HOW TECH STARTUPS ARE FIRING UP THE PALESTINIAN ECONOMY

Posted on Oct 1, 2019

Al-Bushra note: According to Wikipedia (in a write-up first posted in 2009 with the most recent revision on 24 September 2019), the plan was for two mosques and an Orthodox Christian church. By 2017 at least eleven percent of the residents are Christians.

Image: Megan Giovannetti

Megan Giovannetti

By Megan Giovannetti | OXY author

WHY YOU SHOULD CARE

Palestinians are taking their economic future into their own hands, riding on an explosion in tech startups.

Ahmad Ramahi’s success has been a long time coming. Eight years after he graduated from Ramallah’s Birzeit University and jumped into entrepreneurship against the odds in a battered economy, Ramahi’s business-to-business crowdsourcing delivery and logistics company, WeDeliver, has turned into the fastest-growing startup in the Palestinian territories. Operating throughout the occupied West Bank, it is enjoying double-digit growth since its launch earlier this year and is the first startup to boast of a Palestinian angel investor.

WeDeliver’s emergence is part of a pattern that could transform the Palestinian territories. Since 1967, the West Bank, Gaza and East Jerusalem have been under Israeli occupation. They’ve endured increasingly strict restrictions imposed by the Israeli military, which has choked the economy. A 2016 U.N. report concluded that the Palestinian territories’ economy might double in size if the occupation were lifted. But where most traditional businesses are unfeasible, a young generation of Palestinians is driving an explosion in tech startups as an alternative route to catapult the Palestinian economy forward.

Image: Startup accelerator Flow’s office space in Ramallah

Startup accelerator Flow’s office space in Ramallah

Flow, a “one-stop shop” incubator and accelerator program, serves as a backbone to young startup teams and their needs, even post-investment. Fikra Hub — a subsidiary of the largest Palestinian telecommunications company, PalTel group — is another successful incubator, which enjoys the support of the company’s generous venture capital fund. WeDeliver was Fikra’s first partnership.

“WE NEED A FEW SUCCESS STORIES TO SHINE IN PALESTINE TO EMPOWER THE PEOPLE.”
AHMAD RAMAHI, FOUNDER, WEDELIVER

These and other Palestinian startup incubators and accelerators have collectively produced almost 250 startups. The brand-new city of Rawabi, where construction began in 2010, is coming up with the express purpose of serving as a tech hub for the region and as a base for multinational companies. The city hopes to create 5,000 permanent jobs in high-tech sectors over the next three years, says Nadiah Saba’neh, Rawabi’s tech hub manager.

Overall, the Palestinian territories are witnessing a 34 percent annual growth in startups, according to the Ministry of Entrepreneurship. All of that is giving a population under siege a chance to dream again.

“We need a few success stories to shine in Palestine to empower the people,” says Ramahi, WeDeliver’s 31-year-old founder, “to inspire other people to start their own businesses and to get the support and attention [they need].”

Image: SOURCE MIRIAM DEPREZ FOR OZY

SOURCE MIRIAM DEPREZ FOR OZY

The most prominent competitive edge Palestinian startups enjoy is access to a rare talent pool. Addressing an international conference on entrepreneurship in Bethlehem in September, Prime Minister Mohammad Shtayyeh said global partners were drawn because “the illiteracy rate in Palestine is less than 3 percent. You are here because … among 1,000 Palestinians, there are 220 university graduates.”

Yet in the West Bank, nearly 60 percent of university graduates are unemployed while the 14 Palestinian universities are producing thousands of engineers and software developers each year. “With the rising economic crisis and higher unemployment, people are turning to themselves to find solutions to the problems they face,” says Yusef Srouji, a research fellow at Flow.

But the emerging startups could also transform the nature of international aid to the region. For decades, foreign aid — on which the Palestinian economy has depended — has largely gone to salaries of nongovernmental and government workers. With USAID cuts and the Israeli decision this year to withhold part of the taxes it collects on behalf of the Palestinian Authority, the economy is on the verge of collapse. Now, however, donor agencies can invest in the private sector rather than the increasingly dysfunctional government, says Srouji.

To be sure, local solutions to local Palestinian problems are often not scalable beyond the territories. Some success stories — like WeDeliver or the unicorn travel-booking firm Yamsafer — can work in other emerging markets, but ultimately, the rising Palestinian startup scene wants to attract foreign investments and sell products internationally while creating jobs in the Palestinian territories, says Imam Hithnawi, co-founder and CEO of the Ramallah-based Flow. Tech startups can turn the Palestinian territories into an outsourced back office for companies with global solutions, which can’t be restricted by occupation in the same way physical imports and exports have.

Image: Imam Hithnawi, co-founder and CEO of Flow, a startup accelerator. SOURCE MIRIAM DEPREZ FOR OZY

Imam Hithnawi, co-founder and CEO of Flow, a startup accelerator. SOURCE MIRIAM DEPREZ FOR OZY

The small and closed nature of the Palestinian community also makes it perfect for feedback, Hithnawi says. “At the same time you are testing your product in the Arab behavior,” he says, thereby gaining insights into the broader Arab market.

Despite high education levels, most college graduates aren’t prepared for the startup environment, the sector has found. Often students don’t find jobs until years after graduating, making their skills and knowledge outdated. Organizations like Leaders, established in 2008, are looking to change that by integrating entrepreneurship into STEM education, says CEO Shadi Atshan. Meanwhile, the city of Rawabi is investing in training and capacity building through programs with international universities, courses in marketable high-tech skills and even on-demand training for companies interested in Palestinian talent.

The government needs to do more, say founders. The current legal framework when it comes to Palestinian startups treats them at par with normal businesses, with no additional incentives. “It’s a big problem when it comes to foreign investment,” explains Atshan. “Our laws date back to the late ’60s, before the internet.” There are no preferred shares or closure protection for investors, for example. The failure to lure investments and startups better also represents a missed taxation opportunity for the Palestinian National Authority. “The opportunity is there, the talents are there,” says Hithnawi. “But the infrastructure is not. The government, I think, is not. But it is trying.”

The creation of the Ministry of Entrepreneurship is a good start, and the conference led by the prime minister brought international investors face-to-face with more than 50 Palestinian startup teams for the first time. But ultimately, the drive is coming from young Palestinians, and what startups increasingly represent for them.