When the public at large think of Gaza, they’re more likely to visualise razed buildings and rockets than luxury lodgings. Yet despite the enormous obstacles arising from tensions with Israel, in June a five-star hotel opened on Gaza City’s beachfront. With its 225 guestrooms and suites, two-tiered swimming pool, landscaped gardens and ballroom, the 18,000m2 Al Mashtal is the kind of sumptuous resort that, anywhere else on the Mediterranean coast, wouldn’t raise an eyebrow.

The hotel was financed by the Palestinian Development and Investment Company (Padico), owned by Palestine’s richest inhabitant, Munib Masri. But for billionaire philanthropist Masri (the largest private investor in the West Bank and the Gaza Strip, and the territories’ principal private employer) this is no vanity project. Indeed, Padico has other ambitious schemes planned for the area around Jericho – including a major real-estate and leisure development, transport infrastructure and a $300m oil-and- natural-gas power station on the northern West Bank – which it intends to finance by selling five-year bonds worth $70m (€50m) in a private placement.

Masri says he expects most of the investment will be from the Palestinian banks and other financial institutions in Palestine and Jordan. Boosted by overseas aid, the West Bank and the Gaza Strip economies grew by more than 9% last year, while the Palestine Exchange in Nablus was alone among Arab stock markets to show a rise in the first quarter of 2011. As CNBC Business went to press, the UN was preparing to vote on whether to recognise Palestine as a state. For its part, meanwhile, the Palestinian Authority (PA) is engaged in a two-pronged effort to create a modern economy in the West Bank.

“This greatly supports our strategic plans and future directions,” Padico chief executive Samir Hulileh tells CNBC Business.

“Diversifying and matching our investments with the incoming cash flows will enable us to fund long-term and strategic projects while reducing dependency on short-term bank loans. This new financing scheme will also allow us to adopt a consistent dividend policy.”

Domestic corporate heavyweights jumping aboard the bondwagon include telecommunications firms PalTel and Wataniya and the Bank of Palestine, who between them are launching new issues, IPOs and prospective stock-market link-ups abroad.

Ramallah, the commercial hub of Palestine, received a confidence boost last November when, after a nine-year delay, the Mövenpick Ramallah became the first international hotel to open on the West Bank, in a city once synonymous with Yasser Arafat’s besieged headquarters and Palestinian militancy. The five-star hotel – which has 171 rooms (including two presidential suites) and a spa – is owned by the Arab Hotels Company, of which Padico is a major shareholder, and is managed by Mövenpick Hotels and Resorts. Michael Goetz, the property’s general manager, says his Swiss employers decided to open the hotel after weighing up factors such as political stability, an encouraging growth rate and a building boom in the region over the past few years.

A recent IMF report concluded that despite the difficult conditions, steady reforms in the public finance management system have enabled the PA to establish fiscal transparency and accountability in line with international standards. These reforms, along with a prudent fiscal policy, have contributed to a rise in the quality of spending and a sharp reduction in donor aid for recurrent spending, from $1.8bn to $1.2bn in the two years from 2008 (or from 26% to 16% of GDP). It’s hoped that further reductions will bring that figure to less than $1bn in 2011. However, this good fiscal performance has been marred by the accumulation of payment arrears and domestic debt, mostly owing to repeated shortfalls in aid disbursements.

The Jenin-Nablus region, a former terrorist stronghold until five years ago, has played a significant part in the PA’s economic boom. Its revival has been fuelled by Arab Israelis who head there en masse and buy everything they can get their hands on – food, furniture and household items – sometimes for half of what they cost in Israel. One of the main reasons for this is the PA’s policy of imposing extremely low taxes on goods.

While peace itself might not be on the cards, an end to the exhausting Israeli-Palestinian conflict could be facilitated by the business sector, possibly because business interests trump political stubbornness and tensions. According to the Oregon-based NGO Mercy Corps, 32% of Palestinian technology companies cooperate with Israeli companies through sales and outsourcing agreements. Israeli and Palestinian executives add that building up private industry is critical for further economic growth and peace. Last year the Palestinian economy grew by 9.3%, and Samir Abdullah – the former planning minister, current president of the Rotary Club and head of an economic research institute – says: “When we finally have access to our resources and are no longer restricted by the occupation, our economy will be able to grow by 25% a year. Then we'll be the new tiger economy.”

But it is further to the east, in the West Bank city of Jericho, where the investment is more visible. A green oasis in the Jordan valley, 250 metres below sea level, Jericho is the lowest city on earth and the oldest continuously inhabited town in the world, dating back some 10,000 years. Jericho Gate Real Estate Investment, owned in equal parts by Padico and the PalTel Group, is investing $49m (€35m) over the next five years to develop 740 acres of land at the walled city’s southern entrance. As well as basic infrastructure, the scheme incorporates luxury housing, along with tourist and entertainment enterprises such as amusement and water parks. The signature project, though, will be a winter resort – combining ancient and modern design elements, and with a scenic view of a neighbouring date-palm plantation – which Masri hopes will have global appeal.

Padico has partnered with several local and regional investors to establish the Palestine Power Generating Company and build the West Bank’s first energy plant, designed to meet a third of the West Bank inhabitants’ needs. (A 140MW diesel-burning plant just south of Gaza City was built in 2004; Palestinians’ remaining electricity needs are met by Israel.) It will have an initial capacity of 200MW, potentially rising to 400MW. Using a public-private partnership model commonly used in the power-generation sector, private enterprise will design, build, own, operate and maintain the project, with all the financial risks and rewards that subsequently arise.

The plant will cost around $300m, some $120m of which will be financed through equity, while the rest will come from medium and long-term loans. It could potentially lead to an independent Palestinian power sector, paves the way for large-scale industries such as cement factories and steel mills, and will offer more reliable and competitive power sources for West Bank Palestinians.

Then there is the date industry. In March last year, a Padico subsidiary, Nakheel Palestine for Agricultural Investment (NPAI), was established to develop the production of Medjool dates – known as the “king of dates” as they’re exceptionally large and extremely sweet – with an eye on foreign markets, particularly in Europe. The project will represent the biggest Medjool plantation in Palestine, set up over a total land area of roughly 620 acres. Initially 7,500 palm trees were planted on 150 acres in 2010, and the rest of the land area is due to be planted in full by 2013. In addition, the company is planning to build a packaging facility, which will offer its services to other local companies, boosting employment even further. NPAI, which started with $1m in capital, expects this to rise to $11m in the next two years.

Another Padico strategy is to invest in East Jerusalem as part of the company’s commitment to develop the holy city with a view to reinforcing its status as the capital of the Palestinian state. (Even though their aspirations differ, the Jewish state tends to leave the development of East Jerusalem to Arabs.) Now a Padico subsidiary, Jerusalem Tourism Investment Company, has revived the landmark Hotel St George International. Following an extensive renovation, this well-known but long-closed Arab hotel – which has hosted a variety of visiting presidents since King Hussein of Jordan officially inaugurated it in 1965 – is being redesigned to blend the past with the present. Following a scheduled reopening in late September, guests in its 144 luxurious rooms will have at their disposal a banqueting and conference hall, together with several fine restaurants overlooking the Old City’s minarets and domes.

For Masri, this project is particularly significant because of Jerusalem’s religious status and historic importance to the Palestinian people. “Padico has always been able to turn challenges into opportunities through hard work and devotion,” he says. “Our ambitions are endless, and the trust and confidence the Palestinian people have put forth in us enable us to become more persistent in serving Palestine, a land to which we will always remain loyal.”