* Cement prices soar after Egypt floods smuggling tunnels
* Contractors suspend projects, businessmen's group says
By Nidal al-Mughrabi
GAZA, March 6 Business was booming for Gaza
brick-maker Yasser Qreqea, until neighbouring Egypt shut down
smuggling tunnels across its border that were funnelling arms to
militants in the territory and cement and other basic goods to
Overnight the price of building materials soared in the Gaza
Strip, hitting Qreqea's key customers and, industry sources
said, slowing the construction of apartments, roads and houses
across the enclave run by Hamas Islamists.
"Business is dead and we are the ones losing out," the
businessman told Reuters in his factory in the densely-populated
Zeitoun neighbourhood of Gaza City.
A handful of workers stacked bricks in his already bulging
store room, but Qreqea sat idle, waiting for customers.
Egypt said it started flooding and sealing the network of
tunnels in February to cut a two-way flow of smuggled weapons
that was destabilising its border area in the Sinai peninsula,
where separate groups of Islamist militants operate.
Cairo's decision also cut a lifeline to around 1.7 million
Palestinians in Gaza, hit by a blockade on a wide range of goods
imposed by Israel in 2007 after Hamas took power.
The tunnels had been used to bypass the blockade and
smuggle in all kinds of merchandise, including cars, livestock
and fuel - around 30 percent of all goods that reached the
enclave, according to some estimates.
A month ago, a tonne of cement cost 350 shekels ($95) in the
Gaza Strip. After the tunnel closures, the price rose to 650
shekels before Hamas pressured merchants to bring it down to its
current 480 shekel mark.
"I have been speaking to contractors and I understood many
of them have suspended building because of the unstable and
higher prices of cement," said Ali al-Hayek, chairman of the
Palestinian Businessmen's Association.
He forecast "disastrous results for the economy of Gaza and
the building sector", unless Egypt reopened the routes.
Hayek said there was a lack of data on the exact size of the
construction industry in the Gaza Strip, but estimated thousands
of private and public projects were under way before the
Gaza's tunnellers told Reuters nearly 60 percent of the
estimated 1,000 smuggling routes under the border had been
Tunnel owner Abu Jamal said the Hamas government's taxation
of cement and the new price controls had made the smuggling of
construction material through surviving routes unviable.
"The Egyptian campaign damaged our business gravely and
conditions by Hamas here are forcing us to stop the work.
Business is in sleep mode," he added.
Under international pressure, Israel began to ease the
blockade in 2010 and allowed international aid agencies to
import construction material. It further eased restrictions at
the end of last year, but not enough to wean Gaza's businesses
from their tunnel supply routes.
Majed Abu Shaaban, a developer building rental apartments,
said mounting construction costs would ultimately be passed on
to consumers, who would be charged higher rents.
"The solution is to reopen crossings either with Israel or
with Egypt. My only concern is to get goods at market prices,"
Abu Shaaban said.
(Reporting by Nidal Almughrabi, Editing by Jeffrey Heller and