The ongoing conflict in the Middle East has had an unprecedented impact on the economy and private sector activities of both Gaza and the West Bank. Business activity in Gaza has been crippled, with a significant portion of establishments damaged or destroyed, and many business owners and employees displaced. The remaining economic activity is largely informal, focusing on essential goods often sold on the black market at inflated, unregulated prices. In the West Bank, nearly every business reports also being affected by the conflict. Despite efforts to avoid layoffs, roughly two thirds of firms in the West Bank reported some form of reduction in their workforce and 87.2 percent of workers saw their household incomes shrink since the conflict's onset. The West Bank economy alone contracted by 23 percent in Q2 2024, while that in Gaza shrank by an astounding 86 percent, in the same period.1 Unemployment has reached record highs, exceeding 50 percent on average. In a context of high Fragility, Conflict and Violence (FCV) exposure, already before the current crisis, recent developments have further destabilized an already tense situation.

Amid these challenges, the Information and Communication Technology (ICT) sector emerges as a beacon of hope. The borderless nature of ICT services, such as software development, back-office support, and research and development (R&D), has been enabling Palestinian businesses to overcome restrictions on movement and access and continue to operate in the regional and global markets. In fact, Gaza was known in the region as a hub for high quality programmers skilled in AI technologies before the conflict. Despite recurring bouts of violence and the external constraints on the economy, Palestinian IT firms have succeeded in tapping into the global growth of IT services exports. The ICT sector, including telecom firms and internet service providers, employs almost 15,000 people and contributes about 3.3 percent of GDP2. 

The recent launch of the Palestinian semiconductor design firm Orion offers a bright example of the power of the ICT industry to create high-tech jobs in some of the most challenging circumstances. Orion, which is based in Rawabi in the West Bank and was launched in 2022, is the first Palestinian firm specializing in very-large scale integration (VLSI), the process by which millions or billions of transistors are combined onto a single chip. The company was founded with the vision to create a VLSI design industry in the Middle East to enable the training and employment of world class VLSI engineers. Its goal is to create the first-ever semi-conductor chip developed in the Palestinian territories. The chip will be designed to be integrated into a range of systems, including home appliances and automotive applications, with a strong focus on data security.

The launch of Orion was supported by the Technology for Youth and Jobs (TechStart), a project of the Palestinian Ministry of Telecommunications and Digital Economy and supported by World Bank financial and technical assistance. The project – benefitting also from co-financing from the European Union, Switzerland, and the Netherlands – focuses on developing both the supply and demand sides of the ICT industry to increase economic resilience and generate jobs for youth. Launched at the peak of COVID-19 and running until 2028, the project has to date mobilized over US$5 million in private investment into Palestinian IT services firms and created 800 IT sector jobs. These results are especially impressive given the unique challenges of the Palestinian context.

While an exhaustive reflection on the lessons learned so far would require much more than a blog, highlighting the mechanisms used by the TechStart project to facilitate Orion's development can be helpful for designing interventions in other contexts. These were primarily:

1. Access to Global Expertise: TechStart’s UpSkill program helped bring a senior VLSI expert from the Palestinian diaspora in the USA to ASAL, a local IT services company. This expert assembled a team, developed a business plan, and laid the groundwork for Orion.
2. De-Risking Firm Establishment: TechStart’s PIONEER program provided a matching grant to help establish Orion as a separate entity, mitigating the risks associated with launching a new venture by extending the runway to get to profitability.
3. Developing Local Talent: The UpSkill program supported the hiring and training of Palestinian youth as VLSI engineers. This effort expanded Orion's team from 6 engineers in 2023 to an expected 42 by mid-2024, significantly enhancing local capacity.

Orion's success story underscores the vital role that technology and links to the international market can play in building economic resilience in contexts affected by FCV. Orion leverages high-value services outsourcing projects from international clients to equip Palestinian youth with internationally market aligned technology skills and create good jobs, mitigating brain drain and building the reputation of the West Bank as a high-skilled outsourcing destination. With the support of projects like TechStart, such models can be scaled even in the most challenging of contexts. As technological developments, including AI, pose new challenges that may exacerbate the digital divide, this is a critical time for international organizations and governments to step up support to develop domestic ICT industries and high quality, digital jobs.