RAMALLAH, West Bank - Hunched over their laptops, Palestinian software engineers are working on a program that makes desktop computers accessible from anywhere.
But the real breakthrough they are working toward is the possibility that the fledgling Palestinian high-tech industry could one day drive the territories' sluggish economy -- fueled by an abundance of college graduates and not as limited by constraints of the Mideast conflict.
One challenge Palestinians face is an apparent reluctance by foreign firms to form business partnerships with them, but Israeli software entrepreneur Zvi Schreiber is trying to break that mold.
Two years ago, he found Palestinian partners and formed a new company, G.ho.st (Global hosted operating system), which is developing an expanded version of a Web-based program that makes the desktop system accessible from nearly any location.
Palestinian information technology is still in its infancy with just two dozen software houses, a few thousand engineers and US$15 million in exports a year.
Yet Palestinian companies have proven remarkably resilient, making money through years of Israeli-Palestinian fighting that forced many traditional businesses to shut down or scale back.
Through curfews and closures, the software house Bisan in the West Bank city of Ramallah has attended to more than 800 customers, delivering and updating its accounting program via the Internet. In Gaza, the Internet provider Fusion is one of the few private businesses still left operating despite a yearlong ban on most imports and exports -- sanctions against the Hamas government -- that has wiped out tens of thousands of jobs.
From the Palestinian prime minister to an Israeli venture capitalist, there's agreement on the growth potential of Palestinian high-tech.
"I definitely see an opportunity there," said an Israeli, Yadin Kaufmann, who has been investing in Israeli startups for the past 20 years and is now in discussions with potential Palestinian partners.
Palestinian universities produce some 4,000 graduates in computer sciences, engineering and related fields every year, but many don't find jobs and either change professions or emigrate.
Yet many Israeli high-tech companies are still reluctant to look for business partners closer to home, said Amiram Shor of the Manufacturers' Association of Israel. The hurt and suspicion from eight years of bloody fighting is still strong on both sides, he said.
"The Israelis are afraid of what will be tomorrow," said Shor, a member of a group of Israeli and Palestinian industrialists trying to promote closer cooperation. "Even the Palestinians are not rushing."
The G.ho.st program, which has won awards from Red Herring magazine and other high-tech groups, was presented Wednesday at The Wall Street Journal's "D: All Things Digital" conference, a small but influential industry gathering, in Carlsbad, Calif.
Schreiber said he aimed for an equal partnership between the two groups, with most of G.ho.st's research and development done by the Palestinian engineers in Ramallah, while administration and some of the external contacts handled from Modiin, Israel.
"This is very exceptional in terms of lifting the relationships that existed before between Palestinians and Israelis," said Palestinian Tareq Maayah, one of the founders of G.ho.st. "We are doing cutting edge technology from Palestine, and cooperating with counterparts who are also very much advanced, in Israel."
Most of the 30 engineers in Ramallah are graduates of local universities in their 20s and 30s, and get stock options, still a rare perk in the West Bank. The head of research and development, showed off the program Wednesday on a large wall-mounted screen in the conference room. Nearby, some programmers pounded computer keyboards while sitting in red cubicles, or hung out in the hallways.
Schreiber and Maayah hope the G.ho.st model will be copied by others.
However, with the Palestinian territories still widely perceived as a war zone, the reluctance to invest remains strong.
"There is a perception of risk and closures that big companies worry about, including my company," said Andre Hawit of the U.S.-based company PDF Solutions, Inc.
Hawit, who is of Palestinian origin, has been working with a Palestinian subcontractor he helped establish 10 years ago. Palestinian patriotism initially played a role in choosing the West Bank for some of the outsourcing, but the bottom line is just as important, he said. "The biggest advantage is cost," he said.
