The Palestinian Authority said Monday its 2009 two-year plan to put in place the machinery for an independent state has borne fruit in public financial management, law and order and local governance.
"Our efforts have been to make statehood inevitable," Palestinian prime minister Salam Fayyad wrote in the foreword to a report to a meeting of international donors next week in New York. "We are now ready", he said.
The Palestinians intend to seek full UN membership later this month and are to meet in Cairo with Arab League ministers on Tuesday to discuss whether to make their request to the Security Council or the General Assembly.
Earlier on Monday, a World Bank report prepared for the New York meeting acknowleged that Fayyad and his officials had made "substantial progress" in building institutions for a state, but said a fiscal crisis and a slowdown in growth put those achievements in jeopardy.
The bank pointed to the Palestinian Authority cash crunch, caused by delays in payments from donor countries and by Israeli restrictions.
"In... security and justice; revenue and expenditure management; economic development; and service delivery Palestinian public institutions compare favourably to other countries in the region and beyond," it said.
"These institutions have played a crucial role in enabling the positive economic growth in the West Bank and Gaza in recent years."
But it said that initial growth, fuelled mainly by foreign aid rather than the private sector, had proved unsustainable.
"Under these conditions, lower-than-expected aid flows in the first half of 2011 had an immediate impact on the Palestinian economy," the bank wrote.
"Real GDP growth, steadily increasing in 2009-2010 and previously projected to reach nine percent in 2011, is now expected to be seven percent. The shortfall in external financial support in the first half of 2011 has also contributed to the current fiscal crisis facing the Palestinian Authority."
Attempts to negotiate an end to Israel's 44-year occupation and establish an independent Palestinian state in the West Bank and Gaza Strip, with its capital in east Jerusalem, ground to a halt last September after the expiry of a temporary ban on settlement building, which Israel refused to renew.
Palestinian president Mahmud Abbas said he would no longer negotiate while settlements continued to grow, and the Palestinians decided on the UN route as an alternative strategy.
Israel is fiercely opposed to the initiative, arguing that negotiations are the only way to end the conflict and establish a Palestinian state.
"Ultimately, in order for the Palestinian Authority to sustain the reform momentum and its achievements in institution-building, remaining Israeli restrictions must be lifted," the World Bank wrote.
"The resulting revival of the private sector can be expected to grow the tax base and gradually reduce dependence on external assistance. Until then, however, West Bank and Gaza will remain vulnerable to reductions in aid flow, and these will need to be managed carefully."