Financial Times
Risks and rewards in Ramallah
By Sharmila Devi
Published: March 29 2007 03:00 | Last updated: March 29 2007 03:00
Sam Bahour has a warm manner and an infectious laugh. But beneath the avuncular exterior lie a sharp intelligence and a steady nerve that have helped the US-born Palestinian businessman survive since he moved to the West Bank in 1994.
Mr Bahour is one of the founders of Paltel, the Palestinian telecommunications company and now the biggest employer in the territories. He then established the West Bank's first shopping mall and supermarket chain, which opened, against the odds, after the outbreak of the second Palestinian uprising in 2000.
Now, he has set up his own information technology and management consultancy, based in Ramallah - in spite of a western aid boycott imposed on the militant group Hamas that has deepened poverty levels.
"If I wasn't optimistic, I would pack up my bags and go back to the US," he says with a laugh.
The Oslo accords of the mid-1990s gave limited self-rule in parts of the territories and prompted many diaspora Palestinians to return. With the belief that the private sector had a prominent role to play in building a future Palestinian state, Mr Bahour gave up his prospering IT consultancy in Youngstown, Ohio, and came to the territories.
His faith in economic development is unshaken in spite of years of violence and continuing Israeli occupation, which began 40 years ago after the 1967 Arab-Israeli war. He is as critical of the corrupt practices of Palestinian leaders as he is of Israeli policies.
With the help of two European management consultancies, he and a small group of colleagues set about establishing Paltel. "There was no economy here in a real sense," he recalls. "Pre-Oslo, there was an NGO/civil society-run environment so we did not find the skills we required. So we contracted international firms on a short-term basis to support us in building the company and to transfer knowledge to locals."
His first encounters with local business practices were not encouraging. "After I placed the first Paltel vacancy ad in the local papers, a Palestinian approached me to whisper some advice, saying jobs are usually filled by personal contacts. . . We hired people no one knew, based solely on their credentials."
Paltel's launch took place before the Palestinian Stock Exchange existed, so the founders executed an initial public offering through the banking system that was four-and-a-half times oversubscribed. Paltel today is the biggest private-sector company in the territories, employing almost 2,000 people and with a market capitalisation of almost JD700,000 ($988,000) on the PSE.
Mr Bahour left Paltel in 1997 following disagreements with the company's board - he felt the company was pursuing profits at the expense of a developmental role. But he wanted to remain in the territories, so set up Applied Information Management, initially as a pure IT consultancy but later broadening its services to offer management expertise.
Diversified businesses are not uncommon in the region. "I learned the economy is so small and the ability of people to pay for added-value is low," he says. "That's why the person who sells you your computer here will also sell you a desk and, if you need it, will sell you a plant that goes next to that desk as well. Everything is much broader here because you need a certain volume of business to stay open."
In 1999 Mr Bahour was approached by a group of Arab investors with a plan to set up the first supermarket and shopping mall in Ramallah, named the Plaza.
The timing was not propitious. The second intifada (uprising) started in September 2000 and the Israeli military re-invaded Ramallah in March 2002. With regular incursions and periods of curfew and closure, the project took five years to complete, and Israeli security procedures regularly delayed the delivery of construction materials. Mr Bahour waited until the last minute to install the glass cladding in case there were further military clashes.
He left the company to work solo again after spending several months training a successor as general manager. "People said I was crazy to leave a secure job. And I transitioned out of a company without it collapsing, unlike many other institutions and ministries here that fall apart when the top person leaves," he says.
AIM is involved in several IT start-ups as part of Mr Bahour's goal of helping Palestinians leap-frog from a rural, agricultural economy to knowledge-based businesses. He has one factor on his side: Palestinian youth have taken to the internet and IT with gusto because it has helped them forge and maintain ties lost as Israeli security measures have hindered travel.
Many of Mr Bahour's diaspora colleagues have left in recent years. He is determined to carry on, however, even though the obstacles to business are daunting (see left).
"Israel's forced integration of our economy into theirs over the past 40 years has raised the level of wages and cost of living to a point where although we are an undeveloped country, our indicators are closer to those of a more developed country," says Mr Bahour.
While running his business, he has also spent time in recent months fighting an Israeli policy that would see him and other Palestinian returnees excluded from the territories. Israel, which controls the entry and movement of people and goods in the occupied territories, has been refusing visas to foreign-born Palestinians such as Mr Bahour.
Israel issues only three-month tourist visas to Mr Bahour and thousands of others like him - visas that are essential for travel across Israel and into the West Bank.
Although the US and Europe have expressed concern over the policy, the situation for diaspora Palestinians remains uncertain. "It's hard running a business when you don't know if you'll be allowed back into the country every three months."
Copyright The Financial Times Limited 2007
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Financial Times (Sidebar)
FORMIDABLE BARRIERS TO BUSINESS IN A STATELESS TERRITORY
Published: March 29 2007 03:00 | Last updated: March 29 2007 03:00
* West Bank, Gaza Strip and Arab east Jerusalem are separated by barriers, heavily secured Israeli settlements and military checkpoints. Since the Palestinian Authority is not a state, it cannot issue passports. Travel, imports and exports in the Palestinian territories require Israeli permission. Businessmen say security and bureaucratic procedures can be haphazard and increase planning risks.
* The US-led banking boycott of Hamas has increased costs for business. In the past, Palestinian banks would have arrangements with correspondent Israeli banks, since the territories use the Israeli shekel and have no independent central bank. But now, if Palestinian businesses want to pay their Israeli suppliers transactions have to be conducted via a third party, such as a Jordanian bank, says Sam Bahour.
* Plans have long been discussed for industrial parks at sites on the border with Israel. Palestinians, however, remain deeply sceptical, believing they would operate as a way for Israeli businesses to use cheap Palestinian labour or provide a stamp of approval for Israeli goods in the wider Arab world. Mr Bahour would like to see Israeli and Palestinian business partnerships "based on real equality where both parties add real value, but it's probably not possible without a peace deal".
* Mr Bahour says Israeli dumping of goods has increased in recent years. Products include out-of-date food and telephone cards created specifically for the Palestinian market although they are illegal under the Oslo accords.
Copyright The Financial Times Limited 2007
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