A group of Palestinian IT entrepreneurs have launched the first internationally funded economic development project in the Gaza Strip since Hamas took over the coastal strip.

The project, “EnTeG_: Enable Technology sector Growth in Gaza”, aims to help Gazan software developers use the Internet to get around Israeli export restrictions.

The French Development Agency will grant 500,000 euros to the Palestinian Information Technology Association of Companies (PITA) to create the Gaza Strip’s first private sector development project in years. PITA announced receipt of the grant on Monday.

“There has been a freeze on economic development projects since Hamas took power,” Laith Kasis, the CEO of PITA told The Media Line.

“With the Israeli siege on Gaza, the international development and aid community has focused on humanitarian relief – food, shelter, etc. Only recently we have seen the development agencies transfer interest from humanitarian relief to supporting the private sector and economic development,” Kasis explained.

The initial 500,000 euro grant will fund an 18-month pilot project focusing on capacity building of the Gazan IT sector, trade missions and support for specific IT companies with promising proposals.

PITA hopes to raise another 3 million euros to expand the program over three to five years. Companies awarded direct financial assistance will receive somewhere in the range of $8,000 to $20,000 and will be expected to pay 20 to 40 percent of the proposed project’s cost.

“The concept of the project revolves around developing the local market for Gazan IT companies and identifying regional markets to increase exports of IT services and products coming out of Gaza,” Kasis said. “The main beneficiary will typically be software development houses in Gaza and there may be up to eight companies directly benefiting [from financial grants], but all PITA members will benefit from capacity building workshops, knowledge transfer activities, market surveys and trade missions.”

The move comes after Israel was pressured by the international community into partially lifting a blockade on the import of goods into the Gaza Strip after a controversial naval raid on a flotilla of ships heading towards Gaza in an attempt to break the Israeli blockade. Nine Turkish protesters were killed in the incident.

An Israeli ban on trade into and out of the Gaza Strip, as well as the travel of persons into and out of the territory, has been in place since the Palestinian Islamist group Hamas won the Palestinian legislative elections in 2006 and forcibly took over the Gaza Strip the following year. Israel and many Western nations consider Hamas to be a terrorist group, and Israel has attempted to isolate and weaken the Hamas regime.

“Beginning in June of 2007, Israel banned exports almost entirely,” Sari Bashi, Director of Gisha, the Israeli Legal Center for the Freedom of Movement, told The Media Line. “Since then, only 259 truckloads of exports have been allowed by Israel out of the Gaza Strip, meaning that in three years Israel has allowed Gazans to export less than what they used to be allowed to export in four days, and less than what Israel promised to allow in one day.”

Following the flotilla incident in May, Israel eased its restrictions on the import of most consumer goods into Gaza, but has maintained the ban on exports and on the travel of persons into and out of the territory.

Mamar Merzouk, head of programs at the European Commission’s Directorate General for Humanitarian Aid in the West Bank and Gaza, said Israeli restrictions on exports out of the Gaza Strip have made it virtually impossible for international donors to support economic development activities in the territory.

“What the international community is funding currently is mainly humanitarian projects, but what the international community is interested in funding is a different question,” he told The Media Line. “Across the board we’d certainly like to move away from humanitarian aid and into development projects to rejuvenate the economy.”

“The Israeli move to ease access to Gaza is certainly welcome,” he said. “But development and rejuvenation of the economy is two ways and requires both the import and export of goods, so how this is to influence the implementation of various projects remains to be seen.”

Dr. Oussama Kanaan, the International Monetary Fund’s Chief of Mission and Resident Representative for the West Bank and Gaza, agreed that international donors’ interest in funding economic development activities in the Gaza Strip is nothing new but has been hampered by trade restrictions.

“The important constraint on these kinds of projects is the restriction on the import of raw materials and goods due to the blockade,” he told The Media Line. “Now with the lifting of these constraints, I would expect economic development projects to pick up.”

“But it is also important that exports be allowed,” Dr. Kanaan stressed. “Gaza’s internal market is very small, and while you can have growth on a small level, for there to be sustained growth in Gaza there must be a removal of restrictions on exports. Development projects funded by donors and private sector projects all need to be outward oriented and based on exports.”

Ahmed El-Farra, a PITA board member and the CEO of PalTrade, the Palestinian trade promotion organization, said the grant would help Gazan IT businesses find new markets for their goods.

“The project is basically providing Gazan PITA members with access to markets outside Palestine, both regional and international,” he told The Media Line. “Some companies are developing software that could be hosted in the Gulf. One Gazan company, for example, has already sold restaurant and hotel management software to clients in Saudi Arabia, another has sold SMS services in Kuwait and my company develops real estate services that are sold in Dubai.”

Kasis, head of the Palestinian IT group, said Gazan entrepreneurs have cleverly taken advantage of the Internet and ‘cloud computing’ to get around Israeli export controls.

“You need to physically meet the people that you are doing business with, but with IT products, afterwards you don’t need to physically ship the products through the borders, you can shift products, offer services and do business through the telecommunications infrastructure and over the Internet through cloud computing,” he said. “This added flexibility for the Gazan IT sector has meant that IT services prove to be more resilient to Israeli impediments and the siege on Gaza.”

Alexis Madelain, a private sector project officer at the French Development Agency, said Gaza’s IT association was selected because it represents the only economic sector in Gaza able to export.

“Many studies have been carried out on the current private sector in the Gaza Strip and all the difficulties this sector faces due to the blockade,” he told The Media Line. “Instead of carrying out another study, we decided to try a ‘quick win’ pilot project.”

“We chose the IT sector because it is the only sector that can fully develop exports,” Madelain said. “We will support IT companies selected through a peer procedure to develop their activities abroad on a co-funding basis. The idea is to be demand-driven and establish a framework which could be expanded on later, so the content of the project will depend on the proposals of the company.”

The French Development Agency has some 180 million euros committed to state-building development projects throughout the Gaza Strip and West Bank. The agency has been active in the Palestinian territories since 1998.