Economic cost of war (2) – Gaza

Initial estimates suggest that Israel’s economy will shrink by 0.2% as a result of the recent fighting with Gaza. Last week, I detailed some of that potential impact. But what of Gaza? How can over 1.5 million people recover from the severe pounding (literally) handed out by Israel?

A recent IMF report detailed that unemployment was still over 30% in the strip of land, locked between the Bedouin of Sinai and Israel. Much of the Gaza economy is supported by external sources, often smuggled in via the tunnel system. A  video from AlJazeera illustrates this very well, filmed shortly after the current fightng had stopped. Palestinian sources imply that 140, maybe two-thirds of all operating tunnels, were destroyed. Not only does this limit the supply of goods, it removes Hamas from a very healthy supply of revenue from permits for these activities.

However, in some ways, these sketchy details highlight a deeper problem. Obtaining reliable and professional figures for Gaza in most fields is consistently difficult. Just one simple example - the number of minors killed in last week’s fighting: It will take an expert to point out that whatever the stat, and even one death is a tragedy too many, Hamas recruits fighters to its ranks from the age of 16. Thus are these deaths to be recorded as military or civilian?

Now consider the on-going poverty in Gaza, which many people take for granted. The same IMF report also mentions that the Gaza economy grew at a “high rate” in early 2012,“mainly on account of a booming construction sector that benefits from lifting of some Israeli restrictions on imports and Gaza’s tunnel trade that benefits from easing of restrictions owing to political change in Egypt“.

Statistics from the Israeli press and based on information from military sources confirm this trend. Hamas probably benefits by around US$500 million annually from the tunnel economy. While the GDP per person stands at a paltry US$1,500, it has leapt upwards by 30% since 2010. And the Israeli army has ensured that building materials, food and medica supplies continue to enter Gaza in quantity, even during the fighting.

I have commented in the past how Gaza has seen a new millionaire elite emerge in the past couple of years. New cars, often imported from China, are now common in the area. An interesting item from Eric Cunningham and dated from the beginning of the recent hostilities observed how Gaza has much wealthier base than in previous hostilities.

While thousands of Gazans flocked to the territory’s short but stunning coastline this summer, when relative peace still reigned, the abrupt bang of hammers and whir of power-drills could be heard on almost every corner of the capital, Gaza City.

Sky-scraping apartment complexes, glitzy new shopping malls and extravagant hotel retreats were sprouting up amid the rubble, and unemployment had dropped to 28 percent from a record-high of 45 percent at the height of the blockade.

Cunningham’s piece even displays a picture of the new funfair. Pointedly, he concludes by citing a second IMF analysis, posted this October. Gaza’s economy is set to grow by 7% in 2013 and 6.5% in 2014.

You are left wondering. Why does Hamas and its allies would want to jeopardise this prosperity that benefits for the Palestinians and replace it with an on-going bloody fight with Israel?

Will the real Gaza economy stand up and be counted?

The headline from the New York Times made for a simple summary of a UN report: “U.N. Sees Bleak Outlook for Gaza Unless Services Are Improved“

The UN describes how this narrow fertile strip of land, which has been run by Hamas since 2007, may not be fit for habitation by 2020. Education, health and other basic services are on the point of collapse. Unemployment is high. It is sandwiched between geopolitical tensions of Egypt and Israel. Life is very difficult.

To emphasise the point, Maan News service, based in Ramallah, reports that yet again Palestinian Authority (PA) employees in Gaza may not be paid their salaries. The background appears to be a combination of reasons; lack of funds within the PA and also a dispute between the Palestinian Government and its supposed Hamas allies in Gaza.

So how does one reconcile this gloomy picture with new investigative journalism from Arab sources that of the 1.6 million people in Gaza, there are at least 600 millionaires. In fact, on the ground witnesses reveal a very different kind of Gaza than the one depicted in the UN report.

Informed Palestinian sources revealed that every day, in addition to weapons, thousands of tons of fuel, medicine, various types of merchandise, vehicles, electrical appliances, drugs, medicine and cigarettes are smuggled into the Gaza Strip through more than 400 tunnels. A former Sudanese government official who visited the Gaza Strip lately was quoted as saying that he found basic goods that were not available in Sudan. Almost all the tunnels are controlled by the Hamas government, which has established a special commission to oversee the smuggling business, which makes the Hamas government the biggest benefactor of the smuggling industry.

So what’s the truth? The bottom line of the UN report is that 99% of Gaza’s troubles are the fault of Israel. Well, nobody can argue that Israel finds Gaza a welcome neighbour. Daily rocket fire from the Hamas territory did not cease even as schools started up again this week. The problem was that this context was omitted by the authors of the UN document.

The UN also sw correct to underemphasise the large role that Egypt plays in the Gaza economy, such as providing much of its electricity. More recently, because of the increasing terrorism in Sinai, of which Hamas affiliated groups have a significant part, Egypt has been clamping down on its border with Gaza. Only 24 hours ago, CNN detailed how many smuggling tunnels, a core of Hamas’ revenue stream, have been shut down by Cairo.

For the record, I was talking to a journalist last week, who had recently been through some of these tunnels. He described what seemed to be large and growing centres of commerce, which would do proud any transportation highway around the world.

At the end of the day, the economies of Gaza and Ramallah may share a common trend. Life may not be comfortable for all, while there are still many who are doing well – in fact, really well. However,for the UN to argue that life is unbearable in the Palestinian territories and that is all the fault of Israel’s reminds one of those who print such racist tractates as the “Protocols of Zion”. Both contain the same level of hatred and distortion.

Investing in the Palestinian economy – who gets what?

It was recently pointed out to me by a blogger friend that American federal agencies are encouraging those willing to listen that they should place greater investment in the infrastructure of the Palestinian economy. The aim is to move away from the traditional support given to UNRWA or non commercial elements.

A World Bank report in September 2011 describes “the necessity of both sustainable economic growth and effective institutions for a future viable [Palestinian] state. (And)……investment opportunities have arisen in Palestine. For example, in 2011 the Rasmala Investment Bank established the Ras­mala Palestine Equity Fund, which seeks to “achieve long-term capital appreciation by investing in a diversified portfolio of growth and value stocks listed on the Palestine Stock Exchange in securities anticipated to undergo initial public offerings as well as securities at their initial public offering.

One reason for this encouraging change of approach is that the senior Palestinian leadership has yet to shake off the whiff and evil of corruption that pervaded the Arafat dictatorship. To paraphrase a second blogger, Arnold Roth:

Muhammad Rashid, Arafat’s money-carrier (literally), has been arrested. He has been running the Palestine Investment Fund, which in turn controls the Arab Palestinian Investment Company. This organisation is dominated by Tareq and Yasser, the sons of President Abbas.

May not look good to outsiders. The Palestinian Authority (PA) has reserves. Reuters recently observed that:

The Western-backed PA ….says it has poured around $7 billion into the Gaza Strip since its rival Hamas seized control in 2007, but complains that the Islamist group is stymieing its efforts to balance its books……The PA says it spends $120 million a month, or more than 40 percent of its whole budget, on salaries and services in Gaza. 

Remember, those salaries includes dosh for those people launching rockets daily into Israel. And they more than likely funded the “security” provided to a journalist friend as he toured Hamas smuggling tunnels last month. It is also useful to recall that much of this funding comes from the generosity of European taxpayers - over 1 billion dollars since 2008.

Maybe Western leaders are finally aware that this displacement of resources is adversely effecting the average “man on the street” in Ramallah or Jenin. For example, Palestinian sources note that hospitals are facing closure, as they are starved of income. And because the PA has consistently ignored its water obligations under the Oslo Agreement with Israel, villages in the Bethlehem district are now running dry.

Where next? Difficult to say. Palestinian banks are also in a precarious position as they have been struggling to feed the needs of central government. One thing for sure – if you want to invest in the Palestinian economy, make sure that central sources are nowhere near the distribution table.

Women in revolt, Israel and the Arab world

2011 and the centenary of International Womens’ Day had a special meaning. From Algeria to Syria and down through the Saudi peninsular, the female gender has been on the streets in male-dominated societies. It is their desire for greater freedom of expression that has one of the main fear factors, haunting the President of Iran, the Sultan of Oman and the rest of them.

The Prime Minister of Israel is also known for caving in under pressure. Despite the protestations of the Finance Ministry, Bibi Netanyahu raised the minimum wage barrier - immediately deflating cries of protest from women voters. He still has to appease social workers, whose conditions are a national disgrace.

You can surf the net and find all kinds of articles criticising or supporting the way Israel supports women in society. Most these – Guardian (against), Haneen Zoabi (against) and the Jerusalem Post (Israeli newspaper) – come from established positions.

So, what makes Israeli women different from their counterparts in the region.

• Is it that they can lead political parties openly, and even become Prime Minister as Golda Meir did?
• Is it that in a society with a heavy military influence, they can readily be accepted as army officers?
• Does the open opportunity for women to play sport rank as a factor?
• Or how about the increasing openings for females from minority sectors, such as the Bedouin community?
• And what about the achievements of Israeli women in science and research, which are increasingly recognised by the international academic community?

The answer is probably none of the above…as individual issues. It is the sum of the whole that counts.

Just this past week:-

• A female VP of a Tel Aviv media group called to pressure me to move on an issue.
• I have helped a lady in the ultra orthodox community to sell a business in order to expand in to another area.
• A young mother is asking me to help her business diverse, having bought it for very little and converted it into a successful commercial identity.

All of these people have opportunities to control their lives as women, and are seizing the moment. They are not alone.

None of this is to deny that sexism and violence is still prevalent in some sectors of society - as the demoralising trial of ex-President Katsav demonstrated.

That said, the next hundred years of International Women’s Day in Israel should continue be a triumph to what and how others in neighbouring countries can aspire to.

The financial media discovers Gaza

Writing 2 weeks ago in the UK newspaper, The Mail on Sunday, Peter Hitchens summarised an extensive visit to Gaza, which he described as “world’s most misrepresented location“.

Hitchens coverage was the first amongst several similar stories in the international, all with a similar theme.

I don’t think it (Gaza) is a paradise, or remotely normal………..There are dispiriting slums that should have been cleared decades ago, people living on the edge of subsistence. There is danger. And most of the people cannot get out. But it is a lot more complicated, and a lot more interesting, than that………

But if you think Israel is the only problem, or that Israelis are the only oppressors hereabouts, think again. Realise, for a start, that Israel no longer rules Gaza. Its (former) settlements are ruins.

Even when, as in Gaza, there is no way out, morality patrols sweep through restaurants in search of illicit beer and women smoking in public, affronting the 14th Century values of Hamas.

Hitchens is going against a decade or so of politically correct wisdom. Two years ago, Time Magazine pleaded: “Please spare a thought for the starving Palestinians of Gaza. There are 1.5 million of them”. In parallel, and industry of NGOs has arisen, although they seem content to criticise Israel but never the excesses of Palestinian rule.

So what is the truth? was there ever hunger? Has Gaza suddenly discovered gold? Has it been wealthy all the time, but nobody really reported the facts? As Hitchens also commented, the truth in the Middle East is rarely what you see on the surface, so let’s dig a bit more.

Go to any IMF or World Bank report on the Palestinian economy  – and Gaza in particular – and you will find a depressing set of economic statistics. Every since September 2000 when Yassir Arafat and the Palestinian Authority launched the Second Intifada, the economy has nose dived.

But if financial growth in Gaza went backwards, then previously it must have achieved a “higher” level from which to fall. And this is where the work of Sebastien Dessus for the World Bank is so valuable. Professionally, he has been tracking the Palestinian economy for over a decade. Note what he says about the period from the onset of Israeli rule to the start of the Intifada.

While real GDP grew by 5.5 percent on average in West Bank and Gaza from 1968 to 2000, it only grew by 4.2 percent in Israel. During the same time, population grew by 2.9 percent in WBG and 2.4 percent in Israel.

Does that put the Palestinians as one of the most successful economies in the last quarter of the twentieth century? Bring on the Intifada, suicide bombings and attacks from Gaza, and the Palestinian population suddenly found themselves without 125,000 jobs in Israel. And these were considered relatively well paid positions. Couple this with Israeli defensive measures - justified and  / or repressive – and you have the recipe for a mega economic dip.

For the Palestinian leadership, the question was did the political uplift justify the financial turmoil, a debate I will not deal with. Certainly, key personalities did not suffer. Fatah strongman, Mohammed Dahlan amassed a personal fortune since his PA career began in the late 1980s, organising youth mobs in Gaza City. Hamas has collected a wealth of taxes from the smuggling industry, leading to “unprecedented social mobility” according to one local source.

And today? As Hitchens writes, life in Gaza is not a picnic, but neither is it a disaster. Further recent evidence?

• The Financial Times has described the al-Deira luxury hotel, which has remained open despite Israeli measures and the repressive practices of the Hamas government.
• Mai Yaghi, a local Gaza reporter has detailed how the old smuggling tunnels have a completely new and ironic purpose , because “lifting of restrictions (by Israel) in recent months has seen consumer goods pour into the Hamas-run territory through Israeli crossings, transforming the tunnels that once served as a lifeline for Gaza into its sole export channel.”
• The EU’s representative to the West Bank, Gaza and UNRWA, Christian Berger, not considered a friend of Israel, has been quoted as saying that the area is ”full of consumer goods”. 
• And if Berger feels that there is not enough ready cash and actual purchases, he should recall that the largest employer in Gaza is the civil service. The Palestinian Authority is still paying the salaries of these 67,000 people, even if many are paid up Hamas officials.

Is Gaza rich? No. It still needs the tons of daily aid, which Israel facilitates. On the other hand, a utube video from an unknown source shows beyond doubt just what multiple resources are available in wide parts of the territory.

And is there a lesson for the future? Look what is happening in the West Bank. Hatred of Israel may still predominate. But much of the violence has been laid to one side. As Time Magazine now observes.

Ramallah’s first five-star hotel, a Mövenpick, is opening this month. Across the West Bank, similar scenes are unfolding. Building cranes pierce the sky. Outside Nablus, new car dealerships sell everything from BMWs to Hyundais. Inside the ancient city, the first movie house to open in 20 years, Cinema City, is hugely popular. Last year the Hirbawi Home Center, a five-story shopping mall selling luxury items like plasma TVs, opened just outside Jenin.

Indeed, the IMF has reported that the Palestinian economy is on track to grow 8% in 2010.

So, the international media have confirmed that Gaza is not an economic prison. One question remains. As Tom Gross, a leading commentator, pondered; why does the BBC, possibly the world’s largest communicator, seem determined to ignore this story?

So what’s really going on in the Palestinian economy?

Whether you look at Gaza or the West Bank, it is difficult to get a true picture of economic progress. The story is often heavily clouded by the spin of politicians protecting their own agendas.

Fox News reports of the spanking new shopping mall in Gaza. Erected despite the Hamas claims that there are no materials to build new homes, it remains debatable if local purchasing power is strong enough to provide profits for the retailers of fila shoes and barbie dolls.

Khaled Abu Toameh, a Palestinian journalist writing in the Jerusalem Post, takes another angle.

…the Orjuwan Lounge in the fashionable neighborhood of Al-Masyoun in Ramallah has become a symbol of the dramatic change that has taken place in this city in the past three years.

The improved security has encouraged Palestinians and foreigners to inject money into the city or even move to live there. Luxury apartments are on sale in most parts of the city.

(For example): Sources in the Ramallah Municipality revealed that more than 100 Palestinians from Jerusalem have relocated their businesses to Ramallah in the past few months. “Here they pay less taxes and have more customers,” the sources said.

And that is not all. The Abraaj equity group from Dubai will operate a US$50 million investment fund from Ramallah. Toameh goes on to describe how international hotel chains and “embassies” are moving into Ramallah, effectively converting the city in to a de facto bourgois capital.

It is interesting to note that the July inflation stats revealed a sharp rise in prices in the West Bank region, indicative of the reduced fighting and increased prosperity.

Meanwhile, in Hamas controlled Gaza, prices changes were flat. What has yet to be concluded is whether this deflation is a result of continuous authoritarian rule. On the other hand, the trend could be explained by the continued heavy flow of goods into the region via tunnels and Israel’s relaxing of border restrictions, which have thus combined to increase supply and reduce prices. 

Either way, the shouts of deep poverty and “woe is me” in these territories are becoming more exaggerated by the day.

How Jerusalem and Athens differ today

Last week, the Tel Aviv Stock Exchange held its 10th annual soiree in London. The big guns of the Israeli economy were there, led by Esther Levanon, the dynamic CEO of the exchange.

Levanon proudly recalled that once the Israeli economy used to be compared to that of Greece. Today, with Israel now a member of the elite in the MSCI exchanges, her position there is worth that of Greece, Portugal and Ireland combined.

Stanley Fischer, the governor of the Bank of Israel, and with an excellent reputation on the world banking stage, was hauled out in front of loads of tape recorders and video cameras. Fischer was ready to launch his speech at any given moment:

• Israel banks encourage savings and rarely lend more than 70% of mortgage values.
• Israeli workers cut their hours in the recession to protect jobs
• The high tech sector now contributes to 51% of the value of the country’s exports.

The micro stats are just as impressive:

• Unemployment is 7.2% and decreasing, as opposed to 10.0% in the USA and in Europe.
• Israel has maintained its current account surplus
• It maintains a 4.0% growth rate in most years
• It invests 4.9% of its GDP (2.3% for the OECD)
• Its public sector debt barely grew during the recession, where as the OECD average reflected a near 20% change.

Message: Israel is the place to invest

As the financial daily, “The Marker” pointed out – don’t mention the lousy education system or the economic concentration available in the hands of a few families, and life for Israel’s financial planners could seem almost perfect.

Gaza’s economic woes – what happens if the blockade is rescinded

It is politically correct to accept that Gaza’s economic woes are cause by Israeli policies. However, if you use IMF and World Bank stats, 3 points are immediately evident of Gaza’s history:

• Under Egyptian rule up to 1967, the area was an economic no-go area with life expectancy under 60
• With Israel in charge, growth leapt to over 5% per annum until 1999.
• Bring on the Intifada and then Hamas rule, and its back to disaster time.

Fertile Gaza, with an economy that could be really successful, suffers from unemployment, poor sanitation and an authoritarian  government.

For all the repeated criticism of Israel from UNRWA, NGOs, the Turkish Prime Minister and others, there is no starvation in Gaza. Consumer goods exist in quantity. There are even official tariffs to protect some local manufacturers and keep out imports. Hamas has refused to move even one Palestinian family from the refugee camps and into former Israeli towns. 

I found  a recent Newsweek article illuminating:-

While the three-year-old ban on many imports has posed a hardship for most Gazans, smugglers have been able to deliver these items through a network of tunnels connecting Gaza with Egypt. An Israeli television news segment—aired last week and widely discussed here—shows Palestinian shop owners on the phone with their Israeli suppliers, coordinating the delivery of goods by sea to Cyprus and onto Sinai, where they’re carted to Gaza through the tunnels.

So not much of a blockade. So what is likely to change now that Netanyahu has bowed again to international pressure and accepted most of Obama’s demands?

Will there be less firing on Israeli civilians, the main cause of Israeli hostility? Maybe – not out of love, but because Hamas has seen how the propaganda front can be more rewarding than firing thousands of missiles.

Ironically, if imports arrive directly into Gaza, prices may rise and Hamas may lose a source of its income. Hundreds will lose work in the tunnel industry and Hamas will cease to take its graft from the reduced contraband. Maybe, the activities will transferred to the overland ports of entry and “normality” will be restored.

Israel has agreed to up the numbers of trucks allowed to enter Gaza daily from around 100 to 150. Maybe exports can start up, which will produce a real bonus for the economy. The fact that NGOs have failed to call for this until now reveals how their focus was often directed against Israel than on behalf  of Palestinians.

What would truly make a difference is if Hamas were to recognise Israel’s right to exist. In the West Bank, where the economy has grown by around 8% in the past 12 months, there is now cooperation over sewage schemes and alternative wind energy. Rami Levy, one of Israel’s largest supermarket chains, has a new branch near Bethlehem open to all.

Why don’t world politicians force Hamas to do something that is obvious, necessary, simple and humane; to recognise Israel and to live in peace with the state? Think how much we would ALL be better off.

Palestinian economy – moving ahead?

Is the Palestinian economy finally showing real signs of improvement? There is cause to believe that it is moving away from conflict-driven scenarios, while looking to create sustained growth.

The World Bank has documented that between 1968 and 1999, Palestinians averaged around 5.5% real growth per year, a brilliant achievement by any standards.

With the onset of Intifada, those figures went in to reverse. Blame Palestinian terrorism or Israeli aggression, the average Palestinian’s income dropped off the scale. Tax collection was almost a non-entity. The Funding For Peace Coalition estimated that 25% of the Palestinian budget came through external donations. And who knows which elements grafted off the top?

So what’s changed? First, the European Union finally began to realise that the billions of aid distributed annually had to be more transparent. In parallel, there is a growing awareness that a dependency on handouts will not create an independent economy.

One example is this new approach occurred this week. The Palestinian Administration has demanded that Hamas pay for electricity used in the Gaza Strip. This is in response to the European demand for greater accountability.

Tom Gross, an established commentator on the Middle East, reported on how Palestinian security forces in the West Bank may finally be turning to formal policing and not actions against Israel. One effect of this change has been the opening of a new cinema in Jenin, until recently known as a centre of the Intifada violence.

At a macro level, a high level Dutch delegation met with the Palestinian minster of the economy and 50 companies in order to discuss investment possibilities. Abraaj Capital has co-sponsored a US$50 million investment fund, primarily aimed at small and medium sized Palestinian enterprises.

All very encouraging. But what next? It is very much up to the leadership of the various factions. The Palestinian Authority, controlled by President Abbas, is still perceived by many as corrupt. And Hamas in Gaza is little better.

Greater transparency and more local projects out of the grasp of politicians. And a continuous uplift to the economy is probably the best method to turn people away from the supporters of violence.

More dead Palestinians ignored by Goldstone

The Goldstone commission, under UN direction, looked at human rights abuses against Palestinians.

The final report has come in for much criticism from Israel. And yet, with some irony, it is the Palestinian Authority, which has interrupted the progress of the document on the way to the UN’s General Assembly. The reasons for this change of direction vary – ranging from American pressure to a desire to return to the peace process.

The Palestinian Commission for Human Rights suggests an alternative cause for policy alteration. Its latest report, referring to August 2009, makes for damning reading, a mess of violations of human rights, where Israel has had no direct or indirect role.

ICHRdocumented 48 cases of death in the Palestinian-controlled Territory during August 2009. 41 of which took place in the Gaza Strip. In terms of cause of death, these cases are distributed as follows: 28 deaths were attributed to armed clashes in Rafah city, while 3 deaths were linked to violent family disputes and rivalry. In addition, 3 lives were lost due to security chaos and manslaughter while 7 death cases resulted of tunnels accidents.

 

 

 

 

 

As for the West Bank,

 

7 death cases occurred, the causes of which are distributed as follows: one death case occurred in a detention center in Nablus; 5 deaths were linked to family disputes and one death case occurred as a result of negligence and the non-adoption of general safety precautions. death case occurred in a detention center in Nablus;5 deaths were linked to family disputes and one precautions.

The report details names, places, dates, hard facts. It cites the customary harassment of the press, sexual harrassment and the lack of basic religious freedoms.

For all Israel’s criticisms of the Goldstone Report, it strikes me that the commission has failed those people it was trying to help. The report failed to point out and stress these repeated yet hidden deprivations in the life of ordinary Palestinians. If not the UN, who will halt this continuous saga of shame?