Washington insisted on Saturday in Rabat that economic and political modernisation is needed to combat terrorism.

But with unabated violence in Iraq, the inaugural Forum for the Future in Morocco was viewed by many in the Middle East as US meddling.

Outgoing US Secretary of State Colin Powell said Washington was committed to working actively with Palestinians and Israelis to solve the conflict but that "reform does not have to wait for that".

"We did not overlook some of the challenges that we are all facing in the region and uppermost in that list of challenges is the situation between the Israelis and the Palestinians," he said at the close of the one-day conference.

Bone of contention

Powell added: "But we cannot ignore the fact that reform has to go on. A child who is in need of an education will not be a contributing member of society without that education."

"It remains to be seen if we can for the first time be honest with each other and commit ourselves to settling the Arab-Israeli conflict"

Saud al-Faisal,
Saudi Foreign Minister

For his part, Saudi Foreign Minister Prince Saud al-Faisal, dismissing any idea of a clash of civilisations between the Western and Arab worlds, said the real bone of contention was Western bias towards Israel.

"It remains to be seen if we can for the first time be honest with each other and commit ourselves to settling the Arab-Israeli conflict," he told delegates.

European Union foreign policy chief Javier Solana agreed, but in different terms. "The problem of insecurity in Iraq and the peace process in the Middle East need to take momentum" to ensure ideas floated at the forum bear fruit, he said.

Protests staged

While ministers talked behind closed doors, about 150 human-rights activists and Islamists tried to stage a sit-in outside the Moroccan foreign ministry building. The protesters were quickly dispersed by police.

There were no incidents.

Abd al-Hamid Amin, head of Morocco's main independent humans-right group AMDH, said: "The US administration can never bring us a democratic project."

He added: "Look what happened at Abu Ghraib, at Guantanamo, Falluja," referring to reported abuses by US forces.

The Greater Middle East region is
badly in need of foreign capital

The forum's overall aim was to bring more investment capital to a vast region of about 560 million people stretching from Mauritania and Morocco on the Atlantic coast and northwest
corner of Africa to Pakistan and Afghanistan in southwest Asia.

In his address, US Treasury Secretary John Snow said the International Finance Corporation - the World Bank's private-sector investing arm - had set up a regional fund to provide training and technical assistance to small and mid-sized businesses.

The facility currently amounted to $60 million "and with your support more is on the way", he told participants. The goal was to have $100 million within three years.

Other initiatives presented by several countries and approved in Rabat were for education and to halve the illiteracy rate over the next decade, especially for women and girls.

Powell, who is expected to leave his job next month to be replaced by Condoleezza Rice, stressed the Forum for the Future was not a one-off event. The next meeting will be in Bahrain in November 2005.