Bank of Beirut links up with IFC
Bank of Beirut has become the third bank in Lebanon to join the International Finance Corporation’s Global Trade Finance Program, which supports trade with emerging markets worldwide and promotes the flow of goods and services between developing countries. The IFC provides guaranteed coverage of bank risk, allowing recipients to expand their trade finance transactions within an extensive network of countries and banks and to enhance their trade finance coverage.
The Global Trade Finance Program offers confirming banks full or partial guarantees against underlying trade instruments and covers the risk of participating issuing banks. It allows issuing banks to increase the volume and value of trade transactions with enhanced tenors and access to competitive pricing terms.
According to Bank of Beirut’s chairman and general manager Salim Sfeir, “Bank of Beirut has long been at the forefront of commercial banking in Lebanon, mainly trade finance, and we deal in this respect with an extensive network of correspondent banks throughout the world. By joining IFC’s Global Trade Finance Program, we will further expand this network and hence create new opportunities for our customers.”
The IFC first engaged with Bank of Beirut in 1997, with an eight-year credit line for industrial and housing loans for Lebanese private-sector businesses and individuals.
In another development last month, the Bank received a $10 million soft loan from the Abu Dhabi-based Arab Trade Financing Program, to finance foreign trade in Lebanon. The ATFP is a specialized multi-Arab financial institution set up in 1989 to help develop Arab trade and increase the competitiveness of Arab producers and exporters.
More regional activity
Lebanon’s banks continue to escape the confines of a limited local banking sector through regional expansion and development. In a further manifestation of the trend, Byblos Bank Syria – the Syrian arm of Lebanon’s Byblos Bank – in April signed a euro 40 million long-term project development financing partnership agreement with the European Investment Bank (EIB), the Commercial Bank of Syria, and the Unit of Finance Management for Small and Medium Syrian Enterprises (FMU). The agreement is the first of its kind in Syria, according to Byblos Bank, and was inked within the framework of the Euro-Mediterranean agreement.
Byblos Bank Syria will on-loan the EIB funds to its clients, owners of Small and Medium Enterprises and other applicants who fulfill the loan criteria, covering up to 50% of the cost of certain investment projects in Syria. Amounts totaling not less than euro 100,000 will be on-loaned to applicants whose fixed assets do not exceed euro 75 million and who do not have more than 500 employees. The loans will be for a duration of four to five years. Premiums must be settled semi-annually, with a one-year grace period.
“It fits in very well with our overall regional expansion strategy,” said Byblos Bank Assistant General Manager and Head of Business Lines Fadi Nassar. “Lebanese banks are growing bigger, and since Lebanese markets are very small and Lebanese banks have expertise in terms of human resources and know-how, we are expanding. Naturally, you are going to expand into markets where you don’t have huge banks that are going to compete with you. So we are entering emerging markets, where spreads are still attractive and where a presence for huge institutions is risky or not very attractive. Syria is an example. It’s developing very fast and is a very promising market.”
He said Byblos Bank was already also active in Sudan and Algeria, has a representative office in the UAE, and is currently seeking a license for Iraq.
Meanwhile, Bank Audi SAL – Audi Saradar Group obtained an investment banking license for Saudi Arabia, allowing it to launch Audi Saudi Arabia, which will offer a full range of investment banking services. The Audi Saradar Group is contributing 70% of Audi Saudi Arabia’s capital. The remaining 30% belongs to prominent Saudi individuals and business groups. It is the first Lebanese financial institution to recently enter the Saudi market.
“In tandem with its vision for regional expansion, Bank Audi aims at positioning itself as a regional financial group that serves its clients across increasingly integrated markets,” said Bank Audi SAL – Audi Saradar Group Chairman and General Manager Raymond Audi.
Audi Saudi Arabia will officially launch this autumn, and will be based in Riyadh. Outside of Lebanon, the bank is already active in Syria, Jordan, Egypt, France and Switzerland, is planning to start up in northern Iraq by the end of the year, and is eyeing Algeria, Sudan and Yemen.
Finally, Bank of Beirut SAL has been given permission to open a branch in the Omani capital Muscat, with start-up capital of $26 million. It also operates in the United Kingdom, through a wholly-owned subsidiary in London, runs an offshore banking unit in Cyprus, and has representative offices in Dubai, the Nigerian capital Lagos, and Baghdad.
Investcom comes
in on the inside
Investcom started off its operations in 1984, during the height of the Lebanese civil war, by providing telecommunications engineering services in Lebanon. It later constructed, implemented and launched Lebanon’s first AMPS-based mobile network in 1991 – the first such privately owned and operated network in the Middle East. In 1994, it acquired its first GSM license when it won a BOT contract put forward by the late Rafik Hariri, allowing it to operate the France Telecom Mobile Liban (FTML) network – more commonly known as Cellis. It expanded its GSM operations into 10 countries in Africa (Liberia, Ghana, Benin, Guinea Bissau, Guinea and Sudan), the Middle East (Syria and Yemen), Asia (Afghanistan) and Europe (Cyprus), effectively offering services to over 4.8 million customers by the end of 2005. And it made a bang when it listed its shares on the London and Dubai stock exchanges which valued the company at some $3.3 billion.
And Investcom is at it again. However, instead of talk that Azmi Mikati’s firm has acquired a new license or company that would allow it to further expand its operations, the Lebanon-based operator has effectively been gulped up by Johannesburg-listed MTN for $5.5 billion – creating one of the largest emerging market companies in the world. The cash and shares deal – one of the biggest foreign takeovers by a South African group – will give MTN a presence in 21 countries, compared to 11 at the moment, and increase its subscriber base from 23 million to 28 million. The combined company will create an enterprise worth over $23 billion – a new force to be reckoned with.
The deal was a surprising move, and no one saw it coming. It is true that analysts have continuously tagged Investcom as a perfect company to take over since it is neither too big nor too small, however, days before the takeover announcement news reports were touting it as the front-runner for a $5 billion takeover of Nasdaq-listed Millicom. If the reports were accurate, Investcom’s bid for Millicom would have beaten state-owned China Mobile. Since MTN’s takeover, Investcom backed away from the Millicom bid, as well as bids for licenses in countries such as Egypt.
In early May, Mikati told the Financial Times that “being bought by MTN was more attractive than buying Millicom… We think this transaction makes much more sense for the shareholders of both companies.” Rest assured that after the Mikati family sold its 70.6% stake in Investcom and now owns 10% of MTN, the deal was not only attractive, but also made a lot of sense.
Movenpick takes top spot
Luxury spas only really began to appear in Lebanon after 2000. Although spa treatments were already familiar to Lebanese clientele, the “spa experience” was not.
This has changed very quickly. There are currently eight “elite” spas in Lebanon and many more slated to open in the next few years. With much of the domestic market still untapped and tourism and business travel expected to rise, the potential for growth is enormous.
Earlier this month, the Movenpick Hotel & Resort Beirut’s Essential Spa took home the Gold Award for “Best Spa in the Middle East” at the annual MENA Travel Awards in Dubai. Not even four years old, the Essential Spa has already reached the top of the industry.
The Essential Spa’s success is indicative of the sector as a whole. Despite the industry’s youth, Lebanon’s spas are all reporting operating profits.
In part, Lebanese spas have been able to succeed because none is a stand-alone venture. Most spas are affiliated with hotels, providing them with a financial safety net and built-in client base. Despite this, local residents are their main customers. Although hotel guests comprise as much as 90% of clientele at the Essential Spa during peak seasons, local visitors still represent 65% of clients overall.
These affiliations have also enabled Lebanese spas to bring in innovative and experienced managers. When Johan Hellstrom began as spa manager at Le Royal Hotel one year ago, the spa was breaking even. Since then, Hellstrom claims he has managed to triple revenues.
Many spas are now moving towards holistic treatments and the “wellness” concept, to enthusiastic response. Lebanon’s newest spa, which will open at Edde Sands Beach Resort this summer, is entirely designed around wellness, and will offer packages integrating everything from treatments and exercise to cooking classes and lifestyle consultation.
Spas are also working to remove the “elite” stigma associated with the industry. With costs for basic treatments under $100, the spa experience can be accessible to a much broader clientele base. As the Intercontinental Phoenicia’s spa manager John Hopp explains, a spa visit can be “a vacation in a day.” And who in this country couldn’t use a holiday from the stresses of daily life?
Syria looks cautiously ahead
to new economic plan
In a move that some analysts are interpreting as the glimmerings of reform towards a market economy in Syria, Damascus has approved the country’s ambitious Tenth Five-Year Plan (FYP).
President Assad ratified the new economic program in mid-May after the document had received the green light from various state bodies, including the ruling Baath Party, which despite significant opposition had approved the plan’s concept of a “social-market economy” at its annual congress in June 2005.
With the door now effectively open for meaningful economic reform, many progressive economists are urging the government to make concrete and rapid preparations for the potentially catastrophic effects of falling oil income. These currently account for some 15% of GDP and 70% of Syria’s export revenues, a figure which is predicted to shrink to 10% by 2010 as oil reserves dwindle.
To soften the blow, the 1000-page FYP – in some ways more a policy reform document than a classic plan – aims to attract higher foreign investment, reform the subsidies system, prioritise regional development and enhance the role of the private sector. It hopes to achieve a 7% GDP growth over 2006-2010, halve the poverty rate and create 1.45 million new jobs in the process.
Seen as the driving force behind the plan is Abdullah Dardari, a former UNDP advisor who in December 2003 was appointed Deputy Prime Minister of Economic Affairs. Dardari also heads the State Planning Commission (SPC), an independent body which has traditionally been in charge of economic planning.
In drawing up the plan, the SPC received technical assistance from GTZ, the international cooperation arm of the German government, as well as the local UNDP office.
“This is the first FYP to be based on indicative planning,” says Dr. Albert Kraft, who leads the GTZ team in Syria. “In previous plans there was no proper macro-economic targeting based on past data. Although obtaining accurate statistics to work from is highly difficult here, the plan is not based purely on ideas this time.”
Overhauling the subsidies system will perhaps be the most delicate challenge, with the threat of price increases already causing public concern.
The Syrian government currently spends the equivalent of 14% of GDP on subsidizing a number of basic products and services, including water, electricity, sugar, rice, wheat, diesel and fuel oil, in order to keep such commodities affordable.
But white-hot international oil prices mean that the state’s energy burden is becoming heavier, a burden which Prime Minister Najib Otri said last October “cannot be endured any longer.”
These are early days for the new plan, but for many observers this is a window of opportunity to make concrete steps towards a market economy before the oil runs dry.
“It will be a gradual learning curve,” says Kraft, “but economic reform has begun now, and the process will not stop.”
Messing about in boats
It may not have the glamour of Dubai, but following a Hariri-assassination-induced hiatus, the regional Beirut Boat Show returned to the Joseph Khoury Marina in Dbayeh. IFP Group hosts the show in conjunction with Messe Düsseldorf, hosts of the world’s biggest boat show. According to Edward Aoun, director of IFP, exhibitor numbers – both on land and in the water – were up 30% on 2004.
Aoun said the growth in exhibitor figures could be attributed in great part to marketing by IFP’s international network of representative offices and agents, and to the benefits of being associated with one of the world’s leading exhibition organizers.
“There’s a lot of opportunity here, but a lot of things have to be made easier, such as customs and transportation,” said German exhibitor Hartmut Neugen, managing director of marina consultants and equipment suppliers Marinetek Neugen.
The show counted over 100 stands, Aoun said, from at least 20 countries. Aoun declined to reveal how much the show cost but did say that every dollar invested by an exhibitor yields between four and eight times as much to the host city.
The Boat Show focused, for the second time, on the region’s growing marina-building industry, with a ‘Seafront Development & Real Estate Conference.’ Aoun claims that “billions” of dollars have been invested in the marina sector in Lebanon alone, and over $300 billion in the Arab world as a whole.
Emphasis was placed on the importance of constructing environmentally-friendly marinas. Dan Natchez, of waterfront design consultants Daniel S. Natchez & Associates said: “Done right, waterfront development improves the quality of life. Done wrong, you can have problems.”
Asked if Lebanon, with its notorious disregard for seafront water pollution, was ‘doing it right,’ he said: “New York City used to have a very polluted waterfront. In ten years they have massively improved their water quality. It takes time.”
Prefab sprout
While gleaming tower blocks and corporate HQs rear their heads across central Beirut, another more modest aspect of Lebanon’s property boom also seems to be on the up.
A Lebanese firm called Megabox has recently been marketing prefabricated concrete houses, which it bills as “the concrete modular housing system.” Megabox manufactures the buildings at its own special plant in Batroun, close to the cement-producing plants at Chekka, and says it is able to deliver the finished products to customers roughly a month after orders are placed.
“We’ve been making prefab warehouses and storage hangars for about 15 years,” says Pauline Roukos, a sales and marketing representative at Megabox. “But it’s only in the last year that we’ve started selling prefab bungalows too. It’s a new product, and has only just begun to take off within the last few months, but we’ve already sold five houses and actually have a waiting list of orders.”
Roukos says that demand is coming from more rural regions outside of Beirut, especially in the Bekaa valley, where Megabox has just delivered a house to Zahle. The buildings, for which customized designs are available, come with all mod cons, including a fully-equipped bathroom, kitchen, water tank and even an inclined roof as an added extra.
And while concrete prefabricated buildings might not have the same kind of allure as an internationally-designed seafront apartment block in downtown, their own brand of appeal is fairly obvious.
“A 127 m2 house costs about $28,000,” says Roukos, who expects demand from residential clients to grow over the coming months. “Plus, all of our houses come with a lifetime guarantee.”
Forum for reform
The region must take advantage of the oil boom to push through much-needed reforms to help create jobs for a young population and lay the groundwork for sustainable, long-term economic growth.
That was the message hammered home by the Arab world’s top CEOs, ministers, bankers, investors and analysts, who gathered at the Arab Economic Forum in Beirut to analyze the collapse in Gulf stock markets, work out how best to invest petrodollars and how to open up their economies.
Henry Azzam, chairman of the new Dubai International Financial Exchange, warned investors who lost when the stock market bubble burst against repeating the mistake by pouring their cash into huge real estate projects and losing out when the property bubble bursts and the region is left littered with empty glass towers.
While the Gulf economies are growing fast – most notched up GDP growth levels around 7% last year – buildings do not create jobs in the long run.
Key to a productive economy is a dynamic private sector, and executives complained that governments still play too big a role in Arab economies, with many of the largest Gulf conglomerates either wholly or partially state-owned.
Privatization is a sensitive issue in any part of the world, but ministers as well as senior businessmen and experts concurred that there was no better time to push through reforms and increase cooperation than when the Arab Gulf is awash with cash to absorb what can be painful measures.
The timing of the conference, which came a day after over 200,000 people demonstrated against the Lebanese government’s planned reform program to cut the ballooning public debt, drove home just how hard it can be to take such steps.
Prime Minister Fouad Seniora, who opened the gathering at the Phoenicia Hotel with around 1,000 delegates promised to seek consensus over reforms but not to abandon the program. Without reforms, Lebanon cannot hope to attract the assistance it needs at the Beirut I debt aid summit, which was meant to take place last year but has been delayed by political squabbling.
Coming from a country with a long history of missed opportunities when it comes to sorting out its finances, and calling on Gulf countries to continue investing in Lebanon, Seniora warned that the oil boom presented the region with an opportunity it would be foolish to waste.
“Global economic changes are forcing us Arab states to move quickly to confront new challenges effectively, armed with the resources provided by the large increase in the price of crude oil that has created a lot of liquidity looking for new investment opportunities,” he said.
“We face the challenge of seizing this rare opportunity to move towards sustainable development.”
‘Enterprising’ solutions from Nokia
During a May workshop in Dubai, Nokia launched its latest range of phones, the E series, which includes the E50, E60, E61 and E70. The four models are the company’s answer to enterprise solutions, aimed at businesses in the new age of mobile email and the emergence of the now ubiquitous Blackberry. The good news for Lebanon is that while the technology to support Blackberry devices is not available in the country, Nokia E series phones use independent servers so the mobile’s wireless email functions can be accessed pretty much anywhere in the world.
Nokia has been developing the various E series components for the past two to five years after research showed that of the 360 million corporate email boxes in the world, only 1% (about 6 million) are mobilized making the potential for growth an attractive incentive. Although primarily a mobile email device, the E series also provides other broad range services for enterprises, including remote data management, whereby the mobile acts as an extension of a work station, accessing a company’s main IT server so that one is never really away from the desk. The E60 Smartphone even allows for a connection to a company’s main phone line, so that when an employee’s extension is dialed, the call is directly transferred to the mobile.
“In Lebanon, we expect to sell more of the E50,” explained Eric Anderbjörk, the business unit head of Nokia Enterprise Solutions. Expected to retail for about $300 when it hits the local market in September, the E50 is, the “cost-effective” version of the series, which comes with or without a camera and includes wi-fi or 3GPP (used for multimedia playback). Internationally, Anderbjörk maintained that the $440 E61 – already available on the market, along with the E60 and the E70 – is proving the most popular in terms of volume sales thus far.
Although no exact figures were readily available regarding sales of the E series in Lebanon, global figures for the company indicate that in the first quarter of 2006, Nokia sold 75.1 million units overall, representing 40% year-on-year growth and 35% of the global market share (an increase from 32% over the same period last year).
Garden delight
Displaying everything from plant bulbs to palm trees and (rather bizarrely) leather TV recliners, Lebanon’s third Garden Show was held last month on 30,000m2 of the capital’s 200,000m2 race track. The event was hosted by Beirut-based Hospitality Services and garden event organizer Myriam Shuman.
Of the 150 exhibitors hosted at the show, “around 70 were related to gardening and the art of gardening,” said Shuman. “Our goal is to really make it a garden show,” she said, “but that’s not easy. If people don’t see florists or big-name landscapers they say there’s no garden.”
Among the host of non-florists and non-landscapers represented at the show were wine producers Ksara, the Children’s Cancer Center of Lebanon, the Municipality of Broummana, the Beirut Marathon and the Embassy of the Netherlands.
“When you associate the image of your company with events like this, it pays,” explained Ksara General Manager Charles Ghostine. “It gives a young, cultured, artistic and environmental image.” Ksara spent around $15,000 on their 100m2 ‘garden’.
“We want companies to understand that they can exhibit at the Garden Show for their image,” said Shuman. “You can have a garden, even if you are in banking. Then people will say, ‘Oh, have you seen the Merrill Lynch stand?’”
According to Shuman, the show attracted around 24,000 visitors – some 2,000 less than last year. She put the dip down to unusually cold weather on the first two days of the show.
“We were hoping the show would be profitable after three years,” Shuman said, “but I think we’re going to need more time.”
Among the highlights of the show was the presentation of a Dutch technique, the fruit of 15 years of research, used to create tablecloths with natural flowers, and another employed to print messages and photos on the petals of fresh roses.
