The Tunnel Economy
On March 21 a couple from both sides of the Sinai border, an Egyptian bride and Palestinian groom, chose a strange place to take pictures of their wedding. They posed in one of the tunnels that pass underground through the border between Rafah in Egypt and the Gaza Strip in Palestine. The pictures showed how something completely contrary to human nature can transform into an ordinary manifestation of everyday life which people grow accustomed to.
The phenomenon of the underground tunnel network between Egypt and Palestine, and its recent expansion, is linked to Hamas’ control of the Gaza Strip following the expulsion of the Palestinian Authority. However, the tunnel system itself stems back to the days of the second intifada, when the Fatah movement used secret passageways to deliver weapons and supplies in the face of the Israeli blockade. After Hamas took over the Gaza Strip in 2007 it seized control of the tunnels that used to be affiliated with Fatah and restricted even the tunnels affiliated to other movements. It then began the process of expanding a complex and more sophisticated network of tunnels with an estimated 1,200 separate passageways, passing through which are all kinds of goods, from fuel to cars to live animals. This has been no secret; photographs of the entrances to the tunnels and even life inside them have been made available to the press.
Throughout the years of Hamas’ reign, the tunnels have been legitimized with regulations and licenses. In a study published on the Institute for Palestine Studies website, Arab affairs writer Nicolas Pelham contends that Gaza’s smuggling economy has now become official, with a special government committee overseeing the opening of new passages and the management of tunnels on the Palestinian side. There are regulations governing the commercial transactions taking place through the tunnels, and permitting which goods are allowed to be imported and which are not. Then there are the customs duties that must be paid to the Hamas government, which have granted it a degree of financial independence from the Palestinian Authority, as well as enabling it to employ thousands of people in this semi-secret but legitimized economy.
Nowadays there are companies and shareholders securing ownership of these tunnels, creating dozens of millionaires in the Gaza Strip through the activities of what is estimated to be a billion dollar industry. As the secret trade booms, the cost of digging a new tunnel can be recouped through a month’s worth of subsequent revenues from smuggled goods.
The tunnels pass through both sides; there is an opening on the Egyptian side for goods to enter, just as there is another on the Palestinian side opposite. Hence there are partners on the Egyptian side, and brokers and suppliers who bring goods and commodities from the depths of Egypt to be smuggled across the border. This creates a unique economic partnership with strong interest in both countries, and all parties involved are keen for these tunnels to remain at any cost because their closure would leave them with significant financial losses. Therefore, those participating in this underground trade were not impressed by the decisions taken in the last two years to open the Rafah crossing, or to facilitate the entry of goods above ground. Commercially speaking, these tunnels offer an opportunity to smuggle subsidized Egyptian goods and commodities that are banned from being exported, such as petroleum products or certain food items. Successive Egyptian governments have failed to find ways to reduce these subsidies—which deplete their budgets—for fear of social unrest. Likewise, these tunnels also represent an opportunity for more clandestine trades such as arms dealing.
The biggest beneficiaries of the tunnel trade may be the select group of families on both sides of the border, some of whom have transformed into millionaires, in addition to the Hamas government and what it collects from tax on smuggled goods. However, at the same time as this phenomenon has contributed to the reduction of commodity prices in Gaza and the provision of vital supplies there, on the Egyptian side it represents a constant economic hemorrhage. More importantly, it constitutes a security risk with Hamas’ expanding influence in Sinai, and the rumors of Palestinian militants crossing into Egypt especially after the security turmoil that the region witnessed in the wake of the January 25 revolution.
This explains the recent Egyptian security campaign to close these tunnels and demolish them; a campaign that is now far more proactive than during the era of former president Mubarak, who often turned a blind eye to such activities on both sides of the border.
Yet the fact is that these tunnels should have been dealt with more seriously years ago. No country that hopes to have its sovereignty respected would allow the expansions of such activities, especially as they threaten national security. The real challenge now is how to convert these activities, in terms of their commercial aspect, from underground to above ground, in line with how the rest of the world operates.