DAILY MAIL

23 April 2004

Matthew Kalman

This is what happened to a Palestinian child who joined teenagers throwing stones at Israeli border police.

Muhammad Badwan was grabbed by officers and tied by an arm to the grille covering the windscreen of their security vehicle (circled).

Last night the 13-year-old’s father said the police had illegally used his son as a human shield to try to stop demonstrators throwing stones at them.

‘When I saw him on the hood of the jeep, my whole mind went crazy, ‘ said Saeed Baswan, a 34-year-old labourer. ‘It’s a picture you can’t even imagine. He was shivering from fear.’

Muhammad said: ‘I was scared when they got me at first. I thought they would put me in prison. I was scared a stone would hit me.’

The incident happened in Muhammad’s home village of Biddo, north-west of Jurusalem, which has become a flashpoint for violence between Israeli forces and demonstrators protesting against the building of an Israeli security fence.

The picture was published by an Israeli human rights group trying to expose the behavior of some Israeli security personnel. Rabbi Arik Ascherman, director of Rabbis For Human Rights, heard about the boy and tried to intervene with the police, demanding he be released.

The rabbi claimed he was head-butted by one of the officers and arrested. He said he intended to press charges against the police.

‘The boy was sitting on the hood of a vehicle, unsuccessfully trying to hold back his tears, shivering with fright, and with one arm tied to the screen protecting the windshield,’ he said.

‘We tried to calm him down and reassure him. I asked if he was hurt. He said he had been beaten and was in pain.

‘It is very depressing that we have come to this position where this is what we do.’The Israeli police said they were investigating the incident.

Leader in waiting?

Palestinian 'prince' eyes Arafat's throne
Dahlan pushes a more moderate approach on Israel, but also has contacts with Hamas

By MATTHEW KALMAN
Special to The Globe and Mail

GLOBE & MAIL, Saturday, Apr. 3, 2004

RAMALLAH, WEST BANK -- He travels through the West Bank in a bulletproof, black Chevrolet Suburban, bearing official licence plates from the Palestinian security service. Everywhere he goes, his bodyguards stay close at hand, even sealing off the floor of his Ramallah hotel.

As politicians line up to welcome him home after a visit to England, and calls come in from friends in both the U.S. Central Intelligence Agency and Hamas, there is little doubt about the status of Mohammed Dahlan: He is a Palestinian prince in waiting.

At 42 -- a veteran of war, exile, Israeli jails and a long-running feud with Yasser Arafat -- Mr. Dahlan is fast emerging as the most powerful Palestinian of his generation. He is seen as one of the few people who could unseat Mr. Arafat in an election. And with the assassination last month of Sheik Ahmed Yassin, the Hamas spiritual leader, Mr. Dahlan may be unrivalled among Palestinian militant leaders as well.

"The Palestinian people are looking for a way out," Mr. Dahlan said in an interview this week. "They are looking for a Palestinian leadership to take them to this exit."

The former head of the Palestinian security service pierces the air with his finger for emphasis before taking a sip of mint tea. He knows that in Washington, Cairo and Jerusalem, he is considered by many to be the person to provide just that leadership.

"Our experience together -- the international community, the Palestinian Authority, Israel, the States --- has really failed, finally," Mr. Dahlan said. "To be frank with ourselves, it's failed. We have to change our role. We have to change our way of thinking, of working, of implementing our commitment. The Israelis should do the same. Enough is enough. We have to elect a new leadership. I think the new generation will be part of the future."

Mr. Dahlan has been a key player in Palestinian politics for 25 years, rising through the "shebab" youth wing of Mr. Arafat's Fatah movement to head the Palestinian Preventive Security Force, the largest armed detachment in Gaza. He still enjoys the loyalty of thousands of men he commanded, and earned the respect even of his enemies.

Having helped stir the first intifida, or uprising, in the late 1980s, he led the Palestinian Authority's crackdown on Hamas in 1996.

But since his job last year as interior minister in the short-lived government of Mahmoud Abbas, he has been plotting a new campaign, rushing back to Ramallah from a two-month sojourn in Cambridge, England, after Mr. Yassin's death.

"It's a mess," he said of the current heightened tensions, as he kept a watchful eye on Al-Jazeera, the Arabic satellite TV station.

"The Palestinian leadership must share the blame for this result. It's not just the occupation. The [Israeli] occupation destroyed the Palestinian Authority. . . . There is no central ruling authority. The visible militant groups are the ones that are in control locally."

Mr. Dahlan is calling for "fundamental change" in Palestinian ranks, beginning with the full democratization of Fatah and the PA.

Though he's been officially unemployed since September, he is enjoying his time off. Once a four-pack-a-day man, he has quit smoking, coffee and even surrendered his beloved nargila water pipe, all "in one shot," he boasts. He spent his recent visit to England "wasting time, reading and improving my English."

Mr. Dahlan was born in 1961 in the Gaza Strip, in the Khan Younis refugee camp. As a teenager he joined Mr. Arafat's political movement and founded the Fatah Youth Association in Gaza. His role in the Palestinian movement landed him in an Israeli jail for five years (where he became fluent in Hebrew) before he was expelled to Jordan.

Eventually moving to Tunis to join Mr. Arafat in exile, he became a special adviser. He returned to Gaza with Mr. Arafat, taking up a senior position in the new Palestinian security forces and joining U.S.-brokered peace talks. He and Mr. Arafat fell out, mainly because of Mr. Dahlan's push for reforms.

Now he may be one of the few people in the world who maintains an easy-going relationship with CIA Director George Tenet and with Omar Suleiman, head of Egyptian intelligence, as well as an open channel to Mohammed Deif, the Hamas terrorist chief with whom he once shared an Israeli prison cell -- and whom he personally arrested eight years ago.

If Mr. Dahlan had his way, he would get tough with the 14 Palestinian security forces, and fold them into one service. He would also take up Israeli Prime Minister Ariel Sharon's offer to pull out of Gaza, a move he says could be used to create "a new model" of Palestinian governance.

He is confident that a democratic, unified Palestinian Authority can deliver security for Israel also, because the Palestinian people are tired of the violence. "If the Palestinian leadership have decided to stop this kind of attacks they should stop, period," he said. "We can do it. Believe me, we can do it. We did it before."

Mr. Dahlan says a reformed, liberated Gaza could serve as a model for a future Palestinian administration, and dismisses suggestions the PA is threatened by a Hamas takeover. He says the PA, with resolution and through dialogue, would have no problem reasserting its control over a liberated Gaza Strip.

"We need a basic change in the Authority and in Fatah, all through elections. Last time Fatah had elections was 15 years ago, so the cadre now does not listen to the decisions of the leadership," he said, adding that if members of the PA "are elected legally, I will commit myself to them. . . . They should renew their legitimacy through elections."

Would he run in those elections?

"Of course, yes."

Against Mr. Arafat?

"I don't know against whom," he says, then roars with laughter.

"I will play a role but I don't see my future in Gaza," he said, hinting at broader ambitions in Ramallah, the West Bank city where the seat of Palestinian power is located.

"I'm speaking on behalf of my generation. This is our future -- to be together and to create a moderate state here through elections, to develop and improve the idea of democracy among our people."

Venture capital invests in Israeli techs

Recovering from recession, country ranks behind only Boston, Silicon Valley in attracting cash for startups

SAN FRANCISCO CHRONICLE April 2, 2004

By Matthew Kalman, Chronicle Foreign Service

Jerusalem -- Israel's technology industry is doing better than you might think.

Just days after the Bank of Israel declared that the country's recession had technically ended, a group of leading California venture capitalists predicted the renaissance of Silicon Wadi, Israel's impressive high-tech sector.

"It's starting to happen in Israel again," said Harry Kellogg, vice chairman of Silicon Valley Bank and president of its merchant banking operation, which has invested in eight Israeli funds so far.

"Last year, about $1.1 billion was invested in Israel, ranking it No. 3 in the world after Silicon Valley and Boston," said Kellogg, who visited Israel last month along with 40 other major California investors. "More money is coming into startups here than is going into Shanghai or India. It's one of the key markets in the world as far as Silicon Valley Bank is concerned," he said.

Despite the optimism of venture capitalists and government banks, there's no denying Israel remains mired in political strife that makes it difficult for the long-standing technology industry to stay strong and grow. Just the same, Israel's tech sector, nurtured from academic and military roots, is showing that it's up to the task, thanks in large part to money coming from U. S. venture capitalists.

The global economic downturn of the past three years was amplified in Israel by the three-year Palestinian intifada. The impact of continued violence and terror attacks hurt the tourism industry and depressed consumption across the board, sending the gross domestic product plummeting.

"The Israeli economy was essentially mimicking what happened in the United States but with a magnification effect due to the security situation," said Manuel Trajtenberg, an economics professor at Tel Aviv University.

Nevertheless, the American investors visiting Jerusalem said the intifada hurt the high-tech sector less than it did other parts of the Israeli economy. Trajtenberg said figures available so far confirm that impression.

"It is true that the high-tech sector was shielded to a large extent from the magnification effect of the intifada," he said. "If you look at indicators of activity like unemployment, number of workers and exports, the downtrend is similar to the high-tech sector in the United States."

"There was less of a magnification compared to other sectors of the economy like tourism and retail industries," Trajtenberg said.

Last month, the Bank of Israel said that the recession in Israel, which began in the summer of 2000, months before the outbreak of the intifada, ended in November. The central bank said the recession cost Israel 10 percent of its GDP during those three years and sent unemployment soaring to a record 10.9 percent in the last quarter of 2003.

Active tech sector

Already, Israel has more companies traded on the Nasdaq than any other country outside North America. Moreover, annual foreign investment in Israeli startups has consistently outstripped any European country, according to the Israel Venture Capital Association, even though Israel has a population of only 6 million.

Sequoia Capital, one of the first Silicon Valley venture capital firms, has only one office outside the United States -- in Israel. Benchmark Capital's two foreign bases are London and Tel Aviv. Siemens venture capital has said it will open an Israel office -- its only branch outside Europe and the United States.

Israeli companies excel in security technologies, semiconductors and communications. Israeli tech firms include Checkpoint, a leading firewall firm; Amdocs, which makes billing systems for telecoms; Comverse, a big voice-mail company; and Mercury Software, which measures software performance.

Last month, investors at VentureWire Network Outlook 2004, an annual trade conference of the U.S. venture capital industry, voted three non-U.S. companies among the 10 startups most likely to succeed. All three were Israeli: Actelis Networks, BitBand and P-Cube.

Among the recent deals was an investment of $20 million by Grove Street Advisors in Pitango Venture Capital on behalf of the California Public Employees' Retirement System.

Grove Street Advisors manages $2.8 billion invested by CalPERS in 80 venture capital funds. Of that total, $25 million already is invested in six Israeli funds: Pitango, Gemini Israel Funds, Israel Seed Partners, Jerusalem Venture Partners, Apax Partners and Carmel Ventures.

Last week, the Israeli retail comparison site Shopping.com announced plans to file for the first Nasdaq IPO by an Israeli company in two years.

Grove Street Advisors founder and managing partner Clinton Harris said he has been investing in Israel since 1991 and has returned because now is "a good time to invest."

"We have $500 million earmarked for startups and set aside 5 to 10 percent of that amount for Israel," said Harris. "Apart from Israel, we have almost nothing invested outside the U.S."

Overall economic conditions

Israel's economic indicators are turning positive. Growth projections for the year have been adjusted to 3 percent, while demand, private consumption, sales and output all rose in December and January, according to Israel's Central Bureau of Statistics.

Professor Avi Ben-Bassat of the Hebrew University in Jerusalem, a former director-general of the Israeli Finance Ministry, agreed that there is "a very positive change in the trend of the economy." But he's not totally sold on the turnaround. Israel is "still in deep recession," he said.

"It will take a long time before we reduce unemployment from its current very high level of 11 percent to the natural level of about 6 percent and restore GDP growth to the pre-recession levels of 4 or 5 percent per year," Ben-Bassat said. "But we expect GDP to grow at a rate of 2 to 3 percent this year, which is much better than the negative trend of the past two years."

According to the Israel Venture Capital Research Center, the $1 billion attracted by Israeli startups in 2003 meant investment was back to the 1999 level.

"Escalating interest in Israeli high-tech companies among foreign investors and the fact that 12 Israeli venture capital funds have embarked on raising new funds are clear signals that the environment has significantly improved." The center forecasts that Israeli VCs will raise between $1.5 billion and $2 billion in 2004-05.

U.S. investors argued that the fall in foreign investment since 2000 was due to global economic conditions, not the intifada. They said they were not deterred by fears of the security situation in Israel.

"I've come here a dozen times, so I'm certainly not concerned about it," said Arjun Gupta of TeleSoft Partners, which has investments in two Israeli companies, Lynx and Jungo.

"I think there's a higher chance that you'll have a wreck on a U.S. freeway than really get into a problem here. Having said that, if you have other people's capital, you have fiduciary responsibility," he said.

"Across the board, we've never had an Israeli entrepreneur not say: 'Hey, if there's any problem, I'll pull the whole company over to the States,' " Gupta said.

The venture environment

Jon Medved of Jerusalem's Israel Seed Partners, a venture capital group with $260 million under management, said he faces growing competition from U.S. funds investing directly in Israeli startups.

"There has been much talk lately in the U.S. of the venture overhang where too much money is chasing too few good deals, but the situation in Israel is still the opposite," Medved said.

"Israeli venture funds like my own are seeing quality deals at reasonable prices which are roughly half the valuations that are prevalent in the U.S. We have actually been outbid on a few deals recently by U.S. funds who felt the prices were attractive enough to pay a significant premium to what we offered, " he said.

U.S. investors say Israel offers a unique mix of entrepreneurial and technological skill, backed by a discipline and frugality that they ascribe to the influence of the army.

"They don't need as much money to get things off the ground here in Israel as they do in the U.S.," said Kellogg of Silicon Valley Bank. "Fear of failure is not an issue here like it is in other parts of the world. If you fail, it's not a bad thing like it is certainly in Europe and in Asia."

Isaac Applebaum of Lightspeed Venture Partners said he has invested in six Israeli companies and is beginning to see the emergence of serial entrepreneurs.

"It's the only place like it," said Applebaum. "I think it's going to get a lot better because there's a lot of new money coming in. These guys work day and they work night, and they deliver."