Living and working on the edges of Israel’s Start-Up Nation, Palestinian and Israeli Arab high tech entrepreneurs are trying their hand getting companies aloft by leveraging their closeness to Israel’s technology juggernaut and the low cost of Palestinian engineers.

“There’s a great opportunity in Palestine to create a start-up with a great cost structure,” Tareq Maayah, chief executive officer of Shopzooky, a maker of social shopping apps, which was set up in Ramallah last year. “You couldn’t beat it without going to India,” said his partner Sam Taha, chief technology officer.

Shopzooky’s app brings customers of bricks-and-mortar stores together with shoppers to share information on prices, specials and opinions on products available in their neighborhoods. Apple’s App Store is already selling the Shopzooky product and it will be available on Android smart phones in June. Its ad platform, which Maayah and Taha are counting on to generate revenue, will begin in the summer.

“We wanted to do something innovative in the social space. The social space is exploding everywhere,” said Taha.

The two are seasoned technology executives – Maayah worked for the German company Siemens in Ramallah and was a co-founder of the web 2.0 company Ghosts. Taha held senior management positions at U.S. start-ups, among them Employ ease, which was sold for $160 million in 2006 to ADP. Both were educated in the U.S.

That may not be typical for local entrepreneurs, but the Palestinian Authority is home to a nascent technology sector, which many people compare to Israel in the late 1980s before its own industry began to boom.

The Palestinian telecoms and information technology industry numbers about 150 companies and employs about 4,500 people, according to The Palestine IT Association of Companies. The area boasts 10 institutions of higher education with engineering programs, turning out some 2,300 graduates a year. Even more young Palestinians go abroad to further their studies.

Nearly a year ago, Sadara Ventures/The Middle East Venture Capital Fund invested in Palestinian companies developing innovative, new technology in mobile, Internet content and technologies, social networks and software outsourcing.

Two young Israeli Arabs – Adi Omari and Mohammad Zoabi, both age 22 – have also taken up the high tech challenge, forming a website-building company called Widgex. The service, which is still being develop enables the technology clueless to build their own website using a series of widgets, which is a small application that can be installed and executed within a web page by an end user.

“It’s much more flexible,” Omari told The Media Line. “The page is a widget, so you can structure it so that each user’s website looks different There are no control panels or delays. You just click.”

The two partners estimate they are about three months away from completing their first demo, but they plan to invest extra time making sure they have taken all the kinks out of it and to build a service management platform for it. “This is our first product so we want to make sure we don’t miss anything,” he said.

The pair met two years ago at the ORT Ahva high school near Nazareth, Zoabi told The Media Line. It was then that they decided to team up to do something in high tech. The pair is still in school, Omari getting his master degree in computer science at the Technion and Zoabi studying computer science in the Interdisciplinary Center (IDC) in Herzilya.

They formed Widgex eight months ago when they both felt they had completed enough of their studies to begin the arduous work of writing code. For now, they have no employees or investors, but they are beginning the process of raising money.

The two were interviewed by The Media Line at the sidelines of an Innovation Marathon in Tel Aviv sponsored by Bootcamp Ventures, which brings together investors with a select group of technology start-up entrepreneurs. Widgex and Shopzooky were among the 20 invited companies. Widgex got its invitation because Zoabi is participating in IDC program for young high tech entrepreneurs.

Israel boasts a world-leading high technology industry, with thousands of start-ups and some major successes over the years, like Check Point Software Technologies and Amdocs. But Israel’s Arab minority, which accounts for about a fifth of the population, has been largely bypassed by the technology boom of the last two decades.

Yitzhak Danziger, who formed Galil Software which employs Israeli Arabs to provide engineering-outsourcing services, estimated that 80,000 Israeli Jews are employed in skilled positions in the high tech sector but only about 500 Arabs work in it. A survey conducted by the Industry, Trade and Labor Ministry found that some 80% of the Arab graduates of scientific and technological studies are not working in the profession they studied, but rather in teaching, industry and services.

According to the Tsofen organization, which helps Arab high tech engineers, there are five medium-sized high tech companies and several dozen start-ups founded by Arab entrepreneurs in Israel’s northern Galilee region and down south in the Negev. Six of the start-ups are part of the NGT Technological Incubator.

Asked whether they have faced any special challenges getting their start-up off the ground, both Omari and Zoabi are hesitant to answer. “It hasn’t been difficult so far,” Zoabi finally answers. “But it will be when we are opposite the banks [looking for finance].”

Omari said he did not anticipate any problems and said Widgex plans to address the Arab market for its service before going to the English-language and other markets.

“Our market isn’t in Israel, but for the Arabic language” he said. “There’s no competition there. We have a design that performs better than any worldwide …. We think we’ll do well there.”