A new Palestinian state will require almost US$5bn in foreign donor money over the next three years, according to a new development plan tabled by Salam Fayyad, the prime minister.

Palestinian leaders hope to win international approval for an independent state in September this year – in line with an earlier state-building plan published by Mr Fayyad in 2009. His latest proposal, presented to donor countries in Brussels on Wednesday, maps out how such a state would develop, and how much help it would need from abroad in the years ahead.

“Now is the time for us to be the masters of our own destiny in a state of our own,” the prime minister writes in the introduction to the 106-page plan. “We have great ambitions for the future of Palestine. Years of instability, occupation and conflict cannot, and will not, prevent us from fulfilling our great potential.”

The Palestinian Authority has received growing support for its state-building effort, with recent reports by the United Nations, the World Bank and the International Monetary Fund all saying the Palestinians are on track to achieve their goals. A study by the UN released earlier this week found that the PA already functions like the “government of a state” in several key areas, including governance, the rule of law, education and infrastructure.

Mr Fayyad, a former IMF official himself, has long argued that it will be easier for Palestinians to achieve independence and statehood if they can show they are capable of governing themselves – even under the restrictions imposed by Israel’s military occupation of the West Bank. His original plan said Palestine would be ready to establish their own state by September 2011, a declaration that was also intended to inject urgency into peace talks with Israel.

However, negotiations between the Israeli government and the Palestinian leadership broke down last year. Mahmoud Abbas, the Palestinian president, is now hoping to win international recognition for an independent state in the West Bank, Gaza and East Jerusalem even without Israeli approval.

The latest Fayyad plan makes clear that a future Palestinian state will remain heavily dependent on outside financial assistance for many years to come. It foresees “external financing” of US$1.467bn in 2011, US$1.754bn in 2012 and US$1.596bn in 2013, the last year covered by the prime minister’s proposal.

The plan stresses, however, that a growing share of donor money will be used to fund development projects, not recurring public expenditure. It predicts that “the next three years will witness a transformation in the nature of external aid from ‘life support’ to real investment in the future of Palestine”.

The plan’s financial assumptions are based on the expectation of further economic improvement in the Palestinian territories. It predicts growth of 9-12 per cent in the next three years, with unemployment falling from 25 per cent in 2009, to 15 per cent in 2013.

The document also includes a plan to deal with the financial impact of a possible reunification of Gaza and the West Bank. The Gaza Strip is currently under the control of the Islamist Hamas group, which does not recognise the legitimacy of the current Palestinian Authority leadership.

“The difference in financing is not very big because the PA already spends a lot of money in Gaza,” said Ghassan Khatib, a government spokesman. The western-backed authority continues to pay salaries for public sector workers in the strip, as well as funding other projects.

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