The siege has destroyed the economy in the Gaza Strip,” said Moeen Rajab, an economist at Al-Azhar University in Gaza City, noting the Strip’s land and sea borders have been effectively sealed for some two and a half years. “But preventing the tunnel trade will deny the livelihoods of tens of thousands of people who depend on it.”
Up to 80 percent of the 1.5 million people in the Gaza Strip rely on some kind of basic subsistence relief aid. In an economy with virtually no official corridors to the outside world, tunnels dug under the Strip’s southern border with Egypt are economic lifelines.
“Despite the fact that goods brought through the tunnels are expensive and difficult to bring into the Strip, there is no alternative,” said Rajab.
Karen Abu Zeid, the commissioner-general of the UN Relief and Work Agency (UNRWA), said that the tunnel trade, which is used to import consumer staples, mechanical parts, medical equipment, weapons, livestock and any number of other commodities into the Gaza Strip, accounts for some 60 percent of the Gazan economy.
“Preventing the tunnel trade will deny the livelihoods of tens of thousands of people who depend on it”
High profits
Much of the available cash is invested in the tunnel sector, with 800 or so tunnels operating in the territory last year. An average tunnel costs about $90,000 to construct and operate, according to Jordan’s Ma’an News Agency. Tunnels can reach depths of 15 meters and extend 800 meters in length, with the usual cost formula being about $100 per meter of tunnel built. Fully operational tunnels sell for approximately $100,000 to $120,000.
The tunnels, which can take less than a month to construct, are sometimes built on rented land. The land owner is often compensated with a share of the tunnel profits, with goods typically transferred underground by mechanized winches and distributed to traders for sale in Gaza markets.
“The people who work the tunnels use [United States] dollars to trade with Egypt, but the average person uses [Israeli] shekels for everything,” said Abu Ahmed, an economist in Gaza City who declined to provide his real name. (The US dollar is currently trading at about 3.7 shekels on the foreign exchange markets.)
The Hamas government charges a one-time tunneling fee to permit tunnel operators to break ground, though reports vary as to the amount — from $3,000 to $10,000. After that, taxes are collected on goods brought through the tunnels, with some estimates pegging Hamas’ tunnel revenue as high as $11 million a month.
According to Israel’s Haaretz newspaper, to transport a single delivery of assorted goods by tunnel in 2008 cost on average $300, while the total monthly value of all goods brought through the tunnels can reach as much as $50 million.
The revenue collected by owners and operators is estimated at $200 million to $300 million annually.
Since the beginning of the siege, the tunnels have substituted official modes of moving goods into the territory. For instance, only 41 truckloads of construction materials have entered the Gaza Strip since January, 2009. Reliable figures for the volume of the tunnel trade in 2009 are unavailable, but YnetNews put the figure at $650 million worth of goods for 2008.
Sixteen human rights organizations — including Oxfam International, Amnesty International and Mercy Corps — issued a report in December 2009, entitled ‘Failing Gaza,’ summarizing the economic condition of the Strip two and a half years after the start of the blockade and one year after Israel’s Operation Cast Lead — a 22-day military assault in which nearly 1,400 Gazans — mostly civilians — and 13 Israelis were killed, 10 of whom were soldiers. As much as $890 million in damage was caused, including the destruction of schools and farms.
Before the blockade began “an average of 70 truckloads of exports left Gaza per day, while 583 truckloads of goods and humanitarian supplies came in,” noted the report. The first two years of the blockade saw 112 truckloads enter the Strip per day, on average, with 74 percent of this cargo made up of basic foodstuffs. Exports have been entirely banned, save small shipments of carnations to the Dutch market.
Inflation concern
Before the blockade, Israel deemed 4,000 categories of items as admissible for import into Gaza; currently that number stands at 35.
Describing the economy in the Gaza Strip, Abu Ahmed said, “People are struggling. Many things are not available in stores right now, despite the existence of the tunnels.”
“During the war the price of a bag of bread went from 5 shekels [$1.35] to 10 shekels [$2.70]. Bread has dropped to about 7 shekels [$1.88] since then, but the prices of other things have stayed very high.” A 2-liter bottle of soda has jumped 100 percent, from $0.80 to $1.69, since mid-2007.
Abu al-Abed, who works at the Islamic University in Gaza City and declined to be identified by his real name, told Executive: “Prices of goods in the stores haven’t increased very much since we learned about the Egyptian wall, but we do expect them to.”
Rajab agreed and predicted that the “the wall will result in an even more severe inflation.”
Conservative estimates place the depth of the Egyptian wall at 18 meters underground, while numerous media reports suggest it is being installed with water pipes to soak the soil and make tunneling beneath it impossible. The completion of the wall will, most likely, entirely discontinue commerce through the tunnels.
An average tunnel costs about $90,000 to construct and operate, with fully operational tunnels selling for approximately $100,000 to $120,000
