This document discusses the challenges and future outlook of the information and communications technology (ICT) sector in Palestine. It notes that while mobile phone ownership is high, internet penetration remains low due to outdated network technologies and restrictions imposed by Israel. The ICT industry in Palestine is small and fragmented, focusing mostly on domestic software development and services. Challenges to growth include political instability, lack of capital, poor infrastructure, and difficulties marketing to international clients and traveling abroad. To increase its contribution to GDP, the ICT sector will need to pursue more outsourcing opportunities and export-focused strategies, as well as training programs to develop the local talent pool.

1. 2013 December, Data Mining Concept to measuring performance of Palestinian IT Company in ICT world
Challenges and Future Outlook of the ICT of
software
In Palestine under cover of Inflation Informatics
Jamil S. Alagha (Author)
Dept. of Information Technology, Faculty of Postgraduate (Master)
Islamic University
Gaza, Palestine
Introduction
Despite concurrence on specific components in the
1995 Oslo Interim Agreement addressing general
telecommunication issues including the allocation of
telecom frequencies, development pertaining to Area C
and the import of equipment in the West
Bank and Gaza (WBG), Telecommunication
operators, Internet Service Providers, and ICT companies
continue to have difficulty acquiring needed frequencies
for existing and potential wireless networks, building
telecom networks in Area C and importing needed
equipment. New restrictions have been imposed by the
Israelis, due to unclear restrictions and policies, including
the refusal to release frequencies needed for the
development of existing mobile networks and the
development of new advanced wireless and mobile
networks.[1][2]
In an emerging country with a promising economy
like Palestine, broadband internet connectivity is
becoming an imperative step towards the development of
the ICT sector. Mobile and wireless internet technology
is currently available in WBG. 85% of the population
own mobile phones, and internet penetration per capita in
Palestine is at 7%, which is comparable to that of
countries such as Egypt, Syria, Algeria and Tunisia.‎3]
Most recently, Jawwal started to offer internet and
data service through its network, however, the system
still relies on GSM[4] and EDGE[5] technology that is
known for low internet speed in comparison to the more
recent 3G[6] technology. It is crucial to provide wireless
broadband at cost effective rates to consumers while
taking into consideration the Palestinian socio-economic
conditions. Competitive internet connectivity will drive
the prices down to become more affordable, and
providers will be forced to provide better quality of
service. However the development of this sector is
dependent on coordination between the Palestinian and
the Israeli sides, as per the Oslo Agreement. [7][11]
Industries
 Palestine’s software and information
technology services industry is small,
fragmented and mostly inward-oriented.
 Compared to many other countries, the
Software and Information Technology
Services industry in Palestine is at the very
early stages of development.
 At present, there are handful companies
primarily engaged in software, Internet web
site and content development and related
services; of these, perhaps only two or three
may be considered software developers.
 The industry is predominantly selling to the
domestic market and export sales are low.
 Most of companies were established based on
developing an idea was 62.1%.
 The companies said that political
circumstances are the most difficult
conditions that they encountered at the
beginning of the company's establishment
75.9 %, then followed by the lack of capital,
where the percentage of companies that have
faced a lack of sufficient capital are 27.6%

2. 2
Business Outsourcing
Despite the successes of some ICT companies in the
outsourcing business, there remain several challenges
that prevent the growth of this industry and the
Palestinian firm’s ability to secure outsourcing contracts.
The “Assessment of the Outsourcing Capabilities of the
Palestinian ICT Industry” [8] outlined several challenges
that include the following: [9]
International perceptions – Global news media
portrays an image of Palestine that is not conducive for
business. When dealing with this perception, Palestinian
companies must surpass it to win business outside of the
country.
 Security of data and concerns about having
important information physically located in
the area.
 Security of supply, relating to ensuring the
people are able to get to work and that the
networks are robust enough to ensure high
levels of resilience and up time.
 The face to face communication challenges
caused by the ongoing security restrictions
between Palestine and Israel.
 Marketing/business development – The
ability of companies to express their unique
value proposition to a defined customer
profile is sorely lacking throughout Palestine.
At present almost all of the organizations and
individuals assessed do not have the
knowledge or experience at present to
implement a successful regional or global
business development program.
 Travel impediments – inward and outward –
The Palestinian people have significant
challenges in traveling across cities, into
Israel, and internationally. These delays in
time and in getting supplies hurt the ability to
do business efficiently. Additionally, the
international perceptions of personal risk and
lack of attractiveness for Western visitors
decreases the ability for Palestinian
companies to develop strong relationships
with clients.
 Scalability of the labor pool – From several
estimates the total number of IT graduates that
emerge annually from Palestinian universities is
around 2000. This is in stark contrast with the
well over 100,000 graduates from Indian
universities. The lack of mass supply will
limit the ability of Palestine to grow into a
global IT outsourcing player.
Marketing Channels
 Lack of trust to buy Palestinian products
o No proper sector branding
o No industry certification exist for the
back office development and support
operations
 Palestine is not well positioned in the global
market
 There is no clear understanding of marketing
and sales concepts
 The disconnect that exists between the ICT
suppliers and prospective beneficiaries and
customers.[12]
Future Outlook of the ICT Sector
The analysis of the future outlook for the ICT sector
will focus on the overall economic performance in
general and its impact on growth in the sector.
Furthermore, it will assess the ability of the sector to
grow and expand in the global market. The analysis will
also take into consideration the growth of the Jordanian
ICT sector in an economy that resembles that of
Palestine.
1. Contribution to GDP
In a previous section on economic indicators, it
was shown how ICT has a positive growth in
response to new investments in the sector and the
increased internet penetration. In the early years of
the Intifada, the ICT Value Added growth rate was

3. 3
negative. However, in the 2 years after, it
increased significantly with over 25% growth in 2003
and over 50% in 2004. During the year 2005, ICT value
added declined mainly due to the decline in overall
economic activities. In the following 2 years, ICT value
added increased by more than 10% and declined
slightly in 2008 compared to previous growth rates.
The increase in these two years could be due to the
introduction of the ADSL services in mid-2005.
Despite the decline in 2008 that could be attributed to the
closure imposed on the Gaza Strip which led to
overall economic decline combined with the prohibition
of import.
In its future outlook report, the PCBS projected a
decline in the overall economic activities and GDP by
3.1% if the current situation of economic embargo and
restrictions continue to be imposed on the Gaza Strip
during 2009. However, if the restrictions and
embargo is lifted combined with the
reconstruction of Gaza and increased number of workers
employed in Israel, there will be a GDP growth of about
3.2%.
In the first scenario of economic decline, the ICT
sector could mitigate for this through an outward looking
strategy for the global market. A strategy that focuses on
the export market could lead to a growth in the
sector similar to that in 2006 and 2007 of 10% growth
rate. A 10% growth rate would lead to an average
increase in the ICT value added by $ 25 million
annually to reach in 2011 $ 307 m.
On the other hand, the adoption of an ICT
development strategy similar to that of Jordan with
involvement from key stakeholders including the donor
community, could lead to growth rates similar or
exceed those of Jordan which averaged 40% annually.
The ICT sector in Palestine has previously
achieved a growth rate exceeding 50% in 2004. A
15% growth rate would lead to an average
increase in the ICT value added by $ 40 million annually
to reach in 2011 $ 351 m.
2. Employment
Employment in the ICT sector and ICT jobs in
other branches of the economy are estimated at about
15,267 of which about 5,200 jobs are direct ICT sector
employment. It has been shown above that each job
opportunity created in the ICT sector is matched by 3
jobs in other branches of the economy. The Jordanian
ICT sector employment has been growing over the past 5
years at a rate that averaged about 7% annually.
Furthermore, it has been shown that a US$ 1 million
export opportunity generated 40 job opportunities in
Palestine. Taking these two factors into consideration, it
would be reasonable to assume that the Palestinian ICT
sector employment could grow in the range of 3-4
percent annually which translates to 150-200 new jobs
opportunities in the ICT sector annually. These will also
generate 400-500 new jobs in the economy as a whole.
The ability of the ICT sector and other economic sectors
to absorb new ICT graduates depends largely on
economic growth. Further, as most of the ICT business
requires high degree of training, it is not expected that
most of these graduates will have a chance to be absorbed
by the ICT sector unless they receive the proper training
and placement assistance. It is essential to develop
programs that would target new graduates to be attractive
for private sector employment.
3. Business Outsourcing
The Assessment of the Outsourcing Capabilities of
the Palestinian ICT Industry study found that Palestinian
ICT firms may have an opportunity to develop BPO
activities which include data entry and indexing at the
lower end, clams processing in the mid-range of
complexity, and taking on the full responsibility of HR of
Finance in the most complex cases. For these activities to
succeed, a set of recommendations were made in order to
be able to compete in a very competitive global market
for BPO.

4. 4

5. 5
References
1. World Bank: West Bank and Gaza
Telecommunications Sector Note,
Introducing Competition in the Palestinian
Telecommunications Sector, January 2008.
2. PITA:The Palestinian ICT Sector.A Three-
Year Outlook.Based on Economic
Indicators, May 2009.
3. West Bank and Gaza Telecommunications
Sector Note, Introducing Competition in the
Palestinian Telecommunications Sector,
January 2008.
4. GSM (Global System for Mobile
Communications: Second Generation) is the
most popular standard for mobile telephony
systems in the world.
http://en.wikipedia.org/wiki/GSM.
5. Enhanced Data rates for GSM Evolution
(EDGE) (also known as Enhanced GPRS
(EGPRS), or IMT Single Carrier (IMT-SC),
or Enhanced Data rates for Global
Evolution) are a backward-compatible
digital mobile phone technology that allows
improved data transmission rates.
http://en.wikipedia.org/wiki/EDGE.
6. 3rd Generation wireless format. This high-
efficiency data and voice format follows 1G
(analog service) and 2G (digital service).
http://www.ipwireless.com/glossary.
7. Oslo Agreement, Annex III, Protocol on
Israeli-Palestinian Cooperation in Economic
and Development Programs” and “The
Israeli-Palestinian Interim Agreement on the
West Bank and the Gaza Strip (“Oslo 2”—
9/28/95), Annex III, art 36).
8. The Islamic University of Gaza, IUG ICT
Business Incubator, Operation and
Development for Islamic University IT
Incubator, (August 2009).
9. David L. Ross, “An Assessment of the
Outsourcing Capabilities of the Palestinian
ICT Industry”, Palestinian Enterprise
Development Project”, A USAID Project,
May 2008
10. ICT in Palestine: Creating a Development
Dynamics, PITA.
11. PALTRADE(Palestinian Trade Center) ,
Challenges Facing ICT in Palestine (August
2010)
12. The Palestinian ICT Cluster Report,
Palestinian Enterprise Development Project-
A USAID Project, 2006