Counting the cost of the Gaza operation

Some economists calculate that Operation Pillar of Defense cost the Israeli economy 0.2% of GDP or NIS 2 billion.

On the morning after the cease-fire with Hamas, Israel has begun coping with the economic ramifications of Operation Pillar of Cloud. Tax Authority figures and estimates based on the kind of compensation data that resulted from Operation Cast Lead suggests that the immediate damage arising from Operation Pillar of Cloud is about NIS 200 million. A mechanism has not yet been set for compensation for indirect damage from the Operation. However, sources inform "Globes" that such compensation will only be given to damage caused within a 40 kilometer range of the Gaza Strip so that many areas in the center of the country that were effected such as Rishon Lezion, Tel Aviv and Jerusalem will receive no compensation for indirect damage.

On Monday, the Tax Authority published that since the start of Operation Pillar of Cloud, 1,240 cases of direct damage had been recorded. In other words, damage to property including buildings, vehicles and to agriculture. Senior officials at the Tax Authority told "Globes" that such damage is between NIS 30 and 40 million. This figure does not include the damage of the last two days when there were dozens of direct hits in Beersheva and the major damage to the apartment building in Rishon Lezion, which is liable to push up the cost of direct damage to NIS 50 million.

Data on indirect damage related to employees being unable to work and harm to business activities has yet to be calculated or a mechanism even set. Nevertheless, the Ministry of Finance said today that it is preparing a proposal for compensating businesses and factories in southern Israel, "based on the compensation formula from 2009 following Operation Cast Lead." The mechanism for compensation will be determined by a committee headed by Ministry of Finance director general Doron Cohen.

The Ministry of Finance today told "Globes" that compensation for indirect damage will only be given within a 40 kilometer range of the Gaza Strip and that businesses, industry and tourist enterprises elsewhere such as south of Tel Aviv and in Rishon Lezion will not receive anything.

According to Tax Authority figures, the indirect damage from Operation Cast Lead amounted to NIS 390 million after 22 days fighting. By this simple calculation, the latest round of just eight days fighting should cost just NIS 142 million.

A much higher figure is that of the actual lost production during the eight days of Operation Pillar of Defense. Senior economists estimate this loss as 0.2% of GDP or a maximum of NIS 2 billion.

The Manufacturers Association estimates the total damage caused to 430 enterprises within a 40 kilometer range of the Gaza Strip as NIS 200 million. Research by the Manufacturers Association economics department is based on the number of days work lost by employees who did not come to work, according to their salary cost, and the reduction in output during the frequent breaks when rocket alerts were sounded and employees were required to enter secure areas. Most factories reported a 50% fall in producton.

The Manufacturers Association also said that by the seventh day of Operation Pillar of Defense factories were also reporting lost orders and a fall in sales, especially food companies.

Published by Globes [online], Israel business news - www.globes-online.com - on November 22, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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