BEIT LAHIYA, Gaza Strip -- Maher Khoudari boasts that his Gaza grocery has a wide assortment of chocolates for sale -- even some you couldn't find in the cosmopolitan Israeli city of Tel Aviv. The problem is, there is no one to buy them.
Israel eased its blockade of the Hamas-ruled Palestinian territory a year ago and now allows virtually all consumer goods in, meaning there are no longer acute shortages of foods or basic household items. Tiny construction projects have begun sprouting up, and Gaza is awash in big ticket items such as cars and refrigerators.
But deep troubles remain. Israel maintains restrictions on the key construction and export sectors, and the vast majority of Gazans are still barred from traveling in and out of the territory. Nearly half the work force is unemployed, and more than 70 percent of the population relies on food handouts, making fancy chocolates, like any other non-essential goods, a luxury most cannot afford.
"We have no customers," says Khoudari, 40, who owns one of Gaza's biggest supermarkets.
His predicament sums up Gaza's economic situation after blockade was eased amid an international outcry over Israel's deadly raid on a blockade-busting international flotilla. Now pro-Palestinian activists in Greece are laying plans to launch a new protest flotilla toward Gaza, drawing attention back to the plight of the impoverished territory of 1.6 million.
Israel dismisses claims by Palestinians and their sympathizers that there is a humanitarian crisis. Maj. Gen. Eitan Dangot, who oversees Israel's border policy with Gaza, told reporters last week that Israel has taken numerous measures in recent months to boost the Palestinian economy.
He said the number of trucks carrying goods into Gaza has more than tripled, cargo crossings with the area are being expanded and that Israel is now allowing dozens of building and infrastructure projects to move forward.
Palestinian officials say the Israeli measures are far too little. Most critically, Israel continues to tightly restrict the entry of construction materials -- badly needed to repair the damage from an Israeli military offensive two years ago. Tight restrictions on exports, along with the entry of raw materials, mean that more than 80 percent of Gaza factories are either shuttered or working at limited capacity.
"Israel has made much of the fact that there is no starvation in Gaza," said Gaza economist Omar Shaban. "But the humanitarian crisis in Gaza is not about food," he added. "The humanitarian crisis is about education, it's about development, about imprisonment."
The international community has repeatedly expressed concerns about the blockade -- but in a statement this week, the "Quartet" of Mideast peacemakers said conditions in Gaza have significantly improved.
The statement noted "a marked increase in the range and scope of goods and materials moving into Gaza, an increase in international project activity, and the facilitation of some exports." Nonetheless, it said "considerably more needs to be done to increase the flow of people and goods to and from Gaza."
The economy of Gaza, a crowded seaside strip sandwiched between Egypt and Israel, has always struggled.
Shaban said that even if Israel lifted all restrictions on Gaza, it would take years for the economy to recover.
"This is not something you can achieve in days or months," he said, suggested the territory would need an international bailout similar to the post-World War II Marshall Plan that rescued Europe.
Israel and Egypt imposed the blockade after Hamas-linked militants captured an Israeli soldier in 2006. The restrictions were further tightened after Hamas seized control of Gaza the following year.
Israel says the measures are aimed at weakening Hamas, which it considers a terrorist group, and to prevent it from bringing arms into the territory. But the blockade failed to achieve either goal.
Instead, a flourishing smuggling business sprouted up along the Egyptian border. A vast network of tunnels has actually helped strengthen Hamas, which collects taxes on the industry.
Pro-Palestinian activists from around the globe have been trying to breach the blockade since 2008, sending ships laden with supplies bound for Gaza. Israel allowed ships through five times, but has blocked them from Gaza since its three-week military offensive in January 2009.
Under international criticism, Israel began to ease the blockade in early 2010. The situation changed drastically after Israeli naval commandos killed nine Turkish activists on board a Gaza-bound ship. The May 2010 incident was a public relations nightmare for Israel and forced it to greatly ease the blockade.
The military says the number of supply trucks entering Gaza through Israeli-controlled cargo crossings grew 66 percent from a year ago.
Now a loose network of activists organized a new flotilla based mostly in Greek ports, and planned to sail for Gaza last week. But their plans suffered a major setback when Greece banned the boats from leaving for the Palestinian territory, and the project is now in doubt.
Israel says the activists trying to send another flotilla are naive and misguided.
The International Monetary Fund said Gaza's economy expanded 16 percent in the first half of 2010, though that leap was largely a result of a very depressed economy the year before. Nonetheless, experts say economic activity remains below the 2006 levels.
Israel's war in Gaza reduced Fayza al-Louh, her husband and eight kids to living in a single room with one bathroom and a small kitchen. With Israel still severely restricting the entry of construction materials into the coastal strip, thousands of homes and businesses damaged in the war still await repairs.
Al-Louh's three-story home is damaged beyond use.
"Every night, I expect the remains of my house to collapse," Al Louh said. "We suffer from the rain in the winter and the sun in the summer. And if the weather weren't enough of a problem, what about the rats and snakes and mosquitoes?"
Earlier this month, Israeli authorities agreed to allow the U.N. to import materials to rebuild some 1,200 homes destroyed in fighting with Israel nearly 10 years ago.
It is one of the largest projects Israel has authorized in Gaza, but will still only meet a fraction of Gaza's needs and will not help al-Louh, who lives in a different part of the territory. The U.N. estimates some 60,000 homes need to be repaired or rebuilt altogether.
Israel says its only aim in preventing some materials and impeding some projects is security-related. It believes construction materials could be diverted by Hamas for military use. But critics say Israel applies too broad a definition and that the true, unspoken purpose is to punish Gazans for the rule of Hamas.
Amjad Shawwa, a development worker and anti-blockade activist, says the blockade has deprived nearly 7,000 Gaza fishermen of a living, and water, sanitation, electricity and road projects remain stalled.
"You probably won't find hungry people, but the feeling of injustice and frustration is pervasive in all homes," Shawwa said.