Situation in the OT – Israeli economic measures – SecGen note

Israeli financial and trade practices in the

occupied Syrian Arab Golan

Note by the Secretary-General

1. On the basis of a note by the Secretary-General (A/43/432-E/1989/68) concerning progress in the implementation of General Assembly decision 40/432 of 17 December 1987 and Economic and Social Council resolution 1987/87 of 8 July 1987, the Council, by resolution 1988/65 of 28 July 1988, requested the Secretary-General to speed up the preparation of the required report on the trade practices of the Israeli Occupied authorities in the occupied Palestinian territories and on the financial and trade practices of the Israeli occupation authorities in the occupied Syrian Arab Golan and the report to the Assembly at its forty-fourth session, through the Council, on the implementation of the resolution.

2. The relevant sections of a study covering the Palestinian external trade sector under Israeli occupation, which was carried out by the United Nations Conference on Trade and Development, have been submitted (A/44/277-E/1989/82, annex).

3. The relevant sections of a survey prepared by the Economic and Social Commission for Western Asia on the Israeli financial and trade practices in the occupied Syrian Arab Golan are annexed to the present note.

ANNEX

Israeli financial and trade practices in the

Occupied Syrian Arab Golan

I. INTRODUCTION

1. The occupied Syrian Arab Golan is subject to the same discriminatory financial policy and practices as the occupied Palestinian territories.  The only local bank was forced to close and Syrian currency was replaced by Israeli currency.  Israeli banks in the Syrian villages do not offer a full range of services.  Their major function is to facilitate trade between the inhabitants of the occupied Syrian Arab Golan, Israel and the occupied Palestinian territories.

2. As in the occupied Palestinian territories, lending operations are subject to prior approval by the Israeli authorities, who display little interest in facilitating the emergence of a strong local production base.  The volume of loans advanced for industrial and development purposes is negligible.  The informal monetary sector of Syrian villages in the occupied Syrian Arab Golan is much less developed than that of the occupied Palestinian territories.  Furthermore, co-operative societies in Syrian villages, which could play a role in the area of seasonal credit, do not exist.  However, inhabitants of the occupied Syrian Arab Golan rely mainly on personal savings to finance their capital requirements.  It should be noted that, in contrast with the occupied Palestinian territories, nationals of the Syrian Arab Republic in the occupied Syrian Arab Golan have had no access to external funding sources.

3. External trade in the occupied Syrian Arab Golan has undergone fundamental changes during the Israeli occupation.  Local markets were opened to a flood of goods from Israel.  Apples constitute about the only export item from villages of the occupied Syrian Arab Golan.  About 75 per cent of the marketable output is channelled into Israel and 25 per cent goes to the West Bank and Gaza Strip.  Because of relatively low labour costs and the superior quality of their apples, producers  in the occupied Syrian Arab Golan have competed favourable with Israeli producers.  Farmers have been able to solve their marketing problems through the establishment of cold storage plants and a modern packing plant.

4. The advent of the Israeli occupation has resulted in the subordination of the financial and trade sectors to the Israeli economy.  However, no economic links have developed between Israeli settlers and nationals of the occupied Syrian Arab Golan over the past 21 years.

II. MONEY AND BANKING

5. The occupied Syrian Arab Golan is subject to the same financial policy and practices as the occupied Palestinian territories.  Immediately after the occupation, Syrian currency was replaced by Israeli currency and the only local bank in the region was forced to close.  In order to fill the resulting gap, a few years later Israeli authorities permitted the opening of Israeli banks.  By early 1988, two Israeli banks were operating in the Druze villages, one in Majdal Shams (Hapoalim) and the other in Masa’ada (Leumi).  Because of the inadequate volume of business, the latter bank was closed down, leaving only one bank in the Druze villages.  A third branch serves Qatzrin, the largest Israeli settlement in the occupied Syrian Arab Golan.  In the annual reports of the Bank of Israel, no separate data are provided on the performance of these banks, although such data are provided for banks of the occupied Palestinian territories.

6. Officials at the Bank of Israel emphasize that Israeli banks in the Druze villages are extremely small and do not offer the full range of services.  The major function they perform at present is that of facilitating trade between inhabitants of the occupied Syrian Arab Golan, Israelis and inhabitants of the West Bank through checking accounts.  Overdraft facilities and lending services are provided on a very small scale and only for trading purposes.  The volume of loans advanced for industrial and development purposes is negligible.

7. As in the occupied Palestinian territories, lending operations are subject to tacit intervention by local Israeli authorities; hence, private individuals generally opt not to apply for bank loans.  Furthermore, the Israeli authorities display little interest in facilitating the emergence of a strong local production base, an attitude clearly reflected in the credit policies promulgated by local Israeli banks.  In any case, inhabitants of the area tend to harbour strong religious sentiments against the concept of interest on loans, even more so than in the West Bank.  They have further declined to borrow from Israeli banks on account of strong national sentiment, and they resort to banks only for such unavoidable services as paying their tax bills, cashing their wage cheques and receiving national insurance dues.

8. The informal monetary sector in Syrian villages in the occupied Syrian Arab Golan is much less developed than that in the occupied Palestinian territories.  Money changers do not exist, although several large shop owners perform money changing functions on a very limited scale, usually involving American and Israeli currencies.  Unlike money changers in the West Bank, they do not perform such functions as transferring money or advancing loans.

9. Another major distinctive feature of the monetary sector relates to the non-existence of co-operative societies in Syrian villages in the occupied Syrian Arab Golan.  In addition to not having been exposed to co-operative experience prior to the Israeli occupation, the inhabitants of the area are effectively discouraged, and have themselves resisted, the establishment of organizations.  Obviously, local Israeli authorities are excessively concerned about all efforts aimed at building local institutions that may eventually weaken the area's subjugation to Israel.

10. Suppliers of production inputs have played a vital role in the area of seasonal credit.  There are eight specialized shops in Syrian villages, which  have all become major conduits for technological change as well as sources of loans in kind.  According to the estimates of local experts, local suppliers of production inputs offer overdraft facilities to their customers for periods of about six to eight months.  No interest is charged on the unpaid balance of a farmer's bill, but the deferred balance is converted into United States dollars.  The aggregate volume of credit facilities advanced by suppliers of production inputs is estimated at $US 400,000.

11. Borrowing for economic purposes does not seem to pose a special problem to Syrian farmers of the occupied Syrian Arab Golan.  Additional capital is occasionally needed for such modest purposes as reclaiming one or two dunums of land (US$ 1,000-3,000), replacing irrigation pipes or paying for a share in a water tank.  With high income earnings, such capital requirements are usually met from personal savings.  In rare cases where a supplementary loan is needed, farmers and businessmen resort to friends and relatives.  This source seems to play a more important role in the credit market than in the occupied Palestinian territories.  As in the latter territories, usurers do not play any significant role in the monetary market.

12. In sharp contrast to their counterparts in the occupied Palestinian territories, Syrian nationals in the occupied Syrian Arab Golan have not had access to external funding sources.  They were not, for example, included within the mandate of the commission set up by the 1978 Arab Summit, later known as a the Joint Jordanian-Palestinian Committee.  Again, in contrast to the occupied Palestinian territories, the area has not attracted the interest of foreign agencies and non-governmental organizations.  No private voluntary organization or non-governmental organization functions in the occupied Syrian Arab Golan at present, whereas there are about 40 currently operating in the occupied Palestinian territories.

13. Far from being disturbed by the reluctance of seemingly concerned parties to advance financial aid, many inhabitants of the area feel that the lack of aid has actually led them to make spectacular achievements and they have done their utmost to mobilize their own resources for development needs.

III. TRADE

14. Trading services have developed at a rapid rate over the past 21 years.  Internal trade has flourished as a result of a marked rise in per capita income and a swiftly evolving conversion from a subsistence to a market-oriented economy.  By 1983, 148 stores provided the goods and services needed by the local population.  About two thirds of these were grocery shops engaged in selling consumer goods.

15. External trade in the occupied Syrian Arab Golan has undergone a fundamental transformation during the post-occupation years.  Immediately after the occupation began, local markets were opened to the flood of goods from Israel.  But as was the case in the occupied Palestinian territories, the counterflow of agricultural goods from the area into Israel was put under tight Israeli control.  No data are available on trade with Israel, but it is clear that Syrian nationals are more heavily dependent on Israel for  their goods than are Palestinians in the occupied Palestinian territories.  Unlike merchants in the occupied Palestinian territories, businessmen in the occupied Syrian Arab Golan have not established direct trade relations with overseas countries.

Table:  Distribution of shops (1983)

Source:  Aharon Zebaidah, The Druze in the Golan Heights: A Minority community in Crisis, MA thesis, University of Haifa, 1984, pp. 221-222.

16. Apples are about the only export item of external trade from villages in the area.  Annual output is estimated at about 10,000 to 15,000 tons, with a farm-gate value of around $US 15 million. 1/  About 75 per cent of the marketable apple output is channelled into Israel, where quantities in the range of 1,000 to 4,000 tons are purchased by the juice factory in Qiryat Shmona, depending on the quality of the fruit of that season and prevailing prices.  The West Bank and Gaza Strip received about 25 per cent of the output.

17. Delivery to Israeli wholesales is sometimes made in the apple packing plant using buyers’ boxes and trademarks.  The bulk of apples going to Israel is disposed of in the Tel Aviv wholesale market.  All shipments to Israel must be accompanied by individual permits from the Fruit Marketing Board, as is the case with other Israeli producers.  The Board issues these permits at a normal fee and without undue delay.  Since 1981, the shipping of apples from the occupied Syrian Arab Golan into Israel has been free of quota restrictions.  Deductions on produce sold in Israeli wholesales markets amount to 25 per cent of the sales proceeds (Commission 15 per cent, taxes and handling charges 10 per cent).  The cost transportation to wholesales markets in Israel amounts 8 to 10 per cent of the sales proceeds.

18. Because of the relatively low labour costs and the superior quality of their apples, producers of the occupied Syrian Arab Golan have competed favourably with Israeli producers.  This has recently promoted Israeli with vested interests, particularly those living in settlements in the area, to call for the imposition of restrictions on the entry of Druze apple produce.  A bill was presented to this effect by Knesset member Grupper in February 1988.  Echoing the sentiments of Israeli settlers, Gupper argues that inhabitants in the occupied Syrian Arab Golan have expanded their apple orchards illegally and beyond the local market capacity. 2/  So far the Knesset and Ministry of Agriculture have not acted in response to Grupper’s appeal.  Some Israeli experts expect that a compromise may be reached whereby certain restrictions will be imposed on the entry of apples destined for industrial purposes.  But even limited restrictions may have grave consequences for economy.

19. owning to the relatively short production season, for many years apple farmers of the occupied Syrian Arab Golan faced serious problems in marketing their produce, since price levels often dropped to very low during the picking season.  In order to solve this problem, seven cold storage plants have been established with a total capacity of 6,800 tons.  This has effectively alleviated the problems of surpluses and has helped to stabilize prices.  Another major development in apple production and trade was the establishment of a modern packing plant in the early 1980s.  Owners of cold storage plants charge $US 12 per ton for produce stored from October to January, and an additional fee is demanded for longer periods.

20. Trade between villages in the occupied Syrian Arab Golan and the Syrian Arab Republic ceased in both directions when the Israeli occupation began.  Efforts to channel apples via the Syrian Arab Republic to other Arab markets has been advocated in recent years, but so far no practical steps have been taken to implement this.

21. The smuggling of goods across the Syrian border was reportedly very common for a considerable time after occupation began.  Syrian nationals in the occupied Syrian Arab Golan were tempted to bring in goods of Syrian origin because of substantial price differentials.  Fearing economic and security repercussions over this kind of trade, the Israeli authorities have enforced stringent border controls which have helped to reduce this form of trade to a negligible level.

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1/    Date furnished by Department of Agriculture, Qiryat Shmona.

2/    At a farm gate price of about US$ 1,000 per ton, Grupper’s assertions are not taken seriously by most apple traders and agricultural officials.