Israel and the Palestinian Territories received an unusual kind of media attention in the UK this Spring: there is talk of new, post-Brexit trade opportunities. As Britain faces a general the election in December, the Brexit proposal comes under close scrutiny, businesses are looking again at where they should be forging new trading partnerships.
The Spring announcement in Ramallah caught many off guard. A trade continuity agreement between the UK the Palestinian Authority, aiming to simplify trade between the UK and the Palestinian Territories, could provide much-needed stability for Palestinian exporters.
The UK’s freedom to do trade with Palestinian businesses on these new, preferential terms (rather than those of the World Trade Organisation) promises significant savings, acting as an encouragement to trade between the UK and the Palestinian Territories.
UNTAPPED POTENTIAL IN THE PALESTINIAN TERRITORIES
Palestinian businesses have faced considerable difficulties when trying to export to the West, most notably, travel limitations that restrict the flow of goods, finances, and people in and out of the West Bank. The largest exports have included fruit, nuts and vegetable fats such as olive oil, but surely the neighbours of the ‘startup nation’, Israel, heralded by Warren Buffett as “leading, largest most promising investment hub outside of the United States” have more to offer the UK conscious businesses and end customer?
A recent report by World Bank, The Tech Ecosystem in the West Bank and Gaza, finds that there are 241 active startups in the Palestinian territories. This promising development has been largely due to the strong work ethic of the Palestinian people, high educational standard, and high-speed data services in the West Bank made available since January 2018. The implementation of 3G has allowed Palestinians to capitalise on one of their greatest assets: their brains. Palestinian universities turn out about 3,000 engineering and computer science graduates every year, but the unemployment rate is very high – close to 31%. The workforce is young, skilled and available. The talent is not lacking, but the right conditions need to be created.
The Palestinian demographic is young, and so long as jobs are created, an educated workforce is available. The World Bank has reported that if Area C (accounting for approximately 61 per cent of the West Bank) were opened up, it could grow the West Bank economy by a third within eight years.
HISTORICAL CHALLENGES AND NEW DEVELOPMENTS
Israel took East Jerusalem and the West Bank from Jordan, and Gaza from Egypt in the 1967 Six-Day War, when surrounding Arab nations had gathered against Israel. Today, following the Oslo accords, Area A of the West Bank is entirely Palestinian in its administration and security, Area B is a mix, with Palestinian commercial control but Israeli security, and Area C is completely controlled by Israel.
Israeli immigration laws impede migration out of the West Bank, and according to the entrepreneurs and businessmen I interviewed for this piece, Israeli distribution ‘middlemen’ are required for businesses exporting goods, acting as an expensive ‘extra step’.
In April, on my fifth trip to the West Bank, I set out to investigate the situation for Palestinian businesses. My goal was, and is, to invite Western businesses and consumers to connect directly with them, rather than through Palestinian politicians. I was keen to provide Westerners with real opportunities to put their money where their mouth is.
My first meeting in Ramallah was with local businessman, who runs a marketing consultancy that helps international businesses penetrate the Arab world. He has chosen not to be identified for his safety, so I’ll refer to him as Mo, explains that the education system in Palestine is well-regarded among the Arab nations.
Hasan Omar, serial Palestinian entrepreneur, executive co-founder of the first incubator in Palestine back in 2004, and founder of Glow.ps private business accelerator, emphasised the challenge of the high unemployment rate, assuring me that the supply of talented engineers was flooding the demand from businesses. Hasan established the GoCode academy in 2016 – a coding school teaching Palestinian youth everything from cybersecurity to social enterprise. This academy has 2,300 students so far in the West Bank and is growing.
When I asked him how we in Britain can practically support businesses in the West Bank, he gave three suggestions:
1) Offer mentorships in international marketing, supporting Palestinian businesses to improve their appeal and marketing strategy when acquiring international clients
2) Outsource to Palestinian businesses as an entry point when targeting the Arab speaking world
3) Angel invest at a grass route level.
This correlates with the World Bank analysis of the Palestinian tech scene: “Founders tend to be young and with little experience, with the bulk of founders having no previous managerial experience, resulting in limited business acumen of founders.”
The Portland Trust (TPT) is a London-based non-profit ‘action tank’, created to promote peace and stability between Israelis and Palestinians through economic development. TPT explain: “The Palestinian business environment is particularly affected by the political uncertainties. Movement and access are very limited and dependency on trading with Israel has deterred many exporters from seeking other markets.”
Palestinian businesses have responded by seeking customers globally. Two such high profile Palestinian businesses, featured in tech media Wired Holy Land, Start-Up Nations include Mashvisor, a real estate analytics platform targeting US savvy property investors, and Redcrow, which provides businesses real-time security alerts for businesses operating in the Middle East and Africa.
TECH AS A GATEWAY TO ECONOMIC FREEDOM
While the small market may present limitations, the report Tech startup ecosystem in West Bank and Gaza” found that “Tech is one of the main sectors in the West Bank and Gaza with the potential to thrive.” Accelerator programs help startups in their initial stages to develop, and often provide small amounts of seed money. “While the Palestinian startup ecosystem is at its early-stage and still maturing, it has highly educated founders and one of the highest rates of female entrepreneurs across analyzed ecosystems”
Yadin Kauffman is the founder of Sadara Ventures, the first venture capital firm to target the Palestinian tech sector exclusively. Kaufmann’s latest initiative, the Palestinian Partnership Fund, provides grants for joint ventures between Palestinian entrepreneurs and companies in Israel, Middle Eastern countries, and the United States. Kaufmann states, “If we could succeed in doing that it would be good for the Palestinians, and make Palestine more of a real economy rather than a donor-dependent one.”
Sadara has a number of tech companies providing a range of services to suit international buyers. One such company is Freightos, which delivers real-time market pricing and global freight management for over 5,000 companies.
Initiatives such as Tech2Peace are trying to bridge the gap between Palestinians and their Israeli counterparts by focusing on the younger generation. The student and volunteer-led programme that brings Israeli and Palestinian youths together to learn tech skills (3D and graphic design, website creation, app development) and to engage in conflict resolution dialogue.
Palestinian software firm, Exalt Technologies, has 20 engineers building cloud infrastructure support to Nokia’s 5G team, based in Israel. “There is no doubt that there are many political and economic constraints on Palestine, but the media highlights aspects of destruction, instead of focusing on the resilience and love for growth and life, despite hardship,” claims Exalt boss, Tareq Maayah explains in a BBC article.
Property tycoon and businessman, Bashar Masri, who founded and developed the first privately owned Rawabi City has included the Palestine Techno Park. Cerati is the fifth upcoming startup to sign an incubation agreement with Palestine Techno Park. Yafa Abdelrahim and Yousef Shoman birthed the idea of integrating university students within the external Arab labour market and developing their skills. Participating students can also earn a supporting income.
One hope is that Western consumers encourage multinational companies with headquarters in Israel, such as Google or Intel, to open up outsourcing offices to Palestinians. Another hope is that Israeli companies themselves will outsource to their Palestinian neighbours. The biggest success at this stage is Freightos, an online marketplace for international shipping, which on March 29 raised a further $25 million from investors.
Other examples of businesses set to flourish are Yamsafer, an online travel service focused on Arab-world clients, and SoukTel, which provides digital communications to aid agencies and others working in hostile or hard-to-reach environments.
FastForward is Palestine’s first startup accelerator. Since its establishment in 2013, FF has supported twelve companies to grow from idea to business. FastForward Accelerator provides motivated start-ups with seed funding of $20,000, along with office space and technology, and access to highly experienced mentors.
In June, the World Bank approved a $13 million donation to the Palestinian Authority and a Gaza nonprofit to support the growth of the Palestinian tech economy. The World Bank said investment in the technology sector could help battle high unemployment in the region, particularly among young workers.
However, it involves the whole of Palestinian society and not just the younger generation. Hasan Qasem of KWB Business Development Consultancy urged that, “While young people understand the importance of innovation, we still need to explain the concept of entrepreneurship to the Palestinian leadership.”
Even more inclusively, Palestinian businessman and community leader, Ashraf Jabari, said; “We are working on taking down borders, and both Israelis and Palestinians need to take part in this.”
Rather than just giving public kudos to the perseverance and enterprising spirit of the Palestinians, now is the time to build on Palestinian ventures that are seeking international customers. With international trade receiving much press attention, and Brexit still not achieved, now is the time for British and international business to forge new relationships with Palestinian ventures
Acknowledgements, and further reading
- World Bank report: ‘The tech startup ecosystem in the West Bank and Gaza’ from July 2018, covering skills, infrastructure, investment, community, success factors and policy recommendations World Bank. 2018. Tech Startup Ecosystem in West Bank and Gaza.; and Henry, Scott. 2017
- How Tech is Bringing Israeli’s and Palestinians Together by the BBC
- How One Palestinian Territory Outpaces Another by Nick Fouriezos from Ozy.com
- Department of International Trade – Updated 11th May Doing Business in the Palestinian Territories: Trade and Export Guide
- The Portland Trust Palestinian Exports Best Practise
- Palestinians lose faith in Abbas ability to deliver, by The Financial Times
- How 3G availability in Palestine (from January 2018) has transformed startup opportunities
- In parallel to the challenges faced by startups, Palestine’s science and tech research community is struggling under the occupation: Nature magazine longread