Leaders Gather to Form Mideast Economic Bloc

A MAJOR economic conference bringing together Israel and the Arab world with international investors began here last night in a move that US officials hope will consolidate recent efforts establish a lasting peace in the Middle East.

The three-day conference is the first coordinated attempt to get investors from the United States, Europe, and East Asia to invest in a region that risks being left behind in a world of regional trade blocs and a global scramble for capital.

More than 1,000 politicians and business people from more than 50 countries will attend the conference, including several heads of state, foreign ministers, and representatives of the World Bank, the International Monetary Fund, and the world's major corporations.

Plans for the creation of a $10-billion regional development bank, which have already reached an advanced stage, could be announced before the end of the meeting.

Israel, in its most serious bid to break through to the Arab world, is sending a delegation of eight Cabinet ministers - led by Israeli Foreign Minister Shimon Peres - and 80 leading business people.

Backing sought

The conference, brainchild of Mr. Peres, and cosponsored by Russia and the US, will seek to underpin peace agreements between Israel and its moderate Arab neighbors by getting foreign investors to strengthen the contacts between them. A follow-up conference is scheduled to be held in Amman, Jordan, next April.

US Secretary of State Warren Christopher unveiled a four-point plan to forge regional economic cooperation, including: cross-border flow of goods, a regional economic bank, a tourism board, and a chamber of commerce.

King Hassan of Morocco, who is hosting and bearing some of the cost of the conference, is likely to bolster his growing status as an intermediary between Israel and the Arab world.

Egyptian President Hosni Mubarak heads a delegation that will propose a rail and road network linking Mediterranean and North African countries.

The conference could also hasten the demise of the 21-nation Arab League's 43-year-old economic boycott of Israel, which has already begun to fray.

In the past 12 months, Israel signed a peace accord with the Palestine Liberation Organization. Morocco and Tunisia agreed to low-level diplomatic contacts, the Gulf Cooperation Council (comprising Saudi Arabia, Bahrain, Kuwait, Oman, Qatar, and the United Arab Emirates) partially lifted their boycott, and Jordan signed a peace treaty that stands above its other international agreements.

Jointly organized by the New York-based Council on Foreign Relations and the Swiss-based World Economic Forum, the conference could bolster the bridges created between Israel, Egypt, Jordan, and the PLO.

WEF President Klaus Scwab, who was instrumental in fostering a partnership between the African National Congress and the business community in South Africa over the past five years, says the large turnout was ``a sign of confidence in the ongoing peace process in the region.''

Curbing extremism

The conference could also help roll back the tide of militant Islam that is sweeping the Arab world and threatening to break momentum toward peace.

Algeria, Morocco's neighbor, is descending into anarchy as the government fights it out with Islamic militants.

Islamic groups such as Hamas are threatening the year-old accord between Israel and the PLO. And the militant Hizbullah, a Shiite militia funded by Iran, continues to attack northern Israel from bases in Syria and Lebanon, the only two Arab countries boycotting the conference.

A meeting here yesterday between Israeli Prime Minister Yitzhak Rabin and PLO leader Yasser Arafat paved the way for the reopening of the borders between Israel and the Palestinian-run Gaza Strip - closed following the Oct. 19 bombing in Tel Aviv.

Following their meeting, Mr. Rabin announced that Israel would begin a gradual reopening of its borders with Gaza and the West Bank tomorrow. He said that he and Mr. Arafat would meet again at the Erez Checkpoint between the Gaza Strip and Israel Nov. 7.

Rabin also said Israel would accelerate Palestinian civilian authority in the West Bank, including health, taxes, and social programs. ``We reached an accord, now we must find an accord with donor countries that will finance these transfers,'' he said.

The leaders also discussed ways of speeding implementation of the stalled Israel-PLO accord, and Rabin left Arafat considering an offer to push ahead with elections for Palestinian self-rule councils in Gaza and the West Bank.

In the case of the Israel-Jordan peace accord signed last week, the conference could help provide much-needed finance for joint- development projects between the two countries - vital to winning popular support for the accord.