Israel announced yesterday a plan to dig a moat along the Gaza-Egypt border, inviting contractor bids for the project designed to prevent Palestinian terrorists from continuing to smuggle arms through tunnels.

The Defense Ministry published a notice in the Hebrew daily Haaretz inviting bids by July 12 to build a canal along a 2.5 mile periphery of the Rafah refugee camp. The ministry will allow contractors to tour the project site and said one-year contracts would be issued, renewable for an additional 12 months.

It was not clear whether the moat would be filled with water, as military sources had suggested last month, or would be dry.

The Israeli military debated the multimillion-dollar plan last month as a way to reduce weapons smuggling into southern Gaza after 13 soldiers were killed in three ambushes. The moat will be dug deep enough so terrorists wouldn't be able to bypass it if they try to build more underground smuggling tunnels.

Other plans to effectively stop Palestinians from building the tunnels were discussed, including the possibility of expanding the Philidelphi Route, the IDF patrol zone on the Israeli side of the Egyptian border, but this was rejected because of the large number of Palestinian homes that would need to be demolished.

The army has said it found and destroyed more than 80 tunnel in the past three years, and Israel has voiced fears the Palestinians could seek to bring in longer-range mortars and Katyusha rockets that could be fired from open spaces at communities deeper inside Israel.

The moat concept comes 11 days after Israel's security cabinet approved Sharon's plan to withdraw troops and settlements from Gaza and parts of the West Bank, and separate from the Palestinians.

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