Gaza's tunnel economy stumbles

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Fayez Shweikh, one of Gaza's up-and-coming businessmen, shakes his head as he considers his mixed fortunes.

In the past year, he had significantly increased his household income by investing in a black-market, "tunnel" economy, which relied on smuggled goods siphoned through underground passages between Egypt and Gaza.
Israel has always maintained that the tunnels were used to smuggle arms and explosives, but Shweikh says food, gasoline, and household treats – chocolate, in particular - formed the basis of his trade.
"I purchase goods from the chocolate company directly in Egypt; from such companies as Galaxy, from Ferrero or the Kinder Company. I buy, I transfer money and they send me the goods, by way of normal businessmen … tunnel businessmen."
But since the ceasefire between Hamas and Israel took hold several weeks ago, a trickle of Israeli goods have been entering Gaza.
Shweikh says small kiosk owners in Gaza City have started to fill their shops with Israeli juice and chocolates that have not been seen in nearly a year.
"Of course this scares me," he said of the sudden competition.
"I am going to stop [importing] from Egypt and see how the situation will change," he told Al Jazeera.
Cease-fire benefits
Following Hamas' seizure of power in the Strip in June 2007, Israeli restrictions on the flow of people and goods in and out of Gaza developed into a siege.
The stranglehold on Gaza has starved many civilians of basic food items and energy supplies.
To cope with the siege, a number of Palestinians began to dig tunnels between Gaza and Egypt through which dozens of household items, foodstuffs and gasoline were smuggled.
This underground, tunnel economy thrived for more than a year, and offered many Palestinian entrepreneurs an alternative investment channel.
Mohammed Ahmad is one such investor who owned a brick factory in Gaza only to watch it slowly grind to a halt as construction materials no longer entered the territory.
With his factory at a standstill since June 2007, he put his 10 hired laborers to dig the tunnel in which he owns a share. Like so many others he has turned to this underground economy to make a living.
"These jeans I am wearing are from Egypt, where they costs LE 60 ($11), here I can sell them for 120 Israeli shekels ($33.30)," he said.
"My sandals are also from Egypt - there are no other products but those from Egypt available here."
Nahid was once a farmer in Rafah, but when Palestinian produce could no longer be exported to Israel and beyond, he gave up and invested his energies in the tunnel economy.
"I import everything – from men's and women's clothing, to vespa and car parts; chocolate and medicine, but most of all shoes."
No taxes
Entrances to many of the tunnels are clearly visible from the surface and line much of the length of the Rafah border in the south of the Gaza Strip. This means Israel, unlike in the past, consents to their existence.
Shweikh believes Israel wants "to give Gaza some space to breathe".
But this has come at a hefty price. Every ton of goods smuggled through the tunnels costs the investors nearly $9,000.
This has allowed merchants with a monopoly in the market to set their own – usually high - prices.
Hani Al-Yazji, a shopkeeper in Gaza City, says that he had traditionally bought most of his products from Israel but has been employing the tunnels to stock his shelves with Egyptian goods.
"The prices of goods from Egypt are twice as high, sometimes 150 per cent more expensive," he said.
"I make just as much profit if I buy from Israel or from Egypt … the tunnel salesmen can make profits of 50 per cent. But the buyers suffer."
Economic imperatives
The laborers who dig tunnels in secret have also seen their fortunes rise.
Mohammed, an English literature student at the Fatah-affiliated Azhar University who feared giving out his surname, earns about 100 shekels ($28) a day digging tunnels in his spare time.
"I fear for my life when I work here, but what can I do?" he said.
Some 70 per cent of Gaza's population is made up of refugees without land.
The local economy, subject to Israeli control at the borders and crossings, has been on the verge of collapse for more than a year, leaving many laborers little alternative to finding work elsewhere.
According to a 2004 World Bank report, 33,000 Gazans, mostly refugees, had entered Israel in 2004 on a daily basis to pick oranges and work in bakeries, factories and restaurants.
But following its disengagement from the Strip in September 2006, Tel Aviv allowed only 5,000 Gazan workers access to Israel.
Following the formation of the unity government between Hamas and Fatah in early 2007, Israel barred all Gazans from entry.
"Because there are no other jobs in Gaza, no construction, no farming, nothing, everyone is unemployed and there is nothing for anyone to work except working in the tunnels," Majid, a tunnel construction supervisor who would not give his last name for security reasons, told Al Jazeera.
"These days life has gotten very expensive - tunneling is what provides for the Palestinian and his family," he said.
In the first week of the cease-fire between Israel and Palestinian factions in the Strip, the cost of smuggling one ton of products fell from $9,000 to $6,000.
A home-made rocket, rumored to have been funded by tunnel owners, was fired shortly thereafter from Gaza.
Shweikh says "it is conceivable" that a tunnel owner may have suffered from dropping prices and believed a rocket attack would close the crossings again.
"A businessman only thinks of money, how to get money, how to collect money, how to transfer money, other than that the businessman has no interests," Shweikh said.
"If the borders open, all his work will come to an end," he said.
Palestinians smuggle goods and food through tunnels from Egypt to Gaza.

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