EXPOTECH 2006 DEMONSTRATES PALESTINIAN IT SECTOR

UNCLAS JERUSALEM 004807

SIPDIS

SENSITIVE
SIPDIS

NEA/IPA FOR WILLIAMS/SHAMPAINE/STEINGER; TREASURY FOR
SZUBIN/LOEFFLER/NUGENT/HIRSON

E.O. 12958: N/A
TAGS: ECPS ECON BEXP KWBG IS
SUBJECT: EXPOTECH 2006 DEMONSTRATES PALESTINIAN IT SECTOR
RESILIENCE


1. (SBU) SUMMARY: THE THIRD ANNUAL PALESTINIAN IT SECTOR
EXHIBITION EXPOTECH 2006 FEATURED A RECORD 49 COMPANIES,
INCLUDING SEVEN PARTICIPATING FROM GAZA VIA A BROADBAND LINK.
A VARIETY OF PRODUCTS FROM U.S. IT COMPANIES WERE ON
DISPLAY. SECURITY-RELATED PRODUCTS WERE MORE PROMINENT THAN
IN PAST YEARS. DETERIORATING ECONOMIC CONDITIONS IN THE WEST
BANK AND GAZA HAVE BUFFETED THE IT SECTOR. ISRAELI LICENSING
REQUIREMENTS AND LENGTHY INSPECTION PROCEDURES HAVE HAMPERED
THE IMPORTATION OF U.S. PRODUCTS, ACCORDING TO PALESTINIAN IT
COMPANY REPRESENTATIVES. THE PALESTINE INFORMATION AND
COMMUNICATIONS TECHNOLOGY INCUBATOR (PICTI),A LOCAL NGO
ESTABLISHED WITH USAID SUPPORT, ANNOUNCED THE LAUNCH OF A
FUND INTENDED TO PROVIDE INVESTMENT AND SEED MONEY TO
EARLY-STAGE IT COMPANIES AND IT ENTREPRENEURS. END SUMMARY.

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IT SECTOR EXPANDING
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2. (SBU) EXPOTECH 2006, THE THIRD ANNUAL EXHIBITION OF
PALESTINIAN IT COMPANIES, WAS HELD NOVEMBER 6-8 IN AL-BEIREH,
NEAR RAMALLAH IN THE WEST BANK. EXPOTECH 2006 WAS ORGANIZED
BY THE PALESTINE INFORMATION TECHNOLOGY ASSOCIATION (PITA)
AND THE PALESTINE TRADE CENTER (PALTRADE) WITH SIGNIFICANT
FINANCIAL BACKING FROM THE PALTEL GROUP, THE MOST PROMINENT
PALESTINIAN TELECOMMUNICATIONS COMPANY AND OWNER OF JAWWAL,
THE SOLE OPERATING PROVIDER OF CELL PHONE SERVICE IN THE WEST
BANK AND GAZA. CONSOLIDATED CONTRACTORS COMPANY (CCC) AND
ARAB PALESTINIAN INVESTMENT COMPANY (APIC),A RAMALLAH-BASED
INVESTMENT HOUSE, ALSO HELPED FUND THE EVENT. A RECORD 49
COMPANIES PARTICIPATED IN THE EXHIBITION -- 13 MORE THAN LAST
YEAR -- INCLUDING SEVEN FROM GAZA THAT PARTICIPATED VIA A
SPECIALLY DESIGNED PAVILION IN THE MAIN EXHIBITION HALL
OFFERING BROADBAND LINKS ALLOWING THE GAZA FIRMS TO INTERACT
WITH FELLOW IT COMPANIES AND EXHIBITION VISITORS. EXPOTECH
FEATURED TECHNOLOGIES AND EQUIPMENT DEVELOPED WORLDWIDE AND
ALSO SHOWCASED LOCALLY DEVELOPED INNOVATIONS AND SERVICES.

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SALES CONTINUE DESPITE WEAK ECONOMY
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3. (SBU) THE PRODUCTS OF SEVERAL MAJOR U.S. IT COMPANIES,
SUCH AS CISCO, HP, AND DELL WERE PROMINENTLY FEATURED. THE
NUMBER OF BOOTHS OFFERING SECURITY EQUIPMENT AND RELATED
SOFTWARE HADQEDLY INCREASED SINCE LAST YEARS EXHIBITION.
MOST OF THESE PRODUCTS WERE OF CHINESE, SOUTH KOREAN OR
JQSE ORIGIN. LOCAL SOFTWARE DEVELOPERS WERE WELL
REPRESENTED, DEMONSTRATING THE ADVANCING CAPABILITIES OF THE
PALESTINIAN IT SECTOR. VENDORS COMMENTED THAT THE DOWNWARD
TREND OF THE PALESTINIAN ECONOMY SINCE THE FORMATION OF THE
HAMAS-LED GOVERNMENT IN MARCH 2006 HAS DAMPENED SALES, BUT
PRIVATE COMPANIES, AFFLUENT INDIVIDUALS AND BANKS CONTINUE TO
DEMAND THE LATEST TECHNOLOGY.

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IMPORTERS FACE DELAYS
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4. (SBU) IMPORTERS OF U.S. PRODUCTS TOLD ECONOFFS THAT
ISRAELI LICENSING REQUIREMENTS AND INSPECTION PROCEDURES
SIGNIFICANTLY DELAY THE RECEIPT OF ORDERED GOODS. ANY ITEM
CONTAINING A MODEM, FOR EXAMPLE, HAD TO BE INSPECTED,
RESULTING IN DELAYS OF UP TO EIGHT MONTHS, IN SOME CASES.
(NOTE: ACCORDING TO THE IMPORTERS, ISRAELI AUTHORITIES
INSPECT A SAMPLE OF THE TARGETED SHIPMENT AND NOT EVERY ITEM
IT CONTAINS. THEY ASSERT THAT THE OFFICE THAT CONDUCTS THE
INSPECTIONS IS OPEN ONLY ONE DAY A WEEK. END NOTE.) A
PALESTINIAN IMPORTER OF MOTOROLA CELL PHONES SAID THAT IN
SHIPMENTS SHARED WITH HIS ISRAELI COUNTERPART THE PORTION OF
THE CARGO DESTINED FOR ISRAEL IS RELEASED IN 3-4 DAYS WHILE
IT TAKES 3-4 MONTHS BEFORE HE SEES HIS SHARE OF THE GOODS.
(NOTE: ECONOFFS AND FCS JERUSALEM ARE ORGANIZING A MEETING
WITH PALESTINIAN IT COMPANIES TO DISCUSS DIFFICULTIES THEY
ARE EXPERIENCING WHEN IMPORTING U.S. IT PRODUCTS. END NOTE.)


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LOOKING TO THE FUTURE
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5. (SBU) PERSONNEL AT PICTI'S BOOTH ADVISED ECONCQEF OF A
NEW PROJECT CALLED THE PICTI FUND INTENDED TO STIMULATE
INVESTMENT AND PROVIDE SEED FUNDS TO EARLY STAGE TECHNOLOGY
AND TECHNOLOGY-DRIVEN COMPANIES IN THE WEST BANK AND GAZA.
THE FUND, A FOR-PROFIT LIMITED PARTNERSHIP, WILL INVEST IN


THE DEVELOPMENT OF ENTREPRENEURS IN THE IT SECTOR, PROVIDING
THEM WITH INCUBATION SERVICES, RESOURCES AND FINANCIAL
OPPORTUNITIES. THE TARGET SIZE OF THE FUND IS USD 5 MILLION.
(NOTE: UNDER THE REVISED PALESTINIAN ASSISTANCE PACKAGE
APPROVED JULY 2006, USAID PROVIDED USD 1.5 MILLION TO PICTI
TO SUPPORT THE ESTABLISHMENT OF THE NEW SEED FUND. THE USAID
INVOLVEMENT IN THE PROGRAM ENDED SEPTEMBER 30, END NOTE.)
PALTEL GROUP CEO ABDUL MALIK JABER DESCRIBED TO ECONOFFS
PALTELS DECISION TO PROVIDE USD 3 MILLION TO THE PICTI FUND.
PALTEL WILL ALSO PROVIDE PICTI USD 150,000 ANNUALLY TO HELP
COVER OPERATING COSTS. JABER ADVISED THAT PLANS ARE
CONTINUING FOR THE AWARDING OF THE FIRST PALESTINIAN
ENTREPRENEURSHIP AWARDS, OF WHICH THERE WILL BE 12 TOTALING
USD 250,000.


6. (SBU) A LOCAL SOFTWARE DEVELOPER OF MAPS AND MAP SOFTWARE
CONVEYED TO ECONOFFS HIS CONCERNS ABOUT PERVASIVE
INTELLECTUAL PROPERTY RIGHTS (IPR) VIOLATIONS IN THE WEST
BANK AND GAZA. HE ASSERTED THAT ONE OF HIS COMPANY'S
SOFTWARE PACKAGES VALUED AT USD 20,000 CAN BE OBTAINED IN
PIRATED FORM FOR A FEW DOLLARS. HE ASSERTED THAT THE PA
OFFERS NO PROTECTION TO LEGITIMATE SOFTWARE DEVELOPERS. HE
ASKED THAT THE USG, EU, WORLD BANK AND OTHER FOREIGN DONORS
DO MORE TO ENSURE ADHERENCE TO IPR STANDARDS WHEN
IMPLEMENTING THEIR ASSISTANCE PROGRAMS. HE SUGGESTED THAT
USAID CONTRACTORS AND OTHER RECIPIENTS OF USG FUNDS SHOULD BE
REQUIRED TO ADHERE TO USG IPR REGULATIONS WHEN MAKING LOCAL
PURCHASES. THE SOFTWARE DEVELOPER, HOWEVER, DID NOT OFFER
ANY SPECIFIC EXAMPLES OF IPR VIOLATIONS INVOLVING USAID OR
ANY OTHER FOREIGN ASSISTANCE CONTACTS. ECONOFF REPLIED THAT
THE USG GIVES HIGH PRIORITY TO IPR CONCERNS BUT CURRENTLY
CANNOT ENGAGE A HAMAS-LED PA GOVERNMENT ON THIS SUBJECT. HE
NOTED THAT USAID CONTRACTS INCLUDE CLAUSES REQUIRING
ADHERENCE TO IPR REGULATIONS.


WALLES