Wednesday, October 9, 2013

Fiscal crisis and negotiation chips in the Israeli-Palestinian peace talks

"Only free men can negotiate" -- Nelson Mandela

"The Palestinian leadership under Arafat signed onto the “peace process” at Oslo because it was headed towards oblivion (bankruptcy) after backing the wrong horse in the First Gulf War. In return for being rescued by Washington and Tel Aviv, the Palestinian leadership agreed to act as Israel’s subcontractors in the occupied Palestinian territory. (Former Israeli foreign minister Shlomo Ben-Ami, in Scars of War, Wounds of Peace, is very frank on this point.)" -- Norman Finkelstein

Keeping Palestine at brink of bankruptcy -- part of Israels negotiation strategy?

Financially weak partners are more ready for compromises in negotiations. The Arafat leadership, being at the brink of bankruptcy, was ready for compromises during Oslo, as Finkelstein explains. As leaked cables suggest, Israel had a tactic to keep Gaza at the brink of bankruptcy. The Israeli restrictions to the West Bank have multiple effects, some in the field of security, others in the field of economy, keeping the Palestinian economy small and dependent on the Israeli one, which in turn keeps the potential for tax revenues collected by PA small, so the PA is having a hard time increasing the share of budget under its own control, which in turn make punitive customs tax withholding by Israel more painful for PA.

How deep does the PA's financial crisis run?

To get a rough idea, this is how deep the PA's financial crisis runs -- expenditures are approximately 70%, or 1.4 billion $ above revenues:

If you deduct foreign budget support, and deduct the taxes collected by Israel (mainly custom fees), the Palestinian Authority has control over only about 40% of the money it needs to cover all its expenditures.

Without foreign budget support, the current Palestinian leadership would likely collapse. We witnessed a similar scenario after 2005 elections when the international community withdrew its budget support, the elected government had to stop paying public servant's salaries, the parliament got dissolved, and the leadership was replaced by the current one.

Becoming financially independent

It is the PA's priority to become financially independent by bringing a larger part of the annual governmental revenues under its own control. While that portion was only 40% in 2012, the 2013 budget looks much better, especially the customs losses associated to indirect, smuggled imports through Israel are being reduced. But still the PA is far from standing on its own feet financially.

A strong private sector would be key to increasing independent tax revenues to the PA, but it seems like the framework conditions imposed by Israel will not allow for much growth. Palestinian GDP could grow by 35%, if Israeli restrictions would be lifted for C-Areas of the Palestinian West Bank, according to a recent World Bank report. An earlier report by ARIJ ("the economic cost of the occupation") estimated the Palestinian GDP to grow by 85% if all restrictions of the occupation, including the blockade of Gaza would be lifted.

The other option for the Palestinian leadership to become financially independent would be fiscal consolidation. About half of the governmental expenditures goes to the 160.000 governmental employees. In other economies, especially those without oil, it is deemed unsustainable and not really effective to have one third of the workforce employed by the government.

What are the hard negotiating chips?

Under this link, you find some speculation of how the peace talks may develop.

However, not everybody is so optimistic. Some doubt that the Nethanyahu government would have any benefit from entering into serious negotiations. Others suspect certain Palestinian stakeholders who benefit from the status quo to lobby against a final status agreement.
If the enthusiasm about the Kerry initiative is to crumble at some point, what hard playing cards do the involved parties hold in their hands?

Israel has not much to win from negotiations. For the constituency of the Israeli government, the status quo seems to be the best it could wish for (apart from those that dream of getting rid of Palestinians from the occupied territory altogether). However, if no substantial agreement is reached, Israel will continue its path of being increasingly seen as an apartheid government, or a pariah state. Israel will try to sell the outcome of negotiations, however small, as a great success towards peace.

In case of failed negotiations, the PA will probably sign the Rome treaty to get access to the ICC in The Hague -- and this will initiate a flood of cases filed against current and past Israeli government officials, causing major discomfort and fast decay of the moral standing of Israel in the world.

As revenge, the Israeli government could stop transmitting customs revenues, as it did before many times, and ask befriended governments to withdraw budget support, taking the PA to the brink of bankruptcy.  From past experiences, these financial punishments never lasted very long. It appears that Washington and Knesset don't want to let the PA to collapse. Just imagine how messy and expensive it would get for Israel if they would need to take care for the entire civil administration of Millions of Palestinians.

It is a safe guess to assume that the US government, regardless of its financial cliffhanging exercise at home, will offer a sweet budget support deal to the PA government in exchange for not involving ICC. And maybe the PA will be tempted to accept that deal.

But there might be people who would find it morally acceptable to first accept the budget support, and then seek justice through ICC regardless.

And to be honest, the USA doesn't have much leverage to prevent such steps. Another temporary punitive freeze in budget support maybe, so what? USA will never take it as far as to let the PA administration collapse.

Friday, October 4, 2013

The Value Chain of Stolen Cars

On a Personal Note

What made me come up with this post is the fact that during my stay in Ramallah, two vehicles have been stolen from me -- these are the vehicles -- so in case you hear anything, please leave me a note...

Mitsubishi Pajero 2.8TD, unique feature: you honk by pushing a small green button
Suzuki DR350, unique feature: speedometer is shattered

Experiences with Palestinian and Israeli Police

When my car was stolen, Ramallah police was very friendly and welcoming, but disappointing on a professional level, to say the least. My car was stolen in front of a bank, with a security camera pointing at it. I reported the case to the police just two hours after the incident, including hinting at the existence of the security camera. Overall, I have visited the police station six times on six different days to follow up on the case. Each time I was received with very welcoming words and offered coffee and cigarettes, I was being redirected to higher ranking officials who spoke good English, just to find that there was no file on the case available, and that I had to tell my story from scratch. After telling my story for the sixth time, I gave up and went myself to the bank to find out that the police did not pass by to check the video footage.

Since I am driving Israeli number plates, and I wanted to claim my vehicle registration fees back, I also had to report to the Israeli police station responsible for Ramallah -- which is located inside the settlement of Sha'ar Binyamin (where, by the way, I was surprised to find about half of the cars parked in front of the huge Rami Levy supermarket to have Palestinian number plates). The Israeli police had much less staff to handle many more cases, still it took only 30 minutes to have my printed report done, of course without much of welcoming words, no coffee and no cigarettes offered. They assured me that if the vehicle was to cross any checkpoint, it would be stopped and confiscated -- How would that work? I could imagine they have cameras to automatically detect all number plates crossing the checkpoints and compare them with a stolen vehicle database. But do they really? I never saw cameras at checkpoints.

Bottom line is, neither of the polices were successful in retrieving either of my vehicles.

The Value Chain of Stolen Cars

Those who break into cars are usually freelancers who receive an approximate 100$ per car upon delivery in one of the hubs in Hebron, Tulkarem, Qalqilia, Nilin and other places -- typically in Palestinian villages in C-Areas of the West Bank, off-limits for the Palestinian Authority, and mostly neglected by the Israeli civil administration.

The next stage of the value chain is either
  1. Selling the car to the insurance company of the theft insurance, who returns it to the owner. The insurance company saves the cost of paying the entire price of the car.
  2. In case the car has no theft insurance, and the owner finds some informed people, he can pay a tip of a few hundred shekels to get advice where to find the car.
  3. Otherwise, the car is disassembled and sold as spare parts to workshops in West Bank and Israel. The engine and chassis have serial numbers, so they need to be changed to avoid traceability.

The first value chain seems to work efficiently through middle men who take their cut of the business.

The second value chain, which was my case (no theft insurance), I was less fortunate. Regardless of several attempts and very helpful friends, both my vehicles did not show up anywhere.

The third value chain, i.e. the spare parts market, does not work efficiently at all. When I took my car to west bank workshops for repair, they would usually install used spare parts, but often I got the wrong spare parts, or long delays, or sometimes just lack of availability of parts.

Business Case 1: Solving Market Inefficiencies for Spare Parts

Business models like or amazon's marketplace have proven to be very efficient in matching supply and demand for new and used items from a large number of suppliers, including spare parts for cars.

The e-business takes a small fee for the transaction, and facilitates the transfer of the money and the transfer of the goods, while giving buyer and seller trust and confidence through Paypal's insurance, and customer ratings.

The business model needs to be slightly adopted to be a B2B model (instead of B2C), and you might want to facilitate confidentiality on the supplier's side, by buying the most-demanded spare parts against cash, and store them in a warehouse for shipment on demand.

Business Case 2: Retrieving Stolen Cars

For retrieving entire stolen cars, you will probably need to take further efforts for confidentiality of your users. You can receive anonymous hints on where the stolen car is parked, you sell this hint to your client, and you will pass the money in form of Bitcoins anonymously, while taking your cut of the deal.

Also, you could tap the potential of smartphones for this. Imagine you have 1000 users of your smartphone app, that are driving around with their smartphones attached to their own car's windshield, and the camera activated, the smartphone could automatically compare all numberplates of all other vehicles with a list of stolen numberplates. Once it has a match, it will take a photo, and upload the photo along with GPS location to your server. You can sell this information to the victim of the theft, and pass on a part of the revenue to the smartphone user to give him an incentive.

Owners of surveillance cameras that are attached to a PC could also benefit from this scheme if they install the PC-version of that application.

Business Case 3: Preventive Action

Many modern cars make it very hard to be stolen, as all car parts that are connected to the main data bus have to receive data from an electronic key in order to be functioning. So short-cutting the starter circuit won't help. Many Palestinian car workshops can install a number-combination lock preventing the engine from starting.

Another approach to find the perpetrator is to install a GPS tracker, that will send you the current position of your car by SMS. They are available for as little as $40 or a bit more, for instance

Thursday, July 18, 2013

Label for High Quality Palestinian Products

Quality-minded Palestinian customers often look for imported products from Europe, USA, Israel or Turkey, which enjoy a reputation of better quality than many domestic products. This reputation may be true in some cases, but it is not fair to generalize, given that quality varies a lot from one producer to the other, and some Palestinian ones indeed are doing an excellent job in producing decent quality.

Think of food delicacies from Canaan in Burqin, think of plastic chairs from Royal in Hebron, think of Shoes from Falcon, think of diary products by Juneidi, think of matresses by Herbawi, think of furniture from Eisa Mohana Co. in Gaza, medjoul dates by Al Nahkeel farm, bell peppers by Sinokrot, turkey breast by Siniora, and many more. Further recommendations? Comment below!

Trust in Labels

A label without trust is worth nothing. Palestinian customers typically rely on word of mouth (e.g. recommendations of their neighbor), and on opinion leadership (statements of trusted, famous personalities). In addition, compliance labels to international standards (ISO, CE, DIN, etc.) would create trust, but they certify compliance with formal requirements such as material and chemical properties only, not evaluating overall product quality from customer's perspective.

A label would need to make sure its financial independence, and needs to be under the auspices of a trustworthy personality. Criteria for receiving the label, and revoking the label need to be clear and transparent.

Label Design

Since you are promoting domestic products, and addressing an audience that possibly likes to promote the Palestinian cause, a design that includes some elements of kuffieh or embroidery patterns or such, is probably not a bad idea.

The Business Model

To avoid bias in awarding your label, you should charge for a product to be tested, and the supplier needs to pay in advance, regardless of the outcome of the test. If the product passed the test, the producer is allowed to carry the label for a defined duration of time, and he can print your label onto the product.
Include the possibility of revoking the label in the contract.

To get things going in the beginning you can offer at least one product test for each producer for free. Each type of product requires different test criteria, so don't try to start with all product types at once.

Check Best Practices

Europeans love product tests and labels, so get inspired by their huge diversity of different labels. Some are completely private, some are in compliance to some law, or some technical standard. Also look for customer-centered evaluation criteria as used by Stiftung Warentest for example.

Thursday, May 16, 2013

Bitcoin Exchange in Gaza

Background: The Difficulties of Trade in Gaza

The entire export industry of Gaza is virtually dead due to the trade restrictions unilaterally imposed by Israel. The markets that Gaza used to export to (Israel, Westbank and East Jerusalem) are completely blocked by Israeli sanctions. Only a limited set of goods can be exported to Europe, such as flowers, strawberries, furniture, but logistical hurdles and high production as well as logistical costs make it impossible to compete on those markets. Everybody hopes for relief by exporting virtual goods like software, IT services, data entry, call centers, that can more easily get across borders through wire. Palestinian companies like ASAL and Unit One are pioneering in these markets.

But what if your clients abroad are struggling to pay for their services, given that all international transactions are processed by Swift, located in United States, which is blocking virtually any transaction to Gaza?

Bitcoin: A Currency Without a Central Bank

The great advantage of Bitcoin (or Litecoin) currencies is that they travel just as easy as data across any computer network. The amount of money in circulation is limited by mathematics rather than by a central bank (Which these days, under fear of inflation of most global currencies, people might feel more trustworthy). In order to have Bitcoins being used in the Palestinian economy in Gaza, you will need an infrastructure of Bitcoin exchanges, that could change the Bitcoins earned back into Dollars, Shekels, or Egyptian Pounds.

How to Establish the Exchange in Gaza

Well I leave that question to those who have more local experience in Gaza. You might want to work together with banks, you might need to consider governmental intervention from Gaza or Israel, etc.

On the more technical level, you could register your local Bitcoin exchange office under one of the following Websites, and follow the other examples of Bitcoin exchanges in other countries:

Thursday, April 25, 2013

Catering the Rich: Let's do the trickle down effect!

There are more wealthy Palestinians than you think. Those from the families that have always been influential since centuries. Those with a part of the family in diaspora who made their fortunes in USA, Canada, Europe, or the Gulf. Those who made their fortunes in local businesses, sometimes with help of their links to either of the three governments in place. Those who became rich as traders, flooding the local market with foreign products under the free trade regime of Paris Protocol. Those that came back with their college degree from abroad, and created their own successful business.

Billions are stored in bank accounts in Palestine, in Jordan and overseas. The question is, where will those billions be spent? Forget about trying to get hold of that money by force. Most of it lies outside Palestinian jurisdiction.

But if you manage to offer some classy goods and services in Palestine, chances are that people will actually spend their fortunes here, and create jobs and income in Palestine, instead of doing so in the fashionable city centers of Paris, New York or Dubai, or possibly just Mamilla Mall in Jerusalem, which caters even common Palestinian's needs during their Ramadan shopping spree.

Successful Examples of Catering the Rich

Restaurant business is booming in Ramallah, and appears to be quite profitable, regardless of prices similar to those of European metropolises. Luxury cars are selling well, it is not rare to spot brand new top-of-the-line Mercedes, Audi, Porsche cars on Palestinian roads. The weddings industry is booming, and Mövenpick Hotel's wedding hall is often fully booked in advance for weeks during summer before and after Ramadan. A few other premium services have set up their operations very successfully, such as modern beauty parlours with hairdressers who received their training by Toni & Guy, and a couple of other examples.

Identifying Gaps to be Filled

Other economies have more experience with catering the rich. It is easy to get inspired in neighboring countries, look at Beirut downtown shopping center, look at the emirates mall in Dubai. Look at all the products and services advertised in lifestyle magazines. Think of chauffeur service including VIP access through checkpoints. Think of premium medical services. Think of financial services around private wealth. Think of high-standard tailor-made suits. Bring in franchising brands that guarantee a global quality standard. Create an online portal for high-class shopping, services, with an exclusive online community with club membership card and recommendations engine.

Is it Immoral to Cater the Rich?

I know that all this will not end the occupation, and it will do little to advance the political struggle. So I am not suggesting to go for consumerism instead of resistance. The struggle for for Palestinian rights has to go on. But let's be realistic, USA will take a couple of years to shift its military focus away from the Middle East and towards East Asia, thanks to shale gas fracking, and the strength of China. And Europe will take a couple of years to call for significant sanctions for the discriminatory legal system that Israel established in the occupied Territories. Meanwhile, the best tactics for Palestine is to embark on peaceful resistance, obsoleting Israel's ever-repeated "security" argument, while the violations of international law and of discriminatory law and practices are further exposed, strengthening the notion of Israel being seen as a pariah state, or apartheid state, which eventually calls for tough sanctions after a decade or two have passed. Diplomatic and economic pressure on Israel, and (financial, military) aid with strings attached to Israel, would eventually make the scenario of ending the occupation more attractive to the Israeli government than perpetuating the status quo.

Back to the original question, that tactics of political struggle is perfectly compatible with earning some money at the same time doing business, and trying to keep as much Palestinian money in the country as possible by providing decent goods and services for wealthy clients.
In any case, relying on the own economy will give the political struggle more room to maneuver, as opposed to relying on foreign development aid with strings attached to Palestine.

Tuesday, April 16, 2013

Car Sex in Palestine

Italians, sometimes called the "Arabs of Europe", invented the trend of car sex, that became especially popular in the more conservative south of Italy, where most young people live with their families until they get married. Via Manzoni in Naples is a famous hot spot for this:

Merchants are selling newspapers, sticky tape, and all other ingredients for a comfortable evening with privacy in your car.

Car Sex Business Potentials in Palestine

South Italy may be conservative according to European standards, but you may find Palestine slightly more conservative still. So instead of parking your car in a public road under trees by the seaside, your customers will want a more hidden spot on a private property with gate and guard.

In order to avoid conflict with local authorities, you may want to put that spot in a C-Area out of reach of the Palestinian Authoritiy's jurisdiction, but still within reach for your customers.

In order to avoid misunderstandings and outrage of religious zealots, you should call it family barbecue and camping site or something more innocent.

Also you need a large spot of land with enough trees so you can give your customers enough privacy so that they do not bump into each other.

In Saudi Arabia, an even more conservative place than Palestine, people rent tents in the desert in order to avoid being bothered by the strict hotel regulations for couples. A luxurious tent may be a value added service you can offer to your clients at a premium in Palestine as well.

So where is the best spot for a camping site with some privacy? You don't want to be more than 30 minutes away from the large populated areas. So, at least one campsite can be established for Bethlehem/Hebron area, and another one for Nablus/Jenin/Tulkarem area. Towards Jordan Valley, there is a lot of C-Area but very few trees. The western end of the West Bank is greener, but more inhabited by jewish settlements. So finding the perfect spot, buying it, and receiving permission by COGAT to develop it, will be the most challenging part of the exercise. The good thing is that COGAT is usually concerned only about permanent structures cast in concrete. So you can run your site with trees, tents and cars, and that should work without much interference by Israeli forces.

Apart from standard clients, you could also host some special-interest events, like gay or lesbian parties.

Car Sex in '48

For '48 Palestinians (those who enjoy the benefits of an Israeli Passport -- others call them "Arab Israelis") and for Jerusalemites, there is more choice for nice spots without the need to pay for it. For Jerusalemites, the Camping Forest near Ein Kerem can be suitable, or go a bit further on Highway 443, between Modiin and Ben Shemen you will find a large forest with more privacy.

For those along the coast, e.g. from Jaffa, there are more choices, for example parking along the lonely beach south of Herzliya Marina.

Sunday, April 7, 2013

Taking Solar Thermal to a Next Level

Between 50 and 70% of Palestinian households are using solar water heaters. Typical roofs look like this:

Those passive "thermosiphon" solutions are great for a start, mostly manufactured locally in Hebron, and widely available at low cost, but there is a lot of room for improvement:

  • Poor insulation of collector, storage, and pipes, so that in the winter time you will hardly have warm water
  • Small storage capacity, so if you wash dishes with warm water in the evening, the next morning your shower will be cold for all household members
  • Lots of wasted water -- before your shower gets warm, you have to let it run for several minutes and waste maybe 10-15 liters.
  • Heat can be used for water only, not for floor heating.

Potentials of new Technologies

Vacuum tube collectors -- have better insulation and give much better yields especially in wintertime, and require less space on your roof.

Circulation pumps -- insulate your water pipes and let the hot water circulate using a small pump. This way you will have hot water immediately as you open the tab, and no need to waste 10 liters of cold water before every hot shower you take.

Heat storage -- modern storage and heat exchange systems are much bigger in capacity, often located in the basement, and serving an entire apartment block. So even on rainy days you don't need to worry about hot water for your shower.

Space heating -- are you still freezing in wintertime, because you want to save hundreds of dollars of diesel heating cost each month? Investing in a large heat storage and plenty of vacuum tube collectors on your roof could be the solution.

Early Adopters

Several companies are selling vacuum tube passive thermosiphon solutions like this one. I saw some shops in Al Bireh. If you want to go into that business, look on Ali Baba, and you will for sure find a Chinese manufacturer that wants to export them to you. 

So far, those appliances are not yet manufactured locally. Here is a video describing the manufacturing process:

You would probably need a technology partner in order to establish a local production, for instance Ritter Solar.

The city of Rawabi offers to its residents a solar thermal solution that has the heat storage tank on the balcony, instead of the rooftop. This solution employs a circulation pump, and reduces water losses. The same heat storage tank is used for the gas burner, and there is an electronic controller to use gas once the water temperature is dropping too low. So you have not only reduced water loss, but also more convenience.

The company of Royal in Hebron offers comprehensive solutions, including large heat storage tank, circulation pumps and electronic controller. This picture is from their brochure:

Future Outlook

The use of concentrated photovoltaic (CPV) together with solar thermal is a promising future technology. A parabolic mirror reflects sun onto a small high-efficiency photovoltaic module for electricity generation, and the assembly is cooled with a cooling liquid, whose heat can be stored, and used for solar cooling, solar heating, hot water, space heating, etc.

Have a look at their prototype, which is promising an energy collection rate of up to 70% (combined heat and electricity):

Stay tuned what comes up from

Tuesday, April 2, 2013

Hacking for Money

Given the unilateral trade barriers imposed on Palestine by Israel for physical goods, hopes are high that the IT industry of Palestine can take off, given that their virtual products can be transferred more easily by wire. People talk about outsourcing of software development, translation services, call center, software arabization, etc. However, it seems like a large subsector of IT has been largely ignored: IT Security.

The IT security industry creates annual revenues of maybe 50 billion $ per year worldwide. Israel is famous for it's hack on Iranian nuclear centrifuges, and it's firewall software ironically called CheckPoint Firewall-1. In Palestine, you have a few non-profit hacker groups such as KDMS-team.

Many business models of IT security require you to be close to your customers, but some business models can operate perfectly from remote, for example discovering and selling exploits.

The Business of Software Vulnerabilities

Well described in a recent Economist article, discovering a software vulnerability, or exploit, can be worth between 40.000$ and 500.000$ each.

You need a reputable IT security company, and you can offer your services to governmental agencies around the world. On the technical level, you will have software engineers, that are well familiar with IP networks and the use of common debugging and exploit tools.

Even normal software companies, lacking staff with specific hacking skills, can develop their own backdoors into their software, and create additional added value by hiding them well and selling them to governments.

This book can provide some beginner's tutorial on software vulnerabilities:

19 deadly sins of software security

Get Visual Studio that lets you view the memory.

Also you can analyse client-server interaction, and may find good ways to intercept them.

Or this video on reverse engineering:

Tuesday, March 19, 2013

Solar Energy in Palestine Reloaded

Last year I wrote about the regulatory obstacles to developing the renewable energy sector. Some things have changed meanwhile, and the first photovoltaic roofs in Palestine are being connected to the Palestinian power grid within the Palestine Solar Initiative (PSI) of the Palestinian Energy Authority (PENRA). The picture below shows an installation of ISS Solar Systems company in Ramallah. I hope they allow me to steal the photo in exchange for this advertising:

Energy Minister Omar Kittaneh proudly inaugurating a grid-connected PV roof  in Ramallah

Solar Energy Projects Hugely Differ From Each Other

Below I will give a few examples of use of solar energy in Palestine, and elaborate on the potential for growth in terms of private sector investment.

Palestine Solar Initiative

This is the PA administrations' 1000 roofs PV programme, including feed-in tariff. Details described in this document.
Public sector share: I don't have the exact figures -- if you consider an end consumer price of 0.6 Shekel per KWh and a feed-in tariff of 0.86 Shekel per KWh, that makes a 30% subsidy to your private investment, so donor money has a potential 300% leverage, that means each donor dollar will result in 3 dollar of installed PV capacity. With increasing electricity tariffs, and lower PV module prices, the leverage will increase up to the point where no subsidies are needed any more, during the coming years.

Growth potential: Private sector/household investment possible, limited currently to 1000 roofs, and to 5KW per roof, that is a theoretical maximum of 5MW total capacity. Once the limit is reached, further expansion possible.

Hana Siniora Investing in 5MW PV Plant near Jericho

Why did they chose exactly 5MW? To prove a point to PENRA, that the same impact of PSI can be achieved, but without any donor funding? In this article a private sector investment near Jericho is discussed. As far as I know, the solar park is supposed to be located in a C-Area, under Israeli administration, and the investors have obtained permission to feed in electricity according to the Israeli feed-in law, directly into the Israeli transmission grid installed in the occupied West Bank.
I am not aware of the exact agreed feed-in tariff, but let us assume a tariff of 0.6 Shekel per KWh, which roughly equals the end consumer price. Considering that the production pattern of PV is matching well with the peak demand pattern of Israel (air conditioning along coast and desert), this price reflects probably roughly an unsubsidised feed-in price. 

Public sector share: 0%, completely privately funded.
Growth potential: Great, the sky is the limit. If we go solar for 20% of Israel's electricity production, that would be 10 billion KWh per year, and Palestine would become net exporter of energy, without the need of subsidies. However any project has to submit to Israeli regulations as we talk about C-Area.

Jericho Industrial Park Project by JICA

The Japanese government has sponsored a PV plant in Jericho that was recently inaugurated and connected to the grid. Watch the launching ceremony on YouTube: Video

It is essentially a donation to the PA government worth several million dollar, and the PA's budget will benefit from the produced electricity revenues, or, if we are lucky the end customer will benefit from lower prices. 

Growth potential: Not viable for private sector investment -- every installed capacity requires 100% donor funding.

Wadi Al Nar Street Lighting

A Qatari charity has donated solar-powered street lighting for Wadi Al Nar road. See this article

Growth potential: Not viable for private sector investment -- every installed capacity requires 100% donor funding. Maybe an option once Municipalities enter public-private-partnerships for providing street lighting.

Al Ahli Hospital Hebron

Al Ahli Hospital in Hebron has a EU-funded project for wind energy. See official website. While the solar thermal infrastructure of that hospital has a very short payback period of less than 3 years, the wind turbine requires significant co-funding by EU to become feasible. Not sure about the financial details, if we exclude all the awareness and other measures, and look at infrastructure only, maybe 70% donor funding? Please comment if you know more.

Growth potential: Not clear. No market data available. Feed-in of wind energy of that scale is based on individual agreements with distributors and PENRA, not covered by Palestine Solar Initiative.

Wind Energy at Rawabi

The new city of Rawabi is contracting the company Independent Wind to install a 100KW wind plant. This is a 100% private sector investment, but most probably aimed more as a symbolic plant for demonstrational purposes, without considering commercial viability.

Growth potential: Not clear. No market data available. Feed-in of wind energy of that scale is based on individual agreements with distributors and PENRA, not covered by Palestine Solar Initiative.

Mini-Grid for Bedouins in C-Areas

The Israeli-Palestinian NGO Comet-ME has constructed several battery-buffered mini-grid PV solutions for bedouin villages in South Hebron Hills, with funding of German Ministry of Foreign Affairs. Those installations were threatened to be bulldozered by the occupying power, which caused some bad PR for Israel (see Article). To avoid further scandal, Israel has decided to stop demolition. But it is likely that Israel sent a strong message to western governments urging them to avoid future political investments like these. Those installations have more of a symbolic and a political value than being commercially viable. The operator decided to sell electricity to bedouins at the cheap price of the Palestinian grid -- that is a price that does not even cover the operating costs of the mini-grid installation, even under the circumstances that all infrastructure is paid for 100% by donor funding.

Growth potential: Not viable for private sector investment, because lacking the political backing, private sector infrastructure would be subject to demolition. Maybe a Qatari charity can fill the gap, given that western governments are hesitant to step on the feet of the occupying power?

Royal Company Hebron

An early adopter of private-sector investment in photovoltaic energy is the innovative company from Hebron, Royal. Industrial electricity is more expensive than household electricity in Palestine. The industrial consumption pattern matches well with the PV production pattern, therefore even without feed-in, a large part of the production can be consumed on site immediately.

Growth potential: Good for all industrial producers. Even if investors don't want to rely on the political risks associated with a deal with PENRA, they can make sure that most of their energy is consumed on site. I would be curious to see the commercial figures of such investments.

Jiftlik Clinic with PV Roof

Jiftlik is a Palestinian village in Area C in the Jordan valley. A donor-funded project has provided the clinic of Jiftlik with a solar PV roof, feeding into the grid. This is the document of the Israeli military administration describing the project.

Growth potential: 100% donor funded. Lowers running cost of clinic, but not designed for commercial viability.

Net Metering

Net metering means that you pay only the difference between your electricity consumption and your electricity production that you feed into the grid. In a 2012 donor meeting with Omar Kittaneh, head of PENRA, the Minister was asked whether a net metering scheme would be available for those solar installations that don't qualify for the subsidized PSI (Palestine Solar Initiative). He confirmed positively, that anybody would be able to do net metering.

So far, however, any inquiry to the electricity distributors like JDECO in regard to net metering is answered with referring to the PSI only.

Growth potential: 0% donor funding, 100% private investment. Great growth potential once PENRA implements its promise. With a retail price of 0.5 to 0.6 Shekel, the investment will be profitable with low interest rates and long term (20 years) investment. Especially larger scale installations for industry will be financially attractive once/if PENRA moves ahead with net metering.

JDECO installs solar roofs for Beit Sahour Municipality

JDECO is one of the electricity distribution companies which have a monopoly for their regional market. According to a template contract (see here), electricity distributors will offer owners of public buildings and homes an all-inclusive deal, where JDECO will be responsible for the investment, and will keep most of the profit.
This will become financially attractive for electricity distributors especially if they are able to attract donor funding for that scheme.
Other private investors may see that business model as a threat, because they will hardly be able to compete for rooftop space, given that JDECO can use donor funding for its competitive advantage, and may also be able to abuse its control over granting grid connection to its private sector competitors.

Growth potential:
Not clear. Probably reliance on donor funding. Possibly competing with net-metering. No market study available. Anybody?

Solar Thermal on Private Roofs

According to different estimates, approximately 50 to 80% of all hot water produced in Palestine comes from solar thermal installations on domestic roofs. The equipment is produced locally in Palestine, even exported to Israel, and available cheaply with pay-back periods of 2-3 years. Still technology is low tech with lots of water losses (up to 10 liters of cold water wasted until the hot water reaches your bathroom), no longer-term heat storage, and only poorly insulated flat-collectors instead of vacuum tube collectors, so during most of the cold season, people have to heat water with electricity or gas.

Growth potential: Saturated market for low-tech solar thermal, but growth potential of products that have better winter-time performance and less water losses.

Waste and Biomass

Energy-rich biomass is available from large cattle farms like Juneidi and Jebrini in Hebron. Solid waste and waste water sludge is owned by municipalities. While cattle farm owners are open to utilizing their high-energy animal waste, I did not hear of any municipality that gave access to landfills or waste water treatment plants for private companies to operate on.

Growth potential: This sector is starting at zero, and for sure there are some profitable quick wins related to animal waste, even on smaller scale. Up-scaling using municipal waste resources will be the tougher part of the exercise, as the public sector side may not be well prepared in terms of legal and procedural framework. The public-private-partnership city of Rawabi could provide some pioneering in that field.

Optimizing Leverage of Donor Funding

As illustrated by above examples, the projects' profitability ranges from an unprofitable need of 100% donor funding up to a profitable business model with 100% private funding. When designing future donor interventions, keep in mind the leverage that your project brings, that means how many donor/public sector dollars you need to trigger how much private investment, and in how many KWp of installed capacity this results.

Aid effectiveness in this case could be measured in terms of donor dollars per KWp of installed capacity.

Of course, apart from measuring the Kilowatts, you may consider additional aspects, such as job creation, know how transfer, paving the regulatory framework, as well as political objectives such as claiming C-Areas of Palestine.

Sustainable O&M Models

Apart from the aid effectiveness ratio of "KWp per donor dollar", you will want to make sure to have a sustainable operations & maintenance model. For instance, if you donate PV cells for school roofs, while the reduced electricity bills are on account of the Ministry of Education, you may face a situation after a couple of months or years, that the cells are getting dirty, the inverter is broken, and nobody comes to clean it or fix it. That would result in a very low KWh per KWp, rendering your donor investment futile.

Better to hand ownership to a company or a local community which benefits from the produced electricity, and will use the money to pay back the investment, and keep some funds aside to do the cleaning and maintenance as required.


A lot is being done, but since the same paperwork is being sold to a variety of donors, Palestinian implementers often prefer to not publish their work online. This is a call for donors to insist on online publication of all paperwork funded by them.

Here are some starting points for research:

PSSES the Palestinian Solar and Sustainable Energy Society
ISS Solar Systems, Ramallah -- a private company
Ayava Solar -- another private company and direct importer of modules and inverters
Conference Programme on Private Sector Investment in Renewable Energy by KAS
Palestine Solar Initiative project document by PENRA
A 2010 paper by Portland Trust on Renewable Energy
Heinrich Boell Stiftung Gatherings on Renewable Energy
The Feed-In law passed by PA's minister's council in 2012
The home-owner's brochure published by PERC for the PSI
Al Najah University in Nablus has a Faculty dealing with Renewable Energy. Contact Imad Ibrik.
PERC ist the regulatory body. Contact Zafer Milhem.
PENRA is the Energy Authority. Contact Omar Kittaneh.
JDECO and severeal other regional electricity distributors are responsible for actually connecting you to the grid.

Still missing online -- please comment if you find it good URLs:
  • Grid code for Palestine
  • Any private sector position papers regarding the PSI
  • Any proper market studies for the examples mentioned above
  • A clear documentation of net metering regulation

Sunday, March 17, 2013

Do You Love Reading?

When I had my paper subscription of the Economist in Ramallah, that weekly magazine would arrive with an approximate week of delay, or more, to my PO Box. Not great if you want to be up-to-date with news, so I switched to the online subscription, which would conveniently and automatically download to my Samsung phone, so that I could read it at home on the sofa on the same day it comes fresh from the printing press, or listen to the audio version while stuck in traffic of qalandia checkpoint.

Some publishers like the Economist develop their own iPhone and Android apps, while many magazines are available through a digital newsstand online shop like Zinio, Magzter, Pocketmags, Google Play Magazines or Amazon Kindle. But what about Arabic language? After an initial check, I found only a couple of individual news outlets like Al-Quds that have iPhone apps, but no digital news stand like Zinio that would offer a wider portfolio of magazines and daily and weekly papers in Arabic online.

Some examples of Palestinian newspapers and magazines

Ingredients for an Arabic Online Newsstand

So what do you need for such a business?

  • A network of Arabic publishers that are willing to sell their content on your platform. 
  • Some staff for managing relations with publishing houses
  • Arabic language software developers for iPhone/iPad and Android platform. 
  • Some IT staff that works on bringing all content in the right format, ideally automated, and in real time, to keep running costs low
  • A payment provider that works throughout the Arab world
  • A marketing campaign for your app once you are ready to grow

Your Customers

Readers: Of course you want to offer different models of paid subscriptions to your readers, the 12 Million Palestinians worldwide, and potentially the rest of the 300 Million Arab speakers.

Advertising: You could offer part of the content for free, with an advertising business model. Use connect to facebook feature to do well-targeted advertising.

Magazine Promotion: Some of the lesser known magazines may want to pay you money in exchange for promoting their content among the audience, once you have gained a large pool of users.

Value Added Features

Audio versions: As a value-added service, you could record audio versions of those newspapers and magazines. That is good not only for blind, but also commuters and other lazy people.

Different views: As most Arabic news outlets are affiliated with some political powers, your app could provide the added value of displaying a related article by a news outlet of the political opposition. (e.g. Fatah vs. Hamas)

Social news magazine: Copy the concept of the Android app called Flipboard

Tuesday, March 12, 2013

Gaza Tunnel eCommerce

You can get everything in Gaza, but often with great hassle, at great cost, after long delays, sometimes with the risk of advance payments, and goods not arriving.. This is due to the border regime of Israel, the border regime of Gaza authorities, as well as the obstacles that the Egyptian military puts on tunnel transits.

Imagine you would be sitting at home in Gaza, and you go on, and order whatever rare scientific book, or special spare part, or diver propulsion vehicle for your commute to Ashtod, or whatever else, you pay online by credit card, and two weeks later you have it delivered to your home. It's a dream, but thinking about it, it appears even possible.

Using Forwarding Mailboxes

Aramex and several other postal providers are offering a very convenient service. You can have a PO Box address in USA, in UK, or other places with good eCommerce and mail order infrastructure, and once a packet arrives to your PO Box, it will be forwarded to your foreign destination address. The service provider will charge a fee per transaction.

Now this service would be most useful for Gaza, and given the restrictive regime of Israels border, it could employ transfer through Rafah tunnels.

Creating a Shopping Portal Using Web Services

Many eCommerce portals are offering Web Services, which is a machine-interface for their Websites. So you can open your own Web portal, let's say, and in the back-end you are connecting to the Web Services of major shopping portals.

If someone places an order on, your webserver will automatically order the item from or others, have it delivered to your forwarding mailbox in USA, which will transfer to Egypt, and from there you let your order be shipped through the tunnels to Gaza, and deliver it to people's homes.

Insurance of Shipments

Each order will have a long journey, part of which is exposed to some risks, i.e. if the local authorities find the product morally unacceptable, or if the Egyptian authorities intercept your shipment, or flood the tunnels with sewage.

Therefore, you should build trust with your customers by offering an insurance. If the packet does not arrive, or does not arrive in good condition, they don't pay.

The overall shipping cost including delivery in Gaza and insurance will be quite high, but given the scarcity of certain products, you will for sure find your customers.

Friday, March 8, 2013

Peer to Peer Banking

Did you ever wonder where you can get a loan at amazingly cheap interest rates of only 3%? Did you ever wonder where to put your savings, so that you get more than the meager 0 to 0.25% that your bank may be offering for deposits? P2P banking may be the answer for you, because it channels people's savings directly into loans for other people, and takes only a slim overhead to cover risk of default, and contract administration.

(read full Wikipedia article)

There are quite a number of successful P2P banks and lending facilities around, you can read about this industry's news on this website:

Keeping Your Spreads Low

Let's assume your investing peers are receiving an average 2% interest per year, and your loan clients are paying an average interest of 4%, that would leave you 2% of the turnover to maneuver, which needs to cover the defaults, as well as your administrative costs.
Ok, that might be the optimistic scenario in developed countries, but probably you will need to charge higher interest rates, because your customers have a higher default risk, which is determined mostly by 
  • The customer's ability to pay his debt
  • The customer's willingness to pay his debt
  • Your knowledge about your customers. Only 8.1% of Palestinian individuals and firms are in the public credit registry (according to World Bank Doing Business Study). The most reliable payment practices data is probably available through electricity distributing companies, as well as telcos. Another way to improve data is to include location data, and family tree data in your creditworthiness algorithm. Family reputation might be a good leverage to increase debt collection rates.
Besides lowering the risk of default, you need to optimize the transaction cost for debt collection, possibly you can learn from, or even partner with electricity companies (who have the leverage of being able to switch off lights if bills remain unpaid).

P2P-Funded Photovoltaic Roofs

Installing a couple of Kilowatts of solar cells on domestic roofs costs in the range of 5.000$ to 20.000$. The produced electricity can be sold to your local electricity distributor, according to the feed-in legislation passed in September 2012. You can ask solar companies like Ayava (website) or ISS (website) to perform the rooftop installation. It is a very safe investment into assets that generate regular income for pay-back of the loan. This would be an ideal investment to be funded through a P2P scheme, as those people with some savings are not always the same people that have empty space on their rooftop or their garden.
For solar energy investment, it actually makes a lot of sense to partner with the electricity distribution companies for the purpose of collection, that way you can ensure a close to 100% debt collection rate, and your spreads will get amazingly low. Imagine you can finance solar cells at only 3% p.a., that would make them amazingly profitable for house owners.

Engaging Donor Subsidies

Several international donors are attempting to encourage lending by providing credit guarantees of up to 70% of the risk. Engaging with these schemes will significantly lower your spreads.

Paving the Regulatory Framework in Palestine

The Palestinian Monetary Authority (PMA) is the regulatory body for such business models. Probably you will not be able to avoid registering as a bank, but possibly you can register as a Microfinance NGO. Beware that if you register as a bank, the PMA might have high capital requirements for you, and they might require you to lend money to the Palestinian Authority at interest rates that are far from the market's judgement of the PA's creditworthiness.
In addition of the legal status question, a supportive regulatory framework would be a government that assists you in your debt collection, as available in many industrialized countries. That would further lower your spreads.

Going Halal

In the Middle East, everything sells better with an Islamic label on it. Even political parties. But that's another topic. So if you are aiming for a broad customer base, consider using the green color of Mohammed's Qureshi tribe in your logo, include a tawhid calligraphy somewhere, and of course follow some of the Islamic banking principles. I am not a great expert in Islamic finance, but I understand you need to exclude beer and pork from your investment portfolio, and you need to re-name the ugly word of "interest" into something that sounds more appealing, like "profit sharing", or "management fee". Also, you can utilize two purchase transactions, to simulate an interest rate.

As far as I know, there is no Islamic P2P-banking website existing worldwide, so you would explore an entirely new market here.

Sunday, February 3, 2013

Palestinian Cuisine Fast Food

Italian pizza, Turkish döner kebab, Arabic falafel or shawarma, hamburger, french fries, fried chicken, asian noodle dishes, different types of empanadas and sambosas, of tacos and fajitas, chinese dumplings or japanese sushi, all of them are different forms of fast-food which had amazing success in spreading around the world, catering the global trend of increasing demand for fast, convenient and affordable food cooked outside the family home.

This post explores the option of creating fast-food versions of Palestinian dishes like maqluba, musakhan, freekeh, mujaddara, kibbeh nayyeh, etc.

Some Background on Fast Food and Slow Food in Palestine

Around Manara square in Ramallah, you will find hot corn, kaak bread, falafel, shawarma, sfeeha, and some local adoptions of pizza, among others. That's what qualifies for proper fast food. Then there are restaurants that are serving the standard appetizers of levante, together with grilled meat, fries and bread, plus some serve western best-sellers like fettucine alfredo and cesar salad. Proper Palestinian cuisine is rarely found in restaurants. Maybe Darna in Ramallah and Hosh Al Elleyya in Birzeit, among a few others. More recently, an increasing number of international fast food franchises are popping up throughout the city of Ramallah: KFC, Dominos, Pizza Hut, Chili House. Many customers of those franchise chains however, instead of using them for a quick bite on the run, would come with their entire family for a fine dining out at Pizza Hut, and spend hours in the restaurant to fully enjoy the western lifestyle flavour.

Fast-foodizing Palestinian Cuisine

It needs to be quickly prepared, have a standardized taste compatible with most people, come in standardized serving sizes, and be easy to transport and eat on the run.

So for instance musakhan, the olive oil soaked bread with onion-chicken topping. Make the bread slightly slimmer, reduce the amount of olive oil so that the customer will not get oily fingers. Remove the bones from the chicken, and then you roll it up shawarma-style, for easy carrying and eating on the run.

Or take maqluba, the bottom-up rice and vegetable dish with meat. Prepare it in large amounts, keep it hot, and fill it into standardized serving sizes like asian noodle boxes:

Where to Start

You would typically position your fast food restaurant around places that are full of walking or driving customers, in the city center, or along some main access street. Maybe Bethlehem would be an interesting place to start, since it is full of curious tourists that would love to taste some of the local flavours after standing for hours in line at the nativity church.
And to be honest, all the falafel booths that you find on nativity square are not too exciting for Europeans, who find falafel restaurants everywhere around the corner in London, Paris and Berlin.
Jerusalem old town would be also a good guess. Thousands of bypassing tourists every day. Or you could try Rawabi, once this new town is established. Or position your booths at Universities, where Palestinian students, who moved away from their home town to study, are missing their mom's cooking.

If you develop your products, you can develop a brand around it. Call it "MacLuba", "musakhan king", "handala deluxe", "occupied fast food", or whatever... and eventually you can sell it as a franchise, centralizing the supply chain and quality management of your restaurant network.