Whatever the parameters of the settlement "freeze" ultimately agreed upon between Israel and the Obama administration, it is certain that the first to feel its effects will be the companies that build in the West Bank, where 2,500 units are currently in various stages of construction.
Construction in Ma'aleh Adumim, outside of Jerusalem.
Photo: AP
Getting accurate information on building operations in the West Bank is a difficult task. Most authorities don't distinguish between operations on either side of the Green Line. Officials in the Association of Contractors and Builders, for example, couldn't even provide a geographic breakdown of its members, identifying those who might be impacted if a construction freeze went into effect.
According to the Construction and Housing Ministry, in 2008 and 2009 "only several hundred units were offered for development, and it is safe to assume that most of them are in the final stages of construction and therefore will be unaffected by a construction freeze."
Sales representatives of the companies currently building in Ma'aleh Adumim were also quick to reassure that since their projects were under construction and some were near completion, they would not be affected by a possible freeze.
Most of the construction taking place east of the Green Line today is being done in the region's big cities. Places like Ma'aleh Adumim, Betar Illit, Modi'in Illit and Ariel all have new neighborhoods currently under construction and in different stages of completion. Driving through the settlements, one can see an abundance of signs advertising new housing projects, and the sales offices are all open for prospective buyers.
Construction is one of Israel's largest and most central business sectors. The companies that build in the West Bank and stand to lose from a settlement freeze are some of the country's biggest and most well-known construction firms, led by the country's richest businesspeople.
For the majority of the companies, the projects in the settlements make up only a fraction of their overall operations, but with apartments selling for more than NIS 1 million and little hope for full government compensation, many of the companies are looking at possible losses of tens of millions of shekels. In an economy that is slowly emerging from a housing recession, a settlement freeze may mean smaller companies will go out of business.
"There is a lot of uncertainty at the moment. Many of the prospective buyers are hesitant to purchase units where construction hasn't been started yet," said Saleh Mustafa, a construction supervisor overseeing the first stages of building in a new Ma'aleh Adumim project. The project, called Highland, is owned by the Hadar group, a 45-year-old company with projects across the country. The Highland project is planned to include 44 units and is scheduled for completion in the summer of 2011. Construction began several weeks ago, and foundations are starting to be poured.
Mustafa said he was worried that a construction freeze would increase competition for existing jobs, and lower wages.
"The site currently employs 45 workers, and they don't know if their jobs are at risk," he said.
"When you're talking about freezing a project, there are numerous financial implications," explained Asaf Aricha, a building engineer who has worked as a project manager on numerous residential projects.
"Depending on which stage of construction you're at, the losses can arise from several sources," he said. "To begin with, you have the planning expenses. These can make up as much as 10 percent to 15% of the total cost, and if you don't have a final product, they become worthless."
Another expense that the construction companies have, even before they begin the work on site, are the different fees that need to be paid to the utility companies and for municipal services such as fire protection.
"These fees are all required up-front and, again, are money thrown away if the project doesn't materialize," said Aricha.
If the construction has already started, the expenses skyrocket.
"Now you're already talking about paying for things like cranes, fences, special equipment, advertising and the like. These are things that take a lot of time and money to dismantle," he said.
According to the Central Bureau of Statistics, Israeli building in Judea and Samaria in the first quarter of 2009 is already down by 5% compared to last year, with construction having begun on 342 units.
Kadima MK Otniel Schneller, a former director of the Council of Jewish Communities of Judea, Samaria and the Gaza Strip, was quick to say that a complete settlement freeze would never happen.
"Nature is stronger than any declaration," he said.
Schneller differentiated between a geographic freeze and a demographic freeze: "A demographic freeze will be a financial disaster; a geographic freeze is something that, in economic terms, we can live with."
He estimated that a settlement freeze that would include projects already in production would be an impossible burden for the state.
"If the government wants to avoid being exposed to lawsuits that will add up to the hundreds of millions of shekels, it must completely differentiate between new construction and construction that is already in progress," said Schneller. He said he both believed and hoped that this was how the government would act.
"In purely financial terms, the best thing for the economy is a categorical assertion not to build new settlements, but not to freeze the existing settlements," Schneller said.
He added that any development in the big cities or the larger towns of Judea and Samaria would help absorb the people who would have to leave their homes in the case of an overall agreement with the Palestinian Authority.
"It makes economic sense to expand the existing large towns and cities within agreed upon areas, but I can't say the same for those places that are in areas not agreed upon. There, the state will end up having to pay damages to purchasers."
The large construction firms would not be the only ones harmed by a settlement freeze; next in line would be the contractors and subcontractors, construction supervisors and sales staff, carpenters and truck drivers, laborers and security personnel - and all of these would be hit the hardest. It is estimated that such a freeze would mean a loss of more than 12,000 jobs, a majority of them belonging to Palestinian laborers.
