Investments in Gaza tunnels collapse

Below the soil of the Egypt-Gaza separation barrier that runs along the Philadelphia corridor, constructed under the Israel-Egypt Peace Treaty, there are between 800 to 1,000 tunnels. These tunnels, first built under the border to smuggle weapons from Egypt when Israel controlled the territory before its pullout in 2005 , have been the subject of huge investment from Gazans hoping to profit from the large volume of goods smuggled through them.

Food, clothes, machinery, as well as weapons and ammunition were smuggled from Egypt, and attracted the investment of more than 4000 Gazans, who gave their cash to middle-men and tunnel operators last year after Israel blocked the overland transport of goods.

However, during the three week war in Gaza between December 27 and January 18, Israel embarked on a campaign to destroy these tunnels, using air strikes, artillery shells, tank fire and detonations. Investors lost almost US$500 million, and they now want their money back from Hamas, the group that control Gaza.

The Hamas Economics Minister, Ziad Zaza, says that around 200 hundred people have been arrested in connection with the tunnel investments, with most being released shortly after. One of the tunnels biggest operators, Ihab al-Kurd, had money confiscated and compensation is now being offered using this money.

But the impact of the losses caused by the tunnels are though to be so significant people in the region are even claiming it to be worse than the Bernie Madoff scandal: "When you compare the US economy with ours and see how dependent we have become on the tunnels, I assure you that our scandal is much worse than Madoff," said Omar Shaban, Director of Pal-Think, an economic research institute in Gaza City.

The problem is that the investments in the tunnels were illegitimate, with no records of the money that exchanged hands ever being made.

"There is no transparency, no public records, no regulators, none of the mechanisms that would let you trace what happened to all the money that people invested in the tunnels," said Samir Abdullah, the Palestinian Authority's former planning minister. He added that the smugglers provide "essential revenue" for Hamas, classified by the US and EU as a terrorist organisation.

Most of the 200 arrested on tunnel-related fraud charges were released after agreeing to cooperate with investigators, Economics Minister Zaza said. He estimated the losses at US$60 million, based on records he declined to reveal. "Our people had no choice but to use these tunnels in order to survive," said Zaza. "There were corrupt people who took advantage of the situation, but they are in our custody now. I don't blame people for being angry, but we hope to return more money," he added.

Even though the case is from closed, some of the tunnels remain in operation. A tunnel collapse and killed one worker and injured two others on September 27, which is a reminder there is also human tragedy involved in the tunnels, a fact that can be hidden by the mention of money.

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