This week we will try again to understand what the possibilities are for industry in Gaza when the import of consumer goods, such as furniture, is permitted, when raw materials for industry have been cleared for entrance after many months, and while the ban on export remains firmly in place. This time we spoke with Tahseen al-Isi, director of the al-Isi furniture company in Gaza City, whose family has manufactured furniture for the Gaza market since the company was founded in 2000.

Employees in a furniture factory in Gaza.

As opposed to the textile factory we wrote about last week, al-Isi’s factory did not export to the West Bank before 2007, instead focusing on the local market. But since the sweeping ban on export was imposed in June 2007, al-Isi has found himself competing for the small local market in Gaza with all of the vendors who cannot export to the West Bank. The market is flooded with local merchandise, in addition to Israeli merchandise that is allowed in, and as a result, prices have dropped to the point where merchants hardly make any profit.

But that’s not the only problem. Al-Isi explains that when Israel banned the import of wooden boards, he bought expensive boards smuggled through the tunnels. When the ban was lifted, al-Isi discovered that the price of the boards he was buying was three times higher than the price of those recently brought into the Gaza Strip through the crossings from Israel. And so al-Isi found himself having to compete with other furniture-makers who had paid less for their materials, which in turn forced him to reduce production by 50%. If he had continued producing at the normal volume, says al-Isi, his losses would have reached $50,000.

Furniture factory in Gaza

The ban on export not only floods the market with cheap products but also causes a steep rise in unemployment. Whereas in the past al-Isi had 18 carpenters working in the factory’s workshops, today he has only five workers. Al-Isi says that the workers suffer from the situation the most. So much so that most of them now rely on the aid of local and international organizations: “Most are frustrated and desperate about the economic situation”, al-Isi says sadly, “and we merchants do not have a magic wand to change the situation in Gaza”.

Therefore, the ban on export, which is one of the most important aspects of the closure on Gaza, affects directly the citizens’ right to live with dignity.

What happens to industry when you open a market to consumer products but restrict raw materials and ban export? What doesn’t happen is economic recovery.

The Israeli cabinet decision to ease the closure on the Gaza Strip did not change the sweeping ban on Gaza exports. While industrial raw materials were allowed into Gaza beginning in July, the limited capacity of the crossings meant only small quantities entered (raw materials were 4% of the total amount of goods that entered in July), while at the same time Israeli-made consumer products, no longer banned, flooded the market. The combination does not bode well for manufacturers in particular and the economy in general, as evidenced by the story of Jihad Abu Dan, aged 22, married and the father of two, whose family owns a textile factory in the northern Gaza Strip town of Beit Lahiya. His father was a textile worker who built a two-story factory that spans an area of 1,500 m², meant to support the extended family. Says Jihad:

“Not only did the ‘easements’ Israel declared not help us, they have even harmed us. Exports are still banned, and that is a problem because the Gaza market is very small, and a large amount of ready made clothes have been brought in from Israel and China. The Gaza market was flooded with products, there is a lot of supply and less demand, and because of the stiff competition, we are forced to lower prices. As long as there is no export, it is hard for workers in the clothing and textile sector to profit and produce. After three years of closure, we lost the contacts we had developed with clients from Israel, and they went elsewhere”.

“Before the closure, we worked at our full manufacturing capacity, producing 2000-3000 pieces a day. We did not manufacture for the local market; all of our products were for export to Israel and abroad. Back then, we imported between one and one and a half trucks of raw materials a day through the Karni Crossing, three days a week, and we exported between one and one and a half trucks of goods a day, two or three days a week”.

Mohammad Abu Dan and Co. Textile and Clothes Company. ‘These days the factory operates at only about 10% of its production capacity.’

“Right before the closure began, we received an order from an Israeli client, who asked for 100,000 items, which we had to make in three months. We managed to send him 30% of the order before Israel closed the crossings, and the rest of the goods remained in Gaza; he did not benefit from them, nor did we. Because clothing on the local market is sold more cheaply, we had to lower prices in order to sell the goods, and we lost money”.

“Today we employ 25 workers. There is not much work. The Gaza market is very small, and profits are minute. We mostly just cover manufacturing costs, but we continue to operate out of a desire to maintain the factory my father built. Out of 180 sewing machines, these days we are working with just 20. More than half of the machines broke down, partly due to remaining idle for a long period of time. These days we manufacture about 300 pieces a day, 10% of our capacity and our actual production before the closure. For many hours a day we have no electricity, and during that time we don’t work. We adjust our daily schedule to the power supply – Sometimes we work from 6 in the morning until 1 pm, we then stop working, because there is no electricity, and go back to work when the power returns, sometimes from 10 at night to 5 in the morning.”

Mohammad Abu Dan and Co. Textile and Clothes Company. ‘Out of 200 workers prior to the closure, only 25 are employed today, and 20 sewing machines out of 180 are operational.’

The sewing and textile industry in Gaza – general information

In 2005, prior to the closure, the production value of the sewing and textile industry in the Gaza Strip was estimated at $39 million, and approximately 70% of the manufactured goods were designed for sale to Israel and West Bank. In 2000, 37,000 people worked in this industry, whereas today the number of workers is estimated at 1,500. In the past there were 600 textile and sewing companies in the Gaza Strip, however it is estimated that only 10% are active today.

Source: Paltrade and the Textile Industry Association

Agence France Presse (AFP) news agency recently published a report about two sisters from the Gaza Strip, aged 13 and 16, who went to work in the fishing industry to support their family following their father’s illness. The report drew much interest and was translated and published on several Arabic language websites. True, it is out of the ordinary for two girls in a conservative society to find themselves in a field, or sea, as it were, usually reserved for men, but considering the difficult situation in Gaza– 39.3% unemployment in the second quarter of 2010, with the number of people living in abject poverty rising in the last two years from 100,000 to 300,000 according to the UN Office for the Coordination of Humanitarian Affairs in the Occupied Territory–many women are taking the initiative to try and earn a living to help their families make ends meet.

In addition to testimonies from the field, statistics are also pointing towards a change. According to the Palestinian Central Bureau of Statistics, the percentage of women working outside the home in Gaza in 2009 was 11%, low compared to other countries, however there has been a gradual rise. In 2005, before the closure, only nine percent of women were present in the workforce.

Even seasoned pundits could not help but express dismay this week at the televised testimony by senior Israeli officials, beginning with Prime Minister Benjamin Netanyahu, before the Turkel Commission charged with investigating the Israeli military’s May 31 interception of ships bound for Gaza. As the Israeli daily Haaretz pointed out in a scathing editorial, Netanyahu readily acknowledged that Israel’s decisions on what to allow or prohibit into Gaza were based not on concern for the welfare of the population in Gaza but rather about Israel’s image in the international media:

“Even though there was not a humanitarian crisis in Gaza, I decided to gradually ease the limitations and the movement of goods through the land crossings. I did so because gradually these limitations turned into a diplomatic and public relations burden”.

If the limitations really were, as Netanyahu claimed, necessary “to prevent the entry of weapons and war materiel into Gaza”, easing them just in order to improve Israel’s public relations would seem grossly irresponsible. If they weren’t necessary for security – why were they imposed in the first place?

We also found puzzling Netanyahu’s claim that “Israel increased the number of trucks entering Gaza by approximately 30% over the five months preceding the flotilla incident”.  According to the Israeli Ministry of Foreign Affairs, in the first five months of 2010, Israel actually decreased the volume of trucks permitted into Gaza by 9%, relative to 2009 (see the first and last pages of the MFA report, which show that the monthly average of trucks allowed into Gaza in 2009 was 2,576, compared with just 2,329 in the first five months of 2010).

The real change in the volume of trucks permitted into Gaza came only after the flotilla incident, when Israel was pressed to justify its policy blocking the movement of people and goods into and out of Gaza: Last week, Israel allowed Gaza residents to receive 1,126 truckloads of goods, approximately 45% of need, as compared to about 25% of need prior to the flotilla incident.

Export and the movement of people, critical for economic recovery and normal life in Gaza, are still blocked. Perhaps these restrictions do not constitute a sufficiently heavy “diplomatic and public relations burden”?

There is continued buzz this week over new commercial developments in Gaza. The shopping mall is a media favorite, as are reports of a new water park, a media center and new cafes and restaurants. Never mind that all these are housed in either existing buildings that were refurbished or were built anew with materials and money coming in via the tunnel economy; the mere existence of a few places of recreation would seem to point to the total absence of any problems with regard to freedom of movement. Not the case, as we reported last week. Unfortunately, a new mall and a few new humanitarian projects don’t point in the direction of the real reconstruction, recovery and development Gaza needs, especially in order for the economic market to absorb Gaza’s young people.

In late July, the Tawjihi post-high school exam results were announced to the dread or delight of Gaza’s 36,594 exiting high school seniors. Over the summer vacation, these youngsters are making plans for their future like young people elsewhere. Will they attend one of Gaza’s five universities, which don’t offer badly needed degrees in environmental science, medical engineering, veterinary medicine and occupational therapy? Or will they seek to travel abroad, since travel to West Bank universities remains banned? Will they join the ranks of Gaza’s 34% unemployed, or seek work elsewhere, perhaps underground?

Photo: Karl Schembri/Oxfam

In July, following the Israeli Cabinet decision to “ease” the closure, only 4% of the goods entering Gaza were raw materials destined for production, and of course, export remains banned. Under these conditions, it’s clear that the market couldn’t have suddenly bounced back and that not all is good and well.

The youth of Gaza continue to wait for the promised, renewed “economic activity” and hope for opportunities to begin building tomorrow’s future. A new resort or restaurant built from tunnel money can’t possibly employ them all.

The media last week heralded the opening of the first shopping mall in Gaza and immediately the blogosphere was atwitter. Some saw it as proof of the easing of the closure, which Israel had promised, and others saw it as a sign that there is no crisis in Gaza. Indeed, a two-story building converted into an air-conditioned shopping mall (restrictions on the transfer of construction materials into Gaza for the private sector are still in effect and would preclude the building of such a structure) does not correspond with the usual images of the Strip, nor with concerned reports about hunger arising from the closure, still in effect despite the easing of some restrictions. But Gaza is not and was never a place with a quantitative food shortage; rather it is a place where many people lack the means to buy food and other goods because of a closure policy whose tenets are “no development, no prosperity, and no humanitarian crisis”.

Prices at the new shopping mall are particularly low, clients say, and considering the limited buying power of Gaza residents, there seems to be no other choice. Sixty-one percent of households in the Gaza Strip suffer from food insecurity, where the UN defines food security as “a situation in which all people, at all times, have physical, social and economic access to sufficient, safe and nutritious food which meets their dietary needs and food preferences for an active and healthy life”. Unemployment is at 34%, a figure that should come as no surprise due to the sweeping ban on exports from Gaza enforced since the beginning of the closure of Gaza in June 2007. Israel has emphasized that the recent cabinet decision announcing an easing of the closure does not apply to export (nor to the movement of people). Even the recent lifting of the ban on the transfer of raw materials and the slow trickle of spare parts into Gaza have not yet made their mark on economic activity, especially considering the crossings’ capacity limitations.

According to the mall’s directors, the vast majority of brands sold at the mall – 90% – are Israeli-made, in addition to a small percentage of items originating in the West Bank. This is another indication of the dearth of goods manufactured in Gaza itself. Indeed, how can you manufacture clothing, shoes, carpets and food products (items that have been manufactured in Gaza in the past), when, even after the cabinet decision to “lift the closure”, the amount of goods transferred into Gaza last week (979 trucks compared to 2,350 trucks a week in 2005) meets only 40% of needs?

The price is of the products at the mall may be low, but apparently not low enough for most of the residents of Gaza.

Twenty-one days after the June 20, 2010 cabinet decision, Israel allowed Gaza merchants to import raw materials for industry. This followed three years of prohibiting the entrance of raw materials to Gaza, as part of a declared policy of “economic warfare“. Last week fabrics, empty cans, thread and industrial cocoa were brought in.

Although Israel states that the number of trucks carrying goods into the Gaza Strip has risen by 70% since the cabinet decision, when seen in context, that number still only accounts for 34% of the needs of the residents of Gaza and its economy (in 2005 the number of trucks entering Gaza was 10,400 per month).

Furthermore, when you zoom out from the numbers and percentages, it turns out that even though Israel allowed the Palestinian Coordination Committee (the body in charge of coordinating and transferring requests from private sector merchants to the Israeli side, not including the agricultural sector) to include raw materials in its daily lists, there is still a long way to go until those materials actually reach Gaza. Since an Israeli permit is subject to the capacity constraints of the crossings, and since Israel has permitted only one of the crossings (Kerem Shalom) to be fully operational, most requests by merchants for raw materials are not even submitted. Last week, for example, the average number of trucks crossing per day, including via the conveyer belt at the Karni crossing, was 180, including 50 trucks of humanitarian supplies and inputs for the agricultural sector. Under these circumstances, the Palestinian Coordination Committee has its hands full prioritizing the items and trying to find a place in the daily quotas for the various industries in Gaza requesting goods. The Committee estimates that to meet the current applications for raw materials it will be necessary to allow 500 trucks through per day.

Kerem Shalom crossing (source: USAID)

Under these circumstances it will take months until the first orders of basic raw materials for industry will be able to enter Gaza and since Israel continues to insist on banning export, it is not clear how it intends to implement its promise “to expand economic activity” in the Gaza Strip, which depends on the passage of people and goods in both directions.

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While we wait for Gaza’s economy to bounce back and in better news … tomorrow, over 6,000 kids in Gaza will attempt to break the world record for the number of basketballs bounced simultaneously as part of UNRWA’s “Great Gaza Global Bounce”. To see a short clip about the attempt, click below.

As discussion of “easing” the closure of Gaza continues, restrictions on movement between Gaza and the West Bank remain tighter than ever. Last week, the Defense Ministry announced that the “easing” would in no way expand criteria for travel of people between Gaza and the West Bank.

In an op-ed in Tuesday’s Haaretz, former Israeli Defense Minister Moshe Arens implies that the division between the Gaza Strip and the West Bank has only to do with the very real obstacles presented by 40 kilometers (25 miles) of land and the political divisions that define the opposing ruling authorities of the areas. In fact, Israel’s policy separating Gaza from the West Bank goes back long before the Hamas-Fatah split and is entrenched in every aspect of life. It is what prevents families from living together, even when a father is split from his children; it is what prevents a patient from seeking treatment in a Ramallah hospital, even when that treatment isn’t available in Gaza; it is what prevents a trader from shipping his wares to the West Bank, even when the Palestinian economy would seem to include the whole of the Palestinian territory; it is what prevents Fatma Sharif from studying at Birzeit University, even when the program she wishes to study does not exist in Gaza. It is what prevents movement between Gaza and the West Bank almost completely, but allows for a one-way ticket from the West Bank to Gaza. It is why nearly 35,000 people living in the West Bank with “Gaza” written in their ID cards are afraid to leave the house for fear of forced removal. It is the subject of a new interactive media tool called Safe Passage, www.spg.org.il, showing what is not new and not “internal” or “geographical”, but rather intentional, about the separation of Gaza and the West Bank.

We encourage you to play, Mr. Arens.

www.spg.org.il

An article in yesterday’s Haaretz cites Coordinator of Government Activities in the Territories Brig. Gen. Eitan Dangot’s having told the Palestinian Authority that Israel will facilitate an increase the number of trucks entering Gaza by 50%. Dangot claims that in the near future, Israel will allow 150 trucks per day via Kerem Shalom and the equivalent of 120 trucks per day of aggregates via the conveyer belt at Karni, for a total of 270 trucks per day.

That’s better than the current average of 138.5 trucks per day (based on 21 working days per month and including trucks of fuel and gas crossing at Kerem Shalom) but it’s far from what Gaza needs. Even if Dangot’s plan becomes reality, the increase would bring us to just 51% of what Gaza residents need for ordinary trade and activity, not including the additional and immediate demand for tens of thousands of truckloads of construction materials needed to repair damage from the war.

And even if import increases, it’s not clear that raw materials for manufacturing and industry will be included in the increase in items or that export will be allowed. In other words, restrictions continue to apply on goods with no apparent security correlation, pursuant to the policy of crippling Gaza’s economy and keeping residents there dependent on charity. And let’s not forget that people, 1.5 million of them, are still being blocked from traveling into and out of Gaza to reach jobs, training opportunities, schools, medical treatment and family.

Maybe someone should ask them if they feel that the closure has been eased.

On Sunday, Israel’s Cabinet issued an encouraging statement promising to remove many of the restrictions on civilian goods entering Gaza, including those needed for economic activity.

What has changed on the ground since the announcement and more generally, since international pressure mounted on Israel in the wake of the May 31 flotilla incident? The list of consumer goods permitted into Gaza has been expanded to include previously banned items such as ketchup, mayonnaise, and children’s toys. Ah, yes, and chips (french fries) as well, for dipping into the ketchup. But that’s about it.

We are therefore puzzled by Prime Minister Netanyahu’s statement that “we are already seeing a significant growth in the scope of the civilian goods entering Gaza.” There has been no significant change in the volume of trucks entering Gaza, as is evident from Gaza Gateway’s graphs. Last week, for example, 654 trucks entered Gaza, including via the grain elevator, similar to the number that entered in the week before the flotilla incident (662). This week, as of yesterday, the fourth of five working days for the crossings, approximately 567 trucks had entered Gaza, which is consistent with the policy, since June 2007, to allow entry of approximately 25% of what Gaza residents need.

Indeed, it is hard to see how more goods could enter Gaza, given that the one crossing still operating – Kerem Shalom (Kerem Abu Salam) – is working at near capacity with an average of 110 trucks per day of goods, five days per week. The “significant growth” mentioned by Mr. Netanyahu would be difficult unless Israel opens some of the crossings it has sealed over the last three years, including Karni Crossing, Gaza’s commercial lifeline, with a capacity of 1,000 trucks per day.

In any event, as Dan Ephron notes in Newsweek today, without the ability to export finished products and receive raw materials (they are still not being allowed in), economic recovery in Gaza will remain elusive.