Predictive Data on Containerisation of Trade between the West Bank and Jordan

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1 Predictive Data on Containerisation of Trade between the West Bank and Jordan Palestine Trade Center (PalTrade) November, P a g e

2 1. Introduction The only point currently open for goods traffic between the West Bank and Jordan is located in the Jordan Valley. The crossing is known as Al Karameh Bridge by Palestinians, King Hussein Bridge by Jordanians, and as Allenby Bridge by Israelis. The name most commonly used is Allenby and that is how it will be referred to in this report. In the past Palestinian imports usually entered through Allenby, while exports left through a crossing 30km north known as Damya, Prince Mohammed, or Adam Bridge; most commonly referred to as Damya. Currently, Damya Bridge is closed for operations, and has been declared a closed military zone by the Israeli army. Israeli authorities also claim that the bridge itself requires maintenance and re-construction, and all trade between Palestine and Jordan has been diverted to Allenby. Jordanian authorities continue to consider Damya to be the main commercial crossing point between Palestine and Jordan, while they regard Allenby as formally only a passenger crossing point. However, Jordanian authorities operate a reciprocal facility in Jordan for both the processing goods and controlling the crossing of passengers. Allenby Bridge, five kilometers east of Jericho, was built in 1917 and is the only truly international border crossing in the West Bank. As well as operating for goods it is also the only exit/entry point allowed by Israeli authorities for Palestinians residing in the West Bank, and for those traveling to and from Jordan. It serves West Bank businesses that import and export to and from Jordan, the greater Middle East region, and countries further eastward. As of now, the Palestinian side of the border crossing is controlled by Israeli authorities and the facility itself is managed by the Israeli Airport Authority. After the 1967 Six Day War, the Jordan River was established as the border between the Kingdom of Jordan on one side and Israel and the occupied Palestinian territory on the other side. The bridge structure at Allenby was destroyed during the Six Day War, but was replaced in 1968 with a temporary truss-type bridge. In the late 1990s, and subsequent to the Israel-Jordan peace treaty, a new modern paved crossing was constructed, adjacent to the older wooden one, with the aid of the Japanese Government. Officially the normal operating hours for the commercial cargo terminal are Sunday through Thursday 7:30 a.m. to 6:00 p.m. Currently, the Bridge is open to commercial traffic, and is 2 P a g e

3 undergoing a trial period with extended operating hours. During this period, the Bridge is open for commercial traffic from 8:00 a.m. to 12 midnight on Sunday through Thursday and is closed to commercial traffic on Friday, Saturday and Israeli holidays. However, the commercial terminal has been closing earlier than midnight, usually around 5.00pm, due to low demand in the evening. Currently, prior coordination with the Israeli Airport Authority is required for all import and export commercial cargo. Allenby is equipped with one pallet scanner (installed in 2008) with a limited pallet height capacity of 1.8 meters. Current Israeli regulations and policy mean that the Bridge goods facility does not allow for container shipments. Based on a request from the Office of the Quartet Representative, PalTrade conducted a survey to measure the potential impact of containerising Allenby. 3 P a g e

4 2. Methodology PalTrade contacted the companies that had previously participated in the survey of the Trade Corridors Facilitation Project. The number of these companies in the West Bank was 60 which included exporters, importers, and those which are both exporters and importers. The selection criteria of these companies were as follows: The company should have a trade record (Exporter or importer) at least 1 year; The Company must be registered and having a valid license by the Palestinian National Authority; The main activities of the company must be in the West Bank, taking into consideration the geographical distribution within the sample; The company must have a record of export or import via Allenby Bridge (to or via Jordan); Deferent manufacturing/trading sectors should be among selected sample; and Each company should show flexibility in responding to the survey. PalTrade conducted the survey by phone and then performed data entry and analysis of collected data. Further, PalTrade conducted three focus group meetings in order to verify obtained data. These focus group meetings included importers, exporters and freight forwarders. Finally, PalTrade captured different case studies in this regard which will be explored in details in section 4. 4 P a g e

5 3. Results During the meeting with importers, attendees indicated that one of the reasons for not utilizing Allenby is the crossing time. This is vital for some vulnerable products like food and agricultural goods and the meeting participants indicated that containers would protect such vulnerable goods. Furthermore, participants also indicated that containerised imports via Allenby would reduce cost especially from Arab countries due to the fact that some companies would be able to import their raw materials from stores in UAE instead of Europe and at the same time would avoid repacking products from containers onto pallets. In addition, they predicted that if containers are allowed at Allenby, the trade volume might increase by up to four times which will divert some imports from Israeli seaports to Allenby which would reduce the delay some experience at the Israeli seaports. During the meeting with exporters they indicated that the reason for low exports rates to Arab countries is the unavailability of containers at Allenby. They said if containers are allowed at Allenby mixed with an adequate logistics chain (i.e. storage area, clear testing requirements, clear import and export procedures, and predictable working hours), this would definitely increase their use of Allenby. The freight forwarders indicated that the containerization of Allenby would create a great potential for trade with the Arab countries and the Far East simply because the cost will be less than using the Israeli ports. Survey Analysis All surveyed companies were either engaged in export, import or both export and import activities. Figures 1 and 2 below illustrate the sample distribution and the experience period at Allenby as follows: Figure 1: Sample Distribution Figure 2: Experience at Allenby 8% Imports (1-5) Years 32% Exports 33% 39% (6-10 ) Years 60% Imports and Exports 28% More Than 10 Years As can be seen in figures 1 and 2, the sample included exporters, importers, and exporters and importers with considerable experience at Allenby: 61% of the group has been using the crossing for more than five years and one third of the total group for more than 10 years experience there. It is important to note that the majority of surveyed exporters and importers currently utilize 5 P a g e

6 Allenby for shipping a relatively small volume of their products. Figures 3 and 4 illustrate that 83% of importers and 78% exporters ship less than 3 truckloads per month via Allenby. Figure 3: Import Volume during Sep., 2010 Figure 4: Export Volume during Sep., % less than 3 truckloads 7% 10% 5% less than3 truckloads (3-6) truckloads 83% (3-6) truckloads 78% (7-10 ) truckloads more than10 truckloads The majority of trade either comes from Jordan or is destined to Jordan. Figures 5 and 6 show that 72% of imports and 55% of exports are either from Jordan or destined to Jordan. The remaining 45% of exports go to a wide variety of destinations including 15% that go to different Middle East countries which include (Iraq, Yemen, and Lebanon). Figure 5: Source of Imports Figure 6: Destination of Exports 20% 4% 4% 72% Jordan Gulf Egypt Eu 22% 15% 6% 55% Jordan Turky Other Middle East Countries Gulf 2% Algeria Survey participants were asked about the product types they currently import or export using the palletized system and how many of those product types could potentially be handled in containers. Figures 7 and 8 illustrate the number of current importer or exported products that can be containerised. As can be seen, it is reported that almost all economic sectors could readily ship most of their products in containers. Figure 9 shows that 81% of current imports could be imported in containers. Likewise, figure 10 shows that 80% of current exports could be exported in containers. 6 P a g e

7 30 30 Figure 7: Potential Containerized Imports Current Products Potential Containerized Products 31 Figure 8: Potential Containerized Exports Current Products Potential Containerized Products 7 P a g e

8 Figure 9: Potential Containerized Imports Figure 10: Potential Containerized Exports Current Products Potential Containerized Products Current Products Potential Containerized Products Survey participants, both those who export and those involved in import, indicated that there are improvements that could be made at Allenby in its present configuration (pallets). These important improvements include the infrastructure, management procedures, inspection equipment, and waiting time for crossing. Figure 11 illustrates that 83% of importers consider inspection equipment and 54% see waiting time as important improvements required at the Allenby goods facility. On the other hand, 46% of exporters consider both inspection equipment and waiting time as the urgent improvements required on Allenby (Figure 12). The difference between importers and exporters on their view of inspection equipment is probably because the imported goods face a rigorous examination by Israeli authorities while exported goods are not checked in the same detail. It is interesting to note that the cost of crossing goods at Allenby is not a high priority. Figure 11: Required Improvements for Imports 83% 83% 17% 25% 58% 38% 50% 54% 33% 13% 8% 8% 13% 8% 8% Infrastructure Managment Procedurs inspection Tools & Equeoment Waiting Time Important Relatively Important Not Important High Cost 8 P a g e

9 Figure 12: Required Improvements for Exports 80% 10% 34% 56% 44% 41% 46% 46% 34% 15% 20% 44% 10% 12% 7% Infrastructure Managment Procedurs inspection Tools & Equeoment Waiting Time High Cost Important Relatively Important Not Important Both importers and exporters indicted that using containers at Allenby will provide benefits for them. Reduction of damage and the potential to increase quantities were seen as important advantages (Figures 13 and 14) for both. Figure 13: Benefits of Using Containers for Imports Figure 14: Benefits of Using Containers for Exports 2% 19% 55% 26% Increase Quantity Avoid Damages Not Applicable 23% 6% 17% 52% Increase Quantity Avoid Damages Not Applicable Less Cost Others Despite their concerns about delays expressed elsewhere, the current efficiency of Allenby is considered relatively acceptable for both importers and exporters. Figure 15: Efficiency of Allenby for Imports Figure 16: Efficiency of Allenby for Exports 79% 13% 8% yes no relatively 51% 39% yes no relatively 10% 9 P a g e

10 It is predicted by the survey responses that containerisation of Allenby goods terminal would increase the number of both imports and exports. As shown in figures 17 and 18 there is considerable variation across sectors with regard to predicted increases in volume with containerisation. 30 Figure 17: Imports Potential Increase (No. of Products) Number of Curent Products Potential Increase in Products Type Percentage of Potential Increase Metal 133% Paint 0% Plastic 36% Food Industries 85% Medical Supplies 17% Agricultural 17% Personal Use 0% Raw Materials 78% Packaging Items 0% School Supplies 100% Figure 18: Exports Potential Increase (No. of Products) Number of Curent Products Potential Increase in Products 10 P a g e

11 Type Metal 21% Stones & Marble 0% Plastic 0% Food Industries 19% Shoes 18% Pharmaceutical 0% Agricultural 22% Personal Use 0% Glass 0% Percentage of Potential Increase Mattress 33% This survey found that the number of truckloads would increase if goods handling at Allenby is containerised. The results of the survey suggested that the current export and import for the selected sample is 209 truckloads per day. While there is variation across sectors the total predicted increase (imports and exports) is an additional 70 truckloads or 33 % of present demand. Likewise, the participants reported that the source or destination of their products would also increase. Figure 19 shows that 60 % of companies would start importing from Turkey and Gulf. On the other hand, figure 20 shows that 55% of the companies would target the Gulf countries for exports. Figure 19: Potential Increase of Sources Figure 20: Potential Increase of Destinations China 30% 20% 10% Syria Gulf 5% 10% 15% 10% 5% Algeria Egypt EU Gulf 10% 30% Other Arab Countries 55% Morocco Yemen Turkey 11 P a g e

12 Figure 21: Imports Potential Increase (Truckloads) Number of Curent Truckloads Potential Increase in Truckloads 65 Figure 22: Exports Potential Increase (Truckloads) Number of Curent Truckloads Potential Increase in Truckloads 12 P a g e

13 4. Case Studies 4.1 During the focus group meetings, both exporters and importers explained their experience at both the Israeli seaports and Allenby. Companies in this section were selected based on their trade activity and represent both exporters and importers. In addition, these companies also represent different economic sectors (i.e. Pharmaceutical, Food, and fresh products). 4.2 Jerusalem Pharmaceuticals Co. LTD Jerusalem Pharmaceuticals Co. LTD was found in 1969 and is located in Ramallah. The company is considered one of the biggest importers in the West Bank and employs more than 230 employees. It primarily imports raw materials, packaging materials, and drugs from different countries (i.e. India, China, Turkey, Europe, and Jordan). The company is dependent on the Israeli seaports for imports except for imports from or through Jordan. 85% of the company s products are sold locally in the West Bank and Gaza and only 15% are exported to different countries (i.e. Jordan, Gulf, and North Africa) via Allenby. It is obvious that the Israeli seaports are the main entry points for imports for this company and this entails several reported complications as follows: a. They experience a prolonged clearance time which take 4-7 days in average to release imports; b. During Jewish holidays, imports will be held at the Israeli ports until the end of the holiday, causing additional delay. c. clearance priority appears to be given to the Israeli imports as reported by this company when interviewed; Palestinian products are being processed differently. For instance, Israeli shipments can be released to the company warehouse until the issuance of testing result. In contrast, Palestinian imports will never be released under any circumstances until the issuance of the testing results and therefore the company has to pay demurrage. d. Israeli ports are frequently overloaded causing delays On the other hand, the company also encounters obstacles at Allenby. The obstacles can be summarized as follows: a. Many products cannot be imported via Allenby due to the lack of inspection equipments. Therefore, the company has to import these products via the Israeli ports; b. A proportion of imported goods are being stolen in the supply chain since containers are not allowed at Allenby; and c. Due to complicated export procedures at both the Israeli ports and Allenby, the company has lost a great potential to export to the Arab countries and the Far East. This is due to the fact that some Arab countries which do not maintain diplomatic relations with Israel prohibit imports via Israeli ports. On the other hand, the current infrastructure and procedures at Allenby make it impossible for the companies to export to Arab markets especially for fresh products and vegetables. 13 P a g e

14 Accordingly, containerising Allenby would reduce time which is considered a vital element for the company, and this will reduce cost and increase the competitiveness capacity of the company. Notwithstanding, containerising Allenby will reduce shipping costs, avoid damages, and avoid theft along the supply chain. Further, containerising Allenby would also open new markets for both imports and exports. 4.3 Zalmout Distribution Co. Zalmout Distribution Co. was found in 1990 and is located in Nablus. The company is considered one of the biggest importers in the West Bank and employs more than 130 employees. The company imports a variety of snacks and sweets from different countries (i.e. Jordan, Turkey, Brazil, Germany, Gulf, China, Egypt, Malaysia, India, Poland, and Thailand). The company depends on both the Israeli seaports and Allenby for imports. 70 % of products are sold in the West Bank and 10% in Gaza, the remainder being sold in the Israeli market. According to the company, importing via Israeli ports entails several obstacles as follows: a. Prolonged clearance time which take 4-7 days in average to release imports; b. Prolonged inspection time which take up to 6 days and, if sample testing is required, this can take more than 2 weeks in an Israeli lab; c. During Jewish holidays, imports are held at the Israeli ports until the end of the holiday which cost the company demurrage. d. Israeli ports appear to be overloaded. On the other hand, the company also encounters obstacles at Allenby. The obstacles can be summarized as follows: a. Currently, utilizing Allenby for imports is more costly than the Israeli ports. For instance, the company recently imported a shipment from Turkey via Allenby. As a result of not allowing containers at Allenby, the company had to send the shipment to Zarqa Free Zone near Amman in order to repack the product on pallets. This process doubled the shipping cost due to handling and the fact that each refrigerated container requires three semi-trailers to ship the products on pallets; b. Products are being stolen during transportation which could be avoided if containers are allowed; and c. Containerising Allenby would lead to avoiding damage during the back-to-back process. Accordingly, containerising Allenby would reduce time which is considered a vital element for this company. Subsequently, this will reduce cost and increase the competitiveness capacity of the company. Notwithstanding, containerising Allenby will avoid damages, avoid theft, and diversify options for sources of imports. 4.4 Sinokrot Global Group Sinokrot Global Group was found in 1982 and is located in Ramallah. It is a holding company that includes 8 subsidiaries distributed in five different locations in the West Bank. The company 14 P a g e

15 is considered one of the biggest exporters in the West Bank. The company exports different food products (i.e. biscuits, chocolate, pickles, herbs, vegetables, and fruits). The company exports to various countries (i.e. Europe, Russia, USA, and Arab countries). Herbs and vegetables are the highest volume of exported products. The company regularly uses Israeli ports and, in some cases Allenby, for exports. The company also imports raw materials and packaging materials from Turkey. According to the company, exports to Arab countries are still at small volumes due to lack of required infrastructure at Allenby. Lack of containers is considered one the main obstacles to using Allenby, taking into consideration the temperature-sensitive nature of Sinokrot s exported products. In addition, the crossing time is another vital element in this regard. Therefore, containerising Allenby would avoid heat damage to vulnerable products during shipping and would also eliminate the costs and damage of the current pallestised back-to-back process. In addition, the company would be able to export to countries that do not maintain diplomatic relations with Israel (i.e. Syria Algeria, Yemen, and Tunisia) which do not allow imports to come via Israeli seaports. At the same time, the company is currently unable to export such quantities via Allenby to these countries due to the current infrastructure at Allenby. 15 P a g e

16 5. Conclusion After the closure of Damya Bridge, Allenby Bridge has become the only international crossing point between the West Bank and Jordan that serves both passengers and trade. Therefore, Allenby plays a key role in the development of the Palestinian economy and trade diversification. Following the second Intifada and the increased Israeli restrictions on movement and access, the containerization of Allenby presents a great potential for wider development of the Palestinian economy. In particular, the containerization of Allenby would reduce cost, increase potential for imports and exports, and open new markets for Palestinian products. 16 P a g e

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