NABLUS, WEST BANK
They decided not to wait until all the conditions were in place that investors would normally look for in a stock exchange: a healthy economy and well-established companies - not to mention an independent state.
Instead, the Palestine Securities Exchange (PSE) opened for trading last week before the completion of the Middle East peace process. Its aim is to lure investment from abroad to build up the Palestinian economy, and perhaps help foster de facto political independence from Israel.
"Slovenia gained independence [from Yugoslavia] and built a stock exchange a year later," says Safwan Bataina, the PSE's general manager. "That's my model."
The 1993 peace agreement between Israel and the Palestine Liberation Organization set up an infrastructure for a Palestinian Authority, but the final shape of that political entity is undecided and much disputed.
So Mr. Bataina is actually moving a step ahead of Slovenia.
The Palestinian exchange makes no pretensions of being the next Wall Street. Instead it looks more like the home of an Internet company, conducting computerized, on-line trading without the shouting and signaling of traditional stock markets. Its Canadian-made software program is used at markets in Pakistan, Romania, and Jordan.
Bataina brings Wall Street expertise to Nablus, a city on the West Bank that gets its name from the bustling 1st century Roman colony Flavia Neapolis. He worked at Smith Barney in New York after getting a masters degree in business at Columbia University there. He left a post as adviser to Jordan's prime minister to open the PSE.
Priority No. 1 is bringing in capital from Palestinians who left during times of war or hardship and were successful in business in America and elsewhere. Much as the early Zionists sought to attract Jewish funds from abroad, Palestinians hope that Arab investment will wean West Bank and Gaza residents from foreign aid and the Israeli labor market.
"When most of the wealth is abroad, you need to stress efficiency," Bataina says. "Those people need to be able to access the market and be on equal footing with anyone in Palestine, and be protected from price manipulation and fraud."
For now, investors looking for peace dividends have put their money into real estate because anything else seemed too risky. Bataina says the PSE has as many rules to protect investors as exchanges in the West. He insists, "This is not going to be a mom-and-pop exchange."
Though the Palestinian economy has been tottering along under high employment and declining incomes, there are already 60 publicly traded companies in the Palestinian territories. When the peace process began in 1991, there were only 20. All public companies will eventually be required to list on the exchange. For now, companies must have at least $750,000 in capital to list.
One session a week
So far, the exchange is open for limited trading. With 23 companies listed now, the PSE is starting with one session per week until trading volume builds up. As all 60 companies come on board, a total market capitalization of $700 million to $980 million is projected this year. Four local brokerage firms have opened to serve the market, which will be regulated by the PSE and by the Palestinian Finance Ministry.
Ibrihim Abdel Hadi, chairman of Arab Insurance Establishment Co. Ltd. in Nablus, is thrilled to have his firm's shares traded. "People on the outside don't know how good the company is," he says. "Having an exchange will stabilize the prices of companies and ... invite people to come and keep their investments secure."