Palestinian prime minister Salam Fayyad's blueprint for what he has called "de facto Palestinian statehood" offers a new and important element to the quest for peace in the Middle East.

Peace between Israel and the Palestinians hinges on recognition and security for Israel and freedom and independence for a Palestinian state. Fayyad's model emphasises the importance of the reality of the Palestinian state as a functioning entity, irrespective of international recognition and grand diplomatic gestures. By doing so, Fayyad challenges the sole reliance on political and rhetorical tools of diplomacy and international recognition, the traditional path through which Palestinians have sought statehood.

Salam Fayyad is saying that if Palestinians build governing and civil society institutions, Palestine can become a state in reality, whether negotiations are moving forward or not. Palestine will be a fait accompli, rather than a distant aspiration. If you build it, the state will come.

The plan is a call to action for Palestinians to establish "strong state institutions capable of providing, equitably and effectively, for the needs of our citizens, despite the occupation", and "to establish a de facto state apparatus within the next two years". The 38-page document lays out the generalised blueprint for the Palestinian Authority to begin to transform itself into a functioning, responsive and responsible government as if the Palestinians had independence, and in preparation for independence.

Fayyad is calculating that Palestinian governance, reform and development will have a transformative effect on the people and their daily life in the occupied territories, create an atmosphere of hope and belief in a better future, as it creates a new practical reality, which neither Israel nor the international community will be able to ignore. The truth is that decades of occupation, violence and mismanagement have seriously degraded Palestinian governance and civil society institutions.

Some critics in Palestinian society have complained that building state institutions in spite of the occupation amounts to a form of surrender that "beautifies" the occupation. On the contrary, Fayyad's approach would be the most serious possible challenge to occupation because it would demonstrate that Palestinians can not only govern themselves, but that they are governing themselves. Independence then becomes strictly a diplomatic formality that recognises the practical reality that has arisen due to proactive and constructive Palestinian institutional development.

The prime minister's plan prioritises concrete, practical steps the Palestinians can take towards independence on their own and with regional and international support. Fayyad has described a two-year timeframe for the initial implementation of his de facto statehood plan, consistent with President Obama's stated intention of achieving an Israeli-Palestinian peace agreement.

The US, the international community, the Arab states and Israel would do well to enthusiastically embrace Fayyad's programme, since it is the most clearly articulated and practicable alternative to the allure of violent armed resistance. Moreover, all parties that profess to be supportive of Palestinian statehood have a vested interest in creating the infrastructure of a viable state.

It is instructive to note which parties have already publicly expressed opposition to the programme: Hamas, Islamic Jihad, the Popular Front for the Liberation of Palestine, some elements within Fatah, and Israel's rightwing foreign minister, Avigdor Lieberman.

Palestinian rejectionists can be relied upon to dismiss any notion of constructive, proactive state-building projects, since their domestic political fortunes rely on anger and violence rather than purposively working towards independence. Some other Palestinians have accused Fayyad of exceeding his authority, but in fact he has translated the policy of President Mahmoud Abbas into a comprehensive, sophisticated operational programme that offers good governance, accountability and transparency.

Israeli opposition to this unilateral Palestinian programme, as articulated by Avigdor Lieberman, will be harder to maintain since Fayyad is presenting both a challenge and an opportunity to Israel.

The Israeli prime minister Binyamin Netanyahu and his government have accepted, publicly and formally, the goal of establishing a Palestinian state. His government has expressed a keen interest in Palestinian economic and institutional development. By proposing precisely economic and institutional development with an eye towards independence, Fayyad is bypassing Israeli objections by Palestinians taking proactive measures, and also creating a practical test of Israeli intentions and sincerity. As Fayyad puts it, this is a good unilateral action.

In a recent Cif article, Petra Marquardt-Bigman points out that individuals ranging from Lieberman to the Middle East experts Hussein Agha and Robert Malley have seriously questioned whether a two-state agreement is achievable. However, neither these people nor anyone else has put forward a practicable, conflict-ending alternative. In fact, the real alternative is further conflict, occupation and violence. Moreover, a two-state peace agreement is at the core of the broad foreign policy objectives of the Obama administration that has made it a national security priority with a time-horizon for its realisation.

All serious parties have long since concluded that a Palestinian state is essential to any viable Middle East peace agreement. Fayyad has laid out a constructive, proactive programme, entirely consistent with Palestinian, US and Israeli pronouncements, to build the infrastructure and institutions of that state. Everyone has a stake in helping to make it work.