THE KARNI INDUSTRIAL ZONE
October 1997

The Karni Industrial Zone is a product of the vision to develop industrial parks between Israel and the Palestinian autonomous areas.

These parks will contribute to:

  1. Developing an industrial infrastructure in the autonomous areas.
  2. Reducing the unemployment rate by creating sources of employment.
  3. Reducing friction between Palestinian workers and the Israeli population.
  4. Reducing home-to-workplace commuting time for workers.
  5. Strengthening ties with the Palestinians and strengthening the peace process.

Parallel to the establishment the Karni Industrial Zone, work is in progress to transfer the adjacent Karni Crossing Point to civilian use.

Location and Size:

The Karni Industrial Zone is located off the present Karni Crossing Point, near Kibbutz Nahal Oz, on an area of 722 dunams, and is intended to employ 20,000 Palestinians (several thousand in the initial stage). It is located to the in the area under Palestinian jurisdiction.

Bodies Involved in the Project:

The official body behind the project on the Palestinian side is the Ministry of Industry, headed by Deputy Minister Adnan Samara and Director-General Nasser Jabbar.

Project initiatives and operation are being conducted by the PADICO company, headed by Dr. Amin Hadad.

Funding for the project comes from several sources:

  1. The PADICO company is investing 14 million dollars and providing loan guarantees.
  2. The World Bank is investing 27 million dollars (1 million in capital and approximately 26 million in various loans).
  3. The Bank of Europe is investing approximately 16 million dollars in loans.
  4. The American Aid Agency is bestowing a grant of about 6.3 million dollars.
  5. The Palestinian telephone company PALTEL is investing approximately 1.5 million dollars.
  6. Israel, as a donor, is investing about 7 million dollars in a security infrastructure for the Karni Passage.

Status and Timetable

Groundworks are currently under way on both sides of the Karni Crossing Point to level the ground At the industrial park site, concrete surfaces are being poured to serve as a basis for industrial buildings and storehouses.

The crossing point, in its new format, will begin operating on April 1, 1998.

By Palestinian estimates, the first factories can begin operating within a few months, but in the absence of suitable infrastructure (electricity, water, communications, sewage), it appears at this stage that these will be sewing workshops rather than heavy industry – which are expected to open after a year or more.

Operation of the Industrial Zone:

The PADICO company will be responsible for the operation of the industrial zone, under a special procedure to be established for this purpose, which will lease land or buildings to entrepreneurs.

The PA is establishing a special authority for industrial zones in order to address the needs of investors and reduce bureaucracy.

Entrepreneurs and Investors:

The Palestinians and Israel wish to encourage Palestinian investors to invest and create new sources of employment.

Israel has declared its willingness to provide benefits and dispensations to investors in entry, stay and residence permits, according to need and and subject to prior approval by security officials. Planning, work and development teams will also receive benefits in the area of entering Israel, subject to security approval, in order to facilitate proper commercial activity.

It should be noted that the Palestinians are currently concluding legislation of a law encouraging capital investments as well as an industrial zone law, whose purpose is to legally define benefits for entrepreneurs and investors.

The present Karni Crossing Point constitutes a central channel for transporting merchandise to and from Gaza to Israel. The volume of activity is currently about 250 trucks per day, about 60% of which constitutes sales to Gaza and 40% purchases from Gaza.

Security Principles:

Israel insists upon three security principles:

  1. Inspection by Israelis
  2. Inspection within Israeli territory
  3. Inspection according to Israeli regulations

The inspection system will be determined by the type of factory, its needs and the security official’s decision. In any event, the rapid delivery of merchandise to ports (for export) will be ensured, with no damage to the merchandise.

Summary:

At the beginning of April 1998, the operation of the Karni Crossing Point will be be changed to a new format under the auspices of the Israel Airports Authority. Under this new format, the crossing point will provide a solution for the conveyance of merchandise from Gaza in general and the Karni Industrial Zone, in particular.

The Karni Industrial Zone should begin operating within a few months. It is expected that the entrepreneurs will at the outset be Israelis and Palestinians, and at a later stage, international as well.

While funding for the industrial zone exists in principle, disagreement regarding the perception of security operation is preventing the signing of a document of principles and the release of 10 million dollars from the World Bank.

Both sides agree that Karni will receive preferential status as a condition for its success.