Palestinians prepare basics of statehood

JERUSALEM (Reuters) -- The Palestinians' decision to put off declaring a state has given them more time not only to try to reach a peace deal with Israel but also to develop the economic and symbolic features of their future nation.

The Palestinians have their work cut out for them.

Building a state from the ground up after years of Israeli occupation means much more than waving their red, green, black and white flag at international forums, such as sports events.

An anthem called "My Country," elections, ministers and a police force form the rest of the tip of the iceberg.

MESSAGE BOARD Mideast peace     ALSO Palestinians want new concessions for statehood delay Mideast talks get reprieve as Palestinians delay statehood declaration Israeli official blames Hebron settlers for escalating violence Arabs resigned to delay of Palestinian state Russia welcomes Palestinian independence delay Turkey says Palestinian delay good for peace process

But the future state lacks a currency, a national army, borders and a capital.

The Palestinian Central Council decided Sunday to delay a declaration of independence, and said it would reconvene by Nov. 15 to consider when to declare the state with final preparations for statehood completed by then.

"The decision was to entrust or delegate the executive committee...to prepare the constitution and to prepare many other things," Palestinian negotiator Saeb Erekat told Israel radio Monday.

The Palestinian Authority (PA) is building state institutions and applying for U.N. membership.

"The most obvious things they need are to do with borders, which doesn't happen when you go in and out of the West Bank," said Judith Press, acting World Bank country director.

About 3.5 million Palestinians live in the West Bank, Gaza and East Jerusalem, where the PA wants to declare its state.

The most contentious political points are borders and a capital, issues Israel and the Palestinians hope to resolve in a final peace deal for which negotiations are resuming this week.

Palestinians want East Jerusalem as their capital, but Israel says all of Jerusalem is its indivisible capital.

The two sides hope to conclude a peace deal this year agreeing on the shape and size of the future Palestinian state.

Palestinians now recognize that Israel exists on almost 78 percent of historic Palestine, Erekat said, in what he called a "historical reconciliation."

But the parts of the West Bank and Gaza which Israel ceded to their control under the 1993 Olso peace accords consists of unconnected patches of territory which many cynics compare to Swiss cheese.

Fixed, internationally recognized borders will mean an end to the largely symbolic concrete blocks spray-painted in the colors of their flag and manned by Palestinians who wave cars and trucks through into the Palestinian areas.

It will mean control over immigration and customs revenue.

"In negotiations with Israel they still need to work to define what their economy will look like," said a diplomat.

The Palestinians lack their own currency, and companies are submitting designs for the Palestinian bank note to replace up to 500 million Jordanian dinars, up to 2.6 billion shekels as well as U.S. dollars circulating in the West Bank and Gaza.

Analysts noted that a pretty piece of paper was one thing and economic feasibility on when to issue it another.

"Currency is not necessarily a prerequisite for statehood," Press said. "I understand it is a pragmatic decision if and when it serves economic conditions, and not just political grounds."

Mohammed Shtayyeh, managing director for the Palestinian Economic Council for Development and Reconstruction, said:

"It is not important to issue the currency. What is more important is to keep the value of the currency," he said. "Any new currency has to enjoy the confidence of the public."

He said a "solid production base" was also needed.

Last year Palestinians started to assert independence on the Internet, ending their addresses with ".ps" to signify a state.

They have a national airline and airport, but air traffic disputes with Israel have often cropped up.

They are building a port in Gaza, and last month held a public share offering for the first power plant in Gaza, part of plans to replace supplies from the Israel Electric Corporation, now the sole supplier of power to the West Bank and Gaza.

Palestinians depend on Israel for water but are getting "more and more access" with aid development, the diplomat said.

The Palestinian telecommunications network is almost completely self-sufficient. But for much-needed investment, laws for capital markets, intellectual property rights, and land registration were among legislation which has yet to pass.

"The private sector is functioning today. Is it functioning under ideal conditions? Obviously not, but they are not totally impossible. We live in a place of shades of grey," Press said.

Copyright 2000 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

For more Middle East news, myCNN.com will bring you news from the areas and subjects you select.

See related sites about Middle East

Note: Pages will open in a new browser window

External sites are not endorsed by CNN Interactive.