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PACBI-The Gaza Strip blockade could seriously harm Israel's economy


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Haaretz | February 10, 2008

The Gaza Strip blockade could seriously harm Israel's economy

When it comes to security, Israel's balance after the fall of the Rafah wall appears to be negative. Armed terrorists are rushing from the Gaza Strip to Sinai to the Israeli border, and more lethal and sophisticated weapons have been brought into Gaza. The head of the Shin Bet security service, Yuval Diskin, put his finger on this point in a recent report.

When it comes to civilian affairs, the balance appears to be positive. Israel has cast off the burden of worrying about 1.5 million Palestinians in the Gaza Strip. Or as it was phrased with customary delicacy by Housing and Construction Minister Ze'ev Boim: "We'll shut off the electricity in Gaza and they can choke inside there."

But the dry facts tell a different story. In 2006, for example, total Israeli exports to the 60 million or so residents of France stood at slightly more than $1 billion. Israeli exports to the same amount of people in Italy stood at just below $1 billion. Very fine statistics. But total exports to both of these countries, which rank among the eight richest countries in the world, are equal to Israel's exports to the 3.5 million people of the West Bank and Gaza Strip, according to the Central Bureau of Statistics. This is more than 6 percent of all Israeli exports, excluding diamonds. Despite all the intifadas, the Palestinian Authority is the second biggest customer of Israeli exports, after the United States.

"A death blow" is how Hillel Adiri, a former director general of the Agriculture Ministry, describes the economic blockade on Gaza. Adiri is today in daily contact with Gaza farmers who export almost all their produce to Israel, or to Europe via Ashdod. "They are in total despair," he says. "They don't believe this is happening to them." For business people in Gaza, the situation is even worse. Strawberries and flowers still leave Gaza sometimes because the Israeli company Agrexco takes care to export them to Europe (in return for a fee, of course). But the Gaza business people have no one to take care of them.

But if the blockade becomes permanent policy, Israel will lose a large part of its "captive market" - a stock phrase which in this case literally describes Gaza. "Israel benefited from its relations with the Palestinians," says Dan Catarivas, head of the foreign commerce branch of the Manufacturers Association and a former senior official in the finance and industry ministries. "And at the end of the day, it will lose if these ties are cut."

For Ilan Eshel, head of the fruit growers organization, ending these ties means a very big headache. "The entire planning for planting orchards in Israel was based on the assumption that Israel, the West Bank and the Gaza Strip are one market," he says. "One and a half million people live in Gaza. They are hungry and they have hardly any orchards. The citrus groves have almost completely disappeared because of the Israel Defense Forces' activities. We are the only source of food for them. And they pay well, and in cash."

The Gazans buy from Israel between 60 and 80 tons of fruit per year - bananas, apples, pears, peaches and avocados. Eshel estimates that some 10 percent of the Israeli fruit harvest goes to Gaza. This statistic can be misleading. "There are producers for whom it is 100 percent of their harvest," Adiri says.

Closing Gaza to Israeli exports, Eshel says, will lead to a situation where "we will have to uproot 20,000 dunams of fruit, and someone will have to compensate us for that." One dunam of orchard brings in about NIS 6,000 to NIS 10,000 per year. But even if all these avocado and pear trees are uprooted, the problems will not be solved. Eshel says that third-class fruit is sent to Gaza.

"This is fruit that is good but slightly damaged or too small, which the Israeli market is not prepared to buy." A source familiar with the situation says that Gaza is a kind of security valve for Israeli agriculture. "When there are surpluses, they are marketed in Gaza so that the prices in Israel will not hit rock-bottom," he says.

Whatever the 1.5 million people in Gaza need to live comes to them from Israel - from milk products to diapers, from medicine to cement. Even the humanitarian aid from international organizations is bought almost entirely from Israeli companies. Israeli firms also earn money as middlemen. Gas for cars is bought in Gaza via an Israeli intermediary at a tidy fee. About 5 percent of all freight that passes through the Ashdod port is earmarked for Gaza. This is to say nothing of the customs fees Israel is supposed to collect for the Palestinian Authority as part of the Paris Agreement signed in the 1990s, when everyone believed in a future of cooperation between Israel and the Palestinians. This money represents hundreds of millions of dollars that Israel put aside so it could eventually serve as a whip against the Palestinians.

"Certain kinds of factories have no better solution than the connection with the Palestinians," says Catarivas, who has significant experience in the field. At the Finance Ministry, he was a deputy head for international relations, while at the Industry, Trade and Labor Ministry he was the director of the Middle East Department.

"A textile factory in south Tel Aviv, which produces some of its products in Gaza, cannot exist without it [the connection with the Palestinians]," Catarivas says. "There are low-tech firms that are able to exist only because of the Gaza market. The manufacturers in the Arab sector are also dependent on the market in the West Bank and Gaza Strip. True, we have companies that are suffering from unfair competition from firms in the Palestinian Authority, but we take care of everyone."

An estimate by the Palestine International Business Forum shows that cutting off economic ties between Israel and the Palestinians would bring down the standard of living in the PA by one-third. Income per capita would fall to $500, the lowest in the Arab world, even lower than Sudan or Yemen.

Israel, according to this research, would lose around $2 billion per year. Some 76,000 jobs would be lost. Catarivas does not know whether these data are correct, but it is clear to him that Israel will be hurt. To his regret, he does not think that anyone really cares about this damage. "The system will adapt in the long run," Catarivas says. "Economic considerations will not have the upper hand over diplomatic considerations."

http://www.haaretz.com/hasen/spages/952771.html

Posted on 10-02-2008


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