Arab countries and the Palestinians should take the United Arab Emirates as a model for economic development and prosperity, Israeli Minister Meir Sheetrit said yesterday.
Mr Sheetrit is part of the first official Israeli delegation to visit the UAE - one that was initially to include Finance Minister Benjamin Netanyahu, reviled in the Arab world for his hardline policies as prime minister from 1996-1999.
"I am totally surprised that in the middle of this desert, in the middle of nowhere, there is an Arab government that has succeeded in doing the unbelievable, to create so much out of such a very small place," Mr Sheetrit, a minister without portfolio in Netanyahu's office told Reuters.
Mr Sheetrit is taking part in annual meetings of the International Monetary Fund and World Bank meetings hosted by Dubai as one of 184 members of the Washington-based lenders.
Israel has no diplomatic ties with the UAE - as with most Arab countries - and its presence at the meetings amid an increasingly bloody conflict with the Palestinians sparked widespread outrage.
Mr Netanyahu, whose planned visit was a lightning rod for much of the anger, chose at the last minute to stay in Israel for talks on the state budget.
Mr Sheetrit said the UAE's success was partly because the government has diversified the economy away from oil revenues, and this should be taken as an example for other countries.
"Most of the gross domestic product came not from the oil but from trade, tourism, infrastructure and real estate. That's really very surprising and encouraging from our side," he said.
"That shows you that if we can just have peace in our area, all the rest of the Arab states, which are a long way behind the UAE (in economic development), could do exactly the same."
The Palestinians might even manage to have more economic success than the UAE, if they would stop violence against Israel, Mr Sheetrit said.
Israel and the Palestinians have been locked in a bloody conflict which has intensified since a Palestinian uprising erupted in September 2000.
"They have the talent. Possibly if they forgot for a while the trend of war, the trend of terror, they could achieve the same goals," he said. "There is no doubt in my mind that they could do it even better than here."
He said the violence had cost the Palestinian economy around $2 billion in GDP.
Donors are expected to meet in November to try and raise money to rebuild the economy of the West Bank and Gaza and the Palestinian situation has garnered special attention at the World Bank and IMF meetings.
Palestinian Authority Finance Minister Salam Fayyad met with Group of Seven finance ministers on Saturday and requested $1.2 billion in aid.
Mr Sheetrit said donors should give the Palestinians money so long as "they use it really only for development and infrastructure and as long as they have a government over there promoting justice, law and economic development".
Asked about speculation that Palestinian President Yasser Arafat had used money inappropriately, he said: "I'm sure that he used a lot of resources that arrived to him for totally different matters".
Palestinian finance head Fayyad dismissed media reports that $900 million out-of-budget funds had been diverted to a personal account managed by Palestinian President Yasser Arafat without proper accounting.