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Monday, May 09, 2011

The million$ of Hama$ - Take 2

Last Monday, I reported on a Maariv story in Hebrew that discussed the sources of Hamas' wealth. At the time I said that if it came out in English, I would at least point you to it. It came out in English.
The IMF estimated Gaza's 2009 gross domestic product (GDP) growth at 12 percent, an impressive number. According to a September 2010 IMF report, the total Gazan and West Bank GDP was $7 billion, while the gap in per capita income between the two areas was 48 percent; this data, combined with other relevant statistics, implies that Gaza's per capita GDP was around $1,400, much of which derives from payments by the PA. Transfers and remittances added 50 percent more income, implying that average total per capita income was, in fact, $2,100. Yet much of this income does not represent productive economic activities, and unemployment remains high -- probably around a third of the workforce.

One must also take into account the considerable trade conducted via the more than 800 tunnels into Egypt. Based on fragmentary evidence, this trade likely peaked at around $600-850 million per year. Much attention has already been devoted to the goods smuggled into Gaza, such as fuel and cement. Less well understood is the fact that, in exchange for these goods, cash has been steadily exported out of Gaza through the tunnels, at a rate of roughly $750 million per year. Cash is also flowing out of Gaza -- through the tunnels and via bank transfers -- to safe havens in Persian Gulf countries and Europe. The new wealthy class -- many associated with Hamas -- as well as established capital owners are concerned about keeping their money inside Gaza, preferring to move it abroad. And even with huge sums flowing out of the territory, there is still more cash than opportunities to invest it. In February 2009, for example, Gaza banks actually turned to Israel's Central Bank with an odd request: to deposit excess cash reserves in Israel.

Where does all this cash come from? Many assume that substantial sums have been entering Gaza via the tunnels since 2008, but this can be only partially confirmed. Instead, the cash inflow seems to come primarily through banks. According to Palestinian banking officials, an average of $2 billion per year has been transferred into Gaza via the Palestinian banking system since Hamas's June 2007 military takeover. The PA alone wires an estimated $1.2 billion per year into Gaza banks, much of it as pensions and salaries for the 77,000 employees kept on the payroll even though they are not working. In fact, this estimate may be conservative; according to PA prime minister Salam Fayad, 54 percent of the PA's $3.17 billion 2010 budget went to Gaza. Most of that figure appears to be salaries, although it also covers what the PA pays directly for electricity, fuel, and water provided to Gaza by Israeli firms.

In addition, the UN Relief and Works Agency annually transfers about $200 million in cash to Gaza, along with $250 million per year worth of goods, grains, and fuel. Cash is also transferred into Gaza by the 160 nongovernmental organizations operating there, by international organizations such as the World Bank, and by foreign government aid organizations, although much of what they spend arrives in the form of goods shipped via Israel.
Read the whole thing. It sounds like they're starving, doesn't it?

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