BARRIERS TO MOVEMENT AND ACCESS OBLIGE HEBRON

C O N F I D E N T I A L JERUSALEM 004587

SIPDIS

SIPDIS

NEA FOR FRONT OFFICE; NEA/IPA FOR
WILLIAMS/SHAMPAINE/STEINGER; NSC FOR ABRAMS/DORAN/WATERS;
TREASURY FOR SZUBIN/LOEFFLER/NUGENT/HIRSON

E.O. 12958: DECL: 10/17/2016
TAGS: ECON EFIN EIND PGOV PREL KWBG IS
SUBJECT: BARRIERS TO MOVEMENT AND ACCESS OBLIGE HEBRON
BUSINESSMEN TO JOIN EXODUS OF PALESTINIAN INDUSTRY

Classified By: Consul General Jake Walles, Reasons 1.4 (b) and (d).


1. (SBU) Summary: Hebron-based companies have largely been
denied permission to send their goods into Gaza through the
Karni/al-Mintar crossing, according to prominent Palestinian
businessmen. Passage is sometimes allowed with the payment
of exorbitant unofficial fees. Hebron-produced school
supplies purchased by UNICEF for this school year have been
refused entry for months. Barriers to movement within the
West Bank, in some instances, have doubled shipping time and
associated costs. Frustrated over blocked access to Gaza,
barriers to internal West Bank trade, rising costs and loss
of market share, a Hebron-based paper company is making
preparations to other Palestinian companies opening
production facilities abroad. End Summary.

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Tarqumiya Crossing Need Improvements
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2. (C) Nafez Hirbawi, Chairman of PalTrade and
Chairman/General Manager of the Hebron-based Paper Industries
Company, Ltd., told Econoffs and USAIDoff October 16 that the
Tarqumiya crossing with Israel in the southwestern West Bank
is open on a regular basis but does not process Palestinian
exports efficiently since it is a rudimentary back-to-back
operation in an open area divided by concrete blocks. He
suggested that the crossing's hours should be extended to
reduce delays. Hirbawi asserted that in late August 2006
crossing operators began giving priority to perishable goods
and milk products, frequently leaving other cargo waiting
three-to-four hours. Hirbawi stated that, with 70-80 percent
of his paper company's production going to the Israeli
market, efficient and predictable transit through Tarqumiya
is vital to his business. He expressed his concern that when
the crossing moves to a location closer to the Green Line
later this year, a more restrictive crossing "model" might be
adopted at the new site, to the further detriment of
Palestinian exports. (Note: An USAID-leased scanner is
scheduled for placement at the new crossing when it opens.
End Note.)

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Insufficient Throughput at Karni/al-Mintar
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3. (C) Inefficiencies plaguing Tarqumiya pale in comparison
to the serious problems facing Palestinian companies seeking
to ship goods to Gaza through Karni/al-Mintar, according to
Hirbawi. Citing statistics gathered by PalTrade, Hirbawi
said that, thus far in 2006, the maximum number of truckloads
allowed into Gaza on a single day was 230 and the lowest 47.
The maximum number of truckloads permitted to leave Gaza was

25. Karni/al-Mintar has been open fully or partially for
only 116 days so far this year, according to Hirbawi. (Note:
PalTrade has maintained a physical presence at
Karni/al-Mintar since August 2005 to monitor and collect
statistics terminal operations. End note.) Hirbawi stated
that his paper company has the capacity to ship a total of
2,000 tons of goods to Gaza during its high sales season,
from May to October. In 2006, however, he managed to move
only 25 percent of that amount (500 tons - 25 truckloads).

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Scheduling Benefits Israeli Goods
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4. (C) According to PalTrade statistics, 80 percent of the
goods allowed into Gaza in 2006 have been of Israeli origin
or foreign products transiting Israel. West Bank-origin
goods comprised a mere 20 percent of Gazan imports. In
September 2006, the Palestinian share dropped to five
percent. Hirbawi said that a Hebron potato chip manufacturer
who had previously enjoyed a 30 percent share of the Gazan
market has stopped attempting to export to Gaza because of
scheduling difficulties and transportation costs (see below).
Hirbawi added that a pasta company he owns suffered a
similar fate. Israeli producers of the same products,
however, continue to have access to Gaza. Hirbawi advised
that his paper company had committed to delivering by
July/August 2006 an order from UNICEF for 320 tons of school
supplies for Gaza. After repeatedly being denied permission
to ship the goods through Karni/al-Mintar, Hirbawi reduced
the price of the goods in return for UNICEF taking over
responsibility for delivery. UNICEF, however, has had no

better luck and now, well after the start of the school year,
is paying for the supplies to be stored in a warehouse at
Ashdod.

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You Must Pay to Play
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5. (C) Although official fees for transiting Karni/al-Mintar
are NIS 270 (USD 64) for a standard-size truckload and NIS
500 (USD 118) for a trailer, the "normal price" has reached
NIS 2,500 (USD 588),according to Hirbawi. He said that he
managed to get two truckloads through earlier this year at
that price. After his customers in Gaza applied pressure on
the Palestinian side in August 2006, an agreement was reached
with the Israelis at the crossing to allow 100 truckloads in.
The Israeli coordination office, however, continues to deny
the necessary permission to schedule these truckloads for
delivery. Hirbawi asserted that Israeli drivers had recently
approached his staff demanding NIS 6,000-7,000 (USD 1,412-USD
1,647) for each truck. Hirbawi explained that Israeli
drivers of Israeli-plated vehicles serve as the facilitators
for "the two mafias" (Israeli and Palestinian) at
Karni/al-Mintar, demanding and receiving exorbitant payments
to ensure access to Gaza. Hirbawi professed ignorance as to
how these funds are divided up. He stated that a Hebron food
company recently paid NIS 25,000 (USD 5,582) for one
truckload of food prepared especially for the month of
Ramadan. Hirbawi urged the establishment of a transparent
scheduling and fee system involving shippers, not drivers.

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West Bank Internal Trade Stymied
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6. (C) Hirbawi said that trade within the West Bank has also
been adversely affected by increased restrictions on
movement. Shipments from his companies in Hebron to the
northern West Bank city of Jenin, for example, could once be
delivered in about two hours. Now a one-way journey takes 5
hours. According to Hirbawi, people and goods heading north
from the Hebron municipality -- population 550,000 -- must
all be funneled through the single Halhul-Sa'ir checkpoint.
Hirbawi estimated that his transportation costs have doubled
and, as a consequence, he is shipping less to Jenin and other
areas in the northern West Bank. Hirbawi's brother, Majed
Hirbawi, general manager of Hirbawi Investment and
International Trade, stated that he used to travel on
business from Hebron to Jenin once a week but no longer does
so due to the ten hours required for travel.

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Time to Go
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7. (C) After noting that he established his first company in
1970, Hirbawi said that he had never thought about leaving
the West Bank, until now. Costs associated with restrictions
on access and movement are threatening his businesses and the
livelihood of the 250 people he employs. Paper supply sales
in September 2006, for example, were 40 percent lower than in
September 2005 because of market access restrictions and the
decline in the Palestinian population's purchasing power.
Hirbawi stated that he is making arrangements to open
production facilities abroad, most probably Jordan, where his
business might actually expand given easier access to Arab
regional markets. He asserted that his situation is not
unlike that of most West Bank and Gaza manufacturers, many of
whom are also contemplating a move.

WALLES