Amr Hamad, Deputy Director of the Palestinian Federation of Industries, came to Ramallah from the Gaza Strip last week to help assess the damage to the business sector in Gaza as a result of the last war. He told a Gisha representative that the European Union is considering compensating factories, business facilities and other institutions for the damages they sustained, estimated at $45 million (U.S.). EU representatives apparently understand the problematic nature of a situation where European tax-payers are to be sent the bill for damages caused by the Israeli army, and they have decided not to call it compensation, but rather a “business reactivation” plan.

The economy in Gaza, which has been virtually shut down for over two years, sustained a serious blow last January: 1,135 business facilities were damaged, including 324 factories.

Hamad adds that it is unclear how it will be possible to reactivate businesses while a ban on the import into Gaza of raw materials remains in place, and considering that the factories that were most severely damaged were those processing metals and construction materials. Israel is still adamant that construction materials pose a threat to its security and therefore are banned from entering Gaza.

As Israel continues active discussions, in the media and amongst institutional players about whether the claims of war crimes in the Goldstone Report require further investigation, another recommendation made by the Goldstone Commission  has been pushed aside: the recommendation that the closure of the Gaza Strip be immediately lifted and that the free passage of people and goods be allowed.

Despite calls from the EU that the “cycle of destruction and reconstruction” needs to be broken, and the huge amount of money amassed for the reconstruction plan, only 7% of the factories in Gaza are currently operational, Hamad reports. These are the few that are able to acquire raw materials and are not dependent on selling to markets outside the Gaza Strip.

A leading Israeli business newspaper this week provided a window into a different Palestinian economy – “a tunnel economy.” Meanwhile, in the Gaza Strip, the status quo continues this week – with Israel blowing up more tunnels under the Gaza-Egypt border in response to rocket fire on Israel.

Perhaps the Israeli business sector understands something that Israeli politicians simply don’t comprehend – that the Palestinian economy in Gaza, which has collapsed due the 27-month-long closure imposed by Israel, has changed beyond recognition: hundreds of tunnels are currently operational in the Strip (between 600 and 1,000) and thousands of people are risking their lives to work in them. These tunnels are supplying about two-thirds of the goods required by the residents of the Gaza Strip. Thousands of dollars in permit fees and millions of dollars in taxes are being collected by the Hamas government. 

While in Israel they are saying that the last Gaza war gave Israel an economic boost, in Gaza, besides the other kinds of damage sustained, thousands of people who chose to invest in operating the tunnels blown up by Israel have sustained a financial loss.

Israeli security officials view the tunnels as a security threat, due to the concern that arms will be smuggled through them, and this is the reason given for their destruction. Palestinian traders would also prefer to avoid the high costs of transporting goods via the tunnels and resume overland trade, via the border crossings that have remained closed now for over two years.

According to Palestinian officials, last week Israel mounted two attempts to transport industrial diesel into the Gaza Strip via the Kerem Shalom border crossing, and not via the Nahal Oz crossing, which has until now been the only crossing designed and equipped for the transfer of fuels and gas to Gaza. Attempts to transfer industrial diesel via Kerem Shalom were also made in the previous month. In the last week, Israel transferred not one drop of industrial diesel via Nahal Oz and in the previous two weeks transferred 3.68 million liters in total- 53% of the amount required. The reports that Israel intends to close down the Nahal Oz crossing completely follow a gradual slowdown of operations at the terminal, which now operates only three days a week.

The other crossings have also been closed: Karni Crossing, which was the main trade route, has been closed since June 2007, and only one conveyer belt, used to transport produce and animal feed, has continued to operate on a partial basis since then. The Sufa crossing has not operated since September 2008 and Israel announced its permanent closure in March 2009. The transfer of goods via the Rafah crossing is prohibited. And so all of Gaza is now almost totally dependent on the Kerem Shalom crossing, which has limited capacity and was originally designed for the occasional transfer of humanitarian aid only. Now Israel apparently plans to burden Kerem Shalom with fuel and gas transports as well.

Of course, in response to rocket fire from the Gaza Strip, Israel occasionally closes Kerem Shalom too, due to what it identifies as dangers to the crossing.

The possibility that security risks would threaten the opening of Gaza’s crossings was the subject of considerable forethought. As a result, three fundamental conditions designed to ensure that the Gaza Strip crossings would operate continuously were established and agreed to by Israel:  (1) Recognition of the need to operate alternative lanes (lane redundancy); (2) recognition of the need to operate alternative crossings (passage redundancy); and (3) the primary objective which Israel committed to in the Crossings Agreement: the principle of continuous operation.

It is hard to imagine how one crossing, consisting of only one primary lane, can fulfill these fundamental conditions.

Meanwhile, Israel continues to strike against the tunnels underneath the Egypt-Gaza border, via which the majority of goods required by Gaza residents are transported, including by blowing them up.

Under these circumstances, with the sea and air routes completely blocked, the tunnels rejected as a legitimate option, and the overland crossings increasingly shut down, how exactly are the residents of Gaza supposed to get the goods they need?

The announcement that Israel would allow lulavs to be imported from Gaza ahead of the week-long Jewish Festival of Succot, which began on Friday night (October 2), was greeted with mixed feelings. Lulavs, the young shoots of palm trees used as part of the religious rituals associated with the holiday, grow abundantly in Gaza and are in great demand in Israel at this time of year. But how did a “hostile entity” suddenly become a legitimate partner for ad hoc trade?

 According to the media, it was due to the massive pressure exerted by Israeli importers fearing a drop in their profits on the Minister of Religious Services, who obtained the hasty permit from the Minister of Defense.

Of course, there were also those who claimed that using a lulav bought from Gaza is a Mitzvah Habaa Ba’aveirah (”commandment performed through sin”) because the proceeds would fund Hamas.  However, in actual fact it is only when the goods are not exported via the official channels between Israel and Gaza that the Hamas government profits, thanks to taxes imposed on traffic passing through some 600 tunnels that lie beneath the Gaza-Egypt border.

It’s not supposed to be this way.

 In the 2005 Agreement of Movement and Access, Israel undertook to allow 400 trucks carrying goods for export to leave the Gaza Strip every day, in addition to seasonal agricultural produce. This commitment has never been fulfilled, and no more than 70 export trucks per day only were ever allowed to leave Strip. Export from Gaza to Israel was officially shut down in June 2007 when the latter closed Karni Crossing, effectively paralyzing the Gaza Strip’s economy and contributing to an unemployment rate of around 40%. It has been claimed that this policy is necessary in order to exert pressure on the residents of Gaza. Under these circumstances, the announcement that lulav exports could resume should have been welcomed in the Gaza Strip. Still, one cannot help wondering just how necessary the export ban really is, if it can be rescinded relatively easily in response to intensified consumer pressure from Israel?

 However, conversations with lulav growers in the Gaza Strip, some of whom lost their source of livelihood when the exports were banned, made it clear that in the final analysis there would be no export of lulavs from Gaza again this year. Apparently the Defense Ministry did not realize that following a 27-month ban on exports, it takes more than three days to arrange and prepare lulavs for export. The lulavs are in great demand in the weeks prior to the holiday, but become worthless after it begins, and so the timing was just too tight. As explained by Kamel Aklook, a 43-year-old lulav exporter from Deir al-Balah:

 “We all knew that the holiday was starting on Friday and that there was not enough time to complete the whole process. Gaza has the capacity to export up to 120,000 lulavs but it takes time – to harvest, assemble, prepare, and pack them, and the time remaining to us was insufficient to do all this and export them.” 

On a brighter note, it is still possible to revive the Gaza Strip’s agriculture industry and to resume trade ties between Gaza and Israel, to everyone’s advantage. In order to do this, Israel’s decision makers need to rethink their attitude, and recognize that all parties stand to benefit from this change.