Conflict’s impact on Israel’s economy is scattered

Hilary Krieger Jul 25, 2006

KAI RYSSDAL: The airstrikes and tank movements won’t stop any time soon. But Israel did agree today to allow humanitarian relief into Lebanon. That’s the tangible result of the three days Condoleeza Rice spent in the Middle East. The Secretary of State is on her way to Rome for a big conference there tomorrow trying to end the fighting.

The bombs and rockets are concentrated in a couple of major places: Southern Lebanon, parts of Beirut, and from the Israeli border down 30 miles south to Haifa. But Hilary Kreiger reports the economic impact in Israel is more scattered.

HILARY KRIEGER: For years Ben-Yehuda Street, the central pedestrian mall in downtown Jerusalem, was largely deserted. Tourists and locals alike avoided the area, repeatedly hit by suicide bombers during the intifada, the Palestinian uprising, that began in the year 2000. Today, Israel is again at war. But this time, the streets of Jerusalem are packed, as are the shops and hotels.

Many of those clogging the city are tourists from northern Israel seeking refuge. That area has been the target of Hezbollah rockets. Ellie Richmond of Toronto had been staying in the northern city of Haifa.

ELLIE RICHMOND: There was a lot of bombings and a lot of sirens. It was too much to take, running back and forth to the bomb shelters.

In Jerusalem, far from the Hezbollah attacks, she says she feels . . .

ELLIE: Safe. Everything’s business as usual here. It’s nice seeing people out in the streets.

Jerusalem is a stark contrast with the north of the country, where both workers and customers are spending most of their days in safe rooms and bomb shelters. On the main street running past the Haifa mayor’s office, a single car passes.

Then, silence.

YANIV BOAZ: Nobody’s outside. It’s like everybody dies or something. You go outside and you don’t see nothing.

Yaniv Boaz runs a tobacco kiosk in central Haifa. His sales have fallen by more than two-thirds. Many shops are shut altogether.

BOAZ: Everybody don’t go out from the house. They don’t buy nothing.

It’s not just small business owners who are hurting. Throughout northern Israel, most factories have closed, agriculture has halted, and only essential services are operating. Tourism has been wiped out, as Haifa Mayor Yona Yahav explains.

YONA YAHAV: The only tourism we are now facing are thousands and thousands of foreign correspondents who are coming to see this site because it became a war zone, but usual tourism we don’t have. The city’s empty.

But there is another unusual group of tourists in Haifa: American Jews on missions to show solidarity with Israel. Yahav was meeting with one such group when there was a warning of incoming Hezbollah rockets.

[sound of siren]

As the siren went off, the group moved into the narrow, windowless corridor beside his office. Its wailing ended and the visitors started to leave, when a security officer told them . . .

[sound inside bomb shelter]

SECURITY OFFICER: Let’s remain here for two more minutes.

Yahav, looking out for levity as well as at his city’s bottom line, joked to the group:

YAHAV: Listen to me. If you are staying here for more than half an hour, you pay taxes.

But most residents of northern Israel aren’t laughing. Economists estimate closed factories cost the economy $10 million a day. The total economic loss runs up to 10 times that, not including property damage or military expenditures.

The blow is particularly cruel for an economy just getting back on its feet after five years of intifada violence. Growth this year has been a robust 6 percent, but is likely to drop if the conflict drags on for more than a couple of months. And tourism, which was building back up to pre-intifada numbers, has crashed.

Rafael Farber is vice president of the Israel Hotel Association.

RAFAEL FARBER: It’s very hard to see the light at the end of the tunnel. It’s very frustrating that we don’t have at least a few years of calmness here.

Farber runs the Olive Tree Hotel in Jerusalem. For now his business is OK, as those avoiding the north come to him. But he fears that tourists not yet in Israel will skip the trip entirely. Then Jerusalem, like Haifa and other cities, would be seriously affected. Still, Farber says, you have to hold on to hope.

FARBER: We have to be optimistic. Otherwise we cannot function in this industry.

Or, some might say, in this country.

In Jerusalem, I’m Hilary Krieger for Marketplace.

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