Hamas Considers Economic Reforms as Gaza's Economic Activity Plummets

Looking to lessen friction with both Egypt and Israel, Hamas proposes transferring control of key crossings to private Gaza entrepreneurs.

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Voices of construction workers used to ring out in Gaza’s streets. Now hulks of unfinished buildings stand in eerie silence, and the idle builders are left to worry how to make ends meet. An Egyptian-Israeli blockade on the Gaza Strip, run by Hamas, has left industry and construction gasping for resources, pushing unemployment to dizzying heights and deepening suffering for impoverished residents.

The problem intensified after a campaign begun last July by Egypt’s military-backed government to close cross-border smuggling tunnels that used to provide Gaza with basic goods, including food, fuel and building materials. Unemployment jumped to 38.5% at the end of last year, from 32% in the third quarter of 2013, according to the Palestinian Central Bureau of Statistics.

The downturn has put Hamas in a financial and political bind. Buoyed by the Arab uprisings which brought its Muslim Brotherhood allies to power in Cairo, Hamas shunned its old patrons in Iran and Syria. But when the Egyptian army ousted the Islamist government last July, Hamas was left isolated. It is now being forced to explore economic reforms, including possible privatizations, hoping to alleviate the woes that are everywhere to be seen.

Sitting beside a huge apartment building he has been unable to finish because of the lack of cement, businessman Mohammed Abu Izz sips his tea and smokes a cigarette. “Forty families have been waiting for five months to move in. Most them paid the price of their apartments in full and I could not deliver,” he said glumly.

Over the past six months, an angry Egypt has destroyed many of the underground passages, once a lifeline to Gaza’s 1.8 million people, taking the economy down with them. Egypt accuses Hamas of backing Al-Qaida-linked militant groups that have stepped up attacks against Egyptian security forces in the neighboring Sinai peninsula over the past few months.

Looking to lessen friction with both Egypt and Israel, Gaza’s deputy prime minister, Zeyad al-Zaza, said Hamas had proposed that control of key crossings with its neighbors be transferred to Gaza’s private entrepreneurs. Such a move would need to be coordinated with numerous parties, including Palestinian President Mahmoud Abbas, and there is no guarantee it will be approved.

Economist Maher al-Tabbaa, who is also director of public relations at the Gaza Chamber of Commerce, said the suggestion reflected Hamas’ appreciation of how bad the situation had become. But he wondered how it could be implemented. “I would say it was more of an attempt to find a solution to [the government’s] crisis rather than a practical exit from the current difficult situation,” he said.

Naeem al-Siksik, owner of the largest plastics plant in the Strip, said the trade restrictions and tunnel closures were piling pressure on his business, which he valued at $5 million and which used to produce more than half of Gaza’s plastic. Total production output had fallen by almost half over the past seven months, Siksik said.

“We have had to lay off 15% of our 150 workers and lower salaries by 20% as we try to tackle this crisis, but the situation is becoming worse all the time,” he added. Gaza industries’ problems are not limited to import restrictions – power shortages that force residents to live with up to eight hours of blackout a day means Siksik spends over $100,000 a month on fuel for his own generators.

Women in the Gaza Strip walking past a building where construction has stopped. Credit: Reuters

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