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Nurturing Progress

Unleashing Potential in the Palestinian Business and Tech Landscape

By Zackaria Sabella, Aris Molfetas Lygkiaris, Johan Bjurmanm Bergman, Goran Vranic.

The West Bank and Gaza comprise a territory that occupies a distinct place within a complex tapestry of geopolitics, culture, religious significance, and historical narratives. Beyond the headlines that overshadow its economic promise, over the years it has become a crucible for innovation, tenacity, and unyielding determination in the face of what often feels like infinite adversity. The world is beginning to take notice of the opportunities that lie within its borders, especially with many of its youth employing a potent mix of entrepreneurship and resilience to create an ecosystem ripe with untapped potential.
The World Bank supports the improvement of the Palestinian business-enabling environment through a comprehensive set of interventions that range from policy and legislative reforms, such as the support extended to enacting a new Companies Law and the simplification and automation of government-to-business services. Programs such as the Innovative Private Sector Development Project (IPSD) and the Technology for Youth and Jobs Project (TechStart) provide direct support to strengthen entrepreneurs and enablers within the nascent Palestinian technology ecosystem and IT services industry, including at firm level.
A noteworthy advancement and beacon of progress in the PA’s reform agenda was the passage of the new Companies Law that entered into force in April 2022 and was developed with World Bank support. This transformative and modern law, spearheaded by the Ministry of National Economy (MoNE), marks a significant departure from the outdated 1964 predecessor law. Built upon contemporary principles and approaches, it carries a host of benefits for businesses. It aims to promote certainty and predictability for all businesses by facilitating the transparency of and accessibility to business registration data, with the implementation of a fully automated business registry currently underway. It also limits discretionary power of officials such as the Companies Registrar and facilitates the incorporation of businesses by removing unnecessary formalities, minimum capital requirements, and the mandatory involvement of lawyers.
The new Companies Law offers enhanced flexibility, tailored to the needs of small and family-owned private businesses, by introducing the Limited Liability Company (LLC) and the concept of single-member companies. Single entrepreneurs can now benefit from limited liability and build their businesses in a manner that responds to their needs. In a bid to foster foreign investment, the law eliminates restrictions for foreign investors, such as foreign equity limits and local partner requirements.
The law also introduces a suite of instrumental tools, including provisions for company mergers, divisions, and transformations. These mechanisms empower businesses to adjust their operational models in tandem with growth and equip shareholding companies with versatile tools to address the diverse challenges they encounter through various share types, employee stock option plans, and convertible bonds. Promoting gender diversity in leadership, the law mandates that public shareholding companies aspire to achieve a minimum of one-third female representation on their board of directors, a move intended to bolster women’s participation in decision-making roles.

While the new Companies Law is being hailed as a role model in the region, its successful implementation requires collaboration at the political and technical levels between the ministries of national economy, finance, and telecommunications and information technologies and support from partners such as the World Bank. Support from the World Bank is geared at advising key stakeholders on implementing regulations foreseen in the law, developing technical solutions to fully automate business registration services, and introducing the law to judges, lawyers, and the wider business community through workshops and specialized training sessions.
To support the technology ecosystem and IT services industry, in parallel to its support of regulatory reform, the World Bank, in partnership with Palestinian line ministries and international donors, is championing Palestinian entrepreneurship, innovation, and technology through the IPSD and TechStart projects.
IPSD, a US$22 million project with the MoNE and implemented by DAI, employs a comprehensive approach to supporting Palestinian technology and technology-enabled startups and innovative small and medium-sized businesses (SMEs) through a series of interventions. The project’s key features include a de-risking co-investment program, robust startup preparation through tailored mentorship on investment readiness and a pre-investment grants program, and promotion of business linkages between the Palestinian ecosystem and more advanced tech ecosystems regionally and globally.
IPSD is uniquely designed, integrating the concept of flexibility and adaptability to effectively address the constraints facing Palestinian entrepreneurs, women in particular. To date, the project has mobilized over US$11 million in private capital, leveraging close to US$5 million in IPSD grants. Beneficiary startups and SMEs reported more than US$9 million in new commercial deals and partnerships. Around 42 percent of IPSD beneficiary firms are women-owned or managed, a remarkable feat when compared to a meager female labor force participation rate of 18 percent. Most recently, Alma Health, a Palestinian health tech startup supported by IPSD, raised the largest-ever Series-A round by a Palestinian company for the amount of US$10 million.
The IPSD project also aims to build high-value and market-relevant technology skills in Palestinian youth by supporting the establishment of GGateway, a women-led business impact and outsourcing hub in Gaza and the West Bank. The GGateway Outsourcing Hub model is unique to the Palestinian territories and includes an impact arm and a business arm. The former delivers training to Palestinian youth in market-aligned, niche, and high-value IT skills through a range of training programs that feature work placements to gain real world experience. The latter provides services in the areas of staff augmentation, dedicated teams, and education-as-a-service to global IT service companies.
IPSD is also committed to improving the Palestinian business environment through full-fledged support to the Companies Law implementation. This includes the automation of the business registry, including the procurement of critical IT infrastructure and equipment to set up the system, and enhancing access to information for investors. The project has helped decrease the average number of days to comply with business registration from 43 to 10.
TechStart, a US$30.55 million project under the auspices of the Ministry of Telecommunications and Information Technology, is also implemented by DAI and co-funded by the EU, the Netherlands, and Switzerland. The project aims to transform the value proposition of the Palestinian IT services sector from one focused on outsourcing low-skill services to one that offers high-value technologies and services.
Consequently, TechStart is pioneering many new and untested interventions in the Palestinian ecosystem that include upskilling IT graduates and professionals in high-end technologies; improving firm managerial capabilities; increasing the involvement of women in the IT sector, including in leadership positions; and inviting new IT actors into the ecosystem. The project also aims to pilot a shared R&D hub where groups of companies can unite to research and develop high-end, in-demand technologies in-country. It also offers de-risking tools and incentives to multinational enterprises and international companies to establish operations in the Palestinian territories – rather than viewing and interacting with it as a strictly outsourcing destination.

Authors

  • Zackaria Sabella is a private sector specialist with the World Bank in the Finance Competitiveness and Innovation Global Practice. With over 15 years of experience in working with various aid agencies and PA institutions towards Palestinian economic development, he joined the World Bank in 2020 and currently focuses on supporting private-sector programs in the areas of entrepreneurship, innovation, and digitalization.

  • Aris Molfetas-Lygkiaris is a lawyer with a dual legal background in common and civil law, focusing on international economic development. He is a private sector specialist with the World Bank in the Investment Climate Global Practice, based in Washington, DC. His specialties include crafting business regulation in areas such as company law, corporate governance, business licensing and inspections, construction regulation, and the digitalization of government-to-business services.

  • Johan Bjurman Bergman is a private sector development specialist in the Finance Competitiveness and Innovation Global Practice for the Middle East and North Africa, based in Washington, DC. His work focuses on enabling job creation in contexts affected by fragility, conflict, and violence by strengthening ecosystems of support for tech and tech-enabled businesses and increasing their access to skilled human capital.

  • Goran Vranic is a senior private sector specialist with the Global Practice – Investment Climate Global Practice based in Washington, DC. Goran leads the business regulation knowledge management and support to client governments in the areas of agile regulation, disruptive technologies, and technology-driven G2B service delivery.

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