GAZA ECONOMIC LOSSES

UNCLAS JERUSALEM 001455 SIPDIS SENSITIVE SIPDIS NEA FOR FRONT OFFICE; NEA/IPA FOR WILLIAMS/SHAMPAINE/STEINGER; PRM FOR PDAS GREENE AND PRM/ANE; NSC FOR ABRAMS/WATERS; TREASURY FOR SZUBIN/LOEFFLER/NUGENT/HIRSON; BRUSSELS FOR LERNER; PLEASE PASS TO USAID FOR KUNDER/MCCLOUD/BORODIN E.O. 12958: N/A TAGS: ETRD ECON EAID EFIN EIND PGOV PHUM KWBG IS SUBJECT: GAZA ECONOMIC LOSSES ¶1. (SBU) Summary: According to data compiled by the Palestinian private sector, the closure of the Karni/al-Mintar crossing following the Hamas take-over of Gaza is causing catastrophic damage to Gaza's economy. Since the June 12 closure of the crossing, 80 percent of Gaza factories have closed, at least 65,000 employees have been laid off, private sector losses have reached USD 20.6 million, and USD 160 million in construction projects are on hold, according to PalTrade and the Palestinian Federation of Industries (PFI). End summary. ¶2. (SBU) The Private Sector Coordinating Council (PSCC) and the World Bank hosted a July 12 meeting at the World Bank's al-Ram office on the economic situation in Gaza. The meeting featured a PalTrade and Palestine Federation of Industries (PFI) presentation quantifying the cost to the private sector of the continued closure of Karni/al-Mintar crossing following the Hamas take-over of Gaza. Gaza participants, including business association, UNSCO, and NGO representatives, joined the meeting via DVC. Econoffs and USAID representatives also attended. World Bank data on the economic situation in Gaza will be reported separately. Dependency -------------- ¶3. (SBU) According to the PalTrade/PFI presentation, factories in Gaza import 95 percent of their raw materials from or through Israel, and 80 percent of their machinery and spare parts. Gaza's 5,000 cash crop farmers are totally dependent on Israel for supplies such as fertilizers, pesticides, seeds, seedlings, and packaging material. Gaza's furniture sector exports 76 percent of its production to Israel, the garment sector exports 90 percent, and the processed food sector 20 percent (mostly through Israel to the West Bank). Agribusinesses and agricultural associations export almost all their produce to or through Israel. Losses -------------- ¶4. (SBU) Since June 12, 3,190 of the remaining 3,900 manufacturing establishments in Gaza have closed, according to PalTrade and PFI. Those factories still open are operating at 60 percent capacity or less. At least 65,000 employees have been laid off. The furniture, garment, textile, and processed food sectors have lost an estimated USD 16 million in business in the past month. Israeli garment merchants are withholding payment for completed orders until the raw materials they previously sent into Gaza are returned. In the agricultural sector, lost sales are estimated to be more than USD 12 million for the remainder of ¶2007. PalTrade and PFI estimate that the construction sector has lost USD 1.6 million since June 12, and USD 160 million in construction projects are on hold due to lack of materials. (Note: UNRWA announced July 9 that is had suspended USD 93 million worth of projects in Gaza because cement and other building materials had run out. UNRWA says its construction projects employ some 121, 000 people. End note.) Total private sector losses since June 12 are estimated to be USD 20.6 million. Containers Blocked -------------- ¶5. (SBU) Since Israel stopped clearing Gaza-bound cargo from Ashdod port June 18, 850 containers of imported goods ordered by companies in Gaza have been stranded at the port, according to PalTrade and PFI. While demurrage fees on these blocked shipments continue to mount, PalTrade and PFI estimate that about 450 additional containers destined for Gaza are in transit. WALLES