The introduction of Palestinian Authority Prime Minister Salam Fayyad’s plan, entitled “Ending the Occupation, Establishing the State,” has the potential to dramatically transform the Israeli-Palestinian conflict and, by extension, the Middle Eastern political landscape. The essence of the Fayyad plan involves establishing an internationally recognized demilitarized Palestinian state encompassing both the West Bank and Gaza, based on the 1967 borders, with East Jerusalem as its capital. Since August 2009, Fayyad, with the help of the Barack Obama administration, and the European Union, has been quietly building national institutions and physical infrastructure, strengthening governance, increasing personal security and creating a robust economic base in the West Bank.

In evaluating the successes of the Fayyad plan, addressing its obstacles and Israeli misapprehensions, this paper argues that the creation of an independent Palestinian state will work towards Israel’s advantage for the following reasons: First, it guarantees the two-state solution, ensuring that the State of Israel remains Jewish and democratic. Second, Israel’s responsibility towards the Palestinians will be dramatically reduced, for a Palestinian state would become responsible for its own citizens, territory and borders. Third, an independent Palestine will improve Israel’s serious legitimacy problem, for the relationship will be that of two sovereign states, as opposed to the current asymmetrical relationship between a state and a non-state. Fourth, a Palestinian state will strengthen the hand of the moderates, namely Fateh and Fayyad, while weakening Hamas and other Islamic radicals. Finally, the environment for peace negotiations will improve, as Israel’s security needs will be met and the Palestinians, having achieved their decades-long desire for self-determination, will be negotiating from a place of pride and accomplishment, as opposed to the hopelessness and humiliation that engulfs them on a daily basis.

Fayyad Understands the Need for Accountability and Transparency

The success of the Fayyad plan in the West Bank encompasses all areas of governance, especially the economy and the security sector. Fayyad’s success largely stems from his achievements in breaking from the past and creating a clean and accountable administration that encourages the private sector to undertake initiatives, as opposed to [Yasser] Arafat’s regime, where corruption and connections were the central features of the Palestinian political economy. Understanding the importance of accountability and transparency in a well-functioning society, Fayyad has implemented a variety of sound measures to build and strengthen public confidence in the nascent government departments. These measures include: public investments placed under the oversight of the Ministry of Finance; reform of the budgetary system so that links exist between planning and budgeting in order to ensure greater transparency; the introduction of a computerized accounting system to improve audit and control of ministries’ spending; the development of internal audit functions and the creation of a government audit and administrative control bureau; the adoption of international accounting standards; the implementation of a strict government employment policy; the freezing of wage rates; and lastly, the gradual payment of utility bills.1

Unlike in Gaza, in the West Bank the economy is heading towards recovery and sustained growth.2 Indeed, the improvement in the economy has allowed Fayyad to present a budget that included 7% gross domestic product (GDP) growth.3 As part of Netanyahu’s “economic peace,” since April 2008, “Israel has removed 147 roadblocks and checkpoints; approved agricultural vehicle movement in the Jordan Valley; allowed access to seven West Bank cities by Arab citizens of Israel; provided 5,000 overnight permits for Palestinians working in Israel; and extended the operating hours of the Allenby Bridge crossing between the West Bank and Jordan.”4

These successes have not gone unnoticed in the region, for the second Palestine Investment Conference, which was held June 2-3, 2010 in Bethlehem, saw pledges of nearly $1 billion in investments in Palestinian businesses by Arab, European and Israeli private sectors and attests to domestic and foreign investors’ trust in Fayyad’s state-building efforts.

Great Progress in the Security Sphere

Profound strides in the security sphere have also been made as a direct result of the coordination between Fayyad, Israel and the U.S. government.5 Israel is working closely with the United States and the PA to enhance the capabilities and effectiveness of the Palestinian security forces in the West Bank. In concert with former U.S. Security Coordinator General Keith Dayton (who, after five years in the field, has been replaced by Lieutenant General Michael Moeller), the Palestinians have engaged in a series of security offensives throughout the West Bank. According to Dayton, these offensives have been well coordinated with the Israeli army and have shown a genuine and sustained effort to return the rule of law to the West Bank and re-establish the PA as the principal source of authority.6 The security campaigns involve dismantling illegal militias, jailing Hamas members and supporters, and focusing on the overall safety and security of Palestinian citizens. Dayton reported that “crime is down, Palestinian shops are opened after dark and teenage girls in Jenin can visit their friends after dark without fear of being attacked.” These are all positive signs that life is returning to normal in the West Bank and, more importantly, Palestinians themselves are beginning to believe it.

Dayton further argued that “the transformation of the Palestinian national security forces has exceeded all optimistic expectations and has caught the attention of the Israeli defense establishment for their dedication, discipline, motivation and results.”7 Indeed, in light of the impressive improvement in security cooperation between Israel and the PA, Israel is re-examining years-old policies, such as allowing Israelis to enter PA-controlled area A for the first time in 10 years, and allowing the PA to receive 50 Russian-made armored cars, something Israel has been refusing to do for five years.

Coordination between the Palestinians, the Israelis, and the U.S. has been paramount in not only removing a large portion of Hamas’ power base in the West Bank, but also in increasing the level of safety among the population. Many challenges lie ahead, but Fayyad’s efforts to improve both the security and the economy in the West Bank generate a sense of normalcy among the Palestinians, which is critical for the success of the state- and capacity-building program. By tackling the two largest problems in the West Bank — the economy and security — Fayyad’s success not only legitimizes his authority among the Palestinian population in the West Bank, but also shows that a functioning Palestinian state can be attained by the end of 2011 (within the proposed time frame), provided that coordination between the three parties continues. 

Internal Palestinian Tensions

Despite these successes, Fayyad's goal to create the institutional infrastructure for statehood by the end of 2011 has met strong opposition from Fateh officials and his relative vulnerability in the PA is the single biggest obstacle in regard to the successful completion of the program. 

An April 2010 article in the Jerusalem Post highlighted the level of rivalry between Fayyad and Fateh, reporting that several Fateh officials requested that President Mahmoud Abbas restrict Fayyad’s power in the government by removing three of the prime minister’s key portfolios, including the Foreign, Finance, and Interior Ministries.8 In addition, Dan Diker and Pinhas Inbari argue that Fayyad’s initiative poses a direct challenge to Abbas himself as Fateh’s leader, as Fayyad’s ambitions are viewed to be sidelining Abbas.9 The multiple declarations made by Abbas that the only viable option for the PA is to negotiate directly with Israel highlights the fractious relationship between the two leaders. Moreover, Fayyad is seen by the West as a moderate, pragmatic and legitimate leader, who enjoys the full backing of the international community. The West is heavily investing in the Fayyad plan and, without Fayyad, the international community may not be as quick or generous to continue funding the program. It was Fayyad who persuaded the U.S. to renew development aid in July 2009. The aid, which totalled $200 million, was the largest amount of external financial assistance ever to be made available to the PA in a single deposit by any donor since the inception of the PA in 1996.10 In fact, it has been argued that if Fayyad goes, the money goes, too.11 Political tension between Fayyad, Abbas and Fateh has the potential to lead to damaging results. Yet, without Fayyad, international support for the PA would not be as forthcoming.

Unfounded Israeli Concerns

Israeli concerns and criticisms generally stem from a legitimate fear of the unknown fueled by incorrect assumptions of what the Fayyad plan genuinely entails. It is important to correct these misunderstandings and establish a clear picture of what a future Palestinian state would look like under the Fayyad plan. To begin with, the amount of territory that the Palestinians will start with is somewhere between 40% and 60% of the West Bank.12 Second, the Palestinian state will be de-militarized, meaning that the Palestinian national security forces will continue to provide security and protection to the Palestinian population, but the state will not have a military force and, most likely, an international force will be stationed along the border with Israel. Third, in the best-case scenario, it will continue to be led by Fayyad. Fourth, Palestine will be governed by the rule of law and democratic institutions, albeit nascent ones, and will be economically independent from Israel. Fifth, until Hamas and Fateh are able to solve their political problems and bridge the divide, Gaza will not be an operational part of the new state.13

In some cases, Israeli anxiety is fueled by inaccurate representations of Fayyad’s intentions. Several commentators and Israeli government officials have speculated that the successful completion of the Fayyad plan will result in the Palestinians unilaterally declaring independence in violation of the Oslo Accords.14 Their arguments, however, are not supported by any solid evidence. Nowhere in Fayyad’s “Ending the Occupation, Establishing the State” does it explicitly call for a unilateral declaration of independence. Rather, Fayyad’s program states, as Fayyad himself has done in countless interviews both in Arabic and English, that the aim of the project is to build Palestinian national institutions, create a strong economy and strengthen governance to create facts on the ground that will lead the international community to recognize a Palestinian state and force Israel to end the occupation.15 The PA would not unilaterally declare independence; it would be the international community that would recognize an independent Palestine. This distinction is important because it means that the Fayyad plan does not amount to a unilateral declaration of statehood and, thus, does not constitute a violation of the Oslo Accords. Therefore, what Israelis must understand is that “the act of getting ready for statehood is not in lieu of the political process, it is a reinforcement of it.”16

For the Future: Jerusalem, Right of Return, Settlements and Gaza 

Admittedly, the creation of an independent Palestinian state leaves a number of issues unresolved, such as Jerusalem, the right of return, borders, the Jewish settlements in the West Bank and, lastly, Gaza. Each of these issues, excluding Gaza, will have to be resolved in future negotiations between the Israelis and the Palestinians. But as intractable as these problems may seem, there is a far greater chance of resolving them between two sovereign independent states, each with a great deal invested in the negotiations, than there is under the present reality.

As for Gaza, this is an internal problem to be resolved between Fateh and Hamas. Theoretically speaking, a sovereign Palestine must include the West Bank, the Gaza Strip and East Jerusalem. However, without the restoration of national unity between Hamas and Fateh, Gaza will remain diplomatically, politically and economically isolated. There are some who argue that the implementation of the Fayyad plan will constitute a major revision of the status quo, which will have dangerous consequences for Israel. But this is not necessarily the case. The implementation of the Fayyad plan may actually bring about the restoration of unity between Fateh and Hamas, for the reason that Hamas will not want to be sidelined if the Fayyad initiative comes to term. In light of the growing tensions and competition for power in the Palestinian arena, Hamas may feel that the best way to maintain its grip on authority is to engage with Fayyad. How large a political space Hamas will have to maneuver if they agree to reconciliation is questionable, given that Palestinians will be more interested in continuing to secure a stable and prosperous livelihood than waging war on its neighbors. While the power struggle between Hamas and Fateh is a serious issue that deserves careful attention, what is certain is that the creation of an independent Palestine will transfer Israel’s responsibility for the 1.5 million Palestinians living in the Gaza Strip to the Palestinians themselves for the first time.

Creating a New Two-State Reality

Understandably, many Israelis are nervous about the Fayyad plan, but their unease is misplaced. Provided that the Israeli government does not undermine Fayyad’s state- building efforts, the Palestinian state will be created even in the absence of a final status agreement, thereby ensuring that the two-state solution will be the only viable option. Unresolved issues such as Jerusalem, borders and Palestinian refugees will remain contentious, but the difference is that, unlike in the past, they will not prevent the establishment of a Palestinian state and, ultimately, the opportunity for Palestinians to fulfill their dream and right to statehood. In essence, the Fayyad plan has the potential to create a far more stable two-state reality in the Middle East than any other development in the last 62 years. If Fayyad’s goal is achieved, a new dynamic will unfold — Israel will be negotiating with a state, not a liberation movement.17


1 Symbolically, the collection of payments represents a major break from the past insofar as Fayyad is slowly transforming “the culture of non-payment” into a culture that respects the services generated by the government. See Paul Rivlin, “The Palestinian Economy,” Moshe Dayan Center,

2 According to estimates by the Palestinian Central Bureau of Statistics (PCBS), in the early part of 2009 (the most recent period for which there are detailed figures) most of the growth took place in two sectors: real estate, renting, and business services; and community, social, and personal services; both of which grew by more than 24%. Public administration grew by nearly 9% and construction by over 10%.

3 Ghassan Khatib, “A Pillar of State-Building,” Bitterlemons, March 15, 2010,

4 Paul Rivlin, “The Palestinian Economy,” Moshe Dayan Center,

5 Jordan has also been instrumental in the security sector reform: the training of the Palestinian national security forces occurs in Jordan.

6 Remarks by  General Keith Dayton at the Washington Institute for Near East Policy. May 7, 2009.

7 Ibid.

8 Khaled Abu Toameh, “Take Key Ministries Away from Fayyad,” Jerusalem Post, April 29, 2010.

9 Dan Diker and Pinhas Inbari, “Prime Minister Salam Fayyad’s Two-Year Path to Palestinian Statehood: Implication for the Palestinian Authority and Israel” Jerusalem Center for Public Affairs, Oct.9, 2009.

10 U.S. Department of State, Press Conference with Palestinian Authority Prime Minister Salam Fayyad, July 24, 2009.

11 Personal correspondence with Professor Asher Susser, March 29, 2010.

12 These calculations are based on figures from December 2009. The first figure — 40% — is the most conservative, as it takes into account only Areas A and B. The second figure — 56% — includes the 30% of Area C, which Palestinians are not forbidden to build on. For the conservative figure, see: Amira Hass, “UN: Much of West Bank closed to Palestinian Building,” Haaretz, Dec. 16, 2009.

13 However, in Fayyad’s “Ending the Occupation, Establishing the State,” he calls for a physical corridor to link the West Bank to Gaza.

14 Dan Diker and Pinhas Inbari, “Prime Minister Salam Fayyad’s Two-Year Path to Palestinian Statehood: Implication for the Palestinian Authority and Israel,” Middle East Strategic Information, Feb., 2, 2010; see Dan Diker, “The Palestinians' Unilateral ‘Kosovo Strategy’: Implications for the PA and Israel,” Middle East Strategic Information, Feb. 3, 2010; see “Lieberman Rejects Fayad's Plan for De-Facto Palestinian State,” Jerusalem Post, Aug. 31, 2009; See: Isabel Kershner, “Palestinian Leader Maps Plan for Separate State,” New York Times, Aug. 25, 2009.

15 Khalid Farraj, Camille Mansour, and Salim Tamari, “A Palestinian State in Two Years: Interview with Salam Fayyad, Palestinian Prime Minister,” Journal of Palestine Studies, 39, No. 1 (Autumn 2009) 58-74; See: Ali al-Saleh, “Asharq al-Awsat Talks to Palestinian Prime Minister Salam Fayyad,” Asharq Alawsat, April 8, 2010; See: Isabel Kershner, “Palestinian Leader Maps Plan for Separate State,” New York Times, August 25, 2009.

16 Salam Fayyad quoted in Isabel Kershner, “Palestinian Leader Maps Plan for Separate State,” New York Times, August 25, 2009.

17 Yossi Alpher, “The Best Option,” Bitterlemons. March 15, 2010.