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Gaza Cannot Survive Sharon-style" Disengagement"


N June 8, 2004, Ehud Olmert, Israel's Minister of Industry and Commerce, announced his intention to close the Erez Industrial Zone, located on the Gaza Strip's northern border with Israel. Once touted as a model of co-existence, Erez includes factories that are under both Israeli and Palestinian ownership. Until recently it provided employment for 4500 Gazans. Olmert's threat is the first practical application of the disengagement plan that the government of Ariel Sharon adopted on June 6, 2004.

Despite Olmert's announcement, the decision on the Erez Zone is not yet final. Israel is letting its factories operate on a low flame for the present. There are rumors that after the withdrawal, the Zone will continue under the aegis of the World Bank, but these appear to be baseless. An international authority, who prefers to remain anonymous, told Challenge that there is no real plan to operate Erez without Israeli involvement. In fact, says our source, the closing of Erez will threaten plans to establish joint industrial areas along the separation fence in the West Bank.

The significance of closing the Erez Zone

The overall job situation in Gaza is grim. The CIA World Factbook puts unemployment at 50%. The International Labor Organization (ILO), citing figures through the end of 2003, gives an unemployment rate of 35.3% for both the West Bank and Gaza, including those who are too discouraged to look for work. "This number would be even higher if women confined to their homes by necessity and not by choice were included." In Gaza, the ILO report continues, conditions are worse than in the West Bank: only one out of every 7.6 people is employed (compared to one out of every 5.4 in the West Bank). About half of Gaza's population is under 15. Of the rest, only 38% (254,000) participate in the labor force, either working or unemployed and seeking work. The ILO puts the poverty rate in Gaza at 83%, basing this on figures published by the Palestinian Central Bureau of Statistics, which fixes the poverty line at $3.60 per day for a family of four. These figures apply to the end of 2003, but recently this situation has worsened, as a result of closures implemented since February 2004.

Against this background, we can better assess the impact of closing the Erez Industrial Zone. The Zone was established in the early 1970's on Palestinian land beside the Erez Checkpoint, also known to Palestinians as Beit Hanun. Most of it is devoted to light industry, such as textiles, food processing, and automobile repair. Its workers earn 60 – 100 shekels per day (4.5 shekels = $1). Their wages form an economic base for about 50,000 of the 1.3 million Palestinians in Gaza.

In Israel, by contrast, the legal minimum wage is 143 shekels per day. For Israeli entrepreneurs, that is, the Erez Zone offers a cheap, easily available labor force. The location on Gazan land releases them from the wage laws and social benefits incumbent on employers in Israel. This release greatly lowers production costs.
The workers of the Erez Zone go through the Erez Checkpoint, using a separate gate from those with permits to work in Israel. During 2004, because of an increase in Palestinian armed attacks at or near the Checkpoint, the latter has been closed for lengthy periods. Even when open, however, the passage involves humiliation and physical torment. On February 16, a worker, Muhammad Ibrahim Said al-Sheikh, was suffocated to death by the pressure of the crowd near the exit. (See www.workersadvicecenter.org/With-Gazan-workers.htm)

Unable to rely on a steady workforce, the Israeli industrialists at Erez have demanded that the government either reach a final decision concerning the Zone or compensate them. A few have transferred their plants to nearby Israeli towns. In a populist measure, Minister Olmert (who is building his political career on the disengagement plan) has announced, without confirmation from his government, that the Israeli factory owners will receive government aid in exchange for moving their plants to the southern development towns of Ofakim, Netivot, Sderot and Ashkelon, all of which suffer from high unemployment. In this way Olmert can gain points in public opinion for advancing the disengagement plan, while showing that it creates jobs in Israel.

The closing of the Erez Zone will not create jobs in Israel, where such light industries have long proved non-competitive against areas of cheaper labor abroad. The most probable scenario is that these industrialists will get their compensation and move production lines to Jordan or China.

High unemployment and no solution in sight

Israel's unilateral disengagement, which does not take the slightest account of needs on the Palestinian side, threatens to aggravate unemployment and poverty in Gaza to the point of a humanitarian disaster. A report of the World Bank, presented on June 24, takes up the broader topic of the closures that Israel imposes:

"Since the beginning of the intifada in September 2000, the West Bank and Gaza has [sic] suffered one of the worst recessions in modern history. This crisis has resulted from restrictions on the movement of Palestinian people and goods, or 'closures', which the Government of Israel regards as essential to protecting its citizens from attacks by militants. Without major changes in this closure regime, however, the Palestinian economy will not revive, poverty and alienation will deepen." --World Bank

The World Bank refers the Israeli authorities, as well as international bodies, to the grave effects that the disengagement plan will have if it does not establish sustainable sources of livelihood for the people of Gaza. The sums that the donor nations already transfer as humanitarian aid to the Palestinians in the Territories, according to its report, are almost unprecedented:

"With donor disbursements to the Palestinians currently amounting to approximately US$1 billion per year or US$310 per person – one of the highest per capita rates in the history of foreign assistance – donors will need to perceive a fundamental change in Palestinian economic prospects if they are to make such additional efforts." --World Bank

In earlier statements, the World Bank discussed the need to create Palestinian sources of employment that would be independent of Israel. Here, nonetheless, it states that there is no substitute, in the near future, for the commuting of workers to Israel.

"Israel should, at the least, maintain current flows of Palestinian workers for several years to come… Many economists believe that the Palestinian economy must in time abandon its reliance on exports of labor to Israel in favor of exports of goods and services to Israel and third countries – but creating competitiveness will not happen overnight. An orderly economic adjustment is vital to the maintenance of political and social stability." --World Bank

The need for continued employment in Israel

A number of independent researchers have reached the same conclusion: en route to economic independence, there is no way to go "cold turkey" and suddenly stop depending on sources of livelihood in Israel. That dependence is described by Leila Farsakh in an article entitled, "Palestinian Labor Migration to Israel since Oslo and Beyond" (Journal of Palestine Studies, No. 125, September 2002). She presents figures from 1968 to 1998. By 1977, about 30% of the West Bank labor force and 40% of the Gazan were employed in Israel. Through most of the 1980's, the Gazan figures approached 50%. They dipped drastically, for both groups, after Israel imposed closure in 1993, rising again in the late 1990's. In the year 2000, before the current Intifada, 16% of the West Bank work force and 25% of the Gazan worked in Israel.

The dependence is even greater than what these figures suggest, because the income earned by those who worked in Israel flowed into the economies of the West Bank and Gaza, providing more jobs there. We should also note that since the start of the Occupation in 1967, Israeli goods have flowed freely into the captive markets of the West Bank and Gaza, inhibiting the rise of equivalent Palestinian industries, which would otherwise have been able to provide local jobs.

An Israeli researcher, Dr. Onn Winkler, shows the close connection between economic conditions in the West Bank and the Gaza Strip, on the one hand, and the outbreak of the two Intifadas (1987 and 2000) on the other. ("Trends in the Palestinian Economy Before and After the Oslo Agreement", Hamizrach Hahadash. Volume 43, 2002 [Hebrew].) Even during the years 1997 – 2000, when the Territories experienced overall economic growth, this did not suffice for growth per capita. Winkler claims that that the real growth rate of the Palestinian economy was lower by far than the estimate of the International Monetary Fund, reaching only 2.1%. Given an annual population increase of 4% in this period, real growth per capita was negative by about 2%. ("Trends…", p. 258.)

This situation could have been avoided. According to another researcher, Tsionit Fata'el Kuperwasser of Bar Ilan University in Tel Aviv, from the moment of its establishment in 1994, the PA did nothing to encourage sustainable sources of livelihood in the areas under its control. Reviewing her research in Ha'aretz on February 2, Danny Rubinstein wrote: "Whereas the public sector in the Territories during the period of Israeli rule numbered less than 40,000 workers, the PA swelled up as soon as it was born. By 1997 the number of workers in the public apparatus reached 82,000. Today it is roughly 140,000."

This bloating of the PA's public sector in the West Bank and Gaza helped compensate, we should note, for the losses of jobs in Israel because of closure. If the PA was not overly zealous in protesting against closure, this may have been because its monopoly over employment prospects made its people more dependent on it.

Summarizing Kuperwasser, Danny Rubinstein continued, "This [PA] apparatus provides jobs, indeed, to many academics, as well as to women, whose chances of working in Israel were always very limited, but such tumescence has many negative aspects, of which the main ones are wastefulness, corruption and nepotism. The thrust of Kuperwasser's criticism against the PA is that its leadership lacked an economic strategy focusing on job creation. Planned industrial centers were not built, no organizational or judicial structure was created for organizing a labor market, and steps were not taken for encouraging investment. At times one got the impression that the heads of the Palestinian economy were directing their main effort to organizing economic monopolies, which controlled the importation of items like gasoline, flour, sugar, cigarettes, cement and steel. These monopolies brought income to the PA and its cronies. In addition, the leaders of the Palestinian economy devoted much effort to cultivating their relations with the donor nations, in order to gain more money for projects that were not always suitably prepared. The PA gave preference to projects that symbolized sovereignty and status, such as an airport, an electric power plant and a seaport at Gaza (which remains unfinished). As a result, the Palestinian labor market has stayed dependent to a great extent on Israel's economy."

Sources of employment – the key

The question of jobs was and is the crucial one. The disengagement plan will not succeed in bringing stability as long as it fails to treat this basic problem. The Oslo Accords left the question unsolved, even during the years of relative stability that attracted investment. How much harder the problem will be among the present ruins, where no one feels secure.

Moreover, the funds of the donor nations are dwindling. These have helped the PA, until now, to maintain a governing apparatus and pay the 140,000 workers in the public sector, from clerks to police officials. According to the international authority cited at the start of this article, "There is a widespread feeling among the donor nations that as long as Israel prevents the movement of workers and closes the gateways to raw materials and merchandise – even shutting down the sole industrial area in the Strip – their contributions, in effect, finance the Occupation, because they enable Israel to sidestep its responsibility for the fate of the Territories."

The Gazan workers have gone out in the last few months to demonstrate their demand for jobs. They direct this demand to the international community, to Israel, and also to the PA. It is vital that trade unions abroad, which today are alert to the fate of the Palestinians, should put their weight behind the demand to re-open the gates of Gaza and the West Bank, preserve the Erez Industrial Zone, and ensure that the many thousands of Palestinian workers can make a living with dignity. There is no getting around this necessary step. After 37 years in which Israel has impeded development on the Palestinian side, binding the economy to itself and benefiting from the exploitation of cheap labor, we must not allow it now, under the pretext of withdrawal, to shirk responsibility for the fate of Palestinian workers. Without sustainable work places for the present labor force of 254,000, as well as for the thousands who enter each year from the huge reserve of youth, no political arrangement will endure.

For a recent study of the labor market in Israel and the Palestinian Territories, see www.workersadvicecenter.org/Delegation-document-full2.htm

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