The Bright Star textile company in Gaza used to sew 4 million pieces of clothing a month, most of it for export to Israel and beyond – part of a humming manufacturing sector that accounted for nearly a third of Gaza's economy. But after Israel imposed a blockade in 2006, Gaza's factories fell silent, unable to import the raw materials they needed or send their finished products abroad for sale.

This year, Israel began allowing cloth into the tiny coastal territory and said it would allow exports of garments and furniture – a move that promised to help Gaza’s floundering economy get back on its feet after the five-year siege and a brief war with Israel, which devastated the territory's infrastructure.

The Bright Star factory owner fired up the machines, rehired workers, and began churning out products like children’s clothes, soccer jerseys, and men’s suits. But it has taken officials and businessmen 10 months to hash out the details of getting the products through Israeli-controlled border crossings. So the factory fell silent once again, as Ahmed Alghouti tried unsuccessfully to sell all the clothes in Gaza.

“When they allowed raw materials to come into the strip, we started opening the factory ... with hope that they will open the borders for exporting,” says Mr. Alghouti. “But now we have lost hope.”

Israel has already allowed limited agricultural exports over the past year, including strawberries, flowers, cherry tomatoes, and other vegetables. A test run for expanding exports was set to begin yesterday, when a furniture shipment – the first nonagricultural product to be exported since Israel’s blockade began – was due to cross Gaza’s border.

But the factory where the furniture shipment was stored appeared to be intentionally set on fire on Monday, owner Waddah Bsaiso told the Monitor. The blaze, which destroyed the furniture, will delay the pilot program for at least a few weeks.

Gaza's economy grows 28 percent

Many factories like Bright Star fired up this year in anticipation of more open borders. That movement, along with international development projects and a building boom fed by illegal smuggling tunnels, led to enough activity that a September World Bank report said Gaza’s economy grew by 28 percent in the first half of 2011.

Many on the ground consider that number inflated – and unsustainable, driven in large part by a building boom, as well as international aid projects.

“We need to talk about agriculture, factories, fishing, other industries that create sustainable growth,” says Gaza economist Omar Shaban. “We need to build a transparent economy, an accountable economy – on the ground, not underneath it. The danger of this report is that when people in Europe read it, they say things in Gaza are OK, we don't need to lift the siege. It creates an illusion.”

Concern about instability in Egypt

Israel’s blockade of the Gaza Strip, which was aided by Egypt under former President Hosni Mubarak, began in 2006, when militants captured Israeli soldier Gilad Shalit. It was tightened in 2007, when the militant Islamist group Hamas took control of the territory after violently ousting its rival, the secular Fatah party. Israel and the US consider Hamas a terrorist organization. The blockade, limiting the movement of goods and people in and out of the territory, decimated Gaza’s economy.

After an international uproar last year when Israel stopped a flotilla of activists trying to bring attention to the blockade, killing nine, Israel eased import restrictions. The smuggling tunnels under Gaza’s border with Egypt, which had previously focused on bringing in consumer goods, subsequently became devoted mostly to gasoline and building supplies like cement and steel. With the influx of supplies this year, a building boom began.

But Niveen Al Hallaq, head of architecture at El Ajrami Company for Engineering and Construction, one of Gaza’s largest building companies, says everyone is waiting for the other shoe to drop. “This situation is not stable. If anything happens in Egypt, prices will go up and people won't be able to afford to build. It's not stable,” she says.

Most of those who can afford to build right now are Hamas government employees or members of the Islamist movement, she says – because they are among the few with regular income.

Israel blames Gaza exporters for delay

In the manufacturing sector, meanwhile, factory owners are holding out for open borders. Maj. Guy Inbar, spokesman for Israel’s Coordinator for Government Activity in the Territories (COGAT), said in a written statement to the Monitor that a request for approval of furniture and textile exports had been approved July 19, and any subsequent delay was the fault of Gazan businessmen.

“All the export applications were approved, therefore the reason for the lack of implementation of any export applications is the Palestinian exporters' inability,” he said in the statement.

Palestinian businessmen say that while the political approval may have come through at the top, it took months to be translated into practical approval from Israel to get their goods through the crossings. They also had to have contracts to sell the products in Israel or abroad, and many have lost their relationships with buyers in the last five years.

Mohamed Mushtaha, one of the owners of Mushtaha Furniture Company, says he doesn’t know how much longer he can hold on without being able to send his products abroad. He used to sell most of his furniture in Israel and the West Bank. Now, after rebuilding his factory, which was bombed during Israel’s offensive on Gaza nearly two years ago, the factory is open again, but only for special orders. He’s losing money by operating, but says he can’t afford to lose his name recognition in the market, or his skilled workers.

“I have to remain working. Even if I'm losing money, I have to go on,” he says. “I have to keep the workers, I have to keep the company, and I hope I can survive.”