Since September 1, the Lebanese authorities have again been allowing South Koreans to obtain visas upon arrival in Lebanon. The practice had been discontinued in November 2003, when the Lebanese government imposed visa restrictions on a number of countries.
South Korean embassy officials declined to offer an explanation for their country’s inclusion on the list, although one official suggested Lebanon felt that South Korea had not been doing all it could to facilitate visits to the country by Lebanese. They did suggest that the move would boost South Korean-Lebanese business ties. In fact, since the decision was implemented, a South Korean trade delegation has already paid a visit to Lebanon, which imports roughly $64 million in South Korean products a year, for only $8 million in exports.
“Business people have very busy schedules,” asserted the head of the delegation, Youn-Hwan Chung. “We were having to wait up to three weeks for a visa. And even then we weren’t sure of getting it.”
But although the visa hurdle has been dismantled, other obstacles to increased South Korean-Lebanese business remain.
“There are differences in business culture,” noted Chung. “And South Korea is geographically far removed from Lebanon. The Lebanese are more familiar with, and prefer, European brands. And Lebanon’s IT industry is not well developed. The Internet is very slow.”
“Most South Koreans still think Lebanon is very dangerous,” observed the South Korean embassy’s commercial attaché, Kihyoung Choe. “Members of the trade delegation were asking me if it was safe.”
The South Korean ambassador to Lebanon, Young-Sun Kim, however, remained upbeat: “I want to talk only about the positive aspects,” he said. “There is no doubt that the move will greatly contribute to the promotion of business between the two countries.”
Cool heads (if they stay on) prevail
The killing in Iraq of three Lebanese businesspeople, including a married couple, and the wounding of another, as well as further kidnappings of Lebanese since then, have dealt more serious blows to already faltering Lebanon-Iraq trade.
Initial business optimism generated by the quick fall of the former Iraqi regime has been replaced by uncertainty as the security situation in Iraq fails to improve. In recent months, a number of Lebanese businessmen and truck drivers have been kidnapped. According to the satellite television station Al-Jazeera, a statement on the Internet signed by a militant Iraqi group threatened to “slaughter any Lebanese working with the US Army and drag their bodies through the streets of Iraq.” Hundreds of Lebanese have flocked to Iraq over the last 15-16 months, in a quest to cash in on the massive postwar reconstruction effort.
“If there wasn’t so much money to be made in Iraq, we would already have stopped sending people there,” acknowledged Elie Shamsy, a manager of Beirut Cargo Center, which transports goods to Iraq. However, the company has stopped using Lebanese drivers. “We only use Syrians and Iraqis,” said Shamsy, “because they appear to be targeted less.”
But it is in Iraq, asserted Lebanese Industrialists’ Association head Fadi Abboud, that the time-honored determination of Lebanese industrialists has become again apparent. Despite the dangers, he noted, scores of Lebanese businesspeople remain in the country, and others continue heading there. “Iraqi importers who ask for half a million dollars of cement from Lebanese firms can’t provide security. People don’t want to send employees to Iraq. We’re finding it difficult to insure. But the Lebanese will not stop doing business with Iraq. Lebanese businesspeople have historically overcome hardship. They embody the SAS (British commandos) motto: ‘Who dares, wins.’”
A tough financial run
The organizers of the Beirut Marathon–in its second edition this year–say they have learned from last year’s mistakes. In their haste to stage an impressive debut event in 2003, they failed to pay enough attention to spending. The result was a whopping $1.5 million bill–of which only about $150,000 was covered by sponsors. (Close to a million was covered by the marathon’s patroness, May Khalil).
This year, the event organizers have been careful to shop around for the best deals, and have also been able to attract an additional 6,000 contestants. As a result, this year’s bill will run at roughly $800,000–a welcome diminution of last year’s cost, but significant nonetheless.
Despite this, cajoling potential sponsors into forking out cash is not proving much easier this year. The organizers expect only $50,000 more than last year’s $150,000. “It is very, very tough to get hard cash out of companies,” observed Event Coordinator Nadine Moawad. “There is a recession. Everyone says they don’t have the cash to spend on events.”
The race organizers hope that in a few years they will be self-sufficient, but acknowledge that a long road lies ahead. “We will have to show potential sponsors the added value,” noted Moawad. “But it is difficult to get that message through. For the moment, sponsors are not getting a feel of how important this event really is.”
“And even when we do break even, we will have to cover the losses of previous years,” remarked Beirut Marathon General Manager Ara Artine.
Growing mini cards
Lebanese banks Fransabank and Banque Audi recently introduced a new debit card format marketed as “mini cards” due to their 43 percent smaller size over standard plastic.
Issued in collaboration with Visa, the new cards offer advantages for participating banks through the prospect of increased point-of-sales (POS) purchases by consumers. In their functionality, mini cards are engineered to POS usage because they cannot be used in standard Automated Teller Machines (ATMs). A value added is that users carry a fashionable accessory characterized by “greater portability”, thanks to a hole in the plastic allowing it to be attached to a key chain or a mobile phone.
For banks, debit card POS purchases are more profitable than withdrawal of cash from ATMs, which still accounts for most instances of debit card usage. Debit or cash cards, such as the Visa Electron card popular in Lebanon, do not carry credit features.
“The purpose is to migrate people from using ATMs to more POS spending and change customer habits away from withdrawing cash,” a representative of Banque Audi’s payment cards department told Executive. He confirmed that the cards were targeted at “all Visa Electron holders in general but especially young, outdoorsy type of people.” Until the beginning of 2005, Banque Audi is offering their Visa mini card for free.
Fransabank is going after youths by stating in a flyer that its mini account and card are targeted at “cool and trendy people,” with offers of free benefits, including movie tickets.
Perhaps confounding consumers is a new prepaid card by BLOM Bank, introduced about two weeks after Banque Audi publicized its card. BLOM’s standard-size card was advertised as “mini”, but that referred to its ceiling of $500. Apparently targeting similar audiences as the Audi and Fransabank products, the bank crafted an extensive promotional program of discounts at places favored by young consumers (Virgin, Quicksilver, Chili’s, Waves, and on Cyberia).
Banking on Lebanese films
On September 19, Lebanese director Philippe Aractingi started the shooting of Autobus, a full-length musical that he hopes will receive international play. It is Lebanon’s first feature film fully financed by private investors.
“To make the film,” said Walid Hayek, investment manager at the Arab Finance Corporation (AFC), “we had to come up with a new financial structure called investment certificates. Unlike shares, they offer a right on future revenues, but no right to vote. We had to avoid the situation that the investor on paper was able to interfere with the director.”
Asked to help in putting together a finance structure by the film’s producer Fantascope, AFC set up a proper business plan based on estimated cost and revenues to attract investors, and issued 140 investment certificates of $10,000 each, producing a total budget of $1.4 million. “So far, we’ve managed to raise $840,000,” said Hayek, “which is enough to make the film. The remainder of the proposed budget, $560,000, is mainly meant for marketing and promotion. Now that shooting has started, however, I’m sure we will be able to attract further funding.”
The film’s projected revenues have been estimated at $2.1 million, which include theater admissions in Lebanon and the Middle East, as well as from television, video and DVD sales. What’s more, Fantascope and Hayek hope to cash in on the sales of CDs and cassettes with the film’s music.
So far, all the investors are Lebanese, among whom the LBCI chairman Pierre Daher. “Daher is a strategic investor,” said Hayek, “who is not just interested in making money, but who wants to test the market and see what the possibilities are. If this film works, he may be interested in making more.”
This seems to be the motto for all involved in the making of Autobus: including AFC, which has traditionally been focused on investment banking, brokering and portfolio management. “We are interested in targeting other sectors,” said Hayek, “among them audiovisuals, which have so been disregarded by bankers.”
Competing over Martyrs Square
To introduce a new face for Martyrs Square and the central axis of Beirut’s central district, Solidere has launched an international Urban Design and Ideas Competition open to both professional architects and students of architecture, urban design, urban planning and landscaping. In past plans, the axis along the square was meant to be Beirut’s main business and office area, but that seems to have changed.
“There are no limitations or requirements concerning the way participants can envision the new center of Beirut,” said Fadi Jamali, manager of Solidere’s Town Planning Department “It’s a mixed use area, so the square’s direct surroundings can be destined for shops, offices, or any other activities.”
However, Solidere does have a preference that the new heart of the city should reflect the reemergence of the center as a meeting point for people of all confessions and backgrounds. The notions of connection and communication play a major role and in that sense Solidere hopes the new center may become something of a media city.
“Martyrs Square symbolizes the link between past and future, East and West, old and new,” said Jamali. “In that sense not only the media, but also Internet companies and ad agencies could play a role.”
Solidere will award six cash prizes for student participants in the first stage with a ranking of the first three selected urban ideas and three honorary mentions. In addition, 5-7 professional architects will be asked to further develop their ideas and will be paid a fee for their work.
The second phase requires professional accreditation. Three cash prizes will be awarded after the second stage, while the winner will cooperate with Solidere in executing the design. Mid October the jury will decide upon student winners and the architects who will go through to the second round, the deadline of which is mid April. Winners will be announced on Martyrs Day, May 6, 2005.
A diplomatic advertiser
Bigger is not always better, at least that is what the newly founded advertisement and marketing company Adbox is out to prove. With a personalized market approach and a touch of feminine charm, the Gemazieh-based company has quickly found its niche in Lebanon’s highly competitive market.
“Adbox is aspires to be a boutique agency offering tailor-made marketing and advertisement services for small and medium sized companies,” said its owner Ghida al-Solh. “Not everyone can afford or wants to work with the big agencies, as they will never be treated as premium clients. Adbox offers a premium, personalized treatment and the same international standard.”
The company offers anything from public relations, media strategies and brochures to ads, packaging, corporate identity development and direct mailing. Having opened only this summer, Adbox’ clients include the jeweler Tufenkjian Freres, the Rest House in Tyre, Al-Baba Al-Mumtaza Sweets and Bear Real Estate. “For the next two years,” said Solh, a Lebanese American University graduate who worked for 7 years in a PR and marketing company, “I want to work with no more than six clients, after that we’ll see.”
To keep the costs down and remain flexible, Adbox is largely a one-person show. “Apart from my secretary,” Solh said, “I have no staff. I work only with freelancers on a project basis. I know most people in the business. While one may be excellent in layout, another’s specialty may be packaging. So, not only do I keep my operating cost down, I also work with only the best in the market.”
The young entrepreneur thinks she has one more asset allowing her to compete in Lebanon’s advertisement and marketing market, which she defines as “male dominated and rather aggressive.” She claims to “work with a much smoother, yet no less determined approach. I guess I’m just a bit more diplomatic. Perhaps that’s the family genes at work.”
We can use more education
Returns on university investments are highly beneficial to both individuals and national economies, reports the Organization for Economic Cooperation and Development (OECD) in its latest report on global education levels. According to the September 2004 report, individuals investing in their tertiary education on average achieved substantially higher returns than the potential rate of return from investing in financial markets. As for the benefits to a country’s overall prosperity, across OECD countries one additional year of education was estimated to boost economic output by between 3-6 percent
In light of such findings, Lebanon’s unabated fascination with higher education should simply spell good national economic prospects. Today, with an excess of 40 licensed institutions of higher education, the Lebanese university and college sector is continuing to see high demand from education seekers.
When it comes to matching supply and demand, the main surge in student numbers seems to be occurring at institutions with low- to medium-range tuition fees, which were licensed four to five years ago and, since, undertook massive expansion of their facilities. Admission officers at the American University College for Science and Technology (AUST) last month were working overtime to process student applications, anticipating a total enrolment of 4,500 or more, a 50 percent increase over 2002. At C&E American University, administrators told Executive they expected enrolment to reach 2,000 on their three campuses. The institution’s first two graduation classes of 2003 and 2004 numbered 300 in total. Another provider with massive ambitions is Global University, which wants to grow from a student body of 300 students today to “become one of the largest campuses in the area,” says an official,
All three of these education providers have tuition fees in the range of $115-130 for undergraduate courses.
Top-ranked institutions have managed steady but controlled increases of student numbers. In the fall 2004 enrolment season, AUB’s Olayan school of business was keeping its student numbers stable while new facilities are under development. At AUB overall, where the tuition fee per credit hour costs up to $500, total enrolment of undergraduate and graduate students increased from 6,200 in 2001 to nearly 7,000 in spring 2004, with admittance rates for freshmen above 75 percent over the last three years. The shared vision of Lebanese education providers is to function as a regional center for excellence in training. But the rapid growth in institutions and students must, first, prove that it can provide quality across the board.
The perils of cheaper gas
After a summer of high-flying energy costs, oil prices rose above $46 as autumn knocked, minimizing prospects in the foreseeable future that a barrel of crude would be available for $30 or less in international markets. Earlier this year, oil exporting countries and analysts had still claimed that a target range of $28-35 was attainable. Today, however, some analysts contend that the recently feared $50 threshold could soon turn out to be a price platform rather than a ceiling–the high price levels making Western consumers pay at the pump for the cost of the Iraq war.
In this context, Lebanese motorists ought to dismiss any hopes for a near-term reduction in gasoline costs to $10 per 20-liter tank filling. However, the political decision to not let gasoline prices rise above $15 per tank has thus far shielded local drivers from possible further increases. “We used to raise prices immediately after they increased on international markets, but this is no longer done,” confirmed an analyst at the ministry of finance.
So at least for the time being, Lebanon’s system of government-mandated gasoline prices, with fixed trade margins for gasoline importers and gas stations, works to the benefit of the consumer, while the Lebanese state is bearing the burden of international oil price increases. It is impossible today to predict the exact impact of international oil market developments on Lebanon’s fiscal situation, however upward price movements will inescapably cut deeper into the state’s revenue from excise taxes on imported oil derivatives. Over the past years, these taxes had increased dramatically in their importance, reaching almost $500 million in 2002. In the context of the dismal state finances, it appears only a matter of time until the government could see itself forced to look at re-adjusting those revenue flows and lift the price cap on gasoline, even if this risks another price shock to the economy.
