Thursday, February 16, 2012

OPT: Promises of exports fall short for Gaza’s manufacturers

Source: IRIN

GAZA CITY, 15 February 2012 (IRIN) - Mu’min Najar drags open the massive door to the goods depot of his father’s furniture factory, the Modern Industrial Group (MIG), in Rafah in the Gaza Strip.

“Everything you see here is waiting to be sold abroad,” he says.

On the left side of the depot, writing desks are piled up several metres high. Further towards the back, hundreds of chairs have been waiting to be sold for more than a year now, and are covered in dust.

Encouraged by Israeli announcements in 2010 of an ease in restrictions on exports, the factory owner, Mohamed Najar, produced furniture worth about US$150,000 for orders from abroad. But he has little hope he will be allowed to export these items any time soon.

“I am ready to export tomorrow,” he told IRIN, adding: “The Israelis made us prepare with positive announcements. But in the end, nothing has happened.”

The government of Israel controls the territorial waters, airspace and land borders of the Gaza Strip, part of the occupied Palestinian territory. After militant group Hamas won parliamentary elections in Gaza in 2006, Israel imposed a tight blockade on the Strip, sealing its borders almost entirely and banning many imports and all exports. Mohamed Najar said many factories had closed down over the last four years as a result of the export ban.

The UN Relief and Works Agency (UNRWA) says the number of refugees living in abject poverty in Gaza has tripled since the blockade began, and according to the World Food Programme, 66 percent of households in Gaza are either vulnerable to food insecurity or experiencing it.

On 8 December 2010, Israel announced it would allow the export of agriculture, furniture and textile products, “subject to security and logistical preparations at the Kerem Shalom crossing”. The statement was based on an earlier decision by Israel’s Security Cabinet in June 2010.

Since then, at least 400 tons of strawberries, 40 tons of peppers, 6 tons of cherry tomatoes and 812,000 carnations have been exported. But so far, only two truckloads of furniture were allowed to leave - on 22 January 2012 - destined for an exhibition in Jordan.

To some furniture producers in the Gaza Strip, this one-time opportunity was reason for optimism. But others criticized it as a farce. “I didn’t participate in it. Why should I?” Najar asked. “As long as we are not allowed to export, every order I would get at such an exhibition is for nothing.”

Many obstacles

One of the victims of Israel’s export ban has been Hashem al-‘Ashi, manager of an Egyptian branch of the Arabian Woodwork Company.

He once employed 270 people in the Gaza Strip. But in 2007, he had to let all but a few dozen go. And eventually, he told IRIN, he had to shut his factory down altogether.

Many of those he fired looked for opportunities elsewhere. “Some of my former employers even joined the (militant) Qassam Brigades of Hamas,” he said.

Al-‘Ashi moved to Egypt and opened a new factory there, but he said he is ready to come back to Gaza, should the situation change. “We need the market outside to grow from inside. No exports, no profit,” he said.

In the absence of exports, the sales of the furniture industry remain very restricted by the small purchase power of the local market in the Gaza Strip. And according to Faisal al-Shawa, vice-chairman of Paltrade, a Palestinian research and trade organization, Gazan industries have also been affected by what he calls “psychological shocks”.

“All of us were overwhelmed by the [23-day 2008-2009] war in Gaza. For a long time, no one could get things straight. We didn’t believe that the imposed siege would last that long, and were waiting for the borders to open up. On the way businesses lost time, money and employees,” he told IRIN.

A lack of cash and equipment put more constraints on factory owners. “Even if we knew that the borders would open tomorrow, we couldn’t invest more in our companies today,” he added.

An unreliable supply of electricity and a lack of raw materials are additional obstacles, but the main constraint to business growth in the Gaza Strip remains the lack of access to export markets, according to a 2011 Paltrade study, commissioned by the Office of the Quartet Representative, Tony Blair.

High potential

Despite the many difficulties, Paltrade has been trying to enhance the capacity of the private sector through training programmes and research.

Further easing the ban on exports would improve the economic situation in the Gaza Strip dramatically, Paltrade’s al-Shawa said. In 2005, before the ban, exports by all sectors brought in about $180 million in revenue, he said. “More exports will solve the budget problems of the Palestinian Authority, which earns taxes from every export.”

Israel’s easing of restrictions on imports of raw materials initially led to some improvements in the manufacturing sector, which saw sales rising by 27 percent from June 2010 to January 2011. Employment grew by 24.7 percent between the second half of 2010 and the first half of 2011, according to UNRWA.

Dampened hopes

But these improvements have to be viewed as a catch-up from a very low base. Current sales in the manufacturing sector represent only 58 percent of what was sold by companies in 2005. In 2011, Israel allowed only 1 percent of what Gaza exported prior to 2007 to cross.

Asked about why only two truckloads of furniture have been allowed to leave the Gaza Strip since the government decision in 2010, Guy Inbar, spokesperson of the Israeli Coordinator of Government Activities in the Territories (COGAT), told IRIN: “A furniture factory that wants to export to any country abroad can coordinate with us about the amount of goods and the day. But there is no demand for Gaza’s furniture in Europe.”

Prior to 2007, 90 percent of garments, 76 percent of furniture products and 20 percent of food products were exported to the West Bank and Israel, making them the largest markets for products manufactured in Gaza, according to a 2011 report by the UN Office for Coordination of Humanitarian Affairs.

But both Israel and the West Bank fall outside of the new policy.

“The policy to ease restrictions, as decided in 2010, related to exports abroad,” Inbar said. “Exports to Israel and the West Bank were not part of this decision. They are subject to security considerations and customs issues.” He did not specify what these security concerns were, but added: “We hope to solve the issue of trade between Gaza and the West Bank in the next years.”

But the government’s view is disputed by rights activists.

“Israel has no security reason for not allowing further exports,” Sari Bashi, the founder and director of GISHA, an Israeli NGO which focuses on freedom of movement, told IRIN. “It is a political decision, which is part of a policy to separate Gaza from Israel and the West Bank.”

Inbar confirmed that decisions over any future exports from Gaza to Israel and the West Bank are of a political nature, and thus can only be taken by the Prime Minister’s Office.

The hopes for a resumption of exports are also dampened by the low capacity of the Kerem Shalom crossing point, which is the only commercial crossing between Israel and the Gaza Strip. “It can currently handle 300 incoming and 10 outgoing trucks,” Bashi explained, adding: “The old Karni crossing had a capacity for 1,000 trucks a day in both directions. There is no way Kerem Shalom will reach that.”

Inbar confirmed that Kerem Shalom can handle only 10 truckloads of exports per day, but added: “There is no problem with the capacity there.”