(Adds Israeli reaction)

By Adam Entous

JERUSALEM, Nov 18 (Reuters) - Middle East envoy Tony Blair plans to announce on Monday projects designed to bolster the Palestinian economy, including one in the Hamas-controlled Gaza Strip, Western and Palestinian officials said.

The announcement by the former British prime minister comes a week ahead of a U.S.-sponsored peace conference meant to launch long-stalled talks on Palestinian statehood and bolster President Mahmoud Abbas after Hamas Islamists seized control of the Gaza Strip in June.

Western and Palestinian officials, speaking on condition of anonymity on Sunday, said the projects were meant to quickly create jobs and boost economic activity.

Western officials said the decision to include a sewage project in Gaza was part of a new outreach effort to the coastal strip's 1.5 million residents.

Abbas, whose secular Fatah faction still dominates the occupied West Bank, wants to regain control of Gaza but it is unclear how he will be able to do so.

Israel has tightened its economic and military cordon around Gaza since June and has escalated threats to invade the territory in response to Palestinian rocket fire.

"From our point of view, this is a humanitarian question," Shlomo Dror, spokesman for the Israeli coordinator for the Palestinian territories, said of the Gaza sewage project.

Dror said Israel's only concern was that certain types of metal piping could be used by militants to fashion rockets. Dror said alternative types of piping could be used.

Blair's West Bank projects will include a trade corridor in the town of Jericho and checkpoint changes to make it easier for tourists to visit Bethlehem and its Christian holy sites.

Construction of a major industrial zone in Hebron is designed to create local jobs, said Mayor Khaled Oseily, adding that Blair promised to find international donors.

The projects will be unveiled after Blair's meeting on Monday with Palestinian Prime Minister Salam Fayyad and Israeli Defence Minister Ehud Barak.

Speaking to reporters in the West Bank city of Ramallah, Blair said the projects were "designed to give people a sense that some things can change on the ground".

Aid agencies have warned that Gaza's sewage systems were stretched to breaking point.

In March, a sewage reservoir burst next to a village in northern Gaza, killing at least four people and injuring 20 in a torrent of putrid water and waste that buried their homes.

Last year the Bush administration decided to fund water and sewage projects in municipalities not controlled by Hamas. (Reporting by Adam Entous in Jerusalem, Wafa Amr in Ramallah and Haitham Tamimi in Hebron; Writing by Adam Entous; Editing by Richard Williams)

AlertNet news is provided by