These days, for the average Israeli, the thought of the Gaza Strip arouses associations of Molotov cocktails, shooting, and high tension. The Palestinians, for their part, present a picture of a “stifling economic blockade”. But actually, amidst the chaos there exists the threat of relative stability in which everyday joint economic activity continues on both sides. Two central islands of stability are the industrial zone adjacent to the Erez Checkpoint and the Karny / Almuntar crossing.
The Erez Industrial Zone spreads over an area covering 470,000 square meters, of which 225,000 square meters is built up. 162 employers operate there, 92 of them Israeli and 70 Palestinian. Erez is the only industrial zone in the country managed by an army, and it is in this respect almost certainly unique in the world.
The zone is not within the boundaries of any local government. Since 1970, is has been administered by the Gaza Civil Administration as a local jurisdiction, independent in every respect. Heading the administered area is a Steering Committee chaired by economic liaison commander at the civilian district coordinating office in Gaza Lt.-Col. Ami Kadosh.
About 4,500 Palestinian laborers hold valid transit permits to Erez, and an average of 3,500 cross over to work there daily, in addition to about 300 Israeli laborers. The businesses there engage mainly in the spheres of sewing (26%), metal shops (19%), garages (12%), carpentries, and others. The zone is defined as “exempt from closures” and is intended as a place where work continues routinely even throughout severe security events. Therefore, during the past ten months, Erez has been closed for activity due to security reasons for less than ten days.
“In October-November, we didn’t know how to cope with the situation, in light of the events. There was shooting from morning to night, false explosive charges [were planted], and various security problems,” said deputy economic liaison commander at the civilian district coordinating office in Gaza Major Eyal Hajbi. “We recorded a sharp decrease in the number of Palestinian laborers coming to work.”
Erez checkpoint spokesperson Lt.-Col. Yoram Barak said that in principle, there is no problem with laborers entering Erez, but difficulties arose after Palestinians shot at the area. “The Palestinians are aware of the effect of the gunfire on the labor situation of their fellow nationals, and despite the fact that this is one of the last active employment hubs left, the shooting continues, even if it’s not necessarily officially initiated by the PA.”
Growth under fire
At the beginning of December, the situation did stabilize, and the area is actually currently undergoing a growth trend manifested by the opening of manufacturing facilities and the recruitment of workers. Since the beginning of the Intifada, 11 new plants have opened in Erez.
“In the past two months, a 20% increase has been noted in Erez activity,” said economic liaison Kadosh,. Despite the situation, he says, during the next three months, a tender will be issued for the sale of a 25,000 square meter plot in Erez, open to both Israeli and Palestinian bidders.
“There are two reasons for the success here,” said Kadosh. “One is cheap labor, and the other is the low cost of services and property taxes, which is about a fourth of what you’d pay in adjacent industrial zones.”
Before the Intifada, about 25,000 Gazan laborers worked inside Israel. Today, not one is permitted to leave Gaza, and the Erez Industrial Zone constitutes an important source of work for the Gaza Strip, where unemployment is estimated at over 50%.
“One of the purposes of the industrial zone,” said Kadosh, “which was erected on the seam line, is to employ as many Palestinian laborers as possible in order to aid the Palestinian economy. The idea is to create economic and commercial cooperation, and to this end, we’re in touch with Palestinian businesspeople.”
The Palestinian entrepreneurs in Erez sit on a committee chaired by marble factory owner Kamal Abed. The committee is in touch with the Israeli liaison and helps out with ongoing trouble-shooting. At the same time, the Palestinians complain of difficulties in the entry and exit procedures at Erez, carried out at the Magen transit point.
“The difficulty for us as entrepreneurs and business owners,” said Abad, “is the limitation on entry and exit from Erez. After 8 p.m., no entry is allowed, even if an urgent need arises.” Abad is aware of the severe security problems that exist surrounding the compound, but claims that a distinction must be drawn between the security situation and economic activity. “Most Palestinian factories here never exceed production capacity, due to the entry and exit hours of the laborers. I understand the security difficulties, but you’ve got to separate the two [issues].”
The Israeli business owners in Erez are actually happy. Yair Cohen, owner of Emek Ayalon Furniture, which employs 200 Palestinian workers, said that as far as he is concerned, there is no difference in the security atmosphere between Erez and Ashkelon. “The plant has been in operation here for seven years,” Cohen testified, “particularly thanks to the low salaries and property taxes.”
14,000 trucks a month
The Karny Terminal is the economic artery of the Gaza Strip. Karny Crossing director Yonatan Dotan says that in July alone, 14,000 trucks came through Karny, or an average of 600 trucks a day. Two thirds of the cargo on these trucks is bound for export from Israel to Gaza, and one third for import from Gaza into Israel.
“At issue is significant quantities of merchandise,” said Dotan. “In July alone, 52,000 tons of cement, about 105,000 tons of aggregate, and 12,000 tons of construction iron [came through].” In Dotan’s estimation, every day, close to 100 different types of cargo move through the terminal, such as raw materials for the lumber and textile industries, construction materials, and large quantities of agricultural products such as animal feed, dairy products, wheat, and others.
The Palestinian agency that manages Karny in concert with the Israeli Airports Authority is head of Preventive Security in Gaza Col. Muhammad Dahlan. Dotan says that the relations [between the two] have not been damaged, even in these times. “We’re not a security entity or the designers of economic policy, but rather an agency that provides transit services. Our working relations with them [the Palestinians] are reasonable, considering the circumstances.” At the same time, the Palestinians don’t hesitate to shoot at Karny and the surrounding area, despite the importance of transit to them.
The population that makes it living from transporting goods, directly or indirectly, numbers in the thousands on both sides of the conflict—from Israeli and Palestinian truckers to the factories on both sides, raw materials importers, to the terminal staff itself, which numbers nearly 200 Israeli workers.
Rafat Hajaj, a lumber trader from Gaza, is waiting at the Karny Terminal for the merchandise that he ordered to come through from Israel. Karny is a joint Israeli-Palestinian terminal, enabling the two sides to meet. According to Hajaj, the main problem of Gazan traders working with Israel is the inability to get into Israel and check their merchandise before it’s sent to Karny.
“All of the purchase and sales procedures are carried out by telephone,” Hajaj complained. “What makes it to the transit point is what gets into the Strip, and we try to get reimbursed for damages from the Israeli merchant via telephone.” Hajaj, 35, cannot receive permission to enter Israel because of his relative youth. Such permits for businesspeople are given only to those aged 40 and over.
The Israelis stayed outside
Adjacent to the terminal is the Karny Industrial Zone. This compound, in contrast to its counterpart at Erez, suffers from myriad problems, and its activity has been in a constant downward trend in the past 10 months. At its height, Karny – inaugurated in March of 1999 - employed about 1,500 workers at 18 plants, seven of them Israeli-owned or jointly owned by both Palestinians and Israelis. One plant even boasted Israeli-Palestinian-Egyptian ownership. The rest, mostly engaged in the textile industry, are Palestinian-owned.
The area, located east of Gaza City, was intended to foster economic cooperation between Israel and the Palestinian Authority, and to expand employment opportunities and industrial development in Gaza. High hopes were pinned on Karny, and it received special treatment from the agencies involved, both Israeli and Palestinian. Today, as stated above, due to the deterioration in the security-political situation, Karny’s population now numbers only about 800 workers.
Kadosh explains that Karny’s main problem is that it is in Area A, under full Palestinian control. As a result, the Israeli entrepreneurs, who are business owners, are not permitted to enter it for security reasons. “You can’t run a business by remote control,” Kadosh explains, “where an Israeli can’t come in, and a Palestinian can’t go out. You have to train workers, supervise, and direct - and today, you can’t do that.”
In addition, there is the problem of Palestinian control in the area, which is unclear. The company responsible for the joint running of Karny is a subsidiary of Palestinian conglomerate Palestine Development and Investment (PADICO), but in fact, the long arm of the Preventive Security Forces extends to here. This entity has been accused of corruption and attempting to divert part of Karny’s income into its coffers.
Some investment was intended to come from outside sources, such as donations from the Arab states and other countries, but these countries suspect corruption and balk at sending funds. The result, against the background of the security situation, is an atmosphere of uncertainty and lack of trust, further discouraging investment. Despite this, the Palestinians say they plan to continue developing Karny.
Published by Israel's Business Arena on August 5, 2001.