Now that the Israelis (who controlled Gaza in the days of King David) have driven the Egyptians out, as their ancestors once expelled the marauding Phoenicians circa 1000 B.C. The Israelis are determined to stay - first to make sure that Nasser's suicide raiders shall never return to resume their over-the-border raiding from Gaza against Israel's desert settlers, but also because they think the place belongs historically and economically with Israel. They have decided that they cannot now annex the strip, if only because that would mean absorbing the refugees and so increasing their Arab minority to an unacceptable 30%. Their long-term plan: keep administrative control under U.N. supervision, press the U.N. to resettle the refugees, and meanwhile, run the strip so progressively that both the Arabs of the area and the world will some day see that Israel should keep the place permanently.
Well, that worked out.
More to the point, the wisdom of hindsight being what it is, it sounds self-contradictory from the off; make it so nice that the Arabs will like it, while at the same time getting rid of the Arabs. Never workable, never rational.