In the Beit Sahour suburb of Bethlehem, hammers can be heard from hotel construction just up the road from Shepherds' Field, the hillside believed to be the site from where the biblical Star of Bethlehem was sighted. Builders are adding to the Sahara Hotel to nearly triple its capacity to 52 rooms.
Owner Majed Banoura said he would open the hotel, closed for renovations, for Christmas to accommodate overflow from Bethlehem. "There is security and a sense of calm," says Mr. Banoura, who says his family's souvenir business took in a record $1 million this year. "We feel the rule of law. This is what we need."
The construction sector is also getting a kick-start with housing projects in and around Ramallah. And the rollout of a new Palestinian cellphone company this year marked the largest single foreign investment ever.
Yet the economy has a deep hole to climb out of. Hemmed in by hundreds of Israeli military checkpoints, Palestinians have been struggling, with international donors contributing $1.75 billion to keep the government running. The private sector has been in retreat. A recent World Bank report said that the economy won't fully recover unless Israel removes more restrictions on movement and allows West Bank residents access to agricultural land.
"These are wonderful sparks of potential," says one Western diplomat who requested anonymity. "But now the Israelis have to enable it to explode."
When the Bush administration convened Israelis, Palestinians, and Middle East allies in Annapolis a year ago, boosting prosperity in the West Bank was part of a plan to encourage support for peace negotiations and the government of Palestinian President Mahmoud Abbas – at the expense of Hamas, which controls Gaza.