2014 Activities

The government does not interfere with cement prices …There are no clear policies

The government does not interfere with cement prices …There are no clear policies

An accountability hearing involving the Ministry of National Economy was held byThe Coalition for Accountability and Integrity (AMAN). During which, issues such as the ministry’s role in determining cement prices within the Palestinian marketand its control over the cement plant - currently being constructed by the Palestinian Commercial Services Company (PCSC) - were discussed.

The hearing was initiated by AMAN Coalition to emphasize that cement is a strategic commodityin need of government intervention.It was attended by the Undersecretary of the Ministry of National Economy, Mr. Tayseer Amr, in addition to a number of concerned parties and members of the Legislative Council.The hearing was characterized by a general atmosphere of frank and open discussions, especially following the submission of abackground paper on the subject byAMAN’s Commissioner, Dr. AzmiAl Shuaibi.

Mr. Shuaibistressed that cement, along with oil, are strategic commodities that could be monopolized by the government. Said commodities’ prices must be set and controlled by the Ministry of National Economy and they may rely upon the private sector dynamic in price determination. This is also true in the case of the Ministry of Finance’s control over fuel prices, and the Energy Authority’s control over electricity prices.

The purpose of this hearing was to analyze the problems that are currently plaguing thecement sector. In particular, thealleged monopolization ofthe cement trade by the (PCSC), a company owned by the Palestine Investment Fund (PIF). This is added to the fact that, cement - as a strategic commodity - is typically regulated by the government, with regard to managing its production, import and sales.

Thus, and from this prospective, the hearing was held to clarify whether there has been a clear policy set by the Palestinian government denoting its role within this sector. Especially in with regard to supervision, licensing, price controls, establishing a Palestinian cement factory, as well as promoting transparency and accountability.

The session was attended by the representatives of several official bodies and civil society organizations; in addition to, experts, analysts, economists, and representatives from the private sector and thePCSC.

The session was launched by Dr. AzmiAl Shuaibi, with the aim of facilitating citizens’ direct inquiries to government officials, while giving officials the opportunity to justify their positions.

It is worth mentioning that, this is one of the activities proposed by the project titled: "Civil Society Organizations and the Citizen: the DrivingForce behind Public Institution’s responsiveness to Accountability” that is funded by the European Union.

The Palestinian Commercial Services Company; a historical outlook.

AMAN’s Commissioner explained that, since the advent of the Palestinian National Authority, the role played by the government in this sector has always been ambiguous. The PCSC was established through a legally vague ownership and background.Initially, it was created as a private company that leads a range of economic and trade activities. However, the Companies Register Office (that operated under theGaza Strip’s Ministry of Justice at the time) alluded to the existence of a document (signed by the late President Mr.Yasser Arafat) indicating that the company is owned by the PNA and is run according to the private sector model.At the time, and with the PNA’s consent, the PCSC monopolized the cement imports from the Israeli side. It did so to secure the profits generated from cement’s purchase and sales prices discrepancies. On several occasions, the Minister of National Economy passed Bills granting private sector companies permission to import cement; however all such attempts have failed due to these companies’ inability to compete with the PCSC.

Amr: “The government is unaware of any monopolization occurring in the cement sector”

Asthe government’s representative in this aspect, the Undersecretary of the Ministry of National Economy, Dr. Tayseer Amr, clarified that the ministry’s role is limited to issuing licenses to companies that want to import cement, within the quota agreed upon in the Paris Convention.He stressed that he is completely unaware of any monopolization, on the PCSC’s part, of cementimported from Nesher Israel Cement Enterprises Ltd. He added that, over the past year, more than eight companies have submitted requests to the Ministry of National Economy to purchase cement,and that those permissions have been granted. When he was prompted by inquiries - from participatingrepresentatives of local concrete companies - regarding the purpose of such permissions when cement transportationtrucks (Silo) are not granted any licensing, Mr. Amr’s response was: “For the past seven years,none of the cement merchants has ever applied for this license.”

Mr. Amr affirmed that the ministry cannot interfere in tariffs and regulation matters,except within the jurisdictions it has been granted by the law.He further added that, the ministry cannot intervene in price control or the agreement held between the PCSCand Nesher Israel Cement Enterprises Ltd, despite the fact that cement is a strategic commodity.

The Palestinian Commercial Services Company: The Company does not monopolize the cement trade.

On his part, the Chief Financial Officer of the PCSC provided information about the company and relayed that the company is not a monopoly of the cement trade. He explained that matters boil down to an agreement between two private sector companies (the PCSC and Nesher Israel Cement Enterprises Ltd.). And that the company’s main concern is to provide the Palestinian people with a stable supply of cement, rather than earn huge profit margins.
When confronted by the Legislative Council member, Mr. Qais Abu Leila, who insisted that the PCSC monopolization of cement is a well known fact to all, the CFO of the PCSC denied this allegation.

Mr. Ibrahim Al Deek, Director of the Customs Procedures Department within the Ministry of Finance, relayed that the Ministry’s role is confined to monitoring the commodities'movement, and collecting fees and taxes on behalf of the Public Treasury.

During the hearing’s second half, inquires were raised regarding the cement plant being constructed by the PCSC. The company’s Comptroller went on to clarify that the plant will be majorly owned (51%) by the Palestinian Company, while the other (49%) are to be owned by a Saudi investor. He further explained that currently, the high cost of energy poses the only hindrance to the manufacturing of cement in Palestine; however, this matter shall be resolved soon.

In conclusion, participants stressed the need to strengthen the government's Monitoring and Control role in this strategic sector, and that a special tariff should be assigned to this strategic commodity. In addition,they emphasized the need to develop a clear vision and policy with regard to the cement plant being constructed, its ownership, and the allowed investment ratios in its capital.

 This project funded by the EU