03/20/2013 12:25 pm ET Updated May 20, 2013

From "Start-Up Nation" to "Start-up Region"

The Knesset has 48 new members, each bringing a unique background and a new spirit to the Israeli parliament.

I myself was a high-tech entrepreneur, part of the remarkable community that helped turn Israel into the second most innovative hub in the world.

Israel is often dubbed the "Start-up Nation" due to our technological prowess, but looking back at the status of the Israeli-Palestinian track over the past twenty years, as far as our diplomatic achievements are concerned, we are not a "Start-up Nation," we are a "Stagnant Nation."

Unfortunately, our leaders have far too often encouraged discussion about what each party stands to lose from a peace agreement rather than what we have to gain, building barriers, fomenting suspicion, embracing worst case scenarios, desperately searching out arguments against moving forward.

True, the Middle East does at times seem like a very troubled region. And make no mistake -- Israel needs to be as strong militarily as the combination of the players surrounding us. But within the next twenty years the Middle East will have developed a vibrant middle class, and when a middle class develops, major economic opportunities present themselves.

It is time that Israel reaches a two-state solution with the Palestinians as a means to becoming not a leading military power in the region, but rather, a leading economic power with strong ties and thriving trade with our Arab neighbors -- something which has eluded us until now.

It is time to invest the enormous energy, the world-leading innovation, the boundless creativity, the can-do spirit that has turned our high-tech sector into a global powerhouse into our political sphere. Only then can we go from being a "Start-up Nation" to an integral part of what can be a "Start-up Region."

But how do we reboot a peace process which has crashed so many times in the past?

Any new foundation for peace must begin with a process of trust-building and real grass-roots partnership. Building trust is the only way to reinforce moderate elements on both sides and break through the psychological stalemate that has bogged down efforts to address the conflict so far. And, as any entrepreneur can tell you: it is imperative to start any new initiative by building real momentum.

Below are just a few steps we Israelis should initiate which can lay the groundwork for a more sustainable peace effort and help build that momentum. I list them here with a clear understanding that there must be a similar set of initiatives undertaken by the Palestinians to build trust on our side, which has serious reasons for skepticism. I look forward to seeing such suggestions from a Palestinian leader.

Trust-Building Measures

  • Begin renewing political ties through confidence-building gestures. These could include increased freedom of movement and access for the Palestinians in the West Bank, removing checkpoints and roadblocks, limiting construction in the settlements and releasing Palestinian prisoners. These would help pave the way towards renewed, ongoing, sustainable dialogue, which must begin without delay. Direct negotiations are the only way towards creating a renewed Road Map for Peace for a robust diplomatic process.
  • Revisit Palestinian achievements. The Palestinian Authority has to a very significant degree delivered on its commitments to the Road Map to fight terror and increase overall security for Palestinians and Israelis. The P.A. has also established institutions and state-building measures which are fundamental to solidifying their place in the community of nations. These measures should not be taken for granted. One must only look at the reckless, needless hostility emanating from Hamas in Gaza to fully appreciate the opposite approach taken by the P.A. A sober look at these facts-on-the-ground will serve as building blocks for our confidence in Palestinian intentions in the West Bank.
  • Transfer tax revenues withheld from the Palestinian Authority without delay. This is vital to allowing the Palestinians to create a proper budget, pay salaries to their public sector and continue building their key institutions - primarily their security apparatus - in short, the very things we demand from them as credible partners towards peace.
  • Create a vast network of joint Israeli-Palestinian incubators merging expertise and ideas from our two cultures, with co-development offices in Jerusalem and Ramallah. These incubators can serve as living examples of the culture of win-win we must restore to our political domain. Bring in multinationals like Cisco, Intel and Google and you will have a powerful international ecosystem anchored by both regional and global interests in success.
  • Establish a bilateral forum composed of Israeli and Palestinian business leaders who are willing and able to invest in significant joint projects, changing the face of our economies. These financial leaders would put politics aside in order to advance common economic interests and, once again, redevelop eroded trust between our peoples. Give our talented business leaders "executive privilege," and there's no telling how far they will take us.
  • Adopt an ambitious joint Palestinian-Israeli tourism campaign to attract visitors to the Holy Land. Imagine the draw a breathtaking tour of Jerusalem, Bethlehem, Nazareth and the Sea of Galilee would have on the millions of Christian faithful around the world. The economic impact on both sides could rival that of our high-tech miracle.
  • Create a far-reaching international framework to rehabilitate our battered region: a Marshall Plan for the Middle East. Such a plan must earmark significant funds for such sticking points as refugees, settlers, and regional development. It would include free trade zones, invigorating all of our economies much like the economies of post-war Europe. Such a plan would help modernize antiquated petro-economies, transforming the Middle East into an innovative information zone with open barriers, social webs, hearts and minds, making peace more about future prosperity than historical concessions.

    The subsequent growth would reach new sectors of the region's population starving for employment and modernization, offering a glimpse of what can be gained with normalization. It would also serve to entrench the international community as a real stakeholder in regional prosperity and stability.

Secretary of State John Kerry's reported embrace of the Saudi Peace Initiative during his recent visit to Riyadh indicates a willingness by the major regional players to come on board politically. A parallel Marshall-type economic framework for the region can provide exactly the type of financial foundation vital to ensuring the success of any political track and for guaranteeing progress even if the political track gets derailed.

As President Barack Obama begins his historic visit to the region, he surely knows that there is only one reality more powerful than conflict - the reality of hope. It is imperative that, together with our friends in the U.S., we begin to bring this message of hope to the people of the entire region to create a better future on all sides of our borders.

After all, when it comes to hope, we too must learn to be audacious.

Knesset Member Erel Margalit (Labor) is a high-tech and social entrepreneur turned politician who founded one of Israel's leading venture capital funds, Jerusalem Venture Partners (JVP).