Sweeping security, fiscal and political reforms are promised in the most detailed blueprint for the creation of a Palestinian state yet drawn up by the emergency government headed by Prime Minister Salam Fayad.

The reform programme to help reverse the "tragic history" of the seven years since the collapse of the Camp David talks and the beginning of the intifada is contained in the 33-page draft of a document which will be presented to the international donors' conference in Paris next month. The confidential draft is the most concerted effort yet by the Western-backed administration loyal to the Palestinian President, Mahmoud Abbas, to demonstrate that it can develop the capacity to run the independent state in the West Bank and Gaza envisaged in the negotiations due to be kick-started by the international summit in Annapolis, Maryland, next week. The US started issuing formal invitations to the summit last night.

The plan, intended for endorsement by the subsequent French-hosted donors conference to be co-hosted by the international Middle East envoy Tony Blair, is intended to go hand in hand with a peace process and a progressive easing of Israeli checkpoints and closures to allow an urgently required revival of the Palestinian private sector. It pledges this part of the economy will be "thriving" and "open to markets around the world".

The draft submission, circulated by Samir Abdullah, the Ramallah-based planning minister and seen by The Independent, is intended to persuade the international community to sanction financing over the three years from 2008 to 2010 of $5.8bn (£2.8bn) to help build a Palestinian state. The Prime Minister, Gordon Brown, has already pledged $500m if there is "tangible progress on security".

The document repeatedly warns that the Israeli regime in the occupied territories has gravely damaged Palestinian economic and social life through the "fragmentation of Palestinian territories into a group of isolated cantons, precipitated by the tightening grip of occupation, settlement growth and mobility restrictions".

But the preliminary draft, which also warns that the international boycott has contributed to a soaring $1.6bn deficit, states: "We, the Palestinian National Authority, do not seek to absolve ourselves of all responsibility for this tragic history. Shortcomings in governance, law and order and basic service delivery have not received the attention they deserve. We are now absolutely determined to rebuild the trust and faith of our citizens, and our international partners, by embarking on a challenging reform agenda for stabilisation and recovery."

While the document focuses in unprecedented detail on modernisation of Palestinian security and other services, slashing the public sector deficit, and arresting unemployment in the wake of the four economic projects announced by Mr Blair on Monday, it also sets out a "vision" of the future state "with sovereignty over the West Bank and the Gaza Strip on the pre-June 1967 occupation borders and with East Jerusalem as its capital".

It states that Palestine is a stable democratic state that respects human rights, guarantees the equal rights and duties for all citizens and which identifies with Arab Palestinian culture, humanistic values and religious tolerance.

The document, which says that the suffering of people in Gaza is "without precedent", bases its projections on the idea that a unified authority will be back in control of Gaza – without saying how – and it assumes the "illegal and violent seizure of control of Gaza by Hamas" of the Strip is a "temporary constraint".

Pointing out that the Fayad government has already begun to tackle the major increase in lawlessness in the West Bank, the draft envisages streamlining the maze of security services into just three branches and a "disarmament, demobilisation, rehabilitation and reintegration programme" to reduce their size while bringing in new recruits and helping "unauthorised militias resume civilian life".

It promises to reform pensions, appoint a powerful new accountant general to ensure fiscal transparency, and inject $500m into the economy by repaying a "substantial proportion" of the arrears owed to the private sector and public employees caused by economic collapse and economic boycotts imposed in March 2006.

It says that "unique" challenges exist in restoring health care to pre-2000 levels after a progressive deterioration and lack of access to vital services which has seen substantial increases in waterborne diseases, malnutrition rates and conflict-related trauma.

Key points of plan

* The Palestinian Authority must impose law and order, and build institutions to govern a Palestinians state; Israel must remove obstacles to creation of a viable state.

* Security: Start made on better policing and seizure of illegal weapons but streamlined service on way with $230m (£111m) upgrade scheme for training, communications, new vehicles and prisoner rehabilitation. "We acknowledge our responsibility within the limits placed on the Palestinian security forces by Israel's occupation, for bringing the rule of law to the occupied territories and combating violence."

* Make utilities self-financing while ensure they still supply the poor.

* Improve teacher training, and school materials and channel special help to the 100 worst performing schools in Gaza and the West Bank.

* Reform complex network of social protection, including NGOs to ensure help goes to those who really need it.

>

* Major drive on infrastructure especially water poverty: 10 per cent of Palestinians have no access to running water while for others consumption is only 10 per cent of prescribed WHO levels.

* Major roadworks and prospect of reopening Gaza airport and building new one in West Bank.

* Realise "enormous potential" of private sector currently stalled by settlement growth and closures and more "quick impact" projects.