Gaza Faces Long Economic Slog

High hopes are tempered by the recognition that almost everything needs to be fixed in the highly populated area

NABIL RUDESSI snorts when he is asked where he would start to rebuild Gaza, and gestures with disgust at the pot-holed, garbage strewn dustbowl that serves as a street outside his office door.

``Right there,'' he says. ``Or anywhere. All the infrastructure in the whole of Gaza needs to be mended from scratch.''

Amid all the controversy surrounding Israel's deal with the Palestinians giving limited self-rule, one thing is clear: The autonomy plan will work only if Palestinian authorities can lift their people out of poverty.

The Gaza Strip, a pilot scheme for autonomy throughout the Israeli-occupied territories, contains about 800,000 people. Most of them are refugees and 35 percent of them unemployed. They are crammed into some of the ugliest and most unsalubrious slums in the world. Considering all the factors, Gaza is an unenviable economic challenge.

Mr. Rudessi, a wealthy entrepreneur in the plastics business, is right about the scope of the task ahead, and it is not just a question of beautifying the view from his desk.

He is fed up with an electricity supply so unreliable he has to keep generators at each of his three factories. He would be happy to live without the stink of the raw sewage that overflows frequently into Gaza's streets. And if there were just one technical high school in Gaza, he says he would feel more confident about finding workers in the future.

``Basically, everything does need to be fixed,'' says Alex Pollock, an economic planner with the United Nations Relief and Works Agency (UNRWA), the Gaza Strip's largest employer.

The Palestinian authority's first job, Mr. Pollock predicts, will be to launch ``a public-sector-driven infrastructure development program'' to pave roads, mend sewers, build new houses, schools, and hospitals, and install telecommunications.

Such projects, expensive though they will be, have the merit of requiring unskilled manpower, a boon when job creation is the top priority.

Just how much it will cost to lay the foundations for economic development is still a matter of dispute, and Palestinian leaders are talking in astronomical terms. Palestine Liberation Organization (PLO) Chairman Yasser Arafat, for example, said last week that the world would have to find $6 billion over the next three years to fund Palestinian reconstruction.

More restrained estimates are still large. A recent World Bank study says it would take $2.8 billion to rebuild the Gaza Strip's infrastructure over the next 10 years.

Many Gazans are skeptical about how much international aid will actually arrive. ``Everyone is expecting the money to pour in now as if someone had turned on a tap, but I doubt it will happen like that,'' says Freih Abu-Middain, head of the Gaza Bar Association. ``Look what happened to the West's promises of aid to Russia.''

At the same time, economists point out, the West Bank and Gaza Strip are not big enough to absorb unlimited amounts of aid. ``One of the dangers,'' Pollock warns, ``is that you'll get swamped with money which you don't have the capacity to spend efficiently.''

That means it could take several years before Gaza is in the sort of shape that would attract investors. But rebuilding the physical plant is only half the problem.

After 26 years of occupation, Gaza's economy is hedged about with Israeli Military Orders and Emergency Regulations, designed to prevent Palestinian producers from undercutting their Israeli competition.

``Our first step as a Palestinian authority will be to set up new laws liberalizing the economy, freeing up licensing and investment,'' says Salah Abdel-Shafi, head of the Gaza branch of the Economic Development Group. ``Once we have a new legal framework, we will see activity in the business sector.''

Yet Gazan businessmen have never worked under ``normal'' circumstances.

``Even when you lift all the restrictions, markets are not going to magically appear,'' Pollock cautions. Israeli regulations and the Arab boycott have meant that ``Palestinians have been cut off from normal economic intercourse for over 25 years and that takes some time to revive,'' he says.

``Our problem is not manufacturing, it's markets,'' says Rudessi, who plans to sell his plastic matting and jerrycans to the Arab world and Africa. ``Exports, exports, exports, that's what's important.''

But building export markets is a slow process.

For the time being, Mr. Abdel-Shafi says, Gaza's farmers and businessmen ``will take the easiest and quickest way, selling their goods to Israeli merchants, and letting them do the exporting,'' continuing the present subcontracting system.

Few analysts expect major changes in Gaza's economic dependence on Israel in the short run. Even under autonomy, tens of thousands of Gazans will still need to seek jobs in Israel, and the bulk of the region's agricultural and industrial output will still be sold in Israel.

``If you want to disengage yourself economically from Israel, you have to offer people an alternative, and I don't think the Palestinian authority will be able to do so,'' Abdel-Shafi argues. ``We will have no choice but to work with Israel.'' But instead of being at Israel's mercy, as Palestinians have been for 27 years, an autonomous regime in Gaza ``will need agreements where the Palestinian rights are fixed,'' he adds.

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