As world leaders try to breathe fresh impetus into the stalled Palestinian peace process, the new state is striving for economic regeneration and a return to social and political stability.

The Oslo agreement, which heralded the latest stage in the process, acknowledged education will pay a critical role in helping the 2.5 million population of the former occupied territories to fulfil its new destiny.

But for the hard-pressed universities, who bore a large part of the Israeli clampdown during the Intifada, it is proving to be a struggle of major proportions.

The universities are still regarded with suspicion by the Israelis, who resented their inevitable role as focal points for the liberation struggle. Faculty and students were intimately involved, with the inevitable consequences of raids, closures and general repression.

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The Al-Quds Open University has suffered its share of attention from the occupying forces. But the impact has been lessened largely because its 4,000 students are dispersed throughout the former occupied territories rather than being conspicuously concentrated on campuses.

Al-Quds OU (as distinct from Al-Quds University in Jerusalem) was the product of a planning exercise which began in the 1980s, drawing extensively on the experience of the Open University in Britain.

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The first students were enrolled in 1990, when the university's headquarters was in Amman, Jordan, and financial support came from the oil-rich Arab states.

Then Iraq invaded Kuwait and the Palestinians' supposed pro-Saddam Hussein stance meant that the money was quickly cut off.

Now the university is largely sustained by tuition fees and its 5 per cent share of money from the European Union channelled through the Council for Higher Education on the West Bank.

"These sources are hardly enough to keep us alive," Sufian Kamal, its acting president, said. "We are in a bad financial situation but are determined to continue our efforts and establish the university as a good and strong higher education institution. We hope to extend the operation to other countries - maybe Jordan and Syria - in the near future."

"The headquarters is now moving to the West Bank, to Jerusalem, and we hope to retain only an office in Amman which looks after the authoring of books and course materials and television programmes."

The students are spread across five broad subject areas. One of the most fundamental to the future of the new state is education, which ceased to be the responsibility of the Israeli military government last September when the Palestinian National Authority assumed control.

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"Students in this specialism are studying to get BAs and BScs in subjects taught in the schools," Dr Kamal said. "We designed the programmes so that the graduates will have a strong background in the subjects and specialisms and the methods of teaching these subjects so that when they finish they will be qualified to teach and go directly to the schools.

"Education has deteriorated a lot during the past 30 years. It is necessary to stop the deterioration and reverse the process. One way of doing this is to have good teachers and good programmes."

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Other areas of study include management and entrepreneurship, computers and information systems, social studies, and agriculture. "Management focuses on the basic skills we anticipate will be needed in our society during the next stage of development," Dr Kamal said. "We do not have industry, and rather poor agriculture, so if we focus on little businesses and services we will help people find job opportunities.

"The prospects for Palestinian agriculture are greater than industry and it is possible to develop it to encourage people to stick to the land and remain in the country rather than leaving to work in Israel or in other Arab countries."

Al-Quds is not a direct copy of the OU, despite the interest in Milton Keynes taken by its creators. Based on eight study centres it makes extremely limited use of television, radio - Palestine's television service is barely six months old and the university has instead concentrated on producing teaching materials of relevance to the potential students in the scattered settlements in the former occupied territories.

"Not one student has to travel more than 25 or 30 miles to reach a study centre," Dr Kamal said. Rigorous examinations comprise 85 per cent of the course mark with the remainder awarded for written assignments.

A core of 70 full-time staff is augmented by part-time tutors, frequently faculty from the former occupied territories' other universities. "We are reaching sectors of society the other universities cannot," Dr Kamal said.

Dr Kamal feels that his university in particular and higher education in the former occupied territories have a vital role to play in the peace process.

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But he added: "We feel a little bitter about the other side - the Israeli side. Higher education people in Israel did not play a role in the peace process. We heard no voice from the Israeli universities complaining about the closures of Palestinian universities, the prevention of Palestinian universities from hiring lecturers from outside the occupied territories or bringing in textbooks and materials."