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Cablegate: Gaza Economic Losses

VZCZCXRO2150
OO RUEHROV
DE RUEHJM #1455 1941356
ZNR UUUUU ZZH
O 131356Z JUL 07
FM AMCONSUL JERUSALEM
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8359
INFO RUEHXK/ARAB ISRAELI COLLECTIVE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEHBS/USEU BRUSSELS PRIORITY

UNCLAS JERUSALEM 001455

SIPDIS

SENSITIVE
SIPDIS

NEA FOR FRONT OFFICE; NEA/IPA FOR
WILLIAMS/SHAMPAINE/STEINGER; PRM FOR PDAS GREENE AND
PRM/ANE; NSC FOR ABRAMS/WATERS; TREASURY FOR
SZUBIN/LOEFFLER/NUGENT/HIRSON; BRUSSELS FOR LERNER; PLEASE
PASS TO USAID FOR KUNDER/MCCLOUD/BORODIN

E.O. 12958: N/A
TAGS: ETRD ECON EAID EFIN EIND PGOV PHUM KWBG IS
SUBJECT: GAZA ECONOMIC LOSSES

1. (SBU) Summary: According to data compiled by the
Palestinian private sector, the closure of the
Karni/al-Mintar crossing following the Hamas take-over of
Gaza is causing catastrophic damage to Gaza's economy. Since
the June 12 closure of the crossing, 80 percent of Gaza
factories have closed, at least 65,000 employees have been
laid off, private sector losses have reached USD 20.6
million, and USD 160 million in construction projects are on
hold, according to PalTrade and the Palestinian Federation of
Industries (PFI). End summary.

2. (SBU) The Private Sector Coordinating Council (PSCC) and
the World Bank hosted a July 12 meeting at the World Bank's
al-Ram office on the economic situation in Gaza. The meeting
featured a PalTrade and Palestine Federation of Industries
(PFI) presentation quantifying the cost to the private sector
of the continued closure of Karni/al-Mintar crossing
following the Hamas take-over of Gaza. Gaza participants,
including business association, UNSCO, and NGO
representatives, joined the meeting via DVC. Econoffs and
USAID representatives also attended. World Bank data on the
economic situation in Gaza will be reported separately.

Dependency
----------

3. (SBU) According to the PalTrade/PFI presentation,
factories in Gaza import 95 percent of their raw materials
from or through Israel, and 80 percent of their machinery and
spare parts. Gaza's 5,000 cash crop farmers are totally
dependent on Israel for supplies such as fertilizers,
pesticides, seeds, seedlings, and packaging material. Gaza's
furniture sector exports 76 percent of its production to
Israel, the garment sector exports 90 percent, and the
processed food sector 20 percent (mostly through Israel to
the West Bank). Agribusinesses and agricultural associations
export almost all their produce to or through Israel.

Losses
------

4. (SBU) Since June 12, 3,190 of the remaining 3,900
manufacturing establishments in Gaza have closed, according
to PalTrade and PFI. Those factories still open are
operating at 60 percent capacity or less. At least 65,000
employees have been laid off. The furniture, garment,
textile, and processed food sectors have lost an estimated
USD 16 million in business in the past month. Israeli
garment merchants are withholding payment for completed
orders until the raw materials they previously sent into Gaza
are returned. In the agricultural sector, lost sales are
estimated to be more than USD 12 million for the remainder of
2007. PalTrade and PFI estimate that the construction sector
has lost USD 1.6 million since June 12, and USD 160 million
in construction projects are on hold due to lack of
materials. (Note: UNRWA announced July 9 that is had
suspended USD 93 million worth of projects in Gaza because
cement and other building materials had run out. UNRWA says
its construction projects employ some 121,
000 people. End note.) Total private sector losses since
June 12 are estimated to be USD 20.6 million.

Containers Blocked
------------------

5. (SBU) Since Israel stopped clearing Gaza-bound cargo from
Ashdod port June 18, 850 containers of imported goods ordered
by companies in Gaza have been stranded at the port,
according to PalTrade and PFI. While demurrage fees on these
blocked shipments continue to mount, PalTrade and PFI
estimate that about 450 additional containers destined for
Gaza are in transit.

WALLES

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