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The smuggling industry into the Gaza Strip is like a long funnel, at one end of which are the tunnels in the Strip and the other is the Sinai Peninsula as far as the Red Sea coast, Israeli intelligence officials say.

In recent months Israeli actions against smugglers - according to foreign sources - combined with Egypt's increased willingness to deal with the problem, have begun to produce results.

While weapons smuggling has declined, however, the flow of goods in general has turned the tunnels into Gaza's growth industry.

The decline in weapons smuggling has forced Hamas militants in the Gaza Strip to invest more effort in producing weapons locally. Technical experts in Israel are divided over whether Hamas can meet this challenge, although its desire to do so is not in question.

The organization is apparently not currently seeking renewed military conflict with Israel, however. It would like the lull to continue so it can rebuild its operational capabilities, which were severely impaired by Operation Cast Lead in January.

The tunnels were once called "tunnels of life" because they helped ease the Israeli economic blockade of the Strip. But the large numbers of people who have been injured and even killed have turned them into "tunnels of death" to the locals.

Eight Palestinians were killed in the past three days in tunnel cave-ins, eight more were injured yesterday.

The Palestinian press is harshly critical of Hamas because of the organization's inability to control the tunnels.

Residents of Rafah, on the border with Egypt, complain that Hamas encourages the smuggling despite the fact that criminals are also using the tunnels to bring in drugs and alcohol.

People in Rafah are also furious over the outrageous prices that the tunnels' owners charge for their use, as well as the lively trade in counterfeit products.

Another focus of popular anger is a huge fraud scheme that was recently perpetrated on thousands of people who were solicited to invest in tunnels that were never built.

Israeli security officials say there are between 300 and 800 tunnels operating in the Rafah area, employing at least 4,000 people directly and providing a livelihood for tens of thousands more. The tunnels' owners have become the nouveaux riches of Gaza.

The Hamas government recently established a "tunnel administration," to supervise the activity in the tunnels.

Those who want to dig a tunnel must apply for a license, which costs NIS 10,000 and allows its holder to submit a request to the Rafah municipality for connection to the city's electricity and water supplies. The owners are responsible for the utility payments.

The estimated cost of building a tunnel about 15 meters deep and 250 meters long is around $100,000. Construction takes two to three months and involves up to 100 diggers a day.

Digging is very well-paid work, relative to Gazan salaries. Groups of diggers compete against each other in a kind of tender process to excavate tunnels with a specified depth, length and completion deadline.

The owners' return on their investment depends on the type and price of the goods smuggled. Owners levy a 15-percent surcharge on merchants or individuals moving goods or people through their tunnel. At a minimum of $2,000 a head, people are the most lucrative commodity to transport.

More than 100,000 liters of kerosene move through the tunnel daily, equal to the amount Israel allows in to the Strip through the border crossings. Other products that pass through the tunnels are those whose passage through the crossings Israel has banned, such as cigarettes and certain foods, electrical goods and livestock, as well as cement - yesterday was the first a shipment of cement was allowed into the Strip from Israel.

The huge amount of tunnel traffic has led to a growth in ancillary professions - crane operators, carpenters, mechanics, porters and traders, and even real estate agents eager to cash in on the high demand for property along the border.