Abir Dandis, the mother of the two girls who were murdered in the Negev town of Al-Fura’a last week, couldn't find a police officer to listen to her warnings, neither in Arad nor in Ma’ale Adumim. Both police stations operate in areas where Israel wants to gather the Bedouin into permanent communities, against their will, in order to clear more land for Jewish communities. The dismissive treatment Dandis received shows how the Bedouin are considered simply to be lawbreakers by their very nature. But as a resident of the West Bank asking for help for her daughters, whose father was Israeli, Dandis faced the legal-bureaucratic maze created by the Oslo Accords.

The Palestinian police is not allowed to arrest Israeli civilians. It must hand suspects over to the Israel Police. The Palestinian police complain that in cases of Israelis suspected of committing crimes against Palestinian residents, the Israel Police tend not to investigate or prosecute them.

In addition, the town of Al-Azaria, where Dandis lives, is in Area B, under Palestinian civilian authority and Israeli security authority. According to the testimony of Palestinian residents, neither the IDF nor the Israel Police has any interest in internal Palestinian crime even though they have both the authority and the obligation to act in Area B.

The Palestinian police are limited in what it can do in Area B. Bringing in reinforcements or carrying weapons in emergency situations requires coordination with, and obtaining permission from, the IDF. If Dandis fears that the man who murdered her daughters is going to attack her as well, she has plenty of reason to fear that she will not receive appropriate, immediate police protection from either the Israelis or the Palestinians.

Dandis told Jack Khoury of Haaretz that the Ma’ale Adumim police referred her to the Palestinian Civil Affairs Coordination and Liaison Committee. Theoretically, this committee (which is subordinate to the Civil Affairs Ministry) is the logical place to go for such matters. Its parallel agency in Israel is the Civilian Liaison Committee (which is part of the Coordination and Liaison Administration - a part of the Civil Administration under the Coordinator of Government Activities in the Territories).

In their meetings, they are supposed to discuss matters such as settlers’ complaints about the high volume of the loudspeakers at mosques or Palestinians’ complaints about attacks by settlers. But the Palestinians see the Liaison Committee as a place to submit requests for permission to travel to Israel, and get the impression that its clerks do not have much power when faced with their Israeli counterparts. In any case, the coordination process is cumbersome and long.

The Palestinian police has a family welfare unit, and activists in Palestinian women’s organizations say that in recent years, its performance has improved. But, as stated, it has no authority over Israeli civilians and residents. Several non-governmental women’s groups also operate in the West Bank and in East Jerusalem, and women in similar situations approach them for help. The manager of one such organization told Haaretz that Dandis also fell victim to this confusing duplication of procedures and laws. Had Dandis approached her, she said, she would have referred her to Adalah, the Legal Center for Arab Minority Rights in Israel, which has expertise in navigating Israel’s laws and authorities.

John Kerry revealed his long-awaited plan for peace in the Middle East on Sunday, hinging on a $4bn (£2.6bn) investment in the Palestinian private sector.

The US secretary of state, speaking at the World Economic Forum on the Jordanian shores of the Dead Sea, told an audience including Israeli president Shimon Peres and Palestinian leader Mahmoud Abbas that an independent Palestinian economy is essential to achieving a sustainable peace.

Speaking under the conference banner "Breaking the Impasse", Kerry announced a plan that he promised would be "bigger, bolder and more ambitious" than anything since the Oslo accords, more than 20 years ago.

Tony Blair is to lead a group of private sector leaders in devising a plan to release the Palestinian economy from its dependence on international donors. The initial findings of Blair's taskforce, Kerry boasted, were "stunning", predicting a 50% increase in Palestinian GDP over three years, a cut of two-thirds in unemployment rates and almost double the Palestinian median wage. Currently, 40% of the Palestinian economy is supplied by donor aid.

Kerry assured Abbas that the economic plan was not a substitute for a political solution, which remains the US's "top priority".

Peres, who had taken the stage just minutes before, also issued a personal plea to his Palestinian counterpart to return to the negotiations.

"Let me say to my dear friend President Abbas," Peres said, "Should we really dance around the table? Lets sit together. You'll be surprised how much can be achieved in open, direct and organised meetings."

Thick locks hug the front gates of shuttered shops, now covered in graffiti and dust from lack of use. Only a handful of customers pass along the dimly lit road, sometimes stopping to check the ripeness of fruits and vegetables, or ordering meat in near-empty butcher shops.

“All the shops are closed. I’m the only one open. This used to be the best place,” said 64-year-old Mustafa Sunocret, selling vegetables out of a small storefront in the marketplace near his family’s home in the Muslim quarter of Jerusalem’s Old City.

Amidst the brightly coloured scarves, clothes and carpets, ceramic pottery and religious souvenirs filling the shops of Jerusalem’s historic Old City, Palestinian merchants are struggling to keep their businesses alive.

Faced with worsening health problems, Sunocret told IPS that he cannot work outside of the Old City, even as the cost of maintaining his shop, with high electricity, water and municipal tax bills to pay, weighs on him.

“I only have this shop,” he said. “There is no other work. I’m tired.”

Abed Ajloni, the owner of an antiques shop in the Old City, owes the Jerusalem municipality 250,000 Israeli shekels (68,300 U.S. dollars) in taxes. He told IPS that almost every day, the city’s tax collectors come into the Old City, accompanied by Israeli police and soldiers, to pressure people there to pay.

“It feels like they’re coming again to occupy the city, with the soldiers and police,” Ajloni, who has owned the same shop for 35 years, told IPS. “But where can I go? What can I do? All my life I was in this place.”

He added, “Does Jerusalem belong to us, or to someone else? Who’s responsible for Jerusalem? Who?”

Illegal annexation

Israel occupied East Jerusalem, including the Old City, in 1967. In July 1980, it passed a law stating that “Jerusalem, complete and united, is the capital of Israel”. But Israel’s annexation of East Jerusalem and subsequent application of Israeli laws over the entire city remain unrecognised by the international community.

Under international law, East Jerusalem is considered occupied territory – along with the West Bank, Gaza Strip and Syrian Golan Heights – and Palestinian residents of the city are protected under the Fourth Geneva Convention.

Jerusalem has historically been the economic, political and cultural centre of life for the entire Palestinian population. But after decades languishing under destructive Israeli policies meant to isolate the city from the rest of the Occupied Territories and a lack of municipal services and investment, East Jerusalem has slipped into a state of poverty and neglect.

“After some 45 years of occupation, Arab Jerusalemites suffer from political and cultural schizophrenia, simultaneously connected with and isolated from their two hinterlands: Ramallah and the West Bank to their east, West Jerusalem and Israel to the west,” the International Crisis Group recently wrote.

Israeli restrictions on planning and building, home demolitions, lack of investment in education and jobs, construction of an eight-foot-high separation barrier between and around Palestinian neighbourhoods and the creation of a permit system to enter Jerusalem have all contributed to the city’s isolation.

Formal Palestinian political groups have also been banned from the city, and between 2001-2009, Israel closed an estimated 26 organisations, including the former Palestinian Liberation Organisation headquarters in Jerusalem, the Orient House and the Jerusalem Chamber of Commerce.

Extreme poverty

Israel’s policies have also led to higher prices for basic goods and services and forced many Palestinian business owners to close shop and move to Ramallah or other Palestinian neighbourhoods on the other side of the wall. Many Palestinian Jerusalemites also prefer to do their shopping in the West Bank, or in West Jerusalem, where prices are lower.

While Palestinians constitute 39 percent of the city’s population today, almost 80 percent of East Jerusalem residents, including 85 percent of children, live below the poverty line.

“How could you develop [an] economy if you don’t control your resources? How could you develop [an] economy if you don’t have any control of your borders?” said Zakaria Odeh, director of the Civic Coalition for Palestinian Rights in Jerusalem, of “this kind of fragmentation, checkpoints, closure”.

“Without freedom of movement of goods and human beings, how could you develop an economy?” he asked.

“You can’t talk about independent economy in Jerusalem or the West Bank or in all of Palestine without a political solution. We don’t have a Palestinian economy; we have economic activities. That’s all we have,” Odeh told IPS.

Israel’s separation barrier alone, according to a new report by the United Nations Conference on Trade and Development (UNCTD), has caused a direct loss of over one billion dollars to Palestinians in Jerusalem, and continues to incur 200 million dollars per year in lost opportunities.

Israel’s severing and control over the Jerusalem-Jericho road – the historical trade route that connected Jerusalem to the rest of the West Bank and Middle East – has also contributed to the city’s economic downturn.

Separation of Jerusalem from West Bank

Before the First Intifada (Arabic for “uprising”) began in the late 1980s, East Jerusalem contributed approximately 14 to 15 percent of the gross domestic product (GDP) in the Occupied Palestinian territories (OPT). By 2000, that number had dropped to less than eight percent; in 2010, the East Jerusalem economy, compared to the rest of the OPT, was estimated at only seven percent.

“Economic separation resulted in the contraction in the relative size of the East Jerusalem economy, its detachment from the remaining OPT and the gradual redirection of East Jerusalem employment towards the Israeli labour market,” the U.N. report found.

Decades ago, Israel adopted a policy to maintain a so-called “demographic balance” in Jerusalem and attempt to limit Palestinian residents of the city to 26.5 percent or less of the total population.

To maintain this composition, Israel built numerous Jewish-Israeli settlements inside and in a ring around Jerusalem and changed the municipal boundaries to encompass Jewish neighbourhoods while excluding Palestinian ones.

It is now estimated that 90,000 Palestinians holding Jerusalem residency rights live on the other side of the separation barrier and must cross through Israeli checkpoints in order to reach Jerusalem for school, medical treatment, work, and other services.

“Israel is using all kinds of tools to push the Palestinians to leave; sometimes they are visible, and sometimes invisible tools,” explained Ziad al-Hammouri, director of the Jerusalem Centre for Social and Economic Rights (JCSER).

Al-Hammouri told IPS that at least 25 percent of the 1,000 Palestinian shops in the Old City were closed in recent years as a result of high municipal taxes and a lack of customers. “Taxation is an invisible tool…as dangerous as revoking ID cards and demolishing houses,” he said. “Israel will use this as pressure and as a tool in the future to confiscate these shops and properties.”

Ben Bernanke worries about being held hostage to the global economy. The central banker for the Palestinian territories frets about hostage-taking of a different kind.

"Sometimes people take a gun to the head of a branch manager," says Jihad al-Wazir, governor of the Palestine Monetary Authority. "Then I get a phone call."

The PMA is a most unusual central bank. It lacks a currency and a country. It can't control interest rates or fight inflation, like other central banks. And it communicates with its Gaza branch office by videoconference because Israel regularly blocks the border to PMA officials. Meanwhile, Hamas, the militant Islamist party that rules Gaza, wants to boot out the central bank's leader.

The PMA is playing a critical role nonetheless, pressing banks in the West Bank and Gaza to modernize. Its efforts have made it easier for well-off Palestinians abroad to invest back home. That's a big reason households' bank deposits rose by 20% in 2007, according to the International Monetary Fund.

The PMA also is encouraging enterprise in the territories, where much of the population now depends on make-work government jobs. It aims to turn itself into a "full-fledged central bank" by 2010, meaning one with the ability to manage a currency in case a Palestinian state is created.

With the U.S. making another push for a Middle East peace deal, the PMA also has an important political function. It's run by technocrats who are trusted by the West and seen as part of the economic spine of any future Palestinian state.

The rumpled Mr. al-Wazir, 45 years old, embodies the agency's contradictions. He is the son of a Palestine Liberation Organization co-founder who ran PLO military operations and was assassinated by Israeli commandos in Tunisia in 1988. The son says he won't meet with Israeli Defense Minister Ehud Barak, who as an Israeli commando directed the raid. He cracks bitter jokes about what he imagines to be Israel's "Office of Evil Intent," anonymous bureaucrats who make life difficult for the Palestinians.

But he also has a pragmatic bent. He is close to Israel's central banker, Stanley Fischer, who helps him cut through Israeli bureaucracy. He has an engineering degree and a doctorate in business administration. In the late 1990s, he headed a trade center in Gaza and put together a software venture with an Indian partner.

He loves the glamour of international finance, recounting his adventures at a conference in London. "We were toasting the Queen," he says. "I thought I was on a movie set."

Mr. al-Wazir has to navigate politics far more complex than most central bankers face. While the West Bank is run by a secular government, the Palestinian Authority, Gaza is ruled by Hamas, a party that doesn't accept Israel's right to exist and that the U.S. and Europe consider terrorist.

The PMA counts on Mr. Fischer to keep Israeli banks working with Palestinian ones to clear checks and provide cash. But the more Mr. al-Wazir relies on Israel, the less credibility he has with many Palestinians, especially Hamas.

"Jihad [al-Wazir] is a weak person and his personal interests aren't with the Palestinian interests," says Atef Udwan, a senior Hamas lawmaker who handles economic issues, speaking in a whitewashed compound in Gaza City. Mr. al-Wazir responds that his goal is to "preserve and protect the Palestinian banking sector in both the West Bank and Gaza."

Over the past six months, according to the PMA, Hamas has stepped up pressure on the central bank by seizing PMA cars and interrogating PMA officials. Mr. Udwan says Hamas might name a PMA deputy governor to regulate Gaza banks.

At the central bank's seaside office in Gaza City, Abdul al-Mashharawi, a senior PMA official, says: "Every morning we come to work and we say, 'Thanks to God [Hamas] didn't come to take away our business.'"

In the U.S., lawyers for terrorist victims are suing the PMA for damages, alleging it is part of a Palestinian regime that murdered civilians. The PMA has won several decisions in U.S. courts, by proving its independence from those who govern the Palestinian territories. But the ongoing cases, which are on appeal, have spooked Israeli banks, which fear being dragged into similar lawsuits.

The PMA was created in 1995 after the Oslo accords sought creation of a Palestinian state. Jordan vetoed a proposal to let the Palestinians issue their own currency, according to Israeli and Palestinian officials. Palestinians use Israeli shekels, along with U.S. dollars, Jordanian dinars and the euro.

The PMA itself now discourages the idea of a Palestinian currency. Although it collects data on economic activity and intends to begin forecasts of demand for electricity and cement, to manage a currency the PMA would need a capacity for sophisticated economic analysis that it lacks. As a reminder that a nationalist currency dream can go sour, Mr. al-Wazir keeps a photo of a Zimbabwe $100,000 note, now all but worthless after years of ruinous economic policies.

Over the years, the Palestinian economy has crumbled. Israel has barred thousands of Palestinians from working in Israel and erected a web of roadblocks that hobble Palestinian businesses, responding to what it saw as a security threat. The economy of the West Bank and Gaza shrank 40% between 1999 and 2006, after accounting for inflation, and has barely grown since then, the IMF estimates. Its annual output is about $5 billion.

After Yasser Arafat's death in late 2004, a cadre of Palestinians trained at the IMF and World Bank sought to remake agencies that were known for corruption and cronyism. A former IMF staffer, George Abed, took over the PMA, and described it in a central-banking journal as "tense, fearful, demoralized and fractured." He shrank its staff, ousting those without sufficient economic training.

In the West Bank, the PMA created a modern credit bureau to help banks check borrowers' backgrounds. It insisted that family-owned banks add outside directors, to reduce self-dealing. It is working on an electronic system to speed business payments.

In its small headquarters building in Ramallah, shared with the Palestinian water agency, Mr. al-Wazir recently updated two dozen bankers. Fielding complaints that Israel hadn't replaced damaged or worn-out shekel notes, he said he would turn to Mr. Fischer, the Israeli central banker, and others for help. (Later, he managed to get 40 million shekels in new bills, worth roughly $11 million.)

New Code

Seated at a table with a model of Jerusalem's Dome of the Rock mosque in the center, Mr. al-Wazir said the central bank soon would issue a new corporate-governance code. Thanks to the PMA's rules, Palestinian banks don't do business just with well-connected families, as they used to, say banking experts. Hashim Shawa, CEO of Ramallah-based Bank of Palestine, says his institution is starting to make mortgages, student loans and loans to smaller businesses. Mr. Fischer says the PMA "leadership is operating at a very high level."

To make sure the 21 banks the PMA regulates can continue doing business internationally, the authority demands they enforce rules against money laundering. Essentially, transfers are supposed to be matched against lists of terrorist groups to ensure that money doesn't go to their accounts. The PMA says depositors must sign checks in Roman as well as Arabic letters, to make it easier for outsiders to check, and that depositors must have identification numbers registered with Israel and the PMA.

"From our perspective, the PMA has done a really challenging job well," says Daniel Glaser, a U.S. Treasury official responsible for combating terrorist financing.

Israel wants the PMA to go further and press money changers and charities to cut off entities involved in terror financing and supporting Hamas. "If they want to clean out their stables, they still have a lot to do," says Yehuda Shaffer, Israel's top anti-money-laundering official. Mr. al-Wazir says a crackdown on money changers would backfire by driving them underground.

In Gaza, the PMA's job is especially hard. Hamas, having taken control after a 2007 civil war, is on international terrorist lists, as are many Gaza charities and Hamas partisans. So to stay in business, Gaza banks are under PMA instructions to cut off a good chunk of the Gaza population.

The reaction to PMA rules sometimes has been violent. After Arab Bank shut down Hamas accounts in late 2006, someone detonated a bomb in a Gaza branch (while it was closed). Around the same time, Bank of Palestine found a hand grenade wired to a door.

'Armageddon' Scenario

Mr. al-Wazir, who has deep roots in Gaza, became deputy head of the PMA in 2006, before taking the top job at the end of 2007. He put together contingency plans for dealing with potential threats, which he dubbed "Hamas-minus," "Hamas-stan" and "Armageddon."

The Armageddon scenario would involve Hamas robbing banks, cutting off power to them and kidnapping managers. It hasn't happened. But to prepare, the PMA ordered banks to buy backup generators. They came in handy after a different challenge: Israeli attacks that crippled Gaza power plants.

The PMA and the Hamas government have especially tussled over Palestinian Islamic Bank. That bank paid the salaries of some Hamas security people last year, claiming it had received mistaken orders from the West Bank's secular government. The PMA ordered it to shut down the Hamas accounts and seek to have the money returned.

Hamas then seized a bank manager, pressuring him to make further payments, which he refused to do. The PMA pressed Hamas to release the man by threatening to shut down the entire banking sector. Hamas released the kidnapped manager after several hours, but didn't repay the money it had received. Afterward, the PMA fined the bank heavily, convinced that the bank had meant to help Hamas.

"We don't know how to deal with one government in Gaza and another one in Ramallah," says a regional manager at the Palestinian Islamic Bank, Imad al-Sadi. "Two governments for a people that don't have a state."

Hamas doesn't insist that Gaza banks refuse to pay interest, as some interpretations of Islamic law would require. But the confrontation prompted Hamas to look again at how it could strip power from the secular PMA, says Mr. Udwan, the Hamas lawmaker.

One possibility is to appoint a Hamas deputy PMA governor -- who would order local banks to ignore Mr. al-Wazir's dictates. Another idea is to recruit banks that would process overseas payments for Hamas in spite of threats of being blacklisted by the U.S. Treasury. "Will it be a risk, yes," says Mr. Udwan, a quiet man in steel-rimmed glasses. "But we think we can manage it."

Mr. al-Wazir says he doubts Hamas would be able to persuade local banks to participate. Besides, he notes, Israel controls the shipment of shekel notes into Gaza. If Hamas tried to get banks to ignore the PMA's orders, Israel might shut off the flow of shekels and leave Gazans with no way to withdraw cash, says an Israeli security official.

Already, Israel often delays shekel shipments because of divisions within its own government. Some Israeli security officials favor starving Gaza of money to try to turn the populace against Hamas; economic officials say that would backfire.

Mr. al-Wazir says he recently turned to former British Prime Minister Tony Blair, who is now a Mideast negotiator, for help in getting 70 million shekels shipped to Gaza. But he worries that future shipments will be blocked by unknown foes in the "Office of Evil Intent" and deepen the misery in Gaza. "Palestinians deserve something better than a failed state," he says.