With all his chips in, Palestinian businessman aims to build ‘Silicon Rawabi’

RAWABI, West Bank — At the first pre-planned Palestinian city, a large mosque and hospital are still under construction, the municipality building has only a foundation stone, and two-thirds of the students attending the local school are commuters from outside.

Yet at the heart of Rawabi, so far eight years in the making, a tech-oriented business center has recently opened. Its designers hope it can serve as the nucleus of a future Palestinian state’s own Silicon Valley.

Palestinian businessman Bashar Masri, who founded and developed Rawabi, hopes he can fill the business center — which includes a sleekly designed collaborative workspace and startup incubator — with information and communications technology companies, providing thousands of jobs to locals.

But like the city of Rawabi itself — a mammoth $1.4 billion project, partly funded by Qatar — the tech hub is wildly ambitious and well-funded, yet its future is still uncertain.

The hub, which opened nine months ago, is still exclusively filled with Masri’s own companies or companies he backs financially though venture capital funds. The same is true of the startup incubator, which opened in November.

The Palestinian high-tech field is still in its infancy, and only a handful of startups have succeeded. None has been bought out by larger international companies.

Yet, like many countries in which natural resources are scarce, high-tech is the great wireless hope of the Palestinian economy, in which unemployment is at 27%.

Masri and his team hope that Rawabi’s tech hub can evolve into an epicenter of Palestinian high-tech, a small concentrated cluster that will slowly develop into a bustling technological environment. But it’s still early days.

If you build it, will they come?

The new collaborative workspace and incubator, named “Connect,” give a great first impression. The center has a sleek, new-age design akin to a WeWork space, with ample room and big desks for co-working.

Connect members have access to the internal infrastructure of the entire tech hub, which means three internet lines — two Palestinian and one Israeli — plus a secure VPN and access to a state-of-the-art data storage center.

Membership in Connect is just $50 a month, compared to the $175 monthly fee for WeWork in Tel Aviv. The price for office space, according to Sari Taha, the center’s program manager, is on a “case-by-case basis,” and a firm seen to have much potential but little money will be given a break on rent.

Taha said Connect is primed to help introduce Palestinian entrepreneurs to European and Asian markets.

There is also an onsite investment fund, named Bader, specifically for ICT startups, and a training institute that grants “mini-MBAs” to tech entrepreneurs.

Perhaps most importantly, the center is located within Rawabi’s swanky shopping plaza, the only place where Palestinians can shop for the world’s leading fashion labels and have a coffee at one of several cafés.

But is all this enough to draw in clients?

According to Taha, Connect currently houses four companies: WebTeb, an Arabic version of WebMD; Studio 83, which does 3D visualization for real estate companies; one person who works for a German car-sharing startup called GETAWAY; and Imagry, which develops software for automated driving.

WebTeb, Connect’s star client, received a $1.9 million grant from Masri’s venture capital fund Siraj, according to the website Crunchbase, which publishes data on companies. WebTeb was founded in Haifa, Israel. The current CEO, however, is now based in Dubai. Imagry was also founded and based in Haifa.

All four companies in Connect receive funding from one of Masri’s venture capital funds (Siraj along with Bader), Taha said.

There are also several freelancers working out of Connect and several restaurants in the commercial center that are independent and run by local businesspeople.

As in Connect, all the companies based in Rawabi’s business center are also exclusively owned by Masri or funded by one of his companies. These include the software developer Asal Technologies, the Palestinian leasing company Pallease, and a new Palestinian bank called the National Bank, which is funded by one of Masri’s VC funds.

The Israeli tech giant Mellanox — which makes technology that connects computers, databases and servers — and Microsoft’s headquarters in Israel both outsource to Asal and therefore have employees working in Rawabi.

According to Masri, there are tens of companies actively considering the idea of moving to Rawabi. “They are still testing the waters,” he said.

The seasoned businessman does not hide the fact that the city he built is populated by his own companies.

“Asal came here because I said so. If I don’t show that my companies are here, I can’t expect others to come,” he said.

“We haven’t succeeded yet,” he added, noting that his tech hub is only “25%” along its way.

Obstacles to success

Sam Bahour, a well-known Palestinian-American businessman and a policy adviser to Al-Shabaka, a Palestinian think tank, said “it’s too early” to judge whether Rawabi’s tech hub could be successful.

“Three months is nothing in trying to recruit international contracts. They’ve only recently finished the infrastructure,” he said of Connect.

Bahour, however, did think Rawabi should have been able to secure some companies to open offices in the larger business center, which opened around nine months ago.

“The building space is being marketed heavily. They are trying to recruit companies to go there other than his own. If that hasn’t happened yet, that should be if not a red light, at least a yellow light that something is wrong,” he said.

Bahour, who is a vocal critic of Israel’s military rule in the West Bank, said the instability created by political conflict is likely a key factor keeping both local and international companies away from Rawabi.

“It’s placed in an area away from the city center of Ramallah and the city center of Nablus. And given the fragmentation that we live in, that may be a hindrance for people” afraid something may occur to block their access to Rawabi.

He pointed out that Israel continues to restrict access to Rawabi by preventing the city from building a larger access road. The current access road is located in Area C of the West Bank, where Israel has full military control.

Bahour also argued Israel’s control over to Rawabi’s water supply increases instability fears.

Rawabi was ready for residents to start entering their homes in 2014, but it took Israel, which controls the flow of water into Palestinian cities, more than two years to agree to connect the new city to the grid.

Currently, Israel supplies enough water for Rawabi’s some 4,000 residents, many of whom only live there part-time. Masri fears when more people move in, Israel could again drag its feet in increasing the water supply.

‘Piggybacking’ off of Israel

While Israeli bureaucracy has created a number of setbacks for Rawabi, Masri admits that proximity to the “startup nation” is the tech hub’s biggest advantage.

“Let there be no secret: our target is through Israel. We are piggybacking and using the advancements and achievements of Israel,” said Masri.

One hope is that large multinational companies with headquarters in Israel, such as Google or Intel, will open up outsourcing offices in Rawabi. Another hope is that Israeli companies themselves will outsource to their Palestinian neighbors.

Masri noted that while Jordan and Egypt can offer cheaper human resources, they cannot create relationships with Israeli companies like Palestinians can.

“We are not looking to compete by having the lowest prices. We are looking to compete with a package, and the package involves the super high-tech that’s next door to us,” he said.