the right business decisions. At present, trade information is not sufficiently available and not well used, even if PalTrade is doing its best to fill the gaps.

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With the ongoing development of information and communications technology, web-based portals have become a vital tool as a cost-effective vehicle for providing essential trade knowledge to exporting firms. It would therefore be advantageous to develop PalTrade’s web site, in line with “good practice” in this area. To make this investment worth while, it would also be necessary to provide training and guidance to PalTrade staff to up-grade their skills in trade information management as well as to enterprises to enhance their skills in using trade information successfully.

III.5 Trade Development

Exporter readiness training is a vitally important function if firms are to have a chance to succeed in foreign markets and to introduce more firms to exporting. Advice and training skills have to become embedded with local service providers and be available on a sustainable basis. PalTrade and other trade support institutions therefore need to be able not only to deliver quality services but to manage their provision, including by letting MSMEs benefit from matching grant schemes which are or may become available for contributing the costs of e.g. exprt focussed capacity building services, product design and development, promotion materials, and preparation for, participation in and follow-up of trade fairs and B2B missions. Likewise, enterprises need to learn to appreciate the value of quality services, select the service and the provider which best meets their needs, and be ready to contribute to the costs. Assistance in the area of developing exporter readiness should therefore focused on ensuring that PalTrade and other service providers can properly analyse enterprise needs and give advice and support as required to help MSMEs identify and exploit suitable target markets. To this end, staff should receive training and coaching for increasing their knowledge, raise their skills and widen their experience, Their capabilities would need to be benchmarked and recognised. The standard approaches, tools and manuals for trade development would need to be developend and updated. Special attention would need to be given to ensuring that gender and environmental isssues are properly reflected both in the supply of services and in their use. For Palestinian enterprises to export beyond the neighbouring countries, initial exposure to international markets is important for understanding the opportunities and challenges of international business and firming up the ambition to achieve export success. However, it needs to be complemented by acquiring skills and experience in identifying potential clients, creating the ability to offer products which meet client requirements, taking steps to promote the products, meet clients and conclude deals with them, delivering goods and services to their satisfaction, and getting paid by them. To support Palestinian export growth and diversification, assistance could be provided for allowing Palestinian MSMEs to meet foreign potential clients and business partners and participate in international trade fairs in selected markets, primarily regional ones where the export development plans and the analysis of FTAs have uncovered unused potentials. The support would allow PalTrade to provide advisory and logistical support to export ready enterprises for their participation in such events. In addition, trade missions could be organised to enable more Palestinian exporters to understand buyer requirements, meet key contacts in targeted markets and encourage the establishment of supply chain relationships. To maximise the contacts between buyers and sellers as well as to encourage cooperation between beneficiary enterprises, both trade fairs and missions should preferably be organised on a sector basis.

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IV. The Project

IV.1 Expected results

IV.1.1 Objectives

The ultimate objective of the project is to achieve increased employment opportunities and income in the oPt through the development and expansion of exports. This ultimate outcome will be reached in two ways; (i) by enhancing the quality, quantity and relevance of sustainable trade support services and information provided by PalTrade and its public and private sector partner organisations to Palestinian MSMEs with exporting potential, and (ii) by increasing the readiness of private sector MSMEs to identify and to compete in selected potential foreign markets. Thus supported to become more competitive exporters, MSMEs in oPt are expected to increase their capacity to expand their workforce, contribute to economic development and growth, and improve the standard of living. Evidently, the improved competitiveness of Palestinian goods and services in international markets will also benefit home market consumers in terms of quality, product range and value for money, displacing some products currently being imported. Consequently, the beneficial effects of the project on the trade balance are expected to come both from larger exports and from lower imports. The mechanisms by which the project will achieve the intended results are further explained below and e.g. in section VIII.2.

IV.1.2 Immediate outcomes

Reflecting the needs and priorities identified in the preceding chapters, the project is articulated around the five immediate outcomes set out below. In turn, these outcomes are intended to be obtained through the specific outputs of the major activities to be carried out under the project. Each successive outcome and output will build on the preceding ones. Together, they will create synergies between each other and with programmes and activities carried out by other parties. In this way, they will both provide tangible results in the shorter term and create a lasting ability to continue generating benefits for the economy. These sustainability aspects are highlighted below and also covered in Section VIII.2 below. Outcome 1: Increased ability of PalTrade to fulfill its national mandate as the national trade development organisation, supporting SMEs with strategically selected, effective and efficient trade support services. This outcome will be achieved by delivering the following eight outputs:

Output 110: Strategic Planning Unit (SPU) established and working;

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Output 120: PalTrade institutional assessment/benchmarking completed;

Output 130: Strategic HR capacity needs addressed;

Output 140: Private sector trade development demands identified;

Output 150: Business sectors assessed in terms of potential for export development and contribution to poverty reduction, etc., including environmental and gender aspects;

Output 160: Corresponding sector export development plans updated or developed;

Output 170: A 5-year strategic plan and a three-year rolling action plan adopted, also ensuring PalTrade’s sustainability;

Output 180: RBM system established at PalTrade. As a result, PalTrade will have become able to take on its full share of the work with achieving the next four outcomes and will have secured its ability to manage its business and continue providing market oriented trade development services in the long run. The basis will also have been laid for keeping future trade support suitably focussed and thereby effective and efficient, Outcome 2: Enhanced ability of the private sector to actively shape oPt trade policy and benefit from trade agreements. This outcome will be achieved by delivering the following three outputs:

Output 210: A comprehensive assessment of six major trade agreements prepared, with conclusions on actions to take;

Output 220: 4-5 trade policy position papers prepared, including recommendations for action by MSMEs, the competent authorities and other parties;

Output 230: One successful trade policy advocacy event organised with international participation.

With this, the private sector will have received immediately applicable guidance and support for better use of existing free trade agreements and a mechanism will have been put in place for continued, effective trade policy work by the private sector. Outcome 3: Improved access to and use of trade information for export related decisions by the private sector. This outcome will be achieved by delivering the following four outputs:

Output 310: Trade information management capacity built in order to fill gaps identified in PalTrade’s strategy and action plan;

Output 320: General purpose trade information available on-line, including links giving access to external sources of trade information;

Output 330: Customised, sector specific trade information products and services available on demand to local and international users;

Output 340: Information provided to MSMEs about trade information and its use. The future supply of trade information will thereby have been secured in a way that provides continued, direct benefits to exporters and ensures appropriate adaption to changing trade information needs.

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Outcome 4: Increased access to and use of effective capacity building and advisory services by oPt MSMEs. This outcome will be achieved by delivering the following four outputs:

Output 410: Sustainable capacities built among BDS providers through the training and certification of selected practitioners to carry out enterprise diagnostics, assist with export strategy design, and to design and provide firm level advisory services and technical assistance to MSMEs;

Output 420: Specific training needs of women entrepreneurs identified, tools adapted, and training delivered;

Output 430: PalTrade staff prepared for the management of a business advisory services programme for export development;

Output 440: A business advisory services programme for export development delivered on a cost sharing basis under PalTrade’s management.

As a result of stepwise, continuous training and coaching over a considerable time, the trade support skills and experience obtained through the project will become firmly embedded in the minds of trade development practitioners and documented in the form of standard approaches, analytical and advisory tools and manuals. Likewise, MSMEs will have seen both the immediate and the longer term benefits of using quality services and come to appreciate their full value. In this way, sustainable supply of and demand for trade development services will have been established. Outcome 5: Increased access of oPt SMEs in the selected sectors to international business opportunities in targeted markets, and to contacts with the Palestinian business diaspora. This outcome will be achieved by delivering the following five outputs:

Output 510: Market entry plans established for selected external markets for the key sectors identified;

Output 520: Trade show organised in oPt for local enterprises with export potential;

Output 530: Participation in three international exhibitions for selected sectors organised to allow export ready firms to exhibit successfully and not yet export ready firms to obtain the market exposure necessary for future business success;

Output 540: Participation of (groups of) local businesses in international trade missions and business to business meetings facilitated;

Output 550: Enhanced market and trade linkages between local firms and Palestinian diaspora businesses.

Bringing together exporters and their foreign clients in various ways, while building the ability to continue working successfully in the international market, the project will give immediate benefits in the form of new export deals and will also help establish lasting business relations and secure the long term growth of Palestinian exports.

IV.2 Description of the Project

IV.2.1 Intervention logic

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The intervention logic of the project is based on the successive multiplier effects of a carefully sequenced set of complementary activities, dovetailing with those of other programmes for economic and social development and.embodying a ‘learning by doing’ approach. A first stage will identify and prioritise the current trade development challenges and opportunities, with a focus on key sectors, and put PalTrade in a position to successfully address them. In a subsequent stage, experts and advisers in PalTrade and other trade support institutions will further enhance their skills and will be coached while delivering services to a number of MSMEs. In parallel, carefully targeted measures will improve the provision of trade information and the ability of the private sector to understand and benefit from existing trade agreements and develop a cadre of management development consultants who can undertake enterprise diagnostics and advise MSMEs. Finally, PalTrade in cooperation with other trade support institutions will bring more export ready enterprises to the market, while continuing to help others become export ready. Throughout the project, gender and environmental issues will receive particular attention, through specific, targeted interventions as well as mainstreaming within other project activities, aimed at durably enhancing attitudes and approaches. In this way, tangible results will be achieved already during project implementation and the basis will be laid for sustained export success of Palestinian enterprises, allowing them to provide larger opportunities for gainful employment and thereby contribute to poverty reduction.

IV.2.2 Project scope and content

The scope of the project is strongly focussed on ensuring the sustainable provision of high quality trade support services meeting the needs of Palestinian MSMEs and enabling their export success. Under the project, PalTrade will receive targeted assistance from UNDP and ITC, to enhance its capacity to deliver services to the local business community, in line with global best practice. The project will address export development issues comprehensively, covering the fields of capacity building in trade, strengthening of business development services for MSME exporters, trade information, trade development, trade promotion, and trade policy and advocacy. In addition to capacity building, coaching and mentoring services will be provided through the project so that the private sector in oPt can have access to improved and expanded export support services from PalTrade. By the end of the project, targeted private sector companies will have progressed in becoming export ready, accessing new markets and in increasing their exports and local market share, and PalTrade will have become a more sustainable and stronger trade support organisation to serve Palestinian SME exporters. A strong sector focus in combination with a value chain approach will be reflected not only in the export development plans which are to be prepared or updated for selected sectors but also in each of the activities carried out at the level of the individual industry sectors covered by the project. This will help ensure coherence and continuity in preparing and implementing the

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measures in the various project components and set a clear, well defined context for enterprise level work, i.e. addressing the needs of individual enterprises. Piloting actual value chain development excercises will help enterprises appreciate the gains from systematic planning and also help PalTrade and other trade support institutions standardise the process. It will significantly increase the opportunities for MSMEs both to participate in the process and to benefit from it, whether as direct exporters or as subcontractors and suppliers. At the enterprise level, a business process approach will help identify and resolve key problems of one particular enterprise in a way that is similar to what would be done for other enterprises with the same issues to resolve. In this manner, the project will help ensure both effectiveness and efficiency in the delivery of services to the beneficiary MSMEs. Through strengthened capacities at the institutional and company level, i.e., in PalTrade and other trade support institutions as well as in individual companies, oPt’s private sector will thus be put in a better position to exploit regional and international market opportunities for generating higher export revenues to the advantage of all economic stakeholders in the country. Becoming increasingly competitive internationally, they will be able to expand their business, engage more people, including women and youth, and offer them better conditions of work and higher revenues.

IV.2.3 Synergies with other programmes

The project will be implemented in complete synergy with other partners in the country and in the region. Annex V lists ongoing activities and potential projects which could implemented and provides a detailed matrix of potential synergies between the present project and other private sector development initiatives. The synergies with the Government’s plans are outlined in Chapter X. In line with the DAC Guidelines on Strengthening Trade Capacity for Development (2001), the principles of the Paris Declaration of Aid Effectiveness (2005) and taking into consideration lessons learned from TRTA evaluations, the project will build on recent and ongoing efforts of other development partners. It will make use of available analytical work including general and sector-focused private sector development strategies and blueprints. The project will collaborate with on-going TRTA initiatives whenever there is scope for it and pool resources by organising joint activities etc. The project, in particular with regard to the components on strategy, trade policy and trade development, could therefore serve as a platform for other donors wishing to develop new trade development projects. As CIDA is understood to welcome collaborative efforts with other donors, the project management will seek opportunities for joint, add-on or spin-off projects aimed at similar overall goals, sponsored by other donors. A number of other measures related to the above, many of them essential for export success, have thus not been specifically included in the project scope. This is either because they are being separately addressed by PalTrade or other agencies or because they fall outside the reasonable scope of technical cooperation for trade development. Details of some major on-going projects and programmes in these areas can be found in Annex V. Among the prominent agencies and their activities one may mention the following.

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USAID assistance promotes business and agricultural development, including increased Palestinian exports, through technical assistance and loan programmes. The EU assistance through the European Neighborhood Policy with the PA opens new partnership perspectives and aims to achieve developmental objectives and strengthen the capacity of Palestinian institutions including direct budget support to the PA. and to strengthen the agriculture and services sectors and to provide a conducive environment for increased investment. The UNIDO Programme (currently under development) aims at upgrading the business performance of Palestinian industries through capacity-building in government institutions and the private sector as well as in other institutions concerned with industrial development. Synergies will be explored with all these initiatives. On the side of ITC, synergies with the on-going TRTA project Enhancing Arab Capacity for Trade, (EnACT) in the Arab region funded by the Government of Canada, and with other planned ITC projects in Palestine (on trade in services, to be funded by the EU, and other activities with CBI) will be pursued. By field of intervention, there are synergies in e.g. trade related information (e.g., EU, USAID), trade training (e.g.,GTZ, CBI), agribusiness development (e.g., FAO, WB, AFD, Dutch), enterprise upgrading including quality and standards issues (e.g., EU, UNIDO, FNMD/DFID), access to finance (e.g. EU, KFW, USAID, WB), and market development and training (e.g. IDB, CBI) etc. Some specific cases are highlighted here below.. Economic policy making, reform and restructuring of government organisations in the economic sector, improvement of the business environment and foreign investment promotion are done by the Ministry of National Economy, assisted by GTZ, among others. USAID has recently done a thorough commercial, legal and institutional diagnostic in the West Bank and the findings, when published, will inform the present project. In this context, the value chain analyses to be made when preparing export development plans under the project will highlight a number of issues in the fields mentioned and thus contribute to their resolution. In addition, PalTrade’s involvement in bringing the needs and views of the private sector into trade policy will also provide useful inputs. The development of a national export strategy, led by the Ministry, is being pursued in cooperation with ITC under a separate project currently in preparation and in close cooperation with PalTrade. The sectoral development plans to be prepared or updated by the present project will provide important, early inputs for the national export strategy, while the latter may help guide the later implementation of the project. Whereas the trade policy component of the project will likely help identify possible shortcomings with respect to technical barriers to trade, sanitary and phytosanitary measures and other non-tariff measures, these findings will then need to be addressed by other projects funded by other agencies and institutions involved, as described above. Ongoing support for enterprise establishment and development is provided through programmes like UNDP’s DEEP, which also provide access to financial services and business development services for new startups. They can therefore significantly support the present

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project when it comes to identifying and carrying out growth enhancing measures on the supply side of value chains for enterprises and in sectors with potential for exporting. Complementing the actions of the competent authorities and institutions, MSME support in matters related to standardisation, quality assurance, accreditation and certification, and metrology (SQAM) are primarily under the responsibility of the Palestinian Federation of Industries (PFI). Whereas it is recognized that the areas of quality, standards and packaging are key to export success, it will not be possible to address these issues within this project given the limited resources available and the focus on TSI capacity building. However, the project will use the findings of the sector analyses as well as those of the assessments of individual enterprise needs to identify specific needs regarding SQAM and help submit them to the competent authorities and donors. Environmental issues in the manufacturing industry also fall under the remit of PFI. Nevertheless, the development of sector specific export development plans under the present project will be an opportunity for identifying export related environmental issues and carry out corresponding, targeted awareness raising, in close consultation with PFI and the sector associations. Market oriented education as well as vocational training for enterprise managers and staff is covered by several initiatives funded by GTZ, UNIDO and USAID projects. These projects, particularly those envisaged by UNIDO, would contribute to enhancing productive capacity also in other ways, e.g. through the optimisation of production processes. Taken together with e.g. SQAM related work and enterprise development projects, this would help the present project ensure increased competitiveness of oPt MSMEs in terms of product quality, product range and production cost. Gender issues, the integration of disadvantaged groups and the move of enterprises from the informal to the formal economy in Palestine are covered by e.g. ILO in cooperation with Minstry of National Economy through a recent assessment of the situation and the needs. Given the importance of the topic for ensuring lasting impact on human development and the scope for trade to contribute to this, the present project will maintain a particular focus on the participation of women in export development. UNDP and PalTrade will ensure coherence and synergies among the different initiatives in this field. Apart from their social and humanitarian effects, the current physical restrictions on the movement of goods and people within oPt and across its borders constitute a very significant hurdle for trade development. They have been covered by several studies and projects, such as the Cargo Movement Monitoring and Reporting Project, funded by Norway, under World Bank supervision, and the Trade Corridors’ Faciliation Project funded by EC. PalTrade continues to monitor the situation in cooperration with the World Bank and to look for appropriate solutions. The present project cannot effectively address these restrictions directly. However, it will provide evidence of their effects and will inform other actions which may be taken in order to lift or otherwise overcome them. The same applies to the areas of creating a sound trade policy and macroeconomic environment, improving trade facilitation (logistics etc.) and the development of trade-related infrastructure which are covered under other existing programmes: the findings of e.g. the sector analyses and the trade policy initiatives to be implemented by PalTrade will not only be

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directly acted on within the framework of the project but also fed into the government’s decision making processes, in further consultation with PalTrade and the private sector as appropriate. See also the discussion of the assumptions, the risks and their mitigation.

IV.2.4 Geographic coverage

Geographically, the project is designed to benefit oPt enterprises all over the Palestinian territory in the long run. To the extent possible and appropriate, the project will consider differences in needs between different parts of oPt, e.g., considering the differences in industry structure in the north and the south of the West Bank and East Jerusalem, and seek to differentiate the work accordingly, in order to maximise impact and sustainability. PalTrade’s mandate requires it to cover both the West Bank, including East Jerusalem, and Gaza, and its own resources currently allow it to be represented and active also in Gaza (see also IV.2.2. below). However, it is duly noted that no CIDA funded activities other than humanitarian assistance can be provided there. If it happens that security and other operational conditions in oPt deteriorate in the future, arrangements could be envisaged to allow some project activities requiring international expertise to take place in Jordan or Egypt instead. Those would be discussed and agreed on an ad-hoc basis, if and when the need may appear.

IV.2.5 Project duration and phasing

The project duration is proposed to be three years. It is expected that the project will commence in October 2010. During an inception phase of about six months, detailed work plans will be prepared, baselines will be established for the indicators and specific targets will be set for the various activities (complementing and refining those already set out in the PMF), the project governance structure will be put into place, the preliminary assessment of Paltrade’s structure and human resource needs as well as of MSME needs will be conducted, and initial measures taken will be taken to address them. This phase is thus fundamental for the definition of the future projects outputs and activities and for building the capacity of PalTrade to contribute to the project. The stage will thus be set for the subsequent interventions, which would start in April 2011. The project schedule is set out in Annex IV. Particular attention has been paid to the proper sequencing of activities, which is essential for managing the scarce resources of the project and achieving the desired outcomes. For example, reflecting the “learning by doing” approach of the project, initial awareness raising and training of export development advisers will be followed by coached interventions in selected enterprises, before the staff trained can continue on their own. This being said, the project proponents are fully aware that capacity development cannot be achieved in one go. The section on sustainability elaborates on how this will be addressed.

IV.2.6 Project structure

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The logical model attached in Annex I provides a tabular overview of the outcomes, the outputs and the planned activities. Reflecting the needs identified, the project is conceived around five components, each comprising a set of activities matching the intended outcomes and delivering the specific outputs set out above: Component One – Initial Capacity Building For Trade Development T International demand, the economic outlook and the business opportunities for Palestinian exporters are constantly changing, and with them the nature and scope of the trade support services required. Rather than offering yet another one-off support with revising plans and programmes, the first component aims at providing PalTrade and the private sector with the means for sustainably managing change and adapting to future threats and opportunities in a timely, transparent, effective and efficient manner. The main activities under the first component will thus be to:

Establish a Strategic Planning Unit (SPU) at PalTrade, allowing it to properly manage its participation in the project and help ensure the longer term sustainability of PalTrade.

Build the capacity to identify the private sector needs in key sectors and to plan, prepare and deliver adequate responses to them. In order to reach this result, a comprehensive assessment of PalTrade existing resources, services and capacities will be undertaken, setting them against the needs of Palestine enterprises and those of other trade support institutions, and benchmarking them against internationally recognised good practice among TPOs.

Make a comprehensive update of the private sector needs by conducting a survey of private sector enterprises (approx. 400) already exporting or with potential for it, and holding meetings with all trade development stake-holders (enterprises and their organisations, other private sector institutions, and public entities). Complemented by export potential assessments to identify sub-sectors and markets that have high potential, this will allow to identify gaps in the provision of trade support services, to update or develop export development plans for the sectors, and to convey the skills necessary for making future plans and updates without external support and advice.

Develop and introduce an internal planning, monitoring and impact assessment system at PalTrade and correspondingly adapt its financial management system, all based on results based management principles.

Elaborate a strategic five-year-plan with an initial three-year action plan for PalTrade.

Component Two – Supporting Trade Policy Effectiveness Considering past experience and realising the negative impact of dependence on a sole market, PalTrade strives to create well informed private sector consensus on trade policies that lead to sustainable, diversified trade. Realising benefits from trade agreements already signed are key to short and medium term trade diversification and market penetration. Accordingly, following the identification of sectors and markets through the export potential assessments to be carried out under Component 1, and in close cooperation with the different parties concerned, the project will build the capacity of PalTrade’s Trade Policy Department to work with ITC to:

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Undertake a comprehensive assessment of the major existing Free Trade Agreements (FTA) with a view to identify areas of intervention to better implement and take advantage of these agreements at micro, meso, and macro levels.

Prepare and publish trade policy papers reflecting the positions and recommendations of the private sector on how to benefit from FTAs.

Carry out trade policy related business advocacy work through facilitated public-private dialogue in oPt and abroad.

Component Three – Enhancing Trade Information: This component will increase the supply of trade information and enhance the ability of the private sector to actively access and use trade intelligence in a sustainable manner for taking both long term and day-to-day business decisions. The main activities to this effect will be to:

Develop the ability of PalTrade to manage the provision of trade information, including new information products and on-line services, for ensuring the sustainable identification, acquisition, process and dissemination of trade intelligence which meet the needs of the Palestinian and international business community.

Design and set up a trade information portal, improving the access to external sources of trade information and the integration with existing or future knowledge networks, procure additional information as appropriate, and deliver relevant, general purpose trade information to the Palestinian private sector.

Provide customised trade intelligence on priority sectors and markets to local and international clients.

Inform the business community about the trade information services available (e.g. basic reports from Trade map, market profiles, export guides to foreign markets, detailed, client tailored information, etc.), and assist exporters in making good use of them.

Component Four – Developing Export Readiness SME development is highly reliant on the capacity of the firm to manage an export business. Under this component, PalTrade will work with ITC to enhance the capacity of local firms to successfully and sustainably engage in exports – to make them export-ready – while at the same time helping advisory firms become sustainable trade development service providers. Particular attention will be paid to the specific needs of women and young entrepreneurs. This will be done by conducting export readiness assessments of individual SMEs to identify areas of technical assistance needed, and delivering firm level support as needed; through the following activities:

Develop the capacity of practitioners in PalTrade and other local trade support institutions and business development service providers to conduct export readiness assessments and deliver corresponding services. Candidates for becoming certified trade advisers will then be coached when carrying out assessments and building capacity at enterprise level.

Identify the specific training needs of women and young entrepreneurs in Palestine, adapt the tools for export development training correspondingly, and deliver training. This will be done using the approach successfully applied e.g. in Tunisia in ITC’s ACCESS! programme, in close cooperation with the associations of women entrepreneurs, in particular.

Develop the skills of trade practitioners to manage and use matching grant schemes or similar business advisory programmes with a financial support component, and coach them

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while delivering such programmes to beneficiary companies, who would participate on a cost sharing basis.

Component Five – Reaching International Markets Support to SMEs, strengthening TSIs and improving the overall business environment are necessary but not sufficient conditions for increased export growth. At the end of the day, business happens when buyers and sellers come together and make transactions. This project will directly support export growth and diversification by enabling PalTrade to provide effective and efficient support services allowing Palestinian companies to enter foreign markets and find clients through carefully planned and prepared participation in selected promotional events. Enterprise participation in such promotional events will be done on a cost sharing basis. Activities under this component include:

Prepare market entry plans for newly export ready Palestinian enterprises, help them put the plans into practice and to update and revise them as necessary.

Organise an export oriented trade fair in oPt for local enterprises with recognised export potential and the participation of foreign buyers.

Organise enterprise participation in international exhibitions and trade missions to target markets for the selected sectors, set up business to business meetings, and build relationships between oPt firms and the Palestinian diaspora. Particular emphasis will be placed on helping MSMEs to prepare and follow up their participation in such promotional events.

IV.2.7 Budget

To implement the proposed project, an estimated budget of USD 5,990,724, of which USD 5,444,016 are expected to be a direct contribution from CIDA and USD 546,708 will be provided through cost sharing from fees and sponsorships for participation in trade fairs, trade missions, business to business activities, and other business development services. The project budget will cover the implementation of the five components, the general management costs and costs related to coordination of the project. Cost sharing is already a well established practice in PalTrade’s current operations and may well provide larger amounts than those now budgeted. If so, the additional revenues will be applied solely for the purposes of the project.

The table below provides a summary breakdown of the budget items detailed under annex II.

Summary project budget in USD

Component ITC UNDP PalTrade Total Cost-sharing

CIDA contrib.

Component 1: Setting The Stage For Trade Development 709,500 200,000 672,328 1,581,828 1,581,828

Component 2: Supporting Trade Policy Effectiveness 98,000 302,678 400,678 400,678

Component 3: Enhancing Trade 185,000 557,314 742,314 742,314

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Information

Component 4: Developing Export Readiness 164,000 680,229 844,229 175,000 669,229

Component 5: Reaching International Markets 30,000 1,342,874 1,372,874 371,708 1,001,166

Total Components 1-5 1,186,500 200,000 3,555,423 4,941,923 546,708 4,395,215

PalTrade overheads (12% ) 426,651 426,651 426,651

Project Coordination

200,000 200,000 200,000

Fixed Assets (Equipment) 36,000 36,000 36,000

Miscellaneous*

30,000 30,000 30,000

TOTAL project cost 1,186,500 466,000 3,982,074 5,634,574 546,708 5,087,865

UNDP general managem’t (7%) 356,151 356,151 356,151

Total 1,186,500 822,151 3,982,074 5,990,724 546,708 5,444,016

(*) This item includes all costs related to communications, security, travel expenses, etc.

The project’s ex-post evaluation would be costed separately. From UNDP’s experience of managing other projects of the same magnitude, the project evaluation cost could represent approximately USD 100,000. CIDA and UNDP may wish to envisage covering the cost of the post-evaluation. Annex II provides more details on the budget for all components along with the distribution of tasks to be performed by implementation partners.

IV.3 Project beneficiaries The main beneficiaries of the project will be the following, with the benefits cascading down and out from the first participants in the project to the general public:

PalTrade as an intermediary beneficiary;

other oPt trade support institutions;

local MSMEs as ultimate beneficiaries, whether already exporting or with potential for doing so, with special emphasis on women and young entrepreneurs;

their local suppliers of raw materials, semi-finished goods and professional services; and

existing employees and new staff hires in the firms benefiting from the project and their families.

PalTrade’s capacities will be strengthened to enable it to provide better services to its clients: it will improve its planning and management capacity; its staff will become even more proficient in delivering services; new or improved services will be introduced; improved quality, greater flexibility and a wider range of services will allow it to segment its clients and start charging those who receive tailor made support; its role and status will be enhanced, attracting new members and sponsors; and it will thus become more successful and sustainable as a trade development organisation. Other oPt trade support institutions, especially chambers of commerce, industry associations, young enterpreneurs associations, women associations, local advisory firms and individual

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experts assisting and advising MSMEs in export development, will enjoy similar benefits: their staff will be trained, coached and certified (if successful) to provide quality services; they will get new customers among local MSMEs who will have become more aware of the need for such services; they will benefit from improved possibilities to get assignments co-financed by matching grant schemes and the like; and will therefore be able to increase turn-over and profitability while securing the longer term development of their business. For the various reasons set out earlier, the present project will focus on trade development for MSMEs. At the same time, considering the need to rapidly generate trade flows significant enough to start closing the trade gap, and to encourage cooperation between MSMEs and their integration into value chains, larger enterprises (20 employees or more) will also benefit. Participating MSMEs will be found both among PalTrade’s current membership and among other firms. It is expected that participating firms and others will recognise the value of membership and become PalTrade members. The benefits of the project for the MSMEs will come through a series of related, mutually reinforcing effects on the enterprises and the way they work over a period of time. As observed in other countries in the work of e.g. ITC, this mechanism typically works as follows. Through the project, local MSMEs will become better able to successfully consolidate existing markets and enter new ones. Participating firms will learn how to improve their marketing, offer products satisfying customer needs and find new clients and business partners, thereby creating the basis for future business success. They will better understand their own opportunities, needs and limitations and become able to properly use trade intelligence and advisory services to fill their knowledge and skill gaps. They will understand that the large size of the international markets and the requirements for reliable supply mean that other oPt firms in a given sector are potential partners as much as competitors, likely leading to restructuring of the sector for improved long term competitiveness. The initial export successes brought about by the project will allow them to secure employment of existing staff and to engage, train and retain new staff for meeting demand while being profitable enough to finance future expansion. Other local firms supplying goods and services of various kinds, even if unlikely to export directly and not participating in any project activities, will have improved opportunities to sell their products to local exporters, whether for incorporation into items for export or for otherwise meeting the exporters’ needs for inputs. This will acquaint them with the quality and service requirements of international markets and give them incentives to improve their own supply in order to expand and secure the sustainability of their business, providing improved opportunities for gainful employment in the process.

IV.4 Project proponents The project pursues its objectives through a partnership between the UNDP, PalTrade and ITC. Their respective mandates, experience in implementing international development assistance projects, and their roles in the project are described here below.

IV.4.1 United Nations Development Program / Program of Assistance to the Palestinian

People (UNDP/PAPP)

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UNDP has 30 years of local presence in oPt, a well established inftastructure on the ground and expertise in promoting micro and small enterprise development. Its Program of Assistance to the Palestinian People (PAPP) has a long history of supporting private sector development in the occupied Palestinian Territory. This has been demonstrated on the ground over the past 15 years through large interventions for enhancing agricultural and rural productivity, allowing to improve market share and competitiveness, establishment and development of micro and small enterprises for vulnerable entrepreneurs, establishment of financial services and lending systems to support SMEs, skills development and employment creation for young professionals in private sector institutions, and value chain development for domestic products linked to the sustainable management of natural resources, mainly land and water. In its Mid-Term Strategic Framework 2008-2011, UNDP/PAPP has set the specific objective of ‘promoting sustainable livelihoods, economic recovery and self-reliance and enhancing equitable economic development’. To achieve this objective, UNDP focuses on strengthening livelihood opportunities for Palestinian people and their households. Expansion of the private sector, the ‘creation of further income generation and employment opportunities’, and ‘the strengthening of capacities for delivering poverty-focused financial services’ are considered important features of UNDP’s mandate in the occupied Palestinian Territory. UNDP at large has recognized global expertise in identifying and addressing development issues, including in trade, particularly addressing the nexus between trade and human development. This has led to several seminal publications on the subject as well as engagement in policy negotiations, specific diagnostics and provision of technical services and management support. UNDP recently produced a guide on how to conduct Aid for Trade needs assessments and has developed ad-hoc methodologies to capacity building of trade institutions and human development impact assessment of trade agreements. UNDP’s comprehensive approach towards development helps coordinating trade development interventions with a broader set of policies. Without a coherent policy agenda, trade interventions alone would not be sufficient to promote growth and reduce poverty. The capacity development approach is at the core of UNDP programming, allowing UNDP to develop a dedicated knowledge management infrastructure and outreach expertise. Therefore, UNDP/PAPP can draw from global expertise and advisory support on trade related matters as necessary. The UNDP/PAPP Mid-Term Strategic Framework 2008-2011 includes an expansion of trade related opportunities. One means of achieving this output is UNDP’s Deprived Families Economic Empowerment Program (DEEP) which targets 4000 micro and small enterprises in oPt in the fields of agribusiness, crafts, professional services, food processing and packaging, IT development and others with a budget of approximately 45 million USD. The programme provides a comprehensive set of business development services through its wide partnership with 26 specialised local Palestinian NGOs and private sector service providers. The programme also has established an infrastructure for managing a revolving micro-finance scheme through six local micro finance institutions with a lending capacity of 25 million USD to SMEs seeking to expand their businesses. The objective of expanding the capacity of local private sector to increase their share in the local market is no longer sufficient with the increasing need of SMEs to improve their export competitiveness and access to external market. Trade development is now one of the top priorities to enable Palestinian SMEs to increase exports and move up the international “value chain”. In accordance with this need, UNDP/PAPP is currently exploring different export markets (e.g. in the field of agriculture, by contributing to the establishment of an agro-industrial park for

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trade with Jordan) and commissioning studies on trade opportunities. Therefore, UNDP’s trade development portfolio – whereas already commenced – will be an important element of its 2011 – 2013 strategic framework. This will enable UNDP to complete the cycle of private sector development and engagement initiated under the 2008 – 2011 strategic plan. UNDP/PAPP is currently undergoing a review process for its strategic framework to better align it with the continuously changing economic and political conditions in the oPt, and to accommodate the recent shifts in the priorities and needs of the Palestinian people. One major area of review is the section concerning the private sector under the livelihoods development objective, where UNDP is now placing more emphasis on trade development as one of the main drivers for private sector growth on the domestic and external levels. UNDP/PAPP has been sustaining momentum to partner in trade development with PalTrade since 2005, where both organisations have engaged in several initiatives ranging from market assessment studies for olive oil in Chile, supporting local exhibitions, such as Expotech for IT industry, to a specialized awareness and promotional campaign for olive oil, and implementing an employment generation program. UNDP/PAPP considers this project as an important means to engage comprehensively in the field of trade development at a time when UNDP/PAPP’s is also strategically expanding its vision to include this important field. Furthermore, with respect to UNDP/PAPP’s expertise in capacity development for local and national institutions, over the past ten years, UNDP has developed a standardized approach and model for partnering with large national NGOs and smaller CSOs in the areas of integrated rural development, poverty reduction, governance, advocacy, and early recovery. Currently, UNDP maintains active agreements for joint initiatives with 42 national civil society organisations. These agreements include elements of financial management, procurement of goods and services, capacity development, and networking. The accumulated experience of these solid arrangements will significantly benefit the proposed partnership with PalTrade under the project. It will contribute to strengthening the capacity, services and outreach of PalTrade and other trade support institutions covered by the project, and facilitate the active involvement of other organisations, thereby enhancing the reach of the project and the sustainability of its achievements. UNDP’s specific involvement in the project will be five-fold; it will:

take care, as Executing Agency, of project management, monitoring and reporting, where UNDP/PAPP will have the advantage of close day-to-day relations with all the project partners and beneficiaries;

safeguard the human development perspective behind the project’s export development focus;

facilitate the project’s dovetailing with other projects and programmes in oPt, especially in the fields of gender and environment;

entertain high level relations with all the competent authorities and institutions in oPt and neighbouring countries concerned by the project; and

provide organizational capacity development and backstopping to Paltrade in the general areas of programme management and operations, with an emphasis on RBM expertise.

IV.4.2 Palestine Trade Center (PalTrade)

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PalTrade has a key role among the Palestinian trade support institutions. It is and will remain a key player in ensuring Palestinian businesses become ready to take up future export opportunities and to create new such opportunities by and for themselves.Technically an NGO, PalTrade nevertheless has official status as the national trade promotion organisation in Palestine, with the mandate of promotion and development of trade and exports. This mandate was given to PalTrade by a Cabinet decision of the Palestinian Authority in 2005. PalTrade implements this mandate through a variety of activities in the field of trade promotion, trade development, trade information and trade policy. The types of activities that PalTrade has been engaged in are consistent with the majority of Export Promotion Agencies (EPAs) around the world. PalTrade has been assessed by several external evaluators as a competent and efficient organisation. However, according to a 2007 USAID evaluation, one of the shortcomings of PalTrade in the past was its greater focus on export promotion rather than export development at large. Nevertheless, CIDA’s own organisational development assessment of PalTrade (see Annex X.) has confirmed that it operates as a competent, fully functioning trade promotion organisation, according to international norms (see further below). PalTrade was officially registered as a non-governmental organisation in oPt in 1999. Its mandate and business plan are adopted by a General Assembly which also elects a Board of Directors. With a membership of 327 Palestinian businesses, including most of the leading companies, PalTrade advocates a competitive, enabling business environment and is dedicated to improving trade competitiveness. In carrying out its mandate, it is contributing to the Palestinian Authority’s priorities involving export-led growth. At the same time, being a private sector, member driven organisation, PalTrade is certain to represent the actual needs of Palestinian enterprises, including MSMEs, and to be anxious to provide them with the best possible services. PalTrade currently provides its export support in four primary areas:

Trade Policy - analysis of trade agreements, international trade trends and export markets, trade facilitation, and advocacy on behalf of the Palestinian private sector;

Trade Information - market research and intelligence, trade information workshops and market/product reports to assist exporters to enter and sustain a presence in export markets;

Trade Development - activities, such as training programmes, sector strategies, aimed at improving the capacity and capabilities of Palestinian firms to improve their export performance; and

Trade Promotion - the promotion of Palestinian products in regional and international markets and expanding the market share of locally produced products in the domestic market through such activities as trade fairs, trade missions and business-to-business services.

It operates through offices in the West Bank and the Gaza Strip and a representative office in Amman, Jordan, and has market networks world wide. The current budget of PalTrade is around USD 2.5 million per year. It employs some 40 permanent staff as well as external advisers and assistants for its various projects.

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The exhibit below presents PalTrade’s operational approach, indicating key activities of the various main departments. Not included in the table are the services deployed specifically for projects and directly through the membership department which is considered a support department for other technical departments at PalTrade. Its main objective is to constantly communicate with the general assembly members and other departments. Further, the Membership Department not only receives members’ opinions, but also promotes PalTrade’s activities among members.

According to the most recent annual report, for the year 2008, PalTrade organized over 83 ctivities, which is an increase of 54% from 2007 and 93% from 2006. This is mainly due to additional project financing. PalTrade activities are organized not only for members but also for non-members. In 2008 alone, activities reached more than 1,169 companies or which only 329 ere members. On average from 2006 to 2008, only 25% of participating companies were PalTrade members. This illustrates that PalTrade outreach goes far beyond its membership. Further information about PalTrade can be found at http://www.paltrade.org/en/. The main findings in the Organizational Development Assessment of PalTrade, undertaken by CIDA in 2009, were that:

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PalTrade’s mandate and vision are clearly articulated and understood and represent a source of pride for management, staff, and business partners;

it has well formulated policies in administration, finance and human resources;

overall, it is a well managed organisation with experienced and skilled staff and a range of programmes deployed to meet the needs of both members and non-members alike; and

it is regarded as a highly professional and reliable organisation, with very good relations with its Board of Directors, sponsors and partners, and an excellent reputation, attracting many donors.

The key findings of the report are attached as Annex X. For these reasons, PalTrade is the partner of choice for carrying out trade development work with Palestinian enterprises and institutions. With coaching from ITC, as necessary, it will carry out much of the value chain analyses and the export potential assessments feeding into the sectoral export development plans; it will do analytical and promotional work for trade policy advocacy; it will be in charge of most of the field work with beneficiary MSMEs; and will take care of the analytical, advisory and organisational support for helping participating Palestinian firms reach foreign markets. In the first phase of the project, in order to become fully able to carry out this role, it will be the beneficiary of targeted support from ITC and UNDP with organisational development and staff training, especially for revising and updating its strategy, honing its skills in managing and delivering export development services, and introducing a results based management system.

IV.4.3 International Trade Centre

The International Trade Center (ITC) is the focal point in the United Nations system for technical cooperation in the field of trade promotion and export development. Its specialisation lies in building partnerships with trade support institutions - both public and private - to develop integrated and practical trade development programmes focused on export impact for good. In its 45 years of existence, ITC has developed extensive experience in providing practical trade related technical assistance to developing countries. ITC’s main strength lies in its private sector orientation and its ability to provide practical solutions for business support institutions, enterprises and policy makers. It supplies tested solutions in a range of fields relating directly to trade competitiveness at the company level, such as market analysis, trade information and its management, e-commerce applications for international trade, sector-specific product and market development (including trade in services), exporter training, supply chain management, packaging, labelling and branding, legal aspects of trade, quality and standards, private sector participation in the multilateral trading system, etc. In each of these disciplines, a variety of methodological tools, training packages (many of them in the form of training-of-trainers materials), software applications, data bases and publications are available. These are adapted to the regional and national contexts, in close collaboration with and for roll-out by relevant partner institutions in the countries and regions concerned. Partner countries have recognised the significance of ITC’s work and reflected this in the Hong Kong WTO Ministerial declaration (paragraph 53): “We encourage all Members to cooperate with the International Trade Center, which complements WTO work by providing a platform for

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business to interact with trade negotiators, and practical advice for small and medium-sized enterprises (SMEs) to benefit from the multilateral trading system”. ITC provides trade related technical assistance in more than 150 countries with resources provided by more than 20 bilateral and multilateral donors. The current size of its programme of assistance in the Arab States region is approximately USD 10 million with an annual expenditure of approx. USD 3 million. ITC’s involvement in the project will be somewhat front-loaded: considerable early stage support will be given to PalTrade to enhance its capacities and for rapidly improving its ability to work with ITC as a partner for the rest of the project. ITC will then also help train, coach and certify other trade advisers to assist Palestinian MSMEs in the project. ITC will continue by monitoring progress and coaching staff as necessary for ensuring the success of the individual MSME support activities and that of the project at large.Selective coaching is foreseen throughout the project period in accordance with the “learning by doing” principle.

IV.5 Management strategy

IV.5.1 Project implementation partners, their roles and relations

UNDP, PalTrade and ITC are partners in the management and implementation of the proposed project. UNDP will be the Executing Agency of the project. As Executing Agency, UNDP will be responsible for project management and administration including the monitoring of the and reporting on project activities along with the overall financial management of the project funds, in accordance with UNDP financial rules and regulations. UNDP shall designate PalTrade as an intermediary beneficiary of the project, as well as an implementer of project activities. Rather than being a simple capacity building project for PalTrade, the project aims to support PalTrade in implementing its core mandate for the benefit of Palestinian enterprises. UNDP will partner with ITC as the UN technical agency providing capacity building, advisory and backstopping support services to PalTrade to improve and expand its organisational capacities and its service delivery to enterprises. ITC will thus act as a sub-contractor to UNDP, providing technical assistance and international expertise. ITC will provide focused technical assistance in areas needed by PalTrade, as outlined in the detailed project proposal. In particular, ITC will contribute knowledge on international best practice, tried and tested tools and methodologies, as well as a network of partners that can contribute to PalTrade’s success. ITCs approach to PalTrade will be that of a mentor and facilitator based on the principle of ‘learning by doing’. The budget allocated to ITC in the project document will cover all international expertise (ITC staff, international consultants) and their travel as well as ITC’s own coordination and management costs (overheads). All local costs related to ITC’s assistance will be covered locally by PalTrade, including costs of organizing local events, fees for hiring national consultants, local procurement of equipment and services, local costs related to security, etc. As the Executing Agency of the project, UNDP will be responsible for the implementation of the project’s activities and fund management. Local activities will largely be delivered by PalTrade.

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The activities to be performed by UNDP, ITC and PalTrade, respectively are presented in Annex II. The detailed project implementation plans will be finalised during the inception phase in accordance with the respective skills, resources and capacities of the project partners, in a spirit of transfer of knowledge and sustainability. During the inception phase, which will last approximately six months, the institutional assessment of PalTrade and the development of exports plans for selected sectors will be fundamental inputs for the shaping of the subsequent project outputs and activities.

IV.5.2 Project management set-up

UNDP will establish two main cooperation agreements to facilitate the implementation of this project. One will be a UN interagency agreement in the form of a Lettter of Agreement between UNDP and ITC, clearly defining the outputs, activities, involvement and obligations of the two parties. The second agreement will be with PalTrade to establish the contractual arrangements for PalTrade as an implementing partner for project activities under the overall UNDP guidelines for NGO implementations. Under the NGO Implementation Modality, UNDP will review the capacity assessment conducted for PalTrade and will design the contractual arrangements to ensure sufficient control over project operations and financial management. PalTrade will be required to submit quarterly financial and technical reports in order to receive the next advance. A technical committee will be established to provide supervision and guidance of the project. The committee will include representatives from UNDP, ITC, and PalTrade. The committee will meet on a quarterly basis to review progress (technically and financially) and review plans for next quarter. The committee is meant to provide a non-bureaucratic quality control measure to ensure project efficiency, effectiveness, and continued relevance to the local context. In UNDP, overall project management is proposed to be entrusted to a small unit financed by the project. It will be led by a Project Coordinator supervised by the Director of Operations of UNDP. The Project Coordinator will be assisted by a UNDP programme analyst for private sector development and engagement, UNDP gender, environment and private sector advisers. ITC will provide technical support on all trade development issues. In addition to its role in the implementation and coordination of the project’s activities, this unit will prepare official, periodic progress reports and financial reports to the stakeholders (CIDA, etc.) and prepare inputs for the technical committee meetings. Given the time frame for implementation and the need at an early stage to secure a lasting impact of the project, RBM principles will be applied for the management of the project, The project will thus take an RBM approach for work carried out both in the field or at the partner Institutions. The project will follow an integrated approach, creating synergies with the ongoing TRTA activities in the oPt and in the region, involving the trade support institutions, the sectoral associations and the exporting firms.

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Matters related to the flow and management of funds, procurement, monitoring and evaluation, reporting, audit and exit strategy will be handled according to the following arrangements:

IV.5.3 Flow and management of funds

Funds management under the project will be handled by UNDP according to its standard procedures. Upon receiving the funds from CIDA, UNDP will sign Letters of Agreement (LoA) with PalTrade and ITC for the implementation of the designated activities. In accordance with the LoAs, UNDP will make available to PalTrade and ITC funds up to the maximum amounts of the respective LoAs. The first instalments will be advanced within 1 month following signature of the LoAs. The second and subsequent instalments will be advanced to PalTrade and ITC quarterly, only upon receiving comprehensive liquidation reports to date for the initial and subsequent transfers that reflect all expenditures and include all supporting documents, reflecting achievements, issues, risks for the activities completed, and have been submitted to and accepted by UNDP as showing satisfactory management and use of UNDP resources. PalTrade and ITC agree to utilise the funds and any supplies and equipment provided by UNDP in strict accordance with the project document. PalTrade and ITC shall be authorised to make variations not exceeding 20 per cent on any one line item of the project budget provided that the total budget allocated by UNDP is not exceeded. PalTrade and ITC shall notify UNDP about any expected variations on the occasion of the quarterly consultations. Any variations exceeding 20 per cent on any one line item that may be necessary for the proper and successful implementation of the Project shall be subject to prior consultations with and approval by UNDP. Upon completion of the activities, final progress reports and liquidation reports will be submitted to UNDP for verification and clearance. PalTrade and ITC further agree to return within two weeks any unused supplies made available by UNDP at the termination or end of the LoAs or the completion of the project. Any unspent funds shall be returned within two months of the termination of the LoAs or the completion of the Project. UNDP shall not be liable for the payment of any expenses, fees, tolls or any other financial cost not outlined in the project work plan or project budget unless UNDP has explicitly agreed in writing to do so prior to the expenditure by PalTrade and ITC. PalTrade and ITC shall keep accurate and up-to-date records and documents in respect of all expenditures incurred with the funds made available by UNDP to ensure that all expenditures are in conformity with the provisions of the project work plan and project budgets. For each disbursement, proper supporting documentation shall be maintained, including original invoices, bills, and receipts pertinent to the transaction. Any income arising from the management of the project shall be promptly disclosed to UNDP. The income shall be reflected in a revised project budget and work plan and recorded as accrued income to UNDP unless otherwise agreed between the parties. Upon completion of the project/or termination of the LoAs, PalTrade and ITC shall maintain the records for a period of at least four years unless otherwise agreed upon between the parties.

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IV.5.4 Procurement

Procurement of goods and services under the project will essentially apply to the engagement of national consultants, the logistical arrangements for training events and the like, and expenditure for business-to-business meetings and trade fair participation. UNDP’s standard procedures, in line with UN financial regulations, will be followed wherever applicable.

IV.5.5 Monitoring and reporting

UNDP will be responsible for monitoring the overall project activities and their respective outputs and outcomes. The detailed performance measurement framework stipulates which organisation will be responsible for each particular monitoring/performance measurement activity. As required, this detailed performance measurement framework will be reviewed and revised in accordance with circumstances arising from actual project implementation, at least once every two years. Records will be kept of any such modifications. The performance measurement will also address the extent to which project activities will have helped achieve specific MDG targets in oPt. Staff, consultants and counterparts working with the project will be required to prepare reports to project management on the activities, findings, conclusions and recommendations of their respective assignments. At the end of each calendar year, UNDP, with the support of its partner, will prepare a progress report for CIDA and other stakeholders on the implementation of the project. It will:

Describe the status of project implementation;

Highlight key activities that took place since the last report;

Summarize the results of the prject (outputs and outcomes) as measured in accordance

with the performance measurement framework;

Explain any changes made to those performance measurement frameworks;

Describe lessons learned, unexpected results and risk management issues;

Include a summary of financial receipts and expenditures incurred during the period and since project inception;

Outline the activities planned for the coming period, including any changes proposed as a result of the outcome of the reporting period.

IV.5.6 Communication Strategy

The communication strategy provides a single framework for covering all communication with stakeholders under the project, including the Government, the private sector and the international community. It will pursue the following three objectives:

1) To create and disseminate coherent project information among the stakeholders, including communications related to the operational aspects of the programme and to its day-to-day management as well as forward planning, strategic guidance and navigation.

2) To report on project implementation progress and lessons learned to the different stakeholders and share information about related work. Such continuous exchange of information will also enable the project team to react to, support and benefit from new

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developments, programmes and initiatives in oPt in a timely manner and build synergies where possible.

3) To promote project activities and results among beneficiaries, development partners and the business community at large, both domestially and abroad, thereby increasing the impact, sustainability and visibility of the project.

The details of the strategy will be worked out during the inception phase, as necessary and suitable for reaching the above objectives. In the implementation of the strategy, the first and second objective will draw on the project management set-up and the monitoring and reporting arrangements just described, complemented by dedicated efforts to reach a wider audience. The third objective will initially be reached by a special event for presenting the project at an early stage. Later on, it will essentially be pursued by the outreach activities described separately here below.

IV.5.7 Project outreach

Throughout the implementation of the project, special attention to outreach will be given to make sure that the coverage of the project will be as comprehensive as possible. More specifically:

1. From a geographical standpoint, PalTrade will utilise its links with trade associations and forums to ensure that proper geographic coverage is obtained. PalTrade has established relations with the chambers of commerce in all major oPt cities, the Businessmen Forum in Hebron (south), the Business Forum Nablus (north) and the Federation of business associations in Ramallah (central), as well as having a PalTrade office in Gaza. It is normal practice for PalTrade to engage these institutions and promote its activities in collaboration with them.

2. From a gender standpoint, PalTrade will engage the businesswomen’s associations, the

young entrepreneurs, as well as other community associations involving women in the promotion of activities related to this project.

3. From an industry/ sectoral perspective, where relevant, PalTrade will engage the various

industry/sector trade associations for reaching the ultimate beneficiaries and promoting the services that will be provided under the project. This again is the normal practice that PalTrade has already been applying, which will help ensure its success also in this case.

4. As appropriate, UNDP, PalTrade and ITC will use the occasion of its various other

regular and ad-hoc events and activities to present the project, enrol partners and participants, identify and engage business contacts, and disseminate the project findings and lessons learned and encourage their application.

It is worth noting that PalTrade’s membership base is widely distributed from a geographical as well as a sectoral standpoint. Due to its national mandate, PalTrade’s services are not limited to members but are open to all private sector enterprises. In 2008, for example, PalTrade organised activities with participation of over 1169 participants from all over oPt; only 327 participants were members, and the rest were non members. From 2006 to 2008, only 25% of participating companies were PalTrade members. With respect to gender outreach, in recent training activities and the Internship Assistance/Placement programme, participation by women was 20% and 40%, respectively.

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This wide outreach will be further enhanced by the project and complemented by the dense coverage provided the other participating trade support institutions.

IV.5.8 Evaluation

It is proposed that the project undergo a self-evaluation approximately half-way into its implementation. The purpose would be to identify project results and confirm (or clarify) those measured during ongoing monitoring as described above. The mid-term evaluation would also identify changes, including to the objectives now set out in the logical framework analysis, that should be carried out during the remainder of the project implementation and make other relevant recommendations for counterparts and the implementation agency(ies) and its partner to strengthen the results of the project.

In addition, in order to check the results of the project, its expected outcomes and to draw constructive lessons from it, a formal, external evaluation of the project and its results is suggested to be carried out during the final year or just after the end of the implementation. This evaluation could be used by CIDA and other partners to identify priorities and successful project activities for incorporation in future trade development programmes within the region or elsewhere and would provide UNDP, ITC and their partners with inputs for enhancing their future work as well. This external evaluation would have to be budgeted separately from the project.

IV.5.9 Project structure

To further illustrate the management arrangement, the following chart clarifies the structure of the project: Exhibit 9. Project Organisation

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UNDP Gender, environment

and private sector advisors

PalTrade – Implmenting

partner

Technical Committee

Executing Agency

UNDP/PAPP

Programme Qaulity

Assurance

UNDP Programme Analyst

For Private sector

development and

engagement

UNDP Project

Coordinator to

ensure day to day

linkages between

UNDP, ITC and

PALTrade

Project Organisation Structure

Trade Development Unit

Trade Information and

knowledge products Unit

Trade Promotion Unit

Trade Policy Unit

ITC –

International

Trade Centre

(technical agency)

ITC technical

Support

Strategic

Planning Unit

PalTrade–

V. Lessons learned

V.1 Lessons learned by ITC

The lessons learned by ITC from other CIDA funded trade related programmes include the following:

a) Training in export preparedness must be followed by the provision of extensive expert advice (mentoring). Trainers and entrepreneurs who have received training in export preparedness have singled out the indispensable need to follow-up the classroom training with the provision of expert advice on a range of issues such as product costing, packaging and labeling, sources of working and equity capital at reasonable cost, marketing approaches, etc. Such training, in the majority of cases, will need to be provided on a regular basis for a number of years.

b) The fact that business marketing/contact missions can achieve much more than creating

business linkages, market opportunities and export sales should be reflected in the project. Properly supported trade missions allow exporters to identify productivity and competitiveness obstacles to doing business in any market, e.g., in product design, pricing, packaging, marketing strategy, production or managerial capacity, and logistics, and to develop strategies for overcoming these obstacles.

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A trade readiness development aspect of business contact missions should be incorporated into the programme and enterprise expectations established for this type of activity. Support for building readiness to trade should be incorporated into the programme design as should performance measurement instruments that will identify this type of outcome, in addition to traditional measures of sales and leads.

c) Business marketing/contact missions require pre-and post-mission support, particularly

for early stage exporters. Wherever possible, a market based sector specialist should be engaged to do much more than simply organize a set of buyer-seller meetings. Specialists have to be engaged in a consulting capacity to help prepare the companies before the mission and then use the knowledge acquired of the company and its products to set up the most appropriate meetings possible with potential buyers. By providing this type of support through a combination of domestic service providers (for management, financing and general export readiness issues) and market-based specialists (for identification of market requirements and buyer-seller support), the costs of providing such expert advice can be reduced while at the same time enhancing the capacity of local business service providers.

d) A proper assessment needs to be made of local counterpart capacity and interest before

committing to projects. The design of programmes has typically led to the engagement of a single local counterpart institution for programme implementation, usually a Government Ministry/parastatal organization such as the national trade promotion organization. The resource limitations of these organizations, however, can significantly undermine the implementation or outcome potential of the project.

e) The time horizon for trade related technical assistance programme implementation

should be realistic. Capacity building for MSMEs and trade support institutions requires time and considerable handholding to show results. Therefore, a time horizon for programme implementation of three years, as is the case for this project, is not too long; a programme implementation time horizon of at least four or five years is sometimes required to show tangible results.

f) Importance of synchronization of activities: It is important to note that each country has

its own export development plan, institutional infrastructure and human resources in place to carry their strategy forward. A trade development project is better able to achieve sustainable results if it is able to synchronize its activities with existing initiatives in order to support already established country priorities.

Other parameters of crucial importance in the success of a TRTA project are: commitment of the main partners, appropriation of the outputs and of the project, anchorage of the capacity building, a well planned exit strategy and the sustainability of the achievements of the project, and creation of synergies with other partners and other ongoing projects.

V.2 Lessons learned by PalTrade

Lessons learned by PalTrade in similar projects are the advantage of a strategic, comprehensive approach with proper follow-through of all activities initiated, the effectiveness and efficiency of capacity development through a ‘learning by doing’ approach, the need for activities to be demand driven and focused on the outputs and outcomes to be obtained, and,

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correspondingly, the importance of being equipped to provide on demand services, In the past, some outputs were project driven, in the sense of reflecting pre-conceived needs and provided on a fragmented, ad-hoc basis, while in recent years PalTrade has developed responsive knowledge services improving its ability to fulfil its mandate by consistently delivering client oriented products, The present project will further enhance this ability.

VI. Environmental and Gender Considerations

VI.1 Environmental considerations As mentioned in the overview of the development context, some of the sectors with a potential for export development can be considered as important emitters of pollution. Trade development would therefore have to go hand in hand with increasing environmental awareness and addressing the issues identified. At this stage, there is a need to have a better understanding of the environmental issues that are relevant to the different sectors of the Palestinian economy. Given the past and current state of affairs, the environment has not been a top priority for private sector firms, although there is a growing understanding and recognition by the Palestinian authorities for the need to involve the private sector in environmental management activities (such as water production and supply,

The value chain approach in the olive oil sector

The Palestinian olive oil sector has always been disjointed. The main actors in the sector used to work separately, with very little coordination amongst the different players. When PalTrade started working in the sector a few years ago, the initial, main goal was to help bottling companies export their products to selected target markets. However, soon it was discovered that the sector faces many other problems that prevent commercial exports, such as the quality of the oil produced, productivity, food safety issues in the pressing mills, weaknesses in the marketing and promotion capabilities of the exporters, lack of backward linkages to the growers, etc. It was found that developing all components along the value chain would promote better integration and collaboration among the different players in the sector and contribute to positive overall outcomes in terms of improving quality and productivity in olive oil production and enhancing the offer of the bottling companies selling in the international market. PalTrade’s approach in this regard has been to create partnerships in the sector where each partner has a specialized, yet integrated, role. In the currently ongoing project, funded by AFD, the main objective is to improve the overall efficiency of the olive oil value chain, to upgrade quality control and national regulations, to improve quality certification and food safety of millers, and to increase export of olive oil and its by-products. The three partners for the project are the Palestinian Farmers Union, which works with the producers to support the organization of cooperatives; the Palestinian Standard Institute, in charge of strengthening testing and setting up a quality chart; and the Palestinian Food Industries Association, which deals with quality certification for pressing mills.

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solid waste and wastewater management services) if sustainable development is to be achieved. A environmental scan in Palestine related to the selected sectors will be done as a part of each value chain analysis. CIDA’s recommendations and manuals for environmental assessments will be duly put to use for this purpose. The environmental scans will identify the key environmental issues facing the enterprises in the sector concerned and outline suitable, corresponding mitigation measures. These will be incorporated in the sectoral export development plans. The results will also be used to guide a series o workshops and promotional activities which will be conducted to increase the awareness of private sector companies and associations regarding environmental sustainability and environmental quality management. They will also inform the complementary activities that other organisations carry out in the field of environmental protection. Certain official quality standards and norms (e.g. phytosanitary measures or technical regulations) may need to be met for a sector to be export ready or competitive. Private sector labels of conformity are becoming increasingly important in many consumer markets. Also in the context of other capacity development activities under the project, participating trade advisers and enterprises will therefore be repeatedly reminded of the importance of environmental compliance as a marketing tool in many countries, and will get indications of how such compliance can be achieved and demonstrated. They will also be encouraged to see environmental issues as a business opportunity, whether from savings on energy, water and raw materials, recuperation and recycling of waste, investment in ‘green’ production equipment, or export of ‘green technology’ products. The activities described will thus improve the enterprises’ knowledge of export related environmental issues and their willingness to address them, and suggest ways for improving the policy, operating and regulatory frameworks that businesses in the sectors concerned must operate in. For example, in the agro-food processing industry, identifying what inputs are used and what by-products and pollution occur, and calculating the costs and benefits of dealing with them in an environmentally responsible way, would be useful to sensitise the value chain players. Nevertheless, taking specific action in each of the fields of intervention identified would be outside the reasonable scope of the present export development project. PalTrade and other entities and institutions concerned, primarily sector associations, PFI, other NGOs, universities, and the competent authorities, especially the Ministry of National Economy and the Environment Quality Authority, will then continue working separately to identify issues in greater detail and take further measures at regulatory, institutional and enterprise level, as appropriate.

VI.2 Equality between Women and Men An introductory overview of the position of women in the oPt economy is given in the description of the development context of the project (Chapter II.) as well as in Annex VIII. It is evident that the challenges facing women in oPt are considerable, but so are the opportunities for making trade development improve their situation and help them contribute more and better to social and economic development.

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Subscribing to the Millennium Development Goals and keeping with “Objective 5” of CIDA’s 2007-09 Sustainable Development Strategy, the present project will therefore take a holistic approach to addressing gender issues within the project:

a cross-cutting approach, wherein the promotion of women’s empowerment and gender equality will be considered within each component of the project and clear indicators to measure gender mainstreaming within the project will be established;

a gender specific programme approach by which women entrepreneurs will receive particular attention through specific initiatives such as ITC’s ACCESS! approach and materials; and

dove-tailing with other oPt programmes and projects with gender focus. As a cross-cutting approach, the project managers, in collaboration with the lead partners in oPt, will ensure that specific attention is paid to the participation of both men and women within all the project’s activities. This will be done on an on-going basis as a routine element when preparing and delivering capacity building activities, e.g. by having comments in the activity descriptions about their importance for women, monitoring the share of women signing up for a workshop and taking special action if it is lower than hoped for, and rapidly identifying any gender related shortcomings showing up in the participants’ evaluations and taking remedial measures. To this end, PalTrade will e.g. cooperate with the Business Women’s Association and other relevant associations in order to reach out to their membership base for inputs on the precise form and content of capacity building activities and for securing the participation of women. Detailed arrangements to this effect will be made during the inception period. As another example, PalTrade already has sections for young entrepreneurs in its yearly ICT exhibition and may expand this approach to cover women entrepreneurs, also in other sectors and in other export promotion events. A gender specific programme, appearing as Output 420 in Section IV.1.2 above, will complement the cross-cutting approach outlined above. Women entrepreneurs as well as women among key enterprise staff engaged in export development will receive particular attention through a set of specific measures. These will comprise the provision to PalTrade of ITC tools and training materials targeting women entrepreneurs, development and adaptation of these to fit the oPt context, training and coaching of Paltrade staff and selected women entrepreneurs on gender specific issues related to international business, and provision by PalTrade of training and business advisory services tailored to the needs of women entrepreneurs in oPt at large. Participants will also gain access to a large network of businesswomen, giving them opportunities to share experience and learn from successes obtained in other countries (see e.g. www.womenexporters.com). In this way, the particular constraints facing women in business will be addressed by means of enhancing their access to a comprehensive package of trade support services, including exporters’ training, mentorship, business counselling, product and market development, business networking and trade intelligence. As a result, women-owned and operated MSMEs will become more competitive for exports and female staff in other enterprises will enhance their ability to contribute to the success.

VII. Risks

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VI.1 External factors

In the region, there are a number of external factors, which may have a profound impact on the project. Although they can be identified by their nature and by their possible effects, their actual development cannot be foreseen and the project must simply be flexible enough to suitably adapt to their development. Several of these have been highlighted in the description of the oPt development context in Chapter II above, such as the limitations to the free movement of goods and persons across borders and even just within oPt. Some of them are economic, e.g. the price of commodities and other inputs of importance to oPt enterprises, whether affecting export revenues or imports of industrial inputs or foodstuffs; the availability and price of transport and telecommunications; the effectiveness and efficiency of the financial sector and of payment systems; etc. A particularly important external factor is the access of MSMEs to financing for export development, both of the necessary increase in working capital following from larger trade volumes and of investments in productive capacity, quality control and staff skills. While the project will hardly have any direct means of addressing the needs for improvement of the financial sector in oPt. ITC experience and practice shows that improved skills in international business can by themselves be considered as (additional) collateral when MSMEs request financing, and in this way the project will nevertheless contribute to resolving the financing issues. Others are more political, referring to peace and stability in the region and the presence or absence, and the contents, of agreements regulating e.g. trade, especially the movement of goods and persons. This risk is considered in the region to be high and to be unpredictible. The prevailing situation on the ground may affect negatively the implementation of the expected activities and achieve the required objectives. To reduce the impact of political instability, the situation will be assessed on a regular basis during the implementation of the projects and alternatives could be sought as approrpiate. For thus purpose a mitigation strategy will be developped. Finally, climatic and other natural factors strongly influence agriculture in the region and, through e.g. effects on access to water, may have strong impact on industrial and social conditions as well.

VI.2 Assumptions

The proposal is based on a number of assumptions, related both to the development of external factors and to the project itself. Concerning external factors, it is assumed that:

There is no exogenous regional or global slowdown of trade;

There is no deterioration in conditions for doing business outside those addressed by the project and the overall business environment for trade remains conductive;

Safety and security conditions are relatively stable and allow the project to be implemented as planned;

Partners maintain their commitment to trade.

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Regarding the project itself, it is assumed that:

Counterparts respect their commitments and contribute resources;

Beneficiary firms and institutions are fully engaged;

Funding for the project is received in a timely manner;

The competent authorities act on the recommendations made in the project;

External influence does not counteract project efforts on gender, etc.;

Reliable data for performance measurement can be collected. If any of these assumptions does not hold, there may be negative effects on the implementation of the project and on its impact.

VI.3 Mitigation

There are a number of risks related to the assumptions set out above, in addition to those inherent in any development project. These will all have to be addressed in order to ensure that the project gives the intended results, even if some assumptions do not hold. The following table gives an overview of such risks and the measures proposed for mitigating them. Exhibit 7. Risks and their mitigation

Nature of risk Likelihood Consequences Mitigation

Inadequate matching of needs, objectives and activities

Low Gaps and overlaps in project execution; lower final impact

Full use of UNDP,ITC and CIDA contacts in early programming; systematic needs analysis, periodical review of the prject, application of lessons learned

Significant currency devaluation

Low Increase in effective prices; Inability to undertake project activities as planned

Close monitoring of economies and currency fluctuation; flexibility in design of activities

Gaps and overlaps with respect to other programmes

Medium Waste of resources, insufficient coverage of key factors for trade development success

Careful planning, dovetailing with other, known programmes, regular consultations

Insufficient resources and commitment of local project partners

Low Delays; incomplete implementation, lower know-how transfer effects; lower impact

Early engagement and formal commitment to project objectives and work plan; early local buy-in by cost-sharing engagements; timely mobilisation of external resources

Political instability, bad security situation

Medium to high (may change rapidly)

Difficult or impossible for ITC/international experts to continue working; weak impact

Early capacity building of local counterparts; flexibility to move resources elsewhere, e.g. by carrying out training and the like in neighbouring countries

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Nature of risk Likelihood Consequences Mitigation

Deteriorating conditions for doing business, failure of the institutional environment to adapt to international standards

Medium to high

Delays and rising costs for creation and development of export businesses, conformity cannot be ensured and demonstrated, trade growth is impeded

Attention to business conditions in project design, implementation; specific, targeted advice to authorities; support to key institutions

Crowding-out by other, ‘free’ programmes; ‘training fatigue’ of beneficiaries

Medium Low uptake of trade related capacity building; delays in development of commercially viable provision of trade support services; weaker project impact

Choice of specific, strongly needed topics; simple and practical tools for capacity building; information and promotion; policy dialogue with other programmes

Lack of interest and assiduity of beneficiaries for other reasons

Low Lower effectiveness and efficiency of event participation, training; lower impact

Wide, early information and awareness raising; careful selection of beneficiaries based on commitments, capacities and interest, cost-sharing; early success stories

Limited sustainability of trade development services introduced

Medium Slower development of service providers; lower SME competitiveness, lower trade volume and profitability

Emphasis on both supply and demand development for commercially viable, high quality trade development services; ensuring early, clear business advantages

Limited availability and skills of international and national experts

Low Delays; lower efficiency and effectiveness of training; lower impact

Early identification and selection; using ITC roster and contacts, capitalising on ongoing activities, advertising if necessary

Insufficient project management skills or resources

Low Implementation delays, errors; ineffective and inefficient project execution, lower impact

Sufficient management budget; engagement of high qualified staff; close monitoring

Inadequate data or ineffective procedures for monitoring

Medium The advancement of the project cannot be followed, wrong conclusions may be drawn and inappropriate decisions taken; outcomes and impact cannot be measured or properly related to the project

Initial benchmarking; reality check, careful choice of indicators; clear and complete monitoring plan; continuous measurement; results based management; external evaluation

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This list will be reviewed, updated each year in order to respond to the changing environment and to enhance the ability to take appropriate actions to mitigate the risks.

VIII. Expected benefits and sustainability

VIII.1 Expected benefits

VIII.1.1 Benefits for the beneficiary country

The benefits of the project for oPt will appear at several levels:

The direct, economic effects of the project will help meet the Palestinian Authority’s objectives for growth and diversification, poverty reduction, gender equality, and environmental awareness;

Increased turn-over of exporting enterprises, higher salaries in the private sector, and the move of export related business from the informal to the formal economy will help widen the tax base and reduce the authorities’ dependence on aid;

Greater, more active and more informed participation of the private sector in shaping trade policy will likely reduce ‘noise’ in policy making, improve the understanding and acceptance of revised or new trade agreements and the like, and facilitate their orderly application;

Authorities and institutions will receive more clear, specific and well founded suggestions and requests for trade related regulatory and institutional development, helping reduce the time for preparing decisions, improve their appropriateness and render their implementation quicker and easier; and

As has been the case for other countries, the increased presence, credibility and success of Palestinian enterprises in the world market will favourably reflect on the territory itself and its institutions.

More cooperation, partnership and synergies between SMEs in their approach of the regional and international markets.

VIII.1.2 Benefits for Canada

Likewise, the benefits for Canada will occur in different ways:

By financing the project, Canada will have asserted its influence and raised its profile in an important part of the world;

The project’s structuring effect on other trade related technical assistance to oPt and on complementary development programmes will multiply the effects of the funds now spent;

The particular attention to obtaining tangible, sustainable results and the inherent advantages of the RBM approach will set Canadian assistance as an example for other donors;

The sizable Palestian diaspora will be alerted to the role of Canada as a donor and trading partner;

the free trade agreements to be reviewed and made more effective include also Canada; and

Canadian enterprises will get opportunities to expand their business with oPt partners through the trade missions, business-to-business meetings and exhibition participation planned for oPt firms.

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VIII.2 Sustainability

VIII.2.1 Stepwise, long term capacity development

How the intended results will be sustained after project completion is a question closely linked to how the project will achieve any impact at all, which was covered in the introduction, and to the intervention logic presented in the description of the project activities. The presentation of the project outcomes (Section IV.1.2.) has already identified some key sustainability aspects of the project. This section describes in greater detail the mechanisms by which this sustainability will be obtained. By placing emphasis throughout the project on capacity development rather than direct assistance, the project is building in sustainability concerns from the outset. The project will show PalTrade, other local trade support institutions and trade advisers and the beneficiary enterprises how to identify and address opportunities and threats, build on strengths and overcome weaknesses, and help them do it themselves, rather than do it for them. By acquiring and retaining the expertise necessary for successfully doing business on their own, the beneficiaries will no longer be dependent on external support and can continue their development after the end of the project. Another sustainability driver is the step-wise build-up of capacity, with each successive step building on and reinforcing the previous ones. The main intervention sequence followed in this project isfirst to generate interest and attention by actively reaching out to potential participants, then to transmit knowledge through training, create trust by demonstrating early success, build practical experience and confidence through coaching, confirm the commercial viability of the new approaches by helping MSMEs reach new clients and conclude profitable business deals, and finally ensure long term impact through the sustained business development efforts of enterprises knowing how to be internationally competitive and able to do what it takes. Underpinning this approach, international consultants and other experts engaged in the project to build oPt export capacity will not just come in for a few days or weeks to run their workshops and tell people what to do and how, and then leave. Instead, they will typically be retained throughout the project, so that they can properly understand the people concerned and their needs, adapt their tools, materials and approaches accordingly, raise awareness, provide insight and understanding, teach new skills, mentor the practitioners when they put them to use, follow their progress, monitor their achievements, recognise their successes, intervene if warranted, and remain available for informal consultations and refresher courses for another year or two. Although a significant improvement in terms of approach and commitment, this is not a great practical change compared with current practice; the main difference being that assignments will explicitly include some time and resources for follow-up work after the main intervention has been completed, as outlined above. Correspondingly, in their turn, the trainers and trade advisers trained by the project will all apply a similar approach towards their clients, at least as part of the project’s capacity development activities. (Commercial services may likely have to be provided on a different basis later on.) The trained trainers and advisers (e.g., staff of PalTrade and business development service providers) will thus ensure the actual follow-up support at the enterprise level after interventions

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by international experts The added advantage of this approach is that it also creates strong multiplier effects, allowing many more MSMEs to be reached, in addition to improving sustainability.

VIII.2.2 PalTrade sustainability

Complementing the approaches outlined above, the project uses capacity building of PalTrade as an additional and very important means for ensuring sustainability. Improved sustainability of PalTrade helps secure the sustainability of trade development at large in oPt. The project will assist PalTrade to become more sustainable as an organisation in several ways.It will change how PalTrade serves the private sector. An important feature of the project is to work “from within” the key partner institution, namely PalTrade. The approach followed will focus on working together with PalTrade staff, coaching them, emphasising “learning by doing” rather than ”doing for”. This will help it develop and deliver services that are more innovative and of higher quality, properly manage its own provision of trade development services as well as that of other trade support institutions, and thereby to lastingly accommodate the increasing and changing demands put forward by the market. The new Strategic Planning Unit (SPU) will help internalise and sustain key strategic and project management functions. This will not only improve PalTrade’s ability to manage its own affairs and charge for payable services (cf. above and below) but will also enhance PalTrade’s ability to attract additional funding (grants, subsidies, loans, etc.), whether for its own needs or for helping cover the costs of interventions by other trade support institutions (e.g. through matching grant schemes helping MSMEs finance their needs for trade support services). In the review of PalTrade’s strategic focus for the coming years, emphasis will also be placed on identifying further opportunities for increased financial sustainability of the organisation. With this, the institutional and financial sustainability of PalTrade after the end of the project is likely to be secured. Through the project, PalTrade, already being a partner of first choice for a number of development partners working on private sector issues, will become even better placed to be aware of and take advantage of opportunities for co-operation and synergies. Throughout the implementation of the project, PalTrade will seek to create synergies with projects being implemented by other organisations: export development is a common theme amongst many private sector development projects.

VIII.2.3 Trade development as a viable business

In the way described earlier, other trade support institutions than PalTrade and providers of business development services at large will also be helped by the project to improve their offer, enhancing their ability to profitably serve also smaller clients while giving them the skills necessary for competing with larger, foreign advisory firms. At the same time, their potential clients among MSMEs and larger enterprises will learn to appreciate the value of good advisory services, to select the best provider for the services they need most, and to put them to good use. This will not only improve the relevance and the usefulness of the services, helping secure a favourable result in the individual case, but also give good reasons for charging a higher price for them. Together with the matching grant schemes being put into place and the enhanced ability of PalTrade to manage them, the project will thus also contribute to the development of a

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better functioning market for commercially viable, export oriented advisory services, thereby again contributing to the sustainability of the project outcomes. As another contribution to sustainability, the principle of charging a fee for individualised services to enterprises will be instilled from the outset, in line with good practice in the delivery of business development services. Enterprises benefiting from the project activities will be invited to contribute to the costs of the services, including e.g. participation in some international events. This partial cost recovery will also allow the volume of assistance to be increased. This being said, there are a number of functions of an official trade promotion organisation which cannot readily be covered by user charges, either because their very nature would classify them as public goods or because charging each individual beneficiary would clearly be both inappropriate and practically impossible, e.g. the provision of general purpose trade information to exporters and foreign clients and investors. Consequently, there would also in the future be a need for the competent authorities and the business community at large to somehow subsidise such elements of e.g. PalTrade’s work. Finally, all assets created by the project, such as trained staff, methodologies, analytical tools, training materials, roster of national and regional consultants, networks, information systems, etc., will remain in the hands of PalTrade and other trade support institutions at its end, thereby further contributing to project sustainability.

IX. CIDA Development Priorities Canada supports trade-led economic development approaches in its Overseas Development Assistance (ODA) programmes, and trade related technical assistance is one of the fields of the assistance that CIDA extends to developing and least developed countries, including the Arab States. Where Canadian market potential is confirmed within the priority sectors supported by the project and Canada constitutes a potential market for Palestinian products, the present project will seek to promote trade, and possibly investment linkages between the Palestinian Territory and Canada. This will benefit Canadian importers and consumers in addition to oPt exporters and the communities they support. Furthermore, as a nation of traders, Canada has developed substantial expertise in trade promotion and trade development for its own private sector, which might lend itself to be transferred to the partner institutions participating in the project. The project emphasis on supporting institution building for Palestinian business support entities and for networking between them is consistent with CIDA’s ambitions to promote regional integration. Likewise, its focus on the empowerment of women and ensuring gender-balanced approaches in all project components is consistent with the guiding principles of CIDA’s Policy on Gender Equality. Other aspects of this project, such as the results based management (RBM) approach used throughout the design and implementation of the project and its sub-components will be implemented in a manner consistent with CIDA’s Accountability Framework. In addition,

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wherever applicable within the sectors supported by the project, CIDA’s Policy on Environmental Sustainability will be followed. This approach, coupled with a locally based management structure, will help ensure local ownership of the project and its objectives, which is one of the pillars of CIDA’s Policy on Strengthening Aid Effectiveness.

Another, final, rationale for CIDA’s contribution is the important role of the present project for catalyzing further trade development in the oPt and the region. Because of its systematic approach and comprehensiveness, it sets an example and creates a framework for other donors concerned for addressing development issues through trade related measures, in a way that contributes to meeting the Millennium Development Goals for poverty reduction, gender equality, environmental sustainability and global partnership.

X. Recipient Country / Authorities Support The UNDP/PAPP Mid-Term Strategic Framework 2008-2011 has been endorsed by the Palestinian Authorities and provides clear direction and support for UNDP/PAPP to enhance the capacity of existing and promote the creation of new SMEs. This includes an expansion of trade related opportunities. The project’s trade focus is fully in line with the Palestinian Authority strategies, in addition to being supported by donor assessments. For example, the “Framework for Economic Development” of the Ministry of National Economy (MNE) takes a clear stance on the importance of trade development and diversification as a priority for private sector development:

"…The P[alestinian] A[uthority], therefore, has undertaken a series of dialogue sessions, institutionalised discussions and other means of creating and building consensus between the public and the private sectors, aiming towards a strategic vision of national economic development. In this dialogue process, it has become obvious that the Palestinian domestic market is too small on its own to move the wheels of economic development in the future, and hence there is a need to develop external markets which would absorb the productive capacity of industry and services, and which would drive toward prosperity. At the same time, the predominance of the Israeli market in Palestinian external trade (goods and services) not only has a perverse economic effect but equally can undermine Palestinian sovereignty and viability over the longer term. Market diversification is at once a political and developmental prerequisite."

The thirteenth government programme of August 2009 - Palestine, ending the occupation, establishing the state - has defined a set of strategic national goals. One of the goals involves achieving economic independence and national prosperity where some strategic approaches have been identified. The Government has thus clearly affirmed the private sector role as the main driver of development in Palestine,and its intention to

continue developing all segments of the Palestinian economy, building a free and competitive economic system through close cooperation between a competent, capable and visionary public sector and a pioneering private sector committed of achieving prosperity for the Palestinian people;

act to enhance the role of the private sector in national development;

support the development of the Palestinian private sector institutions to increase their capacity to represent the interests of their members, and

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provide essential economic stimulus to alleviate poverty in the near term, in order to build a vibrant, knowledge-based economy capable of producing competitive goods and delivering high quality services.

In addition, in its review of the short to medium term needs for improving market access, MNE has identified a number of outputs that should be obtained, with PalTrade as a key partner for achieving this:

1. Make an updating review of trade agreements in conjunction with sectoral analysis of competitive capacity in order to identify target markets and opportunities for specific products and sectors (. . ); this should include potential services sub-sectors as well.

2. Identify target markets and changes or additions to trade agreements to facilitate the

entry of these products into targeted markets (it is recommended here to target 4 or 5 markets per 6 months in order to fully accomplish this task).

3. Create country / market profiles for various markets.

4. Create a work plan to target these markets.

5. Formulate a medium to long term export strategy for Palestine.

6. Implement these plans through the specialized departments and agencies.

The project’s activities and outputs are thus fully in line with the short and medium term ambitions of the Ministry of National Economy for improved market access and greater competitiveness and also dovetail with its plans for investment promotion and economic governance enhancement.

List of annexes

Annex I: Logic Model Annex II: Project Budget Annex III: Performance Measurement Framework Annex IV: Project Schedule Annex V: Synergy Matrix Annex VI: ITC-UNDP Letter of Agreement and UNDP-PALTRADE NGO Cooperation

Agreement Annex VII: Sectors with likely export potential Annex VIII: Women in oPt Annex IX: Enterprise survey findings

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Annex X Summary of CIDA’s OAD of PalTrade