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The economy of the Palestine refers to the Palestinian territories, which comprise the West Bank and the Gaza Strip.
Palestinian economy is mainly based on agriculture. The production of agricultural goods supports the population's needs and maintains Palestine's export economy. According to the Council for European Palestinian Relations, the agricultural sector formally employs 13.4% of the population and informally employs 90% of the population.
Palestinian agriculture has some problems, blockades to exportation of produce and importation of necessary inputs, widespread confiscation of land for nature reserves as well as military and settler use, confiscation and destruction of wells, and physical barriers within the West Bank. Because the root of the conflict is with land, the disputes between Israel and Palestine are well-manifested in the agriculture of Palestine.
Traditional source of income for the Palestinian economy is also stonecutting. The annual average output per worker in the stone industry is higher than in any other sector. There are 650 stone production outlets in the West Bank, 138 of them in Beit Fajjar. The quarried material is cut into a rich range of pink, sand, golden, and off-white bricks and tiles known as Jerusalem stone.
A diversity of handicrafts, many of which have been produced by Arabs in Palestine for hundreds of years, continue to be produced today. Palestinian handicrafts include embroidery work, pottery-making, soap-making, glass-making, weaving, and olive-wood and Mother of Pearl carvings, among others. Some Palestinian cities in the West Bank, particularly Bethlehem, Hebron and Nablus have gained renown for specializing in the production of a particular handicraft, with the sale and export of handicrafts forming a key part of each city's economy.
Palestine import situation represent a good business environment for other countries, especially for European Union countries. There are the following benefits cooperating with Palestinian Territories: free trade agreement with the European Union (EU) for industrial products, reduced duties on EU agricultural exports to the Palestinian Territories, established contacts in the United Arab Emirates (UAE) can be a route into the Palestinian Territories.
Strengths of the Palestinian Territories market include geographical location (a point of contact between 3 continents - Europe, Asia and Africa), entrepreneurial tradition in wholesale and retail trading, highly educated, multilingual labour force.
There are some challenges when doing business in or with Palestine, for example, economy is heavily reliant on foreign aid, access and movement restriction imposed by the Israeli authorities, some import or export restrictions (particularly in relation to Gaza), high transportation costs, land and property registration.
An Interim Association Agreement on Trade and Cooperation was concluded between the EU and the Palestine Liberation Organisation (PLO) on behalf of the Palestinian Authority in 1997. The agreement provides for duty-free access to EU markets for Palestinian industrial goods, and a phase-out of tariffs on EU exports to Palestine over five years. An Agreement for further liberalization of agricultural products, processed agricultural products and fish and fishery products entered into force on 1 January 2012.
Due to difficult economic situation and restrictions on movement and access, trade with the EU is very limited (195 mln Euros in 2014). Palestine imports mainly machinery, chemicals and transport equipment.