What exactly has the Palestinian Authority done to attract sums of money like $80 million? Even in Israel, which is much more attractive for investors putting their money into high tech, you cannot take for granted investments of that sort of scale.
In proportion to the size of the Palestinian economy, one would expect a much more modest fund, something like $20-30 million. But the amount, and the professional interest that the Siraj Fund is showing, testifies to the fact that there are more opportunities than meet the eye in the Palestinian Authority.
Bashar Masri, a smart businessman, has positioned the fund with a high tech profile, but this will actually be a far more diverse fund that can raise funds from bodies interested in contributing to projects with social aspects, while providing attractive employment opportunities. En route, the fund appeals to businesspeople who want ideological involvement in what is happening in the Palestinian Authority, and there is no lack of such people for whom business considerations are secondary.
And still, the potential contained in the Palestinian Authority regarding the high tech world is probably the most attractive attribute of the investment, even though at the moment the Palestinian Authority does not have much to offer. The official statistics show that the Palestinian software and computer market is worth $300 million and only has 5,000 employees.
Most activities, over 50%, are in retail and services. Spearheading change is the global communications systems giant Cisco Systems which introduced a project in 2008 to promote Palestinian high tech. Today the company employs dozens of systems developers in three Palestinian software companies, and other large companies such as Intel, Microsoft and HP are following in Cisco's wake.
Here is the real gamble for those investing in Palestinian technology funds. If everything goes to plan, within two or three years there will be graduates of the development centers that the high tech giants have opened in the Palestinian Authority who will open their own companies to develop software, computer services, and even R&D for innovative technologies. This process which also took place in the Israeli economy paid off big time for investors in funds in the early 1990s, to a great extent because of the timing.
Masri is not waiting for natural developments to get going, and it is reasonable to assume that even if things happen within ten years and not two years, he could still meet the level of returns that he strives for.
But two major questions arise when considering investment in the Palestinian economy. Will politics permit the conditions required for Palestinian economic success? And will growth be directed towards technology that is the engine for successful long term returns? Masri's investors are gambling that the answer to both questions will be yes, and that there is the potential for make big money in the Palestinian Authority.
Published by Globes, Israel business news - www.globes-online.com - on February 9, 2011
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