Digital Transformation in Palestine: Between Technological Domination and Opportunities for Sovereign Independence

The world is witnessing an accelerating digital transformation that has become the backbone of economic and social life, serving as a key driver for growth and competitiveness. While many countries have managed to leverage this transformation to expand opportunities and improve service efficiency, Palestine continues to face a complex reality where ambition intersects with constraints, technology with politics, and sovereignty with external control.

Digital transformation in Palestine cannot be viewed merely as a technological update, but rather as a sovereign issue that affects the national infrastructure in communications, the financial sector, and data. Every digital service and every electronic transaction passes through networks that are partially subject to Israeli oversight or control, rendering the Palestinian path towards an independent digital economy fraught with structural obstacles.

Infrastructure Domination and Control of Communication

The communications infrastructure in Palestine remains constrained by multiple Israeli restrictions, starting from control of the radio spectrum to international connectivity gateways. For example, Palestinian service providers have only recently been able to operate 4G networks in the West Bank, while Gaza still lacks this service. This delay practically translates into a digital divide between Palestinians and their neighbors, weakening the ability of startups to compete regionally.

World Bank estimates (2024) suggest that the lack of full access to 4G and 5G services has cost the Palestinian economy approximately $1.2 billion in GDP over the past decade. In contrast, enabling digital transformation could add between 1.5% to 2.2% to GDP annually, providing over 15,000 new job opportunities within five years, especially in the financial services, e-commerce, and technology sectors.

The Digital Financial Economy Between National Regulation and Indirect Domination

This control does not stop at internet services; its impact extends to digital financial systems. Local payment systems such as PalPay and Jawwal Pay operate within Palestinian banking frameworks licensed by the Palestinian Monetary Authority, yet they remain linked to the Israeli financial system through clearing and shekel transfers.

This structural connection imposes indirect constraints on the expansion of these systems regionally or their integration into global financial systems, as electronic transfers and cross-border operations are subject to permits and approvals from Israeli institutions or intermediary banking networks.

This structural control makes it difficult for Palestine to build an integrated sovereign payment system, delaying the development of digital financial services that form the backbone of modern economies today. For comparison, Jordan has a unified digital payments system (JoMoPay) under the supervision of its central bank, enabling it to link electronic wallets to regional and global systems, while Palestine still relies on a limited fragmented system operating within an incomplete financial space.

Palestinian Innovation Between Ambition and Obstacles

Despite these obstacles, Palestinian youth exhibit a remarkable degree of innovation and resilience. Over the past three years, Palestine has registered more than 120 digital startups in fields such as artificial intelligence, e-learning, and digital commerce, according to data from the Palestine Entrepreneurship Center (2024).
However, these initiatives face challenging operational hurdles, primarily the difficulty of importing technical equipment, access to international payment gateways, or data protection in an environment subject to external control over cloud infrastructure.

Moreover, the lack of a comprehensive legislative framework for data governance opens gaps in information security, making digital independence a dual challenge, as developing technical capabilities alone is insufficient without a legal and institutional framework that guarantees sovereignty over data and transactions.

Toward Gradual Digital Independence

Building digital and financial independence in Palestine cannot be achieved all at once, but rather through a realistic and gradual multi-stage pathway. The first step begins with strengthening the role of the Palestinian Monetary Authority as a central umbrella for payment systems, and developing a sovereign national gateway for digital payments that connects Palestinian financial and banking institutions within a secure internal network.

The second step involves organized regional openness through partnerships with the central banks of Jordan and Egypt, allowing Palestinian payments to connect to regional systems without the compulsory passage through Israeli clearing. A local Palestinian cloud infrastructure should also be established to store data and government services, reducing reliance on foreign servers managed abroad.

The third step is human and institutional empowerment through national programs specialized in digital skills targeting universities and the private sector, enhancing the participation of women and youth in the digital economy. Without a trained and qualified human base, technology remains merely a tool without developmental substance.

Conclusion: From Technological Dependence to Sovereign Independence

Digital transformation in Palestine is more than just updating services or launching electronic applications; it is a project of national sovereignty in a new space, measured not by land but by data, and managed not by borders but by networks.
In a world where the importance of the knowledge economy is increasing, possessing digital decision-making power becomes a prerequisite for building an independent economy.

Despite the imposed constraints, the opportunity still exists to establish a Palestinian model for digital transformation based on regional cooperation, sovereignty over data, and the integration of the public and private sectors in building a more independent and equitable economic future.