John D. Mckinnon
The Wall Street Journal
May 13, 2008 - 5:58pm

President Bush departs Tuesday for a Mideast peace mission that on the surface appears unpromising.

But administration officials say there is quiet movement on the outlines of a future Palestinian state and that momentum is building on the economic-development front, particularly in the Palestinian West Bank. Even if Mr. Bush's 11th-hour push for a peace deal ultimately fails, growing investment in the area is pointing the way toward possible longer-term progress, officials say.

"The more economic opportunities you have, the more likely you're going to have a foundation and a constituency for peace," said Walter Isaacson, president of the Aspen Institute and chairman of the U.S.-Palestinian Partnership, a government-backed development group.

Efforts to build up the economy have been led by the Palestinian Authority, with support from the Bush administration and Western governments, as well as Arab states.

To be sure, Mr. Bush is a lame duck whom some of the region's leaders evidently hope to ignore. The key players in the negotiations, Israeli Prime Minister Ehud Olmert and Palestinian President Mahmoud Abbas, are hamstrung by political troubles at home, some resulting from the peace process.

In neighboring Lebanon, meanwhile, the U.S.-backed government has been humiliated by a Hezbollah uprising. Also casting a shadow is Iran, which is asserting its influence in a variety of ways, including through Hezbollah and Hamas, which has been making trouble for the Israelis from its power base in the Gaza Strip.

As a result, little diplomatic progress is expected from Mr. Bush's visit to Israel, his second this year. In Jerusalem, he will spend much of his time underscoring his administration's support for Israel. Notably, no three-way meetings between top U.S., Israeli and Palestinian officials are expected during Mr. Bush's trip. He also will travel to Saudi Arabia, where he is expected to make another plea for higher oil production, and to Sharm el-Sheikh, Egypt.

"The Bush administration wants to rush to diplomacy, but the politics for successful diplomacy are missing," said Jon Alterman, a Middle East expert at the Center for Strategic and International Studies.

Despite the political and diplomatic problems, signs of progress are emerging. Investors from around the world -- including the Arab states but also Israel -- are showing interest in the West Bank, even as Palestinian leaders complain that tight Israeli security continues to choke off commerce.

"With the relative stability you've had in the West Bank, it's a huge business opportunity," said Mr. Isaacson. "If war breaks out again it's going to be a mess. But at the moment people are realizing that there's double-digit growth, a highly educated population, and it's a good place to be doing business."

Mr. Bush likely will get an update on the economic situation when he meets on Thursday with former British Prime Minister Tony Blair, who now oversees the international peace effort. Mr. Blair has been touting high-profile industrial parks for the West Bank. Call centers and information-technology start-ups also are being considered, with housing and other infrastructure another big focus. U.S. consumer-products makers also are interested.

Economic development is viewed as a key to shoring up political support for Mr. Abbas and Prime Minister Salam Fayyad. Mr. Blair also hopes to link economic development with progress on the public-sector side, as the Palestinian government takes on more day-to-day responsibilities.

The difficulty of pulling off a Palestinian economic miracle became apparent again Monday, however, as word spread that Israel has fallen behind in issuing the travel permits Arab business owners and officials need to attend an investor conference in Bethlehem later this month.

Still, U.S. and Western officials hope that the pursuit of economic prosperity can create the conditions for greater peace throughout the region.

In a speech in Sharm el-Sheikh, Mr. Bush plans to talk about the need to make the economic and political changes in the Middle East that have led to increasing standards of living for lower- and middle-class people elsewhere.

"But that will require leaders and others to make difficult decisions, to allow reforms so all citizens can participate," a senior administration official said. The president also will call for Middle Eastern countries to change through "rejection . . . of extremism and rogue states," and to come together for the sake of regional prosperity, the official said.

In Sharm el-Sheikh, Mr. Bush will meet with officials to discuss Iraqi economic initiatives, including a $5 billion investment in major infrastructure projects. Mr. Bush is hoping to deflect criticism within the U.S. that Iraqis -- flush with cash from oil exports -- aren't contributing enough to their own reconstruction. Mr. Bush also will review progress the Iraqi government is making against illegal militias, particularly in the oil port of Basra -- a key to attracting Western oil companies that can accelerate production.


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