Despite appearances to the contrary, a controversial plan to expand Jerusalem "is not a done deal," insists Moshe Arad, former Israeli ambassador to the United States.

"It seems to me we are going to see the government and the municipality of Jerusalem having a second look," said Arad, who served as ambassador from 1987 to 1990.

Arad visited San Francisco this week as part of a national tour to meet with potential donors to Jerusalem's Hebrew University. He earned degrees from the school and has worked there as vice president for external affairs for the past four years.

In an interview Monday, the 63-year-old former diplomat spoke of the Israeli capital, a city he has called home for much of his adult life.

Israeli Prime Minister Benjamin Netanyahu has said his Cabinet's recent decision to create an umbrella municipality for the greater Jerusalem area is an economic move with no political implications.

U.S. diplomats, the U.N. Security Council, Palestinian leaders, and Netanyahu's opposition vehemently disagree. Critics say the plan could deal another blow to the stalled peace process because of the sensitive status of the city in negotiations.

"The international reaction is not surprising," said the Romanian-born Arad, who immigrated to Israel in 1950. "Nothing in Jerusalem can be done devoid of political context. Everything has to be treated with the utmost sensitivity."

As things now stand, Arad worries that the future of Israel's capital is not particularly promising. Tensions between the secular and fervently religious are high and young people are leaving in droves.

"The danger is that Jerusalem will be a pilgrimage city, the seat of government, but not the heart of our country," said Arad, a warm and distinguished man whose diplomatic career spanned three decades.

"The key is coexistence, dialogue…I would like to see it as an open city, a multicultural city, an intellectual, cultural and music center."

He believes that vision will be achieved only if open-minded, productive young people are drawn to the city by study and job opportunities, then stay and raise families.

Along those lines, Arad is eager to tout Hebrew University's new engineering school, which is set to open in 1999 with a focus on information technology. He predicts the school will not only attract hundreds of young people to Jerusalem, but could help the city establish itself as a center of high-tech industry.

"The major magnet that draws young people to Jerusalem today is the university," he said. "Seventy percent of our students come from outside of the city or Jerusalem region."

Arad, whose past diplomatic positions include stints as Israel's ambassador to Mexico and director general of the Ministry of Communications, admits he sometimes misses the diplomatic life.

These days, "I'm missing it," he said, "because I feel more could be done, should be done, to advance the peace process."