Gaza’s economy has been stifled by years of sweeping movement restrictions imposed by Israel. Now it’s under double lockdown – the closure being tightened by Israel, and the internal closure implemented to curb the spread of the virus. How have Gaza’s industries and workforce been impacted, and what must be done to alleviate living conditions for residents?
In late August, the first confirmed cases of community transmission of the coronavirus were discovered in Gaza, leading local authorities to impose restrictions on movement and social gatherings inside the Strip, familiar by now to many around the world. Public institutions and schools were closed, non-essential stores and factories were shut down, and travel between Gaza’s districts was blocked. These measures were feared to further threaten livelihoods and food security, at a time when humanitarian conditions in the Strip are already on the brink, exacerbated by 13 years of closure, repeated military operations and, since March, the almost total closure of Erez Crossing and the onset of a global pandemic-related economic crisis. Throughout August, Israel imposed a series of punitive restrictions on movement and access, which it reversed in early September, but too little, too late.
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Most job seekers in the Strip have no prospect of finding employment. The unemployment rate in the second quarter of the year (April-June 2020), the early days of the pandemic, was already 49 percent. More than a third of all people employed in Gaza are public sector employees, that is, people employed by the Palestinian Authority or by the local Hamas-run government in the Strip and have been receiving partial or delayed salaries for years.
Meanwhile, Gaza’s private sector is fighting for survival, and purchasing power in the Strip is in an ever-deepening free fall. Before the coronavirus crisis, Israel had allowed several thousand laborers to exit Gaza and work in Israel, under the cover of “trader permits.” Since early March, Israel has blocked all travel via Erez Crossing, save for a tiny number of urgent medical cases, preventing laborers from reaching workplaces and traders from doing business in Israel and the West Bank.
The following report seeks to provide a snapshot of the economic situation in the Strip and is based on interviews conducted by Gisha with industrialists, traders, laborers, and economists from the Strip and data and information released by Palestinian and international organizations.
As economies much stronger than the Palestinian economy struggle under the weight of the pandemic, this report points to the severe damage to the local job market, residents’ purchasing power and various industries within the Gaza Strip over the past months. The worsening of basic living conditions in the Strip, already in a dire state of affairs prior, should concern all actors with a hand in the region. Gisha calls on Israel to take immediate action to allow maximum economic activity in Gaza including, by refraining from imposing punitive measures on the Strip and removing the closure. Further recommendations are detailed below.
The job market
The job market
The public sector
Close to 40 percent of people employed in Gaza work in the public sector, under either the Ramallah-based Palestinian Authority or the local government in the Strip run by Hamas. Public sector employees have received partial salaries, usually late, for years. In April 2017, the Palestinian Authority announced a cut of roughly 30 percent to the salaries of its 60,000 employees in the Strip. Some employees were also forced to go into early retirement. The move was officially explained as a budgetary constraint but appears to have also been implemented as a means of leverage over the Hamas government in Gaza.
In July 2020, the Palestinian Authority paid about 65 percent of its employees’ salaries from May, and Hamas paid its employees about 50 percent of their June salaries. Still, according to the Palestinian Central Bureau of Statistics (PCBS), average daily earnings in the public sector are about 96.4 ILS (about 28 USD) per day on average, compared to a daily average wage of just 31.9 ILS (less than 10 USD) in the private sector.
The private sector
In March 2020, with the initial outbreak of the pandemic in Israel, the authorities in Gaza also implemented preventative measures, enforcing restrictions on movement and activity until late April-early May. Restaurants, commercial centers, schools, wedding halls and places of worship were shuttered. Rafah Crossing was closed by Egypt. Israel barred travel via Erez Crossing, limiting exit to a small number of urgent medical cases. Israel continues to enforce these severe restrictions to this day, more than six months later. Khader Siniora, head of Gaza’s Industries Union, estimates that during the initial lockdown within the Strip (March, April and May) the private sector suffered losses of some 26 million ILS (roughly 7.6 million USD).
A report released by the United Nations International Labour Organization (ILO) in May called on governments to take immediate, broad measures to protect workers and workplaces, emphasizing that Gaza’s economy must be given room to grow and recuperate. The report stated that this depended, in part, on the extent to which the private sector was able to manufacture and operate in a manner that would enable it to compete in regional and global markets and increase exports, goods and services.
Gaza’s economy is dependent on choices made by Israel, which determines what goods can enter the Strip – raw materials, essential equipment – and which and how many goods, if any, can be sold outside of it, and where. Despite Gisha’s urgings and the economic crisis, Israel made no changes to policy to allow greater access of goods to and from the Strip during this period. A World Bank report from April 2019 estimated that the sectors hurt most by the delays and prohibitions on access of items Israel defines as “dual-use” into the Gaza Strip are industry, agriculture, and the ICT sector. The report also estimated that easing Israeli restrictions on “dual-use” materials and equipment would lead to an 11 percent growth in Gaza’s economy.
Dr. Maher Al Tabaa, director of the Gaza Bureau of Commerce told Gisha early on that, “Tourism is one of the economic sectors hit hardest. Social events have been banned, so banquet halls and conference venues have been shut down. Foreign nationals can’t come into Gaza, so we closed the hotels. I think everyone understands that domestic tourism is out of the question at this point. Gaza residents, who suffer from poverty and want in ordinary times, simply can’t afford such an expense.” About 8,700 people lost their jobs and source of income in the domestic tourism sector since the onset of the pandemic.
Gaza’s transportation sector has also been severely impacted. In 2019, there were 2,612 registered taxis and other transport vehicles, and about 2,700 registered drivers. It is estimated that some 80 percent of these have lost work since the start of the crisis.
Construction and related industries, including wood, paper, steel, aluminum, and construction material businesses, which normally employ tens of thousands of people, have also suffered. In 2019, manufacturing in this sector stood at 27 percent of its capacity. In the first quarter of 2020, production fell to just 11.4 percent. A report by the Gaza Construction Industry Association explains this drop has resulted by the drop purchasing power in the Strip. The vast majority of residents currently limit themselves to the purchase of essential products, such as food, cleaning and hygiene products, masks, and medications.
Gaza’s textile industry has undergone ups and downs amid the coronavirus pandemic
According to figures from Gaza’s Construction Industry Association, about 10,000 people employed in the sector have lost their jobs since the beginning of the crisis in mid-March. A report by the Furniture Industry Association indicates nearly half of the employees in the sector, some 2,600 individuals, lost their jobs, and 150 furniture factories were shut down. The sector’s manufacturing power is currently just five percent of what it was before the closure was tightened in 2007.
The current crisis has produced a 70 percent drop in production by the processed foods industry. A study conducted by the Gaza Food Industry Association in 65 factories in different districts in the Strip showed 1,300 workers had lost their jobs. The study also suggests that the harm to this sector has been mitigated to some extent by increased local demand for dried and canned foods, such that some factories continued operating, with a few companies actually increasing output. The study estimated that some 39 percent of the workers in this sector had lost their jobs since the start of the crisis (compared to the number of workers at the end of 2019).
Some 80 percent of private sector workers earn less than minimum wage, which in Gaza is a mere 1,450 ILS (roughly 425 USD) per month.
According to the PCBS, 53 percent of Gaza’s residents, more than a million children, elderly people, men and women, live below the poverty line and suffer from food insecurity, and 34 percent live in abject poverty. A World Bank report from June 2020 forecasted poverty in Gaza would increase to 64 percent as a result of the recent economic decline. Today, some 80 percent of Gaza’s residents rely on humanitarian aid. The dire financial situation can also be gleaned from the sharp drop in market prices for fruit and vegetables (Arabic). In the summer of 2020, a kilogram of tomatoes sold for 1 ILS (about 30 US cents) in Gaza. In Israel, tomatoes sold for 350 percent that price. Eggplant, also sold for 1 ILS per kilogram in Gaza, was four times more expensive in Israel.
Compounding this situation is the lack of a robust safety net. In addition to the United Nations Relief and Works Agency, which provides basic food products in refugee camps across the Strip, more than 100,000 families in Gaza rely on occasional 100 USD donations provided by Qatar.
Conclusions and recommendations
Conclusions and recommendations
Ongoing restrictions Israel imposes on movement of people and goods to and from Gaza have contributed significantly to the dire humanitarian situation in the Strip and forcibly limit its potential for economic activity. Continued insistence on these restrictions, especially now, is further exacerbating the situation and harming residents of Gaza. Israel’s significant control over countless aspects of life in the Strip, its exclusive control over the commercial and pedestrian crossings between Gaza and Israel (and the West Bank), bring with it a duty to protect civilians, including by facilitating economic activity and development.
Israel must take immediate action to allow maximum economic activity in Gaza:
• Israel must refrain from any punitive measures deliberately designed to harm innocent people as well as humanitarian and economic activity in Gaza.
• Israel must prepare, publish and implement a detailed plan that recognizes its responsibility to meet the basic needs of Gaza’s residents and protect their fundamental rights.
• Israel must remove restrictions on the movement of traders, laborers and goods imposed prior to the coronavirus crisis.
• Israel must lift the extreme and arbitrary restrictions on travel imposed since March 2020 at Erez Crossing. Israel and the Palestinian governments in Ramallah and Gaza must find ways to protect livelihoods while taking necessary precautionary measures to protect public health.
• Israel must take immediate action to allow Gaza’s food industry to continue operating and to develop, including removing the de facto ban on sales in the West Bank and Israel.
• Israel must allow the raw materials and equipment required for routine economic activity to enter the Gaza Strip, with an emphasis on sectors that ensure the local population’s food supply – fishing and agriculture – and ensure the safety of those making their living at sea or in farmlands near the fence with Israel.
• Israel must allow Gaza traders and businesspeople to meet with clients and suppliers outside the Strip in order to reduce the disruption to business relationships and enable monetary transactions.
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