How Palestinians really live

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Al Manara Square in Ramallah
Photo by Tanya Habjouqa

RAMALLAH, West Bank — Swanky coffee shops, luxury-car dealerships, and a designer boutique are among hundreds of new businesses that have sprouted here in recent months, part of a boom that has defied failures to make progress toward peace with Israel.

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Ramallah Blvd now has the West Bank’s first Mercedes dealership
Photo by Tanya Habjouqa

Economic growth in the West Bank raced at 9% through the first half of 2010, according to the International Monetary Fund. Proponents of a Palestinian state have taken heart in that growth.

Improved Palestinian governance, better security and relaxed Israeli restrictions appear to be underpinning investors’ booming confidence.

After the second Palestinian intifada, or uprising, erupted against Israel in 2000, the Palestinian territories were plunged into violence and the economy took a nose dive. As the violence started to recede, the militant Hamas Party won elections, triggering a punishing boycott of the Palestinian Authority by Western donors. Salaries went unpaid, militias ruled the streets and government barely functioned.

Hamas was forced from power in the West Bank in 2007. Under the new government of Prime Minister Salam Fayyad—a University of Texas-educated former IMF official—the Palestinian Authority moved to reduce corruption, make government more transparent and attract business.

The European Union and the U.S. stepped in to oversee the retraining of the Palestinian security forces who have since imposed law and order on the West Bank’s streets. In response, Israel has eased its tough regime of restrictions on the movement of goods and people.

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Photo by Tanya Habjouqa

Meanwhile, the stability also drawn a generation of Palestinian expatriates, who fled during the years of unrest, back home with savings to invest.

“Investors are taking a leap of faith,” says Sam Bahour, a Palestinian-American businessman who invested money in the West Bank long before most, opening the $10.2 million Plaza Shopping Center in Ramallah in 2004.

In August, Mr.Mohammad Omayr, a 24-year-old entrepreneur, borrowed $75,000 from relatives and opened a small, bustling nursery in downtown Ramallah, one of 100 new Palestinian companies registered that month.

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Photo by Tanya Habjouqa

Signs of new wealth are ubiquitous here. “The Boutique,” Ramallah’s first haute couture clothing store, opened late last year, offering Palestinians python-skin purses by Prada for $3,000, Sergio Rossi heels, and one-of-a-kind Valentino dresses. Next door, the Zaman Café serves up Belgian microbrews, French Bordeauxs and $4 cappuccinos.

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Photo by Tanya Habjouqa

This spring, the West Bank’s first licensed Mercedes dealership opened a showroom on Ramallah Boulevard. Owners say it is doing a brisk business selling luxury-class sports cars and sport-utility vehicles, with sticker prices ranging from $100,000 to $200,000, to wealthy Palestinians.

On Nov. 1, Mövenpick Hotels & Resorts made its Palestinian debut, opening the city’s first five-star hotel. The 172-room, $40 million hotel boasts a head chef imported from Florence, a pastry chef from Paris, and a lobby bedecked in marble and Italian suede.

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Photo by Tanya Habjouqa

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Photo by Tanya Habjouqa

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Photo by Tanya Habjouqa

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And in the past six months, the West Bank has also seen the launch of three private-equity funds.

See Related: WORLD POLITICS

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