DISENGAGEMENT: GAZA BUSINESSMEN BOTH HOPEFUL AND

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
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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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