Palestinians Put Hope in Stocks

The Palestinians do not yet have a currency, their own interest rates, or a central bank - and their hopes for an official state are still far from realized. But such shortcomings - and Israel's new right-wing government - seem unlikely to impede the imminent opening of the Palestine Securities Exchange in this self-rule city of 130,000 that Palestinian leader Yasser Arafat recently deemed "the economic capital of Palestine."

The PSE's sparkling new facilities in Nablus are technologically equipped to trade in stocks and bonds, and are expected to have a market capitalization of $700 million this year. But the exchange still faces a few small hurdles, including the passage of an interim agreement with the Palestinian finance ministry to operate and regulate the exchange.

Where much of the world associates the Palestinian economy with frailty, unemployment, and subjection to Israeli closures, the founders of the exchange see an unpolished diamond in the large concentration of Palestinian wealth abroad. Affluent Palestinians around the globe, especially those in the United States, came looking to invest in their homeland in the wake of the 1993 peace accords between Israel and the Palestine Liberation Organization (PLO). Self-rule leaders here aim to recruit expatriate funds to help build an economy that is not forever dependent on donor largess, Israeli labor demands, and basic agricultural exports.

Expatriates anxious to seek a peace dividend, however, found a dearth of secure instruments. "Most of the money went to real estate, and that's hardly productive," says Safwan Bataina, the PSE's general manager.

"This is the only way to bring in long-term capital. You need equity and debt capital to build up an economy," he says in his office overlooking the dramatic gray hills of Nablus, as construction drills buzz in the background.

Already 65 companies in the Palestinian territories are publicly owned, up from 20 before the peace process began in 1991. Several have long been trading unofficially in West Bank cities.

The Palestine Telecommunications Company is expected to be first to list on the market and hopes to be trading later this month. Insurance, bank, utility, and construction firms are also expected.

Still unclear is whether Israel plans to object to the PSE in name or in concept. Historically, Israel has been averse to anything under the name "Palestine." Government spokesmen say they want to see Palestinian business flourish - as long as it doesn't violate Israel-PLO accords. The accords didn't mention a stock exchange.