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Wednesday, October 07, 2009

Hamas: Gaza's Madoffs

From Bloomberg:
Investment opportunities are rare in the Gaza Strip. So when Nabila Ghabin saw one last year, she pawned her car and jewelry and put $12,000 into a network of tunnels that brought in supplies smuggled from Egypt.

She was one of about 4,000 Gazans who gave cash to middlemen and tunnel operators in 2008 as Israel blocked the overland passage of goods. Then Israeli warplanes bombed the tunnels before and during the Dec. 27 to Jan. 18 Gaza offensive and the investments collapsed.

Now investors, who lost as much as $500 million, want their money back from Hamas, which runs Gaza. Hamas Economics Minister Ziad Zaza says about 200 people were taken into custody in connection with the tunnel investments; most have been released. Hamas is offering a partial repayment of 16.5 cents on the dollar using money recovered from Ihab al-Kurd, the biggest tunnel operator.

The imbroglio over the 800 to 1,000 tunnels has deepened Hamas’s decline in public opinion in Gaza and highlights the Wild West nature of the underground economy that supports this jammed enclave of 1.4 million people.

“When you compare the U.S. 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, speaking of New York financier Bernard Madoff’s $65-billion Ponzi scheme.

Top Hamas leader Ismail Haniya has not commented publicly on the losses to tunnel investors.

“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. “The smugglers provide essential revenue for Hamas.”

Hamas, classified by the U.S. and the European Union as a terrorist organization, isn’t offering enough to cover losses, said Ghabin, 43, whose husband is blind and who has five children. She blames Hamas for encouraging the investments.

The imam told us that we wouldn’t regret joining this blessed business,” she said in her apartment in an unfinished 12-story high-rise overlooking the Mediterranean as her husband played the lute. “This happened in mosques all over Gaza.”

“You can feel the frustration because thousands of families lost their money and they hold Hamas responsible,” Pal-Think’s Shaban said.

Ghabin said her imam in Gaza City recommended that worshippers invest in the tunnels, saying he was acting under instructions from the Hamas Ministry of Religious Affairs. Her daughter was pitched by an imam at the al-Bureij refugee camp, where she lives. Officials at the ministry declined to comment.

h/t EBoZ