Hoping to build on reforms since the death of Yasser Arafat (search), the international community will pledge political and financial support for the Palestinian Authority (search) at a conference in London on Tuesday.

But leaders will watch closely for commitments from newly elected Palestinian leader Mahmoud Abbas (search) to overhaul the Palestinian economy, its tangled security services and an administration riddled with corruption.

"The real focus of this conference is what the Palestinians need to do right now in order to set their house in order, to demonstrate that this is a break with the past," Nigel Roberts, who is representing the World Bank (search) at the meeting, told The Associated Press.

The conference is not the major international peace gathering that Abbas hoped for, despite the attendance of Secretary of State Condoleezza Rice, U.N. Secretary-General Kofi Annan and a host of European and Arab foreign ministers. Israel is not represented.

British Foreign Secretary Jack Straw said the meeting was a "vital practical step" toward the moribund 2003 "road map" peace plan, which envisions establishment of a Palestinian state and a series of steps including the end of fighting and of Jewish settlement activity.

"I think that with luck tomorrow, the conference will bring a renewed focus on the road map. People want to look forward, not back," he said.

The conference reflects the improved atmosphere in Israeli-Palestinian affairs since Arafat's death in November and Abbas' election victory two months later.

In return for reforms, the United States is expected to agree to head a new security group to help streamline the Palestinians' security services. The European Commission and World Bank would help oversee reforms of the Palestinian economy and institutions.

Arab countries are expected to make good on their pledges of financial aid, to help the Palestinian Authority meet a $40 million budget shortfall, Roberts said.

The conference is designed to help bolster the Palestinian Authority ahead of Israel's planned withdrawal from the Gaza Strip and four settlements in the West Bank and to prepare for eventual statehood.

Officials are wary of mentioning Arafat by name, but it is clear they believe his death has opened a window.

"The fact that the conference takes place is a sign that the international community does not want to lose this opportunity," said Cristina Gallach, spokeswoman for European Union foreign policy chief Javier Solana.

The Palestinians have expressed concern about the limited scope of the conference. They had hoped it would address sensitive issues such as the status of Jerusalem, the borders of a future Palestinian state and the fate of millions of Palestinian refugees and their descendants — issues that have derailed past peace efforts.

After negotiations with British officials, however, the Palestinian leadership seems convinced that the conference could be beneficial and hopes to secure pledges of more than $500 million.

Israeli Foreign Minister Silvan Shalom urged the leaders to discuss terrorism — an issue back in the spotlight after a suicide bombing in Tel Aviv on Friday that killed five Israelis.

"The international community must demand that the Palestinian community fulfill their obligations — to shut down the terrorist infrastructure and to bring those responsible for terror to justice," he said Monday. "We need a partner who is ready not only to make declarations, but also to deliver on its promises."

Observers say that without reforms, bodies such as the EU will be reluctant to give more support to the Palestinians.

Roberts, the director of the World Bank's West Bank and Gaza department, said the Palestinians must improve security and crack down on militant groups and the Israelis must ease restrictions that have strangled the Palestinian economy.

"Those bad policy conditions need to be fixed first," Roberts said. "If you pledge it now and let it go in without essentially holding either party accountable you are wasting your money."

The World Bank and the International Monetary Fund, members of the Group of Eight industrialized nations and a score of Arab states are scheduled to attend the meeting. The so-called Quartet — the European Union, United States, Russia and the United Nations — are expected to meet on the sidelines.