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PADICO cautious amid rising profits


RAMALLAH, West Bank, Aug 17 (Reuters) - West Bank stability has helped Palestine Development and Investment Ltd (PADICO) increase profits this year, but the holding firm says political uncertainty has kept a brake on expansion. PADICO, which has interests in everything from poultry farming to five-star hotels, is planning more investment in the buoyant West Bank real estate market, Chief Executive Samir Hulileh said in an interview this week. It also plans expansion in the energy sector, water resource management, agriculture and solid waste recycling. But bleak prospects for the Middle East peace process, which the United States is trying to revive, makes PADICO cautious about investing in major industrial projects."We are maintaining the minimum required: not just surviving, but sustaining an operation, showing success and strength in different fields. But we are not aggressive. We tend to be very cautious," Hulileh said. Like many Palestinians and Israelis, he is sceptical about the chances of success in the two-decade-old peace process."If we had a different situation, we would go into establishing a cement factory, or a steel factory," Hulileh said. "But these big projects -- hundreds of millions of dollars -- need a lot of Israeli approvals and, most importantly, long-term stability, which we don"t have," he said. PADICO has reported first-half net  profit of $20.39 million, a 2 percent increase on the same period last year, when it booked a one-time gain from a share transaction.  "The profit is now coming from operations, not from a one-time deal," he said. "It"s more sustainable."Like other firms operating in the Palestinian territories, PADICO faces an array of challenges linked to Israeli occupation. But relative calm in the West Bank has helped. "It"s becoming very secure. This is important. Security is extremely important," Hulileh said. Palestinian and Arab investors set up PADICO at the outset of Palestinian-Israeli peace talks in 1993 with the aim of getting the Palestinian economy ready for statehood. It established the Palestine Securities Exchange, where its shares are now the most heavily traded. PADICO has a 71 percent stake in the bourse and manages 13 companies listed there. PADICO shares last traded at $1.34, unchanged from Monday"s close. They have traded between $1.17-$1.50 in the last year. Hulileh expected PADICO"s 2010 net profit to equal or better 2009"s $42.2 million. "We are expecting $42 million to $45 million," he said. But some $66 million in investments in the Gaza Strip are not helping. Gaza"s economy has withered amid an economic blockade imposed since Hamas Islamists hostile to Israel rose to power. They seized control in 2007. Israel has declared Gaza an "enemy entity" -- bad news for a PADICO unit that built a five-star hotel due to be operated by Movenpick Hotels & Resorts. "It"s a $43 million investment and it"s closed," Hulileh said. But a Movenpick site being built in Ramallah by a PADICO subsidiary is due to open this year and a Bethlehem hotel 40 percent owned by PADICO is making its first ever profit this year thanks to steps to ease its debt burden.


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