Download - Needs Analysis - Downtown East Jerusalem Business 2013

Needs Analysis:

Downtown East Jerusalem Business

Spring 2013

Israel/Palestine Center for Research and Information

Israel/Palestine Center for Research and

Information (IPCRI)

P.O. Box 11091, Jerusalem 91110

Tel.: +972 676 9460

Fax: +972 676 8011

[email protected]

www.ipcri.org

IPCRI – Israel Palestine Center for Research and Information

2

Executive Summary

The Downtown East Jerusalem Business Empowerment project (DEJBE) was initiated by Israel/Palestine Center for Research and Information (IPCRI). The project aimed at engaging directly with the business community in Downtown East Jerusalem (DEJ) to locate reasons for and solutions to the economic decline experienced over the past years. This report presents the findings from a survey of 96 small business owners (SBOs) in DEJ. It identifies the key problems facing the SBOs and expresses the concerns of the businessmen themselves. Moreover, it includes the recommendations made in a series of town hall and representative meetings with leaders of the business community.

In cooperation with the business community, a survey was conducted and followed by discussions with several SBOs and local business leaders. According to the businessmen being surveyed, the closure of Palestinian economic institutions in Jerusalem and the restraints caused by the separation barrier are two main reasons for the economic decline. However, the survey also pointed out several community-related issues and challenges, which highlight a need of capacity building among both customers and traders. These were issues such as littering, harassment from groups of young people in the streets, lack of promotion and shops closing too early in the evening.

A representatives’ group who were particularly interested in pursuing the goals of this project met on a number of occasions with the project’s two coordinators Mona Hamuri and Ayman Salim, and IPCRI’s Palestinian co-CEO, Riman Barakat. The main aim of these meetings was to further develop the suggestions and ideas about improving the local business environment. DEJBE’s main recommendations have thus developed from both the survey and these meetings and are rooted in the local stakeholders’ need to be involved, get active and take more control over the development of DEJ. The primary recommendations are:

• Establishment of a group to coordinate capacity building among traders and customers • Concrete steps to encourage community development • Establishment of lobby group to deal especially with admistrative and political barriers • Creating an innovative vision for East Jerusalem in order to revitalise the area

Looking beyond this final report the next move would be to initiate a follow-on project where the lessons and recommendations from DEJBE are transformed into action plans and then implemented. As mentioned above, there is a clear motivation among the business community to take action. We firmly believe that the potential projects and recommendations presented in this report could take advantage of this motivation and help the DEJ business community develop into a more attractive commercial area. This, however, should be done in the near future as the dynamic already exists, and with the passage of too much time a demoralization of the business community can set in.


3

1. Introduction

Over the past 10 years the economy in Downtown East Jerusalem (DEJ) has been in steady decline. This has become especially palpable over the last 2 to 3 years. In May 2012, 78% of the 360,000 Palestinians in East Jerusalem were reported to be living in poverty. This is the worst poverty rate ever registered in this area and there are few signs of improvement.

Ever since the passing of Palestinian Jerusalem leader Faisel Husseini in May 2001 and the closing of the Orient House and the East Jerusalem Chamber of Commerce in August 2001 there has been a vacuum of community leadership and organization in East Jerusalem. Furthermore, the business community in East Jerusalem, particularly the Small Business Owners (SBOs), has been isolated from the rest of the West Bank by the separation barrier and permit system. Hence, East Jerusalem - which was in the past the center of economic life in Palestine - has become an island, having to fend for itself in a difficult economic environment.

The Downtown East Jerusalem Business Empowerment project (DEJBE) was initiated by the Israel/Palestine Center for Research and Information (IPCRI) to engage directly with the business community in DEJ. It was set up to study and analyze the specific problems and needs of the people on the ground. The primary goal is to work closely with SBOs and develop suggestions and ideas as to how to improve their situation. This has been accomplished through a survey and a series of town hall and representative meetings with members of the local business community. DEJBE further aims to encourage the initiation of development plans together with representatives from the business community.

This report presents the findings from a survey of 96 SBOs in DEJ. It also includes the recommendations made in the town hall and representative meetings with leaders of the business community where presentation of the findings and deeper discussions were conducted. The report also makes a number of recommendations about how to improve the situation for both customers and traders.

During the course of the survey and the meetings, we encountered a degree of pessimism and frustration amongst businessmen who found it hard to believe that anything could change. They say they are not optimistic but they never lose hope. In DEJ people have seen surveys, initiatives and reports like this come and go but action and follow-up seldom takes place. It is therefore crucial, that this project is taken to the next stage in near future, so as to develop the possible implementation scenarios even further.

The main findings from the survey and meetings will be categorized under three headlines: 1) Needs of the business community; 2) Community challenges, and; 3) Systemic barriers. The report aims to show the interconnectedness between these challenges and to logically proceed to a list of recommendations for future development of the community of SBOs in DEJ.


4

2. Survey Methodology

IPCRI devised the questions based on our investigation and consultation with the business community. The questions were specially designed to explore social, economic, and political problems that the business community faces. IPCRI sent out 160 surveys of which 96 were answered.

Not all questions were answered by all respondents. Where there are percentage figures, they are based on the number of respondents who answered the specific question rather than the number who took the survey in total. Figures are rounded to the nearest whole number.

The biggest challenge when conducting this survey was the lack of trust on behalf of business owners. One of the main reasons seems to be the SBOs experience with the Israeli Tax Authorities. When the Authorities send people to East Jerusalem to try to locate businesses that evade taxes this causes a high level of suspicion to any attempt to get information from the SBOs. They fear that any information they give can be used against them.


5

3. Key Findings

The last two years’ decrease in business revenues constitutes the most obvious symptom of a deteriorating economy in East Jerusalem. 75% of those surveyed say that their revenues have decreased in the last two years. 60% of the SBOs are dissatisfied with the turnout for their businesses. The survey and meetings that have been held reveals a need for extensive capacity building in order to change today’s situation.

Needs of the Business Community

Despite a high level of education among people taking the survey, the results identified both a need and a desire to develop specific marketing skills and techniques and cooperation tactics in the business community. During the last years, the majority (57%) of SBOs surveyed said they had not taken any steps to improve their business. Our survey and meetings showed how this is a result of a general attitude among the SBOs. Up to today, most of the business owners stick to a traditional way of thinking and they practice sales techniques based on traditional knowledge. Many SBOs are reluctant to try new techniques and strategies, such as instituting late opening hours. The younger generation is willing to take innovative steps but as long as the conservative business practices prevail the situation will not improve. This makes the business community passive and stagnant and it also has a spillover effect to the way the business owners take care of DEJ in general. For instance, there is problems with littering in the streets because the shop owners do not take responsibility for their own waste.

Initiatives from SBOs to improve their businesses is mostly done on an individual basis and not as a coordinated community action. At present there is very limited access to support groups, legal apparatuses, associations or councils that can assist those who need help in doing this. Working individually rather than jointly means less power and capability to make positive steps for the business area as a whole. The only active business association is the ‘Trade Room’. However, it is viewed by many with scepticism, being a wing of the political party Fatah rather than a true representative for the SBOs.

These issues reveal a lack of capacity in business management and marketing skills, and the consequences this deficit has had. The survey also showed that the absolute majority (96%) of those answering the survey had never taken business consultation. The lack of such knowledge and capacity hinders the SBOs in planning and implementing the necessary measures to increase their sales and eventually highlights the need to provide them with the knowledge enabling them to take such initiatives.

75%

17%

5% 3%

Revenue over the last 2 years

Decreased

Stayed same

Increased

Don't Know


6

Community Challenges

The decrease in revenues and number of customers can also be attributed to several social factors. The shopkeepers and businessmen mention problems related to the quality of infrastructure, such as run-down shops, lack of proper lighting in the streets and an underdeveloped system for waste management. All of this makes DEJ less attractive to customers.

In addition to this, street disturbance such as theft and harassment from gangs of youths in the streets is a challenge posed to the community as a whole. These male youth groups particularly deter female customers and families. Since housewives make up 60% of the customers of DEJ, this is a significant problem for businesses. There is also a considerable presence of illegal activities like fraud and scams with 78% of the respondents reporting that this adversely affects their business. Lastly, information about promotional activities and sales offers are difficult to access. In a financially strained situation, such measures are not prioritized by the SBOs.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Street Harassment

Illegal AcYviYes

Lack of Infrastructure

Nega3ve effects on business

NegaYve Effect


7

Systemic Barriers

Physical Barriers The closure and permit system1 reduces and hinders the flow of goods across the West Bank and East Jerusalem. Checkpoint procedures such as opening hours and restrictions on what is allowed to cross which checkpoint, has severe effect on the DEJ business community. Also, goods are often held for a long time at the checkpoints before being allowed to pass through. This results in considerable uncertainty when it comes to trading with Palestinian goods, making it unattractive both to East Jerusalem businesses and also to the international market.

The physical barriers also reduce the amount of potential customers being able to reach East Jerusalem from the communities in the West Bank. It should be noted that in the past all traffic from the north of the West Bank to the south and back would go through Jerusalem, making it an attractive junction for business. The separation barrier and the Jerusalem bypass road have significantly reduced the daily traffic of Palestinians through Jerusalem. In addition, the closure on Jerusalem has also resulted in higher prices in East Jerusalem, while the West Bank has been able to maintain lower prices, diminishing the attraction of shopping in East Jerusalem. Lastly, the fact that Jerusalemite ID holders are able to go to the West Bank only adds to the discrepancy, leaving even less customers to the businesses in DEJ.

1 The closure and permit system are the checkpoints, roadblocks, walls, barriers and permit restrictions that restrain and control Palestinian movement between the occupied Palestinian Territories, Jerusalem and Israel.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Closure of Wall High Taxes Jerusalem Municipality

Lack of Infrastructure

Systemic Barriers NegaYve Effect


8

Administrative Barriers One of the main administrative barriers to DEJ commercial development has been the closure of Palestinian institutions for trade and commerce by Israeli authorities. Today only a small percentage of East Jerusalem’s business owners are members of such associations, and these actors are mostly from the bigger businesses and thus outside the target group of this project.

Secondly, the East Jerusalem business community faces challenges related to high taxes and Arnona2 at the same time as they do not enjoy the municipal services other businesses in the city receive from paying the taxes. To be able to pay, the SBOs are forced to increase the prices of their goods and services. Combined with not getting adequate services from the Jerusalem Municipality this gives the SBOs an additional handicap in what is already a difficult economic situation.

Thirdly, the Jerusalem Masterplan 20302 regulates construction and renovation of buildings and venues. The Masterplan limits any landowner in Jerusalem to develop their land. There is therefore only a limited amount of commercial space within which all economic activity must be conducted. Another way Israeli authorities control the use of land and buildings in DEJ is through the permit grant system. A Considerable amount of the building permits for Palestinians are delayed, rendering immediately undertaken construction projects illegal, or requiring gigantic profits from the first year of business in order to cover the costs and attribution. Thus, 74% of the SBOs surveyed, did not own their premises. This shows how the lengthy, difficult process of obtaining a building permit from the municipality is further complicated by the political constraints that Palestinians live under. The difficulty in dealing with the Municipality makes many avoid any type of contact with it. Hence, the SBOs in East Jerusalem spend money on rent and refurbishing instead of purchasing and developing their own facilities. This situation poses further institutional support for the acquisition of land to Israeli rather than Palestinian hands.

Despite constantly facing these administrative barriers, very few SBOs go to the Municipality or other relevant authorities to raise their concerns and find solutions to their problems. This is partially a result of the low number of business owners speaking Hebrew and a low level of relevant legal knowledge. Going to the municipality to raise an issue requires certain knowledge within both these fields. Another reason given by the business owners is a general skepticism towards the Jerusalem Municipality. This skepticism is the consequence of a vicious circle where SBOs disengage from the Municipality for a variety of reasons – both political and due to lack of provisions. Next, the Municipality does not see itself as gaining politically from any effort made in the area of DEJ and thus largely ignores it.

2 The ‘Arnona’ municipal tax is collected on the basis of the size of dwellings (residential or commercial), levied by the local authority, which in this case is the Jerusalem Municipality. The tax differs from city to city and property owners and tenants could get charged different rates depending on neighborhoods and type and size of the property. Source: http://www.jcser.org/index.php?option=com_content&view=article&id=6&Itemid=9 2 The Jerusalem Master Plan is developed by The Jerusalem District Planning and Building Committee and it directs all planning and zoning in Jerusalem until 2030.


9

4. Recommendations

Our recommendations can be split in to four main groups. The first three are direct responses to the problems we have identified and the fourth includes innovative suggestions that were raised in meetings with local business leaders.

Capacity Building Our survey reveals a will and motivation to improve the situation amongst business owners in East Jerusalem. However, it also demonstrates a gap in capacity, particularly in modern sales and marketing techniques. Older business owners often have a limited view and too often fall back on outdated techniques and reject innovative steps. On the other hand, the younger generation of business owners in East Jerusalem are interested in moving the business community forward.

The key initiative that we recommend is the establishment of a group of local experts, with strong links to the community. This group would identify the gaps in capacity in the local community and develop strategies and programs that effectively remedy the problems. At the town hall representative meetings we have seen that there is a wealth of experts with fresh ideas who are willing to engage directly in the community.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Improving Business in East Jerusalem

Very Important


10

Our research and discussions with businessmen have shown that lack of effective advertising is a significant problem. 63% of those surveyed said they thought that increasing availability of public information was ‘very important’ and 61% thought that advertisements were ‘very important’. We, therefore, recommend that any capacity building programme focus on marketing techniques, such as seasonal sales and improving advertising. Improvements here would go a long way to benefit both customers and SBOs.

An additional aspect of this lack of capacity that the survey identifies is a predominance of businesses selling goods compared to those providing services. 94% of shops sell goods and only 6% provide services. So another thing that this group should focus on is to educate shopkeepers about business diversity strategies.

However, this capacity building group should also be used to identify further problems that did not emerge from our survey and meetings. The aim is to establish a politically and organisationally indpendent group that is from the community and works for the community. Once it has achieved some concrete results, its reputation will spread and create increased support. The final aim is that the group will exist as a community-motivated body made up of local experts.

Community Development East Jerusalem’s attraction as a shopping district is declining. People complain about cleanliness, street harassment, and more. It is, therefore, an absolute necessity to improve the shopping environment in DEJ. In order for this to happen the business community will have to initiate both physical steps as well as awareness building campaigns among the residents, customers and shopkeepers of East Jerusalem.

There are some problems, for which the solutions are clear and simple. In part, the problems are tangible and related to specific points of infrastructure. The meetings and the survey have produced some specific recommendations as follows: a thorough cleaning of the streets, improving waste management services, and improving lighting in commercial areas.

However, the community also faces less tangible challenges. These include street harassment, attitudes towards littering, and problems of fraud and criminality. It is a pressing concern to educate the community as a whole and show that issues such as littering and harassment are issues that affect the whole community. These should be framed as issues of community pride. Awareness campaigns against harassment and littering should be launched with close co-operation with local schools and community organisations. The municipality could also support the campaign by more strictly enforcing the laws.

One of the biggest complaints is that there is little activity in East Jerusalem at night. 83% of the respondents said that increasing activity at night was very important for their business. It was suggested that a more active nightlife in East Jerusalem would go a long way to addressing concerns about personal safety. If there are more people on the streets incidences of harassment are likely to decrease considerably. In the town hall meetings a trial period of extending the opening hours of shops for one day a week was suggested as a first step.


11

It was also suggested to conduct another survey focusing on customers rather than SBOs, so that the needs of the community could be identified and investigate in greater depth.

Lobby Group The survey revealed reluctance among business owners to go to the municipality or other official bodies themselves. There are a number of reasons for this: a lack of understanding of Israeli law, lack of legal support, lack of knowledge of Hebrew, or lack of willingness to engage with the municipality for political or other reasons. By providing a knowledgeable and impartial intermediary between SBOs and the municipality a lobby group can help serve the needs of the business community. As the lobby group achieves the concrete and observable results, it should become a long-term, self-sustaining venture, supported by the local business community.

The research has identified external systemic barriers as one of the main problems facing SBOs. Therefore, we recommend the formation of a lobby group to help local businessmen tackle systemic problems. Anyone would be able to go to this lobby group, formed of local lawyers and experts with extensive ties to the community, and discuss the obstacles they are facing.

The group would be the address for SBOs complaints and then provide assistance or direction as to how best to deal with the issues raised and where. Such a lobby group would use its experience and expertise to represent the interests of business owners and help them find solutions to their various problems. Although there are certain concerns, such as the separation barrier, which the lobby group will have limited effect on, there are areas, such as provision of services, issues over taxes, municipal bureaucracy, and dealing with the Israeli authorities in general where such a group could be very effective.

83% of respondents said they would be willing to invest their time to improve East Jerusalem and 81% said they would be willing to invest their money. There was also a general view that any solution should come from within the community. 72% did not think that foreign NGOs had a positive effect. We believe this shows a strong will for the local community to take steps to help itself and not be dictated to by foreign organisations. On the other hand, working with local organizations and local field workers is something that the business community is clearly willing to do, as IPCRI's team received near full cooperation and support during the project.

Thus, as the project was implemented up till now, there is good reason to assume that the local businessmen will be the prime movers of the next required steps and projects and a strong impetus would come from inside the community. Local stakeholders should form a central part of any project and advise on the specific points that need to be addressed.


12

Innovative Vision for Downtown East Jerusalem East Jerusalem is in a tough position. For high quality goods people often go to the malls in West Jerusalem, such as Mamila and Jerusalem Mall (Malcha). Because of high taxes East Jerusalem is more expensive than the West Bank. So, for value for money, Palestinians often go to the cities in the West Bank to shop. What East Jerusalem does have is a unique cultural, religious, and historical position. East Jerusalem has attractions that no other place in the world does. This is something that the area should capitalize upon and something that should be incorporated into a vision for DEJ.

One point that was strongly emphasised at our various meetings is that everything should be pursued under a guiding vision for East Jerusalem. We must establish a clear vision in order to guide all our recommendations in the same direction, towards a single aim. The primary actionable suggestion was to create a website which would publicize events, sales, or specific shops in DEJ. This would create a virtual space where people in from Jerusalem and around the world could explore the city and which could publicize the area’s many attractions.

Another possible step is to encourage Islamic tourism, in tandem with Jordan, who has control over the Muslim sites of Jerusalem. As the third holiest city in Islam, Jerusalem could attract a huge number of Muslims from across the world. Supporting this, the participants in the meetings showed interest in maintaining the unique characteristic of the DEJ business district. There was a specific request not to turn the area into too much of a Westernized shopping area but rather to maintain its special character.

For Downtown East Jerusalem to be established as a desirable shopping or touristic destination it is still necessary to improve and diversify the attractions on offer. Ideas that have emerged during meetings include closing Salah al-Din street to traffic on a Friday and turning it into a pedestrian market and putting on Palestinian folklore and cultural shows. These things would help promote DEJ as a cultural hub and still maintain its unique character and follow a unique vision.


13

5. Goals 1 Year Goals 5 Year Goals

1. Locate people to comprise a capacity building group

Have a fully functioning and self-sustaining capacity building group

2. Locate people to comprise a lobby group Have a fully functioning and self-sustaining lobby group

3. Trial later opening hours on Thursday night and closing Salah al-Din street to cars on a Friday

Foster a regular habit of opening shops later into the evening and increasing level of activity at night, at least on Fridays

4. Create a virtual East Jerusalem website, which can inform people about special events

For East Jerusalem to be able to attract a large number of people from around Israel and, hopefully, the West-Bank for cultural or commercial events at least once a month

5. Conduct a survey of customer needs to complement the survey of SBOs


14