Palestinian Prime Minister Salam Fayyad addressed the 2010 Herzliya Conference. He addressed the conference, with characteristic courage, despite criticism from Hamas and Al-Jazeera, because he believed that it was important, specifically at this current juncture in time in which the two governments are unable to communicate, to speak directly to the Israelis. In his speech, Fayyad promised that a Palestinian state would be established by the end of 2012-a state that he has been toiling to organize and prepare for the past number of years. I would suggest that we listen attentively to him: he is going to see that done, just as he has carried out all of the commitments he has undertaken to date.

In June 2002, when Palestinian terrorism was at its apex, President Bush asked the Israeli government to renew the transfer of Palestinian tax funds. As we all know, Israel levies the duty on all imports into the Palestinian territories, and subsequently transfers those funds to the Palestinian Authority. The transfer of those funds was stopped with the outbreak of terrorism. We refused initially, arguing that the entire Palestinian Authority was infected with terrorism.

Please reconsider, asked the president, explaining that the Palestinian Finance Ministry, which is responsible for receiving those funds and disbursing them, was now going to be headed by a new minister: Dr. Fayyad, an economist and a financial expert who lived in the United States for many years and had held a senior position in the IMF. The new minister will be hard put accepting his new job without a regular flow of money. Talk to him and think it over.

We met Fayyad for the first time at the home of US Ambassador Kurtzer in Herzliya. We heard his credo, including his recognition that terrorism was first and foremost a disaster for the Palestinians, isolating them from the world and perpetuating the Israeli control over them, and his understanding that it was imperative that Palestinian society stop terrorism, put an end to the chaos and the rule of armed gangs, establish rule of law, put an end to government malfeasance and establish a free and open economy. On the matter of funds, Fayyad asked that we trust him: the funds are going to be transferred only to the private bank account of the designated recipient and "not a penny will go out unaccounted for."

We reported the content of that meeting to Prime Minister Sharon. We were facing a formidable dilemma: should we place our trust in an unknown Palestinian man, given our bitter past experience with broken promises and the fear that the money would be used for terrorism? At the same time, we wanted to facilitate the work of an alternative leadership to Arafat. "This is the talk of a responsible person," said Sharon. "Maybe we need to try." After consulting with various agencies, Sharon decided, swiftly and courageously as usual, to renew the transfer of funds to the trust fund that was administered directly by Fayyad.

That courage paid off. From that point on, up until today, Fayyad has been working in modesty but with efficiency and determination, to change the Palestinian Authority and to turn it into a state. He brought about the replacement of most of the commanders and personnel in the old security organizations, recruited new people who were not tainted by terrorism and made sure that they were properly trained and equipped. He deployed the rejuvenated security organizations in the cities, villages and refugee camps. He fought crime and corruption, stopped the activity of most of the family-run "monopolies," improved and streamlined as best he could the Palestinian civilian government, won international aid, investments and capital for the Palestinian Authority and contributed to its economic flourishing.

From Israel's perspective, Fayyad has remained true to the tenet he put forward in our first conversation with him: no Palestinian state will be established without security for Israelis. He has kept his word scrupulously. The Palestinian security forces combat terrorism, in coordination with the Israeli security forces, with great success.

In July 2005 Sharon and Fayyad met at the wedding of my youngest daughter. The two men sat together at a table for some three hours, and held an engrossing conversation. They discussed the past, the present and the future. "We were right back then," Sharon said to me afterwards. "He is a serious man and he speaks responsibly." It is regrettable that today, we need the services of an American mediator who runs from one hotel room to the other in order to speak with Fayyad and his colleagues. It is doubtful whether we will have better interlocutors in the foreseeable future.