BUSINESSWEEK ONLINE : DECEMBER 4, 2000 ISSUE
FRONTIER -- GLOBAL REACH

War at the Front Door
Palestinian-Americans like Abdel Hamid Kased returned home to invest in peace. Their hopes aren't dead yet

Sitting behind the reception desk in the unlit lobby of the City Inn Hotel in Ramallah, Abdel Hamid Kased wearily eyes a group of uninvited guests: rifle-toting Israeli soldiers, who for the past six weeks have used the hotel's modest lobby as a sharpshooters' base. This is not quite what Kased had in mind when he went into the hotel business.

For nearly 30 years, Kased and his family owned a thriving supermarket in Brooklyn, N.Y. But in 1997, drawn by the prospects for peace in their homeland, they returned to the West Bank to build the City Inn. Located on the edge of Ramallah, the commercial heart of the territory, the three-year-old, 33-room hotel had been booked nearly solid. At its peak, the hotel employed 34 people and was a popular site of meetings for business executives and international development officials attempting to build a new Palestinian economy.

Deep Wounds. Then the peace talks collapsed, and the intersection outside the City Inn's front doors became the site of near-daily confrontations between stone-throwing Palestinian youths and Israeli military forces, who cleared out the guests and occupied the hotel. Several people have been shot just half a block away, phone lines have been cut, and tear gas wafts past the windows most afternoons. ''I sit here every day and listen to the gunfire outside,'' says Kased.

Kased, 51, and his three brothers are among the 2,000 Palestinian emigres who have returned from the U.S. in the flush of optimism following the 1994 Oslo Peace Accords. ''We thought peace would be good for investment,'' Kased says. For a time, the peace talks were indeed paying dividends. Before the current round of violence erupted, on Sept. 28, the economy in the West Bank and Gaza was expected to grow 7% this year, up from 6% in 1999. Key to that growth has been the influx of Palestinian-American entrepreneurs like the Kaseds, who have injected much-needed dynamism into the territories, according to Maher Masri, the Palestinian Minister of Economy & Trade. ''It's extremely important to have people from the States here,'' he says. ''They've got knowhow, and they're running projects across the board.''

But weeks of clashes have inflicted deep economic wounds throughout the territories. Unable to reach their jobs in Israel since the government sealed the borders six weeks ago, Palestinian workers are losing some $3.4 million a day in wages. Hundreds of small companies have been forced to lay off workers or close their doors entirely, Masri says. Meanwhile, World Bank officials in Jerusalem say it could be years before foreign investors again feel secure enough to put money into the territories. Says Masri: ''The economy has collapsed.''

Kased, for his part, estimates that the City Inn, which the family financed with $1.2 million of their own money, has lost nearly $100,000 since the violence erupted. There has also been some light physical damage--broken doors and windows--though he has yet to make an assessment. So far, he says, the Israeli military has refused to compensate him, and Kased expects to wind up in court. It could be a tough fight. ''I don't think they have any rights to compensation,'' says Israeli military spokesman Yaiden Vatikay. ''Do the Palestinians compensate us for terror attacks?''

Nonetheless, Kased and other emigres express few regrets about their decision to return. ''I have a real sense of belonging here,'' says Sam Bahour, a 36-year-old entrepreneur. Born in Youngstown, Ohio, Bahour moved to Ramallah in 1994 to help privatize the Palestinian telecom system. ''In the U.S., I would just have become lost in the rat race.''

Three years ago, Bahour began working for Arab Palestinian Investment Co., a holding company which has raised $53 million from investors throughout the Arab world, and created 11 startups across the West Bank and Gaza, including a mineral-water factory, a Hyundai dealership, and a cold-storage facility. Bahour's latest venture is a sleek, $6.3 million American-style shopping mall to serve the local population. Located a half-mile from the City Inn, the mall was due to open this month with about 100 employees. But for most of October, only a handful of the project's construction crew were able to make it to work. ''We're determined to keep building,'' Bahour says. The project is still months from completion.

With businesses pummeled by the violence, political sympathies are being sorely tested. Bahour announces his views with a sign on the door declaring his office an ''Occupation Free Zone'' and urging a boycott of Israeli products.

The Kaseds are somewhat more accommodating. They conceived of the City Inn as a meeting place for everyone, Israeli and Palestinian, even designing a logo with olive branches and a pair of shaking hands. ''We came back thinking about peace,'' says Shawki Kased, Abdel's 50-year-old nephew, who also owns a share of the hotel. ''Everybody talked about living together and building Palestine.'' And in spite of it all, that remains the plan, says his uncle. ''Of course, I could go back to Brooklyn,'' he says. The family still owns the supermarket and Abdel Kased returns often. ''But whatever happens, this is still my home.'' Uninvited guests, and all.

By VIVIENNE WALT

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