The Palestinian Authority intends to establish a de-facto state within the next two years, despite failing peace talks, Palestinian Prime Minister Salam Fayyad said on Tuesday.

"We have decided to be proactive, to expedite the end of the occupation by working very hard to build positive facts on the ground, consistent with having our state emerge as a fact that cannot be ignored," Fayyad told the Times of London. "This is our agenda, and we want to pursue it doggedly."

According to Fayyad, the idea would be to "end the occupation, despite the occupation."

The de facto state would include security forces, public services and a thriving economy, Fayyad told the Times, and would hopfully serve as the impetus to Israel to move foward on its own commitments.

Fayyad was to unveil his plan for building the institutions and infrastructure of the state of Palestine, which he said could feasibly be readied in the next two years.

Not so much a blueprint as a wish-list, the 65-page plan calls for a new international airport in the Jordan Valley and new rail links to neighboring states, and proposes a generous tax regime for foreign investors.

The Palestinian Authority which Fayyad heads is dependent on foreign assistance for most of its budget. A copy of the plan was obtained by Reuters ahead of publication.

The plan is short on detail, but setting out these objectives is a departure from Palestinian policy over the past 15 years, which focused exclusively on negotiations with Israel rather than building institutions.

Western-backed Fayyad says Palestinians must not wait for a final peace settlement with Israel but get on with creating their state.

"We call upon all our people to work together on the basis of full partnership in the process of completing and building the institutions of a free, democratic and stable state of Palestine," the plan states.

"The world should hear the clear and united position from all walks of Palestinian society ... that the Israeli occupation is the only obstacle that hinders the stability, prosperity and the progress of our people and their right to freedom, independence and a decent life."

Fayyad, a technocrat with no significant political base, heads a newly aligned cabinet with more ministers than before from the dominant Fatah faction of President Mahmoud Abbas, whose Islamist Hamas rivals refuse to recognize the premier.

On the political level, the plan is in harmony with the position of Abbas, who wants to establish a state on all territories that Israel occupied after the 1967 war, with Arab East Jerusalem as its capital.

The document says the government will focus on improving the performance of Palestinian security services, as part of its commitment to crack down on militants as stipulated in the internationally backed peace plan or "road map".

It speaks of building infrastructure, securing energy sources and water, and improving housing, education, and agriculture. But no detailed prescriptions are included.

"The government will work on encouraging investment in Palestine through offering tax cuts to local and foreign investors (and) will review investment regulations and remove obstacles that hinder investment," says the document.

"Our national duty stipulates that we should do whatever we can to get our economy out of the cycle of dependency and alienation."