PALESTINIAN-AMERICAN BUSINESSMAN SEEKS HELP WITH

C O N F I D E N T I A L JERUSALEM 002606 SIPDIS SIPDIS NEA FOR FRONT OFFICE; NEA/IPA FOR WILLIAMS/GREENE/WATERS/WAECHTER; NSC FOR ABRAMS/DORAN/LOGERFO; TREASURY FOR NUGENT/ADKINS E.O. 12958: DECL: 06/24/2016 TAGS: ETRD ECON KWBG IS SUBJECT: PALESTINIAN-AMERICAN BUSINESSMAN SEEKS HELP WITH PROBLEMS AT KARNI/AL-MINTAR CROSSING REF: TEL AVIV 2301 Classified By: Consul General Jake Walles, Reasons 1.4 (b) and (d). This cable was cleared with Embassy Tel Aviv. ¶1. (C) Palestinian-American businessman Zahi Khoury (please protect) met with the Consul General and the Ambassador June 20 at the Consulate General in Jerusalem to discuss problems at the Karni/al-Mintar crossing. ¶2. (C) As the Chairman of the Board of the Palestinian Economic Development (PED) Company, a fully-owned subsidiary of the Palestine Investment Fund (PIF) charged with managing the former Gush Khatif settlement greenhouses, Khoury noted that PED was forced to lay off, at the end of May, 4,000 agricultural workers in Gaza due to the closure of Karni/al-Mintar to Palestinian agricultural exports. The closure has made it uneconomical for PED to continue to employ those workers past the end of the growing season. Khoury commented that PED, which was to have been a strategic investment company operating in the West Bank and Gaza for the PIF, would likely be absorbed by the PIF at the end of July because it had not been able to sustain the initial PIF investment. ¶3. (C) Khoury is also the Chairman of the National Beverage Company Ltd. (NBC),the West Bank/Gaza bottler of Coca-Cola products. He described how Coca-Cola is re-evaluating whether it should continue distribution of its products in Gaza, given the delays and costs the company face at the Karni/al-Mintar crossing. He said the company had shelved for the time-being plans to open a USD 7 million bottling plant in Gaza using environmentally and more cost-effective returnable bottles due to concerns about getting inputs into Gaza. Khoury noted that NBC products, currently produced in the West Bank, faced significant transaction costs, including a "special private tax" (i.e. bribes) at Karni/al-Mintar, that "automatically put in the red" those companies that ship lower-cost consumer products. He said that this "special private tax" fluctuates depending on how long the crossing has been closed but is usually at least NIS 1500 (USD 338) per truck trailer. Khoury said he was not averse to paying reasonable, transparent user fees at crossings but could not sustain payment of this "special private tax." ¶4. (C) The Consul General noted that the U.S. Security Coordinator is working with the Palestinian Authority's Office of the President to improve security at Karni/al-Mintar. He also noted that President Abbas appears to be listening to private sector concerns about the crossing and may take steps to privatize it. The Ambassador noted that he is aware of the problems on the Israeli side and that he is actively raising the issue with his interlocutors. He said that one solution he is pressing is a transparent registration system for trucks seeking to process their goods through the crossing. Khoury noted that, if there is not an improvement, companies will be forced to continue to make investment decisions that negatively impact the Palestinian economy, such as moving their operations and jobs elsewhere. WALLES