Four out of five factories have ceased operations, forcing producers to lay off at least 30,000 workers – on whom they say a third of Gazans depend for their livelihoods.
“Factories are going bankrupt daily but it is never announced,” says Amr Hamad, director of the Palestinian Federation of Industries. “Businessmen just turn off their mobiles and can’t be found.”
Shelves are emptying and the price of staples is rising as increasing numbers of Gazans are thrown out of work. The local private sector, identified by international mediators as the well-spring of Palestinian economic recovery and thereby hopes for peace, meanwhile faces terminal decline.
The meltdown of a manufacturing sector already struggling with years of restrictions and border closures began as soon as Hamas took control of Gaza in mid-June after ousting forces loyal to Mahmoud Abbas, the Palestinian Authority’s Fatah president.
Israel closed cargo crossings and banned the transfer of shipments bound for Gaza-based companies.
Gaza, the West Bank and Israel all belong to one “customs envelope”. Since mid-June, however, goods bound for companies with a Gaza designator in their value-added tax registration number have been automatically rejected by the Israeli customs computer.
As a result, tons of foreign goods remain stranded at Israel’s Ashdod port, with Gazan importers facing storage charges. Other essential supplies previously cleared for shipment from Israel and the West Bank were also halted.
Israel subsequently loosened the restrictions to allow entry of medical supplies and food. The ban on Gaza’s imports of raw materials has frozen domestic production in most sectors, including food processing.
The Israeli restrictions came into force after Hamas ousted Mr Abbas’s security personnel from positions on the Gaza side of the crossings. Israeli authorities refused to co-ordinate with Gaza’s new rulers, whom they regard as terrorists.
Local businessmen, however, say it is Gazan industry and those who rely on it for jobs and supplies that are suffering, rather than the politicians and militiamen who now run the territory of 1.4m.
Many believe the Israeli restrictions have as much to do with crushing Hamas as with ensuring the security of Israel’s border.
“Israel’s working assumption is that choking Gaza’s economy and closing its borders to the passage of people will achieve the political objectives it wants,” says a report by Gisha [Deleting Gaza Economy from the Map] , an Israeli charity that campaigns for greater freedom of movement for Palestinians.
“This policy is destroying the business sector, creating a new welfare regime in Gaza, and turning growing numbers of Gaza residents into dependants on international welfare agencies and religious charities.”
Local businessmen say that, in addition to the Israeli restrictions, they are caught in the middle of the political struggle between Hamas in Gaza and Mr Abbas’s West Bank regime.
Hamam Rayes, who runs the TransOrient medical supplier in Gaza City, has escaped the worst of the import ban, although shipments have been delayed and his costs have soared.
“But the problem is less getting [medical] goods than deciding who pays for them – Hamas or Abbas,” he says. “Also, the West Bank government has told us not to pay taxes to Hamas. But if you want to do business with a local hospital, Hamas demands you have your tax up-to-date, so you have to do it.”
One consequence of the import-export freeze is near collapse of the textile sector that normally sells 90 per cent of output to the Israeli market. “About $10m [€7.3m, £5m] of finished garments are waiting to be shipped,” says Mr Hamad.
Some 400 containers of furniture, a Gazan specialty, are also stranded. Food processors have stopped work for lack of any one of 33 raw materials – ranging from cacao to carbon dioxide – needed for production.
About 5,000 monthly salary-earners are still in work but most daily industrial wage-earners have been laid off. In Gaza, a wage might feed up to 10 dependants.
Copyright The Financial Times Limited 2007
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