ISRAELI BUSINESS LEADER ENVISIONS A

C O N F I D E N T I A L TEL AVIV 000575

SIPDIS

E.O. 12958: DECL: 01/28/2014
TAGS: ECON EFIN KWBG IS GAZA DISENGAGEMENT ISRAELI PALESTINIAN AFFAIRS ECONOMY AND FINANCE
SUBJECT: ISRAELI BUSINESS LEADER ENVISIONS A
POST-DISENGAGEMENT GAZA ECONOMY


Classified By: DCM Gene A. Cretz for reasons 1.4 (b) and (d)


1. (C) Summary: Dov Lautman, chairman of the board of the
Israeli textile giant Delta, talked to EconCouns January 23
about economic prospects for a post-disengagement Gaza Strip.
Emphasizing that it is impossible to "predict the future" of
security and politics, Lautman argued that donors must focus
on projects that are viable in any environment. In his view,
the construction sector can provide up to 70,000 new jobs
immediately following disengagement, and in the longer term
Gaza can become a "consumer goods hub" for Europe, producing
everything from furniture and apparel to cellular phones. He
said he supports Deputy PM Shimon Peres' initiative to
encourage European investment in industrial zones, explaining
that Israel should not be directly involved with the economic
development of the territories post-disengagement. Lautman
was ambivalent on the prospects for continued cooperation
between the Israeli and Palestinian private sectors following
the withdrawal, stating that only a year of quiet would
encourage those Israeli companies who left the Erez
Industrial Zone to reinvest in Gaza. End summary.

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Despite Instability, Gazan Economy Can Grow
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2. (C) Dov Lautman, chairman of the board of the Delta Galil
textile company, which employs some 4,500 people in its
Egyptian factory as one of Egypt's largest exporters to the
U.S. under the QIZ, spoke to EconCouns January 23. Lautman
said that while it is impossible to know what will happen on
the security and political fronts in a post-withdrawal Gaza
Strip, the donor community must focus on economic projects
that are viable in any scenario. The construction sector is
an industry in which Gazans have extensive experience, he
said. It can provide jobs immediately after disengagement,
and can grow independently of Israel. Although home building
is a highly politicized issue within the PA, he said,
construction of high-rise apartment buildings on evacuated
settlement lands and elsewhere in the Gaza Strip could
"revolutionize" the Gazan economy by providing up to 70,000
jobs.


3. (C) In the longer-term, Lautman explained, Gaza's
proximity to Europe and abundance of cheap semi-skilled labor
could enable it to become a "consumer goods hub" for the
West. "It takes three days by ship for goods to get from
Gaza to England, versus three weeks from the Far East," he
said, adding that Gazan factories could produce anything from
apparel and flowers to furniture and cellular phones for EU
markets. Lautman supports Deputy PM Shimon Peres's idea to
encourage European investment in Palestinian industrial
zones, and said that starting this project immediately can
potentially improve the security situation by giving young
Palestinians "hope for a decent job in their future."
Israel's role, he said, will be to facilitate European and
American investment in the territories -- the GOI should not
be the one to pay for new roads, homes, and factories in Gaza
and the West Bank.

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How Relevant is "Separation Ideology?"
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4. (C) "It is a waste to tell Israelis the peace days have
come," Lautman said, noting that PM Sharon's initial
justification for disengagement -- the alleged hopelessness
of any attempt to negotiate a peaceful settlement with the
Palestinians -- still has emotional resonance within Israeli
society. Yet the lure of cheap Gazan labor may induce
Israeli private enterprise to return to the Strip. In his
view, those Israeli businesses who have pulled out of the
Erez Industrial Zone will need to see six months or a year
free of terrorist attacks before they agree to reinvest. On
labor inflows, Lautman said that the Israeli public is
currently against Palestinian laborers continuing to work in
Israel, but that if the security situation changes they may
begin to prefer Palestinian workers over foreign workers,
since foreign workers effectively live in the country and
present a "demographic threat" whereas Palestinians return to
their homes at the end of the workday.

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