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Wednesday, 11 December, 2002, 08:22 GMT
Business caught in the crossfire
Nadim Khoury samples his beer
Nadim Khoury's brewery is struggling to survive

Nadim Khoury runs the only micro-brewery in the Middle East.

Two years ago, business for Taybeh beer was booming.

Nadim employed 12 people, turning out up to 4,000 bottles of beer per hour from his family-owned plant near Ramallah.

The Khourys returned to the hilltop village of Taybeh after 20 years in Boston and invested $1.2m in the business following the signing of the Oslo Accords in 1993.

But now, with production down 90%, his revenues barely cover the phone bill.


Checkpoints and curfews seriously hamper deliveries while supplies of key imports - British yeast, Belgian malt, German hops and Portuguese bottles - are at the mercy of the Israeli authorities.

The conflict in Israel/Palestine at the moment is affecting everyone and affecting every place

Amir Orly, Israeli tour guide

"They hold our shipment just to give us a hard time, to check if these are not weapons, to check them for security check-ups," explains Mr Khoury.

"They even take a sample of the bottles. They inspect them and they bring them back and charge us every time for security check ups, for opening these containers."

On a recent $20,000 consignment of imported bottles, Taybeh Beer was charged $6,000 in costs for hold-ups at the Israeli port.

The authorities said these delays could be avoided if Mr Khoury bought his bottles from Israeli firms.

Shunned by tourists

The 26-month-long Israeli-Palestinian conflict is taking its toll on businesses on both sides of the divide.

The tourism industry in particular has collapsed.

The view of Jerusalem from the Mount of Olives
Tourism numbers have dropped off sharply

With regular army incursions into Bethlehem, the cradle of Christianity is best visited wearing a flak jacket while the threat of Palestinian suicide bombers in Israeli towns has scared away all but the most die-hard pilgrims.

Up on Jerusalem's Mount of Olives, overlooking the Old City with its golden dome, Israeli tour guide Amir Orly is almost unemployed.

Once, there would be hundreds of tourists from all over the world milling around - now, it is usually deserted.

"The conflict in Israel/Palestine at the moment is affecting everyone and affecting every place," says an exasperated Mr Orly.

"Tourism has slowed down tremendously to a point that as you can see now this is pretty much dead."

Losing out

Israel's tourism industry here once attracted $4bn annually in foreign currency.

Oren Drori of Israel's Tourism Ministry
Oren Drori: Many thousands have lost their jobs

It represented 9% of gross domestic product and employed 100,000 people directly.

But since the September 2000 Intifada, the number of foreign tourists has dropped 65%.

"We're talking about a loss of $2.1bn alone in the year 2001 in expected foreign currency that didn't arrive into the country," says Oren Drori of Israel's Tourism Ministry.

"Some 30,000 people have lost their jobs... so the impact needless to say is great on the Israeli economy."

Wider problems

Leading economist Yoram Gabbay, head of Peilim Portfolio Management Company, says the fallout from the conflict is affecting all sectors, from hi-tech to the high street.

Many small businesses are now surviving on their savings. Another year of the Intifada could see off more than a quarter of these enterprises.

For the Israeli economy, this would add to today's 10.6% unemployed - putting even more strain on the overstretched budget.

Palestinian companies, aware of Israel's economic woes, accuse Israel of trying to alleviate some of its troubles by mounting a trade war on the back of its military clampdown.

'Taking advantage'

Action and inaction by Israel's customs and its army are squeezing once profitable businesses such as Taybeh Beer - which are unable to maintain supplies to customers.

Palestinian businesspeople say Israeli companies are taking advantage of the tense security situation and moving in on their competitors' markets.

However, Israel's Foreign Ministry is adamant that there is no hidden agenda to advance its companies' interests nor to destroy the Palestinian economy.

The official line is: if attacks on Israelis end, there would be no need for the tight security - and normal economic life can return.

Expansion blocked

This is little consolation to Palestinian mobile phone operator Jawwal.

Israel impounded $4m worth of towers and transmitters at Tel Aviv airport 13 months ago - in the name of security.

Hakam Kanafani, CEO of Jawwal
Hakam Kanafani: Claims Israeli operators are competing unfairly

As a result, Jawwal cannot expand its customer base and has trouble maintaining the quality of its existing service.

Its management is battling to maintain market share in the face of competition from Israeli operators.

These companies, with masts erected in neighbouring West Bank settlements, offer pre-paid services in Palestinian towns - even though they have no Palestinian licence.

No licence

"They believe that they can market, sell, promote, cover and go about their business without paying for a licence, without paying value added taxes - and this to them, it's the national expansion," complains Jawwal's chief executive Hakam Kanafani.

"In Israel there are five and a half million people carrying mobile phones out of six million. The market there is completely saturated."

Israel's leading operator Cellcom refused to respond to this allegation. The company would only confirm that it serves Israeli settlers and the military in the West Bank.

Mobile phone agents in Palestinian towns such as Ramallah and Hebron clearly display the Cellcom logo.

Drying up

Back at Taybeh - the word means "delicious" in Arabic - Nadim Khoury explains that when he can't get his beer to his customers, they have to turn to Israeli and European brands.

His back is against the wall.

While the Palestinian Intifada continues, so will the Israeli military crackdown - and both economies are suffering the consequences.

But Palestinian companies are being hit the hardest, leaving what's left of their markets in the sights of Israeli firms.

Nadim, incidentally, means "bringer of drink" in Arabic.

He would, if only he could.

See also:

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