A year ago, deadly clashes between Israeli soldiers and pro-Palestinian activists on a Gaza-bound flotilla of aid forced Israel to relax its blockade on the Gaza Strip and lift a ban on consumer goods such as chocolate – giving the local economy a boost for the first time in years.

But as a second flotilla gathers in the Mediterranean to test Israel’s maritime closure of Gaza, land restrictions on Gaza trade are also still a bone of contention. The scaled-back blockade is still an economic drag, with tight restrictions on exports and imported building materials.

While Gazans no longer have to buy bottles of cola caked with mud from the smuggling tunnels beneath the Egyptian border, the underground economy has shifted to cement, steel, and automobile parts. And despite Egypt’s recent announcement that it would open up its pedestrian crossing at Rafah, the result has been marginal improvement.

"Nowadays you go to the supermarket, and you get everything," says Mkhaimer Abusada, a professor of political science at Al Azhar Univeristy in Gaza City, who says he became used to the layer of dirt covering bottles of Coca-Cola. "Even though the situation is much better than a year ago, still the Palestinians have a general feeling that they are under siege."

IMF: Gaza economy still down 20 percent
In an April report, the International Monetary Fund (IMF) described the economy of Gaza as trying to "catch up" to normal levels. It noted a 15 percent jump in output in 2010, though that remains 20 percent below what it was six years ago.

Though Gaza manufacturers hired 1,200 new workers last year, the total number of employees is less than half of those who had jobs when the militant group Hamas took control of the coastal strip in 2007, according to the Palestinian statistics bureau. Unemployment has dipped but remains at 37 percent.

Shifting rationales
Since Israel first began imposing restrictions on Palestinian movement in and out of Gaza in the 1990s, it justified such restrictions as necessary for its security. But after the 2006 abduction of Sgt. Gilad Shalit on the Gaza border, and Hamas’s ascension to power four years ago, the border restrictions were described as political leverage to pressure Hamas.

Now, Israeli officials have reverted to portraying limits on movement as security precautions.

Israel’s army says that the number of shipping containers at the border more than doubled in May from April, and that there are some 70 development projects by international groups that are either in progress or have been completed.

So far, only flowers and produce destined for Europe have been authorized. Exports to nearby markets in Israel and the West Bank are still banned. Officials insist, however, that the policy is to loosen restrictions on exports.

"If you get a container from Gaza to Israel, how do you know it isn’t going to explode?" says Mark Regev, a spokesman for Israeli Prime Minister Benjamin Netanyahu. "There are logistic and security issues, but the policy is to widen."

Small businesses ready to export from Gaza
Indeed, Mohammed al-Tilbani, the owner of an ice cream and biscuit factory in Gaza, says that he has been approached recently by US diplomats to see if he is ready to resume ice cream exports to the West Bank. Mr. Tilbani says he already has refrigerator storage in the West Bank from the days that 60 percent of his sales came from selling to Palestinians there.

Back home in Gaza, his business has been hurt by frequent electricity outages that make it a waste for Palestinians to purchase large quantities of ice cream.

"Many people promised to me: 'Maybe next month you can [resume exporting].' I said, 'I can be ready within one day.' But, I don’t think it’s going to happen," says Tilbani.

According to the IMF report, Israel has agreed to gradually lift restrictions, to permit the sale of textiles and furniture abroad, but sales to the West Bank and Israel will remain tightly controlled.

Building materials restrictions
Regarding imports, most products are now allowed into Gaza – a sea change from a year ago when only imports defined as "humanitarian" were allowed in. Israel justifies its building material restrictions as a security precaution against a Hamas buildup of military infrastructure. At the same time, it says that construction materials are allowed into the tiny coastal strip of 1.5 million for projects for international agencies.

But that policy only allows for about 7 percent of the supplies needed for Gaza’s building industry, says Sari Bashi, director of Gisha, an Israeli nonprofit that pushes for lifting movement restrictions on Palestinians.

"There have been improvements over the last year, but we’re far from a policy of free movement," she says. Restrictions are still in place "not for security reasons, but rather as a policy of economic pressure, which we consider to be a policy of collective punishment."

Mr. Bashi says Israel also needs to remove restrictions on passage for Palestinians between the West Bank and Gaza.

Blockade counterproductive?
While Israel’s naval blockade is necessary and legitimate to prevent weapons from reaching Gaza militants, the Jewish state gets little to no benefit from the economic blockade on Gaza, saysYossi Alpher, a former advisor to past Israeli prime ministers.

"The land blockade, which was largely canceled, was totally counterproductive. It just brought us international condemnation," he says.

Israel says the flotilla is a provocation and that supplies can reach Gaza through land routes. Both the US and the UN have also warned of the possibility of a flare up from the flotilla, but have urged Israel to show restraint.

The lifting of the ban on imports gave Gazans access to "basic" products like appliances and plastics, says Sami Abdelshafi, an economic consultant to nonprofit groups in Gaza. But that hasn’t helped put much of a dent in unemployment – forcing Gaza’s residents to continue to depend on public assistance, and the United Nations.

Even the Palestinian Authority in Ramallah is propping up the territory, paying tens of thousands of public sector employees who have not worked in government jobs since Hamas’s takeover in 2007.

Though Abdelshafi says the flotilla helps draw attention to Gaza’s problems, he doubts the ability of the challenge to prompt new changes.

"In the grand scheme of things, I don’t think it will help the things we desparately need: economic development and job creation, and on the other hand a comprehensive resolution to the political problem," he says. "It's an admired expression of solidarity, but I’m afraid that it may not have a major hand in political resolution. Gaza is not waiting for flotillas."