For months Egyptian and Israeli helicopters have been hovering back and forth over Rafah, trying to decide where to put the border. In the end, both sides decided no houses would be destroyed. The border fence would cross rooftops, go through backyards and cut across streets.

Houses split half in Israel and half in Egypt would have to decide which, country they wanted to live in and then have their front door on the chosen side.

But from Fatchi’s rooftop you can look out and see, looming towards Rafah from the horizon and stopping abruptly at the edge of the town, a wide, bare, bull-dozed strip. This is the new border being constructed between the Sinai and Israel.

It is a bare swathe of earth 40 to 60 metres, wide with an electronically monitored fence, an asphalt road alongside it and, in some sections, minefields.

The Arab people of Rafah say they know that at the first hint of terrorist activity or gun smuggling across the border, a 60-metre strip will be bulldozed right through the centre of the town within 24 hours.

Rafah feels like a typical Third World town. It is cluttered with poor housing and shops. The dusty streets are crammed with battered cars, people, donkeys and bikes. Hawkers try to sell you everything imaginable. Above the din, the electronic meuzzin in the mosque’s minaret five times a day calls the faithful to prayer.

You know you’re not in Israel proper but in the Israeli-occupied Gaza Strip. The Israelis, however, have no intention of handing back the Gaza, and refer to it as part of Israel. The great irony is that Rafah was united by war and now will be divided by peace.

Rafah began as a farming settlement around an oasis at the point where the Sinai meets the Gaza Strip. In 1906, under British pressure, a border line was drawn between Egypt and the Ottoman-ruled Palestine and Rafah became a divided city.

When Israel was created in 1948, Gaza was under Egyptian control but Rafah was kept divided. After the 1967 Six Day War, when Israel captured the Sinai and Gaza, Rafah was united and the old border taken down.

Houses and businesses were built across the border line and Rafah grew. People moved from one side of town to the other and the standard of living marginally increased as Arabs found work in Israel. The population was further swollen when 500 Palestinian refugee families were moved into an abandoned UN base adjoining Rafah which is now called “Canada”.

Over the past few months, people in Rafah have been swapping houses, trying to organise their families on one side of the border or the other. There is great uncertainty among the Palestinian refugees. They wonder if they would be better off in Egypt or Israel (which they steadfastly call Palestine) while they await their dream of their own Palestinian State.

The senior pharmacist in Rafah, Dr Soleiman Zoarop, said: “During four wars there has been no destruction in Rafah. But with peace, damage and destruction will occur. It is a very hard thing.”

Already on the edge of town, Rafah’s only olive press, a plant which stretches 50 metres and includes a well, packing house, and an ancient diesel engine that runs the freezing-unit, has been marked for demolition because it straddles the border. An ice plant, with its well in Gaza and machinery in Sinai, will have to be relocated.

The compensation being offered the Rafah Arabs is a pittance compared to the $A500,000 per head compensation payments going to the Israeli Sinai settlers.

The Bedouin village of Dehaniya, not far from Rafah, also will be cut in two. The homes are in Gaza but the grazing lands are in the Sinai.

A major problem in patrolling the border is to control the well-established smuggling of drugs and arms as well as Palestine Liberation Army guerrillas.

While the border disputes in the northern Sinai are proving a painful human drama, the disputes in the south are haggles over tourism and big business.

Israelis are genuinely hurt at having to give up their favorite holiday spots on the Red Sea resorts along the Gulf of Aqaba. Hundreds of thousands of Israelis pour out of their crowded land to swim and dive over the splendid coral reefs of the gulf.

The gulf’s attractions were discovered by hippy travellers 15 years ago. Now it is all given back except for one main resort at the top of the gulf, Eilat. The Israelis hope to retain nearby Taba also.

At Taba, a multi-million dollar-hotel sits unfinished while its Israeli owner waits to hear if it will be declared to be in Israel or Egypt.

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The problem is that the old 1906 border wasn’t very precisely marked and some of the topographical features have changed. Egypt’s offer to buy the hotel prompted an angry response from Israel’s Defence Minister, Mr Sharon, that Israel was not seeking Egyptian largesse — only a proper border.

Israelis are hoping they still will be able to visit the Red Sea resorts but already this is proving difficult.

As well as visas, the Egyptians are imposing a $A30 a head entrance fee.

Last week, a group of divers who’d been down “to say goodbye” to the Sinai, sat with a group of topless bathers on the beach at Eilat. “Our space is gone. Now Eilat will be crowded with the millions who once enjoyed the whole gulf. The party’s over,” they said.