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Palestine: Clinton May Be Ready To Put Cash On The Table


International Business

PALESTINE: CLINTON MAY BE READY TO PUT CASH ON THE TABLE

Yassir Arafat, meet the friendly gray suits from the Overseas Private Investment Corp. They're from Washington, and they're coming to help you.

In a move designed to cement the year-old peace accord between Israel and the Palestine Liberation Mrganization, the Clinton Administration is getting ready to put money on the table. By summer's end, the Administration will announce a plan to spend $125 million in risk insurance, loan guarantees, and direct loans to spur business investment in the West Bank and Gaza. In early September, Vice-President Al Gore hopes to cap a Mideast tour with an announcement of the first four deals guaranteed by OPIC. A month later, OPIC and Builders for Peace, a private investment group, will ferry 15 Palestinian business executives on a five-city U.S. tour to drum up partners and venture capital.

MEGADEALS? The goal is to produce a fast payoff in a region that's getting impatient for the promised economic rewards of Middle East peace. "There has to be a quick, visible, material transformation in Palestinian lives through the development of the economy, jobs, housing, and all that flows from that," says a White House official.

Experts say OPIC's involvement is crucial given the continued instability in the region. "Unless there is a guarantee from somebody, you won't see large chunks invested," says Peter Gubser, president of American Near East Refugee Aid. If initial projects succeed, however, OPIC officials predict that mega-deals will follow in the next two years.

But for now, the Administration is concerned that Palestinians and Israelis are drawing away from each other. Privately, U.S. officials say the Israelis seem lukewarm about forming joint ventures with Palestinians in both the newly autonomous lands and the still-occupied territories. At the same time, emboldened Palestinian entrepreneurs want to strike out on their own. U.S. officials see the OPIC deals as seed money to spur local economic development. That, they hope, will eventually entice Israelis and Palestinians to invest in joint ventures and pull in private funds from abroad. "Such investment creates opportunities for partnerships throughout the region," says OPIC President Ruth R. Harkin.

OPIC's ventures will launch small-scale projects designed for quick start-up. They include a Culligan International Co. joint venture to bottle spring water for sale to tourists in Gaza; a West Bank furniture plant that will export to Eastern Europe; a construction company that will supply the housing industry; and a business hotel to house visiting venture capitalists. Other deals in the works include an olive oil processing plant and a company to market telephones. OPIC is also mulling an equity fund that small Palestinian companies could tap to launch startups.

Getting these modest ventures off the ground won't be a snap. Public services in Palestinian lands are all but nonexistent, roads are poor, and half of the population of 800,000 lives in shanties.

Still, revving up the economy stands out as the best hope for nurturing a fragile accord in territories that have known neither peace nor prosperity. The diplomats have done their part--now it's time for the bankers.Douglas Harbrecht and Amy Borrus in Washington


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