Karin Laub
Associated Press
July 21, 2010 - 12:00am

Some of the hundreds of Gaza factories idled by Israel's blockade are cranking up rusty machines to can tomatoes, mix concrete and press pills again now that Israel is allowing in raw materials for the first time in three years.

But Israel's recent easing of the closure appears unlikely to get Gaza's battered economy back on its feet.

While Gaza's entrepreneurs can now import most consumer goods, they still can't export, cutting them off from traditional markets in Israel and the West Bank. Key raw materials, such as cement and steel, continue to be restricted. Imports are funneled through a single, congested crossing. And it remains unclear which spare parts and new machines will be allowed in, and how quickly.

"The steps taken by Israel are a great development, but not enough," said Amr Hamad of the Palestinian Federation of Industries, estimating that only a few hundred of Gaza's 3,900 factories and workshops will be able to start up again.

Israel says allowing Gazans to export and travel still poses too much of a security risk. However, it is under growing pressure from the international community to throw open Gaza's gates to allow an economic recovery.

Israel, along with Egypt, sealed Gaza in June 2007, after the Islamic militant Hamas seized the territory by force.

The blockade aimed to weaken Hamas and pressure the group to release an Israeli soldier, but seems to have failed on both counts. Hamas remains firmly in control and Sgt. Gilad Schalit has entered his fifth year as a captive.

Instead, Gaza's private sector was hit hard. More than 90 percent of Gaza's factories closed and tens of thousands of workers lost their jobs. About one-third of the labor force are currently unemployed.

Over time, a few hundred manufacturers resumed partial production, using raw materials smuggled through hundreds of tunnels dug under the border with Egypt. But tunnel shipments are often unpredictable, and the contraband often more expensive or of lesser quality than what used to come from Israel.

In recent weeks, some factories have been getting supplies from Israel again, with the initial cargo including timber, fabrics, thread, industrial quantities of cocoa, and packaging containers made of metal, plastic and glass.

Ayman Hamada's tomato paste cannery in the small Beit Hanoun industrial zone in northern Gaza was able to bring in 400,000 empty cans that are now stacked up to the roof in his warehouses. The cannery works eight hours a day, but Hamada says he can't resume full production because the Gaza market is small and he can't export. Also, the closure easing came at the end of the tomato season, so he doesn't have enough produce for full production.

During the full blockade, Hamada's factory operated at just 20 percent capacity, using smuggled cans, he said.

Hamada says he urgently needs new equipment and spare parts for machines that have gone without maintenance for three years.

Since many of these parts are made of steel — still restricted under the new rules — it's not clear if and when he can import them. He dreams of setting up new factories for juice and potato chips, but for now he says that's unthinkable.

"If the Israelis let us bring in more machines and improve our work, we can expand," he said. "If they still make a siege, we cannot."

His second business, importing halva and jams from Egypt and Turkey, has revived now that Israel lifted its ban on sweets. Under the old closure rules, only basic foods and medicines were allowed, as humanitarian goods.

One of his neighbors in the industrial zone is not benefiting from the changes. Sami Abu Obeid, 37, makes cinder blocks and concrete, and the ingredients he needs are all blacklisted. Israel argues that construction materials, such as cement and steel, could be diverted by Hamas for military use, and only allows their import for internationally supervised aid projects.

Abu Obeid gets cement from the tunnels and makes gravel — his second key ingredient — by recycling broken cement slabs and cinder blocks of buildings destroyed in Israel's three-week military offensive against Gaza 19 months ago. But many sites have already been picked clean, and Abu Obeid fears he will soon have to stop working.

Another concrete factory is getting some raw materials from Israel — and thus able to operate at limited capacity — because it supplies two international projects, repair of a hospital and construction of a sewage treatment plant.

Owner Teissir Abu Eida showed EU foreign policy chief Catherine Ashton around his factory as she visited Gaza this week, and he asked for international pressure on Israel to open more.

While people understand Israel's security needs, Ashton said, those concerns should not prevent "the free flow of goods into and out of Gaza in order that houses can be rebuilt, children can go to fully functioning schools and businesses can flourish."

Israel has signaled it will respond more quickly to requests from Gaza.

The current priority is to expand the cargo crossing, Kerem Shalom, from 180 to 250 trucks a day and move forward with 45 international aid projects, including the construction of schools, clinics and infrastructure, said Maj. Guy Inbar, a Defense Ministry official.

Of those, 31 were approved by Israel after the easing of the closure, he said. In the past three years, international agencies repeatedly complained of Israeli delays in approving the import of material for such projects.

The policy "will be step by step," Inbar said.

But the day when Gaza can stand on its feet still seems a long way off, say economists and rights activists.

"Without a substantial increase in the capacity of the crossings, well beyond what Israel is promising, and without export, there will be no economic recovery," said Sari Bashi of the Israeli human rights group Gisha.

"There is a limit to how an economy that is being choked can function."


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