This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 02 TEL AVIV 000370 
 
SIPDIS 
 
E.O. 12958: DECL: 01/26/2016 
TAGS: ECON KPAL KWBG PREL IS ISRAELI PALESTINIAN AFFAIRS GOI EXTERNAL GAZA DISENGAGEMENT
SUBJECT: ISRAEL AND TURKEY BEGIN COOPERATION ON EREZ 
INDUSTRIAL ZONE 
 
 
Classified By: Economic Counselor William Weinstein, Reasons 1.4 (b) an 
d (d). 
 
¶1. (C) Summary: On January 5 the governments of Israel and 
Turkey signed a Joint Declaration on contributing to the 
economic development and promotion of the Gaza Strip by 
establishing a Turkish management company that will operate 
the Erez industrial zone.  According to the Turkish Embassy, 
this project is the result of a trilateral private sector 
initiative that is the brainchild of the Israeli 
Manufacturer,s Association president.  Once up and running, 
the Turkish Embassy believes, it could be a major source of 
jobs for Palestinians.  This project still has a long way to 
go and both the Turkish and Israeli governments need to iron 
out a number of issues, not the least of which is meeting GOI 
security concerns.  End summary. 
 
¶2. (C) On January 5, then FM Silvan Shalom and Turkish FM 
Abdullah Gul signed a Joint Declaration on both governments, 
&wish to contribute to the economic development and 
prosperity of the Palestinian population in the Gaza Strip.8 
 The Joint Declaration expressed appreciation for the 
initiative of the Manufacturers Association of Israel and the 
Union of Chambers and Commodity Exchanges of Turkey (TOBB) to 
start a dialogue aimed at revitalizing the Palestinian 
economy and the Erez Industrial Zone.  According to Turkish 
Commercial Counselor Kaan Kokturk, this initiative and the 
Ankara Forum for Economic Cooperation, a trilateral Chamber 
of Commerce association that spearheaded this project, are 
the brainchild of Israeli Manufacturer,s Association 
President Shraga Brosh. 
 
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DECLARATION LAYS OUT ISRAELI-TURKISH COOPERATION 
--------------------------------------------- --- 
 
¶3. (C) In the Joint Declaration, the parties agreed that 
practical arrangements for the facilitation of the operation 
of the industrial zone and the usage of Israeli maritime 
ports for exports and imports to the zone would be 
coordinated between Israel and Turkey based on a set of 
agreed principles.  The principles include that a Turkish 
company will be set up to manage the zone and the two sides 
will work together in order to coordinate activities in 
connection with the operation of the Turkish management 
company. Israeli companies will provide electricity and waste 
infrastructure by way of separate commercial agreements and 
the Turkish management company will deal with sewage and 
waste water treatment.  All operations and activities, 
including access and movement of goods between the zone and 
Israel will be carried out in accordance with agreements 
between Israel and the Palestinian Authority (PA), Israeli 
law, and subject to the security situation at any given time. 
 Advisor to Brig. Gen. Baruch Spiegel, Lt. Colonel Oded 
Herman, told econoff that security remains Israel,s main 
concern. 
 
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A WORK IN PROGRESS 
------------------ 
 
¶4. (C) Herman said that despite the Joint Declaration, 
GOI-Turkish cooperation on Erez Industrial Zone development 
is very much a work in progress.  The two sides had their 
first meeting on January 18 to try to hammer out some of the 
details.  He said the Turks have to complete an environmental 
survey and plan to demolish and rebuild many of the 
structures in the zone.  Herman said that a permanent point 
of contact on the Turkish side will soon arrive.  He said the 
two sides will have several meetings during which the Turks 
will discuss Israel,s security conditions for moving forward 
with this project, which include concern about Qassem rockets 
and the current need for the buffer zone and operation of a 
commercial crossing.  After Turkey has signed a formal 
agreement with Israel, Herman said, it will go back to the PA 
to sign an agreement with the Palestinians on the same 
issues. 
 
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GOI CONCERNS WITH PA-TURKISH AGREEMENT 
-------------------------------------- 
 
¶5. (C) Gabi Bar, Director of Middle East Trade at the 
Ministry of Industry, Trade and Labor told econoff that there 
are also legal challenges posed by having the documents 
signed separately with the GOI and the PA.  The GOI-GOT 
declaration calls Erez an &industrial zone8 for development 
and tax purposes, however, he believes that the GOT-PA 
agreement describes Erez as a &free zone.8  Bar described 
the problem as mainly a tax issue, and questioned the PA,s 
ability to unilaterally declare an area a &free zone8 given 
the existence of a customs union between Israel and Gaza. 
The problem with the differences in the language between GOI 
declaration and the PA agreement is that it would discourage 
Israeli investors in Erez. Under Israeli law, the investors 
would be subject to taxes while the PA exempts international 
investors from tax.  Bar indicated that the MFA and Israeli 
customs are working with the GOT and the PA to resolve the 
differences in language. 
 
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ISRAELI PRIVATE SECTOR CATALYST 
------------------------------- 
 
¶6. (C) Turkish Embassy Commercial Kokturk told econoff that 
this initiative has gotten as far as it has, because it is 
being promoted by the private sector, but also noted that it 
would be impossible to have strike a trade agreement with the 
Palestinians without the cooperation of the GOI.  Kokturk 
predicted that, once up and running, the Industrial Zone 
could provide as many as 10,000 jobs for Palestinians.  He 
said that Palestinian, Israeli, and Japanese businessmen had 
already approached the Turkish Embassy about possibly 
investing in the zone.  Kokturk said that Israeli 
Manufacturer,s Association President Brosh pitched the idea 
of a private sector dialogue that would contribute to the 
Israeli-Palestinian peace process through business 
development to TOBB President M.  Rifat Hisarciklioglu in 
¶2004.  He said Turkey has a great deal of experience with 
organized industrial zones.  Kokturk said that Israeli and 
Turkish businessmen had a good relationship that preceded the 
intifada, but unfortunately suffered somewhat during the 
years of violence.  The Ankara Forum for Economic Cooperation 
held its first meeting in Ankara in April 2005 and met again 
in September. Kokturk said that the Forum established two 
steering committees that deal with its two areas of interest 
) triangular tourism between Turkey, Israel, and the 
Palestinian territories and the Erez Industrial Zone. 
 
¶7. (C) Comment:  Kokturk,s assessment that this idea may not 
have gotten off the ground without the strong support of the 
private sector is probably true.  Still, establishing the 
zone and creating a possible 10,000 new jobs are a long way 
off as discussions of Israeli security concerns have yet to 
begin.  Israel is serious about its security concerns and 
maintaining security while promoting this new development 
will not be easy.  Turkish interlocutors continue to mention 
the possibility of a QIZ (qualifying industrial zone) 
agreement similar to the agreements between the GOI and 
Jordan and the GOI and Egypt for Erez industrial zone. 
However, a QIZ would provide no added benefit since 
production from Gaza for export to the United States is duty 
free under the existing presidential proclamation extending 
coverage of the US-Israel FTA to West Bank and Gaza exports. 
 
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