-- Representatives of the eight major industrial powers and the Arab world signed an agreement Friday endorsing expansion of democratic institutions and a push for political reforms in the Middle East. The agreement came at a session that is part of the Forum for the Future, a key part of the Bush administration's plan to promote democracy in the region.

At the same time, Arab leaders who participated in the event at the Waldorf-Astoria hotel said more progress must be made in restoring full sovereignty to Iraq and settling the conflict between Palestinians and Israelis before the region can take strides toward meaningful political reform. And the forum statement reflected the region's insistence that Arab governments control democratic reforms in their countries -- a reflection of some countries' criticism that the United States has been too quick to prescribe reforms for sovereign nations.

Moroccan Foreign Minister Mohamed Benaissa, who co-chaired the meeting with Secretary of State Colin L. Powell, said that governments in the region cannot "carry out reforms" without "putting an end to the Palestinian tragedy and to the war waged against the Palestinian people."

The reaction underscored the challenge the Bush administration faces in pursuing its initiative to promote democracy in the Middle East. That effort faced another setback this week as Saudi Arabia postponed, for the second time, its plans to hold its first political elections, which were scheduled for November, until 2005.

Powell acknowledged that the United States and other governments recognize that "we must achieve peace and security throughout the region" to succeed in bringing reform to the Middle East. But he said that the region's conflicts were no justification for stalling.

"We don't shrink from that reality," he said. "But we can't not move forward while we are waiting for these difficult problems to be solved."

Powell challenged suggestions that the administration's close ties with Russia and Pakistan, which have restricted democratic rights in their countries, had undercut its case for Middle East democracy.

"I see Pakistan and Russia moving forward," said Powell, noting that he has not shied away from pointing out U.S. concerns about any backtracking. "But these are complex issues, and so we want to be good partners and friends to Pakistan and Russia, just as we want to be good partners and friends in the reform and modernization efforts that are going to be taking place within the broader Middle East process."

The Bush administration's plan to promote democracy in the Middle East has its roots in a speech by President Bush last year, in which he said the United States had erred in supporting autocratic governments in the region to achieve stability. But the administration's "Greater Middle East Initiative" -- initially intended to press Arab and South Asian governments to adopt major political and economic reforms -- has been scaled back in the face of resistance in the region.

Today's forum, which was created at a summit of the Group of 8 industrial nations hosted by Bush at Sea Island, Ga., in June, is devoted to promoting education, job creation and economic development. Representatives from 25 countries participated in the meeting.

Friday's meeting was criticized this past Monday by Egypt's foreign minister, Ahmed Aboul Gheit, who questioned the event's relevance and complained that key Arab governments, including Syria and Libya, had been excluded.

In an address to the 191-member General Assembly, the Egyptian diplomat made no reference to the forum, and criticized U.S. and Israeli policies in Palestinian territories and in Iraq.

Other Arab governments reacted more favorably, saying the initiative gave impetus to reforms that are already underway in their countries.

"What's important is that the political reforms come from within and that every country has to do it at its own pace and that it does it without any patronizing or any pressure from outside," said Algeria's U.N. ambassador, Abdallah Baali.

Secretary of State Colin L. Powell, right, appeared in New York with Moroccan Foreign Minister Mohamed Benaissa, the co-chair of the Forum on the Future.