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Tue 5 Jul 2016 03:18 PM

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The resilience of Palestinian entrepreneurs

In this article, the first in a two part series, Ambar Amleh, chief operating officer at Ibtikar Fund, takes a broad look at that the Palestinian entrepreneurship ecosystem

The resilience of Palestinian entrepreneurs
Ambar Amleh, chief operating officer at Ibtikar Fund.

Given the bleak news from Palestine that dominates the world’s media, it is hard to imagine a burgeoning entrepreneurial scene. Yet, in a land dissected by checkpoints, road blocks, segregated roads and walls, young men and women are building companies that not only serve our local market, but that are looking to serve regional and global markets.

Although we have begun to see impressive results, we had experienced for years what seemed to be a disorganised and disjointed effort – too many players, too much competition, weak entrepreneurial ideas, and too few entrepreneurs.

In an effort to really understand the nascent Palestinian ecosystem, Silatech and Palestine for a New Beginning (PNB) joined forces to “map” it. Their in-depth analysis produced an interactive map designed to help enable more effective interaction among entrepreneurs, support organisations, and policy makers. The ecosystem map presents the relationship between more than 100 various entrepreneurship-related organisations and entities active in Palestine, and represents the first local effort to unify the work of the entrepreneurship players. The interactive map provides a short description of each organisation with a link to its website as well as information about where each organisation operates and, where appropriate, which economic sector(s) it targets.

All the ecosystem players were divided into seven categories: education, government, finance, donors, media, corporations, and the largest segment, support organisations – both those that support SMEs, such as businesses that target local markets, and those that support businesses that look at markets outside Palestine, which are now typically web- and mobile-based businesses.

No shortage of challenges

We all agree that entrepreneurship is no easy task, and in Palestine, the illegal Israeli occupation complicates it even more. The economy is severely constrained by restrictions imposed by Israel, which controls our borders, ports, electromagnetic sphere, natural resources and even our internal movement.

This means, for example, that any company that wishes to import any hardware, for their own business use or to resell to their clients, must either purchase from Israeli suppliers or face steep charges at customs, who charge them for every day the product is held for “inspection.” Similarly, any business that depends on exports encounters long discriminatory delays when moving their products outside of Palestine.

Further, while businesses that depend on the internet (web- and mobile-based businesses) are easier to launch, Palestine has yet to be allowed the spectrum to implement 3G mobile technology, meaning that apps that depend on geo-location and constant connectivity cannot be tested here. Israel has recently announced that they will allow the spectrum for 3G and the import of the equipment needed by our mobile carriers to implement this technology. However, the rest of the world has already moved on to 4G and other more advanced technologies. As such, any testing needed for these types of applications must be done using Israeli carriers that are allowed to serve the settler population in the West Bank.

Finally, in The Gaza Strip, a small self-governing Palestinian territory on the eastern coast of the Mediterranean Sea, the situation is even direr. There, the population is subject to an inhumane siege, where no one is allowed to leave the Strip unless they obtain a rare permit typically allowed only for humanitarian cases.

Start-ups there must deal with rolling electricity cuts. People in Gaza mostly have electricity only about 8 hours per day. Imagine trying to build a business with no consistent electricity – yet our start-ups do it, frequently connecting even through their car batteries in order to keep working. Exports are non-existent, and Israel will only allow certain imports into the area, making web- and mobile-based work a crucial lifeline.

Not just the occupation

Locally, the government has yet to embrace the opportunity presented by entrepreneurship. While the government has yet to implement programmes that support entrepreneurs, such as tax incentives for sourcing from start-ups, it could begin by simply making it easier to be an entrepreneur.

For instance, registering a company remains cost-prohibitive for entrepreneurs bootstrapping their companies — according to the World Bank’s 2016 Doing Business report, registering a company in Palestine costs 82.5 percent of income per capita.

Further, the process remains extremely cumbersome, taking about 44 days to fully comply. In contrast, the average cost of registering a company in the MENA region is about 25.8 percent of income per capita, and the process takes approximately 18 days to complete.

Further, while international property rights laws exist, they are poorly administered and rarely enforced. Further, those laws are not compliant with the Agreement on Trade Related Aspects of International Property Rights (TRIPS), the prevailing international standard for IPR protections, which means that investors are often reluctant to invest as they cannot be assured that their their investment will be legally protected.

All of this means that most entrepreneurs choose to either leave Palestine – when they can –or at the very least register their companies and intellectual property outside of Palestine.

A strong tech focus

Given the myriad of challenges described above, you might be wondering why anyone would choose to build a company in Palestine, must less invest in Palestine.

However, while the challenges are many, we also see many opportunities, especially in building tech-based companies, for several reasons. First, when building a web and mobile-based businesses, there is no need to import resources, nor is it necessary to physically export a product. All that is needed is an internet connection and a computer.

Second, some of Palestine’s brightest students are graduating from local universities with engineering degrees, yet they quickly realise there are not nearly enough jobs. And, those that are able to find jobs do so in outsourcing, working on projects from clients around the world, further honing their skills. Many of these young men and women are now coming up with the most promising start-ups.

Finally, like other countries in the region, Palestine has seized on the opportunity of creating Arabic content for the internet, since it has been estimated that only two percent of the Internet content is in Arabic, presenting a big opportunity for creating a localized content in Arabic for the whole region.

Seizing the opportunity

Like entrepreneurs throughout the world, Palestinian entrepreneurs are not fazed by challenges but instead find ways to succeed despite them. Our ecosystem also continues to develop, with new players quickly filling gaps in support.

In 2011, Sadara Ventures, Palestine’s first venture capital fund was launched. Sadara’s entry gave new life to the ecosystem as entrepreneurs could now clearly see investment potential and support. Further, in 2013, Gaza Sky Geeks and FastForward, accelerators in Gaza and the West Bank respectively, launched their first cohorts of companies including small seed investments, helping turn dozens of ideas into realities.

Unfortunately, the graduates of these accelerators were unable to find follow-on funding to further develop their companies after finishing the programme. Their young companies are considered too risky for traditional lending products, and only few angel investors invest in Palestine. On the other hand, later stage funders, like Sadara, look at more developed companies in which they aim to invest a VC-level funding.

The recently-launched Ibtikar Fund is filling the gap that so far constituted a fatal stumbling block for a good number of aspiring entrepreneurs – we aim to address this specific problem by investing in companies at the seed and early-growth stage through smaller, incremental investments coupled with mentorship.

Ibtikar’s first closing will be later this month, but we have already provided funding to nine accelerator-stage and more developed tech start-ups both in the West Bank and Gaza.

Join us!

Palestinian entrepreneurship is advancing every day. You can help us achieve success by sharing your knowledge and expertise, by buying the services and products made by our entrepreneurs, or by investing in our companies. And stay tuned to the next issue of Arabian Business Startup to read about some of our most promising start-ups.

About Ambar Amleh:

Ambar Amleh, chief operating officer at Ibtikar Fund, has also been supporting Palestinian entrepreneurs as a programme manager for Palestine for a New Beginning (PNB), a Palestinian non-profit company focused on entrepreneurship development. Through PNB, Amleh organised the Celebration of Innovation, a Palestine-wide competition of entrepreneurs, and Global Entrepreneurship Week (GEW). Palestine’s first GEW was awarded the GEW Hosts’ Award, an award given by the over 150 global hosts to the campaign that best embodies the GEW spirit.

Previously, Amleh launched and managed various donor-funded programmes, including the Arab Women’s Leadership Institute and the Queen Rania Award for Excellence in Education.