Palestinians get investment but roadblocks a concern

BETHLEHEM, West Bank (Reuters) - International business executives pledged to invest in the Palestinian economy at a conference in Bethlehem on Wednesday but said Israeli restrictions must be eased for the economy to flourish.

At least two major Arab investors unveiled big deals -- a Qatari businessman is investing in a plan for a new Palestinian town in the West Bank while a Saudi-led group will spend $200 million on building shopping malls in the city of Ramallah.

Organizers said about 500 foreign participants, many representing Gulf investors awash with oil wealth, plus hundreds more from the West Bank and the Hamas-run Gaza Strip, attended the conference at a plush hotel in Bethlehem which stands a few meters from Israel's towering West Bank barrier.

Seeking to boost the economy as he pursues U.S.-backed negotiations with Israel, Palestinian President Mahmoud Abbas appealed to foreign investors to use their wallets to boost chances for peace.

"Investing here will not only be lucrative, but will contribute in achieving and cementing the foundations of the peace process in the Middle East, as well as contributing to security and the economy," Abbas told the conference.

Middle East envoy Tony Blair, charged with helping the Palestinians on their way to statehood, said simply organizing the conference indicated investment opportunities were ripe, despite major hurdles such as Israeli restrictions.

But Abbas cautioned that the Palestinian economy would only take off once Israel ended its occupation -- a sentiment that was echoed by several investors.

Palestinian business people complain that hundreds of Israeli roadblocks and checkpoints, which the Jewish state says are needed to keep suicide bombers away from its cities, hamper trade and stifle economic growth.

World Bank Managing Director Juan Jose Daboub told Reuters he hoped travel restrictions would soon be eased.

"We are all hoping ... to resolve the issues, to remove the checkpoints or to minimize them," he told Reuters in the West Bank city, just south of Jerusalem. "This is something that we will ... hopefully see happening in the near future."

OBSTACLES

In a tangible sign of how such restrictions can harm trade, organizers said scores of business people were unable to attend because they were not granted travel permits by Israel.

Bethlehem is virtually encircled by Israel's barrier and visitors to the traditional birthplace of Jesus from Jerusalem must drive past towering walls and military watchtowers.

Jordanian Adnan Abu al-Ragheb, who runs a real estate company in the capital Amman, said that although he was on the lookout for business opportunities, he was worried about the impact of checkpoints on potential profits.

Qatari Diar Real Estate Investment Co's CEO, Ghanim bin Saad al-Saad, said checkpoints were "obstacles that must be removed" but confirmed he was investing in a $350 million project to build a new Palestinian town in the West Bank.

The Saudi-led Land Holding Company said it would spend $200 million on building shopping malls and leisure centers in Ramallah.

Abbas sacked a Hamas-led unity government nearly a year ago after the Islamist group seized control of the Gaza Strip.

Western powers responded by lifting economic sanctions in the West Bank, where an Abbas-appointed government holds sway. Sanctions remain in place against Hamas's administration in Gaza.

International donors met in December to pledge $7.7 billion in aid as a way of bolstering Abbas and his negotiations with Israel on establishing a Palestinian state.

U.S. President George W. Bush called this week for oil-rich Arab states to "invest aggressively". U.S. Deputy Treasury Secretary Robert Kimmitt reminded the conference that Washington planned to give $550 million in aid this year.

Several business people from Israel are expected, organizers said, as well as delegates from the Gaza Strip, which Hamas seized last June. Gaza faces bleak prospects with its economy squeezed between militants' rockets and an Israeli-led blockade.

(Writing by Rebecca Harrison; Editing by David Fogarty)