TURKEY/ISRAEL/PALESTINE: FM GUL SIGNS AGREEMENT ON

C O N F I D E N T I A L ANKARA 000264

SIPDIS

SIPDIS

E.O. 12958: DECL: 01/24/2016
TAGS: PREL ETRD EINV IS TU
SUBJECT: TURKEY/ISRAEL/PALESTINE: FM GUL SIGNS AGREEMENT ON
EREZ INDUSTRIAL ZONE

REF: A. 05 ANKARA 07675


B. 05 ISTANBUL 01642

Classified By: Political Counselor Janice G. Weiner for reasons 1.4 (b,
d).

--------------
Summary
--------------


1. (C) Turkish Foreign Minister Abdullah Gul visited Israel
and the Palestinian Authority in early January and signed
separate agreements with the PA in Ramallah and with Israel
in Jerusalem, giving a Turkish consortium organized by the
Union of Chambers and Commodities Exchanges of Turkey (TOBB)
responsibility for reviving and managing the Erez Industrial
Zone in Gaza. The GOT and TOBB will finance a USD 1 million
technical and engineering study to determine the most urgent
infrastructure needs. Turkey will soon seek financial
support from the World Bank and signals of interest from
potential U.S., EU, and Turkish investors. The timing of
Gul's visit was important, as it followed Iranian Foreign
Minister Motaki's December visit to Ankara and Gul's November
visit to Damascus. Gul reportedly used his visit to Gaza to
encourage Palestinian moderation in the run-up to PA
elections. End Summary.


2. (SBU) Turkish Foreign Ministry special Coordinator for
Palestinian Development (and former MP and Education
Minister) Vehbi Dincerler told us January 5 that the Erez
project is of great political importance to the GOT, even if
its economic impact is not felt for some time. The agreement
Gul signed is the result of contacts between Turkish, Israeli
and Palestinian business representatives termed the "Ankara
Forum" (reftels). Dincerler said the management consortium
will be 95 percent controlled by the TOBB, with the remaining
5 percent share in Palestinian hands. During his visit, Gul
visited the Erez site, once a large employer of Palestinians
with over 200 businesses but now run down and largely
abandoned since the intifada. In meetings with Israeli FM
Shalom, Gul sought to confirm Israel's strong commitment to
the project, understanding that the Turkish management
consortium will need significant Israeli backing in restoring
basic utilities and services to the zone, as well as in
providing security.


3. (SBU) According to Dincerler, the GOT is currently
looking for a company to conduct a feasibility study. Once
that is completed, TOBB will recruit business leaders from
Turkey and elsewhere to visit the Erez zone and conduct an
evaluation. Meanwhile, Turkey will seek financing from the
World Bank as well as private donors. The aim is to focus on
exportable, labor intensive products, including metals,
textiles, machinery and stonework. Dincerler said that
Turkey would seek preferential treatment from the U.S., EU
and other markets for finished goods produced in Erez. He
added that a U.S. firm (NFI) has promised to provide a
multi-million dollar X-ray machine for the security
checkpoint.

4. (C) Israeli Embassy DCM Nahshon characterized the
initiative as a "win-win-win scenario" for Turkey, which
stands to gain with the Palestinians as well as the Israelis,
U.S. and EU for committing to an important economic project
with the potential to create thousands of jobs for
Palestinians. The project plays on Turkey's unique strengths
in organizing and managing industrial zones and, if
successful, would significantly benefit Turkish business.
Several prominent Turkish business leaders have expressed
interest in the project, Nahshon told us, recognizing that
lower wage costs mean textiles and other products produced in
Erez would be more competitive than similar products now
produced in Turkey.


5. (SBU) Dincerler described other Turkish projects designed
to help the Palestinians. The GOT is seeking USD 12-13
million in financing for a 40-50 bed hospital in Gaza and
will match private donor contributions up to 50 percent. A
private Turkish firm associated with U.S.-resident Islamic
cleric Fethullah Gulen is seeking to set up a primary and
secondary school in the PA with instruction in Arabic,
Turkish and English. Existing training programs in Turkey
for Palestinian police, judges and election officials will
also be expanded. Dincerler said the GOT is open to
partnerships with U.S. organizations in these areas.


6. (C) Nahshon told us that the visit was seen as worthwhile
in Israel despite coinciding with Sharon's illness, coming
after Iranian FM Motaki's visit to Ankara in December and
Gul's earlier short visit to Damascus. Nahshon speculated

that Gul had also used the timing of the visit to encourage
Palestinian moderation in the run-up to PA elections.
WILSON