by the Small Enterprise Center, Palestine
The Palestinian economy suffers from a sharp increase in public expenditures as a result of the precautionary measures taken by the Palestinian government to confront the virus, in addition to disruption of the foreign trade and stopping the import and export movement as a result of declaring a state of emergency in the Palestinian governorates and closing Palestinian crossings and borders with the outside world, which reduces the state’s general revenues and investment.
These impacts hit all sectors and will contribute in jump in unemployment rates and widen the circle of poverty, which raises the alarm and requires all key actors to unite their efforts to develop substantive policies directed to help economies overcome the spread of this epidemic and reduce damage, while maintaining the integrity of the network of economic relations and finance between workers and businesses so that economic activity can recover when this pandemic ends.
In light of these difficult circumstances and within the framework of the efforts exerted by the Small Enterprise Center (SEC), Palestine in the field of research activities to study the impact of the Coronavirus epidemic, developed this study in order to measure the impact of Coronavirus on the performance of Palestinian companies in various sectors by collecting accurate information and putting these results in the hands of policymakers; the main players and companies to help them develop effective policies to enhance the ability of the economy and companies to recover with minimal losses, as SEC is always keen to be present effectively in the crises experienced by Palestinian companies to act as a bridge between the supporting organizations and the needs of SMEs.
The study aimed to highlight the economic impact on the Palestinian private sector, especially small and medium-sized companies in various governorates in the West Bank, Gaza and Jerusalem, due to the spread of the Coronavirus epidemic.
Data were collected in the period between the 4th -8th of April in the year 2020, and the random sample size reached 341 companies from all governorates of the West Bank, including Jerusalem and the Gaza Strip, and from various economic sectors. The geographical distribution of the sample as follows: 44.6% from the Gaza Strip, 55.4% from all governorates of the West Bank and Jerusalem.
2. Precautionary Measures and Measures:
In order to reduce the economic impact on the economic sectors, especially small and medium enterprises ( SMEs), the Palestine Monetary Authority (PMA), in coordination with the Prime Minister (PM), announced a package of banking facilities for the private sector and the business sector, which included:
- The PM announced the establishment of a fund to support SMEs in Palestine, with a capital of USD 300 million.
- Postponing the monthly payments of all borrowers from the banks for a period of four months, which can be extended, and those borrowers who wish to continue may pay the monthly / periodic installments as usual
- Postponing the letters of credits
- Postponing the monthly / periodic payments of loans for businesses in the tourism and hotel sector for the next six months, and its subject to extension
- No any additional fees, commissions, or interest on deferred payments to be collected
- Payments due from small enterprises and commercial loans will continue to be paid against checks as soon as payments are received
- Relaxing the procedures for credit card ceilings and credit limits granted to SMEs, clients and individuals who are affected by economic conditions.
- Directing new credit to SMEs and startups, and granting temporary credit limits to clients, and thus contributing to maintaining the continuation of the economic cycle
- Providing direct credit to the health services sector because of its direct impact in enabling the private sector to respond to the epidemic.
- Banks are obliged to exempt electronic banking and ATM services from commissions and fees for the next six months, subject to extension.
- Banks are obliged to direct the amounts allocated to social responsibility to support the health services sector and contribute to limiting the spread of the epidemic
- PMA will suspend the classification of SMEs and individual clients affected by economic conditions on the system s of the returned checks for the next four months.
3. Relevant points of the survey:
- Regarding to the amount of revenues under the current conditions: 52% of companies reported that there has been a decrease in the volume of revenues due to the spread of the coronavirus. While 36% of them could not determine if there would be a decrease or rise, and the rest (12%) said they expect an increase in revenue compared to 2019.
- Workers reduction: 58% of the companies reported that they needed movement permits for workers. As a result of the spread of the Coronavirus pandemic, 74% of companies reduced the number of employees.
- Workers wages: The percentage of companies that reduced their workers’ wages as of the date of the survey was about 68%, while 18% of companies reported that they increased wages, and 14% kept wages as they were, according to companies’ responds.
- With regard to the impact of the coronavirus epidemic and the resulting closures and restrictions on movement of raw materials and individuals on the production costs of companies. 58% of the companies reported that there is an increase in their production cost vs a 42% which reported a decrease.
- The five most important problems and challenges facing companies due to the outbreak of the epidemic, in order of priority, are: Financial problems, Low demand for products and limited number of orders, Transportation and logistics services and higher costs of such services, Lack of supply of raw materials, Problems related to transportation, logistical services to deliver goods and raw materials.
- Production capacity: 35% of the companies has completely stopped their business activities, while 65% of the companies reported that their production capacity has been affected in varying proportions as a result of the spread of the coronavirus pandemic.
- Resilience of companies: About half of the companies reported that they could withstand for a period of less than 1 month if the current situation continued, while 38% of companies reported that they could withstand for a period ranging between 1 to 3 months, and just 10% answered from 4 to 5 months, and only 2% can withstand a period of 6 months and more.
4. Recommendations and Conclusions:
The recommendations of the surveyed companies in light of the coronavirus pandemic were divided into several levels, the most prominent of which were the followings:
- Government and policy level:
The vast majority of companies seek the assistance of the government and decision-makers in order to continue working in companies and overcome the pandemic. We summarize the following most important points listed by the companies:
- Reassessing the measures that have been taken by the government and working on amending them to re-work in the various economic sectors and restricting movement within the West Bank while taking the necessary health precautions while keeping the borders crossings closed.
- Formulating a clear future strategy to realize the major imbalances that have caused the Palestinian economy to rely heavily on service sector, which makes it makes it vulnerable to crises.
- Looking sympathetically at small and micro enterprises and providing support for them
- Formulating new policies for tax exemption and customs
- Formulating new policies regarding the problem of collection of checks that the vast majority of companies suffer from
- Developing a plan to revive the sectors that do not provide basic consumer goods, as they are the most affected.
- Exempting companies that were exposed to severe crises from all government fees, and working to provide zero interest long term loans to help companies revive.
- Establishing policies that encouraging landlords to postpone the rent payment for a period of no less than three months.
- Facilitating government transactions for merchants
- Developing logistical solutions for exporting abroad in light of the crisis.
- Financial level:
A large number of companies are seeking financial support and grants, especially the smaller ones, to be able to continue to operate after the end of the pandemic in light of the accumulation of debts and obligations. These companies need immediate financial support to overcome such hurdles to be able to: (i) pay the salaries of workers instead of firing them, (ii) finance purchasing raw materials to continue their work, (iii) provide grants or low loan interest for the most affected companies.
- Marketing level:
Companies are seeking support to market their products, they reported that they are not able to reach market due to low demand, and at the same time, consumers are not able to access the companies’ products due to the lock down. Moreover, there is a low demand of certain companies’ products, as a result of consumers behaviors change where only they focus on basic food products giving that a lot of consumers were affected by this situation. Therefore, the companies appealed for the necessity to search for a marketing contingency plan.
- Level of production and capacity building:
As one of the main problems for a number of companies was their inability to get raw materials for production and consequently stopping operation, while others are weak to deal with such crises, and they have weak ability to develop plans and take future decisions in such circumstances, all of this highlight the urgent need to provide training in different fields. Finally, many companies requested a support to issue permits for their employees to arrive the workplace, and to be able to market their products.
Read the complete survey in the following link: