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Last Updated: Wednesday, 15 August 2007, 20:37 GMT 21:37 UK
Japan resumes aid to Palestinians
Taro Aso and Mahmoud Abbas
Agriculture projects will benefit from the aid
Japan has resumed direct aid to the Palestinian government for the first time since the Hamas election victory after agreeing a $20m (10m) package.

The Japanese Foreign Minister Taro Aso signed the deal with Palestinian Authority President Mahmoud Abbas.

Aid was suspended after Hamas formed a government in 2006 but it was fired by Mr Abbas in June this year.

Japan wants to boost economic ties between Israel and the Palestinian government to revive the peace process.

Eleven million dollars (5.5m) will be paid in direct aid, with a further $9m dollars (4.5m) in humanitarian assistance.

Desperate state

Some of that money will go to Gaza where Hamas violently took control two months ago.

Mr Abbas now heads a Western-backed government led by his Fatah faction in the West Bank.

The BBC's correspondent in Jerusalem, Crispin Thorold, says the Palestinian economy has been in a desperate state for well over a year.

He says the $11m in direct aid which Japan has pledged is not a huge amount but does at least mark the resumption of Japanese financial support.

Israeli and Palestinian officials have welcomed the Japanese government initiative to boost economic co-operation but warned that it was not a replacement for political dialogue.

Israel's Foreign Minister Tzipi Livni and senior Palestinian official Saeb Erekat signed an agreement to build an industrial park to process Palestinian fruit and vegetables.

Under the plan, the products will be shipped to Jordan for sale in the Gulf and Israel will provide security and technical expertise.

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