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Jerusalem Center for Public Affairs
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How to Boost Gaza’s Economy without Boosting Hamas: Give Gazans the Opportunity to Secure Jobs, Water, Electricity

Filed under: Hamas, Palestinians

How to Boost Gaza’s Economy without Boosting Hamas: Give Gazans the Opportunity to Secure Jobs, Water, Electricity
Twitter screenshots of demonstrations against Hamas across the Gaza Strip. (@imshin)

Media reports indicate that thousands of people have taken to the streets all across Gaza in rare public protests against Hamas due to the severe deterioration of living conditions. (AP-Washington Post)

Hamas dispersed demonstrators with live fire and batons
Hamas dispersed demonstrators with live fire and batons. (Twitter)

Ever since the complete Israeli withdrawal from Gaza in 2005 and the Hamas takeover in 2007, the humanitarian situation in the area has acutely deteriorated. As Gazans once again take to the streets in protest against Hamas’s corruption and ineptitude, it is reported that 70% of the population is unemployed and suffering from food insecurity, and that the entire population, aside from Hamas elites, lives without electricity 20 hours a day.

Just three years ago, when the unemployment rate was )just( 50%, civil unrest was met by Hamas authorities with brutal repression, true to the fashion of Hamas’ benefactors in Teheran. It is reasonable to conclude that the Hamas autocracy wants its population to suffer to justify its political agenda of destroying Israel.

It would seem, then, that nothing can be done to improve the situation, that to consider economic development for Gaza as long as Hamas is in power is to dream the impossible dream.

How can the cynically calculated intention to keep one’s people in squalor and degradation, to repress the standard of living to achieve political ends, be overcome?    

An Economic Plan for Gaza

A plan to do so can be built on two working assumptions. The first is that most ordinary Gazans want to escape poverty more than they want their rulers to fire rockets at Israel. The second is that if they had a way to alleviate their poverty by circumventing Hamas, they might have something to lose by letting Hamas do as it wishes. In such a situation, the people of Gaza would force the terrorist group to stop holding them hostage.

Proposals for economic development in Gaza—including new industry, a power station, and a water-desalination plant—have focused on the Strip itself and would thus increase the power of the people who have driven it to the brink of destruction. Hence, no such investments are, in fact, made. Meanwhile, foreign aid only ends up lining the pockets of the Hamas leadership, while ordinary Gazans, who have nothing to lose, continue to tolerate their own victimhood. Once Gazans have the opportunity to better their lives, they will not want to give it up. That may be wishful thinking, but it is not ungrounded in reality. Hizballah, unlike Hamas, does not launch rockets at Israel every few years, even though it can inflict far more damage, for one reason: the Lebanese people around them have too much to lose.

What is necessary, then, is to identify engines of economic growth that are out of Hamas’ reach but within the grasp of ordinary Gazans. Practically, this means putting these growth engines on the periphery of the Strip and thus just outside the terrorists’ control—encircling Gaza with economic opportunity.

To the east of the Strip, on sovereign Israeli territory, three industrial zones could be built adjacent to the border. One will be to the south, near the Kerem Shalom junction, in an area under the municipal jurisdiction of the Eshkol regional council. The second, also in Eshkol, will be placed near the Kissufim junction, and the third, in the regional council of Sha’ar Hanegev, near Naḥal Oz. Each one of these sites provides between 1,700 to 2,000 dunams (420-495 acres) of agricultural land that can easily be converted into industrial parks, creating approximately 25,000 new jobs.

Adjacent to the Kissufim industrial zone, opposite Gaza City, a waste-recycling plant can be built similar to Israel’s state-of-the-art plant in the country’s center. That facility converts refuse into fuel and processes 1,500 tons of waste per day, half of all the waste produced by greater Tel Aviv, which in turn contains almost half of Israel’s entire population. A plant with a similar capacity can cover nearly all of Gaza’s waste-treatment needs, as the Strip as a whole produces less than 2,000 tons per day. At such an installation, the recycling process separates hard and soft waste through the use of high-powered magnets and infrared sensors while producing fertilizer for agricultural needs and significant amounts of energy that can be used for making cement. The cement could be used to build modern apartment complexes and public spaces above ground rather than terror tunnels below it.

South of the Strip, Egypt should be encouraged to follow Israel’s example by building a similar industrial park near the Rafah border crossing. Understanding that it must counterbalance Iranian influence in the region, Egypt has been taking a more active role concerning Gaza lately. It has clamped down on the terror network operating from within its own territory and has tried to exert a restraining influence on Hamas. It should now directly assist the people of Gaza by creating employment opportunities that the terrorist group cannot sabotage. Once these four industrial parks are in place, the existing one near the Erez crossing at the northern tip of the Strip could be rebuilt and reopened, leaving the territory surrounded on three sides by engines of economic opportunity.

An Artificial Island

To the west of the Strip, the Artificial Island Initiative could be built. The concept for the initiative was formulated by Israel’s Port Company in 2018 on behalf of Minister for Intelligence Israel Katz. Rather than a seaport on the Gaza coast with all the attendant Hamas/security-related problems that prevent its implementation, the artificial island with a seaport and civilian infrastructure installations will be built 2.8 miles off the coast of Gaza on 1,300 acres of landfill. It will serve as an economic and transportation gateway for Gaza to the world – without posing a security risk to Israel and the region.

Israel will remain in complete control of security in the sea around the island and security inspection in the port. On the island itself, an international policing force will be responsible for security and public order, and a checkpoint on the bridge connecting the island to the coast. Should the security need arise, the island could be disconnected from the Strip.

The artificial island will be internationally financed, built, owned, and operated. It will have cargo and passenger ports, state-of-the-art port operation services and management facilities with logistic centers, a water desalination plant to service the Strip with fresh water, and electricity and gas installations. The power generated on the island will solve part of Gaza’s electricity problem, which among other things, prevents the proper treatment of Gaza’s wastewater, creating a critical health hazard for the people of Gaza, Israel, and Egypt. The Island Initiative will potentially provide approximately 35,000 new employment opportunities.

If the initiative is successful, the island could be expanded to include an international airport. Like the seaport, it would be under full and unhindered Israeli security control. The synergy created by expanded production just to the east of Gaza and export facilities just to its west is a potential game-changer, pulling initiative and economic control from the same hands that fire missiles at Israelis and deprive Gazans of their livelihood.

In preparing the Artificial Island Initiative, Israel’s Port Co. engaged a team of economists to study “Palestinian Trade and Shipment Forecasts” for the next 30 years. They assessed four possible scenarios, three ranging from the totally unviable continued conflict scenario to a marginally improved status quo. The fourth, the “Normal Economic Life” scenario, estimated the growth potential for Palestinian GDP at double-digit levels for the first ten years, with unemployment plummeting at the same time to under 10% and a 4%-6% GDP growth rate for the next 20 years.

This scenario is predicated on a high export rate, for which easing security restrictions is a prerequisite. The combination of dramatically increased production capacity through new industrial parks and a fully operational seaport for exports—both geographically outside the Strip and functionally outside the terrorists’ grasp—could make that possible.

Qualifying Industrial Zones (QIZ)

Industrial production in the new parks should easily fall under the Qualifying Industrial Zone (QIZ) agreements with the United States, in which the latter waives tariffs and quota restrictions on imports from Egypt, Jordan, and the Palestinian areas if the value includes 10.5% Israeli content. The QIZ program was introduced in 1996 by the U.S. Congress to stimulate regional economic cooperation. The focus should be on products such as pharmaceuticals, plastics, processed fruits and vegetables, and textiles, for which the United States needs to reduce its almost exclusive dependency on China. 

There is one more initiative for serious consideration: microfinance through the use of mobile phones. Microfinance has worked in many places worldwide to help small businesses grow and raise the standard of living, including the Palestinian territories. But studies of microfinance show that overly conservative credit policies due to macroeconomic instability implemented by regular banks in Gaza prevent the demand for microfinance from being met, making the gap between supply and demand huge. As Hamas needs to be circumvented, so do the banks, which are hardly independent and not averse to wading into the murky finances of terror funding.

The solution is for-profit microfinance, by independent financial services outside the Strip, handled directly through mobile phones. Networks have the software and cybersecurity in place to handle such transactions, and due to the social cohesiveness of extended family ties in Gaza, the risk of loan default is negligible. Quick micro-loans will enable small entrepreneurs, like fishermen, seamstresses, repairmen, and bakers, to grow their businesses by purchasing equipment or unavailable raw material.  

Were Gaza to be led by people more interested in developing Gaza rather than destroying Israel, Gaza could metamorphose into an economic success story much faster. But in the meantime, a dynamic economic plan, aggressively advanced, complements that intent by providing a horizon where every Gazan can see economic growth and human development. This would also mean that the international community cares more about the people living in Gaza than its obsession with Israel.

Encircling the Strip with economic growth engines beyond the security fence and anti-terror barriers could empower ordinary Gazans to eliminate their hostage-takers by themselves. Then, instead of seeing windmills as giants and trying to fight an unbeatable foe, they could get on with life.

A version of this article was originally published by Mosaic Magazine on June 21, 2021, as part of a symposium on the situation in Gaza.