Gaza Fighting Is Over, but Many Business Sectors See Damage Stretching Into 2015

Tourism, agriculture, even many retailers don’t see a quick recovery.

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Sderot paint plant after rocket attack.
Sderot paint plant after rocket attack. Credit: Eliyahu Hershkovitz

The war in Gaza really seems to be over this time, leaving businesses, farmers and the government to tally up the final costs of the 50-day conflict.

Already one day into the cease-fire declared late on Tuesday, the credit card issuer CAL said purchases using plastic had edged up 3.8%, matching the 4% rise that occurred during the lengthy interim cease-fire but well below the rise of 8.1% CAL registered in the first half of the year before the fighting broke out. During the peak of the fighting in the third week of July, credit card purchases plunged 7.6%, it said.

“No doubt that as the public’s confidence in the [current] cease-fire grows, we should expect to see increasing credit card usage,” said Doron Sapir, CAL’s CEO.

But for many in the retail and tourism sectors, it looks like the sales lost during the weeks of Operation Protective Edge will never be recovered.

Retails sales across Israel were down 8% during the Gaza operation compared with the same time a year earlier, according to Retail Information Systems, which monitors sales in about 2,000 stores nationwide.

Retail sales in the south dropped 12% during Protective Edge it said, but Jerusalem reported an even sharper drop of about 17% and Tel Aviv stores suffered a decline of 9.3%, even though both cities were not nearly as affected by Hamas rocket fire as the south.

The manager of a Jerusalem shopping mall, who spoke on condition of anonymity, said the city’s retailers were hurt by the absence of tourists – both Israeli and foreign – especially at the Mamilla Mall outside the Old City, one of the city’s two main malls and a popular shopping spot for visitors more than for locals.

But the city’s problem predated the war, he said. “Since the kidnapping of the three teenagers and throughout the war, we saw that people from the Arab sector stopped coming to Jewish areas and vice versa. Add the drop in tourism, and you see we were hit badly,” he said.

Only retailers inside a range of 40 kilometers of the Gaza Strip are entitled to government compensation, so that Jerusalem and Tel Aviv shops will not qualify. But even stores in the south said the aid would not make up for the extent of the losses.

Pini Partok, one of the principals of the Zebra apparel chain, which operates stores across the country, estimated lost sales at 2 million shekels ($560,000). He said traffic at his stores had picked up this week, but estimated the government would compensate him for about half his losses.

“In addition, we won’t be compensated for all the inventory we have left over from our summer collection that we never sold,” Partok said. “We’ll keep it in storage in the hope we can sell it for something next year.”

Tourism in doldrums

Tourism industry executives estimated on Wednesday that their losses amounted to 2 billion shekels so far, but even with the end of the warfare their problems are far from over.

The fighting, which began at the start of July just as the peak summer season was getting under way, came at the worst time of the year for Israel’s hotels, airlines and retailers catering to travelers. July saw a 24% drop in overnight stays at the country’s hotels from a year ago to about 590,000, according to the Israel Hotels Association. The drop occurred almost everywhere, with declines of 22% in Jerusalem and 39% in Tel Aviv. Only the Galilee area, which was out of rocket range, saw rises of about 8% for Tiberias and the Kinneret, and 21% for Nazareth.

Executives said they thought it would take until the first quarter of next year for foreign tourists to begin returning to Israel in large numbers, which means they not only have lost the summer season but the Jewish High Holiday season in September-October, as well as Christmas-New Year.

Even outgoing tourism by Israelis travelling abroad was affected, as families with men called up for reserve duty cancelled reservations and other stayed home in solidarity. But so far, there is no sign of a post-war rush to travel: As of now, High Holiday reservations account for only 15% of total holidays booked, half the usual level at this time of the year.

Efforts by the Tourism Ministry to compensate the industry have so far failed. The ministry proposed a 750-million-shekel package, but the Finance Ministry refused to accept the plan.

Industrial, agricultural woes

The damage to industry, meanwhile, is an estimated 1.32 billion shekels – 625 million of it to plants

in the south of the country and the rest to facilities in the center up to the Haifa region – according to Manufacturers Association chief economist Dafna Nitzan- Aviram.

Basing her estimate on a survey of 100 factories, she said 89% of all employees reported for work on average during Operation Protective Edge. In the south, however, the rate was just 80%.

Amir Hayek, the association’s director, said on Wednesday that it was critical that manufacturers receive their compensation as quickly as possible.

Farmers, meanwhile, may have sustained as much damage from Israeli tanks and armored personnel carriers driving across their fields as from Hamas rockets. Avshalom Vilan, president of the Israeli Farmers Association, estimated the cost of restoring fields at between 50 million and 100 million shekels, which should be covered by the Defense Ministry, the Tax Authority and other bodies.

While Vilan estimated indirect damage at another 50 million, Israel Farmers Union President Dubi Amitai said the indirect damages could ultimately reach four times that amount, including not only lost crops but losses incurred by the inability to sow or irrigate fields.

“Agriculture isn’t like industry, where you return to the factory, turn on the electricity and start to work,” Amitai said. “Here the results are going to be felt in September and October. The damage is double and double again.”

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