UNITED NATIONS, Sept 21: US President George W. Bush on Tuesday asked Israel to impose a freeze on Jewish settlements in the West Bank and Gaza and dismantle "unauthorized outposts," and asked world leaders to withdraw support from Palestinian rulers who fail their people.

In an address to the UN General Assembly, where some 100 world leaders were in attendance, Mr Bush issued a direct challenge to Israeli Prime Minister Ariel Sharon while also calling on Palestinians to adopt peaceful means to achieve the rights of their people.

"Israel should impose a settlement freeze, dismantle unauthorized outposts, end daily humiliation of the Palestinian people, and avoid any actions that prejudice final negotiations. And world leaders should withdraw all favour and support from any Palestinian ruler who fails his people and betrays their cause," Mr Bush said.

Mr Bush also told the subdued UN gathering he was proposing a "democracy fund" within the United Nations. He said the fund would help countries lay foundations of democracy by instituting the rule of law, independent courts, a free press, political parties and trade unions.

"Money from the fund would also help set up voter precincts and polling places and support the work of election monitors," he said. Mr Bush said the United States would make an initial contribution. "I urge all other nations to contribute as well," he said. It's a great calling for this organization," he added.

The US President reached out to the international organization to help with the reconstruction of Iraq. "The people of Iraq have regained sovereignty," he said, noting that the prime minister of Iraq's interim government Ayad Allawi was among those attending the session.

"The UN and its member nations must respond to Prime Minister Allawi's request and do more to help build an Iraq that is secure, democratic, federal and free," Mr Bush said.