World Bank: Gaza Strip May Face 'Irreversible' Economic Collapse

Taken from Haaretz, Israel, 12 July 2007
By Reuters

The World Bank said on Thursday the prolonged closure of Israel's border crossings with Hamas-controlled Gaza could lead to the coastal strip's "irreversible" economic collapse.

The international lending agency delivered that stark assessment during a closed-door meeting of aid groups and private sector organizations.Israel has largely closed the Karni commercial crossing, Gaza's economic lifeline, in an effort to isolate Hamas after it seized control of the Gaza Strip a month ago.





Karni border crossing between Israel and the Gaza Strip seen closed for traffic earlier this year. (Limor Edery)

Egypt has also kept mainly shut Gaza's border crossing with the Sinai since mid-June.

Israel has allowed humanitarian aid into the territory through smaller crossings.

While aid groups said this should be sufficient to head off a food shortage in the territory of 1.5 million people, they warned Gaza's economy would be devastated.

Almost all Gaza businesses depend on imported raw materials and other supplies that must pass through the strip's shuttered crossings with Israel.

"The pillars of Gaza's economy have weakened over the years. Now, with a sustained closure on this current scale, they would be at risk of virtually irreversible collapse," Faris Hadad-Zervos, the World Bank's acting country director for the West Bank and Gaza, told the aid groups.

A copy of the World Bank's presentation was obtained by Reuters from a participant in the meeting.

"A solution must be reached very soon, if not immediately... Otherwise, Gaza's dependence on humanitarian assistance could become a long-term and comprehensive situation. These impacts will be difficult to reverse," Hadad-Zervos said.

According to statistics compiled by the Palestine Trade Center and the Palestinian Federation of Industries, more than 3,190 Gaza businesses have temporarily shut down in the last month. Some 65,800 workers have also been temporarily laid off.

Up to 54 percent of employment in Gaza is generated by the private sector, representing more than 100,000 jobs.

Hadad-Zervos said a loss of a third of those jobs would translate into unemployment levels of over 37 percent, up from 30 percent at the beginning of the year. He said unemployment could reach the unprecedented level of 44 percent.

Israel wants to isolate Hamas in the Gaza Strip, while allowing funds and goods to flow to President Mahmoud Abbas's emergency administration in the West Bank.

Israel controls the land crossings between Gaza and Israel, as well as Gaza's air space and territorial waters.