For decades, little attention has been paid to what has actually been happening on the ground with regard to the peace process between Israel and the Palestinians.

The institution-building programme of the Palestinian Authority, which has been spearheaded by Prime Minister Salam Fayyad is surrounded by a great deal of confusion and misunderstanding. This may be a function of the very nature of the programme: a political project that has its foundation in the technical aspects of building a nation.

At first glance, the programme appears to be only technical, steeped (as it should be) in security sector development, governance reform and economic policies. Indeed, what has made it so noteworthy and so different from the traditional hollow pronouncements of reform by most Arab governments is the fact that it has already delivered improved security, better governance and economic growth.

It is remarkable that the most successful and wide-ranging Arab reform programme should happen in the most unlikely locale. The West Bank, with its reality of occupation and a political culture that reflects that reality (which has traditionally focused on liberation at the expense of governance), has accrued these elements of national strength.

Judicious efforts towards reform must continue if the programme's potential is to be realised. This is a political initiative in terms of its ultimate objectives, impact, and what is needed to sustain it. It is precisely because of these political implications that the world must provide the Palestinians with the necessary financial and technical support needed to properly implement reforms.

From its inception, the project of building Palestinian institutions and a sovereign state has been explicit and unapologetic about its objective: to build institutions under occupation in order to end occupation. If the project becomes - or is seen to become - a tool of maintaining the status quo, it will be abandoned not only by the Palestinian public but by its founders.

This is an inspirational and aspirational project whose credibility is based on building facts on the ground. It has already had an undeniable political impact both domestically among Palestinians and in foreign policy.

Domestically, it is helping to shift Palestinian political culture from the understandable, yet ultimately self-defeating sense of victimhood and entitlement into one of self-empowerment. Since the programme was initiated in August 2009, the 2,000 projects already implemented offer clear evidence that a good portion of Palestinians' fate lies in their own hands. This ongoing paradigmatic shift is changing what Palestinians expect of themselves and their governing elites and is introducing new criteria for judging the success or failure of political actors.

Critics have claimed that this initiative has brought nothing new. But this assertion cannot withstand the test of reality, as can be witnessed by anyone who has regularly visited the West Bank over the last decade. Nor is it consistent with the assessment of international organisations such as the World Bank, which has judged the reform trajectory sufficient to form the foundations of a vibrant Palestinian state.

Arab citizens throughout the region are demanding governmental reform and Palestinians are no exception. The public need for good governance, which provides both accountability and competence, must be met. Appointing cabinet members qualified to meet these needs, as well as holding presidential, legislative and municipal elections are expected.

In foreign policy terms, the enhanced security developments have enabled the resumption, though not the continuation, of peace negotiations. The initiative also has increasingly been viewed as a threat, though it was initially supported somewhat in Israel because it was perceived as consistent with what was called "economic peace". However, a significant segment of the Israeli military and security establishment, having witnessed a new professionalism of the Palestinian security forces, has begun to advocate for the programme within the Israeli establishment.

However, the greatest obstacles to implementation are not from without. There has been resistance from some within the old Fatah establishment; Hamas also poses a security challenge. Fatah has to understand that the success of this programme, while it might undermine its networks of patronage, is a success for the national secular Palestinian project and will benefit moderates.

Israel for its part needs to understand the stability and security that such a project brings about. In order to secure its stated national project of achieving a democratic state as a homeland for Jewish people, Israel must break out of the habit of denying the Palestinians access to land and tightening its squeeze on the ground and the people. Institution-building should be insulated against diplomatic squabbles through oversight by the Quartet and its constituent members.

Most importantly, the programme must produce political dividends in order to be sustainable. The Palestinian public must feel that they are moving towards statehood and an end to the occupation. Otherwise, the institution-building process becomes vulnerable to accusations of simply "beautifying" the occupation.

However, even in prolonged periods of diplomatic impasse, there has been progress. There has been a steady extension of Palestinian authority over expanded areas in the West Bank, including the curtailing of Israeli forces in Palestinian territory. In the meantime, statistics show that the number of Palestinians who return to live there is slightly higher than those who leave - a significant reversal of a trend that lasted for years.

The international community needs to treat this programme as much more than a development project. It is an essential component of peacemaking that requires both financial and political support at the highest levels of foreign policy-making.

Defining a two-year time horizon, demonstrable achievements on security, governance and the economy, as well as an energetic Palestinian diplomacy, have created a global sense that Palestinian statehood is inevitable.

The international community must learn that stability cannot be maintained at the expense of responsible governance based on the rule of law, functioning institutions and viable economies. The programme is still taking root, but it needs to be strengthened because it holds great promise for the Palestinians and to the region.

Ziad J Asali is the president of the American Task Force on Palestine