The Diaspora Factor

A small group of diaspora Palestinian investors are now being asked to build an economy independent of donors.

By DANIELLA CHESLOW
Zamn Cafe 311 (photo credit: daniella cheslow)
Zamn Cafe 311
(photo credit: daniella cheslow)
SAM BAHOUR, A TOWERING man who is barely contained by his American Levis, returned to his father’s hometown of El-Bireh in 1995, at the age of 29. He grew up in Ohio. In his initial decade and a half back, he helped launch the first Palestinian telecommunications firm, earned an MBA in Tel Aviv, built the first Palestinian shopping mall, and worked as a consultant for dozens of Jerusalem businesses, all while renewing his tourist visa to Israel every three months.
But after Bahour received his green Palestinian ID card in May last year, his new status meant he shared the same prohibitions as other Palestinians on entering Jerusalem and Israel. Last autumn Bahour suffered a kidney aneurism, requiring urgent medical attention not available in the West Bank. He waited for the military’s permission to enter Israel for tests in Jerusalem hospitals, then went to Cleveland via Jordan for surgery because he was no longer permitted to fly through Ben-Gurion Airport.
“I knew that these restrictions had existed. I wrote about them for years,” Bahour tells The Report, while sitting in the Italian Presto restaurant in Ramallah’s posh Masyoun neighborhood. “But going across the bridge, and waiting in the ambulance that was stopped for a half hour at Qalandia [checkpoint between Ramallah and Jerusalem] – the sheer fact that I needed military approval for health care – I needed to comprehend that.”
Bahour is part of a small group of diaspora Palestinian investors who returned to their roots in the heady days after the Oslo Accords were signed in 1994, when a Palestinian state and peace with Israel seemed to be inevitable and immediate. Now, the Palestinian Authority is again hoping to tap the diaspora to build an economy independent of donors.
But a look at that “class of Oslo,” which came with a patriotic fervor and the foreign business skills to translate that feeling into real projects, shows the promise and the limits of turning to the far-flung Palestinian diaspora community.
THE PALESTINIAN CENTRAL Bureau of Statistics estimates that the Diaspora numbers just under 11 million in 2010. Most of that diaspora lives in Jordan and across the Arab world.
According to economist Samir Abdullah, who heads the Palestinian Economic Policy Research Institute in Ramallah, while in the wake of the Oslo Accords, about 40,000 or 50,000 diaspora Palestinians returned, only about 50 to 100 were well-trained businessmen.
Taken together, they invested about $1 billion in the economy, he estimates.
“They were focused, they came with know-how,” he says. “The Palestinian economic growth that happened from 1993-2000 was the best ever in Palestinian history since 1948 or 1949.”
The largest of investors created sprawling holding companies. The Arab-Palestinian Investment Company’s subsidiaries include a supermarket chain and the Ramallah mall, which Bahour worked on, as well as the local distributor of various imported consumer goods. Another powerhouse is Padico, Palestinian Development and Investment, Ltd., which billionaire Munib Masri founded in 1993, after he studied government and geology in Texas and made his fortune in oil across the Arab world. Padico has majority shares in companies dealing in real estate, industrial development, pharmaceuticals and securities trading. Padico also has minority stakes in the Paltel telecommunications firm, which Bahour helped build, the Arab Hotels Company, which brought the Swiss Mövenpick Hotel to Ramallah, and the National Electric Company.
Abdullah estimates that large returneefunded companies like APIC, Paltel, Padico, Arab Bank and other newly established banks control about a third of the economy, but he notes that about a quarter of their assets came from local investors and the rest from “[diaspora investors] came at a time when opportunities for investment were open in many sectors that had been closed before, such as telecommunications and electricity,” Abdullah says. On the other hand, the Palestinians who had spent most of their lives in the West Bank and Gaza did not think to invest in these new fields because they “were strongly rooted in the sectors and areas that had been open before.”
Even on a smaller scale, returning expatriates brought innovation and optimism to their home country.
Nadim Khoury moved to Brookline, Massachusetts in 1979, when he was 20, and brewed beer in his college dorm room. When the Oslo process began, Khoury saw a window to return home. He learned professional brewing at the University of California – Davis, then invested with his father and brother in a $1.25 million brewery in his home village of Taybeh, near Ramallah. Last year he sold 600,000 liters (158,000 gallons) combined of golden, light, dark, amber and non-alcoholic brews.
At the sixth annual Taybeh Oktoberfest early this month, Khoury presided over a village-wide celebration of beer and Palestinian handicrafts. A Brazilian band and a Japanese fast food stand added international flavor to the stalls hawking falafel, local honey and olive oil. More than 15,000 visitors came over two days, Khoury says. Mary Michael, a Taybeh English teacher selling olive oil soap, said the festival helped the local womens’ cooperative sell more than $1,000 worth of goods.
For Khoury, who has endured beer gone bad at checkpoints as well as trying to market his brew despite a Palestinian injunction against advertising alcohol, the move back was worth it. “I believe I made history,” he says, pulling the golden ale into plastic cups selling for 10 shekels ($2.50). “I want to encourage other Palestinians to do the same.
This is how the state can be built, not to wait for USAID and help from Europe. Taybeh is permanent aid.”
Whether on a small scale like Taybeh Beer or a large one like Bahour’s companies, the returning expats have made their mark, according to Palestinian economist Hisham Awartani, of A-Najah University in Nablus.
“You can easily see that they are not back only to make money,” Awartani says. Thanks to the diaspora investors, “We started talking big … They have injected this element of big business in Palestine. And one should also admit that this has helped create jobs, with relatively large spillovers in all sectors.”
FOR BAHOUR, THE TRIGGER FOR his move back was reading about Yasser Arafat’s plans to privatize Palestinian telecommunications. Bahour, who studied computer technology at Ohio’s Youngstown State University and worked in the field for four years, was skeptical about Oslo but curious about the potential.
“My heart said [Oslo] was not ending the occupation,” Bahour says. “My mind said this is a changed reality, maybe it’s an opportunity.”
On a regular annual trip back to El-Bireh in 1994, Bahour tracked down the potential private sector leaders who would take over the industry. Hearing that one was about to receive an honorary degree at nearby Birzeit University, Bahour drafted a letter, stuffed it in an envelope with his resumé, and had an acquaintance pass it on to Sheikh Omar Aggad, charged with running the newly privatized sector. Hearing no reply, Bahour returned with his wife Abeer to Ohio. Three weeks later, he was recruited to the Paltel company. In less than a month he and his wife moved with their infant daughter to El-Bireh.
Paltel, the first Palestinian telecom firm, went live in January 2007 and provided services across Palestinian villages and cities. “I didn’t sleep for nights [before the opening],” Bahour says. “Very few people have the opportunity to build a national telecom company.”
For some businessmen, Oslo only lit a spark from a distance. In 1999, computer programmer Andre Hawit began thinking of moving back to Ramallah after 15 years in California. Back then, he started a Palestinian arm of his G-Soft company and also began visiting every summer. Last year, he came with his wife and three children.
“The kids had finished high school,” Hawit says. “The US economy was in bad shape and stressful, and … I had a new business project I wanted to start, and it was much more cost effective to build it here and sell internationally.”
HAWIT SAYS HE ENCOUNTERED few obstacles in setting up his Palestinian software company, which makes applications for smartphones.
He enjoyed a tax holiday from the Palestinian Authority and recruited a capable local workforce.
But he faced challenges getting into the country; this September, he received a yearlong visa after two shorter, three-month permits.
Hawit has also had difficulty with the Audi and Lexus cars he imported, which also require visas he must renew every three months. In addition, his three children had to take remedial Arabic lessons to study at Birzeit University.
But overall, he describes himself as “99 percent satisfied.” “I’m living in 10 percent of the space I used to …and I’m at least 10 times happier,” Hawit says.
Businesswomen also returned to the West Bank. Huda el-Jack was born in Sudan to a half-Palestinian mother and a Sudanese father, who was a diplomat. She spent 20 years working in information technology in California. In 1998, El-Jack’s Palestinian husband Bashar Amer decided to move back to Ramallah because, as she puts it, “things were going in the right direction, and he wanted to be a part of it.”
El-Jack supported Amer when he completed the move in 2001, but the couple spent two years apart while Amer waited for Palestinian residency and El-Jack sold their house. When she returned in 2003, El-Jack says she and her son and daughter were interrogated for four hours at the airport.
“My kids were so excited to see their father but they were terrified. My son was sick for a week. He would stand and just pass out,” she says. “Had we not sold our house … we would have left in three months.”
Although El-Jack planned her life in Ramallah to be time off from work, life as a housewife quickly grew boring for a former technical manager. She went to work for Massar International, where she cycled through telecom, agriculture, and most recently, managing an investment fund.
Massar is managed by Bashar Masri, nephew of Munib, who also spent decades abroad and returned in the 1990s.
“When I was in telecom I was the only female senior manager around the table,” she says. However, “I was lucky that my boss always valued me equally. It wasn’t like he thought me any less superior.”
In addition to her position at Massar, El- Jack is also a partner in the Zamn Café, an upscale restaurant in Ramallah. She plans to open a second branch this year and hopes to eventually expand across the region, from East Jerusalem to the United Arab Emirates.
At a meeting at Zamn in May, El-Jack showed that she can be an exacting boss.
She returned her coffee to a scruffy waiter because it had been served in the wrong cup, then mused on why he had not shaven per company rules. She pointed out the Palestinian-made black tables, which were wobbly after only a few months.
“We’re using Palestinian ingredients, Palestinian skills and we’re trying to upgrade the service industry,” she says.
Another well-known woman repatriate is Dina Masri, daughter of Munib, who returned from the United States several years ago and became vice president of the Palestinian Beverage Company, importer of Coca-Cola.
She declined to be interviewed.
Yet along with the great benefits, Awartani says the success of the returnees has generated resentment among businessmen who never left. “There were often questionable, non-businesslike relations between some of these firms and the Palestinian Authority leadership,” he says. “A famous example is the GSM [mobile telecommunications] license to [Palestinian mobile company] Jawwal. This was given many years ago in an uncompetitive way.” Last year Wataniya Mobile launched a competing cellular service. But Samiah Totah, a Palestinian-American who spent six years in California before returning to Ramallah in 1988, says Paltel, which owns Jawwal, retains an infuriating monopoly on phones and the Web.
“One company owns all our communications,” she says. “They give people trouble getting Internet and the [phone] lines are on and off. It’s not a healthy equation.”
It’s a charge Bahour agrees with – even though he set up the company accused. A year after Paltel’s launch, he issued a public letter of resignation in a two-part series in the Al-Quds newspaper, accusing the company of exploiting the PA’s weak regulatory powers in order to charge unfairly high rates with no competition.
“I laid things out rather bluntly, as a good American,” he says.
The returning Palestinians from the United States have few qualms about working with Israelis. Both Bahour and El-Jack got their MBAs from the Tel Aviv University-Recanati Program, affiliated with Northwestern University’s Kellogg School of Business.
Bahour used the Israeli Retalix inventory program in his supermarkets, but refused to carry products of the Israeli settlements. Bashar Masri, El-Jack’s boss, is building the new Palestinian Rawabi. He visited the Israeli city of Modi’in and sought advice from its architect, Moshe Safdie.
FOR ALL THE FANFARE, THE actual number of diaspora businessmen who moved back or invested from home is lower than what most planners had hoped for in the days after Oslo. Astudy published in 2001 in the Middle East Journal found that Palestinian-Americans’ keen interest in investing in their homeland often failed to translate into real projects. Abdullah says that the diaspora investors’ contribution pales in comparison to donor money, a figure that increases annually and now stands at about $2-3 billion a year.
Astaff member at the government-backed Palestinian Investment Promotion Agency (PIPA) says that the agency helped 120 Palestinian Diaspora investors take residency between 1997-99, although additional others may have returned under different titles.
PIPA stopped processing applications after the outbreak of the second intifada in 2000, and no other body keeps similar records.
The major reason for the falloff was the second intifada, which had long-ranging consequences, according to Abdullah, an economist.
“After Israeli tanks and jet fighters started targeting our infrastructure and some factories, this made the risk for business higher,” Abdullah says. “The Israeli military is terrifying for the private sector.”
Awartani says the Palestinian economy has reached its saturation point because of Israeli-imposed restrictions on movement for goods and people, as well as control of water and airspace.
Another cause might be restrictions on entry. According to a volunteer who requested to remain anonymous at the Right to Enter campaign, a Ramallah-based advocacy group for Palestinians who hold foreign passports, Israel has been tighter-fisted with entry visas since 2005. Palestinians who have been abroad for seven years without renewing their residency lose their right to enter Israel without visas. Reinstating that residency, or gaining it for the first time in the case of Palestinians born abroad, is a long and arduous process; without it, Palestinian investors stay in Israel as tourists or temporary workers. Annex III Paragraph 28 of the Oslo Accords states that investors should be granted permanent residency subject to Israeli approval; however, according to the PalTrade organization that advances Palestinian business, no such residency has been issued since 2000. The Israeli Ministry of the Interior did not provide figures for Palestinians gaining residency.
Ali Muhanna, director of the planning and small and medium enterprises department at the Federation of Palestinian Chambers of Commerce, says a Diaspora investor planned to build an industrial zone in the northern West Bank city of Jenin, but the program stalled because he could not get residency.
“How can he invest?” asks Muhanna. “To come on tourist visas…this is not the way.”
For now, the upside is that the restrictions have made businessmen more flexible, Bahour says. Gaza businesses have reached out to Egypt and Yemen. Palestinians in the West Bank market to Jordan and across the Arab world.
And some signs are looking up. The PIPA worker said until recently, her office was focused on retaining investors rather than courting new ones. However, in 2008 PIPA launched the first Palestine Investors Conference, and in its third annual event last June 1,600 participants came. PIPA also maintains a “one-stop shop” aimed at guiding investors through the paperwork and incentives of the Palestinian economy.
Muhanna says there are few programs to specifically entice diaspora Palestinians back. An investment law passed more than a decade ago gives tax holidays to large investors, no matter from where. However, his organization is setting up a conference next year to link local businessmen specifically with diaspora Palestinians.
Ramallah city councilman Adnan Faramand says his municipality is stepping up efforts to draw investment from the estimated 40,000 expatriates from Ramallah, who are currently in the United States. Some 200-300 of them visit their homeland annually, Faramand says, and city hall has put half a million dollars into courting their investments or donations to civil society. Such a push “was done before, but at lower levels,” Faramand says.
Diaspora Palestinians are behind the highest buildings in Ramallah, he says.
“We are trying to plan roads, offices, hotels and tourist sites,” he says. “We are developing plans and updating our skills to suit investors.”
BUT WHILE OFFICIALS AT THE Chamber of Commerce, Ramallah and at PIPA hope to attract diaspora investment, Bar-Ilan University political scientist Menachem Klein says the chances are low.
“The Israeli government wants fewer Palestinians and no return of Palestinians from outside,” says Klein, author of the forthcoming “The Shift: Israel/Palestine from Border Struggle to Ethnic Conflict.” “The result will be a situation of restraint and supervision of the development of the Palestinian society and economy.”
“Since 2000 we are in a different place,” he adds. “In my book I referenced an article by [Nablus academic] Bishara Doumani. He visited Nablus in 2003 and saw everyone leaving, or opening businesses in Ramallah or going to Jordan…. So the situation is that since 2000, we are in a new position that doesn’t allow investment in infrastructure, in imports or exports.”
Klein says inequality is rising as Ramallah is the only place for business in the West Bank.
Still, for an investor class whose decision to return to Palestine was partly national, a decision to leave carries with it uncomfortable implications of failure. Khoury says he does not plan to abandon his brewery.
“We can’t leave and go back to Boston,” he says. “We invested all our money into the brewery, and thank God we’re doing OK…We’ve been here for the past 15 years and no agreement has taken place. It’s the same. More business, more beer.”
Bahour concurs, although he concedes the recent Hamas-Fatah bloodshed was trying.
“When my wife and I discussed coming back… I said I have no problem coming back,” Bahour says. “I can take any change in the occupation for better or worse, including if I were in prison. The only time I would not stay is if we enter into civil war.”
However, when Hamas violently took over the Gaza Strip in 2006, Bahour fought hard to convince himself that this was “external interference turned bloody.” If he had thought it was a Palestinian civil war, he would have left.
Looking forward, Bahour sees the current peace talks as an important litmus test for whether Palestinian President Mahmoud Abbas can continue governing democratically, or whether his moderate Fatah party will lose its mandate and have to resort to government by force.
“I know it’s a volatile environment and I am willing to stick it out,” Bahour says.
However, “I say that knowing my whole family has a US passport in its back pocket.”