Jenin, West Bank - Just outside this northern West Bank city, the groundwork is being laid for the first Israeli-Palestinian free-trade zone along the route of the security barrier separating Israel from the West Bank.

The Israeli and Palestinian officials behind the project say that with enough foreign aid, the industrial zone could generate 10,000 jobs for Palestinians and millions in revenue for investors. Both sides hope it could economically rehabilitate Jenin, one of the hardest-hit areas in the West Bank, and serve as a model for other Israeli-Palestinian industrial zones.

The economy in Jenin has been decimated since construction began on the security barrier five years ago this month. But as the effort to open a free-trade zone indicates, for all its contentious political implications the security barrier is providing the kind of stability locals on both sides say could help lift the area out of dire economic straits.

Jenin’s governor, Kadura Musa, the Palestinian behind the plan, said that “this project could be up and running within a year.” His Israeli counterpart, Gilboa Regional Council head Danny Attar, conceded the idea was floated more than a decade ago, but said “this time both sides want to start the industrial zone. That’s the difference. It’s a golden opportunity.” The Israeli side has already drawn up blueprints for the industrial zone, down to drainage systems and an electrical grid. The Palestinians will provide the land, about 250 acres.

Both sides are collaborating to secure nearly $14 million in startup cash from the World Bank. Last week they hosted the Turkish ambassador to Israel, who promised to promote the plan.

Goods produced in the industrial zone would be exported tax free to the United States. Similar free-trade zones in Jordan have lured brand names like Calvin Klein and Victoria’s Secret.

The stakes are high for Musa and his constituents, as he illustrated recently by whipping open his office curtains and pointing a pudgy finger at the abandoned industrial zone across the street from his office. “That zone provided work for thousands,” he said. “Auto body shops, garages, humus restaurants — 25,000 people used to work there. But now we have 78% unemployment.” By comparison, unemployment in Gaza, considered by many to be the pinnacle of Palestinian misery, is less than 40%, according to the World Bank.

Jenin has been hit worse than other parts of the West Bank in part because the evacuation of Jewish settlers from the area in August 2005 further cut it off from Israel, its mainstay of jobs and customers. Whereas entrance through crossings in the barrier near other West Bank cities is either permitted or simply overlooked for Israeli Jews and Arabs, every pedestrian going in and out of the Jenin area must cross the barrier at the Jalame Crossing. Motorists are forbidden to cross.

The gauntlet of security measures at the crossing was installed not to choke off commerce in Jenin but to halt the flow of suicide bombers into Israel. After the outbreak of the second intifada, waves of Palestinian suicide bombers spilled out from the West Bank. As many as 85% of those bombers came from Jenin, which lies just south of the Israeli province of Gilboa.

To protect his constituents, Attar demanded that Jerusalem build a security barrier — he calls it a fence — to separate Gilboa, an arc of hills and valleys bordering the northern West Bank, from places like Jenin. When the government balked, Attar launched an all-out media campaign, talking to anyone willing to listen.

He finally shamed the government into action by starting to build it himself in early 2003. Five years ago this month, the Israeli government approved construction. By August 2003 the Gilboa section became the first completed part of what would become Israel’s 450-mile barrier, and Attar became something of a national hero. Attar insists the security barrier has served Israel and his constituents well. “Since then we’ve seen nada, zero terrorist attacks, zero theft. Nothing,” he said while driving the Forward around on his trademark tour of the area. “You can’t get a more dramatic change than that.” Indeed, real estate prices have soared, and Gilboa has become such a hotspot that it has been chosen as the site of Israel’s first racetrack. But less then three miles across the security barrier, Jenin is a ghost town. Most shops are shuttered, and men loiter in tea shops, nursing thimble-sized coffees.

The security barrier’s crossing terminal, which Attar had envisioned as a “breathing border,” has turned out quite different than expected. It is designed to channel 5,000 people an hour between Israel and the West Bank, but only a few hundred cross a day.

Reserve Brigadier General Baruch Spiegel, the man tasked by the Defense Ministry in 2004 with designing the barrier crossings, said that “it’s not an issue of capacity but of policy.” If the current talks between Israeli Prime Minister Ehud Olmert and Palestinian Authority President Mahmoud Abbas succeed, Spiegel said, “the Jenin area would be among the first to benefit.” But he noted that even now, when it is hard for people to cross the security barrier, goods and produce flow through the terminal at a brisk rate.

It is clear to the casual observer, however, that Jenin has withered. In the 1990s it grew wealthy, as Israeli Jews and Arabs flocked to the city hunting for bargain-basement prices. The difference between those prosperous times and now is etched onto Rafa Abu Alaya’s face.

Abu Alaya is the owner of a spotless butcher’s shop in downtown Jenin. He depends on income from his brother in Australia; without the help, he couldn’t afford to pay his rent of $150 a year.

Leaning against his chopping block, letting cigarette ash float down to the floor, he says he makes less than his father did before the Six-Day War, when the West Bank was under Jordanian rule. “Not even in my nightmares did I think it’d get so bad,” he said. And he’s not too eager to latch on to what he calls pipe dreams. “We’ve heard of [an industrial zone project] since the Palestinian Authority began in 1993,” Abu Alaya said. “And we’ve not seen a single project materialize. They are only making fools of us by talking about such projects.”

Attar says he sympathizes with Palestinians like Abu Alaya. He also recognizes that the economic fallout caused by his section of the security barrier might blow back in Israel’s face: “As a father I’d do anything I need to feed my kids; I’d turn the world upside down, I’d launch terrorist attacks, anything.”

The idea behind the planned Israeli-Palestinian industrial zone, Attar said, “is to remove people’s motivation to do that.”