After getting Iraq's first post-invasion cellular phone network operational in four months, Allan Richardson expected that launching the second Palestinian mobile service would be easy.

But nearly a year and a half after arriving here, the chief executive officer of Wataniya Palestine Telecom is still waiting for Israel to release cellular frequencies.

The delay has held up a $650 million investment in the Palestinian economy and the creation of 2,500 jobs in the midst of double-digit unemployment.

Many see Wataniya as a test case of whether the Palestinian economy can recover: Success could spur the prosperity negotiators hope will build support for a peace treaty. But continued delay is likely to deter entrepreneurs, perpetuating the conditions that sow extremism.

For now, the Mr. Richardson remains optimistic. The native Scotsman walks through an empty office floor that will be the location of the call center.

"You can do business here," he says. "It's difficult, but it can be done. You've got an economy here which is like a bottle that is corked up."

Last week, those concerns were the focus of discussions among more than 2,000 participants at an investment conference in Bethlehem.

Guards with AK-47s secured the gleaming convention center as entrepreneurs and investors debated whether now is the time to invest in the West Bank or Hamas-controlled Gaza Strip.

Sam Bahour, a Palestinian-American business consultant who lives in Ramallah, said the conference successfully applied pressure on Israel to ease restrictions on Palestinian businesses.

"It's critical that some of these projects do get realized. Economic activity is more than just generating profits. It's a factor in our ability to survive," he says.

At the same time, "we need to be very honest and realistic about how difficult the investment environment is. It is nowhere near ideal."

Operating in less-than-ideal business environments seems to be Richardson's trademark. He's helped set up networks in Iraq and Afghanistan.

In the West Bank, the main obstacles are bureaucratic, he says. The Gaza Strip, which is included in Wataniya's $350 million license fee, is completely beyond reach because Israel has sealed off imports to the Hamas-run coastal enclave.

In principle, Israeli officials have given their agreement to make the cellular frequencies available but have not yet formally signed over the airwaves. After the frequencies are released, Wataniya still needs Israeli customs authorities to release the broadcast equipment – another hurdle which could drag on for months.

"Everybody is talking about boosting the economy of Palestine.... But we are here sitting waiting to invest," Richardson says. "We're not asking for money. We're going to put money in the economy, we're going to create jobs.... My question is why is it taking all this time? There's a lot of money at stake."

In addition, making cellular phone services more competitive will lower prices among the Palestinians. Tony Blair, the former British prime minister and special envoy of the "quartet" of peacemakers has already interceded on behalf of Wataniya. This month, the quartet and Wataniya said they've been promised by the Israelis that the frequencies will be released in days.

Israel's communications ministry declined to comment when asked about the year-long delay. Suleiman Zuhairi, the Palestinian deputy minister for information technology and telecommunications, accused Israel of dragging its feet for political reasons.

In a report released last month, the World Bank estimated that the West Bank and Gaza experienced zero growth overall in 2007. At the same time, the World Bank projected growth of 3 percent for 2008 in the Palestinian territories – a pace that won't keep up with the population growth.

If the Palestinians can make their government run effectively and Israel frees up restrictions intended to hinder militants, the economy could see double-digit growth, according to the report.

The large turnout at the business conference suggests that there is an ample number of professionals who share the view that there is business to be done despite the violence.

"There's always a risk in business. There is no investment that is guaranteed," says Ayman Al-Majali, the vice chairman of the Jordan Commercial Bank, which plans a $100 million investment in the West Bank. "We want a return, but we also want to help Palestinians exit their poverty."

Despite disruptions to Palestinian life, PalTel, the Palestinian telephone monopoly, reported that profits at its mobile phone subsidiary, Jawaal, increased 50 percent from 2006 to 2007.

"People operate in crisis mode all the time, and a mobile phone is part of the survival kit," says Kamel Husseni, PalTel's corporate affairs adviser.

That probably explains why the majority owner of Wataniya, Qatar Telecommunications, has the patience to negotiate with both the Palestinian Authority and Israel for the frequencies.

"I can see both sides, but I'm not a judge. I'm a businessman," he says.

And yet, Richardson can't resist pitching his philosophy on the role of telecoms could play in the Mideast: "You can't shoot a Kalashnikov if you are talking on a mobile."