Baird said Canada's contribution is part of a $100-million initiative to kick-start economic development in the region ahead of a meeting led by U.S. Secretary of State John Kerry in New York next week.
"This is another expression of Canada's commitment. Prosperity is absolutely essential, it is key to peace and security," Baird said.
He commended Kerry's efforts in bringing the Israelis and Palestinians together, saying "recent developments in negotiations are encouraging."
Israeli-Palestinian negotiations over the terms of a two-state solution resumed last month.
"It is our hope that these negotiations are just the beginning of a productive and fruitful dialogue, and that Canada lends its unqualified support," Canada's foreign affairs minister said.
Baird said he had "a good exchange" with Malki on a wide range of issues spanning from security, economic development, the Palestinian territories, the peace process, and other issues.
"I re-iterated Canada's strong commitment to the prosperity and the security of the Palestinian people. We strongly believe that stability and security is critical to a two-state solution," Baird said.
Baird said Thursday's meeting with Malki, whom he described as a "good friend," builds on the growing relations that Canada and the Palestinian people have enjoyed for many years.
Malki, who addressed Baird by his first name, said the meeting was "productive and frank," and that he agreed with "most of the issues" the two discussed.
"We hope that we can really work together to build trust in that region," Malki said.
Asked by reporters about past differences, Malki said, "many words have been said … but if we want to see ourselves hostage to these words then we can't really move anywhere."
Baird added that "the ties that bind are stronger than those differences."
Earlier this summer, Baird travelled to Ramallah — his third visit to the West Bank since he became foreign affairs minister in 2011.
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