A state-of-the art Palestinian city with residential towers, a mall and a convention center is rapidly going up on once desolate West Bank hills and turning into a symbol of national pride.

A giant Palestinian flag flies from the highest point of Rawabi, signaling to Israeli settlers living nearby that the first new Palestinian city being built since Israel captured the West Bank in 1967 isn't just about real estate.

"It's a message ... that we can also put facts on the ground," said Palestinian-American developer Bashar Masri, using a phrase associated with Israel's settlement construction on lands the Palestinians want for a state.

But the West Bank's largest private investment project, totaling more than $1 billion, has also suffered costly delays because of wrangling with Israel over an access road that still lacks final approval, he said.

Rawabi's bumpy history illustrates the constraints of doing business under occupation, Masri said. It's also a harbinger of challenges U.S. Secretary of State John Kerry likely will face as he promotes a three-year plan for even more ambitious economic projects in the Palestinian territories, particularly in areas where Israel has restricted Palestinian development in the past.

The plan is meant to transform a sluggish Palestinian economy held back by Israeli constraints on access and movement, as Israelis and Palestinians negotiate the terms of Palestinian statehood.

But progress on the economic track is unlikely without a breakthrough in the talks, which are stuck after four months. Kerry was back in the region Thursday to try to break the impasse, but the two sides remain far apart.

Rawabi — Arabic for hills — offers a glimpse of what could be if statehood talks succeed.

The city looks like the large urban Israeli settlements in the West Bank with neat rows of apartment buildings and will have amenities unheard of in Palestinian towns, at least in such a concentration. Those include an open-air shopping mall, a convention center, restaurants, three movie theaters, a gym, a five-star hotel, a science museum, a medical complex, an amphitheater seating 5,000 and a soccer stadium.

It's the first Palestinian city built according to a master plan, in contrast to the crowded and often chaotic West Bank towns and refugee camps. The Palestinians have lived for the most part under someone else's rule, with limited local authority that didn't allow for large-scale urban design.

Construction in Rawabi began in 2011, with 5,000 laborers working in two shifts.

Eventually, Rawabi is to have 30,000 residents in 6,000 apartments and homes. Apartments in two of 23 neighborhoods and parts of the town center have been completed, and the first tenants are to move in by May.

On a recent afternoon, Abdel Baset Mahmeed, a 40-year-old high school principal from the Arab Israeli town of Umm el-Fahm, was touring Rawabi's hilltop showroom with glass-encased models of the city. "I never expected to see something like this in Palestine," Mahmeed said.

Next to the showroom, the giant flag, measuring 135 square meters (1,450 square feet), flew from a tall pole, in direct line of sight of the small Israeli settlement of Ateret on the next hill over.

Such proximity of Israeli settlers and Palestinians is typical of the West Bank's patchwork of jurisdictions.

Palestinians run their own affairs in just over one-third of the land, while the remaining 61 percent, called Area C, remains under sole Israeli control and is home to 350,000 Israeli settlers.

The World Bank has said that less than 1 percent of Area C is open for Palestinian use. The Palestinians could expand their economy by one-third if Israel allowed them access, the bank said.

Israel has said developing the Palestinian economy is a strategic interest, but that issues such as access to Area C need to be dealt with in negotiations.

The Rawabi developers — Masri's Massar International and Qatar's Diar Real Estate Investment Co. — ran into trouble over the land divisions early on in their project. More than 90 percent of the city's 1,560 acres (631 hectares) is under full Palestinian control, but the access road runs through Area C for about three kilometers (two miles).

Masri said he spent five years trying to get Israeli approval for the access road, with former British Prime Minister Tony Blair lobbying on Rawabi's behalf with Israeli Prime Minister Benjamin Netanyahu. About two years ago, Israel granted a temporary permit for a two-lane paved road, enabling Masri to push ahead with the construction.

A request for a permanent permit is now being considered, Israeli military spokesman Maj. Guy Inbar said. He said that process only could begin when Masri bought land alongside the road a few months ago so it could be widened.

Jack Nassar, a Rawabi spokesman, said Israel had denied permit requests because the road runs through Area C, close to a settlement, not because of land ownership issues.

The tussle over the road has caused delays and uncertainty, Masri said.

"A lot of people are skeptical about buying because they worry about the road," he said. "They don't want to be in a prison," he said, referring to previous periods of unrest in the West Bank when Israeli troops would seal Palestinian communities.

The project is also running over cost because the cash-strapped Palestinian Authority has not kept its promise to lay down infrastructure, he said. Masri said he's had to raise apartment prices and is now trying to attract more buyers with easier financing, adding that more than 600 apartments have been sold.

Masri said he has no regrets. "Investing in Palestine is very risky, regardless of what project," he said.

Netanyahu has said he supports economic development in the West Bank and he has eased some restrictions on Palestinian trade and movement. His office didn't respond to requests for comment on Kerry's economic plan, which includes another new city and a Dead Sea tourism resort in Area C.

U.S. State Department spokeswoman Jen Psaki said the economic track is being discussed with both sides.

Mohammed Mustafa, the top official in charge of the West Bank economy, said the plan could quickly wean the Palestinian self-rule government off foreign aid, but won't go anywhere unless Netanyahu gets on board.

"I was told that some approvals (of projects) require 16 Israeli (entities) to agree to it," he said. "This is not a recipe for success. What needs to be done is ... a political agreement for the whole package to be approved."


Associated Press writer Lara Jakes in Jerusalem contributed reporting.