Israeli officials today said Jordan's decision to cancel a $1.3 billion development plan for the Israeli-occupied territories would have no practical effect because the plan existed primarily on paper. Palestinian leaders in the West Bank were divided on the impact. Some said it would seriously hurt some residents already struggling financially because of the 8-month-old Palestinian uprising in the occupied lands. Jordan announced Thursday it was canceling the development program in a move to hand over more responsibility for the 1.5 million Arabs in the occupied West Bank and Gaza Strip to the Palestine Liberation Organization. Meron Benvenisti, an Israeli expert on the West Bank, said he thought the move was the first step toward a decision by Jordan's King Hussein eventually to cut ties with the occupied West Bank and Gaza Strip altogether. ``He wants to see how people react. But ultimately he has no choice but to cut ties,'' Benvenisti, head of the West Bank Data Bank, a U.S.-funded research project, said in an interview. ``If he doesn't, he gives money to people who in the long run are his enemies,'' said Benvenisti, referring to a growing anti-Jordanian slant among West Bank Palestinians. He said Hussein's plan ``was a bubble. King Hussein didn't have the money for the project. He hoped to get foreign governments to donate funds.'' It is difficult to gauge how much of the $1.3 billion has reached the occupied territories. Deposed Gaza City Mayor Rashad Shawaa said the Gaza Strip had received about $6.6 million. Foreign Minister Shimon Peres said the Jordanian measure would not affect his approach to a Middle East peace settlement based on Israeli-Jordanian negotiations. Hussein and Peres, of the left-leaning Labor Party, agreed last year to hold direct talks in the framework of an international peace conference. The accord was vetoed by Prime Minister Yitzhak Shamir, head of the right-wing Likud Bloc. Peres, speaking on Israel radio, said Jordan remained crucial to a resolution of the Palestinian problem because the 850,000 West Bank Palestinians hold Jordanian passports, the West Bank and Jordan have strong trade links, and Israel and Jordan share a long border. In Gaza City, Shawaa, known for his pro-Jordanian views, said in an interview that the move was ``regrettable because people here need help, and this was an important source of help.'' But Mustafa Natsche, deposed mayor of the West Bank city of Hebron and a PLO supporter, said ``the Amman decision will not affect anybody.'' Natsche said the Palestinians in the West Bank needed contributions from all the Arab countries, not just Jordan. But he said what they needed most was to be steadfast in their struggle to end Israeli occupation. The five-year project was set up by Jordan in 1986 under an agreement with Yasser Arafat's PLO. It was to improve health, education, housing, cultural and other services in the territories. Israel took the West Bank from Jordan and the Gaza Strip from Egypt during the 1967 Arab-Israeli war. Two-thirds of Jordan's 3.5 million people are of Palestinian origin.