Mujahid El Sousi has been studying how to market his furniture to the international market from his Gaza factory after Israel effectively permitted Gaza’s textile and furniture industries to export internationally. El Sousi will be marketing to an entirely new customer base, since for the 25 years he has been in business, he has only supplied to Israel.
The lifting of the export ban on furniture and textiles—which was announced back in February but only took effect in July—is a boost to the decaying textile and furniture industries in Gaza. For example, the textile industry earned an estimated $39 million per year and employed 37,000 workers before the blockade was put in place in 2007. As a direct result of the four-year Israeli ban on Gaza exports, only 1,500 people are employed in the textile industry today. Similarly, the furniture sector used to employ 12,000 people before 2007, now it only employs 2,500 people.
Economists agree that the new access of Gaza exports to the international market is a step in the right direction for Gaza’s economy. With unemployment numbers hovering above 45 percent—according to the latest UNRWA report released in June—and an unsustainable public sector dependent on foreign aid, economists have pointed to the loosening of the Gaza export ban as the key to boosting a devastated private sector and the ultimate recovery of the Gazan economy.
Gaza has a strong potential for exports since it’s situated in a prime location near the Suez Canal and in between three continents. It has an educated population, with many people with valuable skills in engineering and medicine and has an under-developed industrial sector that can see years of rapid growth rate until Gaza will reach a reasonable level of industrialization.
But there are still restrictions on Gazan exports to Israel and the West Bank, which traditionally represents a combined 90 percent of the Gaza export market. What is more, the 22 factories operating in the textile and furniture industries in Gaza, which are ready to produce and export, are hardly prepared to compete in the international market as their traditional consumer base had always been Israel and the West Bank.
They took away the only two important markets for Gaza
“They took away the only two important markets for Gaza,” said Hana Taha, acting CEO of the Palestinian Trade Center, a national export promotional organization based in Ramallah. “We need the Israeli market to boost the Gaza export community.”
Israel maintains its ban on exports into Israeli territory because of security risks, explained Ephraim Kleiman, a leading Israeli economist on the Palestinian economy and its relationships with Israel.
“Israel has bad experience from Gaza,” he said. “There were several knifing attacks a few years ago and now Israel will not allow exports from Gaza.”
At the start of 2011, Israel allowed the export of Gazan agricultural produce to Europe—after a gap of four years—but it has now been more than two months since any goods left Gaza. According to a report conducted by The Coordinator of Government Activities in the Territories (COGAT), an Israeli Defense unit that coordinates civilian issues between Israel, the Palestinian Authority and international diplomats, the export project supported by the Netherlands to export strawberries, carnations and bell-peppers earlier this year stopped—due to the low quality of the produce that did not meet European standards.
This was a consequence of not giving the Palestinian exporters a chance to really understand their new international customers, Taha said. “Now not only did we lose such a significant chunk of our traditional markets but we are now telling Gazans to sell to the international market,” she said. “We never exported furniture or garments to the international community—we need time, one or two years, to sufficiently study the international market and create a solid market for Palestinian products.”
Compounding the lack of international experience are numerous disincentives of exporting through Israeli controlled channels—such as the Allenby Crossing to Jordan or the Ashdod sea port via the Kerem Shalom Crossing—because it is time consuming, expensive and ridden with restrictions in the name of security.
Even as El Sousi is confident that his products have potential demand in international markets, he is reluctant to export his furniture through Israel because of the thorough and intense security checks. “They will open all the cartons to make sure we are exporting what we say we are exporting, and that will cause a lot of damage to our products,” he said. “I just can’t afford that.”
Gaza producers may yet wait for an alternative exporting channel. With the partial opening of the Rafah Crossing in May, the only official border crossing between the Gaza Strip and Egypt, Palestinian exporters in Gaza will likely put off using the legal Israeli export terminals and wait for the Rafah Crossing to become available for trade, Taha said.
“When Rafah becomes available, Gazan exporters will utilize Rafah,” she said. “They won’t bother with Israel.”
But while the opening of Rafah threatens Israel’s policy and signifies Egypt’s decision to stop cooperating with the siege, Rafah is far from becoming a good export venue for Gaza as it is far from any ports, said Shir Hever, an economic researcher at the Jerusalem-based Alternative Information Center. “Israel is still more reliable and cheaper for Gaza exports,” he said.
At the same time, the Egyptians will likely only allow Rafah to be used to import its goods to Gaza, not the other way around.
The Israeli Manufacturers Association is aware of this possible turn of events, and have expressed worry that if the Rafah border opens then Gazans could import cheap goods from Egypt (without customs) and then sell them in Israel, creating competition for Israeli products in Gaza, Hever explained.
Because Gazans use Israeli currency, the Gaza economy has an effect, however marginal, on the Israeli monetary market. This leads the Israeli government to consider severing the economic ties between Gaza and the West Bank in order to re-establish control over its economic borders, which might explain the Israeli policy of blocking Gaza exports to the West Bank.
With the access to foreign markets, Hever estimates that Gaza exports can grow to eight times their current levels. “The Gaza market is very small and it cannot depend solely on the domestic or the Israeli market. It needs international trade more than international aid,” he said. “Gaza needs countries to look to Gaza as a potential market and as an equal trading partner, not just as a country that needs charity.”
While there still is no official discussion of opening a pathway for Gaza exports through Rafah, the potential new Egyptian-Palestinian border could help exporters like El Sousi, who hasn’t left Gaza in five years. It will give him the ability to travel abroad and study new markets and build new business relationships, without the hindrance of Israel’s security policies. Of course in an ideal world, El Sousi would be able to supply to his more familiar clients in the West Bank and Israel, too.