Defense Minister Moshe Arens appointed a committee Monday to study possible economic development in the occupied Gaza Strip, in what was seen as a first step toward separating the territory's economy from Israel's.

Any encouragement of development in the occupied territories would be a reversal of Israel's policy of keeping Gaza and the West Bank dependent on Israeli goods and employing Palestinians as cheap labor in Israel.A Defense Ministry statement announced formation of the committee, headed by economist Ezrah Sadan. The statement said the group also will investigate the relationship between the economies of Gaza and Israel.

According to the daily Haaretz, a ministerial committee headed by Prime Minister Yitzhak Shamir recently gave the Israeli military government in the territories "a green light to push for establishment of an independent economic infrastructure in the territories."

In line with this policy, the military administration has approved the creation of dozens of new plants and given licenses to factories that operated illegally without them, Haaretz said in a report published Sunday.