US embassy cable - 05TELAVIV5515

C O N F I D E N T I A L SECTION 01 OF 02 TEL AVIV 005515 
 
SIPDIS 
 
E.O. 12958: DECL: 08/31/2015 
TAGS: ECON, KPAL, EINV, EAID, IS, PTER, GAZA DISENGAGEMENT 
SUBJECT: DISENGAGEMENT:  GAZA BUSINESSMEN BOTH HOPEFUL AND 
CONCERNED 
 
Classified By: Ambassador Daniel C. Kurtzer, for Reason 1.4 (b) and (d) 
 
1. (C) Summary:  In an August 24 meeting with the Ambassador, 
nine businessmen from the Gaza Strip stressed that freedom of 
movement for people and goods was essential to achieving 
economic prosperity after disengagement.  They claimed that 
the GOI's proposal for a trilateral border crossing at Kerem 
Shalom was impractical, asserting that two-way traffic 
through Rafah and a fully operational international airport 
were necessary.  The Ambassador suggested that Israel's 
legitimate security concerns required that the Gazans seek a 
compromise solution on passages, particularly if they wish to 
maintain the customs union with Israel and the West Bank. 
Although all asked for assistance in the rapid development of 
Gaza's infrastructure, some of the businessmen downplayed the 
importance of a new port.  Most complained that, in planning 
for Gaza's future, donor countries and the PA itself have 
ignored the private sector.  They also fear that increased PA 
involvement in business ventures will spread corruption.  The 
Ambassador urged them to take more responsibility for 
improving the security situation in Gaza in order to secure 
greater USG assistance and foreign investment.  End Summary. 
 
2. (C) The Ambassador began the meeting with a review of some 
of the outstanding issues associated with Israel's 
disengagement from the Gaza Strip.  He noted that, although 
there were still problems, progress had been made in 
discussions about the Erez and Karni crossings, and the 
attitude on both sides was very good.  Plans to employ 
USG-Funded scanners and other technology had been 
instrumental in bringing the parties closer to agreement. 
The Rafah crossing, however, presented a greater challenge, 
as the PA sought movement in both directions for people, at a 
minimum, while the GOI was evaluating how it would be a part 
of that process without being physically present.  The GOI 
faced a similar challenge with a proposed new seaport and 
wants a say in defining port operations, although this is not 
as urgent an issue given the extensive period needed for 
construction.  He pointed out that since the re-opening of 
Gaza International Airport could take place in less than two 
months, agreement would have to be reached soon on procedures 
to be implemented there.  The GOI's plan to establish a 
trilateral checkpoint at Kerem Shalom also required immediate 
attention. 
 
3.  (C) The Ambassador cited the recent disbursement of USD 
50 million in cash to the PA as an example of how serious the 
USG is about quickly taking advantage of the disengagement in 
order to improve the lives of the Palestinian people.  He 
also noted that release of USD 30 million marked the lifting 
of the freeze on USG funding for the North/South Water 
Carrier project.  The Ambassador added, however, that USG 
funding for the Gaza desalination plant would remain on hold 
until the security situation improves and the PA brings to 
justice those responsible for the deaths of three American 
security personnel in October 2003. 
 
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FREEDOM OF MOVEMENT REQUIRED 
---------------------------- 
 
4.  (C) Mohamed al-Yazgi, Pepsi bottler and Chairman of the 
Palestinian Business Association (PBA), stated that the main 
issue, "the key to everything," was freedom of movement for 
people and goods.  He emphasized that, in addition to 
stimulating trade, freedom of movement was required to 
attract investment to the Gaza Strip.  Palestinian expatriate 
businessmen and other potential investors from Arab states 
must feel free to come and go.  Two-way passage through the 
Rafah crossing and a re-opened international airport would 
ease their concerns.  Yazgi asserted that Israel would be 
able to meet its security concerns by employing advanced 
technology, enhanced procedures and, in some cases, a 
third-party presence.  He dismissed the GOI's proposed Kerem 
Shalom crossing as impractical, obliging travelers and goods 
to cover longer distances through "three countries." 
 
5.  (C) Yazgi said that freedom of movement was "the path to 
success" in meeting Israel's security goals because it would 
contribute to economic prosperity in Gaza and, therefore, 
leave Palestinian militants with "no reason to hang on to 
their guns."  Salah Abdel Shafi, an economist and World Bank 
consultant, stated that high unemployment, poverty and 
dramatic rapid population growth contributed to building 
pressures in Gaza that needed immediate attention.  Shafi and 
others stressed that Gazans expected the disengagement to 
yield immediate economic benefits and also contribute to the 
revival of the Israeli-Palestinian peace process. 
 
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PRIVATE SECTOR WANTS A SAY 
-------------------------- 
 
6.  (C) Several businessmen expressed their frustration at 
not being part of planning for Gaza's future.  They claimed 
that donor nations and NGOs tended to ignore the private 
sector, even though the private sector would be the primary 
engine of economic growth in Gaza.  As an example, they cited 
a recently approved PA master plan for Gaza that most of them 
had not seen.  They also voiced skepticism over public sector 
involvement in projects and other business activities, 
expressing fear that "big sharks" would use their political 
connections to enrich themselves.  As for USG assistance, the 
businessmen praised the recent USD 50 million transfer to the 
PA, welcomed the re-start of the Gaza water carrier project, 
urged immediate action on the proposed Desalination plant, 
and asked for greater USAID support for the private sector 
and help in protecting heritage and culture. 
 
7.  (C) While generally pleased with the pace of the GOI's 
disengagement, and anxious to quickly secure freedom of 
movement for people and goods through crossings and an 
airport, the Gaza businessmen advocated a more measured 
approach in determining what to do with settlement lands and 
a proposed seaport.  Jawat Khoudary, a contractor and PBA 
member, suggested that, for the most part, areas formerly 
occupied by settlers be left vacant for the next five years. 
Authorities needed to concentrate more on important 
infrastructure projects and take time to develop long-term 
plans for the evacuated land.  Khoudary, Yazgi and several 
others also questioned the need to build a seaport, at a cost 
of USD 150 - 200 million, when the Israeli port of Ashdod 
could continue to adequately handle goods to and from Gaza. 
However, more than one of the businessmen asserted that 
shipments through Ashdod were not always handled 
satisfactorily and better service would not be realized 
because Palestinians did not have a voice in Ashdod port 
operations.  (Note:  GOI current efforts to modernize the 
Erez Crossing include a plan to establish an Erez-Ashdod rail 
link.  An IDF officer at Erez recently noted to Econoff that, 
thus far, the PA had no plans to upgrade its side of the Erez 
crossing.) 
 
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COMPROMISE NEEDED, BUT NOT ON SECURITY 
-------------------------------------- 
 
 8.  (C) In reply to the points presented, Ambassador Kurtzer 
began by emphasizing that security is a priority at this 
stage and most other issues are dependent on improving the 
security situation.  He noted that, as citizens of Gaza, the 
businessmen needed to work within their community to help 
stem the violence and get gunmen off the streets.  He 
recommended that in discussions aimed at expanding freedom of 
movement, appropriate consideration needed to be given to 
Israel's security concerns.  The Ambassador suggested that, 
since the businessmen have identified the continuation of the 
customs union with Israel as a priority, perhaps they should 
consider, in light of Israel's security needs, meeting the 
GOI halfway:  as an interim solution on crossings, agree to 
Kerem Shalom as an entry point for people and goods for a six 
month period, after which the situation can be reviewed. 
 
9.  (C) The Ambassador reiterated that the USG funding for 
the desalination plant remained frozen.  He explained that 
the hold on funding remained tied to the security situation 
in Gaza.  He reiterated that the USG expected the PA to bring 
to justice the perpetrators of the October 2003 terrorist 
attack on an Embassy Tel Aviv motorcade in Gaza that resulted 
in the deaths of three American security personnel.  He 
stated that the USG remains disappointed by the PA response, 
and suggested that the businessmen press the PA on this issue 
as they also stood to benefit from an improved security 
environment and a resumption of USG assistance. 
 
 
 
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