Gaza's underground economy

Ebrahim Sobeh
27 March 2009

It has been approximately three years since Hamas won the second Palestinian legislative election on which the majority of the Palestinians pinned great hopes. These hopes have now given way to a frustration and despair daily exacerbated by the restrictions on the movement of workers and goods which has isolated the population of approximately one and a half million Gazans, and led to skyrocketing levels of unemployment and government deficit.


The economy was already disrupted as a result of the repeated closure of the border between Israel and the Gaza Strip. Closures lasting longer than one month exerted tremendous recessionary pressures on the economy. They restricted business activity, reduced the money supply, productivity, trade and financial flows and made it near to impossible for businesses to meet financial obligations. As a result most businesses have experienced frequent losses in sales opportunities, supply-side shocks and liquidity crises. In response to the Israeli blockade on the Gaza Strip, the number of tunnels mushroomed.

Tunnels restored life to the besieged Strip. Tunnel traders strike deals with their Egyptian partners which enable them to sell goods to the local shops. For many Palestinians this is their sole source of income. For the Gazans as a whole, the tunnel economy is all that exists between them and starvation. Tunnels have been used to smuggle through a vital economic lifeline, including domestic goods, medicine, fuel, cigarettes, power generators, motorcycles, livestock and sometimes people into, or out of, Gaza. The Hamas leadership has welcomed the emergence of this new tunnel economy, as a way of circumventing Israel's blockade on the Gaza Strip. They claim that the tunnels will be shut down as soon as the main Gaza-Israel crossings are opened.

Welcome to Tunnel City

It is March 12, 2009, and I would like to welcome you to "Tunnels City", where, every 200 metres or so you will find a group of Palestinians digging a tunnel. Nowadays, they make little effort to hide the excavation work which lurks under a network of tents and jerry-built shacks along the border. Husam, 45, who like many other operators along the border refused to be named, told us that his tunnel is used to smuggle whatever can break the Israeli siege and help ease some of the hardships Palestinians have been enduring. A large loan from friends on top of his life savings as a teacher set him up as the tunnel king he has become today. In particular, his tunnel is frequently used to bring petrol into Gaza: petrol has become one of the most profitable commodities.


Abu Mohammed Al Shaer, 30, is also a tunnel owner: "Tunnels are used to procure basic stuff that cannot be had, due to the extensive Israeli restrictions on the most innocuous imports into the Gaza Strip." Our visit coincided with the  tunnels operators coming to assess the damage caused by the latest Israeli bombardment raids: "Thank God! The tubes are working and we can get fuel through," Mr. Al Shaer said. For his part, he strongly denied Israeli claims of weapons-smuggling. But no-one denies the possibility that various armed factions' weapons and funds are being brought into the Strip through secret tunnels, built inside houses nearer the border line. 

The fact is, it is really hard to be sure how many tunnels now exist beneath the Gaza-Egyptian border line, the sole remaining crossing point for Gazans to the outside world. Tunnels, dug from the basements of Gazan homes, can be up to 30 metres deep and 800 long, surfacing in houses on the Egyptian side of the border. It takes at least a month to build a tunnel and requires the expertise of a few people (highly paid at around $100 a day) equipped with electric tools, ventilation pumps, communications gear and rudimentary elevators.


Many residents have no choice but to allow the tunnel to be built from inside their homes because of their desperate need for money. You can purchase a ready-to-use tunnel for approximately $70-90,000. This market opened up when a tunnel owner raised the price of a house on the border to $50,000. Husam said that he rents the land his tunnel is built on from a poor family in return for a share of the profits.

There are rumours circulating that the Hamas-run government has imposed strict control on what can be brought into Gaza and that they tax the tunnel operators. But the two tunnels operators we interviewed told us that they have not paid any thing to Hamas since their tunnels were built. Like many other operators along the border, however, they often supply the Hamas-run municipality with fuel.

We are joined by Mohammed Abdual'al, 23, a tunnel digger emerging from the tunnel hole "eye" breathing heavily, with sweat running off his forehead. Mohammed Abdual'al is bitter, "No matter how vital these tunnels are to the Palestinian economy, there is a human cost. I have already lost my brother and a friend who was trapped underneath and suffocated to death. However, I will not give up, as I have a 16-member family dependent on me. But there is always a risk of collapse. We tunnel diggers are digging our own graves. I smell death every day, but I have no choice."


If the death toll amongst tunnel diggers is rising, so is the number of Palestinians (currently estimated at around 7,000) employed in the clandestine industry. And for hundreds of tunnel operators who can rake in tens of thousands of dollars in a week, this has become a highly lucrative business. For instance, a sack full of goods costs about $300 to move through the tunnel system. It is said by some that Egypt would never willingly endorse the destruction of the tunnel system, due to its importance to the economy of the people of Sinai.

We have moved now to the home of Abu Basem, one of the tunnel operators of Gaza. His villa is in Rafah City, in the southern part of the Gaza Strip. The house is furnished expensively in a way few ordinary Gazans can afford. A Land Cruiser Jeep, BMW car and Hunday Jeep are parked at the entrance. Abu Basem is open about how much he owes to the tunnel economy, "In fact, I own two tunnels: each earns $15,000 a month." He, too, was once a teacher, living with his extended family in a poverty-stricken part of Rafah.

Israel and the US have already expended a great deal of effort to shut the tunnels system down. Under pressure from the Israeli Government. the Egyptian authorities have deployed poison gas, water and even sewage in attempts to halt the smuggling. In June 2008, Haaretz reported that the US army was training Egyptian soldiers to locate and destroy tunnels in an effort to improve the Egyptian army's ability to cope with arms-smuggling from Sinai into the Gaza Strip. In January 2009, Egypt in cooperation with US Army engineers reportedly set up ground-penetrating radar along the border ‘to detect smuggling tunnels'. But as a foreman in charge of tunnel diggers told us on our latest visit, "If one tunnel is destroyed, in no time a new one will spring up in its stead."

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