About a month ago, the technology giant Apple made a surprising announcement: not only does it currently employ about 60 engineers in the Palestinian city of Rawabi in the West Bank, it also plans to further increase its workforce there. Although these numbers pale in comparison to Israel, where the number of Apple employees is estimated at 2,000 people, this is still encouraging news for the Palestinians, with the potential to become a pillar of the Palestinian economy.
The Palestinian economy has been floundering for many years, and is far from realizing its potential. Agriculture is on the decline, and the economy is becoming more and more consumption-based, without significant production. In addition, the coronavirus pandemic has exacerbated the proportion of Palestinians living below the poverty line.
Does Palestinian hi-tech actually have a chance? Avner Halperin, an Israeli entrepreneur, teamed up with American economist Eli Sandler and the Palestinian entrepreneur Mahmoud Kwais to draw up a report examining the Palestinian hi-tech sector's future potential, commissioned by the U.S. State Department. The recommendations were submitted last week, and now the team hopes to turn the recommendations into a detailed action plan.
Big opportunities
"We held in-depth interviews with 70 entrepreneurs, investors, government officials, Palestinians, Israelis, Americans and Europeans who work in the Middle East's hi-tech," Halperin said. "We mapped the recommendations that exist today, and discovered that there is a great opportunity for the success of Palestinian hi-tech, for several reasons."
Despite being overshadowed by Israel, the high proportion of Palestinians who work as engineers stands out among the Middle East, and is even three times higher than that of the U.S. "Thousands of students, most of whom study at universities in the West Bank, graduate with engineering degrees every year," Halperin points out.
Another reason, which is also important: money. "There is substantial capital, and a willingness to invest in the region," says Halperin. "The [U.S.] administration made several decisions, including the promotion of the Palestinian economy and regional cooperation. MEPPA (Middle East Partnership for Peace Act), which was passed during the time of President Donald Trump, allocated $250 million."
One of the people who pushed the issue behind the scenes in Washington was Israeli venture capitalist Yadin Kaufmann, who works to grow the Palestinian hi-tech sector, and also founded a venture capital fund more than a decade ago entirely focused on Palestinian hi-tech. According to Halperin, "there is a serious budget for the next five years."
Even within Israel, there is interest in developing the Palestinian hi-tech sector, which is seen a regional interest rather than a political question. "In one of his last speeches as prime minister, Naftali Bennett claimed that he promoted the integration of Palestinians in Israeli hi-tech," noted Halperin. "And in November, the government did approve the entry of 500 Palestinian hi-tech workers into Israel."
Difficult challenges
It is impossible to divide the economy from politics, and this is doubly true in the Palestinian territories. One of the largest issues facing the Palestinian economy is Israel's control, which restricts the entry and exit of people and goods from the territories, as well as internet communication.
"Entrepreneurs are people who overcome problems. But in our age you have to be able to communicate from anywhere," Haslperin explains. "Cellular communication in the Palestinian territories is limited, which has come up in many conversations with investors, entrepreneurs, and international actors. Some places still use 2G which makes it difficult to communicate."
Another challenge facing the Palestinian hi-tech is the Palestinian Authorities' management. It is evident that Halperin tries to express himself gently when he says that "the PA does not pass as an efficient body with governance and transparency in financial management." Yet another problem is that even though thousands of Palestinian engineers graduate every year, their training is not advanced enough to match the most innovative prospects in the industry.
The steps required
In the late 1970s, the Bird Foundation (BIRD) was established with the assistance of the American government and State of Israel, whose purpose is to promote and support Israeli-American collaborations in the field of research and development. "Researchers who studied the development of Israeli hi-tech claimed that the Bird Foundation was one of the factors that promoted the industry, and helped build the startup nation," says Halperin.
The main recommendation in the report by Halperin and his colleagues is to inaugurate an upgraded Bird Foundation in the West Bank (Later on, the recommendations will also deal with the Gaza Strip) — a body financed by the American government, Gulf countries and possibly also European bodies, and advance three main steps: the first, international collaborations between American and Gulf companies and Palestinian companies.
"Palestinian hi-tech is suitable to operate with the Gulf countries, since it can be used with existing technologies and adapt them to the Arab world in terms of language, culture, and more," says Halperin.
The second step of the proposed fund will be to promote the provision of incentives. "When establishing and an innovation industry, we need a leading body that can be turned to when problems arise and that can provide economic incentives. Like the Israel Innovation Authority," says Halperin. "We want this body, the Global Palestinian Innovation Foundation, will do so as a public body, and not a governmental one. The international support will help create connections with companies around the world, and will require a strong board of directors — which includes the funding agencies, as well as successful Palestinian hi-tech people, some of whom currently live abroad."
The third step will be a connection between the successful businessmen from the Palestinian diaspora around the world and the local Palestinian industry. "If you look at what happened in Israeli hi-tech," says Halperin, "many Israelis went abroad, succeeded, then returned to Israel and grew the industry, or assisted in helping Israeli companies from abroad. An Israeli entrepreneur who wants to get tot Cisco, for example, there will always be a senior Israeli there, as well as in Intel, Microsoft, and more. The Palestinians should also have this ability.
Cooperation will wait
Indeed, cooperation with Israeli hi-tech is not included in the list of goals of the future body. "We discussed this. After all, such cooperation is necessary, but we decided that it should not be part of the body's mandate. Such a move would create objections and become a political matter. We believe that such collaborations will naturally happen in the long term," says Halperin.
Apple is not the only large international company that employs Palestinian engineers. Also the Israeli Mellanox, which was sold to the chip giant Nvidia, began operating in 2010 in the West Bank, employing programmers in Ramallah, and later in Rawabi and even in the Gaza Strip. Today, approximately 150 Palestinian engineers work for Nvidia. "There are thousands of Palestinian engineers who work for international outsourcing companies. Today there are about 100 Palestinian start-ups in their early stages with some initial success. Global technology companies play an important role in developing this industry. We hope that Apple employees will eventually establish and develop their own start-ups," says Halperin.
"The goal is to create companies, but also to establish development centers in the territories. Global competition has made is challenging to establish innovation centers. Therefore, this body must be attractive, and roll out a red carpet for companies to show it has the backing of the American government — and above all, that there is someone to talk to."
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