US embassy cable - 05TELAVIV4775

C O N F I D E N T I A L SECTION 01 OF 03 TEL AVIV 004775 
 
SIPDIS 
 
E.O. 12958: DECL: 07/29/2015 
TAGS: ECON, KWBG, EAID, PREL, IS, GAZA DISENGAGEMENT, ISRAELI-PALESTINIAN AFFAIRS 
SUBJECT: GAZAN BUSINESS STRUGGLES WITH DISENGAGEMENT 
PREPARATIONS 
 
Classified By: Deputy Chief of Mission Gene A. Cretz for reasons 1.4 (b 
) and (d) 
 
1.  (C) Summary:  Gazan private sector contacts are on edge 
over current GOI-PA negotiations regarding the 
post-disengagement border crossings, arguing that without 
freedom of movement at Karni, Erez, and Rafah terminals, the 
Gazan economy will not survive Israel's withdrawal.  Business 
leaders believe that any "lockdown" of the Gaza Strip in the 
run-up to and during disengagement will further harm 
manufacturing and construction enterprises already hampered 
by a recently tightened closure regime.  Several contacts 
have expressed concern over what they view as 
counterproductive political disagreements between the GOI and 
the PA on crossings, especially the nature of door-to-door 
cargo shipment and "safe passage" between Gaza and the West 
Bank.  Hanan Taha of Paltrade emphasized that the private 
sector "does not care" how the parties resolve their 
differences as long as Gazan goods and people are able to 
move in and out of the Strip, and even urged the PA to accept 
the GOI's preference for free-circulating trailers rather 
than Palestinian trucks moving through Green Line Israel. 
Housing engineer Jawdat al-Khoudry of 
the Palestinian Business Association (PBA) disagreed with 
what he views as the donor community's insistence on removing 
settlement rubble to Egypt, asserting that the private sector 
can generate significant employment by combining rubble from 
the settlement houses with already-existing Gazan rubble to 
build roads and mid-rise housing.  While Taha and PBA 
Chairman Mohammed Yazgi gave rare praise to the PA for its 
efforts to curb violence and streamline procedures on the 
Gazan side of Karni terminal, Khoudry alleged that the 
Ministry of Civil Affairs has distorted the distribution of 
one-year "businessman permits," giving the cards to 
colleagues and personal friends of Ministry officials who do 
not qualify under the criteria agreed to by the GOI and the 
PA.  End summary. 
 
--------------------------------- 
Freedom of Movement Still Primary 
--------------------------------- 
 
2.  (C) While Gazan private sector contacts continue to 
profess ignorance of most aspects of disengagement planning, 
many are keenly aware of GOI-PA coordination on border 
crossings, arguing that the crossings regime will make or 
break the Gazan economy.  Hanan Taha of PalTrade told Econoff 
July 27 that because Gaza,s local market is relatively 
small, the post-disengagement economy will be almost solely 
dependent on increased exports of agricultural produce, 
furniture, and textiles to the West 
Bank and EU countries, requiring GOI guarantees on the free 
movement of goods out of the Strip.  Housing engineer and 
board member of the Palestinian Business Association (PBA) 
Jawdat al-Khoudry (please protect) concurred, arguing that 
while "everyone" from the donor community to Israeli 
economists have predicted that the Gazan construction sector 
will boom immediately following disengagement, growth could 
be significantly hampered if companies are unable to import 
aggregates and potential investors are not 
assured that their materials and personnel will be able to 
move freely. 
 
----------------------------- 
"Lockdown" Threatens Business 
----------------------------- 
 
3.  Taha argued that what she termed the recently tightened 
closure regime has weakened the private sector and rendered 
it unable to prepare for possible lockdown of the Gaza Strip 
during withdrawal.  "We don,t know whether it will be for 
two days or two months, and nobody can stock up on supplies 
because of the closures," she explained.  While Israeli 
products and Gazan exports now often move through Karni 
terminal in under three days, several contacts noted that 
West Bank imports are still regularly delayed for two weeks 
or more.  PBA Chairman and 7-Up Gaza CEO Mohammed Yazgi said 
that the closure at Abu Kholi junction, now entering its 
third week, has cut him off from the Rafah and Khan Yunis 
markets that comprise over 40% of Pepsi sales, and Khoudry 
pointed out that the price of a ton of imported construction 
aggregates has risen to USD 10, more than triple global 
market price.  Any additional measures could "destroy" the 
economy, Khoudry continued, causing thousands of layoffs at a 
crucial time.  To ensure the survival of private enterprise 
during the lockdown period, he said, it is imperative that 
Karni terminal remain functioning at least at its current 
level, and that Erez reopen for Palestinians at least 1-2 
days a week. 
 
--------------------------------------------- - 
Politics Has No Place in Crossings Discussions 
----------------------------------------- 
 
4.  (C) Taha expressed her concern that the GOI-PA 
negotiating teams are getting stuck on divisive issues with 
regard to crossings, asserting that the Gazan private sector 
"does not care about the politics of the crossings" as long 
as Gazan exports are assured.  On door-to-door cargo 
transport, she said that she understands GOI reservations 
about Palestinian trucks inside Green Line Israel and 
believes the PA should accept free-circulating trailers, 
which will sufficiently address private sector needs.  (Note: 
The GOI and the PA sides have both accepted, in principle, 
the long-term goal of door-to-door movement, with both sides 
still discussing how to improve the back-to-back system in 
the interim.  Such an improved back-to-back system may 
involve the use of trailers and containers that can move 
between the West Bank, Israel, and Gaza, with new truck cabs 
hooking up to the trailers at crossing points.  End note.) 
Khoudry concurred that "for business, there are no conditions 
on whether the link to the West Bank is a train or a sunken 
road -- any passage is a good passage."  Khoudry claimed that 
real estate prices in Bayt Hanoun have already increased 
nearly 70 percent, thanks to a rumor that the link will 
originate there. 
 
------------------------ 
Gaza is Ready for Rubble 
------------------------ 
 
5.  (C) Khoudry said he fears that the GOI, the PA, and the 
donors are only willing to consider removal of rubble from 
the demolished settlement houses to Egypt, despite the fact 
that it could require up to 80,000 trips and cost some USD 80 
million.  In conjunction with the German consulting company 
GTZ, the PBA compiled a report on how to combine settlement 
rubble with approximately 10 million cubic meters of 
already-existing rubble generated by IDF incursions and 
Intifada activities.  "Existing Gazan rubble 
and settlement rubble should be viewed as one problem with 
one solution," he said, explaining that it could be used in 
road and mid-rise housing construction, potentially creating 
thousands of jobs in the short term.  (Note: World Bank 
country director Nigel Roberts told Emboffs July 28 that 
light demolition of the houses could leave up to 77 percent 
usable rubble, and that PA Civil Affairs Minister Dahlan 
agreed in principle to employ this in construction.  End 
note.) 
 
-------------------------------------------- 
Private Sector Contacts: PA Fighting Terror, 
Misusing Business Permits 
------------------------------------------- 
 
6.  (C) While private sector contacts have in the past been 
quick to blame Gazan economic woes at least in part on PA 
inefficiencies, recent discussions have yielded praise for PA 
efforts in the run-up to disengagement.  Yazgi emphasized 
that the PA is "very serious about closing the door on 
terrorism," and argued that PA President Abbas has been 
unable to deliver quality-of-life improvements to 
Palestinians because the GOI has not yielded on any key 
humanitarian issues.  Taha credited the PA with shortening 
wait times for Gazan exports at Karni, citing a new system 
that allows representatives from sectoral unions to submit 
shipment coordination requests to the Ministry of National 
Economy three days in advance.  This procedure enables 
greater accountability and consistency than the old system, 
she explained, in which representatives dealt directly with 
the security services on the ground at Karni, a process open 
to inconsistencies and potential corruption. 
 
7.  (C) Khoudry (please protect) countered these positive 
assessments, however, claiming that Deputy Minister of Civil 
Affairs Naser Sarraj had distorted the process by which Gazan 
Palestinians receive "businessman cards," one-year permits 
enabling regular entry into Israel and expedited passage 
through Erez crossing for qualified business leaders. 
Khoudry claimed that Sarraj, with the blessing of Civil 
Affairs Minister Dahlan, provided dozens of cards to personal 
friends and contacts, including "journalists, a UN employee, 
a mid-level PA employee, doctors and dentists in private 
practice, and colleagues' wives" with unclear connections to 
businesses inside the Erez Industrial Zone, none of whom 
qualify for the cards under the criteria agreed to by the 
Israeli MoD and the PA.  Khoudry said he confronted Dahlan, 
who reportedly called these examples "small mistakes" and 
argued that he did not have the capacity to follow up. 
 
********************************************* ******************** 
Visit Embassy Tel Aviv's Classified Website: 
http://www.state.sgov.gov/p/nea/telaviv 
 
You can also access this site through the State Department's 
Classified SIPRNET website. 
********************************************* ******************** 
KURTZER