RESTRICTED THROUGHPUT AT KARNI/AL-MINTAR CROSSING

C O N F I D E N T I A L SECTION 01 OF 02 JERUSALEM 005056

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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: 12/28/2016
TAGS: ECON EIND ETRD KWBG IS
SUBJECT: RESTRICTED THROUGHPUT AT KARNI/AL-MINTAR CROSSING
CONTINUES TO ERODE GAZA'S INDUSTRIAL BASE

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


1. (C) Summary: By operating at limited capacity, the
Karni/al-Mintar crossing continues to deprive Gaza factories
of raw materials and reliable access to markets, according to
Gaza industrialists. The Palestinian Federation of Industry
estimates that Gaza's industrial sector has suffered more
than USD 60 million in losses in 2006. About 80 percent of
the textile factories in Gaza are idle and ten percent have
established alternative production sites in Egypt or Jordan.
Most metal shops have closed as a result of Israeli
restrictions on the importation of metal into Gaza and IDF
attacks against alleged rocket production centers. Lack of
funding for infrastructure projects and shortages of raw
materials have stalled construction. Due an insufficient
supply of asphalt, some of the roads damaged during recent
Israeli military incursions cannot be repaired. End Summary.


2. (C) In discussions with Econoffs on December 13 and, via
DVC, on December 14, Gaza businessmen described the
deterioration of Gaza's industrial base due to severe
restrictions on throughput at Karni/al-Mintar crossing and
the resultant dearth of raw materials. High transportation
costs for inputs and goods that do transit Karni/al-Mintar
crossing have rendered many Gaza products uncompetative and
Gaza factories unprofitable. Local press December 25 cited a
Palestinian Federation of Industries (PFI) report declaring
that 20 factories have left Gaza in 2006. PFI Deputy
Secretary General Amr Hamdan told Econoff December 27 that 13

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of the 20 factories that have relocated were textile
factories each employing an average of 120 workers. The PFI
estimates losses in Gaza's industrial sector to be more than
USD 60 million in 2006, including crossing closure costs of
USD 500,000 a day.

Textiles - Close Out Sale
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3. (C) Mohammed Abu Shanab, general manager of Geia, a
clothing manufacturing company, told Econoffs December 13
that the textile sector in Gaza once employed 45,000 workers
but about 80 percent of the factories have closed and 10
percent have relocated to Jordan or Egypt. He said that 90
percent of the textiles produced in Gaza historically were
shipped to Israeli companies. In the past, textile factories
in Gaza could complete an order for an Israeli company in a
day. Now it takes a week-to-ten days. Saleh Ayesh, a member
of the Sewing Factories Association (Gaza) added that
Palestinian textile firms used to ship "ready" clothing
(pressed and on hangers),but now earn less on such contracts
because they have to pile the clothes in boxes suitable for
scanners on the Israeli side.

Metal Shops Without Metal
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4. (C) Emad Hassnat, GM of Hamdi Hassnat and Son's, reported
December 13 that Israeli authorities, citing potential
dual-use for rocket production, currently prohibit the
importation of 80 percent of metal materials previously used
in Gaza metal shops. (Note: Managers of a West Bank dairy
product factory told visiting Econoffs December 19 that
Israeli officials, citing security concerns, had informed
them earlier the same day that they could no longer use
specially constructed metal frames to transfer their dairy
products into Gaza. End note.) Hassnat said that 70 percent
of the work places using steel have shut down due to lack of
raw materials or damage inflicted by Israeli airstrikes and
incursions. He added that his family's company makes
electric power line towers, but is no longer able send them
through Karni/al-Mintar to be galvanized in Israel.
According to Hassnat, because Gaza has no means of
galvanizing steel, his company cannot fill orders or bid on
new projects.

Glassware Going Nowhere
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5. (C) PFI Treasurer and Glassware factory owner Abdalrahim
Abu Seedo stated December 13 that Karni/al-Mintar crossing
closures and limited operations have cost him a business he
spent 20 years building. He said that his inability to make
deadlines for the past year has obliged long-time European
customers of his high quality, hand-blown glassware to turn
to other suppliers. His factory once employed 20 people but

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now has only two workers who merely maintain the facility.

Road Construction/Repair Stalled
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6. (C) Osama Kohail, Chairman of the Contractors Union,
complained December 14 that the suspension of international
aid to the PA had adversely affected a number of
infrastructure projects, in some cases leaving contractors
with financial obligations that they can no longer fulfill.
Shortages of construction materials have also slowed or
suspended construction company activities. The current stock
of bitumen, a necessary ingredient of asphalt, is sufficient
to meet only 2 percent of Gaza's demand, according to Kohail.
As a result, repairs to roads damaged by recent IDF
incursions and other roadwork projects cannot be completed.
Kohail asserted that, in the absence of needed repairs, some
roads in Gaza will become impassable during winter rains.

WALLES