Amid <i> Intifada,</i> One Palestinian Enterprise Offers Economic Hope

In a plain building near the center of this Palestinian Arab city, Susan Rockwell, Harvard ‘84, inspected the stitching on a high-fashion silk brassiere destined for sale in London’s Harrods or New York’s Bonwit Teller.

“Top-of-the-line stuff,” boasted her boss, Brooklyn-born Charles Shamas, Yale ’69.

But the undergarment was hanging on an iron rack a few feet from a window that had been pockmarked by an Israeli soldier’s bullet during a recent clash on the stone-littered street below.

Amid the turmoil of the intifada , as the Palestinian uprising in the West Bank and Gaza Strip is known, the two American advisers and 40 Arab employees of the not-for-profit Mattin Center for Product Development are making luxurious lingerie and a simple statement--that with persistence and a tolerance for red ink, Palestinians can develop companies and management capable of competing in world markets.

The aim, Shamas said, “is the business of creating human capital.”

Mattin has been at it for 10 years now, but the breakthrough came only as the intifada began to choke the economy of the occupied territories and of Israel itself.

Unrest Stifles Trade

Late last month, Michael Bruno, governor of the Central Bank of Israel, reported that the violence and boycotts spawned by the 18-month-long uprising had cost Israel $650 million in export earnings last year, including an estimated $280 million from tourists frightened away by the rebellion. Bruno said he could not estimate the amount of foreign and domestic investment chilled by the climate of political uncertainty.

But Israel’s exports to the occupied territories, a key indicator of the relationship, dropped 40%, Bruno disclosed in the bank’s annual report. At the same time, imports from the territories plunged 48%. The Palestinian Arabs of the West Bank and Gaza make up Israel’s second-largest foreign market, after the United States.

Atef Kamal Alawnah, president of the Arab Economist Assn., explained in an interview in East Jerusalem that as part of the protest against Israeli administration in the territories, “we have tried to use our own goods.”

Although not entirely successful, Palestinians have created small dairy and tobacco industries, among others, to replace Israeli imports.

Families in the West Bank are planting backyard gardens, making wool and doing piecework for small enterprises in an attempt to break their dependence on the Israeli economy. But Alawnah laments that most Palestinian-made goods are substandard.

The Mattin brassieres, slips and negligees are sophisticated exceptions.

Process Over Product

“The women here call these ‘man-melters,’ ” Rockwell confided, holding up a pair of silky white pajama pants. She said Mattin’s export products have been shown in ads in such fashion barometer publications as Vogue, Elle and Women’s Wear Daily.

Proud as they are of the frills turned out in the Ramallah factory, Shamas and Rockwell insist that it is the process, not the product, that is important to them.

“Mattin’s Palestinian staff wants to show the world what Palestinians can do, given the means and the freedom,” Shamas said.

Means and freedom have been a problem from the start, said the 40-year-old American, who professes to be a “naturalized Palestinian.”

His parents, both Lebanese, were in the garment business in New York, but when Shamas completed liberal arts studies at Yale at the height of the turbulent late 1960s, he was caught up in social issues, not in shirts and suits.

He went to the Middle East to conduct economic research and found what he considered to be an almost completely negative set of circumstances in the Israeli-occupied territories: the brain drain of Palestinians leaving for better prospects abroad; a “dormitory economy” supported by Palestinians working in Israel and little business except for the small-scale trading enterprises typical of underdeveloped areas.

Practical Experience Lacking

Worse yet, in his view, the Palestinians of the West Bank and Gaza had begun to see themselves as victims and had developed a handout mentality--they had become willing to live on the charity of sympathizers abroad.

Palestinian capital was available, however. What the Palestinians needed, he concluded, was some practical experience in running a modern business--expertise in marketing, finance and accounting, production and quality control. Unfortunately, he had none of these.

“People like me have these ideas, but very little background in business,” Shamas conceded, but he recalled saying to himself: “This is going to be my thing. Let’s get down to the business of doing it.”

Shamas and some like-minded men founded Mattin to examine what business skills were needed, then formed the lingerie business in 1979 as a commercial laboratory--he calls it a “learning-tolerant incubator venture”--to test his ideas and to teach the Palestinian workers.

“We had to learn it all from scratch right on the shop floor,” he said. “We were bootstrappers.”

The first call went out to Brooklyn, to his widowed mother, who knew the trade, and for the family machines, old but still operable.

‘Made in the West Bank’

“The problem was getting them back together after the (Israeli) security check,” Shamas recalled. “We had seven years of red ink, but we accepted it so long as what we produced against it was human capital.”

In terms of business, the obstacles were considerable. Mattin, for instance, had difficulty competing with Israeli firms because of added exchange rate costs for material imports, plus certain production subsidies for Israeli manufacturers.

Then there was the labeling problem, resolved only in recent months. Israeli officials, Shamas said, wanted Mattin’s export goods to go abroad labeled “Made in Israel,” or “Made in Ramallah, Israel,” masking their origin in the Palestinian-populated occupied territories.

Under recent regulations worked out by the United States and European Community trade officials, Mattin products going to Europe are labeled “Made in the West Bank,” and those going to the United States are tagged “Made in the Israeli-Occupied Territories”--labels that give the Israelis no particular satisfaction.

The complexities of the political status of the West Bank and Gaza Strip also work against Palestinian businesses, Shamas insists.

“Israel and Jordan have the GSP (Generalized System of Preferences, a U.S. trade privilege), but we don’t,” he pointed out.

But the underlying problem that Mattin and its advisers found when they took up their task has largely been solved. They have created business know-how, the human capital.

“We have marketing people, production control experts, we have cutters and pattern-makers,” Shamas said.

The operations manager is a Palestinian woman, Selwa Duaibis. This small pool of middle-management personnel will be made available to other Palestinian businesses that want to follow the trail that Mattin has blazed through the Byzantine corridors of Israeli and international bureaucracies.

The lingerie company will train newcomers to take their places, starting a spinoff of qualified commercial managers in the territories.

“The Palestinians want to be self-reliant,” Shamas said.

More Pressure on Israel

Politically viable businesses in the territories help create the facts that underpin Palestinians’ demand for an independent state.

While business expertise is in the formative stage, the Palestinians intend to press Israel on other economic fronts, with Arab labor being their most forceful weapon. More than 100,000 Palestinians had been working in Israel, mostly as laborers. Sporadic strikes called by the intifada leadership have cut that number by about 25%, and Arab merchants in East Jerusalem close their shops every afternoon.

Alawnah, the Palestinian economist, pointed out that several sectors of the Israeli economy are particularly vulnerable to dependence on Palestinian workers. Of the 55,000 construction workers in Israel, for instance, only 5,000 are Israelis, according to his figures. Palestinians also provide 40% of the hands in Israeli agriculture and do 70% of the seasonal harvesting, he said. This year’s orange harvest in Israel was hurt by the labor boycott.

But shop closings and labor boycotts hurt Arabs as well as Jews, and life in the territories has been difficult since the intifada began. West Bank schools have been closed under Israeli order. Workers who have abandoned their jobs in Israel cannot be absorbed by the small Palestinian economy. And the brain drain continues.

For Palestinians, the achievements of Mattin lingerie stand out in a landscape of hard times.