If Israel and the Palestinians don't change their behavior faster in the West Bank, they will fail to finalize a peace agreement in 2008, Palestinian Authority Prime Minister Salaam Fayad told The Jerusalem Post on Tuesday.

He spoke with the Post briefly in the aftermath of a rare address to the annual Conference of Presidents of Major American Jewish Organizations, which is meeting in Jerusalem this week.

"There must be a greater focus. What we need to do is to pay close attention to the road map," said Fayad.

For a deal to be struck this year, he said, it was important for both sides to push harder "to meet those obligations."

It was a point he underscored during his hour-long speech to the conference, which took place in advance of Tuesday night's meeting between Prime Minister Ehud Olmert and PA President Mahmoud Abbas, the latest in a series of ongoing negotiations between both sides toward a 2008 deal.

Olmert and Abbas were likely to take stock of the situation, said Fayad, but he already had his own assessment.

"My own sense, to be blunt about it, is that not enough has happened in the past three months that could suggest to me [that] a treaty per se is going to be possible [in 2008].

"I say this not because I am interested in making [predictions] about the future, but to suggest that if, indeed, this is going to happen, the pace has to be stepped up - and stepped up significantly," said Fayad.

He told the American Jewish leaders that the process that was formally re-launched in Annapolis in November must be buoyed by active changes on the ground.

Annapolis set the parties on a path "consistent with the need to improve the context in which the negotiations were to proceed," Fayad said.

People have forgotten about these obligations, noted Fayad, adding that for the Israelis, this means the cessation of settlement construction. The Palestinians have an obligation for governmental reform, financial transparency and improved security.

These issues made sense with regard to the overall goal of creating a viable Palestinian state that would live peacefully side by side with Israel, and not merely because they were part of an international obligation that both sides have taken upon themselves, said Fayad.

He refrained from making accusations against Israel during his speech, focusing instead on a laundry list of improvements that his Fatah government has made since its split from Hamas in the summer of 2007, even before Annapolis.

He pointed out that since then, the pace of progress had picked up significantly.

In spite of his skepticism regarding a 2008 peace deal, Fayad said the PA had taken many steps to improve its security forces, which has made life safer for the Palestinians and allowed the Fatah security forces to have a better working relationship with Israel.

In the past, he said, the PA's "security performance had not been adequate." Palestinians' sense of personal safety deteriorated and by mid-2007 had become untenable.

But that was changing, he added, saying, "We have made
substantial progress" in the West Bank.

Fayad pointed out that on the financial side, the PA was working to improve transparency and as of March planned to publish a monthly bulletin detailing its financial transactions. The PA wanted to expand its donor list beyond governments and bring in private sector donors, including Israeli businesses, said Fayad.

To bolster that effort, the PA planned to hold an international conference in Bethlehem in May, right after the World Economic Forum meeting, he said. But Fayad added that much work remained.

"The situation is not a happy situation, but it is better than the situation that prevailed a few months ago, [when] there were no talks," Fayad said.

Looking ahead, he said that a Palestinian state must include Gaza.

"There is a tendency to confuse Gaza with Hamas or to use 'Gaza' and 'Hamas' interchangeably," said Fayad. But that was not the case, Fayad explained.

"We should do everything we can to preserve the integrity of the future state. Gaza will have to be part of the future state," he stated.

Fayad, who has in the past met with individual members of the conference, and who was warmly introduced by conference chairwoman June Walker as a "courageous man," received a mixed reaction from the audience. Many shook his hand, thanked him for coming, and said they looked forward to working more closely with him.

But he was also attacked by participants who doubted his sincerity and commitment to peace in light of the anti-Jewish and anti-Israeli materials found in Fatah publications and in PA schools.

Defending Fatah's commitment to the peace process, Fayad said that the PA has prohibited incitement in places of worship and has changed its school curriculum.

Fayad told reporters he had accepted the conference's invitation to speak because he thought an exchange of views was important for each side to understand what the other expected.

The conference's executive vice chairman Malcolm Hoenlein agreed.

He told the Post that the forum sought to present the Jewish leadership with a wide range of views. This week, it has already heard from Olmert, as well as left- and right-wing politicians.

"People will draw their own conclusions," Hoenlein added. While there had been Palestinian participation in past conferences, it was unusual to host someone of Fayad's stature, he said.

As if to underscore the unusual mix of personalities attending the conference, Fayad literally bumped into former IDF chief of General Staff Lt.-Gen. (res.) Moshe Ya'alon, who opposes the Annapolis process.

Startled, the two men looked at each other and then shook hands.

"How are you?" asked Ya'alon.

"There is a lot of work to do," Fayad replied.