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Port of Gaza: Taking the Plunge
Business Middle East / August 2000

By Larry Luxner

The State of Palestine, which doesn't yet exist, nevertheless boasts its own international airport, with Palestinian Airlines jets operating regularly scheduled flights between the Gaza Strip and half a dozen Arab capitals.

Now, the yet-to-be-declared country wants its own seaport, and looks likely to get one. The Palestinian Authority (PA) already has authorised a Franco-Dutch joint venture to develop a deep-water cargo port at Sheikh Ijlin, four kilometers south of Gaza City. PA President Yasser Arafat says the port could be ready for business as early as next year.

The future port will handle general cargo from Africa and the Mediterranean. At least in its infancy, it is most likely to specialise in heavy equipment for infrastructure development in the new Palestinian state-which itself could be declared as early as September. Later on, the new port could add containerised cargo, posing some competition to the nearby Israeli ports of Haifa and Ashdod.

Although there is no shortage of ports in the eastern Mediterranean-indeed, they compete fiercely for cargo-the PA has good reasons for building its own.

One is perhaps a matter of pride: Most nations want control of strategic assets such as ports and airports. Closely related is the wish to minimise dependence on Israel's ports. PA Transport Ministry spokesman Mohammed Suleiman hinted at that when he accused Israel of trying to slow Gaza economic development by preventing imports of West Bank rocks to build the new harbour. He also said the PA will not agree to Israel maintaining security control over the port.

There also are economic reasons for building a port. The PA sees a business opportunity. In a recent speech to the US Chamber of Commerce in Washington, Mr Arafat noted that Amman is 460 km from the Jordanian port of Aqaba but only 160 km from Sheikh Ijlin. Moreover, he said, Aqaba is on the Red Sea, while Gaza City faces the Mediterranean, with direct access to European markets. "I think it's going to be one of the region's vital seaports," he said.

Despite their high hopes, Palestinian officials are remarkably closed-mouthed about specific plans to develop the port. They reveal that France and the Netherlands have pledged $80m each to the Franco-Dutch joint venture developing the plans. But they are not disclosing names of companies involved, the projected handling capacity of the port or the financing that will be needed to make it operational.

That may be because certain security arrangements must first be agreed with Israel. The Israeli government has raised concerns about the use of Palestinian ports and airports for contraband arms and other terrorist purposes. The PA, on the other hand, will insist on extending its rights under the first phase of the Israel-PLO peace accord, which gives it limited autonomy over Gaza.

The same debate is already under way at the $100m Gaza International Airport, inaugurated in late 1998. According to Tawfiq al-Hourani, the airport's head of international relations, its biggest stumbling block is the presence of Israeli security. "We hope not to see Israeli soldiers here in the future," he said in a recent interview. "Palestinians should have the right to fly anywhere they want."

The Israelis and Palestinians also have an environmental issue to resolve. The proposed deep-water seaport would involve building breakwaters, which could cause erosion further up the coast in Israel. "This could damage our beaches very seriously," said Mendi Zalzman, spokesman for the Israeli Ports and Railways Authority in Tel Aviv.

To avoid that problem, the Israelis have proposed an alternative to the PA: a dedicated Palestinian pier at the new Jubilee port being built at Ashdod, Israel, about a half-hour's drive north of the Gaza Strip. "For (the Palestinians), it's a quick solution, and for us, solving the problem of sand erosion is a major reason to encourage it," Zaltzman said.

The Israeli Ports and Railways Authority also may have economic reasons to discourage construction of a separate seaport at Gaza, although Zaltzman denies that this is a factor. "We don't see Gaza (Port) competing in the medium term with Ashdod," Zaltzman said, adding that Gaza wouldn't pose much of a competitive threat to other nearby ports either. And, in fact, Ashdod has a huge head-start.

Nonetheless, a low-wage port in Gaza could compete directly with Ashdod in certain market segments in which the Israeli port specialises, such as handling cement, timber and metals. Joseph Bassani, deputy port manager at Ashdod, noted that Ashdod now handles a lot of cargo destined for Palestinians. He estimates the Israeli port could lose a million tons of cargo a year, if the Gaza port is ultimately built.

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