$2 billion pledged for Palestinians' homeland effort Clinton arranges talks between Peres and Hassan


WASHINGTON -- More than 40 countries agreed yesterday to contribute $2 billion over five years to help Palestinians build a homeland, and Israel and Jordan turned another page toward peace at an unprecedented White House meeting.

Donors pledged $600 million for the first year, $1 billion for two years and nearly $2 billion over five years to help Palestinians meet needs such as teacher salaries and road repairs and start public works projects needed to spur private investment.

The pledges fell $500 million short of World Bank five-year targets, but officials said that if the first-year contributions are continued, they will exceed it.

This ensures a continuing flow of money during the crucial period leading to a final settlement between Israel and the Palestine Liberation Organization.

The conference, held at the State Department, marked a speedy attempt to launch Palestinian self-rule on a solid financial footing with guidance from a seven-nation steering group.

"We must help them demonstrate the tangible benefits of peace, and we must do so quickly if the advocates of peace are to be strengthened and the enemies of peace are to be isolated and discredited," Secretary of State Warren M. Christopher said.

The biggest single donor, of $600 million, was the European Community. The United States made a five-year pledge of $500 million.

President Clinton, meanwhile, shattered another taboo in the Arab-Israeli conflict by bringing together Israeli Foreign Minister Shimon Peres and Jordan's Crown Prince Hassan at the White House. The two agreed to work together toward economic cooperation.

It was the first time a top Israeli had met in the open with a leading member of the Jordanian royal family, although there have been numerous reported secret meetings between King Hussein and Israeli leaders.

Yesterday's talks, coinciding with the donors' conference, were a step toward close economic ties among Israelis, Jordanians and Palestinians-- a "common market in the Middle East," as Mr. Peres calls it. They also served to bind Jordan to progress toward peace among Israelis and Palestinians.

But other taboos from the 45-year Arab-Israeli conflict remain in place.

Only the PLO and Egypt officially recognize Israel. Most Arab states have turned down U.S. demands to lift their economic boycott of Israel, although a secondary boycott of firms that do business with Israel is being widely flouted and the new Israeli-Jordanian relationship is a significant crack.

"There are many things, including the boycott of Israel, that have no place in a world seeking peace," Vice President Al Gore said in opening the donors' conference.

Palestinians are reluctant to urge lifting the boycott, even though not lifting it may harm their economy indirectly, because they view it as leverage to make Israel more flexible on "final status" issues such as sovereignty over Jerusalem.

Other Arabs "want to see if life is improving on the street" for Palestinians, a senior U.S. official said.

Yesterday's conference also showed continuing bitterness among the United States' Persian Gulf allies toward PLO Chairman Yasser Arafat for his support of Iraqi President Saddam Hussein during the gulf war.

Of these, only Saudi Arabia and the United Arab Emirates pledged specific dollar sums, $100 million and $25 million respectively, although Saudi Arabia assured U.S. officials privately that it would give $1 billion over 10 years.

The Saudi Foreign minister, Prince Saud al-Faisal, made a point of saying that his country's money would be funneled through the World Bank.

Kuwait, despite pressure from the United States, refused to commit itself to a figure but promised to be helpful.

But for now, $600 million is all the Palestinians will be able to absorb successfully in the first year, according to Nabil Sha'ath, political adviser to the PLO chairman. While voicing concern that the aid would be sustained over the long term, he pronounced the organization pleased and grateful.

However, Mr. Arafat told British television, "It is not enough if it is two [billion dollars]. At least we are in need of $5 billion."

The money will fund some projects developed by the United Nations and the U.S. Agency for International Development and others that are expected to be developed by a Palestinian reconstruction and development group.

With the World Bank coordinating donations, the money will be disbursed both by the bank and the aid organizations of individual countries.

A seven-nation group of donor countries, with Egypt, Israel, Palestinians and Jordanians as associate members, will meet every six months.

Israel contributed $25 million in grants and $50 million in loans yesterday to the effort, but Mr. Sha'ath termed this a symbolic commitment and indicated that tough financial issues remain to be settled between Israel and the Palestinians.

These include providing the Palestinians with some of the money from sales taxes and tariffs levied by Israel on goods sold in the occupied territories.

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