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Palestinian government allows entry of Israeli goods into Gaza

The Palestinian government has said that the decision is a temporary measure made necessary by the destruction to factories during the last Gaza war.
A Palestinian inspects al-Awdah food factory, which witnesses said was shelled and torched by the Israeli army during the offensive, in Deirl al-Balah in the central Gaza Strip August 14, 2014. A renewed truce between Israel and Hamas appeared to be holding on Thursday despite a shaky start, after both sides agreed to give Egyptian-brokered talks more time to try to end the Gaza war. REUTERS/Ibraheem Abu Mustafa (GAZA - Tags: POLITICS CIVIL UNREST) - RTR42EJW

GAZA CITY, Gaza Strip — The Palestinian government has allowed the entry of some Israeli products into Gaza, after having banned them for years in compliance with the 2013 Import Substitution Industrialization (ISI) policy. The move resulted from the inability of factories to meet the needs of the market, as most of them were destroyed during the 2014 war on Gaza.

Hatem Oweida, undersecretary of the Ministry of National Economy, told Al-Monitor, “We have confronted two dilemmas since the last Israeli war. The first is that some producers are facing hardships in resuming production because their facilities were destroyed. Second, the domestically produced goods alone are not enough to meet the needs of the market. Therefore we opened the door to the import of some Israeli goods.”

He added, “This is a decision for a limited period to alleviate the situation. We did not take this step to make money from importation fees, as has been said, because the goods we allowed to enter do not necessitate large fees. However, we continue to ban some goods that have domestic alternatives. After a short period, we will reinstate a policy in line with conditions.”

The Israeli war has cost the industrial sector an estimated $200 million, including the destruction of some 860 business enterprises, the Palestinian Federation of Industries (PFI) informed Al-Monitor. For example, the Palestine Food Industries Company, a major local juice producer, stopped operations after its only factory was bombed and bulldozed during the Israeli ground invasion. The administrative departments and a permanent exhibition hall for marketing in the al-Basha Tower were also destroyed.

The company has lost an estimated $13 million, and employees are anxious to resume production. Wael al-Khalili, Palestine Food Industries CEO, told Al-Monitor, “The only production line that survived the war was the one we had ordered before the outbreak of the fighting. It has now arrived, and it is helping us get back to production, but it will be with very limited capabilities. The decision to import Israeli juices should only be temporary. Our company has been bombarded over the past three wars, and the ISI has helped us get back on our feet and resume production.”

According to Khader Shinerwa, PFI executive manager, “With the implementation of the ISI, employment increased by 17%, while the market’s need for products was met.” The Boycott, Divestment and Sanctions movement in Gaza criticized the decision to import Israeli products that have no Arab alternatives, in light of the growing international boycott in support of the Palestinian cause.

Oweida responded to this criticism, saying, “We did not insist that traders deal with an entire state, but we allowed the return of some Israeli products for a limited period of time, as this benefits the traders. Most Palestinian traders have relations only with Israeli traders in light of the restrictions they face in traveling abroad. This forces them to have business relations with Israel, the only choice they have. Moreover, the [Israeli] products [in Gaza] do not serve to boost Israel’s economy.” 

Offering another perspective, Maher al-Tabaa, an economics analyst, told Al-Monitor, “The ISI loses all credibility when it ignores the national products from the West Bank or even from Arab countries, while allowing Israeli goods into the Gaza Strip.”

According to Mohammed Abu Shaaban, deputy CEO of Line Food Company, the ISI has been insufficient in protecting local products. Despite the government’s import bans, the Palestinian market still includes Israeli and Italian products that compete with local goods, which of course affects market demand, Abu Shaaban pointed out. “We produce sauces from 100% local products. We also rely on agricultural sector output. We only import boxes, yet the government continues to relentlessly impose taxes and fees on us,” he further lamented. 

Abu Shaaban said the war damage to his factory's infrastructure has caused losses estimated at $6 million. This does not take into account the destruction to the agricultural sector — there was no tomato harvest — which has forced his company to import tomatoes from Egypt.

At a time when the world is pursuing a free market economy, the Hamas government has been applying the ISI for the past few years to deal with the challenges of the siege imposed on Gaza since 2006. As Oweida explained, “We are applying the ISI policy in light of the restrictions imposed by Israel on domestic exports. We have developed a suitable environment to support domestic products and [promote] their consumption. A few years ago, we launched the ISI policy, according to which we completely banned certain goods and legalized others, as per specific quotas and customs tariffs.”

Alaa al-Deen al-Rafati, a former minister of economy in the Hamas government, told Al-Monitor, “When the blockade was first imposed, Israel tightened the ban on the entry of basic materials to the Gaza Strip. It allowed the import of about 13 types of goods out of the 5,000 stipulated in the Paris Protocol. We had to find a local alternative to strengthen the national industries.”

Rafati further stated, “After 2010, a wider variety of goods were allowed to enter Gaza but did not amount to 1,000 [products]. The Gaza ministries decided to cut down on the import of goods that have local alternatives, including in the food industries, clothing and even agricultural products, in a bid to prevent the domestic market from consuming imported goods. This is especially true since local products are not easily marketed locally and internationally given Israel’s restrictions.”

After Hamas handed power in Gaza to the unity government, there have been no new government institutions or strategies to promote Gaza’s steadfastness in the war. According to Oweida, “The Ministry of Economy in the West Bank has no relations with Gaza, with regard to workers, performance or strategies.” Regardless, availability of products continues to be at the mercy of government, which itself faces hardships in light of Israel’s control of borders and resources, which disrupts the wheel of reconstruction and development.

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