As the Hamas reign in Gaza stretches into its second month, local businesses on both sides of the border are suffering as the Karni crossing, the main thoroughfare for the passage of commercial goods between Israel and the Gaza Strip, has been open only for the transfer of humanitarian necessities since June 12.

GOODS SITTING at the Karni crossing. The closure of the main thoroughfare for passage of commercial goods between Israel and Gaza is hurting business on both sides of the border.
Photo: Ariel Jerozolimski

"An economy cannot survive on food and medicine alone, without raw materials for industry and construction, and without the ability to export goods," said Dr. Bassim Khoury, chairman of the Palestinian Federation of Industries. "If we don't re-open the commercial crossings, the economy in Gaza will die out."

Khoury, speaking at a press conference on Sunday organized by the non-profit organizations Oxfam International and Gisha-The Legal Center for Freedom of Movement, noted that most of the industries in Gaza are manufacturing industries, of which there is a 95 percent dependency on imported raw materials and an 80% dependency on the import of machinery and maintenance parts.

"Interruption of these imports has led to the suspension of many production lines in Gazan factories," said Khoury, adding that since the Hamas takeover of Gaza and the subsequent decision by Israel to shut the Karni crossing due to security concerns, 80% of businesses establishments in the Gaza Strip are temporarily shut down and of those still operating, production is down some 60%.

"My future as a factory owner is bleak and I have already lost all my customers in the West Bank, 50% of my business," said Muhammed Al-Talbani, owner of the Al-Auda biscuit factory. "In Gaza, people are begging to work for NIS 10 per day, but I can't hire them because I have no work to give them."

According to numbers provided by the World Bank, over the last month, at least 3,190 businesses in Gaza have closed, some 65,800 employees have been temporarily laid-off and the local Gazan economy has suffered losses of an estimated $20.6 million.

"If conditions do not improve, we can expect unemployment to rise to 70%, poverty levels to rise even further and a total collapse of the Gazan economy," said Khoury.

While Gazan citizens and private sector businesses are hurting from Israel's closed-door policy in regards to a Hamas-ruled Gaza, Palestinian leaders, at least in the eyes of some experts, are not doing enough to get the borders open.

"This issue should be on the top of their agendas and we are hoping that [Palestinian Authority Chairman] Mahmoud Abbas will bring it up when he meets with Prime Minister Ehud Olmert later this week," said Sari Bashi, director of Gisha.

Many believe that even though Abbas may pretend to want the crossings fully open, he may also be happy for the opportunity to weaken Hamas.

Part of the problem facing the Palestinians is the fact that despite a desire to unite the West Bank and Gaza Strip as one economic and political unit, the two are in reality very far apart.

"The Gaza Strip is the second largest market for West Bank exports, after Israel, however, it has become virtually impossible to send goods between the two areas - it costs more to ship a cargo container to Gaza [from the West Bank] then it does to China," lamented Khoury."

Today, despite the West Bank being responsible for the overwhelming majority of the PA economy, the complete shutdown of Gazan exports is taking its toll.

"A drop of some $150m. is almost impossible to recover from," said Khoury. "Therefore, we must unite the two areas in order to strengthen our competitive advantages. The only way for our economy to survive is if we are able to properly integrate - we either stand up together or we will fall together."

While the effects of the Karni crossing have been pronounced inside the Gaza Strip, Israeli exporters are also being hurt by the border closings.

"Believe it or not, the Palestinian Authority is the second largest export market of Israeli manufacturers, trailing only the US," Uriel Lynn, president of the Federation of Israeli Chambers of Commerce, told The Jerusalem Post.

According to statistics provided by the Manufacturers Association of Israel, the country does about $2.95b. worth of trade, including imports and exports, with the West Bank and Gaza Strip each year.

"In 2006," said Dan Catarivas of the Manufacturers Association. "Israel exported about $120m. worth of products into Gaza, mostly textiles, metals, furniture and construction material, and while this may not seem like an awful lot, for those exporters who rely heavily on trade with Gazan customers, Israel's current economic boycott of Hamas is crippling."

Recently, the Israeli Flower Growers Association announced that as a result of the Hamas decision to close the Kerem Shalom crossing to flower imports, local growers have suffered losses of NIS 20m., with this number increasing by millions of shekels each week. Similarly, exports of Israeli fruits and vegetables have also been banned by Hamas from entering Gaza, causing losses of NIS 3 and 5m. a day.

"I have hope that someday soon the situation will return to normal and we will be able to send our products into Gaza and even increase our cooperation with Palestinian flowers growers," said Haim Hadad of the Flowers Association.