By David Rohde
RAMALLAH, West Bank, May 31 (Reuters) - At first glance, it is a tech utopian's dream. For the last two years, several dozen Palestinian entrepreneurs have been getting training from Israeli high tech experts courtesy of the American firm Cisco Systems.
The sessions feature no talk of politics. Instead, Israelis coach Palestinians on the latest trends in software development processes, best practices and branding.
"From my own perspective, it was a very successful training," said Saeed Zeidan, chief executive officer of a small Palestinian startup. "We managed to improve our services."
The training sessions are an example of privately funded economic initiatives that President Barack Obama and Secretary of State John Kerry have praised in recent trips here.
In his March visit , Obama lauded Cisco's efforts. In a landmark speech in Washington last week, where he tried to redefine the "war on terror," Obama said it was vital for the United States to help countries in the region "modernize economies, upgrade education and encourage entrepreneurship."
Three days later, Kerry unveiled a plan to create $4 billion in private-sector investment in the West Bank and Gaza, the largest economic initiative in the Palestinian territories since the 1993 Oslo accords. He called it a "new model" for economic development in the region.
"We need to partner with the private sector," Kerry said, "because it is clear that most governments don't have the money. And in certain places the private sector actually has a greater ability to move things faster than government does."
Cisco's efforts began five years ago. Encouraged by U.S. and Palestinian officials, the company's CEO, John Chambers, visited Ramallah in 2008. Since then, Cisco has invested $15 million in Palestinian tech startups and training programs.
"It opened the door for Palestinian software companies to do business with international corporations," said Gai Hetzroni, an Israeli Cisco executive who manages the program.
Dozens of other Israel-based companies have followed Cisco's example and hired Palestinian firms for outsourcing work. Palestinian firms now also work for Hewlett-Packard, Alcatel-Lucent and other American and European tech giants.
Today, 250 Palestinian information and technology companies produce 6.1 percent of Palestinian economic activity, the Israeli newspaper Haaretz recently reported. PalTel, a large Palestinian telecommunications company, skews the figures, but the tech sector is now larger than the historically dominant agricultural sector.
Ali Taha, another Palestinian participant in the program, said receiving Cisco training helped to boost Palestinian firms' reputation in the tech world - as it has for his own company, Art Technologies. Taha said one potential overseas customer was shocked to hear that such business existed on the West Bank.
"When someone told them there is a company that can do this, they said, 'Is there Internet in Palestine?' " Taha recalled, laughing. "They could not believe we could do it."
In his speech Sunday, Kerry said, "Foreign direct investment - private investment, leveraged investment, visionary investment - has the ability to be able to change the world." Success in Palestinian territories, he argued, could serve as an example for countries across the region.
Researchers working with Quarter representative Tony Blair and international business leaders have identified "stunning" opportunities for private investment in tourism, light manufacturing and construction, Kerry said. Home building alone, he estimated, could mean jobs for 100,000 Palestinians.
"These experts," Kerry said, "believe that we can increase the Palestinian GDP [gross domestic product] by as much as 50 percent over three years Their most optimistic estimates foresee enough new jobs to cut unemployment by nearly two-thirds - to 8 percent, down from 21 percent today - and to increase the median annual wage along with it, by as much as 40 percent."
This week, however, Kerry's optimism ran into the realities of the Israeli-Palestinian peace process. Palestinians' reactions to his proposal were generally positive, but the history of failed past initiatives loomed large.
Many Palestinians - including participants in Cisco's program - cautioned that economic investment was not a substitute for the creation of a Palestinian state. They have been complaining for years that Israeli restrictions on the movement of people and goods in the West Bank strangle the local economy.
Taha, the Palestinian entrepreneur, recalled that foreign economic investment had poured into the West Bank after the 1993 Oslo accords. But the Western high-tech company that employed him in Ramallah closed its office here after a 2001 Israeli military incursion. ()
"Investment and economy cannot survive together with unstable political situations," Taha said. "Economic investments are a waste of money and effort if they are not executed in parallel with a politically permanent solution."
Kerry's economic proposals are positive. Corporations that now have record profits and unprecedented global reach are being asked to make a contribution. They can and should do so. To Kerry's credit, he has repeatedly stated that his economic initiative is no substitute for a political settlement.
His effort is laudable. But he faces a long road ahead.
Palestinians remain eager to unilaterally seek official recognition at the United Nations. Israelis, meanwhile, are increasingly focused on their own domestic issues, not peace with the Palestinians.
Economic proposals involving private companies involve little political risk. Reaching a peace settlement, however, means Israeli, Palestinian and American officials must take enormous risks. Peace is not possible in the Middle East on the political cheap.