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Palestine infrastructure: From rags to riches
Journal of Commerce / July 24, 2000

By Larry Luxner

BETHLEHEM -- According to the Bible, Jesus Christ was born in a manger because there was no room at the inn.

If Jesus were to return to Bethlehem today, however, he'd find plenty of rooms -- 250 to be exact -- at the newly inaugurated Jacir Palace Inter-Continental Hotel, about a mile down the road from Manger Square.

"This is the first five-star hotel in Palestine," says General Manager Olof Jurva, who arrived here from Finland about half a year ago. "This is a boutique hotel in a 100-year-old palace, built on 30 hectares of property and surrounded by 30,000 trees and bushes."

The Jacir Palace, which represents a $50 million investment on the part of its owners, Palestine Development Co., is indeed the first five-star hotel under jurisdiction of the Palestinian Authority. But it won't be the only one.

Kingdom Holding Co., based in Riyadh, Saudi Arabia, is developing a 250-room Movenpick Hotel in the Gaza Strip, according to executive vice-president Ramsey Mankarious. Other chains are also interested in Palestine, which could declare statehood as early as September.

"We now have 1,500 rooms in the West Bank and Gaza. By year's end, we'll have another 1,000," said Bajis Ismail, director-general of the Palestinian Ministry of Tourism and Antiquities. He noted the success of the Oasis Casino just outside Jericho. Austria's state-owned Casinos Austria AG, owners of the $50 million project, say they employ 1,500 Palestinians and are getting around 3,000 visitors -- mostly Israelis -- every day.

Luxury hotel construction isn't the only sign that new money is flowing into the Palestinian economy. Foreign funds are also being invested in the fledgling country's port and telecommunications infrastructure -- a trend likely to accelerate once the Israelis and Palestinians sign a final, comprehensive peace settlement.

In 1994, things began changing with the signing of the first phase of the Israeli-PLO peace accord, which gave Palestinian Authority (PA) limited autonomy in the Gaza Strip and Jericho. That autonomy has gradually been expanded to the point where all major West Bank cities and towns are now under Palestinian sovereignty.

The PA has already authorized a Franco-Dutch joint venture to develop a deep-water port at Sheikh Ijlin, about four kilometers south of Gaza City in the Gaza Strip.

During a recent visit to the United States, PLO Chairman Yasser Arafat -- who's also president of the Palestinian Authority -- said the port could be ready for business by 2001.

"It will open horizons for employment opportunities, during construction and after construction; not only for us as Palestinians, maybe also, job opportunities for our brothers in Jordan," Arafat told the U.S. Chamber of Commerce delegation in Washington. "Keep in mind that the distance between Gaza and Amman is about 160 kilometers, while the distance between Amman and [the Jordanian port of] Aqaba is about 460 kilometers. Keep in mind that the Gaza port faces directly towards the Mediterranean, and has proximity to Europe, while Aqaba is on the Red Sea. I think it's going to be one of the region's vital seaports."

French President Jacques Chirac has pledged the equivalent of $80 million to develop the port, while the Dutch have already contributed a similar amount.

Mohammad Suleiman, public relations director at the Palestinian Transport Ministry, recently told an Israeli newspaper that the proposed Gaza port is aimed at freeing the Palestinian economy from dependence on Israel. He accused Israel of trying to keep the Gaza Strip under its economic thumb by preventing the import of West Bank rocks for the harbor, and insisted that the PA "will not agree to Israel maintaining security control over the harbor."

Israelis are worried about the port's construction for a different reason, however.

"If the Palestinians build their port with breakwaters, it will cause erosion further up the coast and could damage our beaches very seriously," said Mendi Zaltzman, director of external relations for the Israel Ports and Railways Authority in Tel Aviv. As a result, he said, there's some talk now of the PA actually leasing space in the new $500 million Jubilee port under construction in Ashdod -- about half an hour's drive north of the Gaza Strip -- instead of going through with building their own port.

"A Palestinian pier in Ashdod is one of the issues we're discussing," he said. "For them, it's a quick solution. For us, solving the problem of sand erosion is a major reason to encourage it."

If the idea flies, it wouldn't be the first instance of Israeli-Palestinian cooperation on transportation infrastructure projects.

Talks are already underway for Israeli transport company Maman to help construct an air-cargo terminal at Gaza International Airport, inaugurated in November 1998 by Arafat as the gateway to a future Palestinian state.

The $100 million airport, located at the southern end of the dusty, crowded Gaza Strip near the Egyptian border, handled only 90,000 passengers and 117 tons of cargo in 1999. Its main client is Palestinian Airlines, which owns only three aircraft: one Boeing 727-200 donated by Saudi Prince Walid bin-Talal, and two Fokker-50s donated by the Dutch government.

The Palestinian Authority is also seeking investment in another key field: telecom.

Recently, the International Telecommunication Union, in an unprecedented move, awarded Palestine its own international dialing code: 970. And in the latest symbolic gesture, the Internet Assigned Numbers Authority has designated ".ps" as the top-level domain for Palestine.

All this comes as the Palestinian government rushes to disengage its telecom network from that of Israel, which until recently was the sole supplier of fixed and mobile phone services in the West Bank and Gaza.

"We started working five years ago. It was a very difficult situation at that time, because the Israeli occupiers didn't want to improve anything," claimed Imad Falouji, the Palestinian minister of posts and telecom. "Their policy was they didn't want any communications between villages and cities."

As Falouji was being interviewed in his Gaza City office, the power went out briefly -- a situation he also blamed on the Israelis, even though Gaza has been under Palestinian autonomous rule since 1994.

Despite their mutual suspicions, Israeli and Palestinian officials talk regularly on a number of issues, telecom being one of them.

"After we established our network three years ago, we started separating our network from Israel. Now local and national telecoms are fully separated; only the international code remains linked. Within two months, we'll have full separation," said Falouji. "But we agree with Israel that all future calls between Israel and Palestine should be charged as domestic and not international calls."

So far, 48 countries recognize the 970 code for Palestine, though from the United States, only MCI customers can use 970. AT&T and other companies still use Israel's code, 972, to reach cities and towns in the West Bank and Gaza.

The disparity in telephone density between the two peoples is glaring. Israel's teledensity of 47 lines per 100 inhabitants is among the highest in the world; it's hard to meet an Israeli these days who doesn't have both a fixed line and a cellphone, not to mention Internet access.

Among Palestinians, however, it's a different story. Teledensity ranges from a low of 5.8% in the crowded, impoverished Gaza Strip to a high of only 28% in Ramallah, a prosperous city in the West Bank. Overall, teledensity in the areas controlled by the Palestinian Authority comes to just 8%, with fewer than 9,000 Internet subscribers.

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