Arabs and Israelis Start Turning Swords Into Business Shares

A HIGH-POWERED summit here on regional integration had some surprising political spinoffs that could boost Israel's faltering accord with the Palestine Liberation Organization and hasten a peace treaty between Israel and Syria.

The Middle East-North Africa Economic Summit, convened here Oct. 30 to Nov. 1, highlighted the international isolation of Syria and Lebanon, which boycotted the conference, as well as the economic benefits that would flow to these countries from a peace treaty with Israel.

Plans are already underway for a follow-up summit to be held in the Jordanian capital of Amman in June next year. It will attempt to draw Syria and Lebanon into the growing club of Arab states seeking peace with Israel and the normalization of their international trade and investment.

The Casablanca conference sought to enlist the international business community in shoring up the Middle East peace process through trade and investment - particularly in those countries already shifting toward free-market policies, such as Jordan, Morocco, Egypt, and Tunisia.

``What we are talking about here is a new kind of Marshall Plan,'' said Leslie Gelb, president of the New York-based Council on Foreign Relations, cosponsor of the Summit. ``You won't get the United States and other governments putting up billions of dollars in grant aid anymore. But you will get them opening up and supporting trade and investment between the Middle East and the rest of the world.''

On the Palestinian front, next Monday's scheduled meeting between Israeli Prime Minister Yitzhak Rabin and PLO Chairman Yasser Arafat is being seen in political and diplomatic circles as their most important meeting since the Israel-PLO accord was signed a year ago.

Palestinian officials say that the Rabin-Arafat meeting is crucial for creating the climate and setting the date for the holding of Palestinian elections that Mr. Arafat is demanding by the end of this month.

Important steps

Palestinian officials who attended the summit were far more conciliatory about the Israel-PLO accord at the end of the conference than they were when it began. This was largely due to five important developments resulting from the conference:

* The pledge by Jordan's Crown Prince Hassan that Jordan would hand over custodianship of Jerusalem Muslim shrines once the final status of Jerusalem is decided.

* Israeli Foreign Minister Shimon Peres said that Israel regarded the Palestinian issue as the key component of a Middle East settlement and vowed to redouble efforts to secure a peace treaty with Syria.

* While there was a broad consensus that trade and investment should drive the process of economic integration in the Middle East, short-term aid for the Palestinians is vital for repairing the damage caused during the conflict with Israel.

* A clear message given to Israel that the borders of the Palestinian territories have to be kept open for trade, tourism, and employment to allow the Palestinian Authority (PA) to build a viable economy.

* A decision to set up a steering committee to advance plans for three regional bodies: a development bank, a tourism board, and a chamber of commerce.

Jordan defuses shrines issue

The undertaking by Crown Prince Hassan on the Muslim holy sites has removed one of the major obstacles to a settlement on the status of Jerusalem.

It has also defused the acrimonious rivalry between Arafat and King Hussein of Jordan, which was threatening the Israel-PLO accord.

In his closing remarks to the Casablanca conference, Arafat struck a conciliatory note on the Jerusalem issue and the negotiations with Israel. But he insisted that economic development should go hand-in-hand with political progress.

Mr. Peres responded directly to Arafat: ``I want to tell Chairman Arafat that we regard the Palestinian problem as the heart of the problem in the Middle East, which we want to solve honorably and justly. We will not stop until we have a comprehensive peace in the whole of the Middle East.

``Israel's accord with Jordan does not close the door to peace with Syria and Lebanon,'' he said.

But there was little progress on securing the flow of $2.3 billion in aid pledged by donor countries. About $100 million of an initial target of $700 million for 1994 has been released by the US.

The PLO claims the amount is only $75 million and that it has been directed mainly to feasibility studies for construction and infrastructure projects.

PA Planning Minister Nabil Shaath insists that the basic requirements for building a Middle East economy are not yet in place. But he adds that he is not suggesting an international conspiracy against the Palestinians and says he understands the complex process involved in releasing donor aid.

Mr. Shaath says he is concerned, however, that the proposed regional development bank is to be run along purely commercial lines.

``What we really need is some institutional help from the donor countries to help us create export markets,'' he told the Monitor. ``The PA is too small to compete, and the Palestinian territories are not recognized internationally.''

He says that the proposed bank would only be effective to the extent that it dedicated funds to the region. He cites the $125 million in loan guarantees from the US Overseas Private Investment Company as the best example of how a financial institution can make a positive contribution.

Victor Politis, managing director of a New York-based investment company who engaged in a spontaneous debate with Mr. Shaath at the conference, says that there is an urgent need for the PA to pass legislation that will set up the legal framework for the repatriation of capital from the Palestinian territories.

``The Palestinians are among the best traders in the world. But they need to create a climate which will attract investors,'' Mr. Politis says in an interview with the Monitor.

``If you have invested in the Middle East as I have, it is not a threatening reality,'' he adds.

Politis says he is confident that international investment in the Palestinian territories will soon become a feasible proposition because it is in Israel's interests to have a viable economy in these areas.