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NAZARETH — Hany Abu-Assad, the director of “Paradise Now,” the only film by a Palestinian filmmaker to receive an Oscar nod, is drinking tea at a cafe in the Israeli Arab town of Nazareth when he taps the table with his finger.

“This is Palestine,” he says. “They can decide whatever they want,” he adds, referring to international governments, “but I don’t consider the Palestinian territories the only place Palestinians should live.”

That ever-contentious question of where exactly Palestine is located makes it as difficult to define a Palestinian film as it is to define a Palestinian person. The majority of Palestinian directors live in Europe, which is also where a great deal of their films find financing. The body of Palestinian films is estimated to number close to 800, but there are no cinemas in Gaza and only a handful of movie houses in the West Bank.

Abu-Assad is Palestinian, but he was born in Israel and educated in the Netherlands, where he lived and worked until recently. “We are not a state,” he says in his confident but imperfect English. “We are a case. We are struggling for equal rights, for equal citizenship, for our rights.”

One of the most successful Palestinian actresses of all time, Hiam Abbass, also draws a wide net around the boundaries of the term “Palestinian.” Abbass, who appeared in “The Visitor” and “Munich,” was also born in Israel. She has lived in Paris for the past 25 years.

“When we say ‘Israeli Arab,’ for me, it’s almost like denying this other person that exists within me that I cannot help. It’s there, it’s my blood, my culture, my parents, it’s my history,” she says of her Palestinian heritage. To Abbass, for a movie to be Palestinian, it need only have a Palestinian point of view.

“Calling a movie Palestinian is just really giving an identity to the directors behind it,” she says. “For me, it’s almost like more of a cultural, political issue rather than about its production. Production always comes from somewhere else.”

Abbass recently wrapped her directorial debut, “Inheritance,” which was filmed in Israel with a writing and production team that spans the Middle East.

Despite the ever-shifting question of what “Palestinian” really means, one thing is clear: The nascent Palestinian film industry is growing, and fast.

Until the late 1980s, Palestinian films consisted mostly of documentaries, made and distributed in Lebanon and Iraq. Things started to change in 1987, when Michel Khleifi’s “Wedding in Galilee” picked up the Intl. Critics Prize at Cannes. Elia Suleiman’s 1996 debut, “Chronicle of a Disappearance,” was the first film from a Palestinian director to secure a U.S. distribution deal, and in the years that followed, Palestinian filmmaking picked up significantly.

The Palestinian Ministry of Culture earned a major victory in 2002 when it convinced AMPAS to revamp the selection criterion for the foreign language Oscar after Suleiman’s “Divine Intervention” was disqualified because no country could claim it.

That move paved the way for the Oscar nod of “Paradise Now,” which followed two childhood friends recruited to commit a suicide attack on Tel Aviv. Pic, which also nabbed the Golden Globe for foreign film, was released to international acclaim in 2005, just as the second intifada (Palestinian uprising) was coming to an end.

That same year, moviegoers in the West Bank saw history made with the inauguration of the Al-Kasaba Film Festival, which screens films by and for Palestinians, unspooling pics in Bethlehem, Jerusalem, Ramallah, Jenin, Nablus and Gaza City. In half of the cities, however, fest directors face the unique challenge of having to haul in their own projection equipment and screens because there are none on the ground.

In 2008, Annemarie Jacir’s “Salt of This Sea” took best screenplay at the Dubai Film Fest, while an international campaign saw the reopening of a long-defunct cinema in the Jenin refugee camp.

There are now more than a dozen Palestinian film festivals around the world, from Chicago to London to Melbourne. However, there are still no Palestinian film schools, so most Palestinians interested in cinema go abroad. There is scant infrastructure to support film distribution. The Palestinian film industry remains as much in exile as its people.

“We are living in an age of crisscross immigration, and I think that maybe it’s necessary to not base the idea of cinema — national cinema — on geography,” says Suleiman, who now lives in France.

Born in Nazareth, Suleiman makes many of his films with funding from Israel and European countries. He is quick to declare that Palestinian art transcends Palestinian politics.

“I doubt that (Palestinian film) does any good for national aspirations, simply because cinema is such a universal language, and its existence de facto is that it can crisscross borders and cross checkpoints. The fact that it does not stop at any sort of geographical boundary makes it an international language, and therefore is not only good for one people, but is good for all people,” Suleiman says.

If Abu-Assad, who recently returned to Nazareth after nearly 30 years in Holland, has anything to do with it, though, the Palestinian biz may find a foothold one day in Palestine.

“I really feel like there is space to push the Palestinian film industry to a better place,” he says.