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A UN development thinktank on Thursday called on the Palestinian Authority to reduce its economic dependence on Israel through better management of its economy.

In a report on Palestinian economic development, the UN Conference on Trade and Development (UNCTAD) recommended that the Palestinians "try to shift away from close economic involvement with Israel."

The report argued that the Palestinians could reduce dependence on Israel caused by occupation, by restructuring the economy to specialise in certain products, strengthening the domestic market and diversifying export markets and supply sources.

It also recommended that the Palestinian Authority shift away from its short-term reliance on "emergency responses", and use aid to build long-term development planning and a "vision" of viable institutions.

The report did not say how the hemmed-in and largely impoverished Palestinians could avoid Israel for trade.

Some 95 percent of Palestinian exports go to Israel, while Israel accounts for 75 percent of Palestinian imports, according to UNCTAD.

On Wednesday, the Middle East quartet -- the United States, United Nations, European Union and Russia -- established a temporary trust fund which would enable donors to resume aid without having to deal directly with the Hamas-run authority.

The quartet said that Hamas had to accept responsibility for its ongoing financial crisis over its failure to renounce violence and recognize Israel's right to exist.

For each dollar of aid granted to the Palestinians, 45 cents is spent on buying Israeli products, said Raja Khalidi, head of UNCTAD's assistance programme for the Palestinian people.

In theory, "the Israel economy would be the best bet for the Palestinians," Khalidi told journalists.

But a Palestinian-Israeli free trade project set up in 1994 has been stifled by renewed skirmishes and security blockages following the most recent uprising in 2000, he added.

Container-loads of goods are regularly snared up in ports and crossing points.Agence France Presse