ARABS-ISRAEL - Jan. 27 - Economic Integration Plan.

An independent panel of Israeli and Palestinian experts called Aix group, formed after an economic seminar at Aix-en-Provence, France, in 2002, issues a blueprint for close economic integration between Israel and a future Palestinian state to boost the prospects of both peoples. Group members, however, current developments on the ground threaten their vision of joint economic development. The panel recommends establishment of a free trade area between Israel and the Palestinian state that would give the Palestinians open access to their biggest market. At present there is a customs union between Israel and the PA. "A free trade area would reflect the interests of both sides", says Saeb Bamya, a Palestinian on the team. "The Palestinian market is one of the most important for Israeli goods and services and Israel is the biggest market for Palestinian goods". The panel, working in co-operation with the World Bank, the IMF and the EU, proposes that investors in one state be granted national status in the other state. Arie Arnon, an economist at Israel's Ben-Gurion University, says one aim is to raise living standards in the Palestinian economy to the level of those in the developed Israeli economy. There would be a shift away from the Palestinian economy's dependence on providing cheap labour to the Israeli market. The previously uncontrolled flow of Palestinian labour to Israel has dwindled since the outbreak of the intifada on Sept. 28, 2000. In future, Palestinian workers would be given preferential access to jobs in Israel, but the flow would be regulated. Arnon says the plan carried substantial benefits for Israel, adding: "A new arrangement along the lines we propose will be the best guardian of the economic advancement of Israel". The Aix group says its plan is dependent on successful implementation of the third phase of the international "road map". The peace plan envisages the establishment of a Palestinian state in the West Bank and Gaza Strip. The panel says establishment of defined borders would benefit both economies. Bilateral co-operation would be masterminded by a joint Israeli-Palestinian economic committee. The two sides should also consider setting up a development fund to finance industrial estates, joint ventures and tourism projects. (The peace plan is, however, frozen at stage one, with each side blaming the other for failing to take steps towards normalization). Bamya says: "If developments on the ground continue as they are, there will be nothing to discuss". He says construction of Israel's controversial separation barrier and the cantonisation of Palestinian communities in the West Bank are undermining the viability of a future Palestinian state. The head of Israel's Peres Centre for Peace, Ron Pundak, says: "The work of this group is quite unique. It shows that it's possible to put Israelis and Palestinians together to think about the benefits to both sides by taking a win-win approach".