KO Coca Cola Company

By Rory Jones 

GAZA CITY-- Coca-Cola Co. and its Palestinian franchise operator have opened a $20 million bottling factory in the conflict-ravaged Gaza Strip, investing in a market where half the population receives international aid assistance.

National Beverage Co., Coke's Palestinian partner, transports cans and plastic bottles of the drink firms' products on trucks from the West Bank that are loaded and unloaded several times for security reasons, adding to costs, said Zahi Khouri, the company's head.

The plant's opening on Wednesday was hailed by the company as a symbol of hope after three wars in a decade between Israel and Gaza's ruler, Hamas, decimated the strip's commercial industries.

"We see the reality of the living conditions," said Mr. Khouri. "[But] what we are doing in Gaza will be to our benefit."

The plant opens at a difficult time, however. A gradual easing by Israel on restrictions on goods and people moving in and out of Gaza that began after a war in 2014 has come to an abrupt halt, slowing economic growth, Western diplomats and international aid agencies say.

In August, Israel accused an employee of Christian aid group World Vision of siphoning off more than $50 million of charity funding to Hamas over more than five years, in charges that shocked aid agencies working in the Palestinian territories.

Since then, Israel has limited goods moving in and out of Gaza and increasingly denied permits for Palestinians traveling between the strip and the West Bank for commercial deals, aid agencies and diplomats say. Some 8,400 truckloads of goods entered Gaza from Israel last month, compared with roughly 13,000 in August, according to Gisha, a nongovernmental group that tracks movement into the strip.

A spokeswoman for Israel's military administration that oversees access to Gaza didn't immediately respond to the request for comment on the changes.

Israel stringently checks goods going into Gaza to ensure they can't be used by Hamas, which has been building underground tunnels to penetrate Israel and launch attacks against its population. The U.S. designates the Islamist group a terrorist organization.

The Gaza plant, unlike three other production facilities in the Palestinian West Bank, will use returnable glass bottles as getting raw materials into Gaza for canned and plastic products is difficult, according to the plant's manager.

The glass-bottled Coke will be cheaper than similar plastic and canned products that will continue to be shipped into Gaza depending on demand, Mr. Khouri added. Some 3 million glass bottles of Coke will circulate around Gaza as the factory ramps up production.

Coke joined with Mr. Khouri in the Palestinian territories in 1998. In a deal similar to other markets around the world, Mr. Khouri invested in building the plant while the drinks giant pays for marketing and sales campaigns.

Write to Rory Jones at rory.jones@wsj.com

(END) Dow Jones Newswires

November 30, 2016 12:20 ET (17:20 GMT)

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