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Despite a truce, there has been more tit-for-tat violence in and around the Gaza Strip over the past week. It began after Israel assassinated a militant leader. Armed groups in Gaza responded with rocket fire on Israeli communities.

But despite the unrest and continuing restrictions on imports to and exports from Gaza, the Palestinian territory is in the midst of a construction boom. It comes more than three years after a major Israeli assault that left much of the territory in ruins.

NPR's Lourdes Garcia-Navarro was recently in Gaza and filed this report.

(SOUNDBITE OF MACHINERY)

LOURDES GARCIA-NAVARRO, BYLINE: The oily black tarmac being laid down in a section of downtown Gaza City is drawing a crowd of onlookers. The heavy roller flattens the material for a new section of road. Gaza's potholed streets are finally getting a makeover. And infrastructure upgrades are still a novelty here for residents.

UNIDENTIFIED MAN: (Foreign language spoken)

GARCIA-NAVARRO: The overseer of the project says, before we couldn't get enough material to do this, now everyone is building, he says.

Building materials haven't been allowed into Gaza legally since the militant group Hamas took over the territory. Israel maintains it doesn't allow them in because they could be used for military purposes. So they come in illegally instead.

(SOUNDBITE OF CHILD VOICE)

GARCIA-NAVARRO: I'm in the bustling border town of Rafah in Gaza. This is the place where all the smuggling tunnels are located. There are about 600 of them working right now, and there is one thing that most of them are bringing through from Egypt, and it's something that's been missing here for a very long time.

ALAA HAMOUD: (Foreign language spoken)

GARCIA-NAVARRO: Alaa Hamoud smuggles paving stones and cement in his tunnel. He used to bring in foodstuffs, but since Israel eased restrictions on food imports he converted his tunnel to be able to bring in construction materials, like most other smugglers in Rafah.

HAMOUD: (Foreign language spoken)

GARCIA-NAVARRO: There is a huge pent-up demand, he says. Many houses and buildings were damaged or demolished during the Gaza War and they are just being rebuilt.

(SOUNDBITE OF HAMMERING)

GARCIA-NAVARRO: And that's providing much-needed work. Men saw and hammer at this new family house that is being built in Gaza City. Akram Al Draimli is one of the workers.

AKRAM AL DRAIMLI: (Foreign language spoken)

GARCIA-NAVARRO: He says, I had no work for years. But there are more people getting married, more babies being born, which means more people need new homes. He says there's more demand for skilled workers than there is supply.

Omar Shaban, a Gaza-based economist.

OMAR SHABAN: There is a need for more than 80,000 housing to Gaza. In the past five years there were 250,000 new born, which means that 250,000 people become adult. We have in Gaza around 40,000 marriage cases every year, which means we need a new flat for these new marriages.

GARCIA-NAVARRO: And so people are now building. More than 500 apartment blocks are going up in Gaza. Shaban says wealthy individuals from the Gulf are actually investing in the construction sector here. But this is not development, he warns.

SHABAN: In Gaza, we have an economy with one leg. There is a booming in the construction, while other sectors are paralyzed.

GARCIA-NAVARRO: Israel only allows limited exports from Gaza to the West Bank, which is where previously most of Gaza's exports were sent. Unemployment is still rife here and hundreds of thousands of people depend on food aid. And there are the crippling power outages.

Wow. It's totally dark. This apartment building has about how many floors?

UNIDENTIFIED MAN: Nine.

GARCIA-NAVARRO: Nine floors and there's not a light on in the entire area.

Electricity shortages in Gaza are nothing new, but they've become critical lately. Hamas recently signed an agreement to increase Egyptian supplies of diesel fuel to Gaza's sole electricity plant. The problem is the plant uses the same diesel fuel as the cars here and there isn't enough to go around. Mohammed pours black market diesel fuel into his car. It's expensive, he says, and scarce.

MOHAMMED: (Foreign language spoken)

GARCIA-NAVARRO: We can't find it anywhere. I had this stored in my house and I only use it for emergencies he says. Most gas stations in Gaza are actually shuttered. People have to walk to get to and from work or linger on street corners desperately waiting to catch a lift.

MOHAMMED: (Foreign language spoken)

GARCIA-NAVARRO: Hasaan and his friend have just come from the university and are trying to flag down a passing car. But he says the cars are not moving around, and the ones that do are crammed full of people. And that is one of the conundrums of Gaza's economy. It operates, says economist Oman Shaban, at the whim of its neighbors. Policies in Israel, Ramallah in the West Bank, and Egypt decide if it will thrive or die.

HASAAN: You know, in Gaza we are living under four government. We have Hamas government, we have Egypt sometimes, we the Palestinian Authority who have some say, and we have the Israeli government. So we are so lucky.

GARCIA-NAVARRO: There was no escaping the sarcasm in his voice.

Lourdes Garcia-Navarro, NPR News.

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