0nly on Sunday mornings can the
thunder of horse hooves and the
cheers and moans of men be heard
rising up from the 84-year-old Beirut
Hippodrome. In stark contrast to the glamorous
Mediterranean racetrack it was before
the war, the facility today is in a sorry state.
Its concrete bleachers look like the seating
one would find in a third-rate football stadium.
The lighting for the track was blown out
during the war and never repaired.
Consequently, potentially lucrative night
races cannot be held. There are only 10% of
the number of stables today than there were
during the early 1970s. And the
Hippodrome has become a big money loser.
Between 1995 and 1997, the Association
for the Protection and Improvement of
Arabian horses (SPARCA), a non-profit
organization that has been managing the
track since the late I 960s, reported a loss of
about $700,000 from the facility,
which has yearly revenues of about $14 million.
Weekly losses on races alone total roughly
$20,000 on revenues of $210,000. SPAR CA
blames the war for many of the racetrack’s
ailments. With fewer stables and less horses,
races can only be held once a week, limiting
revenues. And with finite resources,
SPARCA says that it cannot market the
races properly. The organization also complains
that the taxes it pays are too high.
While 72% of the bets are distributed
among the winners, trainers and jockeys,
14% goes to the ministry of finance, 2.24%
goes to the municipality, which owns the
track, and SPARCA gets 11. 76% for managing
the facility. “Our percentage cut
comes to about $1.5 million a year. That’s
not enough to cover the costs of maintenance,
employees, and to make improvements
at the same time,” says Nabil de
Freije, SPARCA’s president.
But most problematic is that nearly
$800,000 in bets are lost each week to illegal
bookies – called paroli – and the police
have done virtually nothing to stop them,
according to SPARCA. Unlike the
Hippodrome, which pays winners $1 for
every $1 bet, bookies pay $1 for every 60
cents. But the paroli don’t pay track maintenance
fees or taxes. A person betting with
the paroli doesn’t even have to attend the
races, avoiding the track entry fee. What’s
more, the bookies are able to extend credit
lines, while bettors at the track must pay
cash. “If the government stopped the
paroli, our revenues would increase dramatically,”
says de Freije. Many public
officials sympathize with SPARCA. “The
government should fight illegal betting to
improve our income,” says Abdel Munim
Ariss, mayor of Beirut.
But not everyone is convinced that the
racetrack’s problems are the result of factors
outside SPARCA’s control. The paroli,
after all, have been around since the 1920s,
and they didn’t keep the Hippodrome from
generating a healthy income during its
heyday. “In all parts of the world, illegal
bookmaking is synonymous with gambling,
especially horse racing. You can’t stop
it, and it represents only part of the problem
here,” says Faisal Abou Hassan, a horse
breeder and trainer. Some bookies claim that
they’re actually money generators for the
Hippodrome. According to one, if many
clients are betting on a particular horse,
and the odds on that horse are low, a bookie
will bet his own money at the
Hippodrome in order to narrow the odds and
reduce his liability. “If it w-+1sn’t for the
paroli, the Hippodrome would go bankrupt.
Two-thirds of its income is from the
bets we place. They would beg us to continue
if we stopped,” he says.
According to SPARCA’s critics, bad management
is the root of the problem. The organization
has been accused of everything
from failing to abide by its contract to mismanaging
racetrack funds. Its members are
blamed for failing to pay the proper rental fees
on stables. Despite complaints about high
taxes, over the last three years the association
has been granted a series of exonerations
and deferments. Total taxes owed reached
$1.06 million by the end of 1999 and still
haven’t been paid. The most recent reprieve
came with a decision of the council of ministers
last year to give SPARCA a 50% tax
deferment, reducing the amount paid to the
ministry of finance from 14% to 7%.
As early as February 1999, Ariss
described the old contract with SPARCA as
unsound. Even Mohamed Kabbani, currently
a de: Freije ally, has said that the
Hippodrome should be managed as a
build-operate-transfer (BOT) contract. In a
press conference two years ago, he said
SPAR CA shouldn’t be allowed to bid on the
BOT until its taxes were paid in full. In fairness,
SPARCA has made some improvements
to the Hippodrome. A computerized
betting system was installed about a year
ago and 12 legal off-track betting centers
were recently opened. But most of
these improvements came after years
of promises and delays.
In January 1998, the government
and the municipality of Beirut decided
to change things. Rather than continue
with SPARCA, they opted for a BOT
arrangement. Private companies
would be allowed to bid for the rights
to manage the Hippodrome for 15 to 20
years, and the company would be
expected to make major renovations to
tum the facility into a high-caliber
racetrack. The council for development
and reconstruction (CDR) drew
up a contract, the municipality
approved it and a consultancy firm
called DG Jones was assigned to study
the bids and assess the qualifications of
bidders. Last March, the municipality
sent a letter to Yakoub Sarraf, Beirut’s
administrator, requesting that he
approve the plan. More than $15,000
was set aside to publish the tender in local
and international newspapers.
SPARCA is today one of the staunchest
critics of a BOT, but it was one of the first to
suggest the idea. In a letter dated October
29, 1997 to then prime minister Rafic Hariri,
Pierre Pharaon, SPARCA’s president at the
time, submitted preliminary plans for a $24
million renovation of the Hippodrome. They
included improvements to the racetrack’s
infrastructure, the installation of a computerized
betting system, the building of an equestrian
club and the opening of 40 new offices
for legal off-track betting. The letter suggested
that SPARCA carry out the project and that
it would need a few years of tax breaks to pay
for the renovations. But if the government did
not opt for SPARCA, Pharaon suggested the
project could be tendered as a BOT.
SPARCA was not the only organization
with ambitious plans. Hippodrome de Beirut
Investissement (HBI), a company formed in
1998 by a group of Lebanese and European
investors, stepped forward with a proposal of
its own. It also had plans for a $24 million renovation
of the facility. But unlike SPARCA,
HBI was not asking for tax breaks or a crackdown
on the paroli. But things did not go quite
as planned for HBI. “As we were waiting to
submit our bid, things got complicated,” says
Louis Maaroui, HBI’s general manager.
“Beirut’s administrator (Sarraf) did not sign the
OK to proceed, and we were later shocked to
find out that Corm had other ideas.”
The government decided to put the BOT
idea on hold and extend SPARCA’s contract
for another three years. Rather than the $24
million renovation plan, the ministry of
finance prepared a scaled-down $4.2 million
scheme that SPARCA would be responsible
for implementing. According to Ariss, the
Hippodrome cannot be turned into a BOT
until the relevant privatization law, currently
being studied in parliament, is passed. But
several public facilities are currently operating
under BOT contracts. For example, the
airport parking lot, which is managed by the
Kuwaiti company Mohammed Abdul
Mohsen Al-Khorafi & Sons.
“We want the BOT but we didn’t want to
create a void while the [privatization] law
was being drafted. [Later] we will evaluate
the contract and its result to determine if we
continue with SPARCA or not,” says Ariss.
In the meantime, the government has
agreed to grant SPAR CA $10.7 million
worth of tax credits for the renovations. It
has also agreed to incur the projected losses
of $1.2 million during those three years,
which SPARCA has agreed to pay back later.
And since the revenue projections
in the contract are for six years,
SPARCA could easily make the case for a
further three-year extension of its contract.
The $24 million renovation plans had to be
scrapped because they were too ambitious,
says Corm, adding that SPARCA would have
difficulty in securing financing for the
scheme. “Small is beautiful. We know the
results with big international projects. Look at
what happened with Solidere, the economy
paid a big price,” he says. And what about HBI
and its plans? ‘The French company came to
us unofficially. But when asked to provide us
a feasibility study, they gave us bits and
pieces of information and we didn’t take
them seriously,” says Farid Meshaka, Corm’s
advisor. According to Maaraoui, HBI could
not divulge a detailed feasibility study before
submitting its sealed bid because there was a
risk that the study would be leaked to competitors.
But, he says, the company’s intentions
were explained to Meshaka in detail.
The rehabilitation plans are directed
toward improving the Hippodrome’s infrastructure.
According to the ministry of
finance, the improvements should boost the
racetrack’s revenues from $13 million to $78
million within six years. During the same
period, SPARCA’s turnover would increase
from $2.5 million to $8.6 million with the government’s
share jumping to $26 million and
the municipality’s to $10 million. De Freije is
happy with the new arrangement. “BOTs
don’t work,” he says. ‘Those people are here
for one reason only: to make the most money
they can and leave. Bettors will lose trust,
knowing that it isn’t a non-profit organization
running the racetrack.”
Nonsense says Maaraoui. HBI would run
the Hippodrome better than SPARCA
because if it doesn’t, its investors wouldn’t
make money, he explained. The lure of
profits would be the incentive to do a good
job. And making the track a financial success
requires gaining the trust of bettors.
“This new document is a scandal,” says
Maaraoui. “The system that’s in place now
will encourage even more illegal betting.”
He’s skeptical that the government will be
able to generate the projected revenues from
such a small investment. HBI, he says, forecasted
that its $24 million renovation plan
would boost annual revenues to just $50
million. “For 30 years SPAR CA lost money.
But instead of giving someone else a chance
to make money, the government is repeating
the same mistake; only this time it’s giving
the association more money than before,” he
says. “We hope the new government will
reconsider its position and abide by the
decrees. But I’m not sure how patient my
investors will be.”
Other options
A new location
Horse breeder Faisal Abou Hassan thinks that no matter who runs it, the current
Hippodrome is doomed to mediocrity. Having a world class racetrack will require building
new facilities in a different location, he argues, as the Hippodrome’s 220,000m2 is not sufficient.
He proposes building a new 500,000m2 to 700,000m2 racetrack on the outskirts of
Beirut, suggesting his own 400,000m2 plot of land in Choweifat or reclaiming land by the airport,
which would give ships easy access to the track. He estimates the project would cost
$350 million to $500 million, while investors could be found in the Gulf, where most of the
region’s racehorse owners live. Due to high temperatures, they can only run their horses for
four or five months. “We have the best weather year-round. They would love to come here
for the remaining seven or eight months,” says Abou Hassan. He adds that large international
racetracks make money because of the big cash prizes, reaching $6 million a race. This money
can be invested in horse breeding and training. The prize money generated at the
Hippodrome, which has about 800 stables, is not enough to cover the $8,000 it costs horse
owners to maintain their animals. A future racetrack would need at least 2,500 stables, both
a grass and sand track, a swimming pool for training the horses and a veterinary hospital.
A park
Greenline, an organization dedicated to the conservation and creation of green areas,
has been campaigning to turn the Hippodrome into a park. “We thought that the
matter would take a couple of months,” says Salman Abbas, secretary general of
Greenline. Beirut has just 0.8m2 of green space per person. “The world standard is 40m2
and anything below 20m2 creates a health danger,” says Abbas. “I’m only asking to give
every 1,000 citizens as much green space as one horse takes. Is that too much to ask?”
Unfortunately for Greenline, the municipality’s answer was yes. The racetrack brings
in too much money to turn it into a park. But the municipality did decide to dedicate
65,000m2 of the existing 220.000m2 as a public green area.
A grand prix race circuit
K haled Altaki, a local businessman, wants to turn the Hippodrome into a Grand Prix
race circuit. Altaki’s idea is certainly not new. Five years ago, he gained notoriety
for designing the Beirut Hariri Circuit, which ran along the Corniche, in the hopes of hosting
a Formula One race. That idea was later scrapped. But Altaki never gave up on the
dream of Michael Schumacher zipping his Ferrari through Beirut. The new Victory Circuit
of Beirut would be a 3.1 -kilometer course with construction costs estimated at $20 million.
But that’s less than the expected $38.5 million in revenue that Altaki says a Formula
One race would bring in. A Formula Three race would generate $7.5 million.
Altakl has one condition: “I will only do this if the Hippodrome moves to another location.
I’m not here to deprive people of their horse racing.”
Either way, Altaki has some competitors. The government has formed a committee
with plans of hosting a Formula One race in the streets of downtown.
