GAZA CITY, Gaza Strip — The Ministry of National Economy in the Gaza Strip announced Oct. 31 the cancellation of exclusive commercial agencies granted to a number of traders. These traders had monopolized the importation of some basic commodities, such as baby formula, gluten-free wheat and cleaning products, as well as some nonbasic commodities, under exclusive agency agreements between them and foreign companies.
The ministry said the decision, which will become effective at a maximum of six months, would curb rising prices in favor of consumers.
Undersecretary of the ministry in Gaza, Ayman al-Abed, told the Palestinian Press Agency that the monopoly by a large number of traders over commodities and their prices in Gaza triggered the decision to cancel exclusive agencies. "The ministry called on traders to regularize their situation before the entry into force of the decision, within six months at the latest, in consultation with their respective legal counsel," he said.
The decision to cancel exclusive agencies stirred the wrath of companies with exclusive importation licenses, many of which attempted to pressure the ministry into reconsidering its decision. Some traders tried to use their connections with senior officials at the ministry, but to no avail.
It should be noted that the Ministry of Economy did not provide any statistics on this issue, which also angered the concerned traders, who described the decision as unjustified.
Salah al-Din Makadmeh, the marketing and public relations director of Mareb Co. for Trading & Industry, denounced the ministry's move, describing it as a "unilateral decision." He told Al-Monitor, "Instead of taking an arbitrary unilateral decision, the Ministry of Economy should have discussed such a decision with us and with all parties concerned with consumer protection."
Maher al-Tabbah, an economist and the director of public relations and media at the Chamber of Commerce in Gaza, told Al-Monitor that the move reflects the government's indifference to the interests of the private sector. "Such decisions should have been taken based on in-depth studies and continuous consultation through workshops with the private sector, where all participants would convince each other of the appropriate steps to ensure local consumer protection," he said. "If the ministry's decision aims to protect the consumer's purchasing power and reduce prices, such a decision must also protect the interest of the private sector."
Makadmeh explained, "The ministry's justifications are unacceptable and inaccurate, we do not monopolize the commodities and we are not behind the rise in prices. For example, Mareb Co. has Egyptian, Turkish and other agency agreements to import foodstuffs, baby diapers and raw materials. There are numerous imported alternatives for our products in the market. We do not want to pressure the consumer into buying the goods we are offering. We know the prices of our products are high, but so is their level of quality compared to the alternatives available in the market. Ultimately, the consumer always has the freedom of choice."
Makadmeh expects this step will lead to the counterfeiting of brands and quality fraud. He warned the government of the disputes that will flare up among traders as a result of this decision. "These traders worked very hard to obtain these exclusive agencies and licenses and maintain consumer satisfaction by offering high-quality goods. They spent huge amounts of money on commercial campaigns to promote their products," he said. "They will not easily allow other traders to import the products subject to their exclusive commercial agencies."
He added, "If the ministry is really concerned with the consumer it must supervise the products supplied to the local market, which do not meet the minimum packaging standards. Many of these goods do not indicate their country of origin and do not meet the marking and labeling requirements."
But Rami Abu al-Rish, registrar of commercial agencies at the ministry in Gaza and director-general of trade and border crossings, told Al-Monitor, "The ministry wisely examined its decision to cancel commercial agencies to prevent a specific category of traders from monopolizing the import of basic and nonbasic commodities and to reduce the prices of goods that are currently under this monopoly. Only around 50 traders have importation licenses in the Gaza Strip."
He said, "The cancellation of exclusive agencies will allow small importers to conduct import activities, which will reflect positively on local consumers due to the end of the monopoly. This will also lead to the emergence of diverse products and multiple importation companies, and a price decrease of 20-30%, particularly the price of basic goods, such as cleaning products, and food commodities such as baby formula, gluten-free wheat and frying oil."
In a related context, Rish believes that the decision to cancel exclusive agencies has angered Israeli authorities, which communicated with traders in Gaza to ask them about the government's motives behind the decision. "Exclusive agencies are an integral part of the Israeli blockade policy on Gaza," said Rish. "Around 20 traders from among the 50 traders [in Gaza] who hold exclusive import licenses also hold import licenses from Israeli companies. … Since the 2007 blockade, the Israeli authorities deliberately and repeatedly reduced the number of trucks transporting goods to the Gaza Strip, to decrease supply in domestic markets. This has led to higher prices. Within the last five days, the number of trucks declined from 300 to 190 trucks per day."
Rish explained that just like the blockade imposed on Gaza, exclusive commercial agencies also put pressure on the consumer, since some traders deliberately take advantage of the lack of imports to raise prices and reap more profits.
Economist Ayman Abu Aisha told Al-Monitor that the government's decision is a confused decision void of any new economic vision. "It is an acquired right for any trader to have an exclusive agency," he said, "and the cancellation of such exclusive agencies is a violation of the property rights and would lead to the emergence of a black market, where products would be sold outside the formal market, due to uncontrolled prices. Should a number of traders import different quantities of the same commodity, the price of the product will differ, due to different importation cost."
He also added, "Developed countries resort to exclusive importation agencies to restructure their economy, support their domestic production and apply the import substitution strategy aimed to replace foreign imports with domestic production. Yet, the cancellation of exclusive agencies in Gaza would undermine the Ministry's declared policy of protecting local products."
He stressed that the alternative is to adopt other policies based on lowering taxes, preventing double taxation, subsidizing local products and encouraging domestic production.
Abu Aisha linked the government's decision to its need for additional tax revenues to pay employee salaries. "The government secures 45% of Gaza employees' basic salaries from tax revenues," he said. "It seeks through this decision to increase the number of importing traders and thus increase its revenues from taxes on imported goods."
While the government insists on its decision to allow new traders to import as a way to broaden the tax base, some traders continue with their opposition. Meanwhile, consumers wait to see whether their purchasing power and the quality of the products will be affected.