Gaza businesses risk collapse despite calm

GAZA, July 13 (Reuters) For Hamdi Abu Sido, the end of bitter Palestinian faction fighting in the Gaza Strip a month ago has meant a boom in business as parents and children venture out again to fill his beachside amusement arcade with laughter.

But for other entrepreneurs, the seizure of Gaza by the Hamas Islamist movement on June 14 threatens disaster, as Israel, the Western-backed Palestinian leadership in the West Bank and international powers have all but sealed off the enclave of 1.5 million people from the outside world.

Prominent businessman Mustafa Mahmoud, lamenting shattered hopes for trade that were raised when Israeli troops left Gaza in 2005, said the blockade imposed on Hamas for its refusal to renounce violence was halting projects including one designed to avert a repeat of floods of sewage in which people have drowned.

Popularly elected 18 months ago, Hamas leaders now face the long-term challenge of showing voters they can govern in the face of international hostility. But for the time being, an end to months of fighting between Hamas and their secular rivals in President Mahmoud Abbas's Fatah faction has brought relief.

''People now want to entertain their children. Before, people hardly ever came and we used to close up very early,'' said Abu Sido at his Gaza Game Zone arcade, where children were playing computer games and riding electric cars and mini trains.

''It is true that people's financial conditions are poor but they feel safe and there's a sense of stability,'' he added as customers including 11-year-old Zahwa rode on a miniature train.

''Dad couldn't bring us before because there was always shooting,'' Zahwa said. ''Also my father is a doctor and he used to be in hospital looking after the people who'd been shot.'' However, a few kilometres (miles) away, at the major border crossing points into Israel and Egypt, closed barriers and empty transit halls tell a story of economic isolation and slump.

Israel has allowed international aid shipments of food and medicine, as well some other goods, to come in to Gaza but has refused to deal with Hamas officials in order to open the major freight and passenger terminals essential for full trade.

Exports and passenger traffic are blocked and only limited supplies of materials for business are getting in.

PROJECTS SUSPENDED The United Nations this week said it was suspending all its building projects in the Gaza Strip, including housing, schools and public services such as sanitation facilities because it was unable to import building materials via Israel.

UN officials warned of a humanitarian disaster.

Acknowledging the economic crisis, senior Hamas official Sami Abu Zuhri blamed Abbas, in the West Bank, for refusing to help reopen crossings formerly run by Gaza officials loyal to Fatah in coordination with the Israeli military, which aims to prevent militants moving fighters and weapons into Israel.

But Abbas's information minister, Reyad al-Maliki, said Hamas bore sole responsibility for its problems, criticising the behaviour its militants in taking over areas around crossing points after they routed Fatah forces last month.

Entrepreneur Masoud said business people felt deceived by the turn of events since the Israeli withdrawal two years ago: ''We had hopes that the economic situation would get better and that financial support from donor countries would increase and so we expanded our company,'' he said in his office.

''What happened was the opposite and even worse. A complete blockade and siege against goods and businessmen.'' He had laid off 60 workers on two projects recently, while cutting salaries for others.

Masoud said he feared a health crisis as equipment he needed for a sewage plant could not be brought in: ''The delay could lead to another flood,'' he said, referring to a surge in sewage two months ago that killed four people and damaged many homes.

Hamas has proposed to allow Fatah loyalists or private sector representatives to run the crossings in a bid to get them reopened but Abu Zuhri said Abbas and Israel rejected that. He accused Abbas of trying to undermine Hamas with ordinary Gazans: ''We do not deny economic conditions are dire. They began long before but have got worse because of Palestinian pressure to show Hamas is weak and cannot help the people,'' he said.

''Things are boiling up and we are afraid the crisis could explode,'' he added, saying he hoped Egypt might reopen its Rafah crossing with Gaza -- though this is far from certain yet.

Meanwhile, factories lie idle and workers fret over money.

''Working here is my only source of livelihood,'' said Rafiq Salha, director of a factory owned by Masoud that used to produce most of the cartons for Gaza plants turning out ice cream and biscuits, but which is now no longer operating at all.

''As a result of the blockade over 30 people have no work, because we cannot bring in raw materials,'' he said. ''In the past we could predict what would happen but now we have no clear vision and we are unable to forecast what will come next.'' Back in Masoud's office, the businessman is gloomy.

''This could lead to the collapse of some companies,'' he said. ''Some factories could be completely shut down.'' REUTERS SW HS0921