June 28 (Bloomberg) -- Israel's blockade of the Hamas-ruled Gaza Strip has been a bonanza for Palestine Food Industries Co., the only functioning juice maker in the Gaza Strip, with sales increasing ten-fold as the embargo kept out competition.
Now, as Israel relaxes its restrictions, the company has joined fellow manufacturers including Pepsi-Cola bottlers Yazegi Group in demanding that Hamas protect local industries and refuse imports of juice, soda and snack foods. Officials of the Islamic movement have heeded the calls and are barring entry of such items as Israeli grapefruit juice and potato chips.
"The policy of the government is to protect and maintain local products and industry and employ a large number of workers who have no job due to the siege," Ziad Zaza, the Hamas economy minister, said in an e-mailed response to questions about the restrictions on Israeli goods.
Israel has been under increased international pressure to relax its blockade since its May 31 commando raid on a flotilla of aid ships to Gaza left nine Turkish pro-Palestinian activists dead.
The embargo led to smuggling via tunnels dug under the Egyptian border, making the production of goods more expensive as smugglers' charges and Hamas taxes on the passages increased costs.
"The quality is low but the prices are very high," said Omar Shaban, director of Pal-Think, an economic research institute in Gaza City.
Fresh Fruit Shortage
The Israeli government said June 20 it will loosen the blockade so that all food will be let in and only weapons and items that have a military use are kept out. Israel closed its border with Gaza and restricted imports after Hamas seized full control of the coastal enclave in 2007 following a violent struggle with the secular Fatah movement, once its partner in a power-sharing arrangement.
Human rights groups including Amnesty International say the embargo has devastated local industries and caused widespread suffering. Israeli officials have said there is no humanitarian crisis in Gaza.
The blockade initially made it difficult for Gaza City- based Palestine Food, which is owned by the Palestinian Authority's Palestine Investment Fund, to get fresh fruit to make its drinks. The company, which largely produced citrus concentrates for juice production before the blockade -- 90 percent of which were exported -- changed its formula after access to foreign markets was cut.
"We diluted it with water and added sugar and flavoring," said Haytham Qannan, the juice factory's procurement manager. "It tasted good and sold very well."
The company now produces Tropica-brand grapefruit and orange drinks, which have less fruit content. Palestine Food also started producing a line of Frouta jams, Lamooni lemon juice and Tamtam ketchup after Israel imposed restrictions.
The company's revenue grew to $1.8 million in 2009 from $145,780 in 2006, Qannan said. Staff has quadrupled since 2006 to 65. The company's $16-million plant was donated by the government of Italy.
If Hamas allows Israeli juice to enter Gaza, Palestine Food will have to compete with Primor juices made by Gan Shmuel Food Industries Ltd., based on the Gan Shmuel kibbutz south of Haifa, and the Tapuzina-brand produced by closely held Jafora Tabori Ltd., based in Rehovot, near Tel Aviv.
Gaza City-based Yazegi Group's Pepsi factory published newspaper ads calling on Hamas not to allow rival soft drinks into Gaza, according to its director Rajab al-Ghazali. Al-Awda Factories Co., which makes cookies and ice cream and is located in Gaza City, has also sought Hamas protection from Israeli imports, said Manal Hassan, its executive director.
Oranges grown in Gaza are twice as expensive as those from Israel, where packaging materials are also 30 percent cheaper, Qannan said. As much as 85 percent of Gaza's citrus crop was destroyed by tanks and soldiers since 2000, much of it during Israel's 22-day military operation that ended in January 2009, according to Mohammed al-Agha, the Hamas agriculture minister, driving up the cost of the fruit.
The Israel Defense Forces said in an e-mailed response that the Hamas figure is wrong. It didn't say how much of the citrus crop was destroyed.
Mark Regev, an Israeli government spokesman, said the fact that Hamas is refusing to admit products allowed in by Israel shows that it "continues to put its extremist political ideology above and beyond the well-being of the people of Gaza."
Israeli leaders said last year's military operation was aimed at stopping the firing of rockets into southern Israel. Hamas is classified as a terrorist organization by the U.S., European Union and Israel.
The blockade limited imports into Gaza to no more than 150 products, according to Raed Fattouh, the Palestinian Authority's liaison officer at Israel's Kerem Shalom crossing into the territory. Before the restrictions, some 8,000 products flowed into Gaza, he said.
The Hamas agriculture ministry, in an effort to restore the citrus crop, has planted 4,000 acres of trees in what Zaza described as "liberated" former Jewish settlements that Israel evacuated in 2005 when it also withdrew its troops from Gaza.
Qannan said it will take seven years before they bear the quality of fruit needed for juice.