In January 2020, the United States Agency for International Development (USAID) Digital Economy and Market Development (DEMD) project, under the USAID Bureau for Development, Democracy, and Innovation (DDI) Center for Economics and Market Development (EMD) - implemented by Resonance and subcontractor Nathan Associates - was tasked by the USAID/West Bank and Gaza Mission to conduct a diagnostic study on the West Bank and Gaza’s enabling environment for doing business in the digital economy, using the Systems Analytic Framework for the Digital Economy (SAF-DE).
The SAF-DE architecture is based on the model of the USAID Commercial, Legal, and Institutional Reform tool, in use for nearly 20 years, which covers specific policy areas by examining the laws, the implementing institutions, the wider range of supporting institutions, and the relevant issues in the political economy.
With unemployment running at 24.9 percent and poverty estimated at 27.3 percent, new opportunities for sustainable growth are an urgent priority for the West Bank and Gaza. Expansion of the digital economy can play a major role in creating new jobs, generating higher salaries, and expanding the reach of Palestinian goods and services to new markets. Trends are generally positive, as e-commerce has grown significantly in the West Bank and Gaza in the last decade, and freelancing and outsourcing of IT services is a budding but growing sector providing good incomes for IT workers. However, more remains to be done. While 80 percent of households in the West Bank and Gaza have access to the Internet, only 8 percent of Internet users purchased goods or services online in 2021, and fewer than 3 percent are employed in the IT and e-commerce sector, indicating significant potential for expansion. Reforms will require close and effective coordination among the various stakeholders in the private sector and across various public institutions.
Developing a digital economy will help the West Bank and Gaza bypass and leapfrog stages of technological development. The youthful population is highly motivated to better itself, and facilitating this motivation can enable Palestinians to find employment by servicing domestic or foreign markets and selling products online to customers at home and abroad. The prospects are promising on many levels: by building a better digital enabling environment for finance, jobs, and e-commerce, the livelihoods of many Palestinians will be improved. Taking advantage of these opportunities will require a concerted and highly coordinated effort to overcome several critical factors and barriers.
This report examines the business enabling environment, and existing barriers to digital economy development across six critical policy areas (digital economy and commercial law, digital entrepreneurship, digital financial services, digital skills, trade logistics, and small and medium enterprise (SME) preparedness). While each policy area presents its own unique challenges and opportunities for inclusive digital development they are interconnected and recommendations to address specific issues will often require a coordinated effort with overlapping stakeholders to drive inclusive digital economy development.