Gazans want "Marshall Plan", Israel policy falls short

GAZA (Reuters) - Wael El Wadiah's Gaza snack food factories once employed 250 people. Today, denied access to the West Bank market by Israel, he employs a few dozen workers in what is left of a business built up over 25 years.

"I am right back to square one," he said.

Jamal Basala once employed 20 people on his fishing trawler. Today, his access to the sea restricted by Israel, he employs four. He used to earn $5,000 a month. Today, he accepts assistance from aid agencies and can't afford his son's university fees. "I suffer depression," he said.

Mahmoud al-Hindi, a civil engineering graduate, once hoped for a career in a respected field. Today, more than a year since he graduated, Gaza's decaying economy has yet to provide him with his first job. "You find all the roads closed in your face," he said. "We have lost hope."

The late Palestinian leader Yasser Arafat pledged to turn Gaza into Singapore on the Mediterranean. Today, four years of sanctions have turned it into something quite different.

The blockade, tightened as Hamas Islamists hostile to Israel rose to power, has devastated the economy and with it hopes for a better future for Gaza's 1.5 million residents.

Israeli restrictions on Gaza's crossings were tightened when Hamas won parliamentary elections in 2006, again a few months later when Gaza militants captured an Israeli soldier and further still when the Islamist group took full control in 2007.

Palestinian businessmen and economists count the costs in tens of thousands of lost jobs and the destruction of Gaza's industry. Harder to quantify is the shattered hopes of young Palestinians who would leave if only they could get out.

Businessmen who saw profit and prosperity in peace with Israel now question the concept. They believe Israel's policy has targeted them, not the Hamas group whose rule has grown only stronger as Gaza has decayed.

"ECONOMIC WARFARE"

Hamas is as uncompromising as ever. Classified as a terrorist group by the United States and the European Union, it will not yield to Western demands that it recognize Israel and renounce violence.

To Israel, Gaza is an "enemy entity".

Yet even states sympathetic to Israel's security concerns have criticized the embargo -- pressure that contributed to a decision in June to ease some aspects of the policy.

Previously banned consumer goods and raw materials have started crossing into Gaza in recent weeks. Israel says it will let in everything other than weapons or materials that could be used to make them.

Critics point at manifold flaws in the new policy.

The quantities Israel has pledged to let in fall far short of Gaza's ordinary needs, before taking into account the additional requirements of an economy yet to rebuild from the military offensive Israel launched against Hamas 18 months ago with the declared aim of curbing cross-border rocket attacks.

Equally important, there is no mention of exports.

"Our concern is that Gaza residents have a right not just to consume, but also to produce, export and travel," said Sari Bashi, director of Gisha, an Israeli human rights group. "The policy of economic warfare continues."

The quantities entering Gaza have risen. In the week ending July 24, 979 truckloads went in -- a 40 percent increase on the figure a month before, Bashi said. But that is still only 40 percent of what used to enter Gaza before Hamas took control.

"Gaza needs a Marshall Plan," said Palestinian economist Omar Shaban, referring to the U.S. aid plan that jumpstarted Europe's economy after World War Two. "The term 'economy' no longer applies here."

Unemployment has soared. The level is currently around 40 percent, compared to around 30 percent in 2007, according to the World Bank. The United Nations' agency UNRWA which cares for Palestinian refugees says 80 percent of the population now depends on its food aid, up from 40 percent a few years ago.

Inhibiting recovery, Israel's banned list includes building materials such as cement and steel -- among other "dual use" goods it says could be used for military purposes.

Such materials will be allowed in, Israel says, but only for projects under international supervision.

Both are already available to Hamas and anyone else who can afford the services of smugglers who can supply anything you need through tunnels from Egypt.

"CREATING MONSTERS"

Typifying a new layer of industry based on making the most from what is available, rubble recycling has been one of Gaza's few active sectors. Chunks of concrete, collected from the rubble of buildings, are delivered by donkey cart to plants which turn it back into bricks.

The blockade has been felt across all sectors, from food production to furniture. Industries have had to adapt or die.

Fisherman who are only allowed to sail up to three nautical miles from shore have abandoned large trawlers for smaller skiffs. Beyond the 3-mile mark, they risk running into the Israeli navy, which enforces the rule with Egyptian help.

Jamal Basala's trawler, built at a cost of $80,000 in 1992, hasn't been to sea in four years. Today, sitting on a beach in Rafah, the boat provides Basala with shade while he repairs fishing nets. "Today it's smaller boats, smaller nets, catching fewer fish," said Basala, interrupted by the sound of two warning shots fired by a warship on the horizon.

Wadih El Wadiah, the snack food manufacturer, has also been forced to adapt. He has turned the bomb-damaged remnants of biscuit factory into a vegetable pickling plant. His business, like Basala's, has gone backwards.

Wadiah has started receiving packaging materials from Israel in recent weeks. His wish list includes new machinery and access once again to the West Bank market where he used to sell most of his output. "As they have let products in, they must let them out for this crisis to end," he said.

As businessmen in Gaza count the costs of the blockade, many have concluded that Israel has deliberately sought to destroy their livelihoods.

The policy has cost Israel what Palestinian friends it had in Gaza, said Amr Hamad, executive manager of the Palestine Federation of Industries. "We are losing the layer of legitimate businessmen who were the last layer of believers in peace," he said. "Israel is losing friends and creating monsters."

(Additional reporting by Saleh Salem; Editing by Samia Nakhoul)