Palestinian National Authority السـلطـة الوطنيــة الفلسـطينيـة
Ministry of Telecom. & Information Technology وزارة االتصــاالت وتكهولوجيا المعمومات
Date: 12/16/2006
To whom it may concern
General ICT Cluster Description in Palestine
ICT related activities started in Palestine in early 1980s with a handful of companies selling computers
and electronics. These companies were mostly sub-agents to Israeli dealers and had limited experience
in services. The handful of software companies focused on accounting-related packages to serve the
local market.
At the beginning of the 1990s the demand for ICT services increased with the demand coming mainly
from the private sector, universities and the local governments. During the occupation, Israel fully
controlled the telecommunication sector, and it was only after the Oslo agreements in 1993 that ICT
activities started to grow. The first Palestinian ISP was created, and Internet became commercially
accessible to individuals, companies and universities.
After the establishment of the Palestinian National Authority (PNA) and the arrival in Palestine of NGOs,
banks and new companies, the ICT cluster started to show significant growth by the end of 1995. Today,
the PNA is the biggest end-user of technology products and services, followed closely by municipalities
and large companies. Utility companies are fueling ICT consumption in Palestine. By 1997, the
Palestinian telecom sector was 100% privatized with the creation of the Palestine Telecommunications
Company (PALTEL). PALTEL, with an exclusivity license, has a complete digital network connecting the
West Bank and Gaza and offers a wide range of services such as standard fixed telephone lines, leased
lines, and ISDN connections. It has over 315,000 subscribers for its fixed lines, with an 8% penetration
and 11,000 ADSL lines. Jawwal, the cellular operator, has over 550,000 mobile subscribers, and 51% of
the Palestinian market share. The telecommunication sector is expected to be fully competitive by the
end of 2006.
The ICT sector’s 2003 revenues were estimated at $87 million despite a sharp decline from its 2000 high
of $120 million. In 2000, the average annual growth rate for ICT companies was estimated at 25%. The
ICT cluster and market demand is concentrated in Ramallah, Jerusalem and Gaza areas. A wide array
of Palestinian ICT companies sells hardware products (direct agents or PC assemblers), software
development, enterprise consultancy and Internet services and office automation equipment. As of the
end of 2005, there are approximately 100 ICT companies, 150 small computer stores and more than 150
Internet Cafés in Palestine. A number of international companies including HP, IDS, Timex, and Siemens
had opened offices or established direct sales operations in Palestine.
As a result of the recent ending of the monopoly of Paltel in the ICT market in Palestine, the sector will
soon have more players and competitors in all services which increase the disparate need for qualified
persons in the ICT and management fields. Palestine as a young nation eagerly looking for highly
qualified professionals in the ICT sector who will add value to the way things are being handled and
managed by introducing the international expertise and the utilization of new and advanced technologies
in Palestine.
Although it is becoming apparent that the Palestinian universities are graduating a sufficient numbers of
IT graduates, there is an urgent need to have better quality, rather than large numbers. This capacity
building can be achieved by improving universities’ curricula, co-op programs, internships, apprentice
programs and post graduate studies specialized in the various fields of the ICT sector.
Tel: 08 2829488 - 08 2825666 Fax: 08 2822222 82/4244444 :تميفون : 2229424 28 - 2225424 28 فاكس
Palestinian National Authority السـلطـة الوطنيــة الفلسـطينيـة
Ministry of Telecom. & Information Technology وزارة االتصــاالت وتكهولوجيا المعمومات
Analysis of Cluster Strengths, Weaknesses, Opportunities and Threats (SWOT)
Strengths
Palestine’s ICT cluster has a number of strengths. First, the cluster was relatively more resilient than
many other clusters to the political situation and the region’s economic sufferings during the past five
years. Another key strength is the fact that there is a pool of well established and managed local
companies providing proven products and services and supporting the local market. Some of these
products are already being exported to the region. The ICT cluster is led by a strong and active
association, PITA, which is playing a very important role developing and promoting the Palestinian ICT
cluster. PITA has strong cooperation with other specialized ICT associations and institutions like PICTI,
PNINA, PalTrade and ISOC-PS.
Furthermore, there exists an adequate national data network (ADSL, ISDN and leased lines) that offers a
robust infrastructure for ICT development. In addition, ICT has officially been recognized in government
economic planning as a future economic pillar. The cluster enjoys strong commitment and support of all
stakeholders of the ICT Cluster.
Weaknesses
Despite the cooperation from all cluster members toward developing a strong ICT cluster, a unified vision
for the cluster has still not been achieved. At the general firm level, there is moderate professionalism
and business management aptitude. The lack of competition in telecom is a major factor hindering
cluster development. Venture capital – the lifeline of technology startups – is absent in Palestine. ICT
diffusion in many productive clusters remains below global levels. At the policy level, there is a general
lack of harmonized regulatory framework. This includes the lack of clear procurement policy by the
government, NGOs and leading private companies.
Opportunities
The potential for benefiting from local and regional initiatives, like e-Government, Palestine Educational
Initiative (PEI) and National Educational and Research Network (NERN) projects is an important
opportunity for the Palestinian ICT cluster. The expected liberalization of the telecom market will also
offer an opportunity for software and ICT service providers. Similarly, promotion of ICT adoption by small
and medium enterprises in industrial clusters will lead to opportunities for ICT products and service
providers. Donor-funded projects can help accelerate growth in the ICT cluster provided the political
situation remains conducive.
Threats
Current political conditions and barriers on movement of people and products affect the development of
the ICT cluster and will remain as a threat. The lack of enforcement of policies and regulations, such as
the protection of intellectual property rights, present a challenge for Palestine’s ICT cluster. The private
sector perceives direct competition from some NGO’s, government agencies and universities in some
activities like training and software development. The low levels of ICT penetration, especially in the
small and medium enterprise segment and the lack of awareness on the importance of ICTs by other
trade and industrial clusters have led to a moderate demand. Price sensitivity of the local market limits
profitability of ICT ventures.
Sources:
Palestinian Ministry of Telecom and IT (www.mtit.gov.ps)
PITA Annual Report 2005 (www.pita.ps)
Paltel Annual Report 2005 (www.paltel.ps)
DAI ICT Cluster Report, May 2006 (www.dai.ps)
Tel: 08 2829488 - 08 2825666 Fax: 08 2822222 82/4244444 :تميفون : 2229424 28 - 2225424 28 فاكس