While 60 cruise ships dock at Beirut each summer only one, the Ausonia, takes on new passengers, and for three years now, Lebanese holidaymakers have signed up for the weeklong Greek island cruise, organized by the Cypriot company, Louis Cruise Lines. That was until this year, when prices went up by about 5%, noted Toufic Keyrouz, general manager of the travel agency Lebanese International Tours, who feels that the budget cruise may have had its day.

Paul Zahlan, a director of Lebanon’s Aeolos travel and cruise agency, which helps Louis organize the cruise, said roughly 1,000 places are sold to Lebanese each year. Aeolos spends $20,000 to market the trip on LBC, Light FM and Radio Free Lebanon and the company also relies on word of mouth from what it hopes are satisfied customers. According to Zahlan, the Ausonia, which accommodates a maximum of 690 people, is no luxury vessel, but its prices appeared to fit in with Lebanese budgets.

However, lure of cheap charter flights, luxury cruises, and more stringent visa application processes since Cyprus’ accession to the European Union may conspire to reduce the number of Lebanese interested in the cruise, he said. “I don’t think we will sell as many places this year,” Keyrouz warned.

His prediction comes at a time when local travel agents are selling week-long holidays to Turkey’s highly regarded resorts for under $400 per person. Prices on the Ausonia start at $500 per person going up to $1,030. 

A taxing transfer

As they prepare to transfer management of the mobile network over to German firm Detecon and Kuwait’s Mobile Telephone Company (MTC), the two mobile telephone operators, Cellis and LibanCell, contend that their employees do not have to pay taxes on their indemnity packages following their voluntary decision to resign. The companies contend that they received confirmation of this in a letter from Sarkis Saker, the finance ministry’s tax department director.

However, the validity of the letter has since been thrown into doubt. An independent Audits Court is currently deciding whether the indemnity payments, ranging from $20,000 to $133,000, should, in fact, be subject to 20% taxation. A current Detecon employee, as well as a former Cellis one, told Executive that they had seen the letter. They both asked not to be named. The Detecon employee suggested there was a misunderstanding, or that a decision had been taken at a certain level but not at another. “If Sakr doesn’t represent the ministry, then who does?” asked the Cellis employee.

Saker confirmed that the letter had been sent, but said he was unable to comment further since the file was with Fouad Siniora, the minister of finance. He said he didn’t know when a decision would be taken. An official at the ministry said that  Jean-Louis Qordahi, minister of telecommunications, wrote to Siniora on May 17 urging him to speed the decision process up.

A spokesperson for Detecon said less than 20 people had chosen to revoke their decision to voluntarily resign from Cellis by mid-afternoon on May 18 – the deadline given for doing so. MTC, for its part, said about 20 LibanCell employees had decided not to resign after all. More than 300 people at both Cellis and LibanCell have resigned.

How Smart a purchase?

With gasoline prices hurting the purse of most drivers, Mercedes importers Gargour & Sons were given an added fillip for the launch of the roughly $20,000, four-seat, four-door variation of their hip, compact Smart car, which can do about 350 km on a full tank per 20 liters. DaimlerChrysler chose Lebanon as the first Middle Eastern country in which to introduce the Smart series, and launched the 1.5l, four-cylinder 109 horsepower “smart forfour” at the new Smart showroom in Saifé.

A spokesman for DaimlerChrysler said the auto giant had picked Lebanon as their point of entry the region because it regards Beirut in particular as sharing the ‘hip lifestyle’ image it associates with the brand, which despite its obvious attractions has yet to catch on with the mainstream Lebanese car market.

At the newly-opened showroom 18-year-old Ibrahim El Zein agrees. “This is the best car for my age,” he said, before acknowledging that his parents would be footing the bill. Buyers said their attention had been drawn to the car by a successful billboard campaign, and noted that at a time of high petrol prices, the “smart forfour’s” fuel efficiency influenced their decision to buy.

By mid-June, Gargour had sold 17 of the cars. The distributors hope to sell 110 by the end of the year. But this may be overly optimistic. Mathieu El Hawa, a 33-year-old events organizer who has just bought a “smart forfour” at $22,500, said he thought the price was “at the upper end” of the range for that kind of vehicle. “I think the price will deter buyers,” he warned.

Overall, Gargour & Sons have sold about 80 smart cars – including the smart 4.2 and the roadster, exceeding expectations, said Aoun, who boasted that the “smart forfour” would help sales to continue “snowballing.”

Losing money, tranquilly

Restaurant owners on Maarad Street are angry that a walkway under construction behind buildings on one side of the street still has not been completed. The path will flank the rear façade of several restaurants as part of a “Garden of Forgiveness” – which will incorporate a portion of Beirut’s ancient ruins.

Before work began in September last year, the restaurants were using the space for outdoor seating. They have since been deprived of valuable income, and losses are growing as the summer season sets in. Revenue at Casper & Gambini’s Maarad Street outlet – which lost 120 outdoor seats when work on the path began- – has dropped by 50%, according to the restaurant chain’s director of research & development, Carol Maalouf. The neighboring TGI Friday’s has lost more than $100,000 since construction began.

Initially, restaurateurs had been promised that the walkway would be finished by March or April. “I am going to look into it to see if the delays are minor or major,” pledged Beirut Mayor Abed El-Menem Ariss. “The municipality does not delay things.” He said he was unable to say when the walkway would be finished.

Restaurateurs had also been told they would be allowed to set up outdoor seating again once construction had ended, Maalouf said. But it is now unclear whether the restaurants will, in fact, get their terraces back. “Halfway through they said no,” stated Maalouf. She said that the sudden volte-face had been prompted by Beirut Municipality concern that restaurant tables might spoil the tranquility of the garden. A Solidere urban development manager who asked not to be named said he was “extremely concerned about the abuse of space.” We don’t want the garden overwhelmed by commercial activity,” he said. The delay could, he acknowledged, have “something to do with that.”

Crashingly low payment

Half a year after a disaster of a Union Transports Africains flight cost the lives of over 130 passengers, most of them Lebanese, the carrier and its insurers issued an offer to compensate the families of victims. According to a press release by London law firm Barlow Lyde and Gilbert (BLG), UTA and its unnamed insurers established a “humanitarian fund” willing to disburse $10,000 per adult and $5,000 per minor killed or injured onboard the Boeing 727 that crashed on Christmas Day 2003 during takeoff from Cotonou (Benin) to Beirut.

The size and form of the proposed settlement raised questions in Beirut, as the amounts offered are unusually low for compensation commonly paid in airline accidents. Several families of crash victims immediately rejected the offer and some called the amounts “insulting,” said lawyers Youssef Mouawad and Diane Armaleit, who represent the interests of about 20 affected families.

According to Mouawad, the exact terms of the settlement proposal had not yet been conveyed to him and his clients by mid June. While some might be tempted by it, he said “the families of many victims are not going to accept this,” and would press for establishing the criminal culpability of the airline’s [Lebanese] owners in court.

Because of the circumstances of the crash, attributed by initial investigations to massive overloading of the plane, the families would aim to have the UTA owners charged with “gross negligence amounting to fraud,” Mouawad said, as soon as the final disaster investigation report is issued.

British law firm BLG, which administers the portentous fund and appointed lawyer Fady Mallat as their Beirut representative to submit claims to, would only state that the fund was established “outside of the terms and conditions of UTA’s insurance policy” and told Executive that it could not comment further.

Information sector disinformation?

A new study on the Lebanese information and communications technology (ICT) industry puts the sector’s size at 600 companies with a workforce of up to 6,750 employees and annual sales of up to $400 million. It affirmed that ICT is “a significant, vibrant and productive industry sector in Lebanon.”

The study, which canvassed sector companies based on commercial directories in March and achieved a response rate of just under 25%, was conducted by California-based research firm SRI (formerly Stanford Research Institute) and funded by the USAID mission in Lebanon.

Based entirely on industry responses, the survey found that 51.4% of sector companies are medium-sized firms ($100,000 to $1 million in sales). Almost 40% are active only in software development, where companies achieved almost triple the annual business growth of pure hardware firms. Regardless of their specialization, small firms (22.6%) reported higher growth rates than medium and large players. Companies said that insufficient information about export markets was their main challenge to growth and presented themselves as fairly confident of their technical and management skills.

Often hailed as key industry with international growth perspectives, the Lebanese ICT sector had suffered for years from an absence of reliable industry data. SRI cautioned that the survey results did not allow drawing implications for any strategic change.

Officials of Lebanon’s Professional Computer Association, which participated in the commissioning of the study, welcomed the results. But Fares Kobeissy, president of the Association of Lebanese Software Industry, questioned several figures, such as the reported annual industry growth rate of 12.5% over the past two years, based solely on information from companies in a sector known for presenting overly rosy figures. “We know that we have a lot of problems in our sector,” he said. “Unless we can be sure that they are 100% correct, such numbers are not going to help us.”

Have a Spin(neys)

Can you use new wheels? Try Spinneys. Ten spanking new cars are the main feature in a 100-day promotion and advertising drive from May to early August, which Lebanon’s expansive supermarket chain describes as “by far the largest ever” for such a campaign in retail here.

Putting out Toyota cars as prizes worth “just short of $300,000” and investing into advertising and below-the-line product promotions, the three-tiered campaign carries a value of $600,000, Spinneys’ Middle East retail director Michael Wright told Executive. At its mid-point, results were in line with expectations and brought the company month-on-month sales growth of 15% to 20%.  

The campaign’s unprecedented size is based on both sales volumes and increased geographical presence of Spinneys markets in Lebanon. “Our advertising budget is directly related to our top-line sales,” Wright said. When the company operated at single branch level, even nationwide campaigns had been of limited effect, because customers would not find their way to the store, he added.

While some of the chain’s previous promotion efforts, such as introduction of coupons in 2003, seemed over-complicated for local habits and were not carried further, the current high visibility campaign apparently strikes a strong chord with Lebanese consumers. Under the rules of the campaign, a customer receives one ticket participating in the draw for the car prizes per each $34 in purchases.

The mechanics of the car giveaway follows the rules for lotteries under Lebanese law, by which prizes must amount to at least 3 percent of the accumulated value of participating tickets. Thus the campaign is geared towards achieving $10 million worth of tickets. For those who have a penchant for a gamble, this places the odds for winning an extra four wheels with your LL50,000 purchase at one in 30,000.

The politics of economic reform

Politically driven economics were high in the decision to initiate an early swap of $7.5 billion in Lebanese Eurobonds maturing in 2005 and 2006, for a new debt maturing in five years. The swap was approved on June 17 by the Cabinet, authorizing finance minister Fouad Siniora and central bank governor Riad Salameh to start negotiating a swap operation with commercial banks.

On contending sides of the issue were Prime Minister Rafik Hariri, who had opposed the measure, and President Emile Lahoud, who initiated it. Hariri stated that the national debt has reached $35 billion and could rise to $45 billion over the next three years, unless the country achieved its long-called-for economic reforms. Lahoud argued that the swap would ease pressure off the economy and that, done early, it could save the country money by achieving lower interest rates than those expected in international markets next year.

These latest economic policy arguments between Lahoud and Hariri grew from a seed planted a month earlier when the prime minister announced that he intended to orchestrate a third international donor conference for Lebanon, dubbed Paris III, in 2005. As pundits saw it, a new donor conference would underscore the importance of Hariri’s role for Lebanon’s economic recovery, weakening the president’s chances of an extended or renewed mandate; whereas avoiding such a conference would work to strengthen the position of Lahoud.

The question not commonly addressed in the dispute was why international institutions and donor countries would be interested in participating in yet another meet to rescue the Lebanese economy when the country has failed to deliver its promises made at the Paris II conference of November 2002. International economists observing the Lebanese scene immediately doubted that donor countries would have the stomach for yet another Paris round.