When the war between Lebanon and Israel began, there were no smartphones or wifi routers in every home. But today, technology could be the key to opening relations between the neighbors.
Israel, known fondly as the “startup nation,” has seen a plateau in growth as the industry struggles to bring in more talent. In 2000, the country had high tech exports at 19 percent of its GDP, a number that fell to 16 percent in 2014
Just across the border, the GDP in Lebanon is largely dependent on a fragile banking system and remittances from citizens living abroad. It is a country rich in talent and investment but poor in infrastructure, rushing to build up a lucrative tech hub before its regional competitors.
Trade Before The War
Tensions escalated between Israel and Lebanon in 1982, when the Israeli military followed members of the Palestinian Liberation Organization in to Lebanon. This began years of occupation and bombings, as well as the formation in 1985 of terrorist organization Hezbollah.
But even with the war between the countries, trade was still going through the border at a healthy rate. Some believed that the trade could help to normalize relations, including David Brodet, then the director of Lebanese commerce for the Israeli Ministry of Industry and Trade.
“I see a large potential for trade between Israel and Lebanon,” Brodet told The Washington Post in August 1982.
In December of 1982, there were estimates that total trade amounted to $20 million in goods to Lebanon monthly. Brodet also told the Post that he expected Israel to trade high tech medical equipment and specialized electronics to Lebanon.
Months later Saudi Arabia imposed a ban on Lebanese imports, after an announcement from Israeli officials about the trade between the two countries. That trade accounted for up to 35 percent of Lebanese exports and caused the currency to drop in value. Since then, the countries have had a closed border.
War with Israel compounded with a serious civil war destabilized Lebanon, leaving it a risky investment.
Israel Can Grow and Stem Lebanon’s Brain Drain
Lebanon has the most educated population among the Arab countries. With almost 100 percent primary school enrollment and 90 percent adult literacy, according to UNICEF, the small country beats its wealthy neighbor Saudi Arabia.
But almost half of the college educated Lebanese citizens are leaving the country. In fact, nearly 15 percent of the country’s GDP comes from remittances sent from citizens who work abroad.
Fostering startup culture was supposed to help stem new graduates from moving away to work.
“Here it is a problem with the mentality of our target. The problem with them is that they don’t believe they can achieve,” said Fadi Mikati, president and co-founder of the Tripoli Entrepreneurs Club.
Mikati and his co-founder, Najwa Sahmarani, started the NGO to help foster the startup ecosystem in the northern city of Tripoli where almost a quarter of the citizens live on $2 a day.
“Outside of the capital, it is really hard to get funding for an NGO like us, and businesses,” Mikati said.
In Beirut, the government has helped foster a Digital District with a $400 million dollar investment from the national bank, Banque Du Liban. The UK Lebanon Tech Hub, sponsored in part by the UK Trade & Investment, offers mentorship, free co-working spaces, and accelerators in the heart of the district.
These efforts are supposed to encourage business and keep the talent from leaving.
Government support is aimed at expanding high technology exports, which only accounts for 2 percent of Lebanon’s GDP. Engineering is highly is currently ranked as the second most popular major for college students after business at the Lebanese American University and the American University of Beirut.
Why is this good for Israel?
Yoav Chelouche, co-chairman of Israel Advanced Technology Industries told Bloomberg last year that 10,000 engineers are needed to ensure the growth of the tech sector.
Competition is rising for Israel as other countries put more resources into innovation. China, for instance, has a much larger market than Israel and can easily fill jobs from either its own population or migration.
Unfortunately, immigration for non-Jews into Israel is near impossible.
But Beirut is approximately 183 miles from Tel Aviv, which is 32 miles shy of the distance between Boston and New York. Israel can still preserve its Jewish statehood without compromising its business needs.
If the two countries were willing to open up business relations, Lebanese engineers and entrepreneurs could work remotely with innovators in Israel. This would allow Lebanon to retain their highly educated youth and allow both countries to grow their industry capabilities.
The Politics Standing in the Way
While Arab countries such as Egypt and Saudi Arabia are beginning to warm up to working with Israel, Lebanon remains completely closed off and frigid to their neighbor. In return, Israeli forces are at a constant battle with security at the northern border due to Hezbollah.
Even Arab-Israeli and Palestinian entrepreneurs find it difficult to open to the Arab markets, according to Eitan Sella, managing director of The Hybrid. The Hybrid is an organization similar to the Tripoli Entrepreneurs Club, providing mentorship, workshops, and networking opportunities for early stage Arab entrepreneurs in Israel.
But it isn’t easy to open up Arab entrepreneurs to the Arab markets.
“The moment they realize your company is based in Israel, they don’t want to do business with you,” Sella said.
The Hybrid doesn’t advertise any assistance given to startups that are trying to find investors in the Arab states. Opportunities in that region are obvious for the startups Sella works with, especially since the creators speak Arabic and understand the culture. Even with the roadblocks, Sella says opening up these opportunities will be a good equalizer.
“The start up industry is the only thing that’s going to save Israel from itself. Let me be blunt about this,” Sella said.
Remaining a Jewish state is a key concern to the Israeli government, which is why there are so many jobs that are hard to fill. Many of the engineers who helped to build technology to 16 percent of the country’s GDP came from mass immigration after World War II and are reaching retirement.
Opening up trade is the only way to solve both problems. If Lebanon and Israel become invested in each other, it could help stabilize relations between the two countries.
Israel has done trade with countries in the region in secret for years, according to reports from the country’s newspaper Hareetz. But embargoes and sanctions have forced these efforts to remain backdoor deals to protect the politics.
“I think wherever there is ethnicity tensions, you need people from both sides to be able to break through,” Sella said.