The Palestinians will be able to make a strong case that they have built the foundations of a nation when they ask the U.N. this week to recognize an independent Palestine in the West Bank, Gaza and east Jerusalem, the lands Israel occupied in 1967.
In the West Bank, they've been laying the infrastructure piece by piece, including widely praised systems of public finance and banking and a U.S.-trained security force. They've amassed many of the trappings of independence, from their own internet domain and international dialing code to a flag, an anthem and a national football team.
But their U.N. bid also highlights a simple, bitter reality: They cannot establish an actual state without Israel's blessing, even if the Security Council or a majority of General Assembly members recognize Palestine in pre-1967 borders.
Israel has kept a tight grip on the occupied lands, even while engaging in sporadic talks _ frozen since late 2008 _ on the terms of Palestinian statehood. It has annexed east Jerusalem, enforces a border blockade of Hamas-ruled Gaza and retains ultimate say in the West Bank, despite limited self-rule there by Palestinian President Mahmoud Abbas's government.
Israel remains the final arbiter for some 4 million Palestinians who often can't travel, trade or even build homes without Israeli permission. Ambitious plans can't advance, such as building an international airport in the West Bank or issuing a currency, the Palestine pound, to replace the Israeli shekel.
"It's not going to change anything in my life," Mofid Sharabati, a plumber in the city of Hebron, said Sunday of the bid for U.N. recognition.
His family of seven lives in the Israeli-controlled center of Hebron, where some 500 Jewish settlers live. For the past five months, Israel has blocked Sharabati's plans to enlarge his cramped home even though he says he has a building permit. He was never given a reason, but says he believes it's because of pressure from settlers.
Many Palestinians are losing hope, saying they've tried everything to dislodge Israel's occupation _ negotiations, a violent uprising, nonviolent protests.
Abbas's U.N. bid grew from the same desperation.
The Palestinian leader believes there's no point in negotiating with Benjamin Netanyahu because the Israeli leader seems unwilling to go as far as some previous Israeli leaders did _ contemplating a state in the pre-1967 borders, with some adjustments and land swaps to allow Israel to keep a few of the largest Jewish settlements closest to the old armistice line.
Netanyahu says he now accepts a two-state solution, but his envisioned borders seem far from what the Palestinians would accept, and he has enraged them with continued construction in Jewish settlements deep inside the West Bank.
Netanyahu has couched his arguments in security. Memories of Palestinian suicide bombings a decade earlier remain vivid, and Israel's withdrawal from the Gaza Strip in 2005 was followed by years of rocket fire by Gaza militants on southern Israel.
Israeli officials also say Palestinians failed to respond to serious peace offers in 2000 and 2008.
"Palestine" won't get full U.N. membership since only the Security Council could bestow such a status and the U.S. has said it would use its veto. As a lesser option, the General Assembly would likely accept Palestine as a nonmember observer state.
West Bank-based Prime Minister Salam Fayyad says his biggest achievement during four years in office has been to foster a shift toward pragmatism by focusing on the groundwork for a state. "There is a sense of self-empowerment, that we can do this," he said earlier this year.
Fayyad has partial control over some 40 percent of the West Bank _ islands of territory where the vast majority of its 2.5 million Palestinians live. Israel controls the rest, including key water sources and crossings in and out. It has final say over who can live in the territory and has restricted Palestinian immigration.
That arrangement was created by interim peace deals of the 1990s, a transition phase that has lived far beyond its intended five years. The sense of being boxed-in is pervasive in the West Bank, a territory about twice the size of Luxembourg. Palestinians must carry Israeli-issued ID cards, and anyone caught without one at any of the dozens of Israeli checkpoints within the territory could face detention.
Palestine's desired capital, east Jerusalem, is off-limits to Fayyad's government, a point driven home by a towering wall of cement slabs _ part of Israel's barrier of separation from the Palestinians.
Still, there is visible progress.
Construction sites line the main road from the graffiti-covered barrier wall into the interim capital of Ramallah, a metropolitan area of 120,000.
Scores of restaurants, coffee shops and bars, and more than a dozen hotels, have opened in Ramallah, serving an SUV-driving middle class and foreigners employed by international aid groups. A 23-floor glass-fronted office tower, topped by a revolving restaurant, is under construction.
The municipality is repaving streets, laying new sewage and water pipes and planting flowers. Some $300 million are going toward a new industrial zone.
In Hebron, the ancient and often troubled city to the south, mayor Khaled Oseily has completed $150 million worth of largely foreign-funded projects, including 20 schools and a municipal sports complex with squash courts and indoor gym.
"It looks like it will be a piece of New York," Rula Bader, 44, said of the transformation, as she watched her two sons play basketball in the new gym.
More than 10,000 Palestinians work in information technology, with the number of high-tech companies almost doubling to 110 in recent years. A $25 million venture capital fund by U.S. and Palestinian investors gave the industry another jolt.
The Palestinians were recently assigned their own postal routing code, and West Bank's air mail is now sent through Jordan, instead of Israel. Palestinians have their own Internet country code (.ps), unlike the independence-seeking Kurds, and their own international dialing code, 970. Palestine's football squad is ranked 157th out of 203 national teams.
Much of the development is funded by billions of dollars from donor countries. Having invested so much, Europeans, Americans, Japanese and others are unlikely to pull out and risk the collapse of the Fayyad government.
The situation is markedly different in Gaza, the coastal strip run since 2007 by the Islamic militant Hamas, Abbas's rival, and separated from the West Bank by about 25 miles (40 kilometers) of Israeli territory.
Hamas militants have built a separate bureaucracy and functioning government, with 20,000 civil servants and a 16,000-strong security force funded in part by Iran.
The Islamists have also imposed their ultraconservative mores step by step, especially on strict gender separation and modesty: Women are barred from smoking waterpipes in public or riding motorcycles, schoolgirls are pressured to wear long robes and headscarves and male hairdressers can no longer work in women's salons.
The deepening split has undermined the Palestinians' statehood claims, with Israel saying a peace deal can't be implemented as long as Hamas runs Gaza.
But a state is inevitable, says Jibril Rajoub, a former West Bank security chief and member of Fayyad's circle of pragmatists.
"I do believe, as a man who was involved in this struggle, which I think was too long, too arduous .... that the question is not whether we are close or far," said Rajoub, who spent 17 years in Israeli prisons.
"The question to the Palestinians and Israelis is how much do we save blood and suffering for both peoples."
Associated Press writer Ibrahim Barzak in Gaza City and Nasser Shiyoukhi in Hebron contributed to this report.