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Gaza's Businesses Under Rising Pressure

The New York Times

26 July, 2007

Mamoun Hamada's cannery, which used to provide a living for hundreds of people, is phasing out production, along with 80 percent of the factories in Gaza, after the territory was sealed off from the world following the violent Hamas takeover last month.

The international community, including its visiting new Mideast envoy Tony Blair, must now decide whether it wants to keep Gaza isolated as part of its boycott of Hamas, but at the cost of destroying Gaza's economy and turning the area's 1.4 million residents into increasingly resentful welfare recipients.

International aid agencies warn that time is running out.

The strict closure has forced the dismissal of about 70,000 of 120,000 private sector workers since mid-June, driving unemployment above 40 percent, according to the Palestinian Federation of Industries. Even before then, 1.1 million Gazans received foreign food assistance, a figure that rose sharply as a result of Israeli trade restrictions and an international aid embargo imposed after Hamas won 2006 elections.

''The pillars of Gaza's economy have weakened over the years. Now, with a sustained closure on this current scale, they would be at risk of virtually irreversible collapse,'' the World Bank wrote in a document obtained by The Associated Press.

Since the Hamas takeover, Israel has permitted shipments only of food and basic supplies into Gaza, but largely halted the imports of raw materials for industry and all exports of Gaza goods. Gaza's main cargo crossing, Karni, has been closed; shipments have been sent through two smaller passages.

Israel, which shuns Hamas as a terrorist organization, says it cannot reopen Karni because there's no one with whom to coordinate border traffic. Gaza militants keep attacking crossings with mortars and explosives, and Israel says it is too risky to operate Karni, where Israeli border officials would be exposed to danger.

It's difficult to gauge how hard Hamas' political rival, the West Bank-based government of moderates installed by President Mahmoud Abbas, is pushing for a reopening of the Gaza crossings. Abbas still claims to be the legitimate authority over Gaza, but he has cut off ties with Hamas since the Gaza takeover.

Gaza's worried business leaders are still trying to arrange a meeting with government officials in the West Bank to discuss the fallout from the closure, said Nasser el-Helou, who imports doors, windows and medicine.

Mideast analyst Mouin Rabbani said Abbas appears to be trying to punish Hamas.

''There's an element of trying to demonstrate to the population (in Gaza) that this is what you get when ruled by Hamas,'' said Rabbani, of the International Crisis Group.

Several international aid officials, speaking privately, agreed with this assessment.

However, Abbas aide Saeb Erekat, who regularly meets with Israeli officials, said he has repeatedly urged them to reopen Gaza crossings. Erekat said it would be shortsighted to try to exploit the Gaza closure for political gain. ''No one thinks like that in Abbas' office,'' Erekat said.

Blair's new employer, the international diplomatic Quartet comprised of the U.S., the European Union, the U.N. and Russia, has not yet staked out a position. U.N. chief Ban Ki-moon has called for opening Gaza.

After a two-day visit to Israel and the Palestinian areas, Blair is to return to the region in September, but by then it might already be too late for Gaza's economy.

Since June, 3,190 factories and workshops in Gaza have closed and the remaining 20 percent have reduced production, Palestinian business leaders said. The U.N. has halted $93 million worth of projects because it couldn't bring in raw materials. Of 68,000 private sector workers who have been fired in recent weeks, 10,000 have already applied for assistance, a U.N. official said.

The closure of the crossings hurts every aspect of Gaza's economy.

In the case of the Hamada cannery, the losses begin with farmer Abed Abu Mustafa. The 42-year-old, four of his 10 children and five seasonal workers pick tomatoes on their farm in southern Gaza. Hamada pays the farmer $100 for every ton of tomatoes, and bought Abu Mustafa's crop before the closure.

''This season, I can sell my tomatoes, but what about next season?'' Abu Mustafa said during a demonstration outside Gaza's parliament, where farmers blocked the road with trucks to protest their uncertain future.

Hamada said he's still canning tomatoes he's already paid for, and would store them in a warehouse, but that he wouldn't buy any more crops. He used to export most of his goods to the West Bank and sell the rest in Gaza's smaller market. Hamada hasn't fired his 60 workers yet, but he has shortened their shifts.

Hamada still struggles along where others have shut down. The AG Garment factory halted production June 14, putting 240 people out of work. It's unable to deliver $38,000 worth of clothes to its Israeli contracting company, according to the Palestinian Private Sector Coordinating Council.

Israel's business community is also increasingly concerned.

Ronen Leshem, head of the business department at Israel's Peres Center for Peace, said Israeli businesses will be hurt by losing Gaza, a key market.

''In a few weeks, the business sector in Gaza is going to collapse, and one of the big losers is going to be Israel,'' he wrote in an op-ed piece in The Marker, an Israeli business publication.