Between tightly packed meetings with foreign diplomats, local clan leaders, and manufacturers, Hebron Mayor Khaled Osaily offers visitors a glossy booklet detailing the achievements of the West Bank's largest city.

A former tycoon, he has brought a business mentality to Hebron's bureaucracy, introducing new programs that have streamlined operations.

"This is the foundation of the state," he beams.

On the first floor of the municipality building, a row of tellers sit behind flat-panel displays – Hebron's "one-stop shop" for citizen services, as he calls it, which has reduced processing time by about two-thirds. One floor up, the municipality's chief for water resources boasts that a new computerized monitoring system cuts down on wasted water.

Beyond the confines of the municipal building, work is being completed on a new community center and school, a project financed by South Korea.

"We are better than many other countries already," says Mayor Osaily.

Indeed, the whir of activity in Hebron is part of a broader Palestinian Authority (PA) initiative to demonstrate that the building blocks of independence are in place ahead of a key United Nations vote on Palestinian membership.

Yesterday PA President Mahmoud Abbas confirmed that Palestinians will seek full membership as a sovereign state when the UN General Assembly convenes in New York on Sept. 20. His announcement, at a press conference in Ramallah, rebuffed a last-minute American diplomatic effort to persuade Mr. Abbas to call off the UN statehood campaign, which the US and Israel have characterized as a unilateral move that bypasses years of peace talks. The US has threatened to withhold its $550 million in annual aid and veto any vote in the UN Security Council on Palestinian membership.

As Mr. Abbas forges ahead despite such threats, even some Palestinians aren't convinced that the PA's building blocks can support a stand-alone country just yet – and say that pushing for the UN to take action is therefore premature and potentially detrimental to Palestinians.

Like hundreds of thousands of Palestinians employed by the government, Omar Deek – an employee in the PA's Education Ministry – only got half his salary for July because the government didn't receive funds pledged by Arab donor nations.

Looking ahead to the UN vote, and the possibility that the United States and Israel may withhold key funds in retaliation, Deek is worried about more salary problems since the PA is heavily dependent on foreign aid. He's already looking for a second job as a driver.

"I hope that the Palestinian Authority will become aware of the dilemma of its citizens more before it takes political decisions that deter the international donors," he says.

Together, Osaily and Deek represent the dilemma facing Palestinian leaders – and their Western backers – at a time of tremendous upheaval in the Arab world. Winning international recognition at the UN of a Palestinian state in the West Bank and Gaza Strip would be a historic victory with far-reaching symbolic, diplomatic, and possibly legal implications.

But trying to establish a state prematurely – one that is completely dependent on outsiders and unable to control all its territories – could discredit PA leaders at home, exposing the secular government in Ramallah to a number of potentially disastrous consequences, including economic crisis, a challenge from the Islamist militant group Hamas, or a popular uprising inspired by Arab revolutions elsewhere in the region.

"The Palestinians don't have the ability to stand on their own if Israel says, 'Do it yourself,' " says a senior Israeli official. "It's an international illusion. They have no currency, no tax system, and they have no ability to deal with Hamas."

Preparing for statehood

In August 2009, PA Prime Minister Salam Fayyad launched a two-year initiative to prepare for statehood. His emphasis on reform restored the confidence of the international community after widespread corruption in the 1990s and the early 2000s. Foreign donors underwrote his state-building project to the tune of nearly $2 billion a year.

Today, at the conclusion of the initiative, Mr. Fayyad and Mr. Abbas point to achievements such as the overhaul of the Palestinian security forces, the reestablishment of law and order in towns, and increased transparency of key ministries like the treasury.

Proponents of "Fayyadism" say it marks a paradigm shift in Palestinians' thinking: that they have the freedom to build a state rather than seeing themselves as handcuffed by Israel's military occupation.

Israeli military leaders have lauded improved Palestinian security in former hotbeds of militancy, such as the West Bank city of Jenin. Israeli media have even likened Fayyad to Israel's founding Prime Minister David Ben Gurion and Fayyad's project to the pre-1948 work of the Jewish Agency, which built up the institutions that became Israel's government. In April, the World Bank declared PA institutions as "well-positioned for the establishment of a state at any point in the near future."

Israel's occupation

But critics say the PA's achievements remain limited by Israel's occupation of the West Bank, which hampers development. There are also allegations that the PA hasn't done enough to wipe out corruption. A government commission on corruption is currently investigating charges against two ministers that sit in Fayyad's government.

"I don't believe the systems are in place," says Sam Bahour, a business consultant from Ramallah. "All we are doing is surviving.... [We're] not in a state of economic growth. With all due respect to everyone out there, we've reached the maximum of what can be achieved under occupation."

The World Bank backs him up. In April, it said a Palestinian economic surge of 9 percent in 2010 is largely due to the increase in donor aid, and prospects for continued growth are "bleak."

Foreign aid: a quarter of GDP

There are plenty of UN members considered "failed states" that are worse off than the PA, says Ofer Zalzburg of the International Crisis Group. But he says that the fact that Israel still controls much of the West Bank and Hamas controls Gaza makes it unlikely that the PA will be able to govern that territory even if the UN recognizes Palestinian statehood.

"The building blocks are important, in the fact that no one wants to see a failed Palestine emerging," he says. "But in terms of the political scenario, the question is: Does this state have the ability to assert sovereignty?"

Indeed, even though Palestinians are enthusiastic about the prospect of a UN vote and the symbolism of international recognition, few say it will change their daily lives. They are more worried about losing international aid – $1.7 billion, or a quarter of Palestinian gross domestic product – as a result of the vote. That aid affects the salaries of about 250,000 public-sector employees, including Deek. He remembers the economic devastation during the Palestinian uprising, or intifada, of the last decade, and doesn't want to go back to it.

"I support the UN bid," he says, "but I know that there will be more bleak days in our household the more this UN bid becomes serious and is actually implemented."