The Palestinian Authority (PA) is ready to run an independent state but will struggle to make further institutional progress due to the restrictions of the Israeli occupation, the UN has said.

Tuesday’s report followed equally upbeat assessments of the PA’s nation-building achievements released over the past week by the World Bank and the International Monetary Fund.

The positive statements come ahead of a meeting in Brussels on Wednesday of aid donor countries which will review Salam Fayyad’s, the Palestinian prime minister, drive to construct the framework of a state by mid-2011.

"In six areas where the UN is most engaged, governmental functions are now sufficient for a functioning government of a state," said the report.

The report, entitled "Palestinian State-building: A Decisive Period", listed the areas as: rule of law and human rights; livelihoods; education and culture; health; social protection; and infrastructure and water.

However, it said the PA could not make significant further advances given the continued Israeli occupation of the West Bank and a breakdown in Middle East peace talks.

"Measures of occupation which stifle Palestinian life need to be fundamentally rolled back by more far reaching Israeli actions to match the progress of the state-building programme," the report said.

‘Significantly Constrained’

Direct negotiations aimed at ending the decades-old conflict broke down last September following a dispute over continued Israeli settlement building on the West Bank.

Given the impasse, Palestinian leaders aim to ask the UN General Assembly in September for recognition of statehood on all of the territory Israel occupied in 1967, including Gaza – over which the PA has no control.

In a statement accompanying the report, Robert Serry, the UN Middle East envoy, said it was vital for Israelis and Palestinians to resume talks.

"I … stress the urgent need for Israeli-Palestinian peace negotiations on a two-state solution to resume, if the state building and political tracks are to come together by September," he said.

The UN said deep political divisions between the PA and Hamas, which runs Gaza, added another complication to the drive to Palestinian statehood.

However, the report said the main constraint to the creation and successful running of a Palestinian nation remained the Israeli occupation.

Israel still controlled 62 per cent of the West Bank, including major road links, it said.

"The current situation leaves Palestinians significantly constrained in terms of movement of people and goods and access to land," the report said.

(Agencies via Aljazeera)