1:41pm , Tuesday 19th January 2021

The Tunnels of Gaza: Investment Companies Earning Manifold Profits

5 December 2010

Every inch of the vestibules and damp passageways of Gaza Strip tell thousands of stories about the suffering of citizens worn down by divisiveness and the siege.  The intricacies of daily life seem to vanish in those areas, and little is known about them, including the stories of those who exploit the prevalent suffering as they ride the wave of “the end justifies the means” and “necessity is the mother of invention” to achieve their ultimate goal of a quick profit.  This, however, is what human memory retains throughout history:  the abuse by some of the phenomenon of “spawning” tunnels in Gaza Strip for the sake of speedy wealth, while authorities fail to undertake any deterrent measures.

Greed is proof of condemnation

The Palestinians in Gaza Strip, under the Israeli siege for four years, try to find a solution to the dual problem of hunger and unemployment, and to alleviate their catastrophic impact.  This has consequently increased the phenomenon of digging tunnels that have enabled the people in Gaza to bring in many smuggled goods from Egypt – from food and medicine to cement and cars.  Yet, those same tunnels have allowed for the usurpation of the needy citizen in terms of price and product quality, because of the traders’ greed and monopolization of the market, not to mention the smuggling of all types of toxins and narcotics.  Meanwhile, the dissolved government in Gaza is silent.  Indeed, official parties have legitimized smuggling operations, as was evidenced by several human rights organizations working in Gaza, as well as by citizens’ accusations.

The tunnels of Gaza have partly contributed to a limited alleviation of the siege.  Yet, at the same, they have brought ample money to smugglers, tunnel owners and traders, as well as government parties that deduct amounts of money from the smugglers, ultimately leading to unprecedented social activity.

This money, however, could be lost at any moment.  This is what happened with Salah, a young Gazan in his early thirties who dug tunnels for nearly four years until he came to own one.  Salah secured a great deal of money, but he wanted more.  He started digging several tunnels at the same time, until he ultimately lost all his savings and was not able to dig any more tunnels, which prevented him from paying the daily wages of the workers.  Salah’s story counters that of hundreds others like him who used their new-found wealth to buy land and fancy cars, and to build buildings.

The “lords of tunnels” do not belong to one specific social class or another, but any person who has a few thousand dollars may turn into a “tunnel lord” by owning one or sharing its property with others.  There are also those who might opt for what is called “the philanthropy system”, which means contributing to the digging of the tunnel for no financial return until it is completed, and when smuggling operations begin, the person who worked on the tunnel free-of-charge becomes an owner and a certain percentage agreed upon previously with the original tunnel owner is calculated for his benefit, according to some tunnel owners.

Although there is no accurate statistics about the numbers of the “tunnel lords”, rumored suggest they number about one thousand, between exclusive owners and joint partners of a single tunnel, while some prefer to work without disclosing the nature of their work.

“The Lords” and “The Poor”

Opposite the “tunnel lords”, there are those like Husam, the government employee who makes a monthly salary of two thousand shekels (nearly $550) that are barely enough to sustain him through the first third of the month because of the blatantly expensive prices of goods smuggled through the tunnels.  Like most of Gaza’s residents, estimated at 1,540,000 people, his situation continues to deteriorate and worsen, and, according to the 2010 Palestinian Statistics Center, there is a huge difference in quantity and quality among the two classes.

The exploitation of the tunnels is not limited to raising the prices of smuggled goods.  Indeed, financial need and the rise of unemployment rates have forced many to work in tunnel digging without care for the hazards involved in this work.  Statistics issued by Al-Mezan Center for Human Rights in Gaza indicates that the number of fatalities among tunnel workers has reached 24 from the beginning of 2010 and until August 2010.

Um Mansour Al-Batneeji, a woman in her fifties, along with her sons, Mansour, Na’el, Ibrahim and their families, were financially deficient before they took on work in the tunnels in 2009 and improve their financial status.  This bliss, however, did not last long.  Three of her sons were killed when Israel bombed one of the tunnels.  Um Mansour became poor for money and sons, with the exception of a single remaining son who provides for her and the families of his brothers.

The mourning mother says:  “The tunnel owner said, I will remember the children of your sons who were killed by helping them financially.  And now he continues to dig the tunnel and gives us nothing.”  She bitterly adds, fearful of the future:  “The government in Gaza gave their families of at least six people a simple monthly salary: 600 shekels (around $165) for Ibrahim’s family, 700 shekels (around $185) for Na’el’s family, and 800 shekels (around $215) for Mansour’s family.  These amounts are not worth anything at all.”

From the outset: tunnels were purposeful and useful

The story of the tunnels of Gaza Strip travels all around and is related to the siege, but it is not a new story, explains Dr. Sameer Abu Mdallaleh, head of the Economic Department at Al-Azhar University, in a lengthy report entitled “Economy of Tunnels in Gaza Strip: a national necessity or a socio-economic disaster?” which was published in the quarterly “Seyasat” magazine issued by the Institute of Public Policies in Ramallah (Edition 12, April 2010).  “The talk about smuggling and the tunnels in the city of Rafah in the south of Gaza is a talk about a historical phenomenon that spans from 1949 to this day.”

Prior to 2000, “activities in tunnels were characterized by operations involving the smuggling of drugs and gold which is prohibited but highly profitable.  Tunnels were rarely used to smuggle weapons.  With the beginning of Al-Aqsa Intifada in September 2000, the tunnels started to take on a new purpose of smuggling of weapons for the resistance factions.  With the expansion of those activities, the numbers of tunnels consequently increased.”

The “tunnel lords” employ workers that are mostly children and youth to dig tunnels using a variety of tools, including small mechanical diggers, as well as primitive tools, such as large plastic containers or gallons to transport dirt and sand outside the tunnels.  The shortest tunnels range between 250-300 meters and the longest up to 1500 meters crossing the borders between Rafah and Egypt.  For some tunnels, diggers are forced to dig deeper because of the nature of the sandy soil, reaching clay or rock layers.  Tunnel depths and width depends on the type of smuggled goods.  Tunnels designed to smuggle cars reach 15 meters in depth and are dug at an incline towards Gaza to facilitate the movement of the cars’ wheels.

Diggers’ wages are estimated according to the nature and requirements of the dig.  If they are digging a tunnel and installing wooden poles in it, they charge up to US170 per meter, which is divided among four or five shift workers.  The cost of digging a single tunnel reaches at least $30,000.

Tunnel digs lack the most basic safety conditions.  A tunnel is subject to collapse at any moment because of the nature of the soil and the lack of supporting tools.  Workers are also vulnerable to electrical shocks due to the lack of safe electrical systems.

Core transformation from resistance to trade

Most tunnels function publicly and openly, but their numbers cannot be accurately told.  The location of some tunnels is unknown, either because of fear of Israeli bombings or because they are used to smuggle cars, drugs and medicines.  There were periods when the number of tunnels increased noticeably, while in others, their numbers decreased, especially in the last quarter of 2009 when the Egyptian government began building the iron separation wall between the Palestinian and Egyptian sides of the city of Rafah.  In his report, Dr. Abu Mdallaleh says that the number of tunnels “may have increased from 20 tunnels in mid 2007 to 500 tunnels of various shapes and purposes in November 2008, according to some estimates.  Some estimate the number of tunnels to have reached around 800, whether those completed and are functioning or those still under construction.”

The massive increase in the number of tunnels rendered their objectives different.  Although they assumed their legitimacy from the imposed siege, they have become an illegal trade where motives and reasons become jumbled in the smuggling operations, particularly when their function became legal.  In his report, Dr. Abu Mdallaleh stresses:  “Some members of the Legislative Council, from the Hamas Movement leadership, believed that the tunnels are important for alleviating the siege and that the tunnels solve some problems resulting from the Israeli siege with regards to basic living requirements.  Workers are confused about the motives and the reasons in a manner that is filled with contradictions and discrepancies, from reasons related to unemployment, poverty and necessity to traders’ greed and gangs that smuggle all types of toxins and drugs, as well as everyone in between in terms of people of power.”

The tunnels have turned into commercial companies, similar to investment companies that function on the basis of shares.  This is indicated Dr. Abu Mdallaleh report:  “For a single tunnel, there is more than one partner and is managed on the basis of shares, where the share price, the number of partners, and the profit distribution system to shareholders are set and determined.”

The sharing and partnership system is not different from any other.  A person paying ten thousand dollars, for example, for the cost of digging the tunnel becomes an owner of one share, and another who pays twice that amount becomes an owner of two shares and so on.  Otherwise, the “Egyptian guardian”, whose task is to bring the goods through the tunnel from the Egyptian side, unload and guard it without paying anything into the cost of digging the tunnel, receives 50% of the tunnel’s total revenue.

Economic and Humanitarian Disaster and Quick Profit is the Concern

Whoever looks at the roots of the tunnels issue finds that it has caused economic and humanitarian disasters.  At the economic level, no goods or commodities are exported from Gaza, such as flowers and vegetables and others.  This indicates that Gaza’s economy is 100% consumption and money flows in one direction only – towards Egypt – to pay the bill for imports.  This is confirmed by Dr. Abu Mdallaleh, who adds:  “Some estimate the monthly imports through the tunnels to be between $35-40 million, with no products whatsoever exported aboard.  Meanwhile, annual imports are estimated at $650 million and profits reaped by tunnel owners and workers range between $200-300 million given that profit rates are calculated in the range of 30-50%, sometimes reaching 100%, which would double the annual profit rate.”

It is worth noting here that the goods that were smuggled the most at the beginning of the tunnels’ work were “pastime foods” and soda drinks, which continue to be smuggled to a large extent, followed by construction materials, like cement, rebar and ceramic.  Motorcycles and tricycles were smuggled to a large extent since the beginning of tunnel digging until the streets of Gaza were filled with them, while few vehicles were smuggled.

A person examining the items being smuggled through the tunnel would find that smuggled goods are not necessarily essential items, but are accessories to a large extent.  In a study prepared by the Popular Committee to Confront the Siege about the economic impact of the siege on Gaza, it was concluded that the construction sector in particular faced severe and continuous deterioration and decline since mid 2007.  90% of contractor companies stopped working because of the unavailability of cement, iron and aggregates, whose prices increased in the black market and for those that were smuggled through the tunnels, if any, to more than 800%.

In this context, Dr. Maher Al-Tabba’, the Director of Public Relations in the Chamber of Commerce in Gaza stressed that “what is being smuggled on a monthly basis through the tunnels does not exceed 10% of the construction materials that were imported via main border crossings and that were unlimited and suitable for the community’s needs.  This low percentage of construction materials smuggled through the tunnels is attributed to two reasons, namely their extremely high price and the difficulty of transporting the materials through the tunnels.”  As for “pastime foods” and soda drinks, they are smuggled in quantities that make up %70-75% and are sold at double their original price when they are imported through main border crossings.

The impact of the tunnels is not limited to economic profit and loss balances, but also impact human aspects.  The number of killed and injured workers in the tunnels increased.  Al-Azhar University Economy Professor Dr. Mu’een Rajab confirms that the desire for speedy wealth was the concern of investors and leading traders who want to maximize their profits, leading to the growth of the rich class that accumulated much profit.  In return, many tragic incidents occurred as the number of killed and injured workers in the tunnels increased due to their employers’ negligence and the lack of safety standards.  According to human right organizations in Gaza, the average number of victims ranged between five and six people a month.

Statistics published by Al-Mezan Center for Human Rights in Gaza and collected by field researchers indicated the number of tunnel victims from 2006 until May 2010 have reached 157 death, including 4 children, 478 injuries, including 17 children.  From the beginning of 2010 and until the end of August of the same year, the death toll registered 24 people, including two children, and 219 injuries, including one child.  These numbers were the result of lacking safety conditions in the tunnels.  As for “martyrs” who died as a result of Israeli bombings of tunnels, their number registered 12 martyrs, including one child.  This increase in the number of deaths and injuries is considered by human rights organizations as indicative of the lack of protective measures for workers undertaken by the outgoing government.

Tunnels, the legality of exceptions and government disregard

The Gaza tunnels issue also assumes a legal perspective, as indicated by the Director of the Field Research Unit at Al-Mezan Center for Human Rights, advocate Samir Zaqout:  “We believe that smuggling operations through the tunnels is going on outside the framework of the law.  There is nothing that legalizes the smuggling.  They are illegal and the community has dealt with it as a step to break the unfair Israeli siege.  Unfortunately, what we have seen as human rights organizations is that it has not constituted a response to the siege, but has instead contributed with its many negative impacts.”

While official parties stress that they do not grant licenses for the digging of the tunnels, the truth says otherwise.  Legal consultant for Rafah Municipality, Mahmoud Yousef, stresses that the Municipality “does not grant any licenses for the tunnels, but attempts to regulate the random work and the chaos on the borders.  Owners of these tunnels apply for electricity, usually for an abandoned home or an old house.  After the applicant acquires the electricity, it becomes apparent that it is being used for digging a new tunnel.  As a result, it was decided to double the fees in those areas where the Municipality received hundreds of applications at the beginning of the tunnels’ work.”

Whether consultant Mahmoud Yousef acknowledges the legalization of tunnel digging or not, what is happening on the ground is a process of legitimization for the exception, the illegal and the chaotic work which was started by the tunnel owner, as confirmed by some of the documents we obtained.

During the preparation of this investigation, advocate Samir Zaqout showed us a document that indicates the involvement of Rafah Municipality in the legitimization of the work of the tunnels.  Zaqout says:  “Rafah Municipality took advantage of the tunnels phenomenon in a major financial way and has come to grant licensing for digging tunnels, known as “cross-borders trade”, through which it imposes on anyone digging a tunnel to pay a sum of money, and this has contributed to a large extent to the steady rise of the number of tunnels.”

Zaqout adds:  “The claim that the Municipality is granting licenses for residential homes is far from the truth and is contested by the de facto situation.  The tunnels are bringing in astronomical profits to their owners and the smugglers.

Zaqout refers to the “free trade” document, a copy of which we have obtained, and which Rafah Mayor Engineer Issa Al-Nashar sent on 9/9/2008 to the Financial Director at the Municipality, stating two decisions:  the first decision regarding the collection of ten thousand shekels (two thousand and five hundred dollars) on annual basis in fees for the tunnels’ trade, which was confirmed by all the tunnel owners we spoke with, and the second decision regarding raising the fees for formal paperwork to thirty shekels (nine dollars) at the minimum for all paperwork

The “cross-borders trade” document refutes the remarks of consultant Mahmoud Yousef.  This document constitutes legitimization of the smuggling operations through the tunnels and the imposition of taxes on them.  It confirms that the tunnels are nothing more than a means to earn funds for the Municipality and for their owners alike.  Through this document, it becomes clear that the expensive prices of goods smuggled through the tunnels started with the agreement of the outgoing government in Gaza.  We addressed a formal letter to the government’s spokesperson, Ehab Al-Ghusein, to discuss the tunnels issue, but he refused, wrote back “we regret” on the response, and justified the response by referring to the presence of a formal decision from the Interior Minister of the outgoing government to not cooperate with any journalist wanting to cover the tunnels issue.  As such, the government committee responsible for the work of and monitoring the tunnels refused to deal with us.  (Copy of the letter attached[MSOffice1] ).

[MSOffice1]Attach letter

Fraud, hopes for maintaining tunnels, and usurpation of necessity

The people of Gaza tell many stories of fraud committed by tunnel owners.  The details and circumstances of such stories were not readily available however because of the blackout exercised by the outgoing government.

In his report, Dr. Abu Mdallaleh mentions this issue:  “Around $600 million that tunnel traders and diggers collected from the people of Gaza on the pretext of investments in return for profits of up to %50 have been squandered.”  This is confirmed by one of the victims, who spoke on condition of anonymity, of these fraudulent operations.  He said that “the whole process is fraud, nothing more and nothing less.  Four people used well respected persons, like the imam of a mosque, as ‘fronts’ and persuaded them to attract individuals who want to invest their money in the tunnels in return for a commission paid per individual they bring.  In return, anyone who wanted to invest their money receives %10-12 in profits.  Indeed, those people started to trade through the tunnels, and goods would be sold even at a loss, and then we would receive the agreed percentage of the earnings.  After that, we started giving them more money and keep the money we earned with them.  All this was a charade and fraud.  After that, a person came along and he was collecting money for investment at a profit of up to %50, which is what tempted the people.  These people later claimed they lost the money once they ran away from Gaza, and to this day we do not know their fate or the fate of our money.”

No doubt, smuggling through tunnels opens the door for fraud, but they remain limited.  What is noteworthy however is the level of the exploitation.  During the preparation of the investigation, Israel partially opened the crossing points and allowed the entry of some goods that were banned.  The level of exploitation became immediately clear, as the price of these goods decreased by more than half.  This is confirmed by one of the traders, who spoke on condition of anonymity:  “We buy goods from Egypt and the tunnel owner receives it and charges his fee for every bag he brings in.  The price per bag of any goods is determined on the basis of time and weight.  In the past, the tunnel owner would charge $40 for a bag weighing 40 kilograms that comes through the tunnel, but now and after the partial opening of the crossing points, he charges $5.”

Asking a tunnel owner by the name of Abu Salem whether or not he wished the tunnels would shut down and the crossing points would open officially, he did not hide his wishes:  “I would love for the crossing points to open up and for the people to breathe easy, but I also wish that tunnels would function because they cost a lot of money.  Let us not forget that there are many goods that are still banned from entering through the crossing points.  Personally, I hope that even when the crossing points are opened and everything is allowed in, the tunnels would not shut down because they cost thousands of dollars.  If they want to shut them down, they must pay us compensation and then we will shut them down.”

Sky-rocket prices and astronomical profits

and peoples’ conditions at rock-bottom

A simple mathematical calculation involving the numbers provided by Abu Salem shows that under “difficult tunnel work”, he earns three thousand dollars on a monthly basis, which he is not pleased about.  He explains:  “Before the latest Gaza war, 2008-2009, prices were good and there was profit, but now I would make one hundred dollars a day.  The prices these days are miserable for two reasons, namely the opening of the crossing points and the entry of too many goods through the tunnels.”

At the beginning of the siege and smuggling operations through the tunnels, prices of smuggled goods were very high.  For example, the price of one ton of cement at that time reached 4200 shekels ($1150), although its original price ranged between 350-400 shekels ($95-105).  Thus, we notice that its price at that time and until the end of May 2010 increased tenfold.  Today, however, the cement price reached 700 shekels ($190), which is double its original price.  Abu Salem attributes price hikes to market economy mechanisms, indicating that “offer and demand is the factor that sets the prices of cement, rebar and others.  So, for instance, they said that the crossing points opened up, and as such the cement prices went down.”

No protection for consumers

President of the Palestinian Society for Consumer Protection in Gaza, Dr. Sa’oud Al-Sweirki, stressed that the tunnels have created a two-thronged problem:  “the first is related to price chaos and not just a rise in prices, because the price of some goods doubled many times due to their scarcity in the market and the citizens’ need for them.”  As for the second part of the problem, adds Sweirki, “it is related to the quality of these goods.  We as consumers see smuggled goods that have expired, of low quality and entirely non-compliant with specifications, and others that have no labels.  This is because the process of bringing in the goods through the tunnels is not a formal process and is not subject to quality standards.  Here lies the importance of activating the role of official parties in relation to the issue of goods and prices.”

The smuggling of goods that do not comply with standards do happen, despite the fact that the Consumer Protection Law stresses the need for protection for many materials, which in turn provides procedural protection for consumers, regardless of the source and producer of the material so long as they are in the Palestinian markets.  Article (7) of the Consumer Protection Law number (21) for the year 2005 stipulates:  “The product shall be compliant with compulsory technical instructions in terms of indicating the nature, type, core specifications and contents of products, and this shall also apply to packing and packaging processes that encompass product identification elements and precautions that need to be observed upon use, as well as the source, the place of origin, the manufacturing date and the expiration date, in addition to method of use, while taking into consideration the stipulations in relevant laws, regulations and decision, especially those related to environment safety.”

Dr. Sweirki confirms that “tunnel owners have lately been marketing products that are economically popular in the markets, and they look for goods that they can sell and then bring others.  But Israel has recently permitted in part the entry of some goods, which became available in larger quantities in the market, thus creating an imbalance of prices compared with the expensive prices that were prevalent before.”

Consequently, the main importer is the one responsible for any risks to consumers, while in the case of tunnels, the tunnel owner and the trader are responsible for such.  Article (10) of the same Law stipulates:  “The final supplier shall be responsible for damage to consumers resulting from the use or consumption of the local or imported product that does not fulfill safety or health conditions, or from non-compliance with declared or agreed upon guarantees, if he fails to prove the identity of the product supplier and prove that he is not responsible for the incurred damage.”

Legislative justifications for exploitation

Despite the consensus agreement of official parties, like the Legislative Council in Gaza, that the tunnels have caused the exploitation of citizens, they have not done anything to prevent this phenomenon.  Indeed, they have provided political justifications for them and turned a blind eye.

“Change and Reform” Bloc representative in the Palestinian Legislative Council and member of the Internal and Security Committee, Jamal Skeek, justifies the current status quo:  “We are besieged and there is nothing that enters Gaza Strip without Israel’s approval, so much so that they determine the button, the pin and the needle that go in.  As such, we thank the government for opening the door for the entry of basic needs, such as petrol and others, where the price of petrol reached one and half shekels when it used to be five or six shekels.”

Skeek believes there are more serious things that traders’ price hikes, and says:  “The danger lies in the hazardous items that are smuggled, by which people want to become rich at the expense of taboos, and which the security and internal affairs personnel and observers in the government need to be aware about because it is possible that not only Tramal comes in, but also other more serious drugs.”

It is probably quite strange that this acknowledgement is coming from a member of the Internal and Security Committee of the Legislative Council, whose task is to monitor the government’s performance.  This is indicative of the Committee’s inability to monitor the defects and corruption and to undertake measures to eliminate them.

Justifications by tunnel owners:  “the smell is better than nothing”

The justifications yielded by official parties have ultimately led to justifications and pretexts brought forth by some tunnel owners, such as Abu Wadee’, a partner in one of the tunnels.  Abu Wadee’ believes that “the tunnels have solved the problem by helping undo the siege on Gaza.  The smell is better than nothing, as they say.  I go to buy wheat, rice and other supplies that were banned from entry through the crossing points.  They are brought in through the tunnels.  For instance, the price of something before the siege was ten shekels and now under the siege, it is fifteen.  It is available however and fulfills the necessity.”

With regard to the level of exploitation in the first three years, Abu Wadee’ talks about crimes being committed against citizens that are revealed from the profit margin after the partial opening of the crossing points.  He explains that “tunnel owners would take three hundred dollars from the trader for a bag filled with any type of goods in the early days of the tunnels era, but now they take eight or ten dollars.  In the early days of the tunnels, a person who brought in one hundred bags was better off than a person who brings in 2000 bags today.”

The Sharia is against …

While the phenomenon of proliferating tunnels was welcomed by the outgoing government and some formal institutions, the religious institution adopted a different position.

Sheikh Jawdat Al-Mazloum, member of the League of Palestinian Scientists, says:  “The position of religion vis-à-vis the tunnels and the smugglers dictates that they must be put to trial and be judged before the people so that they are made lessons of for others.  I believe they should receive very high fines so that they are deterred and do not go back to what they were doing.”

Public Survey

In a survey of a random sample of 75 individuals (40% of which were females) that was conducted on Wednesday and Thursday, 18-19/8/2010, 75% said that the tunnels have solved the problem created by the Israeli siege in terms of unavailability of goods in Gaza Strip.  In turn, 85% of polled people complained that tunnel owners have exploited the citizens.

Meanwhile, the percentage of those who said that tunnel goods are expensive exceeded 90%.  45% of polled people blamed the outgoing government for the high prices and 50% held tunnel owners responsible.  83% believe that tunnels have created a new rich class, and the percentage of those who identified the members of the class was close, as 85% said they were the tunnel traders and owners and the smugglers.

89% believe that tunnel owners have used illegal ways to get rich fast, and those who said this agreed that the methods of getting rich fast were by smuggling low quality goods and other expired products, as well as narcotics such as Tramal, which is a painkiller used for some treatments but some misuse it as a drug leading to addiction.

45% of the sample blamed civil society organizations for not playing their role in protecting consumers in Gaza.  40% of the sample did not, however, blame those organizations.  Meanwhile, 70% blamed the Legislative Council for not monitoring the government in Gaza and prices.

77% believe that the tunnels have damaged the cause entailed by the siege, as they convinced the world that everything is available in Gaza through the tunnels.  With regard to main crossing points, 88% said that the tunnels are not replacement for them.

This report was completed with the support of Arab Reporters for Investigative Journalism (ARIJ) and under the supervision of Waled Batrawi.


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