From his base in the West Bank, Canadian entrepreneur Khaled Al Sabawi, founder and president of Mena Geothermal, often finds himself coping with unusual logistical challenges.
The most recent involved trying to import a seven-tonne air compressor from Israel. Problem was, Mr. Al Sabawi says, the Israeli bank he was dealing with wouldn’t accept a cheque from a Palestinian bank. He also worried that if he wired the money in advance, there was a slim chance the seller would pocket it and not show up at the checkpoint at which they'd arranged to meet.
The only option, Mr. Al Sabawi felt, was to pay in cash upfront.
“I'll never forget sitting in [a]sketchy warehouse in Tel Aviv, with $50,000 on my lap, my lawyer by my side and the shipping company on standby waiting for us to make the exchange,” he recalls.
Starting and running a business in a conflict zone comes with its own set of hurdles: political tensions, bureaucracies, trade barriers, checkpoints, telecommunications obstacles, along with many of the other usual difficulties of working in foreign countries.
They add to the challenge for young entrepreneurs already on a steep learning curve.
But Mr. Al Sabawi, who launched the first geothermal energy company in the Middle East, is among the Canadians who have decided to try their hand at setting up business in the West Bank and Gaza, believing in the need to strengthen the Palestinian private sector. They are also savvy enough to know a good market opportunity when they see it.
A study by the International Monetary Fund last year found that the West Bank and Gaza were on track to see their economies grow by more than 8 per cent in 2011.
However, the International Finance Corp. and the World Bank released a more recent report called Doing Business 2011, ranking 183 of the world's economies in terms of how easy it is to run a private enterprise in each.
Under “starting a business,” the West Bank and Gaza came in at 173.
Mr. Al Sabawi, who was raised in London, Ont., and earned his degree in computer engineering at the University of Waterloo, started MENA Geothermal in 2008. Of Palestinian extraction – his mother is from Gaza, and his father is from a small town outside Jaffa – he moved to the West Bank with his father, hoping to get into real estate development and capitalize on the booming construction industry.
Then, he took a closer look around: The population was rapidly growing, there was very limited space and 97 per cent of the area’s energy was being imported.
“We recognized the potential – the necessity, really – of sustainable development and green energy in this region,” he says. “Nobody was doing geothermal yet.”
A couple of years earlier, Jacob Korenblum, a 31-year-old from Toronto, was visiting Ramallah and recognized another potential opportunity: a growing labour market in the West Bank, with a lack of adequate communication about how to find jobs.
“There were no employment centres at the universities, no career resources, no Monster.com,” says Mr. Korenblum, who graduated from Harvard University with a master’s degree focused on education and social entrepreneurship.
“The public sector, the Ministry of Labour, was providing nothing. At the same time, we noticed that, while not many people had Internet access, everyone was using cell phones. If you can't move around as much, like in the West Bank, you look for other ways to communicate with people.”
He decided to stick around, and started a mobile software business called Souktel , which connects unemployed youth with work opportunities via text-messaging.
That’s not to say that these ventures don’t come without challenges.
One of them, says Sam Bahour, a U.S. businessman who went to the West Bank in 1994 to establish the Palestinian Territories' first telecommunications company, Paltel Corp. (now the largest private-sector employer in the area), is the preponderance of local NGOs, which can offer three to four times as much in salary as most other companies in the area.
Startups like MENA can’t compete with such wages and often have to compromise by hiring less-qualified workers who require extra training. Mr. Al Sabawi had to do just this, taking on recent engineering graduates and teaching them how to calculate heating and cooling loads or analyze pipe designs.
“The donor community is the backseat driver of our entire economy,” says Mr. Bahour, pointing out that approximately 30 per cent of the GDP in the Palestinian territories is attributed to foreign aid.
Another obstacle is the restriction on travel into Israel, which Mr. Al Sabawi faced in 2009, a year into starting his company.
“There's no system in place for Canadians to obtain a work visa in the Palestinian territories,” he says.
“If you're doing work in Ramallah, the Israelis say 'Talk to the Palestinians,' because the city is controlled by the Palestinian Authority, but the Palestinians say, 'Talk to the Israelis,' because they control the borders. So for the first two years I was working there, I'd be given a tourist visa. Then I was given arbitrary visa terms and 'Palestinian Authority only' stamps saying I couldn't travel outside the PA area … but those stamps aren't recognized by the Canadian government.”
Mr. Korenblum tries to get around this by having any foreign consultants or new employees at Souktel enter the West Bank via the land border in Jordan. He gives them an official letter of invitation and then simply holds his breath. To his frustration, a recent hire on the software team who's also Canadian was stuck in Amman after being turned away by Israeli officials.
Perhaps the most annoying impediment to conducting business at Soutkel, which happens on a day-to-day basis, is the failure of two politically divided phone networks to provide consistent service. Because the Palestinian and Israeli networks have different international calling agreements, anyone making long-distance calls on a regular basis requires two phones.
“I can take my Israeli mobile into Ramallah and I can call Kenya on that,” Mr. Korenblum says, “but if I try to use my Palestinian phone, it could get blocked. You'd never sit in your office in Toronto with an American cell phone in your pocket just in case you want to call someone in England and can only do so on Verizon. Really, I don't know of anywhere else in the world where you'd find this situation.”
There’s also plenty of red tape when it comes to registering a business, filling out tax forms or starting a new project. It can delay schedules for months, which is what happened shortly after MENA Geothermal got the go-ahead to build a geothermal heating and cooling system at the American University of Madaba in Jordan, what it said was the largest such system in the Middle East and North Africa.
“We were faced with a Technicolor web of bureaucracy,” says Mr. Al Sabawi.
“Before we could begin, the Jordanian government forced us to submit approvals from the Ministry of Public Works, the Ministry of Industry and Trade, the Ministry of the Interior, the Jordanian Intelligence Agency, the Prime Minister's Office, the Ministry of Water, the Ministry of Energy, the Ministry of Environment, the Jordanian Contractors' Union and the Jordanian Engineering Association.”
However, none of these obstacles are stopping either entrepreneur.
Mr. Korenblum recently moved Souktel into a bigger office space in the upscale Al-Tireh neighbourhood of Ramallah. He now has 10 employees, has expanded his service into Jordan, Morocco, Somalia and the new South Sudan, while also preparing to launch a text-messaging service for aid workers and business owners in Haiti who want to take part in the rebuilding efforts. The company is projecting revenue increase of 200 per cent this fiscal year to $750,000.
MENA is doing similarly well. The company, certified by the Canadian GeoExchange Coalition , has seen its annual revenue grow to $1.6-million, while staffing has expanded to 20 employees. Mr. Sabawi was recently named one of the world’s top energy entrepreneurs by online media outlet Global Post.
As one of the few at Souktel able to enter and exit the West Bank with relative ease, Mr. Korenblum sees first-hand the contrast between doing business in a liberated and progressive country and one that's trying to grow but remains stuck in persistent political conflict.
Nonetheless, he believes Canadian entrepreneurs can play a crucial role in helping to overcome this.
“Because of their situation, Palestinians are constantly suffering from a lack of exposure to the latest expertise, whatever field it may be; Canada, meanwhile, has an incredible amount of expertise to offer,” he says.
“So if you can't bring Mohammed to the mountain, pardon the pun, you bring the mountain to Mohammed.
"The more we can get Canadian business leaders to come to Palestine and share their expertise, the more we contribute to their economy.”
Special to The Globe and Mail