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$6B in damage: Gaza economy reels from four weeks of war

Territory struggled with blockade even before Protective Edge; fixing it requires broader Israeli-Palestinian agreement

Hamas is branded a radical extremist group by its enemies, but in the current Gaza conflict it tacked to the Palestinian political center. “When Palestinians look at the Hamas demands, they say, ‘This is what we want, what all Palestinians want,’” says Israeli analyst Gershon Baskin.

That’s because Hamas has focused its cease-fire terms on breaking the economic stranglehold imposed on Gaza by Israel with the help of Egypt, calling for an opening of border crossings and the expansion of areas where Palestinians may fish and where farmers may till their lands.

But even if the siege is eased or lifted — and there’s no sign yet that the troubled search for a truce would produce such an outcome —  rebuilding Gaza’s economy will remain a formidable challenge.

“You cannot say there is an economy right now,” Omar Shaban, director of the PalThink Institute for Strategic Studies, said last week. “There was ongoing shelling 24 hours a day, and I hadn’t been out of my home for the past 24 days. This applies to everybody. Farmers can’t go out, and factories are not working.”

More than 485,000 people have been displaced, the U.N. says, as residents of neighborhoods in the border areas controlled by Israel fled to Gaza City. More than 10,000 homes have been demolished and another 5,000 significantly damaged. The destruction is more severe than in either of the past two wars between Hamas and Israel.

‘You cannot say there is an economy right now. This applies to everybody. Farmers can’t go out, and factories are not working.’

Omar Shaban

director, PalThink Institute for Strategic Studies

Even before the current war, the blockade’s choking off of diesel supplies meant that Gaza suffered power cuts about eight hours a day. During Operation Protective Edge, electricity was out more than 20 hours per day, Shaban said. He described Gaza’s electric power breakdown: 32 megawatts from Egypt, 120 MW from Israel (down to 40 MW, with only two lines functioning) and 70 MW from Gaza’s only power plant (knocked offline).

Shaban, an economist, said that before the current conflict, there were few Egyptian goods arriving in Gaza through the smuggling tunnels into Rafah. The Egyptian military’s campaign to destroy the tunnels accelerated in July 2013, after the ouster of President Mohamed Morsi.

“We used to have cars with Egyptian fuel — lower quality, but cheaper,” he said. “Milk and cigarettes from there we also stopped seeing. So I don’t imagine the smuggling has continued.”

Gaza’s economy was in dire straits even before last month, with falling growth and a staggering 70 percent of residents dependent on humanitarian aid.

Some of the primary industries in Gaza are textiles, food processing and farming — including citrus, strawberries, dates, olives and flowers. Employees of the former Hamas government stopped receiving salaries after the April formation of a technocratic unity cabinet. Under pressure from the U.S., funds from Qatar to the 44,000 civil servants could not reach Gaza.

Unemployment stood at more than 40 percent before the current round of fighting, and construction — one of Gaza’s biggest sectors — shed 17,000 jobs over the last year, since the import of cement was halted.

Shaban fears for the economic aftermath of weeks of intense fighting. “I’m not asking Hamas to love Israel or for Israel to love Hamas,” he said. “But the more the war continues, the bigger the challenge for reconstruction.”

Relief rather than reconstruction has been the focus of outside groups as the war has exacted a brutal toll on the civilian population.

“The policy right now is that only humanitarian goods are allowed to go to Gaza,” Guy Inbar, spokesman for the Coordination of Government Activities in the Territories (COGAT) under Israel’s Ministry of Defense. “That includes food, water, fuel and medical supplies.”

He explained how Israel sees a security risk in allowing in construction materials such as cement, insisting on close monitoring of future supplies. “Instead of building Gaza and taking care of their population, they preferred using building materials for terror tunnels,” he said. “They would have been able to build a three-floor clinic for each tunnel.” Palestinians say the tunnels are a legitimate strategic component of self-defense.

The U.N. refugee agency UNRWA has appealed for $115 million in immediate relief aid. Saudi Arabia has offered $53 million to the Palestinian Red Crescent, the UAE committed $41 million for home reconstruction, and U.S. humanitarian aid pledges total $47 million. In addition, Turkey has airlifted medical aid through the Kerem Shalom cargo crossing.

The Palestinian deputy prime minister estimates that the war cost $6 billion, including lost output, infrastructure and homes destroyed. That figure is more than double Gaza’s $2.9 billion annual GDP, according to the World Bank and Palestinian Central Bureau of Statistics. Israel has lost an estimated $2.9 billion, which is just 1 percent of its GDP.

The Palestinian deputy prime minister estimates that the war cost $6 billion, including lost output, infrastructure and homes destroyed. That figure is more than double Gaza’s $2.9 billion annual GDP.

Dana Erekat, the Palestinian Authority Ministry of Planning’s head of aid management and coordination directorate, said just 250 million shekels ($73 million) remained in Gaza’s banks, according to unofficial figures. And merchants reportedly gave up making money on goods. “What I’m told is that shopkeepers are selling products at cost, given the emergency situation. Most are not trying to make a profit.”

After convening emergency government meetings in Ramallah through the military escalation during the Eid holiday last week, Erekat said: “We are preparing for reconstruction plans whenever there is a ceasefire. But for now, under the attacks, we can’t do any assessment.”

Yet, even if a truce were to hold, “unless restrictions and the siege are lifted, no amount of funding will lead to sustainable development in Gaza,” Erekat said, adding that the contamination of the water infrastructure by bombing poses an immediate challenge.

Israel says it supports economic reconstruction in Gaza, but ties lifting the siege to its demand for the territory’s demilitarization.

Even if that demand won support from Western and Arab powers, however, it remains highly unlikely that Hamas would surrender arms the movement considers its only effective leverage against the occupying power.

The key to the territory’s development, then, remains a political solution to the wider conflict. “If Gaza is still isolated as a separate territory under Israeli control of exits, borders, coastal waters and the population registry, then forget it,” said Baskin, co-chairman of the Israel/Palestine Center for Research and Information. “Even money doesn’t solve the problem. People will not give up their fight for freedom.”

(With additional data reporting and interactive production by Hashem Said)

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