DESPITE the constant presence of Israeli soldiers and Israeli right-wing extremists on the doorstep, the Palestinian officials at Orient House are busy trying to draw private investment to East Jerusalem.

The final status of Jerusalem is not due to be tackled by Israeli and Palestinian negotiators until next year at the earliest but Kamel Hussaini, head of the private sector unit at Orient House, believes there is no time to waste. 'We are preparing for the potential of Jerusalem,' he says. 'Today Jerusalem is a problem, but tomorrow it will be an investment opportunity.'

At the first Middle East and North Africa economic summit in Casablanca last October the PNA's representative in Jerusalem, Faisal Hussaini, had the message ready in a paper he presented entitled 'Investment Opportunities in East Jerusalem.' Hussaini identified investment priorities and called on Israel to give Palestinians the freedom to develop their own capital in the city. 'If Israel maintains that Jerusalem is its eternal capital, then Jerusalem will become the capital of an isolated Israel in the Middle East,' Hussaini told the conference. 'If Jerusalem becomes an open and free city with two capitals, then Jerusalem will become the capital of the Middle East.'

Kamel Hussaini is determined to make a go of promoting the city to potential investors. The private investment unit has been busy compiling economic data on East Jerusalem with the aim of becoming a 'one-stop shop' for outside investors. 'Trade missions do not want politics,' he says. 'We want Orient House to be the one place they can come and find all the information and advice they need.'

Orient House is focusing much of its energy on the potential of tourism. 'This is the quickest and most attractive sector in Jerusalem,' says Hussaini. 'By virtue of the presence of holy sites, we will be able to promote East Jerusalem as a destination in itself.'

The Palestinian tourism sector has been starved of investment since 1967. The number of hotel rooms has remained static at 2,200, while West Jerusalem has seen an explosion of capacity from 1,193 rooms in 1968, to 5,361 in 1993. The number of travel agencies in East Jerusalem has also dropped from 46 in 1967 to 36 in 1992, while the number of Israeli travel agencies has grown from 35 to 436 in the same period.

Orient House aims to add another 5,000 rooms to existing hotel capacity in East Jerusalem. By its own admission, this will be an uphill task. Since 1967 Israel has annexed 73,000 dunums (7,300 hectares) of land in East Jerusalem, leaving only 44,000 dunums (4,400 hectares) in Palestinian hands. And the Israeli authorities have decreed that construction can only be carried out on 21 per cent of the land that remains in Palestinian hands.

There are other restrictions designed to defeat all but the most determined developer. Anyone dreaming of building a house in East Jerusalem needs lots of patience and deep pockets. A detailed master plan is required for each parcel of land to be developed and initial approval takes 2-3 years, at a cost of about $20,000. It can take another two years to get the actual permit to start construction.

Permission to build can be granted in curious ways. One developer, Issa Kurdieh, learnt that he had received a building permit when he saw the plans splashed across the front page of Israeli newspapers and heralded as an example of Israeli even-handedness in the treatment of Palestinians and Israelis in Jerusalem. Kurdieh has no doubt the decision to grant him a permit last May was purely political - it came the day after Israel and the PLO signed the Cairo agreement marking the start of Palestinian self rule in Gaza and Jericho.

Kurdieh may have official permission to build a four-storey hotel and shopping complex in the heart of East Jerusalem, but his problems are hardly over. Getting finance for the project is the next challenge. At the moment only Israeli banks can operate in East Jerusalem, and they will only lend if they are granted title to the land as security for a loan. Kurdieh is not keen on that idea and is looking elsewhere for help. He hopes he has found a more sympathetic backer in Qatar-based Salam International Investment, which may help to finance the $8 million project.

TA