INVESTIGATION: Yezid Sayegh on the Hamas economy in Gaza

Later today, the Israeli Foreign Ministry is expected to publish a new list — of items forbidden to enter Gaza. This is the revamp of Israel’s sanctions policy that was announced in the wake of the 31 May Israeli attack on the Freedom Flotilla attempting to “break the siege on Gaza” by sea, which resulted in the deaths of 8 Turkish men and one American student.

But why is this list being announced by the Israeli Foreign Ministry?

Probably to emphasize, first of all, that Israel and Gaza are two different entities. Despite considerable evidence to the contrary, Israel has insisted since its unilateral withdrawal, in September 2005, of 8,000 Israeli settlers and the troops protecting them, that it is no longer occupying Gaza.

Since September 2007, following an Israeli Government decision to declare Gaza an “enemy entity” or “hostile territory”, the Israeli siege on Gaza has been administered by the Israeli Ministry of Defense — and in particular, its COGAT [Coordinator of Government Activities in the Territories] department — without any other government supervision or oversight, than a warning by the Israeli Supreme Court, in response to a lawsuit brought by a group of Israeli and Palestinian human rights groups [with GISHA in the lead] not to allow a “humanitarian crisis” to develop.

Some international organizations believe that a this threshold has already been passed, several years ago.

And, there are continuous reports that this Israeli policy toward Gaza is not completely unappreciated by the Ramallah-based Palestinian Authority, who also want to subdue if not topple Hamas and restore their control in the Gaza Strip. This commonality of interests supports the Israeli “siege”.

But, to the extent that a humanitarian crisis has not — yet — become a humanitarian disaster, resulting in a huge number of deaths among the 1.5 million people trapped by the siege in the Gaza Strip, is due, some argue, to the organization and coping strategies developed by Hamas.

It is worth noting that since the Israeli naval assault on the Freedom Flotilla, COGAT as reportedly been too busy to accept many scheduled deliveries of goods into Gaza, according to some reports in Ramallah — COGAT has been preoccupied with searching and inspecting the cargo of the Freedom Flotilla. Israel promised to deliver what was not forbidden to Gaza — and the entry of this material is only taking place now. This concerns a reported 70 truckloads worth of items, including electric wheelchairs.

COGAT in the past week has managed a steady increase in the number of truckloads it is allowing to pass through to Gaza per day — it is now hovering around, or even surpassing 150 truckloads per day [this should be compared, however, to the pre-2007 levels of between 400 and 600 truckloads a day, for 1.4 million people].

Yezid Sayegh, Professor of Middle East Studies in the Department of Wars Studies at King’s College London who is currently on leave to Brandeis University [his bio also says he is a former adviser and negotiator in the Palestinian delegation to the peace talks with Israel – but doesn’t say which ones] wrote an analysis of “Hamas Rule in Gaza -Three Years On”, published in March 2010, that says:

“Gaza has developed a unique economy based on a combination of three main inputs: smuggling (through the tunnels dug under the border with Egypt at Rafah); monthly subventions worth $65 million from the Fayyad government to pay its employees and operate Gaza’s power plant; and the services and salaries provided by international NGOs and, especially, UNRWA.

“These inputs relieve the Hanieh government of a considerable burden, much as a considerably greater scale of foreign aid relieves the Fayyad government. At $540 million, the Hanieh government’s declared budget for 2010 is a fraction of the $2.78 billion budget of its West Bank counterpart; but with only 32,000 employees to the latter’s 145,000, its costs are far lower. Even so, the Hanieh government is believed to collect no more than $5 million a month in local revenue, or even less, if its own informal figures are to be believed. It has avoided taxing the tunnel trade in civilian goods entering from Egypt, with the result that commodity prices have dropped since the start of 2010. The bulk of government income derives instead from foreign sources: contributions from the Muslim Brotherhood International (Hamas’s mother organization), collections from zakat committees, and a portion of the assistance believed to reach the Hamas leadership in Damascus from Iran”…

Yezid Sayegh’s study continues: “Foreign aid does not allow significant investment in public works or infrastructure; but it is sufficient to cover the government’s monthly budget of NIS96 million ($25.5 million): a salary bill of NIS70 million, operating costs of NIS20 million, and NIS6 million in municipal subventions. The government has constructed ‘a fiscally sound administration in the midst of terrible economic devastation and international boycott’, according to one opinion. This judgment appears to be borne out by, for example, its avoidance of runaway recruitment—the bane of the Fatah-dominated Palestinian Authority—and by its ability to hire substitute teachers when faced with a Fatah-instigated strike at the start of the 2008–9 school year; to guarantee jobs to university graduates; and to recruit 1,000 extra policemen in February 2010.

“Ironically, Gaza’s markets and cash flow have actually grown since Operation Cast Lead, despite the failure of the international community to deliver the $4.5 billion in post-war reconstruction aid pledged at the Sharm el-Sheikh conference in March 2009 [n.b. – they will not deliver this money to Hamas, of course]. This is entirely owing to the tunnel trade, which accounts for the largest portion by far—perhaps as much as 80 percent—of the territory’s civilian imports. As a result, local bankers estimate, the Tunnels Authority of Hamas earned $150–$200 million in 2009. Hamas also benefits from its monopoly over the import and retail sale of cigarettes, as well as from the newly established al-Multazim insurance company, which was awarded the contract to insure all government cars. The revenues from these various activities and enterprises accrue to Hamas, not to the government treasury.

The ‘new’ economy evolving in Gaza bears an uncanny resemblance to Algeria—where, ‘[b]enefiting from an increase in return on investments, the informal economy, held for the most part by the Islamists, has been organized into networks and monopolies compensating for the dysfunction of the administered economy’ … The Hanieh government faces a similar challenge in Gaza: to regularize an informal economy while ensuring a steady flow of capital.

“At a minimum, the Hanieh government needs to provide the means for the safe deposit and investment of the large amounts of cash in circulation. The tunnel trade has generated a huge demand for U.S. dollars and Jordanian dinars, the currencies favored by Egyptian suppliers and increasingly used to pay salaries, and as a result left Gaza with an over-supply of New Israeli Shekels [n.b. – there have been periodic reports of shekel shortages, though...] However, with the Palestinian banking system carefully monitored by the Palestinian Monetary Authority headquartered in the West Bank, Hamas has been unable to launder revenue. Attempts by the Hanieh government to create a parallel banking system have failed completely; Hamas members and tunnel entrepreneurs deposit their earnings in the newly formed Islamic Bank [n.b. where Hamas has reportedly made at least two withdrawals at gunpoint, see our other post here, Quote of the day – two], but owing to the Palestinian Monetary Authority firewall in place, this bank is little more in reality than a local ATM network. In the absence of a legal means to transfer or invest money abroad, Gaza has experienced a significant shift of investment into real estate, resulting in a sharp rise in land prices.

The opportunities for corruption in a cash-based economy are clearly substantial. Hamas’s detractors claim that senior officials in the movement have amassed vast fortunes running into hundreds of millions of dollars, derived in part by acting as silent partners for tunnel operators; some, it is alleged, were implicated in a Ponzi/pyramid scheme uncovered in early 2009. Yet, local bankers and businessmen who do not sympathize with Hamas argue that its tight organization and internal discipline have greatly limited the scope and scale of irregularities. They moreover confirm that local businesses are not subject to extortion or protection rackets imposed by Hamas militants, in contrast to the predations of Fatah-affiliated militias and security agencies that they experienced prior to June 2007. It is difficult to ascertain the veracity of any these claims, but independent analysts note that allegations of Hamas corruption appear to come almost exclusively from senior leaders in Fatah, and are not yet substantiated or widely believed.

“Nonetheless, a new elite does seem to be emerging, comprising senior Hamas figures—including government ministers, members of Parliament, and key administrative or political personnel—along with some 5,000 tunnel owners. While elements of the business community—buffeted or driven into bankruptcy by the ongoing siege since 2006—resent this development, many have become tied to the tunnel economy in their attempt to adapt and survive, and they may also benefit from favors and facilitation extended by Hamas. What is certain is that the ‘new’ economy enables Hamas to look after its own. With members and supporters constituting a high proportion of the 32,000 government employees, another 40,000–50,000 people working in or around the Hamas-regulated tunnel economy, and a network of Hamas-associated Islamic charities and zakat committees complementing social welfare, the movement can rely on a substantial and loyal core constituency.

“Having toyed initially with the illusion that Fatah could spearhead a forceful takeover of Gaza, building on supposed mass discontent with Hamas, some quarters of the Israeli political and security establishment and its West Bank Palestinian counterpart now expect the Hanieh government to crumble under the weight of the continuous siege. However, it is highly doubtful that anybody else still believes that the relentless pressure of sanctions will move the 1.5 million inhabitants of Gaza to open opposition to Hamas rule and trigger its collapse from within. For that to happen, the siege would have to attain truly medieval proportions—cutting off all supply of food, water, and medicines—an option belied by the obvious acquiescence of all parties in the continued flow of civilian goods from Egypt into Gaza. That said, none of the main parties to the siege—the Government of Israel, the West Bank Palestinian Authority, the United States, the European Union, and Egypt—is likely to be the first to break the formal status quo.

“This leaves Hamas in a strategic predicament. It gambles on time to impose a new political reality by means of its successful governance of Gaza, but any expectation that external actors will seek to lift the siege before Hamas undertakes unambiguously to end violence against Israel is no more realistic than the expectation that the siege will eventually force it to capitulate. The Hanieh government may declare its desire to ‘open up to the world’, but it is unable to grasp, or at any rate endorse, the key requirement for attaining that end. Until then, Gaza remains one huge prison, with massive unemployment and crushing poverty. Hamas has the wherewithal and the stamina to endure as a movement, but it runs the risk that, in promoting a discourse of armed resistance and martyrdom and in encouraging the Islamization of society—as a means both of containing dissent and of deflecting internal pressure to resume active hostilities with Israel—it inadvertently encourages its core constituency to defect to more militant Salafist groups that it does not control, and which increasingly vie for recognition by al-Qaeda as its local affiliates.

“The Salafist threat should not be exaggerated, however: Hamas does not perceive itself to be so threatened as to compel it to afford external actors meaningful leverage. More to the point, Islamic radicalization poses no less a threat of blowback to Israel, and to neighboring Arab states. Hamas has demonstrated its ability not merely to survive, but also to rebound and even innovate, keeping itself at the heart of Palestinian national politics and decision-making. Whatever other policy options there may be for dealing with Hamas, the siege of Gaza has run its course: If anything, it helps Hamas consolidate itself as a ruling party and exercise increasingly effective government” …

This analysis from Yezid Sayegh can be read in full here. Thanks to Helena Cobban for posting this link on her blog, Just World News…

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