Identifier
Created
Classification
Origin
06TELAVIV370
2006-01-26 16:01:00
CONFIDENTIAL
Embassy Tel Aviv
Cable title:  

ISRAEL AND TURKEY BEGIN COOPERATION ON EREZ

This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L SECTION 01 OF 02 TEL AVIV 000370 

SIPDIS

E.O. 12958: DECL: 01/26/2016
TAGS: ECON KPAL KWBG PREL IS ISRAELI PALESTINIAN AFFAIRS GOI EXTERNAL GAZA DISENGAGEMENT
SUBJECT: ISRAEL AND TURKEY BEGIN COOPERATION ON EREZ
INDUSTRIAL ZONE


Classified By: Economic Counselor William Weinstein, Reasons 1.4 (b) an
d (d).

C O N F I D E N T I A L SECTION 01 OF 02 TEL AVIV 000370

SIPDIS

E.O. 12958: DECL: 01/26/2016
TAGS: ECON KPAL KWBG PREL IS ISRAELI PALESTINIAN AFFAIRS GOI EXTERNAL GAZA DISENGAGEMENT
SUBJECT: ISRAEL AND TURKEY BEGIN COOPERATION ON EREZ
INDUSTRIAL ZONE


Classified By: Economic Counselor William Weinstein, Reasons 1.4 (b) an
d (d).


1. (C) Summary: On January 5 the governments of Israel and
Turkey signed a Joint Declaration on contributing to the
economic development and promotion of the Gaza Strip by
establishing a Turkish management company that will operate
the Erez industrial zone. According to the Turkish Embassy,
this project is the result of a trilateral private sector
initiative that is the brainchild of the Israeli
Manufacturer,s Association president. Once up and running,
the Turkish Embassy believes, it could be a major source of
jobs for Palestinians. This project still has a long way to
go and both the Turkish and Israeli governments need to iron
out a number of issues, not the least of which is meeting GOI
security concerns. End summary.


2. (C) On January 5, then FM Silvan Shalom and Turkish FM
Abdullah Gul signed a Joint Declaration on both governments,
&wish to contribute to the economic development and
prosperity of the Palestinian population in the Gaza Strip.8
The Joint Declaration expressed appreciation for the
initiative of the Manufacturers Association of Israel and the
Union of Chambers and Commodity Exchanges of Turkey (TOBB) to
start a dialogue aimed at revitalizing the Palestinian
economy and the Erez Industrial Zone. According to Turkish
Commercial Counselor Kaan Kokturk, this initiative and the
Ankara Forum for Economic Cooperation, a trilateral Chamber
of Commerce association that spearheaded this project, are
the brainchild of Israeli Manufacturer,s Association
President Shraga Brosh.

-------------- ---
DECLARATION LAYS OUT ISRAELI-TURKISH COOPERATION
-------------- ---


3. (C) In the Joint Declaration, the parties agreed that
practical arrangements for the facilitation of the operation
of the industrial zone and the usage of Israeli maritime
ports for exports and imports to the zone would be
coordinated between Israel and Turkey based on a set of
agreed principles. The principles include that a Turkish

company will be set up to manage the zone and the two sides
will work together in order to coordinate activities in
connection with the operation of the Turkish management
company. Israeli companies will provide electricity and waste
infrastructure by way of separate commercial agreements and
the Turkish management company will deal with sewage and
waste water treatment. All operations and activities,
including access and movement of goods between the zone and
Israel will be carried out in accordance with agreements
between Israel and the Palestinian Authority (PA),Israeli
law, and subject to the security situation at any given time.
Advisor to Brig. Gen. Baruch Spiegel, Lt. Colonel Oded
Herman, told econoff that security remains Israel,s main
concern.

--------------
A WORK IN PROGRESS
--------------


4. (C) Herman said that despite the Joint Declaration,
GOI-Turkish cooperation on Erez Industrial Zone development
is very much a work in progress. The two sides had their
first meeting on January 18 to try to hammer out some of the
details. He said the Turks have to complete an environmental
survey and plan to demolish and rebuild many of the
structures in the zone. Herman said that a permanent point
of contact on the Turkish side will soon arrive. He said the
two sides will have several meetings during which the Turks
will discuss Israel,s security conditions for moving forward
with this project, which include concern about Qassem rockets
and the current need for the buffer zone and operation of a
commercial crossing. After Turkey has signed a formal
agreement with Israel, Herman said, it will go back to the PA
to sign an agreement with the Palestinians on the same
issues.

--------------
GOI CONCERNS WITH PA-TURKISH AGREEMENT
--------------


5. (C) Gabi Bar, Director of Middle East Trade at the
Ministry of Industry, Trade and Labor told econoff that there
are also legal challenges posed by having the documents
signed separately with the GOI and the PA. The GOI-GOT
declaration calls Erez an &industrial zone8 for development
and tax purposes, however, he believes that the GOT-PA
agreement describes Erez as a &free zone.8 Bar described
the problem as mainly a tax issue, and questioned the PA,s
ability to unilaterally declare an area a &free zone8 given
the existence of a customs union between Israel and Gaza.
The problem with the differences in the language between GOI
declaration and the PA agreement is that it would discourage
Israeli investors in Erez. Under Israeli law, the investors
would be subject to taxes while the PA exempts international
investors from tax. Bar indicated that the MFA and Israeli
customs are working with the GOT and the PA to resolve the
differences in language.

--------------
ISRAELI PRIVATE SECTOR CATALYST
--------------


6. (C) Turkish Embassy Commercial Kokturk told econoff that
this initiative has gotten as far as it has, because it is
being promoted by the private sector, but also noted that it
would be impossible to have strike a trade agreement with the
Palestinians without the cooperation of the GOI. Kokturk
predicted that, once up and running, the Industrial Zone
could provide as many as 10,000 jobs for Palestinians. He
said that Palestinian, Israeli, and Japanese businessmen had
already approached the Turkish Embassy about possibly
investing in the zone. Kokturk said that Israeli
Manufacturer,s Association President Brosh pitched the idea
of a private sector dialogue that would contribute to the
Israeli-Palestinian peace process through business
development to TOBB President M. Rifat Hisarciklioglu in

2004. He said Turkey has a great deal of experience with
organized industrial zones. Kokturk said that Israeli and
Turkish businessmen had a good relationship that preceded the
intifada, but unfortunately suffered somewhat during the
years of violence. The Ankara Forum for Economic Cooperation
held its first meeting in Ankara in April 2005 and met again
in September. Kokturk said that the Forum established two
steering committees that deal with its two areas of interest
) triangular tourism between Turkey, Israel, and the
Palestinian territories and the Erez Industrial Zone.


7. (C) Comment: Kokturk,s assessment that this idea may not
have gotten off the ground without the strong support of the
private sector is probably true. Still, establishing the
zone and creating a possible 10,000 new jobs are a long way
off as discussions of Israeli security concerns have yet to
begin. Israel is serious about its security concerns and
maintaining security while promoting this new development
will not be easy. Turkish interlocutors continue to mention
the possibility of a QIZ (qualifying industrial zone)
agreement similar to the agreements between the GOI and
Jordan and the GOI and Egypt for Erez industrial zone.
However, a QIZ would provide no added benefit since
production from Gaza for export to the United States is duty
free under the existing presidential proclamation extending
coverage of the US-Israel FTA to West Bank and Gaza exports.

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