TURKISH ADVOCATE OF INDUSTRIAL ZONE INITIATIVE

C O N F I D E N T I A L JERUSALEM 000876 SIPDIS C O R R E C T E D C O P Y (ADDING ADDRESSEE) SIPDIS NEA FOR FRONT OFFICE; NEA/IPA FOR WILLIAMS/SHAMPAINE/BELGRADE; NSC FOR ABRAMS/DORAN/WATERS; TREASURY FOR SZUBIN/LOEFFLER/NUGENT/HIRSON; USAID FOR KUNDER/MCCLOUD/BORODIN E.O. 12958: DECL: 05/14/2017 TAGS: ECON EINV ETRD BEXP KWBG IS TU SUBJECT: TURKISH ADVOCATE OF INDUSTRIAL ZONE INITIATIVE SAYS PROGRESS STILL LACKING ON ISRAELI/PALESTINIAN FRONTS REF: A. ANKARA 1033 ¶B. JERUSALEM 717 Classified By: Consul General Jake Walles, Reasons 1.4 (b) and (d). ¶1. (SBU) Summary: Guven Sak, the Turkish coordinator of an initiative to rebuild the Palestine Industrial Free Zone (PIFZ) in northern Gaza, reported May 8 that only minimal progress has been achieved since the project was first conceived and currently "nothing is moving." He noted there has been little movement on a security and trade facilitation agreement. Palestinian support remains tempered given the absence of a comprehensive design plan and a clear explanation of benefits to the Palestinian economy. End Summary. ¶2. (SBU) Guven Sak, the coordinator of the Turkish initiative to rebuild the PIFZ (formally known as the Erez Industrial Zone) met May 8 with Econoffs to discuss the status of the project. Also in attendance was former Palestinian Industrial Estate & Free Zone Authority (PIEFZA) Director General Naser Jaber, who is now the local representative for the initiative and will soon be opening an office in Gaza. ¶3. (C) Sak stated that only minimal progress had been achieved on the project in the last two years and currently "nothing is moving." He reiterated that a security arrangement governing protection of the zone and the movement of goods remained vital to the project's success. Nevertheless, despite strong support from Israeli Deputy Minister of Defense Sneh, he said there has been little progress on this issue. Sak said that the Israeli MOD needs to provide more details on the security measures/procedures it will require for the zone. He claimed to be "ready to start" once a security and trade facilitation agreement is concluded. ¶4. (C) Sak said that the company formed to develop and then operate the PIFZ will soon be registered with the PA. He added that a feasibility study on the zone should be completed within six weeks. Sak agreed that a detailed project plan was needed to garner support, adding that some parts of the January 2006 general plan are "now obsolete." Sak said that a draft concession agreement had recently been passed to the Palestine Investment Fund (PIF),which he claimed will replace PIEFZA as the licensing authority for the zone. (Note: Ref. B reported that the PIF has not formally assumed a licensing role. Econoff confirmed May 10 that this is still the case and that the PIF is still not inclined to act in the absence of a comprehensive design plan for the project and a clear explanation as to how the Palestinian economy would benefit. End Note.) Sak said that, under the terms of the draft concession agreement, "the PA won't make any money. Workers will make money." He claimed that, when serving as Minister of National Economy, Mazen Sinokrot had agreed that the focus would be job creation, not PA revenue generation. ¶5. (C) Sak asserted that his organization has the funds to rebuild the zone, but wants international donor involvement to serve as leverage with the Israelis to keep raw materials and finished products flowing. Palestinians will be expected to provide labor and nothing more. He and Jaber stressed that, given the PA's lack of resources, donor funds would also be required to provide the off-site infrastructure necessary to support the zone, such as an industrial waste water treatment facility. ¶6. (C) Consulate comments to ideas raised in Ref. A: A and C. Securing Palestinian Support/Marketing to Investors -- In the absence of a detailed project plan (and, until just recently, a draft concession agreement) Palestinians have had little to evaluate the Turkish initiative. The most important component, however, remains a security and trade facilitation agreement between the Turks and the GOI. Without such an agreement, Palestinians, foreign investor and donors will remain circumspect. The square mile of rubble that once was the Israeli-run Erez Industrial Zone serves as a testament to the difficulty of economic cooperation in the current environment. ¶B. Support for a security agreement with Israel -- We defer to Embassy Tel Aviv on what could be done to promote a more robust GOI response to the Turkish initiative. WALLES