مؤسسة فريدريش ناومان.. من أجل الحرية. Handicraft Sector. Palestine

Transcription

1 مؤسسة فريدريش ناومان.. من أجل الحرية Handicraft Sector Palestine December

2 Palestinian Handicrafts... 3 Introduction... 3 Handicraft Sector in Palestine:... 5 Types of handicrafts:... 6 Current and potential markets for Handicrafts:... 9 Legal Framework: Government Strategy and Planning Ministry of National Economy (MoNE): Ministry Of Culture Strategic Plan Ministry of Tourism Legal framework Challenges: Lengthy Procedures for exporting Lack of supporting Policy by the Government Difficulty in Accessing additional Financial Resources Ineffective Donors Project Lack of Marketing Awareness Lack of Powerful and effective Private sector representation Lack of Credible Data about the Sector Impediments by Israeli occupation Limiting the access of tourists to the local shops Difficulties in importing the needed machineries and raw materials Difficulties in movement and access Conclusion Recommendations Bibliography Types of Handicraft in Palestine

3 Palestinian Handicrafts Introduction For the past 5,000 years, production of Palestinian Handicrafts have reflected the unique connection between people, the environment and land. The methods used to produce handicrafts is an integral expression of the Palestinian cultural heritage and identity and a main pillar of the Palestinian tourism industry Palestinians accumulated the skills of handicraft-making and developed them through different generations, making the contemporary economy of many Palestinian cities, including Nablus, Bethlehem and Hebron, dependent mostly on the handicrafts industry. It is an inimitable practice with an important economic impact on the development of the Palestinian economy. For centuries, the Palestinian handicrafts industry has been a significant contributor to the Palestinian national economy and a contributing source to the Palestinian GDP. Moreover, due to labor intensive characteristic of the industry, the Handicraft Sector is considered one of the most important and needed sectors in generating jobs. Currently the handicraft sector faces several obstacles and challenges hindering its development and expansion but also threatening the operation of existing businesses. The challenges are a result of imposed limitations by the occupation, but are also magnified and amplified by other factors including the inefficient planning by the responsible authorities; lack of cooperation and coordination between the private and public sector, the oblivion of the importance of improvement and renovation of industry's production. Regardless of the obstacles faced by the sector, there is no doubt that the industry has untapped potentials for further support of the growth and development of the Palestinian economy, while preserving the Palestinian cultural heritage and identity. This study is intended to highlight the current practices of the Palestinian handicrafts; view the governmental efforts and plans to develop the sector; explore the challenges and weaknesses; explain how the Israeli occupation impediments hinder the growth of the sector and based on the latter, provide recommendations for the viable development and improvement of the handicrafts industry. The first section of the study intends to provide the reader with an overall overview of the handicraft sector in Palestine and to describe the different characteristics and practices of each handicraft sub-sector, moreover, the section highlights the current export capacities and briefly addresses the potentials that can be utilized by developing the sector. 3

4 The following sections Government Strategy and Planning underlines the plans set by the government for the period between , with highlighting the major shortcomings from the Palestinian private sector perspective. The following two sections challenges and Israeli impediments provide the obstacles and challenges posed by internal policies, inefficient business practices and Israeli policies. Finally, the study concludes and provides recommendations extracted through the revision of all documents available related to handicraft sector, interviews with key players in the sector and working group meetings with the Palestinian private sector. It is worth mentioning, that for the sake of this study and the different figures available (discussed later in the study), the numbers and figures used result from workshops questionnaires and interviews with key players in the sector including business owners, private sector institutions and government officials. 4

5 Handicraft Sector in Palestine: Originally, handicrafts products used to be sold locally to tourists and pilgrims who visit Palestine during religious Holidays such as Christmas. Currently, it has expanded to reach few foreign markets through informal and formal businesses that export the handicrafts products to other countries. However, this might seem as a progress in trade but it has posed many challenges to the legal and viable development of the handicrafts industry for many reasons, as defined in this study. Thus, it is important to define the strategies, of exports and marketing that the businesses adopt, to evaluate the performance of the industry and recommend feasible ways to improve it. The Handicraft Sector in Palestine is mainly concentrated in Bethlehem and Hebron compared with other cities' contribution to the sector. The sector s major companies and an average of 80% of production units are located in Bethlehem and Hebron; with the majority of the businesses being family owned businesses. The success of the handicraft sector products is derived from its attachment with the Holy Land which gives it a comparative and competitive advantage. The latter, provides a justification for the high price of the Palestinian handicrafts products' compared to similar products produced in other countries. In addition, all products are handmade, by skilled labor, who inherited the know-how technique from previous generations adding the historical advantage, which usually translates to additional business returns, but has been diminishing in recent years due to three main factors: The increase in the foreign low cost and replica products entering the Palestinian markets and being sold to incoming tourism as souvenirs from the holy land. Lack of labeling of the Palestinian products. A large margin of the products price is added by the souvenir shops, and could reach up to 10 times of the price sold by the workshops and factories. One of the major deficiencies of the sector is the businesses' lack of the marketing and promotional skills. Other than that, the expansion of sales beyond the tourists coming to the holy land is limited and hence the sector became seasonal dependent, resulting in liquidity problems in off-season periods of the year. According to several investors and shop owners, the sales only peek around the holiday periods, but in other periods of the year, the sales drop to barely cover the operational cost. 5

6 Types of Handicrafts: The types of handicrafts in Palestine are unique in terms of material used and patterns. Annex 1 of the study illustrates the types and provides sufficient information on each. It is important to note that each type is associated with a Palestinian city, village. The types include: Embroidery Tatreez Fallah (Cross Stitch Embroidery) Tahriri (Couching - stitch Embroidery) Tashreem (Patchwork) Majdalawi Weaving Bedouin Weaving Olive wood Carving. Olive Oil Soap. Ceramics. Basketry. Glass and Pottery Mother of Pearl. Based on market analysis study 1, there are four main handicrafts products that directly contribute to the handicrafts sector. The four types are Embroidery, Olive Wood Carving, Glass and Pottery and Mother of Pearl. The market analysis was based on sector-selection criteria, which was conducted to determine the sub-sectors with the highest potential levels in employment, growth and impact on the economy. In addition, the sectors chosen below have the most potential to realize and utilize major opportunities for development. The analysis below is based on the market analysis and assessment made by CHI international in With reference to Table A sector-selection matrix, in the appendix, the following sectors are analyzed. The most important type is embroidery. It is considered the main and most famous handicraft product related to Palestine both locally and internationally with high sales in the local market, and it is characterized with high growth potential that could reach thousands of women working in handicrafts production, through formalizing the handicrafts sector. Regardless of the latter, the embroidery products are not competitive exports because of many factors including the high cost of production, low capacity to address products demand and lack of abroad market access. Addressing the aforementioned issues, the potential of the embroidery will be utilized to make it a competitive export. 1 CHF international

7 There are many embroidery designs representing different Palestinian areas,as each Palestinian city or village is known for its own famous texture. Considering the working force, the majority of labor consists of household women seeking to improve income. The embroidery sub-sector has the largest number of informal businesses compared to all other sub sectors with the estimated ratio of 1 to 10. The number difference between the formal and informal segments in the embroidery sector is a result of the cultural norms that is shared among certain Palestinian villages and areas. due to the conservative nature shared among these communities, it is not preferable for women to seek work, and so it was substituted by such work which can be completed at home. Nevertheless, in northern parts of Palestine, in cities including Jenin, Tulkarem and Qalqelya, the number of women working in embroidery decreases as most women are more involved in agricultural activities. There were attempts by the chamber of commerce and several women organizations to regulate the sector through charging a small registration fees of (100 NIS) but it never succeeded. The embroidery produced by women is either sold through NGO institutions such as YMCA and Red Crescent or directly to the shops. The price is estimated either according to the number of Yarn balls used or a lump sum based on the days needed to be completed. The twine ball is sold for 6 NIS and in some villages the cost can reach 3 nis. Moreover, the quality of dresses or clothes is decided based on the type of needlework and Twine used. In Gaza, the registered number of embroidery workshops does not exceed 50 while the informal workshops, or women working in this sub-sector is estimated to exceed 2000 women. In Hebron, an estimated number of 3000 women work to produce embroidery. While in Nablus, Ramallah, Jericho and Jerusalem, the number of women producing embroidery is estimated to be 1000 women in total. Since the academic institutions, teaching production skills, are limited in number, most women learn embroidery from older generation in their families. However, the introduction of new designs is inadequate, and there is a lack of professional promotional activities that target international markets, and so the exports in this sub-sector are very limited, unable to compete globally. However, through some special requests, there have been several diversifications in recent years, including scarfs, bags and mobile cases. Unfortunately, due to the high cost, integration in the textile sector was infeasible. Other important type of handicrafts include olive wood craving as it is only found in three main cities of Bethlehem (Bethlehem, Beit Jala and Beit Sahour) with each city specialized in certain designs. Most of the labor force working in this field are men with the direct labor force estimated to reach 600 and 400 as indirect labor. The row materials, which mainly consist of olive wood, used to be imported from Gaza but after the closures imposed by the Israeli governments during the second Palestinian intifada, wood has been imported 7

8 from northern parts of Palestine. The cost of wood depends on its quality as it can cost up to 1600 NIS per ton. According to recent estimates, this sub-sector consumes between 3000 and 4000 tones of olive wood annually. In recent years, US and European countries started to request that wood must be treated from rots and insects, unfortunately increase the cost of production. Olive woodcarving is considered sub-sector with the largest profit margin among all other handicraft sub-sectors. For instance, the production cost of a 15 cm nativity set is 4$ while it is sold for 15$. On the other hand a 1 m nativity set which need 5 working days by one labor cost 5000$ and is sold for $10,000 by the souvenir shops. There are 95 registered wood carving workshops while the unregistered workshops are estimated to be 120 to 130 workshops. The cost of establishing a workshop can vary between $6,000 for small workshops to $50,000 for workshops with high production capacity. Beside the cost of Wood, the main production cost remains the Labor cost which can reach 200 nis for certain skilled labors who are considered scarce in resent days. In addition to embroidery and Olive wood carving, Glass and pottery are mainly known as the Khalili Glass (Hebron Glass) which first appeared during the Roman rule of Palestine. Hebron's Old City has a quarter named the "Glassblower Quarter" and Hebron glass continues to serve as a tourist attraction for the city, as Glass is mainly made in Hebron with small number of workshops located in Jericho, Nablus and Ramallah. The cost of raw materials is very low since it uses recycled glasses and clay. The labor force working in this sector is approximated to be 750 person mostly men, the number is expected to increase dramatically to reach 4000 labor since it is labor intensive and is hand made. Most of the current consumption is limited to decoration purposes even though there is potential to be introduced as house tools such as cups and dishes. Since the main consumer targets tourist groups, the products are mostly located in the tourism areas. One of the most drawbacks of this sub-sector is their negative effect on environment that result from the used ovens which consumes used car oils and gas. Overall, due to the raw materials used, the products are limited to certain colors (mainly blue) with few numbers of design and poor packaging qualities. Mother of Pearl: mainly located in Beit Sahour and it is dependent on the imported shells, which used to come from Australia and recently from New Zealand and India. The cost of the imported shells has increased from 1500 NIS per ton to reach now between 4000 and 7000 NIS based on its quality and purity. There are 150 workshops with the main investment is the skilled labor which has accumulated experience through the years. The main exporting countries are Islamic countries since European countries have banned its importation due to environmental reasons. Like most of the handicraft sub-sectors, the 8

9 mother of pearl businesses lack the proper packaging in addition to the introduction of new designs which can open new markets. Overall success of the aforementioned types and also adding ceramics sector, reflects the foreign and local market demands for the handicrafts products, as consumers prefer products with special and unique characteristics. according to the market assessment made by CHF INTERNATIONAL, "On average, olivewood and ceramics businesses are able to achieve revenue of $300,000 - $500,000". It is important to note that despite the constraints, the olivewood exports sales is approximately 2-4$ million dollars per year. 2 Current and potential markets for Handicrafts: Regardless of which handicraft sub sector is being described, it is worth mentioning the level of representation by the private sector institutions is underestimated and as a result several governmental policies have been imposed without the prior knowledge of the businesses of the policies implemented. Moreover, the lack of follow up by the private sector institutions of the implementation of projects related to improving handicrafts production, has proven that companies may accumulate theoretical knowledge in the field of marketing and designing handicrafts, but not applying that knowledge to their practice. The latter, has limited the potential of efficiently exporting products to foreign countries under a governing law that ensures the application of legal procedures through proper administration of a governmental entity, responsible for the monitoring and administration of export/import procedures. Even with the dependence of the sector on tourists, the export activities form part of the sector's sales., According to PALTRADE the exports of the handicrafts may vary. According to official numbers, the export consists of ($1 million) from the total sales ($6 million). 3 On the other hand, the number provided by the businesses estimates the exports value to be between 50% and 70% of a $60 million total sales. In both cases, the largest percentage of the exports from the handicraft products are exported to the Israeli market, either as a final distinction or for re-exporting to other markets. Moreover, and regardless of the exports value, the sector was able to enter several regional and international markets. Below is a table of handicraft products and market destinations: 2 Ibid 3 Sector Needs Assessment PALTRADE. P.19 9

10 Table 1: Current Handicraft Markets 4 Sold to Local Market Sold to Israeli Market Sold to international Markets Handicraft Products Ceramics, Olive Wood Ceramics Products, Products. Embroidery Glass Sets. Wood and embroidery Ceramics Products, Glass Sets. Wood and embroidery Moreover, Following is the Existing and Potential Markets according to PALTRADE Need assessment Survey: Table 2: Potential Markets for Handicraft Sector Handicraft Products Existing Markets UAE, Israel, Jordan, USA and Europe Potential Markets Arab Countries, Israel, EU markets As it is clear, some of the markets importing Palestinian handicraft products are also future potential markets, since they are not fully exposed to the Palestinian businesses, and there is a possibility for further expansion either in-relation-to the kind of products exported or quantity exported. Furthermore, the businesses currently working in the handicraft sectors are considered uninformed of the potential to export their products to foreign markets., Compared to other sectors in Palestine. Table 3: level of demand on market information - by market and sector 4 Paltrade Sector Diagnostic Study,

11 Taking the above table as a reference, the sample of handicraft companies indicates that most market information demanded are on the Israeli market, Europe and USA as they contain the highest profit margins and can be accessed either directly or through an Israeli intermediary. The information requested about the USA and European markets are focused on rules and regulations to enter the markets, cost to enter the market and business contacts. While the information about the Israeli market is more focused on the customer needs, such as designs and prices. The businesses' interest to acquire information about Arab market such as Jordan and UAE is limited, since the businesses can obtain the information without the need for external support while other Arab countries are difficult to access and hence there is no interest in collecting information about them. Companies in the handicrafts sector are always faced by a high cost in return to explore new markets. As a result, hindering their export activities and expansion to new markets. Moreover, in addition to the difficulties in accessing the Israeli market, the handicraft sector also face high difficulties in entering the Arab markets where it is expected to flourish due to the Arab emotional relation towards Palestine. Legal Framework: Government Strategy and Planning Ministry of National Economy (MoNE): Considering the legal framework that is currently applied and implemented in Palestine, the Industrial law No.10 for the year 2011, authorizes the ministry of national economy as the main public institution responsible for the planning and the development of industrial sector including the Handicraft industry. Moreover, the Ministry is responsible for the support and promotion of the industrial sector. Bearing in mind the Ministry of National Economy Strategic Plan, the handicraft is not considered a priority sector and is considered in the plan as part of the development process of the tourism sector. The low priority of the sector was also reflected in the national development plan since the handicraft sector planned activities was included under Tourism and Antique. Beside the MoNE Plan, there are two main strategies directly related to Handicraft industry in Palestine, administered and decided by the Ministry of Tourism and Antiques and the Ministry of Culture Strategies. Regardless of the ministries different approach to the handicrafts sector, the cultural identity and heritage are made a priority over the business interest of the sector. Ministry Of Culture Strategic Plan The Ministry of Culture considers the handicrafts as the historical identity of Palestine as it views the sector as a promotional tool to preserve Palestinian heritage and the Palestinian 11

12 historical identity. Through the revision of the Plan, Handicraft sector was addressed specifically in the third strategic objective which states Protected, safeguard and renovated cultural heritage of the Palestinian people, it is clear that the strategy of the ministry considers the Handicraft industry as a mean to preserve the Palestinian heritage and culture and a tool to transfer it abroad but with little interest in improving the business aspects of the industry. As a result of concentrating on the cultural aspects of the sector, all proposed programs addressing the sector are mainly general promotion of the product and increase awareness about its importance from a cultural point of view as shown below in the table. Policy Intervention 1) Encourage and 1. Conduct a comprehensive survey on traditional industries and support traditional handicrafts. industries and handicrafts 2. Enforce laws on the support and promotion of traditional industries. 3. Enhance quality production of traditional industries and handicrafts. 4. Promote traditional industries and handicrafts abroad. 5. Launch a sensitization campaign throughout schools and universities and in the media about the significant support of traditional industries and handicrafts, thereby support heritage, conserving the environment and developing national economy. 6. Encourage and organize local and external exhibitions for traditional industries and handicrafts. 7. Rejuvenate the Traditional Industries Development Centre in Al Eizariya area, which was approved by the late President Arafat. As it is shown in the interventions set by the ministry concerning the Handicraft industries, the sector is a promotional tool to the Palestinian heritage and identity both on the local and international levels, even point three which target the quality of the handicraft products is not clear through the strategy literature if it is for improving the sales or any other purposes. Moreover, the budget dedicated to the industry which consist of approximately $5 million distributed on three years is not sufficient to address the needs and the requirements of the sector to improve and expand both locally and internationally. 12

13 Unfortunately even though the Palestinian national development plan of clearly states: " Development Approach: The Ministry of Planning and Administrative Development (MoPAD) sponsored the Culture Sector Strategy in cooperation and coordination with respective bodies. In partnership with experts selected by the National Team, MoC established a specialized technical team of the Ministry s staff. Over January 2010, the technical team developed working papers, which included a presentation of the culture sector situation, diagnosis of problems and relevant causes, and identification of strengths and weaknesses. These working papers were presented through 14 meetings, attending by workers and entities interested in the culture sphere, for discussion, observation, comment, and proposals in order to develop each field of culture. Working papers addressed the following themes: publication and printing books; traditional handicrafts and industries etcc" 5 The feedback from the various government officials and private sector businesses in addition to the revision of the plans set by the related ministries (MoNE, MoC and MoT) show lack of coordination between the three bodies and a very week participation of each ministry in the plans of the other two ministries. With the only connection between the ministries exist through the accumulation of the Ministry of Planning (MoPAD) to all plans to form one general plan. Moreover, the financial difficulties that the Palestinian government went through in the previous years have prevented the ministries from implementing the majority of the projects related to the Handicraft sector. Ministry of Tourism The Tourism Ministry considers the handicraft sector an integral part of tourism and a continuing source of funding for the tourism sector in Palestine, as mostly dependent on tourists consumers. 5 Strategy of Ministry of Planning 13

14 Legal framework: The current Palestinian law needs the necessary amendments to regulate the handicraft sector through the development and improvement of a package of laws that empower and stimulate cultural and intellectual creativity (Law on the Protection of Cultural Heritage, Law on Intellectual Property Rights). Enacting a law with provisions that regulate the work of heritage industries with a focus on handicrafts, will provide a legal framework in which enterprises can easily operate. The law should include a definition, classification, defined IP registration process, regulatory framework, specifications and standards for the handicrafts as heritage products so as to ensure high quality traditional products and their IP rights. The Palestinian law must ensure that the handicrafts industry, ways of production and designs, are protected as Palestinian heritage and identity, locally and internationally. Thus, it should be based on the international standards and definition of cultural heritage, as intangible culture products type. Also, not only protecting handicrafts products, as folklore, artistic expressions and cultural heritage currently but also preserving the Cultural heritage as it is unique and irreplaceable, which places the responsibility of preservation of the knowledge and techniques of how to produce handicrafts products, folklore and traditional art, all maintained and preserved for the benefit of the future generations. The latter can be achieved through ratification of international conventions including The Convention for the Safeguarding of the Intangible Cultural Heritage is a UNESCO treaty adopted by the UNESCO General Conference on 17 October 20036; the purpose of the convention is to safeguard the intangible cultural heritage; to raise awareness at the local, national and international levels of the importance of the intangible cultural heritage, and of ensuring mutual appreciation thereof; and to provide for international cooperation and assistance. Moreover, Convention on the Protection and Promotion of the Diversity of Cultural Expressions adopted by the UNESCO General Conference on 20 October 2005 is of great importance and relevance to the protection of Palestinian handicrafts products 7. The agreement is binding on all state members and made to ensure that states have the responsibility for the protection and promotion for the "diversity of cultural expressions and ensuring the free flow of ideas and works". The latter must be achieved through the ending of occupation and the Israeli impediments that greatly hinders the free movement of handicrafts products as cultural products. The convention also sets objectives that 6 Intangible cultural heritage refers to "traditions or living expressions inherited from our ancestors and passed on to our descendants, such as oral traditions, performing arts, social practices, rituals, festive events, knowledge and practices concerning nature and the universe or the knowledge and skills to produce traditional crafts" 7 "The Convention recognises the rights of Parties to take measures to protect and promote the diversity of cultural expressions, and impose obligations at both domestic and international levels on Parties. 14

15 strengthen the economic value of intangible heritage, and so including the handicrafts industry. The conventions include the objective of support co-operation for sustainable development and poverty reduction, via assistance from the International Fund for Cultural Diversity Furthermore, the protection of handicrafts products as cultural products can be achieved through the ratification of the mentioned conventions. However, it is also vital to protect the products as economic goods, as the handicrafts sector is an industrial sector, it is of high significance to solve the issues related to the economic value of the products and the issues that the private sector faces due to weak legislation and regulatory framework. Sustainable development can be achieved through regulating the handicrafts industry and registering the products as industrial design with intellectual property rights. 8 Under The Hague Agreement Concerning the International Deposit of Industrial Designs, a WIPOadministered treaty, a procedure for an international registration exists. An applicant can file for a single international deposit with WIPO or with the national office in a country party to the treaty. The handicrafts products design will then be protected in as many member countries of the treaty as desired. The latter can be achieved through creating a Palestinian law with sui generis intellectual property rights listing the handicrafts products as a protected industrial design. Based on the latter, the TRIPS agreement can be applied, if Palestine becomes member to the WTO and so the handicrafts products will be protected further by the WTO rules, and any violation of the industrial design right by a member state, through illegally and illicit copying or manufacturing of the handicrafts products design, can then be challenged at the WTO dispute settlement body. The handicrafts can also be protected with the Geographical Indication primary IP rights (GI), since different regions in Palestine produce handicrafts design each with its own colors and patterns, and so the product is associated and defined with a specific Palestinian city or village, based on its specific qualities and traditional designs. The maintenance of the latter and the specific qualities of the products can be protected and maintained through labeling the products with " holy land products, or Palestinian traditional products", expressing the Palestinian identity through exports. 9 Accordingly, it is highly recommended to create the necessary laws and regulations to ensure that the Palestinian identity and cultural heritage is protected as a cultural and 8 An industrial design right is an intellectual property right that protects the visual design of objects, it consist of the creation of a shape, configuration or composition of pattern or color, or combination of pattern and color in three dimensional form containing aesthetic value. An industrial design can be a two- or three-dimensional pattern used to produce a product, industrial commodity or handicraft. 9 A geographical indication (GI) is a name or sign used on certain products which corresponds to a specific geographical location or origin (e.g. a town, region, or country). The use of a GI may act as a certification that the product possesses certain qualities, is made according to traditional methods, or enjoys a certain reputation, due to its geographical origin. 15

16 economic value through a series of regulations governing and monitoring the products locally and internationally. Negative consequences of the weak regulatory framework related to handicrafts sector: 1) Non-cooperation between authoritative ministries and bodies: the regulations and law related to handicrafts do not provide clear identification of how cooperation between the responsible bodies should occur and what steps must be made to implement the strategic plans. The lack of cooperation and mutual vision of the economic development of the sector, hinders any sustainable development of the handicrafts sector and undermine its importance to the economy, tourism and finally the private sector. 2) Absence of responsible financial institutions; in the laws and regulations there are no defined financial institution or body that is dedicated for the financial support of the sector and to ensure the financing of the strategic plans. 3) Weak legislation and vague provisions on the development of the industrial sector: there is no regulation that clearly defines the development goals nor the mechanism on how they will be achieved as the focus is based on tourism, the economic development is not made a priority, 4) Lack of defined quality standards: there is no clear identification or definition of handicrafts products and the facilities in which they are produced. 5) IP rights protection: finally and most importantly, the Palestinian law lacks any international standards for the protection of the handicrafts products in local and foreign markets, as the laws lack Intellectual property right that protects the cultural identity and heritage expressed through the handicrafts products, and thus risking the Palestinian products in foreign markets, through unfair competition and lost identity, making unoriginal copies of the Palestinian handicrafts a cheaper and more desirable products to consumers, inducing costs on local businesses. Thus a law that focus on the handicrafts sector as an industrial sector with IP protection will yield substantial profits to businesses, positively reflecting in return on tourism and culture. 16

17 Challenges: Lengthy Procedures for exporting: For monitoring purposes, The Makasa VAT documents have to be submitted by the Palestinian businesses prior the export process with only limited number of shipments included in the same documents. Adding the difficulties faced due to the Israeli restrictions, the Palestinian businesses are discouraged to export their products to foreign markets, as the costs associated with the procedures are high. Controlling the Market According to the assessment done and the feedback received from the businesses working in the sector, the current Palestinian legal framework does not the sector.. The current laws and regulations do not impose the required level of market control that will allow fair competition and protecting the local products from the invasion of the foreign products that are cheap replicas and labeled as holy Land products. Additionally, the Fair competition in the market has been effected by the existence of informal businesses that perform the production process through households work, and have no taxes or labor commitment and accordingly acquired competition over prices. Moreover, the lack of market control has given the businesses, such as the tour guides, tour buses companies and souvenir shops, a powerful bargaining position over the workshops and has contributed to a dramatic increase in the local product price without any effect on the profit margin of the workshops. 17

18 Lack of Quality Standards Since the Handicraft sector has always been related to culture and heritage, it was never fully approached by the Palestinian government as an economic sector and as a result the quality standards set by the specialized authority is limited. It is worth mentioning that the Palestinian Standards Institutions, the agency responsible for setting the standards in Palestine, only have limited quality standards concerning the safety of the products while the quality standards are absent. Lack of supporting Policy by the Government Due to the fact that the Handicraft sector in Palestine is not considered a priority sector compared to Health, Education and Security, adding the constant inclusion of the sector as part of the Tourism Sector, both the financial and policy support of the government do not reach the needed supportive level. For instance, the Tourism Strategic Plan do not include proposed program that target the sector while the Ministry of Culture Strategic Plan dedicated only 7% 10 of the proposed budget to the sector. Moreover, the lack of supporting policies can be presented through the absence of special pricing for the production inputs such as water and electricity, which decrease the cost and hence encourage the workshops and firms to increase their production Outputs. Difficulty in Accessing additional Financial Resources A healthy credit environment can stimulate productivity improvement through technology upgrades, quality standards through certifications, and market diversification through the design and modification of products to meet new market requirements. Of particular importance then, is the way in which access to finance facilitates industrial improvement and growth Unfortunately, the political situation in Palestine is rated as risky and unstable, as the main public institutions and ministries never received the planned budget dedicated to the development of handicrafts, the government plan was frozen and limited in terms of implementation. Moreover, the banking sector in Palestine is following a cautious policy in providing funds to the business sector in which a number of collaterals are needed to obtain the required fund/ loan in addition to the filtration process which makes only a 10 Ministry of Culture Strategic Plan P17 18

19 small percentage of businesses qualify to request the fund. As a result, the availability of funds provided to the businesses, which can be used in the development and expansion of the businesses, are limited. Another shortcoming that is affecting the expansion of the handicraft firms in Palestine and exposure of new international markets is the limited Banking services provided. Several factories has turned down business opportunities with international firms due to the lack of proper payment procedures such as (PayPal) 11 which provide security for both parties. Ineffective Donors Project With the businesses in the sector suffer from low financial capacity due to the decline in the sales and being limited to only holidays periods, which also effect the available liquidity. In Addition to the high cost of production that is a result of the high cost of labor and production inputs, the only outlet for businesses to build their capacity and expand is through the available donor projects. Unfortunately, the donor projects that were implemented in recent years have rarely addressed the major issues that will significantly improve the sector performance. With the exception of few projects such as the EU project which was implemented by PALTRADE, which aimed to assess the current Palestinian handicraft products, and address issues, which will lead to an increase in the Palestinian market share in the Israeli market. the issue of movement and access is in need of external interference by the international community Unfortunately, there was never a serious attempt through the donors projects to address this issue. Lack of Marketing Awareness Through several assessments that was done to the Palestinian handicraft sector, the main shortcoming of the products consist of the lack of constant updates in the designs and products which match the needs and taste requested by the market. Moreover, the Palestinian companies have little experience in the marketing strategies, which needs to be followed in order to enter the international markets and/or gain more shares in it. One of the clear examples about the limited capabilities of businesses in marketing is the current packaging for the products. Currently the packaging used by companies lack 11 PayPal is a faster and safer way to send money, make an online payment, receive money or set up a merchant account 19

20 creativity required to attract the customers. Also, it is dependent mainly on the way the souvenir workshops present the products. Lack of Powerful and effective Private sector representation The lack of representative body that properly represent the handicrafts sector and translate its needs and requirements into a unified position lobbied and advocated with the government to influence policies, rules and regulations. Moreover, a unified and joint strategy between both the private and public sector will encourage the donor institutions to dedicate funding to build the capacity of the sector. Most of the internal problems that the handicraft sector is suffering from are due to three main issues: The development Handicraft sector is not considered a priority by the government The sector suffers from several policies and regulations imposed by the government that affect the sector negatively and needs to be revised The needs and requirement of the sector is not being addressed neither by the government nor by the donor s projects Lack of Credible Data about the Sector The data related to the Handicraft sector, is unfortunately very limited and is likely to give a misleading representation of the sector's characteristics. Data covering information on the large percentage of informal business and other organizations involved in the sector including municipalities, churches and NGOs, significantly alter several analysis of the sector performance. To illustrate the latter, there are two figures for the annual sales of the handicraft sector in Palestine, the first figure source is governmental data, which states that the sector is extremely underperformed, as the annual sales are roughly estimated at around $6 million. The other figure, estimated by the companies and production facilities working in the sector, is between fifty to sisxty millions. 20

21 The reason that triggers a difference between the two figures is based on several indications: The Informal business in the handicraft sector in Palestine forms the majority of the sector. The number of embroidery workshop registered in Palestine do not exceed 5 workshops, but the estimate number of facilities which produce embroidery can reach up to 3000 facilities, taking in consideration NGOs and home based working women The inaccurate reporting of sales to the governmental agencies Several NGOs in Palestine and other entities including churches and municipalities buy local products and export them to foreign countries. These sales are not registered as exports. The current research companies in Palestine lack the advanced methods to collect and analyze the data more accurately. For easier market access, the companies are exporting through intermediate Israeli companies and hence its not recorded as Palestinian exports, especially that most of these products are labeled as Israeli product or holy land which in both cases result in not realizing Palestine as the country of production. 21

22 Impediments by Israeli occupation: Limiting the access of tourists to the local shops Due to the Israeli control over the borders and the fact that most of the tourist groups come through Israeli tourist agents or guides, the tourists movement in the Palestinian authority cities such as Jerusalem, Bethlehem and Jericho is limited and hence the access to the Palestinian souvenir shops is weak, and with considering the relation established between the tourism agents and specific souvenir shops, the access of the Palestinian shops to the Foreign visitors is minimal and as a result the sales are not reaching the expected level. Difficulties in importing the needed machineries and raw materials similar to other industrialsectors in Palestine, the Handicraft businesses in Palestine suffer from the limitation and constraints of the Israeli military policies that hinder further development and expansion. The main impediment is the inability of the businesses to import the needed raw materials without passing through extensive security procedures that consumes time and money. Moreover, the businesses are unable to import new machines which will significantly contribute to the modernization of the industry (with preserving the identity) in addition to increasing the capacity of production to cover high demand due to the dual used 12 items list claimed by the Israeli military. Difficulties in movement and access The difficulties in movement and access suffered by the handicraft sector has increased the cost of production significantly since it increases both the transaction cost of the raw materials imported and the final product when exported. Also, the difficulties in movement and access have affected the availability of the handicraft products in all Palestinian cities. The difficulty in movement and access and the unpredictability in the time needed for export has also discouraged the Palestinian companies to export. There are several companies who recorded financial losses due to their inability to fulfill their contracts with foreign companies within an agreed time table which resulted either in rejection of the product or the activation of a penalty clause in the contract. 12 Items as identified to have military use in addition to its industrial use. It is banned to be imported by the Israeli Military under all circumstances across Israel's frontiers without specific permits 22

23 Conclusion The basic weakness of the Palestinian handicraft industry is that it is still primarily oriented towards local sales to incoming tourists. A basic change of orientation is needed, towards export markets, in order to create the drive for the needed fundamental changes in the structure and other aspects of this industry. The main internal weaknesses that need to be addressed in order to promote exports are as follows. Quality control: Though the present quality of products is high, the industry needs to learn and apply upgraded quality control techniques and procedures. This is needed in order to maintain the high product quality, while widening product lines to include also non-traditional designs, and shifting to production of relatively large quantities; and especially to meet the strict requirements of export markets for consistency in all the specifications of the product, and in its quality. At a later stage many of the workshops would need financing facilities to upgrade their equipment, in order to meet increased demand of foreign markets. Designing-related weaknesses: Existing products lines are narrow, and designs do not match the tastes of the export markets Lack in advanced design know-how and experience, and in acquaintance with the latest trends in global giftware and home decoration markets. Marketing-related weaknesses: Lack of information about International markets. Lack of know-how and experience in the development and application of marketing strategy, distribution strategy, and other aspects of marketing and sales on international level External impediments Movement and access obstacles. Specific difficulties related to small-size shipments required in the handicraft industry, which result in undue extra costs of transportation. Legal and Policy Framework 23

24 Lack of laws and policies by the government to protect the local industry from low cost duplicates imported from other countries Lack of financial support by the government in the off season periods Lack of Financial Resources Difficulties in obtaining additional finances from banks due to unstable situations 24

25 Recommendations In order to capitalize on its vast export opportunities, the Palestinian handicraft industry has to transform, from an industry primarily oriented towards local sales to incoming tourists, to an export-oriented industry. In doing so, it will build on the solid base of its existing strengths, and preserve and develop its sales to the local market; while gradually developing its export capabilities. The following are the recommendations: Marketing: Export o Since the handicraft industry is characterized by many small manufacturing units, its export effort must be joint or coordinated. Possible models for such a joint/coordinated effort can be through (1) jointly owned export company; or (2) coordinated marketing activity, whereas the marketing strategy and core branding and positioning activities are done collectively, as well as certain costly marketing activity (for example, exhibitions); while each company has its own separate distribution network and sales operation. o In-depth market research led by the private sector with the support of the Palestinian government which will map in details the marketing channels and promotional support needed by Palestinian handicraft companies to penetrate global markets and reach giftware markets o Introduction of new products that will cover a larger and more segments and increase the diversification of the sector. o Use all available capacity building programs to obtain professional support in all needed areas o Construct a progressive matching plan to be implemented by the specialized private sector institutions that will link the Palestinian producers with its counterparts in international markets. 25

26 Logistics: o Establish a collection shipment center that can facilitate the transportation of product to and through Israel and will lead to a decrease in the cost of transportation. Production and quality control Design: o With the support of the leading Professional workshops, private sector and public sector institutions, identification and setting advanced quality control procedures, as required by export markets. o Through using external technical support, introduce new tools and production technologies to be used in the handicraft industry, without affecting the handmade characteristics of the product. Consortium Introduce new designs based on market research and the ability to implement on the short run and with minimum cost and without effecting the characteristic of the Palestinian identity Building on previous Capacity building programs and introduce new and advanced professional courses and workshops and on the job training in product design, trends evaluation, use of advanced 3d designing programs, CNC lathing and turning, etc. Administration: Forming a consortium from a group of handicraft related businesses that can implement a complete export strategy that includes quality control, branding, packaging, promotion and shipping in addition to promotion activities which can eliminate several obstacles that might be faced by each company if it attempts to export independently Establishing a governmental organizational body with several supervised entities, to regulate, administer and monitor the sector. For example, in collaboration with the private sector, the organizational body can assist in providing the raw materials of good quality to industries at a reasonable price. (MAS 2006) Human Resources and financing: 26