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Exclusive: Arabic high-tech made in Israel
By NIV ELIS
17/03/2014
With Arabic becoming one of the most widely used languages on the Internet, Arab-Israeli start-ups eye users across political boundaries.
 
Six months after Clalit Health Services released a series of instructional Arabic-language videos about breast feeding on YouTube, the health fund was shocked by their popularity – the combined million views they racked up eclipsed the number of breast-feeding women among the country’s 1.7 million Arab citizens.

Clalit found the solution to the mystery in the analytics: More than half of the views had come from Saudi Arabia, 16 percent from Egypt and 9% from Iraq. Only 4.5% were from inside Israel, while the vast majority came from countries that boycott its goods and refuse to establish diplomatic ties.

Arabic, which accounts for some 3.5% of online content today, is the fastest growing language on the Internet. It is projected to become the fourth-largest in 2015, up from seventh place at the end of 2012.

The growing market has created a unique opportunity for Israel’s Arab citizens.

As native Arabic speakers with access to the flourishing hi-tech ecosystem that has earned Israel the moniker “start-up nation,” they are uniquely positioned to fill the market void. As a result, the country has become home to a wave of hi-tech start-ups creating Arabic-language apps, Web content and programs for consumption in neighboring states.

“It’s very hard to find good content in Arabic, and I think that’s the case for many Arabs on the Internet, so there’s potential in this area,” says Bader Mansour, a Nazareth- born entrepreneur who runs a portal for sharing videos, pictures and articles in Arabic.

His website has already accumulated more than 1.5 million hits.

Omar, an Arab-Israeli entrepreneur who asked that his real name not be used to protect his business interests, founded an educational start-up that has already created more than 70 Arabic-language mobile apps.

“It was my dream that a big company would come and buy me, that it would be the first [Arab-Israeli] company to make an exit,” he says, using the Israeli term for foreign acquisition. “Today in the Arab sector we haven’t heard of such a company.”

Raised with 12 siblings in Maghar, northwest of Lake Kinneret (the Sea of Galilee), Omar credits his family for pushing him to study.

“We’re a family that was raised either to study or to work. I always excelled in my schooling,” he says.

He earned a bachelor’s degree at the Technion- Israel Institute of Technology in Haifa, where Arabs comprise 17% of freshmen undergraduates.

Just 2% of Arabs who study hi-tech end up working for Jewish employers in the field. Half ultimately become teachers instead. Omar was among the lucky ones, finding work in several big technology companies, including Amdocs, where he gained experience in mobile applications.

Noticing a dearth of Arabic apps, he decided to put his skills to use in his own company. With the 130 million smartphones in the Middle East and North Africa region expected to double in number in the next two years, he says that “slowly, slowly, people are starting to understand that the potential is huge there.”

It is illegal for Israelis to sell to enemy states (Lebanon, Syria and Iran), but trade between Israel and the Arab world is not unheard of. Selling to Egypt and Jordan is legal, and a 2011 study by Tel Aviv University’s Yitzhak Gal estimated that Israel exports more than a half-billion dollars worth of products to Gulf states each year, though always through third-party countries.

Unlike the goods trade, which necessitates cross-border agreements, trade commissions and merchant shipping, digital commerce can easily cross political lines. When customers buy a game in an international app store or click on a website, they seldom consider where the content was created.

“It’s complicated doing business with the Arab world from Israel,” says Mansour. “It’s no secret that there is an [Arab] boycott on Israel because of the Israeli-Palestinian issue, so they don’t want to do business with Israel.

The Internet opens some ways to do business with countries you couldn’t do business with before. We get ads from Google ads, so you get paid from Google.”

But in most Arab countries, trade with Israel remains banned or taboo. Just as the US accuses China of using hi-tech companies such as Huawei as conduits for cyber-spying, in the Arab world even an Israeli-Arab company might be seen as a tool of the Mossad. In March, the Saudi Gazette reported that local authorities seized Israeli persimmons that somehow had made their way to a Saudi market.

“There are some Arab organizations or countries that do not want to do business with Israel, and Israeli Arabs are Israel,” says Gai Hetzroni, director of corporate social responsibility at Cisco Israel and Ma’antech, a Cisco-funded organization that promotes Israeli-Arab entry into the hi-tech sector through mentorship and training.

“Even if the owner is named Muhammad, they don’t want to do business with a company that’s registered in Israel,” Hetzroni says.

As a result, many Israeli companies that rely on users elsewhere in the region find creative solutions to avoid being identified with Israel, such as opening branches in Ramallah or Jordan that can more easily interface with the Arab world.

“If we want to target the Middle East, being labeled an Israeli company does not help us, neither in marketing nor in promotion,” says one entrepreneur who asked not to be named but is planning to open a branch of his Arabic-reading app company in Ramallah.

Others are more coy, keeping their identity quiet but not secretive per se.

“We’re not trying to emphasize too much that we’re from Israel. We’re not hiding it, but we’re not advertising it either,” says Mansour.

All the entrepreneurs interviewed for this report asked that either they, their company or both not be mentioned by name for fear that exposure would harm their business.

Many declined to be interviewed at all.

Being an Arab in the Jewish state carries its own set of challenges.

“I know a lot of Arabs who live in Israel and aren’t particularly Zionistic,” says Guy Spigelman, director of NazTech, a Nazareth- based accelerator for Israeli-Arab startups.

“They know and accept that they live in a state that’s majority Jewish, but also that it could do a better job on absorbing and accepting minorities. Most of them just want to have a decent job that pays a decent wage, educate their kids and have a decent life.”

Although Arabs make up a fifth of the country’s population, they account for only 8% of the economy. Their poverty rate, at 57%, is more than 2.5 times the national average.

In recent years, however, the country’s political and economic establishments have started to digest the importance of integrating Arabs into the workforce.

“Twenty percent of the population plus the haredim [ultra-Orthodox Jews] don’t have good jobs, they don’t pay taxes and the burden is on the rest of the population,” Cisco Israel’s Hetzroni says. “It’s a disaster for Israel’s economy.”

At a conference on the issue sponsored by the Prime Minister’s Office in October, Bank of Israel Gov. Karnit Flug warned that given demographic trends, a failure to integrate Arabs and ultra-Orthodox Jews into the labor market would eventually lop 1.3% off of annual economic growth.

“The incidence of discrimination must also not be ignored, and we know that the Arab public has difficulty integrating into certain industries, even if the appropriate training is provided,” Flug said.

Economy Minister Naftali Bennett, known for his opposition to a two-state solution, voiced agreement at the conference.

“Of course there is discrimination; we won’t pretend there’s not,” he said, warning that Jewish-Israeli businessmen would do well to let go of their prejudices.

Things are already moving in the right direction, according to Jimmy Levy, founder of the Nazareth-based Galil Software, the largest company of its type in the Arab community, employing more than 130 engineers.

“What we’ve seen in the past five years in the sector as a whole is companies like Babcom, Galil Software, Amdocs setting up shop in Nazareth, and these developments are not isolated,” Levy says. “There’s a trend, a shift, happening, a recognition that there are capable people in the Galilee, and that’s an opportunity for everyone to leverage.”

The number of Arab engineers in Israeli hi-tech grew from 300 to 1,500 in the past five years.

Levy, who calls Israel’s Arabs “an emerging market within Israel’s developed economy,” co-founded Al-Bawader, an Israeli venture capital fund that invests in Arab start-ups. Several of the seven companies it has invested in focus on creating Arabic content and programs for the greater Middle East. Their heads all declined to be interviewed for fear of “stirring the pot.”

Businesses from Europe and the United States that see a market in the growing Arabic Internet have started to realize that Arab Israelis and Palestinians could serve as a bridge.

“We believe that this could lead to a significant business partnership with British companies and eventually create a gateway to the Arab world,” says Dona Haj Mana’a, a sector manager at the UK Israel Tech Hub, a British Embassy-sponsored initiative to strengthen ties between the two countries.

In June, the hub will send a delegation of Arab entrepreneurs to the UK to develop business ties and seek investment.

“As far as we know, the tech hub is the first of its kind, and it’s the first time an embassy is approaching the Arab community here from a business perspective, not from a social or philanthropic perspective,” says hub director Naomi Krieger Carmy.

Should the Arab-Israeli conflict ever wind down, the community could also serve as a useful link between Jewish-Israeli businesses and the Arab world.

“I think that if we fast-forward 10, 15 years, if there’s a peace agreement the Arabs in Israel are going to play a crucial role in Israel’s economic development,” says Naz- Tech’s Spigelman. “The Arab world is such a major market on our front door, and the Arab Israelis are a bridge.”

Already, there are signs of a thaw, he says.

“In terms of the population at large,” Spigelman explains, “there’s a huge respect for Israeli technology in the Arab street.”

Muhammad Omara, an Egyptian tech blogger and entrepreneur, pushes the notion of Israel as “start-up nation” as a model for Egypt, though he still calls Israel an “illegal state.”

Kamal Ali Hassan, a policy fellow and lecturer at Mitvim – The Israeli Institute for Regional Foreign Policies, links the change, in part, to the Arab Spring.

“With the changes going on toward democratization, liberalism and more independence of people, organizations and businesses, they see in Israel a developed source of change in technology, education, economy and agriculture,” Hassan says.

“Within the meaningful, drastic changes happening in the Arab world, there’s some respect for the brand or product of ‘Israel.’” The Clalit breast-feeding videos, for example, had clear links to Israel yet remained a hit.

“The Arab community is becoming part of the ‘start-up nation,’ and the start-up nation is becoming part of the ‘start-up region,’” says Chemi Peres, son of President Shimon Peres and a partner at Pitango Venture Capital, which houses the Al-Bawader fund.

Panet, a news portal based in the town of Taiba, east of Kfar Saba, uses Israel’s “co.il” web address suffix and gets 46% of its 1.4 million daily hits from abroad. On March 6, President Peres used the platform to conduct a question-and-answer session with Arabs throughout the Middle East as part of a public diplomacy effort.

As the session with Peres began, heavy traffic crashed the inundated website.
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