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Nasty Piece of Mideast Business

Pact with Israel in '93 prompted a return of Palestinian entrepreneurs who now struggle to keep their companies afloat amid armed clashes and military closures.


RAMALLAH, West Bank — Flush with optimism after the signing of the Oslo peace agreement, Bashar Masri returned to his homeland to found the Palestinian daily Al Ayyam, never imagining that as chief executive of a $7-million company he might one day have to deliver the newspapers himself.

Hossam Sharkawi came back and helped set up Arabcare Medical Services, the Palestinians' first HMO, in a spot where armed clashes and Israeli military closures have presented him with problems that "didn't come up" in management classes at the Harvard School of Public Health.

Tareq Maayah left his job at a Silicon Valley semiconductor firm to start a telecommunications company in Ramallah, not anticipating that the growth of his Hi-Tek Engineering would be limited because Israeli dealers refuse to set foot in Palestinian-ruled areas, while Israel restricts his access to Jerusalem and Tel Aviv.

"I had always wanted to come back to my country and thought this would be a good opportunity for business," Maayah said. "The reality is, we're not as close to peace as we thought, and a lot of the obstacles that existed during the occupation are still here."

Masri, Sharkawi and Maayah belong to a small group of Palestinian entrepreneurs and professionals who returned from the diaspora at the time of or after the 1993 peace accord to help build their country and blaze a new trail for Palestinian private enterprise.

While most of their counterparts have judged the political situation to be too unstable for investment, these thirtysomething optimists bucked conventional wisdom to take some risks.

And risky it has been.

Masri invested in the newspaper and printing company, believing that the success of the peace process depended on the growth of the Palestinian economy. But the reverse also turned out to be true. The near-collapse of the peace process has strangled the economy, causing investments and credit to dry up and limiting the cash Palestinians have to spend on food, let alone a newspaper.

He and the others have built cutting edge businesses that, along with new Internet companies, restaurants, caterers and other enterprises, provide hundreds of desperately needed jobs for Palestinians. But while their efforts are key to the future development of a Palestinian state, they are not nearly enough to salvage the economy from decades of Israeli occupation and siege. Palestinian opponents of the peace process continue to attack Israel with bombs, and Israel has responded with almost continuous military closures around the West Bank and Gaza Strip, resulting in supply shortages, personnel problems, construction delays and other hidden costs that have set business projections back by more than a year.

Residency restrictions imposed by Israel force the returning Palestinian entrepreneurs to enter the country on their foreign passports and leave every three months for a new visa, or to enter as West Bank residents and seek a permit every time they wish to cross a military checkpoint into Israel.

The Palestinian Authority, meanwhile, has been more bureaucratic and less efficient than anyone expected. Infrastructure lags. The promised free-market economy is still highly managed and is driven by mushrooming public-sector companies.

For Maayah, the situation has become a Catch-22 that could put him out of business. The peace agreement prohibits Palestinians from importing foreign communications equipment, requiring them to buy Israeli products. But the Palestinian Authority has responded to the latest military closures with a boycott of Israeli goods, including the telephone systems in which Maayah trades.

All of this leaves Maayah--who grew up in Chicago--wondering if he made the right decision to return here. Some of his colleagues have quit and gone abroad again. He is sticking it out.

"Once you start a business, it is difficult to take it apart. Do I regret it? I can't make up my mind," he said. "I am still making money, but soon I may not be."

Paper Woes

Masri had thought that he was going into the newspaper and printing business with his eyes open to the difficulties of working in a pseudo-state carved into islands and surrounded by Israeli soldiers. He thought that the peace accord was bad for Palestinians, hammered out after their leaders backed the wrong side in the 1991 Persian Gulf War and just as the six-year intifada, or Palestinian uprising, was losing steam.

"When you are the losers, you get a losers' agreement. But it was an opportunity to show who we are and to build a nation on the ground," he said.

Masri was born to a prominent Nablus family six years before Israel captured the West Bank from Jordan in the 1967 Mideast War, and he grew up under the occupation until moving to the United States while in high school. He returned to the West Bank in early 1995, surprised to discover that he was one of only a handful of investors coming back.

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