Co-operation, not collision, with Israel is the only route out for the Palestinian Authority

Fayyad, who previously worked at the IMF and the World Bank, has been steadily building-up the West Bank’s economy - with a great deal of support from Israel and the US.

This has lead to some impressive feats - the economy of the West Bank grew by 8.5% in 2009, when most of the world was in recession; improved tax collection has increased tax revenue by 15% and unemployment has been reduced by over 30%. Also, where Arafat was often criticised for corruption and embezzlement of PA funds, Fayyad has focussed on transparency and used the money to dramatically improve the West Bank’s infrastructure.

In just two years, he has built over 120 schools, 1800km of new roads, and 1500km of new water networks, as well as building 11 new health clinics and expanding an additional 30 in the last year. This represents a very positive shift in Palestinian mentality - where the vast majority of Palestinians and their supporters blame Israel for poor water services and roads, he has decided to stop pointing fingers and actually improve the situation.

With cooperation and training from the US and Israel, the Palestinian security forces, traditionally little more than militias for corrupt leaders, have been transformed into a competent organisation that is able to maintain law and order in Palestinian areas. This has made for a far more liveable West Bank.

On a personal note, during a recent visit to Bethlehem, I witnessed my taxi driver being pulled-over for making an illegal turn; I have never before seen anyone so overjoyed to receive a traffic fine. He explained that until a year or two ago, there were never any traffic laws in the area.

Even in Gaza the situation has been improving, albeit at a very slow rate. 2010 saw the opening of Gaza’s first Olympic-size swimming pool and its first shopping mall, as well as the easing of Israel’s blockade, allowing most goods into the enclave and all but putting the tunnel smuggling trade out of business.

Doubtless there are still major issues, including widespread homelessness, unemployment and aid dependency; as well as the oppressive Hamas regime, which refuses to renounce violence and recognise Israel, tortures and kill political enemies and clamps down on “un-Islamic” practises such as surfing for adult females. Still, since the previous war ended in early 2009, there has been a relative calm.

Rather than its myopic focus on the issue of settlement construction and its bafflingly inconsistent policy of pressuring one party or another, the US may have made significant headway in peace negotiations by building on the positive trends that have been happening in spite of, rather than because of, the lacklustre “peace process”. Unfortunately, in the case of both Palestinian territories, the situation is likely to deteriorate in the near future.

As time heals the wounds of the 2008/2009 war and increasingly sophisticated weaponry is smuggled into Gaza, the militant groups there - some aligned to Hamas and some independent of it - are growing more and more bold, with a series of attacks on Israel in the last few weeks which induced reprisals and escalated tensions to the highest levels in two years.

Unless Hamas can be convinced to again clamp down on such activities, it is very likely that they will sooner or later spiral out of control and lead to another vicious conflict.

Meanwhile, a worrying trend from the Palestinian Diaspora has infiltrated the PA leadership - the idea of cutting ties and cooperation with Israel.

This has manifested itself both as an attempt to boycott Israel and thus cut economic and social ties, as well as by Fayyad and PA President Mahmoud Abbas eschewing negotiations in favour of a unilateral declaration of Palestinian statehood.

Having already recruited several countries in Latin American, the PA is pushing for a UN resolution in favour of this. The policy, which was attempted before in 1988, risks driving a wedge between the two sides, ending the mutually beneficial cooperation and re-igniting emotions around key issues such as borders and Jerusalem - which could only ever lead to conflict.

The progress from the end of the last decade is hanging by a thread. Only strong and intelligent leadership from the US - focussing on improving the existing practical West Bank cooperation, strengthening deterrence of Hamas, and signalling strongly to the Palestinian Authority that there is no viable alternative to serious negotiations with Israel - will be able to prevent the conflict from spiralling out of control and preserve the practical progress toward a two-state peace which has emerged in recent years.