A National Economy — Without the Nation

West Bank entrepreneurs are building businesses in case peace breaks out

By Stacy Perman / Ramallah Monday, Oct. 18, 2010
    • Yoray Liberman for TIME

    Shoppers at the new mall in Nablus.

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    Two years ago, their lobbying paid off. Cisco, the $40 billion U.S. networks company, gave a $10 million grant for seed-funding tech start-ups in the West Bank and Gaza. Initially part of Cisco's corporate-social-responsibility initiative, the investment turned out so well, the company is converting it from a CSR investment into businesses. Cisco plans to work with Palestinian IT companies to bolster their ability to handle large outsourcing contracts from the U.S. and other countries. Recently Microsoft, HP and others have begun investing too.

    The West Bank's IT sector is also attracting pure venture capital. One fund that has come calling is the aptly named Middle East Venture Capital Fund. The fund, which has a reported $50 million target and some heavy-hitting backers, was started by a pair of high-tech veterans — Yadin Kaufmann, an Israeli, and Saed Nashef, a Palestinian.

    Kaufmann went to Princeton and earned a law degree from Harvard before emigrating in 1985 to Israel, where he clerked for the Supreme Court. At the cusp of the country's high-tech revolution, Kaufmann joined Athena, Israel's first venture fund. Surveying the Palestinian high-tech landscape, Kaufmann says, "I saw how Israel's venture business impacted economic development. I started to think about doing something else to help in the region." Kaufmann decided to launch a fund to invest in Palestinian high tech, but he needed a partner on the other side.

    That would be Nashef. Born in Jerusalem, Nashef studied computer science in the U.S. and spent 19 years there, including a six-year stint at Microsoft. In 2006 he returned to Jerusalem and decided to take a year off with his family. That visit stretched into four years and counting. "I saw the beginnings of a technology and telecommunications sector," he says. "I wanted to build something to contribute." His tech consulting firm, Equiom, had been outsourcing software engineering to China, India and Ukraine, and Nashef says he thought, "Why not give a piece of that business to Palestinians?" He started with a three-person team in Hebron. The trio eventually replaced a five-person team from India. The math was basic: "They were higher quality and lower salaries." That led Nashef to make it a permanent move and establish his Ramallah-based spin-off of Equiom, called Nena. "We're not advancing an economic or political peace agenda," says Kaufmann. "We are leveraging real opportunities." Says Nashef: "At the end of the day, we are creating high-value jobs. We are giving people hope."

    The Limits of Development
    While there are promising signs of growth, economic development is no substitute for a political solution. The borders, airspace, water rights and communications are still under Israeli control; so is 60% of the West Bank. "We are not waiting for a political solution to move forward with economic development," says one Palestinian banking specialist. "But the impact of these efforts is diluted when there is no parallel political movement. It is like a bird flying with one wing."

    The fragile state of affairs is not just contingent on Israel. There is a sharp divide between the Fatah government, led by Mahmoud Abbas and Fayyad, that rules the West Bank and the fiercely Islamist Hamas, which took control in Gaza in 2007. And Carnegie scholar Nathan J. Brown noted in a recent report that economic development has actually impeded some democratic and human-rights reforms. While Fayyadism is roundly praised among many Palestinians and in the U.S. and Europe — and even Israeli Prime Minister Benjamin Netanyahu has expressed his support — its progress stands on a very shaky footing. Says Said Abu Hijleh, managing director of DAI Palestine, a consulting firm: "There are still limits to how far you can go. I wouldn't call this an emerging economy but a promising economy." As tenuous as the current state-building is, it rests on the creation of institutions critical to any sustainable economy. And that just might be the start of a genuine Palestinian revolution.

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