Sealed-off Gaza's economy barely ticking

GAZA CITY — Defying southern Gaza's dusty soil, sturdy little sprouts stand in neat rows before Zakary Hejazi.

The buds are a gamble: $162,000 worth of carnations. In the coming months, Hejazi hopes to export them to Europe.

But politics could make this harvest, and his business, wither.

"All the farmers are having nightmares," he said on a recent afternoon. "If the border closure continues, it'll be the death of the people -- not just the flowers."

Since the Islamic militant organization Hamas took control of the Gaza Strip in mid-June, Israel has in effect sealed off the territory, closing border crossings to the import and export of most produce and other goods.

As a result, the already weak and aid-dependent Gaza economy is on the verge of collapse. Hundreds of factories have closed and tens of thousands of people are out of work.

On Monday, President Bush said the U.S. was giving $190 million in aid to the Palestinians. But the money is intended for Palestinian Authority President Mahmoud Abbas' government in the West Bank.

Israel, the United States and some European countries are trying to undermine Hamas, which they consider a terrorist group, by dividing the Palestinians and isolating Gaza.

But residents, business leaders and officials in Gaza said in interviews that they think Israel, not Hamas, is to blame for the economic crisis.

"People don't have anything against Hamas," said Mohammed Talabani, owner of a Gaza cookie factory. "It's Israel that is creating the crisis."

Talabani normally exports $750,000 worth of biscuits, wafers and ice cream to the West Bank every month. But there are no more exports, and the Al Awda factory is running out of imported cocoa, sugar and ice cream sticks.

Talabani has cut production by two-thirds, sending home hundreds of workers.

In the industrial sector alone, as many as 35,000 workers have been laid off, with losses amounting to $20 million, said Ali Hayak, the director of the Palestinian Federation of Industry. The problems add to Gaza's already considerable economic woes.

Official figures put unemployment at about 50%, but unemployment in effect is closer to 85% because many workers receive salaries that are so meager as to be meaningless, said Omar Shaban, a leading economist who blames both Israeli and Palestinian politicians.

Almost two-thirds of Gaza's budget comes from outside aid, he said.