Gaza is the most conservative of Palestinian communities; its Islamist militants once set fire to a sea-front hotel, a restaurant and other such dens of iniquity.

So imagine the pious horror at the opening of Gaza’s first and only nightclub. On a Thursday evening of the Muslim weekend, I found the Zahra al-Mada’in, the Flower of the Cities, packed almost to capacity, not just with lonely young men come to admire Gaza’s first belly dancers and songstresses – locally recruited gypsies – but with entire families, women, children and even a babe-in-arms.

In other smart or risque places, you can add illicit liquor to your Coca-Cola, but here, in another Gazan first, you can order your scotch or your Israeli Maccabee beer on the very premises. However the oddest thing is not so much the place, but the clientele: they are mainly “Tunisians”, not Gazans at all.

Tunis was Yasser Arafat’s last headquarters in exile, and “the Tunisians” is a nickname which Gazans gave to those, officially known as “returnees”, who came with him when, following the Oslo accord he established himself here instead. There are about 10,000 of them, bureaucrats who run his Palestinian Authority, former guerrillas who dominate his enormous security apparatus.

The Tunisians” have “come home” to the soil of Palestine itself. But the terrible irony is that they are not merely strangers in their own land, they are for the most part disliked, despised, even hated. It is they who introduced such abominations as Zahra al-Mada’in.

But it is not just Hamas and Islamic Jihad, or bigots in general, who feel the shock. Liberals who welcome any challenge to the dour local mores feel it too. For almost everyone, “the Tunisians” are as alien, as unfit to rule, as those – Turks, British, Egyptians, Israelis – who came before them.

And because they are actually Palestinians, and came as “liberators”, the shock is even worse. Arafat’s Palestine Revolution never made itself very popular, among governments, elites or even ordinary people of the territories it passed through.

But at least in Jordan, in the sixties, its men truly fought and died. So, though with less purpose or conviction, did they in Lebanon in the seventies and eighties. Obviously, during the eighties and nineties, they could not fight from Tunis, and other far-flung Arab countries in which they fetched up, but at least, as members of the world’s richest liberation movement, they continued to pump money into local economies.

Here, in the homeland itself, far from fighting the former Zionist foe, they lead the collaboration with it. They may attract money in the form of international aid to this poorest of Palestinian communities, but they take at least as much away from it. They are oppressive, and immeasurably corrupt.

“We live in amazing, shameful times,” said one of Gaza’s merchant princes, and a former Fatah fighter himself, “but you should know that every revolution has its fighters, thinkers and profiteers. Our fighters have been killed, our thinkers assassinated, and all we have left are the profiteers. These don’t think even primarily of the cause, they don’t think about it at all. They know that they are just transients here, as they were in Tunis, and, as with any regime whose end is near, they think only of profiting from it while they can.”

This is a damning indictment, but if any system can be measured by the conduct of its bureaucrats it is a fair one. In fact, the justice of it hits even a casual visitor in the eye. Just go to the district of Rimal. Rimal means “sand”, and on this former wasteland there is now arising, at incredible speed, the most up-market neighborhood of “liberated” Gaza.

You might not think it at first sight; a sand-smothered, refuse-strewn mess of empty lots amid shacks that are disappearing and half-finished concrete monsters that are taking their place, it differs little in spirit from the rest of this desolate, infinitely decrepit and unsightly city.

But it is mainly here that “the Tunisians” have taken root, with their amazing array of “ministries”, “authorities” and special “agencies”, police stations and sentry posts, choice rooftop apartments, villas and places of entertainment.

Here is Arafat’s own sea-front bureau, al-Muntada, The Club, with all the “presidential” trappings he so adores, and here in the very next building, is the Zahra al-Mada’in cabaret.

Here you will sooner or later run into Suha, his young wife, out for lunch at Le Mirage, an exclusive sea-front restaurant, with her infant daughter and a posse of Force-17 bodyguards. You will run into her, at least, when she is not in Paris, where she does her shopping and can find a decent hairdresser, unlike the first, disastrous Gazan one, who reportedly turned her blonde locks almost orange.

And you are bound to come across Susie, her ample British nanny who affects leopard-skin tights and often has too much to drink, a condition in which she is apt to dispense indiscretions about the presidential household, threatening, some fear, another Middle Eastern nanny scandal of Netanyahu proportions.

Among the fancy new villas, fanciest is that of Abu Mazen, key negotiator of the ill-fated Oslo accord. It is not clear who paid for this $2 million-plus affair, all balconies and balustrades in gothic profusion, but the graffiti which some irreverent scoundrel scrawled on its wall proclaimed that “this is your reward for selling Palestine”.

Lifestyles match. Nabil Shaath, the highly articulate minister of planning much seen on Western TV screens, recently took a wife young enough to be his daughter. He required four receptions to celebrate this event, in Cairo, Gaza, and two in Jerusalem. Because his Israeli friends could not go to the one in East Jerusalem’s Orient House, that “illegal” outpost of the Palestinian Authority, he had another in the Ambassador Hotel.

For salutary contrast with Rimal, just stroll up the coast where, just beyond Le Mirage, you will come upon the awful squalor and open sewers of the Shati’ refugee camp, conditions resembling those n which most Gazans live.

There, in a windowless concrete block they call “the cafe”, I asked some day laborers, idled by yet another Israeli border closure, whether they thought that Gaza’s per capita income, far from rising, had actually fallen by as much as 39 per cent since the Oslo accord. For that is what a recent UN survey says. “More like 75 per cent,” one replied. “some no longer think it a shame to send their children out to beg.” That also seems to be borne out by the UN report, which records an “alarming” increase in “child labor”.

More shocking, really, than the contrast itself is what lies behind it. When he first came here, Arafat said he would turn Gaza into a “new Singapore”. Palestinian businessmen, who made their fortunes building the Arab oil states, would help him build his.

But, three years on, it is clear that none will seriously touch it. Not just the Israelis deter them, with their repeated frontier closures that bedevil businessmen as well as workers. In truth, Arafat does not want them either.

For they would undermine his control, achieved through a combination of police surveillance and money power. So instead of any kind of independent, creative, wealth-producing capitalism, he and his coterie of unofficial economic “advisers” have thrown up a ramshackle, nepotistic edifice of monopoly, racketeering and naked extortion that enriches them as it further impoverishes society at large.

Two years ago, the al-Bahr company barely existed. Al-Bahr means “sea”. But Gazans now dub it “the ocean”, because, they say, “it is swallowing Gaza whole”. Legally speaking, not being officially registered, it should not be operating at all. Yet it is so brazen about its powerful connections that, to the impotent indignation of the Palestinian “parliament”, it even uses the Authority’s letter heads.

It belongs to Arafat, or, more precisely, to his wife Suha and the other “shareholders” who handle his private finances. Al-Bahr – who else? – runs the Zahra al-Mada’in nightclub.

The premises were supposed to go by open tender to the most qualified bidder. But Arafat just signed a decree placing it in his protege’s hands. It is never by fair, and often by quite foul, means that Arafat Incorporated moves into real estate, entertainment, computers, advertising, medicine, insurance. Only the most powerful Gazan businessmen can resist its encroachments. It goes chiefly after small and medium fry. These are pressed into “partnership” with al-Bahr.

Al-Bahr is the new, strictly domestic instrument of Arafat’s takeover of the Gazan economy. It complements already existing monopolies, for the import of such basic commodities as cement, petrol or flour, which he operates in complicity with the Israelis. For example, out of the $74 for which a ton of cement is sold in Gaza, $17 goes to the Authority, and $17 into his own account in a Tel Aviv bank.

It is no secret what Arafat uses this money for. “I shall give you all you want if you obey and protect me – and give me all I want.”

That has always been his message to his nomenklatura, and it has been amazingly successful. For what resistance can be expected from an apparatus whose minister of civil affairs, Jamil Tarifi, a big contractor, goes on building Israeli settlements even as the Palestinian people threaten a new intifada over Har Homa?

Or whose high officials use their VIP cars to sail through Israeli checkpoints on their way to the fleshpots of Tel Aviv even as Israeli border closures rob day laborers of their menial wage?

Rarely can a revolution have degenerated like Arafat’s and yet survived. It only survives because, in robbing his people to bribe his bureaucrats, he has proved so great a commitment to the peace process that the parties on which he now completely depends – Israelis, Americans, the international community at large – are willing to ignore, even encourage, his manifest corruptions.

The Israelis may be embarrassed by the latest, scandalous revelations of their leading newspaper, Ha’aretz, about the Arafat slush fund that the great peace-maker, Yitzhak Rabin, authorized.

But so long as Arafat goes on bending to their conception of the peace, they will go on letting him draw on it.

European governments would be far more embarrassed if it were established that Arafat really does earn far more from al-Bahr and his illicit monopolies than from all their aid combined. But unless the scandal becomes too great, they will go on paying too. But they delude themselves if they think that they can go on propping him up for ever. And in this regard, it seems, Arafat and his “Tunisians” are more clear-headed than they are. They know that there is a point beyond which even he cannot go without risking his people’s wrath.

Small wonder then that, according to Ha’aretz, a part of Arafat’s secret fund is earmarked for “emergency situations”, such as a coup or a civil war, in which he, his family and immediate entourage could be forced to flee into exile once more, and re-establish the leadership from there. They know, better than anyone, that the peace process, and all they get out of it, is built, like the Zahra al-Mada’in, on nothing more solid than the fine white powdery sands of Rimal.