Introduction

Stiftung Wissenschaft und Politik German Institute for International and Security Affairs

Comments

Unlocking the Gaza Strip’s Economic Potential and Fostering Political Stability WP S Europeans Should Seize the Opportunity of the Rapprochement between Fatah and Hamas Omar Shaban

Although the UN report of 2012 projected that Gaza would be uninhabitable by 2020, Gaza is likely to collapse into a state of chaos domestically and renewed military con- frontation with Israel much earlier. Gaza’s current reality is shaped by the aftermath of military clashes between Israel and Palestinian groups, the tightening of the blockade by Israel in 2007, the closure of the Rafah Crossing by Egypt, and the international com- munity’s no-contact policy towards Hamas. This has created a situation of isolation, in which the infrastructure as well as the social and political fabrics in the Gaza Strip have suffered. Gaza’s once export-oriented economy is now largely defunct, with the popula- tion impoverished and dependent on foreign aid. These factors pose serious threats to domestic stability, to Palestinian unity, and to the stability of the sub-region. Immedi- ate intervention by the EU is needed to alleviate the humanitarian crisis, advance Pales- tinian reconciliation, and lift the Israeli blockade. The current rapprochement between Fatah and Hamas offers opportunities for the Europeans to engage.

Over the last 10 years, the Israeli-imposed sponse to its refusal to abide with the three blockade and the Palestinian factional divi- conditions set by the Middle East Quartet sion have strongly impacted Gaza’s economy (composed of the United States, Russia, the and society and have negatively affected UN, and the EU), that is, the recognition of the Palestinian national project. In January Israel, the renunciation of violence, and the 2006, Hamas (the Islamic Resistance Move- adherence to all previously signed agree- ment) had won the second legislative elec- ments between Israel and the Palestine Lib- tions and then formed its first-ever govern- eration Organization. In addition, the Israeli ment in March 2006, ending the domi- government declared a full blockade of nance of its rival Fatah movement over the Gaza in the middle of June 2007, thus re- Palestinian leadership since the 1960s. Sub- stricting even further the import and ex- sequently, large parts of the international port of goods and the movement of people. community announced a “no contact policy” The small coastal strip (Gaza has an area towards the Hamas-led government in re- of only 362 km2) is densely inhabited by

Omar Shaban, Director of Palthink for Strategic Studies in Gaza, was a guest researcher at SWP’s Middle East and Africa Division SWP Comments 42 in August and September 2017 with the kind support of the Friedrich Ebert Foundation October 2017

1 1.94 million people, with a strong popula- that they could be used for civilian pur- tion growth (3.3 per cent). It is estimated poses such as reconstruction as well as the that its population will reach 3 million by manufacturing of weapons. The import of 2030 and 4.8 million by 2050; 69 per cent wood, cement, iron, and many other goods of the population are refugees. Gaza is sur- has therefore been highly restricted. In rounded by Israel, Egypt, and the Mediter- 2006, Dov Weisglass, then a senior advisor ranean Sea. to Prime Minister Ehud Olmert, explained For its population, there are only two ways that the Israeli policy towards Gaza in reac- to exit: The first one is through the Erez tion to Hamas’ election victory was designed Crossing, which connects Gaza with Israel “to put the Palestinians on a diet, but not and, therefore, theoretically enables travel to make them die of hunger”. In 2012, an to the West Bank, Jordan, and the world. Israeli court ordered the release of a govern- However, since 2007 the Israeli authorities ment document that detailed “the number have allowed Palestinians to exit via Erez of calories Palestinians in Gaza need to con- only in “exceptional humanitarian cases”, sume to avoid malnutrition”, a document with an emphasis on urgent medical cases. that had served as a guideline to calculate Whereas in 2000 around half a million in- the volume of imports allowed into Gaza. habitants left Gaza every month through In addition, next to all export of goods has this checkpoint, this number declined to been banned. 144,000 in 2016. Although Israel’s blockade After the 2014 military confrontations, policy has gone through different phases, the Israeli government agreed to what it has never been oriented towards Gazans’ became known as the “Gaza Reconstruction needs. Mechanism” (GRM), which was adminis- The second way to exit Gaza is through tered by the UN and was to regulate and the Rafah Crossing, which connects Gaza supervise the flow of commodities into with Egypt’s Sinai Peninsula. Although the Gaza. Through the GRM, some construction crossing has been sealed by the Egyptian materials have been allowed into Gaza, but authorities on principle since mid-2007, sever restrictions remain. All in all, accord- due to its non-recognition of and enmity ing to a report by the Israeli NGO Gisha, the with Hamas, Cairo has occasionally opened volume of imports has increased gradually the crossing for humanitarian purposes. since the worst years of the closure (2007– Thus, since then, the Rafah Crossing has 2010), when everyday items such as chil- operated for three to five days every two dren’s toys and paper were blocked. or three months, with individuals meeting certain criteria (e.g. for pilgrimages, stu- dents in a third country, medical reasons, From Legal to Black Economy etc.) being allowed to exit. Whereas the Israel and the West Bank used to be Gaza’s monthly average number of entries and main commercial partners. Cutting these exits through the Rafah Crossing reached economic ties by way of the blockade has about 40,000 per month in 2005, it declined resulted in a significant decrease in the pro- to 3,520 entries and exits per month in 2016. duction levels of the local industries. They were replaced by organised smuggling through a complex system of tunnels under Economic and Social Impact the Rafah border. Thus, the economic restric- The blockade of the Gaza Strip has not only tions imposed by Israel led to a fundamen- imposed severe restrictions on the move- tal shift: It pushed the Gazan population ment of people, but it has also dramatically to depend on tunnels to obtain all types decreased the influx of goods. Israel has of goods, ranging from milk and cement limited or denied entry for all materials to stationery, clothes, and even fuel and that can be considered “dual-use”, meaning cars.

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2 Until June 2013, the number of tunnels other taxes, which has caused enormous re- was estimated to range from 450 to 1,200 sentment among the population and led to beneath the 12-km-long Gaza-Egypt border. a decrease in the government’s popularity. The tunnels shifted the economic centre of the Gaza Strip from Gaza City to Rafah and triggered the emergence of a new business Palestinian Civil Society: class, which made huge profits out of the Deepening Polarisation, New Roles tunnel trade and whose members came to The Palestinian factional division has put be known as “the new millionaires”. The civil society’s independence to the test, as change from a legal to an illegal economy the rivalling parties have each applied pres- also affected the values and social princi- sure to gain support for their cause and ples that govern Gaza’s society. Although delegitimize their rival. At the same time, the latter perceived the tunnel trade to be the split has reshaped civil society, con- illegal in the beginning, the business was fronted it with new tasks, and equipped it promoted as a tool to challenge Israel’s with new tools. occupation and, thus, started to gradually Many civil society organisations have gain social acceptance. tried to make use of their positions as non- Realising that the tunnel trade could partisan mediators and grassroots mobilis- be a source of revenue that would enable ers in favour of reconciliation and over- it to overcome the financial boycott by the coming the intra-Palestinian split. Adapting Palestinian Authority (PA) and many in their priorities, they have focussed on pre- the international community, the Hamas- venting negative effects of Palestinian divi- led government started to regulate the tun- sions on society at large. The new functions nel business by charging commissions on of civil society that arose thus were media- the smuggling as a replacement for regular tion, bridge-building efforts, and the provi- income taxes. For example, from 2008 to sion of visions, plans, and forums for debate 2013, Hamas collected a tax of 10 shekel on how to overcome the divide between ($2.50) for one ton of gravel, 20 shekel ($5) the PA and Hamas. At the same time, many for one ton of cement, and 50 shekel NGOs engaged in advocacy activities such ($12.50) for one ton of metal. The launch as demonstrations, vigils, and the creation of a new tunnel was taxed with around of networks and coalitions; capacity-build- $2,800, and the tax for a smuggled car of ing; and trainings aimed at overall sensi- around $6,000 in value was $1,000. All in tisation for a culture of tolerance between all, it was estimated that the Gazan govern- the two camps. Palestinian civil society ment collected around half a billion US dol- has therefore played a constructive role in lars per year from various types of tunnel achieving a modicum of stability and mod- taxes. eration and in maintaining diversity. The tunnels thus became a major source Yet, the factional split made the situa- of income for the Hamas-led government. tion worse for civil society on many levels. Yet, starting in July 2013, the new leader- The internal division led to the suspension ship in Egypt, headed by Abdel Fattah of elections, to a significant increase in hu- al-Sisi, ordered the tunnels to be destroyed. man rights violations by the two rivalling This campaign was aimed at exerting pres- authorities, and to a curtailing of civil sure on Hamas. Since then, the Hamas-led society activities. As a result, donor fund- government has suffered from a severe ing-priorities changed, too: More funds financial crisis, to the point that, in the were directed to the PA in the West Bank last months, it has been unable to pay the and to humanitarian organisations, so as salaries of its 40,000 public servants on to bypass the Hamas-led government. In time. To replace this source of revenue, it addition, banking was strongly affected by felt compelled to impose several types of regulations from the two rivalling author-

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3 ities as well as third parties such as the but it was met with significant suspicion United States and the EU, thus making from the two authorities, which imposed financial transfers to civil society organisa- severe restrictions that halted the move- tions in Gaza more difficult. Consequently, ment. Palestinian civil society is today far less able Another call to demonstrations was ini- to defend the people’s rights and cater to tiated online on 11 November 2013 under their needs than a decade ago. To continue the name “Tamarod” (Arabic for rebellion). fulfilling a moderating and balancing role, The Tamarod movement was a copy-and- it needs financial and diplomatic support. paste attempt of the 2013 Egyptian experi- ence that brought about the downfall of the Mohammed Mursi presidency. Yet, it failed Youth: From an Asset to a Burden to consider the Gaza Strip’s specificities – Gaza’s youth – some 72 per cent of the above all, the exclusive control of Hamas – population are younger than 30 years – and thus was not successful either. have been particularly strongly affected by In general, the failure to bring about the Palestinian factional division and the change through a “Palestinian Spring” was blockade. The suspension of regular elec- due to the inability of Palestinian youth to tions and of the work of the Palestinian form a clear vision for the future, the lack Legislative Council (PLC) has deprived the of coordination between Gaza and West youth of being able to actively participate Bank youth, and the failure to agree upon politically and make their voices heard. demands and their prioritisation. Unlike Gaza’s youth have felt marginalised and their Arab counterparts, who confronted a neglected by the competing authorities. In single government in their endeavours to addition, as Israel’s blockade policies gener- improve their situation, Palestinian youth ally deny youth to travel, they have been were caught between the Israeli occupation, deprived from interacting with the outside Fatah in the West Bank, and Hamas in Gaza. world and from upgrading and modernis- ing their knowledge and skills. Frustration, anger, and desperation are the main side- Despair Leads to Emigration and Suicide effects. The lack of interaction with the out- The continuous failure of Palestinian youth side world has also furthered fatalism and to improve their lot has pushed them to be- radicalisation among Gaza’s youth. come increasingly frustrated. A survey pub- lished by the Palestinian Central Bureau of Statistics in August 2017 confirms that No “Palestinian Spring” there is a growing desire among Palestinian The Palestinian youth closely followed the youth to emigrate: About 24 per cent of the youth-led upheavals of the so-called Arab 15- to 29-year-olds have a desire to emigrate. Spring with great admiration. They hurried In Gaza, the percentage is even higher, at to copy the protests and methods, with the 37 per cent, compared to only 15 per cent aim of bringing positive change to their en- of the West Bank youth. To date, hundreds vironment. One of the first concrete actions of Gazan youth have succeeded in escaping was to call for mass protests – by using social through the underground tunnels, seeking media, as had been done in many other to migrate to Europe through the Alexan- parts of the Arab world – to end the fac- dria seaport. According to media accounts, tional division. On 15 March 2011, thou- in 2014 around 400 Palestinians lost their sands of Palestinian youth gathered in the lives when their boats, bound for Europe, West Bank and Gaza, calling primarily to sank in the Mediterranean Sea. Another end the then four-year-old division. This growing phenomenon in that context is outbreak of youth activism was positively that young people looking for jobs escape welcomed by Palestinian society in general, into Israel by jumping over – or cutting

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4 through – the barbed wire fence surround- mosque in Rafah city. Hamas attacked the ing the Strip. group, killed 21 of them, and damaged the Yet another effect of the Gazan reality mosque. Repeated attacks by these groups is a growing tendency among youth to followed against internet cafés, women commit suicide. In August 2017, Mohanned coiffeurs, sport clubs, summer camps, and Younis, a 22-year-old pharmacology stu- the French cultural centre, aimed at chal- dent, voluntarily ended his life. Shockingly, lenging Hamas’ authority. On 17 August a considerable number of Mohanned’s 2017, a radical Salafist committed a suicide peers supported this decision. The incident operation at the Rafah Crossing. He ex- came after a similar case in which a talented ploded himself after approaching a Hamas cartoonist, Moaz al-Hajj, hanged himself. border police officer in Rafah, killing one These two incidents upset Gaza’s society Hamas official. After each of these incidents and further highlighted the crisis Gazans Hamas has demonstrated its control with are undergoing. a wave of arrests among Salafists in Gaza, exacerbating the existing frictions. These incidents, as well as Hamas’ reactions to Youth Turn to Radicalism them, have led to a state of fear among the As Palestinian youth realise that their people of Gaza. efforts to change their situation by peace- ful means have failed, many lose faith in moderation. This creates an environment Disintegration of the in which radical groups can easily attract Palestinian National Project youth to their ideology. Some of these Over the last decade, due to the factional youth are invited by radical groups oper- division and the lack of substantial inter- ating in the Sinai Peninsula to join them, action between the two authorities and either to fight against the Egyptian author- populations, the political, social, and eco- ities or to travel on to fight in Iraq and nomic differences between Gaza and the Syria. Sinai also provides a training ground West Bank have increased significantly, for those who escape Gaza through the despite them having been foreseen as tunnels to spread a jihadi ideology upon one political entity, according to the Oslo their return. According to the online plat- Accords from the 1990s. The division be- form Al-Monitor, an estimated 100 young tween Hamas and the PA has exceeded the Gazans are reported to have joined the so- political realm and brought about changes called Islamic State in Iraq and Syria. The in other domains as well. It has had legal, same report speaks of more than 1,000 economic, social, and cultural repercus- young Gazans who are ready to join the sions and has negatively impacted on the organisation, once they have the chance Palestinian national project. to exit Gaza. Since 2007 more than 150 decrees have been issued by PA President Mahmoud Abbas, while the Hamas bloc in the PLC, Dispute over Representing Political Islam which has continued to meet as a rump In recent years, tensions between Hamas parliament, has issued and validated 50 and radical Salafi groups have been grow- decrees. These decrees have created legal ing and repeated clashes between them divisions between the two areas. have occurred, followed by the arrests of At the same time, Gaza’s economy con- hundreds of their members by Hamas tinues to weaken vis-à-vis the West Bank’s: forces. Open conflict broke out in August The GDP per capita in Gaza is only 45 per 2009, when a group announced their cent that of the West Bank’s; the unemploy- affiliation with Al-Qaeda and declared the ment in Gaza has reached 42 per cent (where- establishment of an Islamic emirate in a as it is 18 per cent in the West Bank); and

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5 the poverty rate in Gaza is around 40 per The Prospect of the Two-state Settlement cent, but 19 per cent in the West Bank. The hope for a two-state solution will vanish Food insecurity affects 47 per cent of the if the Palestinian leadership remains divided households in Gaza, whereas in the West – with Hamas being considered a terrorist Bank it affects 16 per cent. organisation by Israel and Egypt as well as Moreover, Gazan society has grown other key international actors, and the PA apart from the rest of Palestinian society. not being able to claim to represent the The policy of restricting people’s movement Palestinian people and territories. Thus, in between the Gaza Strip and the West Bank order to progress towards – and be able to has led, among other effects, to a signifi- implement – a two-state solution, Palestini- cant decrease in contact between Palestin- an unity must be reached first and bring ians in the two parts of the Palestinian terri- about a unified Palestinian leadership, one tory: Gaza and West Bank. There has been that would represent all Palestinians and be a growing feeling among the population able to reach a final agreement with Israel in Gaza that they are no longer an integral to bring an end to the conflict. part of the Palestinian national project. This has again triggered the debate about whether Gaza can be a separate political Reconciliation Efforts under and territorial entity as a “mini” Palestinian Egyptian Lead state. In reality, the continued separation During the period from June to September of the two Palestinian territories must be 2017, surprising developments took place considered a serious threat to the unity – that might lead to positive changes: The and the success – of the Palestinian national Hamas leadership was twice invited to Cairo. project. During the first visit in June, they met with the Egyptian authorities and – even more astonishing – with their rival Mohammed Regional Spillover Effects Dahlan, the former Fatah security chief of Gaza is too small, too dependent on its Gaza, who had played a key role in trigger- neighbours for resources and access, and ing the armed clashes between Fatah and too poor to cope with all of the abovemen- Hamas in 2007. tioned problems by itself. Also, Gaza’s prob- Cairo aimed to utilise the financial crises lems cannot be contained within the Strip, of Hamas and its regional isolation to bring especially as most of them are either gen- Hamas closer to its position and to distance erated or accelerated by external factors. it from its former ally, Qatar. In addition, Against the backdrop of high population Egypt changed its approach from viewing growth, low economic performance, un- Hamas as an enemy to seeing it as a poten- employment, increasing radicalism, and tial ally in fighting terrorism in Sinai. the heavy presence of militant and armed Hamas was offered a regular opening of the groups, Gaza is on the brink of exploding Rafah Crossing, the provision of fuel for the internally – internal turmoil might come Gaza power plant, and international travel in the form of clashes between the people, of its cadres via Egypt. In exchange, Hamas armed groups, and the Hamas-led authority promised cooperation in securing the – or externally, as a new round of hostil- border with Sinai. ities with Israel is very likely. In this con- During the second invitation to Cairo in text, radical groups have been trying to September 2017, Hamas was also allowed trigger a reaction from Israel by repeatedly to convene a meeting of its Political Bureau, launching homemade rockets into south- including Hamas officials from the diaspora. ern Israel. After that meeting, Hamas announced the dissolution of its administrative committee, which had been formed in March 2017 to

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6 govern the Gaza Strip and was perceived by European markets. Furniture and garments the PA as a shadow government. In response, were manufactured and exported as well. the PA took a series of severe measures The Strip could be turned into a haven of against Gaza, for example the reduction of stability and prosperity rather than being PA employees’ salaries by 30 per cent and aid-dependent and a threat to its neigh- decreasing the subsidies for Gaza’s electricity bours. “Global Palestine, Connected Gaza” – bill. The decision of Hamas to dissolve the a study led by the Palestinian private sector administrative committee opened the way with technical support from an interna- for the so-called consensus government of tional consulting firm – envisages Gaza as Rami Hamdallah to govern Gaza. Then, on a globally relevant, knowledge-based, and 11 October, a reconciliation deal between resource-efficient economy pursuing oppor- Hamas and Fatah was reached through tunities in high value-added services and Egyptian mediation. The deal provides for niche manufacturing, trade, and transport, the PA to take over the government of Gaza with tourism and agricultural activities as well as the deployment of the Presiden- expected to play an important role. Ulti- tial Guard to the Gaza crossings. mately, Gaza could also be developed into Despite all these positive developments, a regional hub for IT industries, as there the road to reconciliation is still long. All already are several small companies in Gaza past experiences and efforts to bridge the that have established cooperation agree- divide, such as the Mecca Agreement (Feb- ments with big IT companies such as Micro- ruary 2007), the Sanaa Declaration (March soft and Google. 2008), the Cairo Agreement (May 2011), In addition, Gaza boasts natural gas the Doha Declaration (February 2012), resources, both inland and offshore, with and the Shati Agreement (April 2014), two gas reservoirs already having been dis- were not successful in healing the rift. Still, covered in the Mediterranean. The idea of the recent rapprochement between Hamas expanding Gaza by building small islands and Egypt and the reconciliation agree- in the Mediterranean has been debated do- ment between Hamas and Fatah are sig- mestically and internationally. Those small nificant, as they can help contribute to- islands would help to ease pressures result- wards defusing the tension between Hamas ing from the population density and could and the PA. If continued, these meetings be used for production facilities and tourism. might mark the beginning of a reconcilia- To revive and utilise its potential, Gaza tion process, especially if they entail elec- must be reopened for trade, including by tions for the parliament and the presi- building a small port and a regional airport dency. that would connect Gaza to the rest of the world. A significant Palestinian diaspora would be ready to invest in – and contrib- Unlocking Gaza’s Economic Potential ute to – the development of Gaza and the Despite all the man-made problems and Palestinian territories, once the current challenges, Gaza has many assets that offer obstacles have been removed. the potential for prosperity. Gaza lies at the crossroads between Asia and Europe and its population has a highly entrepreneurial Recommendations spirit and a competent workforce with The blockade imposed by Israel, the Pales- modern skills, often acquired during earlier tinian factional division, and the severe employment at Israeli companies. Before humanitarian crisis in Gaza are not natural the blockade, the comparatively modern disasters that must be accepted. The inter- agricultural sector exported large amounts national community should intervene in a of cash crops, such as carnations, straw- determined and swift fashion to prevent berries, and vegetables, to the Israeli and the collapse of Gaza. Given the opportunity

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7 offered by steps towards reconciliation of elections, political movements should between Hamas and the PA, this might transform themselves into legal political just be the right moment for the EU to act. parties with clear and written bylaws. The Germany is in a good position to start and would-be elected Palestinian leadership lead such an initiative, utilising its central should declare its readiness to enter into position within the EU and international peace negotiations with Israel that aim to politics, its unique relations with Israel, reach a final agreement and end the conflict. and the very positive image that Germany has acquired in the Middle East due to its welcoming policy towards refugees in 2015. Two types of simultaneous interventions are advisable: at the humanitarian and devel- opmental as well as the political levels.

© Stiftung Wissenschaft und Politik, 2017 Humanitarian and Developmental All rights reserved Immediate intervention is needed to sus- These Comments reflect tainably solve the crisis concerning the the author’s views. water and electricity supply in Gaza, the SWP lack of medical facilities, and to address the Stiftung Wissenschaft und high level of youth unemployment. In this Politik German Institute for context, it is key to lift the blockade, that International and is, to allow the movement of people and Security Affairs reopen Gaza for trade; support projects Ludwigkirchplatz 3­4 that promote green, self-sufficient energy 10719 Berlin sources (such as solar energy); and support Telephone +49 30 880 07-0 Fax +49 30 880 07-100 the private sector, which would create jobs. www.swp-berlin.org Also, support for Palestinian civil society – [email protected] aimed at restoring civic education and advo- ISSN 1861-1761 cacy for reconciliation, peace, and human rights – is important to rebuild the fabric of Palestinian society. In addition, steps should be taken to un- lock Gaza’s full economic potential. In this regard, reconstruction of a Gazan seaport, exploration of the gas fields, and jump- starting the export industry are among the key measures to be supported.

Support for the Domestic Political Process The international community should help Palestinian factions to see the implementa- tion of reconciliation agreements through. This includes elections that would restore the democratic process and bring new le- gitimacy to the PA, the PLC, and the Presi- dency. In this context, the PA should pro- mulgate the draft law that would regulate the formation of political parties. Ahead

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