US embassy cable - 04TELAVIV2352

C O N F I D E N T I A L SECTION 01 OF 02 TEL AVIV 002352 
 
SIPDIS 
 
NEA FOR BURNS/SATTERFIELD 
 
E.O. 12958: DECL: 04/23/2009 
TAGS: ECON, KWBG, IS, GAZA DISENGAGEMENT, ISRAELI-PALESTINIAN AFFAIRS, ECONOMY AND FINANCE 
SUBJECT: EREZ INDUSTRIAL ESTATE: DAYS MAY BE LIMITED 
 
 
Classified By: Ambassador Daniel C. Kurtzer, Reasons 1.4 (B) & (D) 
 
1.  (C) Summary:  On April 21, the Israeli daily Haaretz 
reported that the IDF may close the Erez Industrial Estate 
(EIE) in response to a spate of recent terror attacks at the 
zone.  GOI officials told Gaza Econoff that the GOI is split 
over whether the EIE should continue operating both in the 
short- and long-term, i.e. post-Gaza withdrawal.  However, 
our contacts believe that the zone will/will likely re-open 
after Israeli Independence Day, April 27.  Israeli and 
Palestinian investors with factories in the zone have 
received very little information to date on future plans.  A 
meeting is scheduled between the GOI and Israeli investors 
for Sunday April 26.  Palestinian investors, however, are 
completely out of the information loop.  End Summary. 
 
--------------------------------- 
Erez: Prime Target for Terrorists 
--------------------------------- 
 
2.  (C) The Erez Industrial Estate (EIE) has been the target 
of several attacks since the beginning of the year.  On 
January 14, a female suicide bomber killed four Israelis when 
she blew herself up at the entrance to the zone.  On February 
25, two Palestinian gunmen infiltrated the zone overnight and 
opened fire on GOI buildings near the entrance to the zone 
the following morning.  One Israeli soldier was killed when 
the IDF engaged and killed the gunmen.  On April 17, a 
suicide bomber who, according to Israeli sources, had a valid 
permit to work in the zone detonated his explosives inside 
the EIE killing himself and one Israeli border guard. 
 
----------------------------- 
GOI Response: Close the EIE? 
----------------------------- 
 
3.  (C) Throughout the course of the Intifada the GOI has 
closed the EIE only rarely, this despite almost daily mortar 
shells in the area.  Following the terrorist attacks earlier 
this year, the GOI responded by closing the zone for a day or 
two only.  After the April 17 terrorist attack, however, the 
GOI instituted a prolonged closure and the zone is not 
expected to re-open until after Israeli Independence Day at 
the earliest.  On April 21, Israeli newspaper Ha,aretz 
quoted a senior IDF officer as saying,  &It is quite 
possible we will have no choice but to close the industrial 
zone.8  The same article reported that IDF Chief of Staff 
Moshe (Boogie) Ya,alon visited the EIE on April 20 and said 
that the zone would not be re-opened until a suitable way of 
protecting soldiers is found. 
 
------------------------------------- 
Working Level Says EIE Will 
Likely Re-open After Independence Day 
------------------------------------- 
 
4.  (C) Lt. Colonel Isaac Gurvich, head of the Economic 
branch of the Office of the Coordinator of Government 
Activities in the Territories (COGAT), told Gaza econoff that 
notwithstanding the Haaretz report, &no decisions have been 
taken to close the zone.8  Gurvich said that the GOI was 
split with some, e.g. Ministry of Defense, advocating to 
close the EIE immediately and others, e.g. COGAT, arguing 
that it should be kept open for humanitarian/cooperation 
purposes.  Gurvich said that difficult questions were being 
posed ) &Is it justifiable to put Israeli soldiers at risk 
to preserve jobs for Palestinians?8  Gurvich noted that the 
soldiers are not guarding settlements and Israeli citizens, 
nor are they providing security for the Israeli/Gaza northern 
border, nor are they securing a significant economic asset. 
 
5.  (C) Gurvich said that if the final answer is yes, it 
makes sense to keep the zone open because it provides a 
livelihood for four to six thousand Palestinians and thus 
indirectly feeds 24,000 )36,000 individuals, then the issue 
turns on how to keep it open.  How much is a reasonable 
amount of money to invest in security upgrades?  These 
concerns were of course further complicated by the Gaza 
disengagement initiative.  Gurvich said the GOI was 
&struggling8 with two &momentums8 ) &What happens to 
the EIE after separation and what do we do about terrorist 
attacks now?8  He insisted that no final decisions had been 
reached on either of those two broad questions. 
 
6.  (C) Captain Joseph Levy, COGAT liaison for the Erez 
crossing, was firm in his belief that the EIE will re-open 
after Israeli Independence Day.  Giving the on-the-ground 
perspective, Levy said that soldiers have received no orders 
to close the zone permanently or to begin preparations for a 
closure.  Levy said, in fact, the opposite was true; soldiers 
have been instructed to review lessons learned from the April 
17 terrorist attack and to make recommendations for security 
modifications.  He said that his orders were to &find the 
way8 to allow the zone to re-open.  Levy insisted that the 
only reason why the zone remains closed is because the April 
17 bomber used a new technique of only carrying plastic 
explosives which were undetectable by the metal scanners as 
opposed to the more typical nail-embedded explosives. 
Obviously this security gap would have to be addressed but 
the closure was not indicative of a policy decision to 
abandon the estate in his view. 
 
------------------------------------- 
Business Owners in the Dark; Some Not 
Sticking Around to Wait for Answers 
------------------------------------- 
 
7.  (C) Gaza Econoff called Um Hassem, a Palestinian woman 
who owns a textile factory in the zone, which exports 
clothing to Israel and the U.S., for her reaction to the 
Haaretz report of a possible permanent closure of the EIE. 
Hassem reacted with alarm and dismay and said that the GOI 
had not/not apprised Palestinian owners of any possible 
closure and that she was preparing to go back to work after 
Israeli Independence Day.  (Note:  The GOI makes very little 
differentiation between Palestinian factory owners and 
Palestinian day laborers.  They use the same entrance/exit 
gates and are subject to all other security protocols. 
Owners have very little access to information and are not 
allowed into their factories when the zone is closed.  End 
Note).  Hassem beseeched the USG to intervene to save the 
livelihoods of the business owners and the thousands of 
Palestinians who work at the EIE every day. 
 
8.  (C) Kobi Cohen, President of the Erez Association of 
factory owners and himself the owner of five textile 
factories in the zone, told Gaza econoff that factory owners 
were very distressed.  Cohen said that between April 20-22, 
fifteen Israeli owners had decided to close their businesses. 
 (Note:  Before this recent exodus, the EIE had 201 factories 
) 97 Palestinian and 104 Israeli owned. End Note.) Cohen 
said that he tried to persuade them to stay but to no avail. 
Cohen said that the GOI had not told Israeli business owners 
that Erez would close, but rather that although it would do 
its best to keep it open it could offer no guarantees. 
Security would have to be evaluated on a day-by-day basis. 
Cohen said that he and other owners of course understood the 
security rationale but they could not run businesses under 
such circumstances.  No one is able to meet their orders, he 
lamented.  Cohen admitted that he also was actively 
considering shifting his factories inside Israel, despite 
having been born in Gaza.  There is no future for Erez, he 
said.  &Things are getting worse, not better.  So we have to 
be realistic.8 
 
9.  (C) Asked about his conversations with Palestinian 
business owners as the president of the owners association, 
Cohen said that it had been limited to some telephone contact 
since the Palestinian owners are not allowed in the zone 
during closure.  Cohen opined that Palestinian owners would 
not leave barring a complete closure of the zone. 
Palestinians have few options, he said.  If they leave Erez 
they will be forced to use Karni crossing for their imports 
and exports and Karni is not sufficiently reliable to sustain 
an export business to a demanding, competitive market. 
 
10.  (C) Cohen confirmed information passed to Gaza econoff 
by Gurvich that the GOI is planning to meet with Israeli 
investors on April 26.  Gurvich said that the meeting is 
being organized by Deputy Director General, Foreign Trade 
Administration, Gabi Bar of the Ministry of Industry and 
Trade.  According to Gurvich agenda items will include issues 
relating to improving security and compensation if the GOI 
decides it must close the EIE, either now or in the future 
after disengagement. 
 
11. (C) Comment:  We assess that the EIE will re-open some 
time after April 27.  Clearly, however, its future is 
ambiguous, at best.  As we consider ways to make Gaza 
economically viable in the immediate term and 
post-withdrawal, we will need to take a close look at the 
successes and failures of existing joint Israeli/Palestinian 
industrial estates; the mechanisms for guaranteeing security 
and a predictable operating business environment; labor 
access; and control over access to inputs and outputs, 
without which any business will fail. 
 
 
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