KARNI/AL-MINTAR CROSSING OPERATIONS FAVOR ISRAELI

C O N F I D E N T I A L SECTION 01 OF 02 JERUSALEM 005057 SIPDIS SIPDIS NEA FOR FRONT OFFICE; NEA/IPA FOR WILLIAMS/SHAMPAINE/STEINGER; NSC FOR ABRAMS/DORAN/WATERS; TREASURY FOR SZUBIN/LOEFFLER/NUGENT/HIRSON; COMMERCE FOR ITA/MAC/JDERSTINE E.O. 12958: DECL: 12/28/2016 TAGS: ECON EFIN PGOV KWBG IS SUBJECT: KARNI/AL-MINTAR CROSSING OPERATIONS FAVOR ISRAELI GOODS IN GAZA REF: A. JERUSALEM 5056 ¶B. JERUSALEM 5031 ¶C. JERUSALEM 5505 Classified By: Consul General Jake Walles, Reasons 1.4 (b) and (d). ¶1. (C) Summary: Gaza residents report that Israeli-produced goods are capturing greater market share in Gaza as a result of Karni/al-Mintar crossing closures and reduced operations. They attribute the trend to the difficulties faced by West Bank companies in shipping their goods to Gaza, the exorbitant transportation costs, extended delays at the crossings, and consumer concerns over the quality of some Palestinian products due to delays at the crossings. End summary. ¶2. (C) In a December 14 DVC between prominent Gaza businessmen and ConGenoffs (ref A),Mohammad Abu Ramadan and other Gaza participants reported that Israeli products are capturing greater market share in Gaza at the expense of West Bank, European, and U.S. products. Gaza businessmen meeting with Econoffs December 13 in Ramallah had suggested the same. In separate conversations with Econoff, other Gaza residents observed that many West Bank, European, and U.S. products once commonly available on Gaza grocery shelves have now been displaced by Israeli-produced goods. Easier Entry -------------- ¶3. (C) The Gaza businessmen offered as the primary reason for the trend the increasing lack of alternatives to Israeli products. Many non-Israeli goods imported in the past can no longer transit Karni/al-Mintar crossing on a regular basis, if they manage to get through at all. Gaza importers assert that Israeli companies and their products receive preferential treatment at Karni/al-Mintar, taking up most of the slots in the daily queue. Abu Ramadan asserted that on December 14, with the exception of one truckload of dairy goods, only Israeli products were being allowed into Gaza. (Note: As reported in ref. B, Econoff visiting the crossing in November 2006 observed hundreds of cases of Israeli-produced soft drinks being transferred into Gaza at a time when the West Bank producer of Coca Cola could not secure a place in line at the crossing and the Gaza bottler of Pepsi could not import sufficient raw materials for his operations. End note.) Lower Costs -------------- ¶4. (C) The flow of non-Israeli products into Gaza has also been constricted by higher transport costs paid to ship goods from the West Bank, according to the Gaza businessmen. Emad Hassnat, general manager of Hamdi Hassnat and Sons, told Econoffs December 13 that the cost of shipping one container from Taiwan to Ashdod port is USD 1,250 while the cost of shipping the same amount of goods from the West Bank to Gaza is at least USD 5,000. (Note: A Hebron producer of corn chips told Econoffs December 19 that he stopped shipping to Gaza in August. He said that fees charge by Israeli transportation companies for a truckload of his goods valued at NIS 20,000 have risen to NIS 25,000. End note.) Added costs of doing business include demurrage and storage fees on containers and non-containerized goods waiting for months in Israeli-owned warehouses before being granted permission to cross into Gaza. As a consequence, non-Israeli goods that make it into Gaza are often more costly than those offered by Israeli competitors. At a time when household incomes and purchasing power in Gaza have plummeted, Gaza consumers are increasingly drawn to Israeli products based on price comparison. Preference for Quality and Reliability -------------- ¶5. (C) The high costs and delays associated with West Bank goods have discouraged Gaza wholesalers needing a reliable flow of products, according to Gaza importers and West Bank producers. (Note: ref C describes similar effect on IT imports. End note.) Gaza businessmen and residents assert that consumers are also turning increasingly to Israeli products for reasons of quality and reliability. One Gaza JERUSALEM 00005057 002 OF 002 resident working with an International NGO told Econoff December 20 that her family now prefers some of the more expensive brands of Israeli-produced perishable goods, such as dairy products, because of concerns about spoilage of similar West Bank goods due to delays or damage at the Karni/al-Mintar crossing. As it is generally know that many Gaza factories are not receiving sufficient raw materials for their operations, Gaza residents have also come to suspect the quality of some Gaza-produced food products. WALLES