CAIRO, July 29: Israel and Palestinians have decided to return to the negotiating table in the next few days, after a four-month old deadlock, even as Israel's Interior Ministry formally announced today that the Har Homa housing project has been temporarily halted.

An Israeli Ministry spokesman said it bans work on the site ``until a decision is made on an appeal submitted by two municipal council members.''Earlier in the day, Israeli Foreign Minister David Levy said, ``We are deciding to return to the talks out of a desire to restore mutual trust.''

He was in Jerusalem to meet Palestinian Planning Minister Nabil Shaath.The two Ministers later announced that nine joint committees, created in January to work out implementation of Israeli commitments under the self-rule agreements, would begin work soon to look into various outstanding aspects of the peace process.

The announcement comes after visits by officials of both sides to the United States (US) to discuss ways of getting the deadlocked peace process back on tracks. Levy also attended a meeting at Brussels along with Palestinian Liberation Organisation (PLO) leader Yasser Arafat.

The peace process broke down in March when Israel started construction of Jewish settlements in areas of east Jerusalem, which Palestinians hope will be their future capital. Shaath was reported as saying that if the two sides exchanged confidence-building measures it would be easier to tackle contentious issues such as final status negotiations and Israeli Army withdrawals from the West Bank.

Today's decision comes after an announcement last week by Jerusalem officials of a new housing project in East Jerusalem by a Miami-based Jewish American millionaire.

The announcement of the housing project had further angered Palestinians and observers had feared that it could completely stall the revival of the peace process.

Meanwhile, Israeli President Benjamin Netanyahu said he was opposed to building the politically sensitive project, and assured the Palestinians it would not go forward.

In an interview on Israel TV Monday, Netanyahu suggested the Ras-al-Amud project might endanger Har Homa if it went forward. ``I think a decision to build a new neighborhood in Jerusalem, even 70 units, must be part of a master plan, not private decisions,'' Netanyahu said.

Shaath said Netanyahu's opposition to the Ras-al-Amud project contributes to the confidence that is being built and creates ``a better atmosphere to the future''.

The Palestinians had demanded a halt to the construction at Har Homa and all Israeli settlement activity, but Shaath said such issues would be dealt with after the talks resumed.

Israeli sources said Israel was pleased recently by the Palestinians' improved security cooperation, noting the arrest of Palestinian officers Israel charged were planning attacks on Israelis and the discovery of a bomb-making factory in Bethlehem.

Saudi investment

Saudi billionaire Prince Walid Ibn Talal Ibn Abdel Aziz has made his first investment in the Palestinian self-rule areas. The Prince is to pump $ 10 million into the Palestine Investment and Development Company (padico) for hotel and housing projects in the Gaza Strip and cities of the West Bank.

The Amman-based PADICO has a capital of $ 200 million. The Prince, a nephew of King Fahd, is the 13th richest person in the world, excluding rulers and royalty not involved in business, according to Forbes.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.