Extract from an article in Issue 10, September 1, 2008 of The Jerusalem Report. To subscribe to The Jerusalem Report click here. Peace talks may be stalled, but that hasn't stopped a group of Palestinian, Israeli and international experts from hammering out an "economic road map" for Israel and a future Palestinian state. A pragmatic plan or a grand delusion? How much would it cost to resettle Palestinian refugees and how much compensation should they receive for the loss of their land? If there is an independent Palestinian state alongside Israel, what kind of customs and trade arrangements would be in force between the two states? Politicians have made little progress recently in resolving the core issues of the Israeli-Palestinian conflict. But that hasn't stopped a team of leading Israeli, Palestinian and international experts - with tacit support from their respective governments - from hammering out a detailed plan of economic relations between Israel and a future Palestinian state. The only question is whether conditions will ever be ripe for implementing such a plan. For the past six years, Dr. Ron Pundak, the director general of the Peres Center for Peace in Tel Aviv, who played a decisive role in creating the secret negotiation track that led to the Oslo agreement of 1993, has been intensively involved in the Aix Group, an Israeli-Palestinian-international economic research group named after its host institution, the University at Aix en Provence, France. The group, led on the Israeli side by economist Prof. Arie Arnon of Ben-Gurion University and on the Palestinian side by Saeb Bamya, former deputy minister of economics in the Palestinian Authority government, has studied and proposed solutions, from an economics perspective, to many of the central disputes between Israel and the PA, including borders, the future of Jerusalem, and a resolution of the Palestinian refugee issue. Their efforts have produced an "economic road map" for Israel and the future Palestinian state. With official Israeli, Palestinian and international representatives often participating in the talks - formally as observers, but also influencing the direction of the group's work - Pundak hopes that the papers produced by the Aix Group will be adopted nearly as a whole in future official Palestinian-Israeli negotiations. Palestinian participants, however, are expressing increasingly pessimistic views about the possibility of ever implementing their own recommendations because they regard the chances of arriving at a two-state solution to the Israeli-Palestinian conflict as rapidly receding. In the early 90s, Pundak, now 53, who holds a PhD in Middle East political history and had worked in various Israeli government and intelligence positions in addition to a stint as a journalist, teamed up with historian Yair Hirschfeld of Haifa University to conduct a series of meetings in Oslo, Norway, with the head of the financial department of the Palestine Liberation Organization (PLO), Ahmed Qurei (Abu Alah), who subsequently became a Palestinian prime minister. The meetings, which started out as academic talks, caught the attention of Palestinian and Israeli decision-makers, were transformed into a secret negotiation track and eventually produced the historic Oslo agreement of 1993, in which for the first time Israel and the PLO granted each other mutual recognition and created the Palestinian Authority. Overnight, Pundak was propelled from anonymity to a key position in back-channel Israeli-Palestinian peace negotiations. Even after the resumption of hostilities between Israelis and Palestinians in 2000, Pundak continued his efforts, backed by senior Israeli political figures, such as former Justice Minister Yossi Beilin and Shimon Peres. He played a central role in behind-the-scenes contacts, such as the negotiations leading to the 1995 "Beilin-Abu Mazen Understanding" and was one of the drafters of the 2003 Geneva Initiative, an unofficial Israeli-Palestinian peace proposal signed by Beilin and Yasser Abd-Rabo, who was at the time a minister in the Palestinian Authority government. In 2002, a year after he had assumed the director-general position at the Peres Center, Pundak was contacted by Prof. Gilbert Benhayoun of UniversitÃ© Paul CÃ©zanne-Aix-Marseille, in France, who, at the height of the fighting of the second intifada, offered to provide the auspices for renewed Palestinian-Israeli dialogue. Together with members of the DATA Center for Studies and Research in Bethlehem, Pundak took the opportunity to put together a group of professionals in several fields, ranging from finance to urban planning and labor policies, in order to create an "economic road map." "We wanted to reverse past approaches, which had concentrated on politics and roughly stitched in the economics later, as an afterthought," Pundak tells The Report. "The economic aspects must be placed front and center, taking into account Israeli and Palestinian interests in a win-win approach." The original vision behind the Oslo agreements included a major economic component, under the assumption that improved economic conditions would lead to reduced hostility, which would further build confidence and advance economic development in a virtuous circle, thus encouraging the two parties to reconcile their differences in other core areas. In practice the Palestinian economy significantly worsened over the past 15 years, Israeli confidence in peace negotiations was shaken by waves of Palestinian terrorism, and a vicious cycle emerged, in which ever-increasing Israeli checkpoints and closures choked off Palestinian trade, which only further stoked Palestinian rage against Israel. In Pundak's opinion, one of the main reasons the Oslo process failed was the gradualism that became identified with it, in which negotiations over difficult core issues and a permanent settlement were continually pushed off into an indefinite future, while incremental "confidence-building measures" were sought even as the situation on the ground deteriorated. "We have adopted the opposite approach," he says of the Aix Group. "In what we term 'reverse engineering,' we start with the parameters of the permanent settlement that we want to attain and then work backwards from them to sketch the road map for getting there. This should have been done 15 years ago. A month after the signing of the first Oslo agreement [in September 1993], we should have plunged into negotiations based on a reverse engineering approach, instead of putting off permanent settlement talks." And why didn't they adopt that negotiating approach? "There were people who raised the idea back then," asserts Pundak. "I suggested taking that road, as did Yossi Beilin and others. But there was opposition to it and mainly on the Israeli side. Yitzhak Rabin rejected the idea, as did Shimon Peres after him, and then Benjamin Netanyahu and Ehud Barak in turn. And that was a mistake." From the start, the Aix Group sessions were intended to be more than yet another academic discussion of the Israeli-Palestinian conflict. Official Palestinian, Israeli and international figures were invited to participate as observers in the group's meetings and many readily accepted the invitation, lending the sessions a semi-official air. The list of official observers includes delegates from the Palestinian ministries of Planning and Infrastructure, National Economy, Finance and Trade, officials from the World Bank, the International Monetary Fund and the European Union, and representatives from Israel's Ministry of Industry and Trade, Finance Ministry, Foreign Affairs Ministry, and the Bank of Israel. The Aix Group includes Israel's Vice Prime Minister, Haim Ramon, on the list of observers who listened and commented on the group's ideas and proposals and formally presented their findings to several high-ranking political figures, such as Abu Ala and former Israeli Deputy Defence Minister Efraim Sneh. "Officials who participate in our sessions as observers are free from formal constraints, because they are not there in their official capacities," explains Pundak. "This gives them the opportunity to speak more freely, while giving us insight into their thinking. Sneh has said that when formal negotiations do eventually take place, large parts of the agreements of the Aix Group can simply be adopted as is." The contrast, however, between Pundak's confident optimism and the gloomy pessimism expressed by Saeb Bamya, who is currently the economic adviser to the Palestinian Federation of Industries and heads the Aix Group's Palestinian Research Team, could not be starker. "I simply do not believe there is political will at the highest levels, on the Israeli side, to agree to a package that will lead to a viable Palestinian state," he says bluntly. Bamya, aged 61, a generally soft-spoken man who joined the Aix Group while still in his official capacity as director general of the Palestinian Economics Ministry and continued to participate in its sessions as he was promoted to assistant under secretary and then deputy minister, tells The Report that he is becoming increasingly doubtful about the future of Israeli-Palestinian relations. "What Israel is doing on the ground makes it impossible to believe that a two-state solution can be attained," he says. "The expansion of settlements and the physical transfer of land in Palestinian territory to Israeli control makes this option less viable by the day. When there is no respect of Palestinian interests and no agreements, the extremists like Hamas take over." Does he still stand by the proposals appearing in Aix Group documents, which he had a significant part in composing? "Yes," he replies, "and I would like to see them implemented. But the peace camp in Palestine is dying, and this is not in Israel's interests. We need to join efforts to prevent extremism from winning, but Israel seems to lack the will to do so." The two-state solution, with distinct and sovereign states of Israel and Palestine, forms one of the bedrocks of the Aix Group's assumptions. The group's documents presume that the borders will be drawn so that each state will have contiguity, that the land will be divided along a 78-22 percent split between Israel and Palestine, allowing for swaps of land along the "Green Line," and that arrangements will need to be found to allow the free flow of people between the West Bank and the Gaza Strip. Extract from an article in Issue 10, September 1, 2008 of The Jerusalem Report. To subscribe to The Jerusalem Report click here.