VZCZCXYZ0046
OO RUEHWEB

DE RUEHJMA #0144 0241534
ZNR UUUUU ZZH ZUI RUEWMCF1190 0241852
O 241534Z JAN 07
FM AMCONSUL JERUSALEM
TO RUEHC/SECSTATE WASHDC 0000
INFO ARAB ISRAELI COLLECTIVE
RHEHNSC/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHBS/USEU BRUSSELS

UNCLAS JERUSALEM 000144 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
NEA FOR FRONT OFFICE; NEA/IPA FOR 
WILLIAMS/SHAMPAINE/STEINGER; NSC FOR ABRAMS/DORAN/WATERS; 
TREASURY FOR SZUBIN/LOEFFLER/NUGENT/HIRSON 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EFIN PREL KWBG IS EG
SUBJECT: WORLD BANK STUDY TIES GAZA'S ECONOMIC REVIVAL TO 
OPENING OF RAFAH TRADE CORRIDOR 
 
 
¶1.  (SBU) SUMMARY: A WORLD BANK STUDY OF ALTERNATIVES FOR 
PALESTINIAN TRADE HAS CONCLUDED THAT OPENING THE RAFAH TRADE 
CORRIDOR FOR EXPORTS FROM THE GAZA STRIP THROUGH EGYPT WOULD 
SIGNIFICANTLY BOOST THE FLAGGING PALESTINIAN ECONOMY. 
ACCORDING TO THE STUDY, THE RAFAH TRADE CORRIDOR PROVIDES 
COMPETITIVE LOGISTICS AND COSTS FOR PALESTINIAN EXPORTERS TO 
ACCESS KEY MARKETS, SUCH AS EUROPE AND THE GULF.  ACCESS TO 
THESE MARKETS WILL REDUCE HISTORICAL PALESTINIAN DEPENDENCY 
ON ISRAEL AND HELP PALESTINIANS COMPETE IN THE GLOBAL MARKET. 
 WORLD BANK PERSONNEL ASSERT THAT THE AGREEMENT ON MOVEMENT 
AND ACCESS (AMA) PROVIDES THE BASIS FOR IMMEDIATE USE OF 
RAFAH FOR EXPORTS, WHICH COULD BEGIN FLOWING IN LESS THAN TWO 
WEEKS AFTER CONCLUSION OF A JOINT AGREEMENT ON BORDER 
PROCEDURES.  END SUMMARY. 
 
¶2.  (SBU) IN A JANUARY 10 PRESENTATION AT THE CONSULATE 
GENERAL, WORLD BANK SENIOR FINANCIAL SECTOR SPECIALIST 
JOSEPHINE BASSINETTE AND WORLD BANK TRADE CONSULTANT JOHN 
ARNOLD STATED THAT THEIR RESEARCH CONCLUDED THAT THE RAFAH 
TRADE CORRIDOR IS A PREFERABLE ALTERNATIVE TO THE HEAVILY 
RESTRICTIVE KARNI/AL-MINTAR CROSSING FOR MOVING PALESTINIAN 
PRODUCTS OUT OF THE GAZA STRIP.  THEY STRESSED THAT OPENING 
THE RAFAH CROSSING --INITIALLY ONLY FOR EXPORTS FROM GAZA-- 
IS URGENTLY NEEDED IN ORDER TO HELP REVIVE THE PALESTINIAN 
ECONOMY. 
 
---------------------- 
BREAKING WITH THE PAST 
---------------------- 
 
¶3.  (SBU) THE PRESENTERS NOTED THAT PALESTINIAN TRADE HAS 
BEEN LINKED TO THE ISRAELI ECONOMY SINCE 1967.  THE VALUE OF 
PALESTINIAN TRADE WITH ISRAEL, HOWEVER, IS NOW STAGNANT AND 
OPPORTUNITIES TO MOVE TO HIGHER VALUE-ADDED PRODUCTS ARE 
LIMITED.  AS ISRAEL HAS MOVED TO HIGHER VALUE-ADDED GOODS AND 
SERVICES, THE LEVEL OF PROTECTION HAS DECREASED AND WEST 
BANK/GAZA GOODS HAVE FACED INCREASED COMPETITION.  BASSINETTE 
AND ARNOLD, THEREFORE, ASSERTED THAT, EVEN IN THE ABSENCE OF 
THE SERIOUS RESTRICTIONS ON THE MOVEMENT OF GOODS, 
PALESTINIAN EXPORTS TO ISRAEL WOULD CONTINUE TO DECLINE. 
SINCE 2000, THE VOLUME OF TOTAL PALESTINIAN TRADE HAS BEEN 
STATIC OR DECLINING AT A TIME WHEN GLOBAL MERCHANDISE TRADE 
ROSE BY 4.2 PERCENT EACH YEAR FOR THE PAST 10 YEARS.  WHILE 
ISRAEL WILL REMAIN AN IMPORTANT TRADING PARTNER, IF THE 
PALESTINIAN ECONOMY IS TO GROW, IT MUST FIND AND GAIN DIRECT 
ACCESS TO NEW MARKETS. 
 
--------------------------------------------- - 
RAFAH:  A QUICK AND COST-EFFECTIVE ALTERNATIVE 
--------------------------------------------- - 
 
¶4.  (SBU) WORLD BANK STAFF ASSERTED THAT THE RAFAH TRADE 
CORRIDOR PROVIDES THE QUICKEST, MOST COST-EFFECTIVE MEANS OF 
MOVING GOODS OUT OF GAZA AND ON TO EUROPE, THE GULF AND 
DEVELOPING MARKETS IN ASIA.  THE WORLD BANK PRESENTATION 
PROMOTED SHIPPING OPTIONS SUCH AS TRUCKING PALESTINIAN GOODS 
TO THE AL-ARISH AIRPORT, CAIRO AIRPORT, OR SUEZ CANAL 
CONTAINER TERMINAL-PORT SAID FOR ONWARD SHIPMENT BY AIR OR 
SEA TO EUROPE AND THE GULF.  ALTERNATIVELY SOME GOODS COULD 
BE TRUCKED FROM RAFAH TO NUWEIBA, THEN SHIPPED BY FERRY TO 
SAUDI ARABIA, AND TRUCKED OVERLAND TO THE UAE.  UNDER MOST 
SCENARIOS AND FOR MOST PRODUCTS, EGYPTIAN PORTS/AIRPORTS 
OFFER CHEAPER RATES AND SHORTER DELIVERY TIMES WHEN COMPARED 
TO THOSE OF ISRAELI PORTS/AIRPORTS, ACCORDING TO THE WORLD 
BANK FINDINGS.  IN ADDITION, THE WORLD BANK STUDY USED 
"STANDARD COSTS" AND NOT THE EXORBITANT "UNOFFICIAL" FEES NOW 
BEING CHARGED AT THE KARNI/AL-MINTAR CROSSING WITH ISRAEL, 
CURRENTLY THE SOLE OUTLET FOR COMMERCIAL GOODS LEAVING GAZA. 
 
---------- 
NEXT STEPS 
---------- 
 
¶5.  (SBU) BASSINETTE STATED THAT THE AMA PROVIDES THE BASIS 
FOR IMMEDIATE USE OF THE RAFAH CROSSING FOR EXPORTS FROM 
GAZA. ARNOLD SUGGESTED THAT A JOINT AGREEMENT ON BORDER 
PROCEDURES BE REACHED WITH THE PALESTINIANS, EGYPT AND 
EU-BAM.  BOTH BASSINETTE AND ARNOLD NOTED THAT EGYPTIAN AND 
ISRAELI SECURITY CONCERNS WOULD ALSO HAVE TO BE ADDRESSED BUT 
ADDED THAT THE FOCUS SHOULD BE ON THE CROSSING ITSELF AND NOT 
THE ENTIRE BORDER.  (NOTE:  EU-BAM COORDINATION WITH THE 
ISRAELIS AND PALESTINIANS HAS BEEN WORKING WELL.  THE 
EGYPTIANS HAVE RECENTLY BEEN INVITED TO FILL A POSITION AT 
THE KEREM SHALOM LIAISON CENTER, THEREBY ENHANCING EGYPT'S 
 
 
ROLE IN COORDINATING RAFAH CROSSING ACTIVITIES.  END NOTE.) 
"DEMONSTRATION" SHIPMENTS UNDER SPECIAL ARRANGEMENT WOULD 
FOLLOW.  THE PALESTINIANS AND EGYPTIANS WOULD ALSO HAVE TO 
NEGOTIATE IMPLEMENTATION OF A TRANSIT PROTOCOL CONSISTENT 
WITH INTERNATIONAL PRACTICES.  ARNOLD ASSERTED THAT A BASIC 
BACK-TO-BACK OPERATION COULD BE SET UP IN AS LITTLE AS TEN 
DAYS.  HE ALSO SAID THAT ONCE EGYPTIAN AUTHORITIES ARE 
CONFIDENT THAT THE GAZA PRODUCTS WOULD BE FOR RE-EXPORT ONLY 
AND WOULD NOT COMPETE WITH EGYPTIAN GOODS ON THE DOMESTIC 
MARKET, EGYPTIAN AUTHORITIES WOULD WELCOME THE INCREASED 
PORT/FREIGHT FEES AND ASSOCIATED BUSINESS FROM OPENING THE 
RAFAH CORRIDOR. 
 
¶6.  (SBU) COMMENT:  GIVEN THE DIFFICULTIES THAT CURRENTLY 
EXIST AT RAFAH - ISRAELI OBJECTIONS TO REGULAR OPERATIONS, 
HAMAS EFFORTS TO TRANSFER CASH TO GAZA, AND LIMITED 
PALESTINIAN CAPABILITY TO MANAGE THEIR END OF THE OPERATION - 
OPENING A BACK-TO-BACK CARGO OPERATION WILL BE MORE DIFFICULT 
THAN THE WORLD BANK TEAM SUGGESTED.  THAT SAID, THE IDEA 
MAKES ECONOMIC SENSE AND SHOULD BE EXPLORED IN ORDER TO 
PROMOTE LONG-TERM DEVELOPMENT IN GAZA. 
WALLES