LeadersOpinion

Stonewalled

by Executive Editors
written by Executive Editors

Executive didn’t get past security at the Grand Serail. It was March 3. The access to information law was just over a month old, and we were barking excitedly, unsure if whether we were even in front of the right tree. In hand were requests for minutes of cabinet meetings. We were hoping to reach the Office of the Presidency of the Council of Ministers. Our parting advice from the security official acting as gatekeeper was to call back and follow up. Call back we did. Repeatedly. Since then, however, our requests have been ignored.

An attempt to access information from the Ministry of Finance was swifter and more definitive. “No,”  Executive was told by phone (read: no paper trail) within one week of making a request for the Value Added Tax (VAT) and customs revenues from mobile phone imports over the past five years. So far, not so good.

Flood the gates

After it had been sitting in a drawer in Parliament for nearly 10 years, the legislature finally passed the access to information law in January. As Executive noted in a special feature last month, the law mandates the creation of an anti-corruption commission (ACC) that would, among other things, adjudicate appeals when requests for information are denied or ignored. It’s a hopeful sign that Speaker Nabih Berri reiterated the need for the ACC in late March. We stand with the speaker in calling for immediate legislation to create the ACC – not least because we’re unsure of how to proceed with the Ministry of Finance stonewalling access to information that can help highlight just how costly the country’s rampant mobile phone smuggling is for the treasury.

The last week of March brought some more good news. The Council for Development and Reconstruction (which signs large-scale public works contracts on the government’s behalf) has dedicated a staffer to handle information requests, as the law requires. This staffer was welcoming and helpful, even assisting Executive in submitting a request after the president’s office technically closed (full disclosure: it was around 2:30 in the afternoon on a Tuesday). That very same day, Executive received a late email reply from the Ministry of Telecommunications. A faxed request sent March 10 had been received, and the ministry’s lawyer was busy retrieving the requested documents. While we were warned the process “might take some time,” updates, the email promised, would be forthcoming.

We’re cautiously optimistic at this point. While there are indications that recent talk of a “new era” and promises of long-stalled reform will prove hollow, we have witnessed that the access to information law is at least being partially implemented. Law 28 of 2017 is an important tool, and we encourage more individuals and institutions to make use of it, and go public with their experiences. Decision-making in Lebanon far too often happens in a black box. This law is our chance to pry that box open. The more requests pile up – and the more institutions are bombarded with pleas for information – the harder this law will be to ignore. This magazine will keep pressing, but we need all the help we can get both from fellow transparency advocates, and from a properly constituted, functioning, and empowered anti-corruption commission.

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LeadersOpinion

An industry-wide upgrade

by Executive Editors
written by Executive Editors

Times of change and upgrades of operating systems are confusing events, or, in today’s economic lingo, disruptive. Few things can be more disruptive than the abrupt upgrade of a whole industry to a higher level, forcing it into new ways of doing business and, inevitably, altering its whole identity in the process. That’s what’s currently happening to insurance.

The upgrade of this industry encompasses on one hand the transition into the digital age, with a host of new challenges in distribution, security, consumer behavior, and, perhaps most importantly, new risks, accumulations and synergies of risks. On the other hand, insurance has been deeply affected by the global transformation of the financial economy and the rise of uncertainty and change triggered a decade ago in the Great Recession, which remains far from over.

Since Lebanon’s economic rebirth after the internal warfare of the 1970s and 80s, the insurance industry has made some remarkable strides. Premiums grew almost exponentially and rates of insurance penetration, or percentage of GDP spent on protection, remained at the top among Arab countries.

But one cannot overlook the fact that the Middle East is a global laggard when it comes to insurance penetration, something that is not expected to change radically in the next 10 years. Global insurance group Allianz predicts that the average per capita contribution in the Middle East and Africa will only grow from $139 to $180 from 2016 to 2026, and that the MENA region will account for just 1.8 percent of global premium income in 2026.

Current insurance penetration in Lebanon – estimated by Swiss Re Sigma at 3.42 percent for 2015 – shows the country to be at the forefront of Arab markets, and respectable in comparison with middle income countries from Argentina and Russia to Bulgaria and Iran. But this is not much to write home about when compared to the average global insurance penetration rate of 6.23 percent. In purely domestic terms, the Lebanese insurance sector’s assets, premiums and profits in 2016 (while not yet officially announced) are dwarfed by the assets, deposits and profits in our banking industry.

With change, opportunity

Within the financial landscape, Lebanese insurance stands timidly in a swamp of undeveloped capital markets and foggy legislation. Moreover, when compared with the friendly but boisterous banking ogre and its substantial marketing power, the sector is practically invisible. In Executive’s view, this situation warrants remedy.   

By conventional wisdom, great change is a time of great opportunity. Agility and openness to new ways are a requirement for benefiting from these opportunities. But effective exploitation of change requires legal empowerment. Executive believes that it is not enough to pursue piecemeal improvements in the legal framework for insurance and calls for the adoption of a new insurance law in Parliament. 

With a view to insurance, we reiterate our demand for a supportive framework for growth in the financial markets, and our call for the Capital Markets Authority of Lebanon to focus equally on the regulation and development of our capital markets. The CMA has to step up its efforts and effectiveness to invigorate the markets under its supervision, and the Beirut Stock Exchange has yet to deliver vibrancy to the bourse. We would like to see all local insurance companies listed, and adhere to the corporate governance structures and systems that befit a modern corporation. 

One often encounters the perception that insurance is boring. In truth, it is a complex cog in the financial industry and one with much hidden – or difficult to understand – potential and attraction.

Reporting on these issues in our current issue, Executive endorses the view, expressed by the chairman of the country’s largest insurance provider, Allianz SNA, that an indispensable precondition for successful adoption of corporate governance and transparency in our private industries is public sector leadership by example. We need full and speedy implementation of the new law on access to information, and transparency and accountability in our government institutions before we can realistically hope to see tax compliance, proper reporting, and real transparency in our private sector.

As for insurance stakeholders, we affirm our view that it is time to free industry minds from the last remaining burdens of egoism that symptomized the industry in the past; they must cast off the cloak of invisibility and put on the armor of transparency and good corporate governance. 

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Hospitality & TourismNatural Foods

When snacking becomes healthy

by Nabila Rahhal
written by Nabila Rahhal

Whether it is quinoa chips or chia seed cookies, snack food products, once dismissed as pure junk, have taken a turn toward the healthy and natural, and it seems the world’s consumers couldn’t be happier.

Globally, consumers are increasingly aware of the importance of a good diet on their health, according to Reema Mansour, founder of Biolicious, a Lebanese company which produces organic and gluten-free snacks and foods. “People are much more aware that what they eat has a direct impact on how they feel. Plus, there has been a large global rise in food sensitivities and allergies,” Mansour explains.

[pullquote]

Major food producers in

Lebanon have woken up to the potential profit in healthy snack foods

[/pullquote]

This increased awareness has come with a splurge in spending, too. According to Euromonitor, a global market research firm, worldwide sales of health food products are estimated to reach $1 trillion by the end of 2017. Between 2015 and 2020, the global organic food market is projected to register a compound annual growth rate of 16 percent, according to a TechSci Research report entitled “Global Organic Food Market Forecast and Opportunities, 2020.”

The agro-industrialists Executive spoke to believe that healthy and natural snack food is not just another passing fad, but a lifestyle change that is here to stay. “I don’t see the health food industry dying any time soon. It’s one of the fastest growing industries in the world, and everything is being switched to something healthy: equipment lines are being redesigned to produce healthier food and chocolate companies, such as Cadbury and Mars, have reduced their portion sizes. Everybody is trying to ride the bandwagon of health. It’s not a trend; it’s a fact and reality,” emphasizes Soumaya Merhi, founder of Lebanese company BreadBasket sal, which produces several varieties of healthy snacks branded Taqa.

The Lebanese scene

Lebanon has only recently hopped on the organic and natural foods bandwagon. Less than 10 years ago, the few brands of natural or health foods available in Lebanon were restricted to a couple of shelves in the corner of the supermarket labeled “diet.” Today, however, many of Beirut’s and Mount Lebanon’s supermarkets have dedicated health food sections, which are awash with imported brands of gluten free and organic items. Moreover, there are at least 20 specialty shops across Lebanon that only sell natural or organic food products.

Although there are no numbers that quantify the market size of healthy snack foods in Lebanon, indicators suggest that it remains a niche, despite its rapid development. This could be due to the price of such products – especially when imported – or the lack of awareness of the importance of healthy eating among many Lebanese. “In Lebanon, there are many locals who lack health awareness. For example, many don’t eat olive oil because they think it’s fattening and they don’t know its health benefits; or they eat gluten free bread since it’s the trend,” says Hill Skaff, processed food value chain leader at the USAID funded Lebanon Industry Value Chain Development (LIVCD).

Made in Lebanon

While snack food production is arguably well-developed in Lebanon, it is no easy task to find locally produced and healthier varieties of savory or sweet treats. Recently, major food producers in Lebanon have woken up to the potential profit in healthy snack foods and have introduced alternative snacks to their existing production lines. Examples include Masters Chips introducing air-popped rice crackers, Al-Oumara bakeries launching rice cakes and oat breads, and Castania Nuts producing trail mixes.

Meanwhile, the past five years have seen an emergence of small-to-medium sized enterprises that solely produce healthy snack foods. Their number, however, remains quite low, and they face numerous challenges.

The most common challenges that companies voiced to Executive were elevated production costs and difficulty in gaining market exposure. “These companies need support to get more exposure and awareness among consumers. On the technical level, in healthy foods production, they need semi or full automated equipment to decrease their cost of production, and standardize products,” says Skaff, giving the example of how LIVCD invested in semi-automated machines to help ready-to-eat kibbeh producers decrease the time spent on producing them manually.

Biolicious

Photo by: Greg Demarque/Executive

In 2013, Reema Mansour found out that the aches in her joints and back were a result of an autoimmune disease, which meant she had a high level of inflammation in her body. To control these pains, she decided to cut all foods from her diet that might cause this inflammation, such as grains and pulses.

This left her with a very narrow list of foods available to eat in the Lebanese market, especially when it came to snacking. “The texture of food available to me was very restricted, and I started craving food with a crunch. What was available in Lebanon in terms of healthy food of that kind was very limited and very expensive. There were a couple of very good shops that were bringing in organic produce of excellent quality, but the tastes of these specific things that I wanted were not very good,” recounts Mansour, adding that the vast majority of the products she found were imported.

So Mansour, who says she has always enjoyed cooking, took matters into her own hands. “I started doing some research and making my own foods. In the meantime, I was doing an online course on holistic food coaching, and that opened my eyes to the possibilities, and how I can make things happen in terms of creating and marketing healthy food,” she explains. Mansour recounts that she started out small by making vegetable crackers, which she distributed to friends and family. Gradually, through word of mouth, the reputation of her products grew and friends in the food industry became interested.

Using an initial investment of $80,000 secured from a personal fund, Mansour was able to officially launch Biolicious in 2015 with a line of vegetable crackers, which she dehydrates at a very low temperature to save the nutrients, a process she describes as lengthy and time-consuming.

Following the positive response to the crackers, Mansour introduced kale chips a year later, and wafers the year after that, translating into a new product line every year, with more to come. “I still have a lot of recipes in my repertoire and want to expand, but [I] have to choose ones which would be viable in the market in terms of shelf-life and demand. It also takes time, so I am growing slowly,” she explains. Biolicious’ products have a shelf life of four to six months.

Biolicious products are certified by Instituto Mediterraneo di Certificazione, an Italian certification body operating in Lebanon, and therefore comply with international standards, such as having completely organic ingredients.

She says that it has not been easy in Lebanon as the market for organic produce is underdeveloped, therefore driving her cost of production up. Whenever possible, Mansour tries to use locally produced organic ingredients in an attempt to lower costs. As such, fresh produce used is grown in certified organic farms in Lebanon, and ingredients such as tahini, molasses, sun-dried tomatoes and apple vinegar are brought from Adonis Valley, a local producer of organic food products.

Still, Mansour believes organic and health food producers like herself would benefit from more support and development for this sector, so they can at least manage costs. “Supporting organic and alternative productions in the agro-industry in general would be a very good step in supporting small producers like me. If there was more organic production in Lebanon, I would buy at a lower cost, and then be able to produce at a lower cost,” she explains, citing Berytech’s Agrytech program as an example of support and funding for the agro-food sector.

Mansour has to import whatever ingredients are not found in Lebanon. This is another challenge, as she has no storage space, and thus, must purchase small quantities – further increasing the cost of production.

Beyond the cost of production, Mansour says that there is the cost of the environmentally friendly packaging and the one employee she recently hired to handle distribution. Otherwise, she works alone in a semi-industrial kitchen. A small box of crackers is $3.50 while a bag of kale chips is $5.67.

[pullquote]

What was available in Lebanon in terms of healthy food was very limited and very expensive

[/pullquote]

While today Biolicious is present at 25 points of sale, concentrated in Beirut and Mount Lebanon, Mansour says she would like to have wider distribution and more exposure. “A challenge is that it is a very niche product, in a niche market. I work with a lot of organic and health shops, delicatessens, specialty stores, high-end supermarkets, diet centers, gyms … but it could be a lot more. I would like to expand on many levels. I tried chain supermarkets, but the payment terms for small producers are very difficult,” she explains.

Mansour first started promoting Biolicious in exhibitions and farmers’ markets in Lebanon. She still sees them as effective tools to reach consumers and give them the chance to try her healthy snacks. “It’s very helpful that I can go to markets and participate in any activity happening by offering samples of my products. That’s what people like. You might have looked at this [box of crackers] for half an hour on the supermarket shelf and not bought it. But when you taste it, and you like it, that’s what matters to me,” enthuses Mansour.

Mansour recognizes the need to be present in regional markets to grow Biolicious, saying she has the facilities to expand production and hire workers, but needs the right opportunities. She would prefer the kind of direct contact she has with the consumer in Lebanon when expanding to international markets and again laments the lack of support for such initiatives. “I want to go to these fairs and exhibitions and take a stand to show my products and get things distributed there, but it’s not an easy task. If you look in other countries, they have systems and bodies that support such industries, and they go together as a country to share new things like this.”

Still, Mansour says she has garnered interest from Singapore, Qatar, United Arab Emirates, and Saudi Arabia; having already shipped small quantities to Singapore. She believes Biolicious’ competitive edge is in its Mediterranean taste and speaks with pride of her products’ reception in these markets. “I went to Dubai to check things out, and I was very proud because these countries have access to similar high-quality items produced in the USA and Europe, but they were interested in Biolicious. So I am very happy,” concludes Mansour.

Eshmoon

Photo by: Greg Demarque/Executive

Samer Tutunji, a chemist and yogi, says he was driven by the holistic health philosophy promoted by yoga to start Eshmoon, a company that develops “products that promote conscious minds.” Eshmoon is named after the Phoenician demigod of health and was established in 2003, with the intention of promoting a natural well-rounded lifestyle for the emerging niche market of health conscious consumers in Lebanon.

While Tutunji originally wanted to make use of his chemistry background to produce natural beauty products and soaps, he felt the Lebanese market would not trust such products just yet and decided to start with food. “We chose to start with food because it is the basis of everything. If you eat healthy, it means your mind is healthy,” he elaborates.

Tutunji decided to start his business with the most universally loved food product, chocolate. “We started with chocolate because it is a tasty treat – and therefore we can sell it – but is usually considered junk. People are addicted to chocolate even though they know it is bad for their health, but now we are giving them an alternative, which is made of all-natural healthy ingredients,” says Tutunji, giving the example of how he uses grape syrup, instead of sugar, for sweetening.

Tutunji launched Eshmoon with an initial investment of $150,000 – from personal funds and family support – which he invested into testing and small-scale equipment. The company gradually grew, securing revenues by producing chocolate for weddings. Tutunji then reinvested another $150,000, from the profits generated, into developing his kitchen and designing a $25,000 outlet in Boushrieh, Metn (adjacent to the industrial kitchen), where Eshmoon products are currently sold.

[pullquote]

We chose to start with food because

it is the basis of everything

[/pullquote]

Eshmoon gradually added more products to its offerings, and Tutunji says this expansion only intensified in 2015. Eshmoon currently produces a variety of chocolate products, organic cereals, honey and molasses. Tutunji adds that he is looking into producing organic nuts next.

Eshmoon’s prices are at least 1.5 times as expensive as the mass produced versions ($7.50 for a box of chocolate cereal, for example), but Tutunji says that his products are both tastier and lighter. He justifies the price as due to the high cost of production since although he tries to use locally produced ingredients, he still has to import many items. “In our choice of ingredients and products, we are aiming toward locally produced, but at the end, there are some products which are simply not grown in Lebanon. Still, we try to promote rural agriculture through the choice of our products whenever possible,” he says, giving the example of the locally produced molasses used as a sweetener, or the locally grown oranges used in the chocolate-coated oranges.

Other costs are relatively low, since many of Eshmoon’s ingredients are locally sourced and Tutunji has a small team (seven employees maximum during peak times such as holidays). “We don’t want to drown in fixed expenses as we need to remain versatile,” he explains, adding that they use recycled material for packaging and the store’s layout to remain cost efficient, and also to be in line with Eshmoon’s minimalist philosophy.

In addition to the store, Eshmoon is present at several points of sale and has gained exposure through social media and its participation in many exhibitions and fairs, such as Souk El Tayeb and Salon Du Chocolat. “In exhibitions, we have the chance to make people taste, so we’re growing through word of mouth, which is proving to be a success,” enthuses Tutunji.

Tutunji acknowledges that there has been a mistrust of locally produced foods, but says this is slowly changing. “The healthy snack foods trend is here, but we imported a lot of products because consumers did not trust locally produced items. This is slowly changing, and there is a niche of consumers who want to buy local to reduce their carbon footprint and eat fresh,” he explains.

While Tutunji says the local market for Eshmoon, and health food in general, is growing in Lebanon, he still sees it as limited. “The market in Lebanon is very narrow in that it is restricted to Beirut and Mount Lebanon. So if we need to grow, we have to start exporting and are aiming for that,” says Tutunji, adding that he would export anywhere health-minded consumers can be found.

Tutunji believes Eshmoon products can compete globally because of locally produced ingredients, such as grape syrup or carob molasses, which are not found internationally. He had considered exporting to the Gulf countries – where according to him, Lebanese foods have acquired a positive reputation – but the high cost of shipping following the closure of land trade routes through Syria has since discouraged him.

Although the desire to export is there, Tutunji says he needs to expand production and work on marketing, which requires time and capital. While Tutunji is satisfied with the organic way Eshmoon has been growing, he is not against bringing in investors at this stage – if they believe in the company’s philosophy and mission. “I am not looking for investors who are just in it for the cash because they see there is money in organic and healthy [products] nowadays. I want an investor who would sacrifice his or her money as part of investing in the cause. Of course, it will bring them back their money, but I want to feel that they are giving it as a donation, not as an investment,” argues Tutunji.

Nature’s heart

Photo by: Greg Demarque/Executive

For Malek Karam – owner of the company United Market Team that produces Nature’s Heart, a line of cookies and crackers – it all began with the natural sweetener stevia.

Karam first learned of stevia when he grew concerned about his health and began researching sugar substitutes. Upon discovering stevia, a natural plant-based sweetener – as opposed to the artificial sweeteners found in the market, such as aspartame whose harmful effects on health are well known – he saw the potential in bringing it to Lebanon.

In 2012, Karam began importing processed stevia, produced in Malaysia, to Lebanon under the brand name Green Light, which he distributed in both bulk form to dessert producers, such as Bachir Ice Cream, and in packaged units to retail spaces.

While Green Light succeeded among Lebanese consumers, Karam observed that it was mainly being used as a sugar substitute in hot drinks; his goal was for it to have wider consumption. “People were mainly using it in their coffee, but I wanted them to use it in their cooking as well and in their cold drinks; in everything that needs a sweet taste,” he says.

Karam tried to promote the varied usages of stevia by giving talks in universities and distributing pamphlets in health stores. But when that did not achieve the desired results, he decided to lead by example and use stevia in a food product. “Because I wanted to grow the market for stevia in Lebanon, I introduced sweet cookies and biscuits under the brand name of Nature’s Heart as a first step to promote stevia as an ingredient. Because of stevia, we became cookie producers,” Karam muses.

Nature’s Heart’s production of wheat cookies began in 2013. Karam invested around $220,000 –  $100,000 of which came from a Kafalat loan, with the remaining amount personally funded – into constructing the factory in the basement of a building he owned and buying the industrial stove needed for production.

The response for the wheat cookies was positive enough that Karam focused his efforts on developing and refining Nature’s Heart. He introduced oat cookies almost six months after establishing the brand to accommodate for those with gluten sensitivities. He also worked on refining the packaging to make it more attractive and to extend shelf life. Because of the vacuum seal bags and air tight plastic containers, Nature’s Heart products currently have a shelf life of six months.

[pullquote]

It all began with the natural sweetener stevia,

which is extracted from the leaves of the plant species

with the same name

[/pullquote]

About a year and a half after establishing the line of cookies, Karam decided to enter the savory snacks market by introducing all-natural oat crackers. As opposed to non-natural crackers, Karam explains, Nature’s Heart’s crackers use real ingredients for flavoring, rather than artificial ones (for example, real black olives are used in the mix of the olive flavored crackers). For him, it was the right time and place to take the step into the savory snacks market. “I noticed that Lebanese like to have a salty snack with their drink and that there are no natural locally produced alternatives to chips and crackers. I already had the industrial stove, so I thought why not?” he recalls, explaining how he developed the recipes for each cracker flavor purely through trial and error. 

Today, Nature’s Heart employs 12 people and produces 40,000 to 50,000 bags of crackers and 6,000 boxes of cookies per month. Karam explains that external distributors take a 20 percent cut, and so, he has an in-house distribution team of five people and is present in over 200 points of sale across Lebanon, including health stores, gyms and major supermarket chains. According to Karam, Nature’s Heart’s selling points in the local market are its flavors, which appeal to the Lebanese, and its affordable price when compared to similar imported goods. A bag of crackers is priced at $2.60; while an eight-piece box of cookies is $2.

The natural flavors of Lebanese cuisine (such as aniseed in cookies, and thyme and white cheese in the crackers) are also a selling point in the countries Nature’s Heart exports to, which are Saudi Arabia (Farm and Panda supermarket chains), Jordan, Kuwait, and France (the Lebanese market in Paris).

Karam explains that his expansion into export markets was possible due to expats and Arab tourists who would try Nature’s Heart on visits to Lebanon and wanted it to be available in their own countries. He has set his eyes on the United Statesas an export market, which he plans to target through the speciality Lebanese markets there. Karam says getting to the US has been his biggest challenge so far, since there is no support system or network in Lebanon that would facilitate reaching that market, although he has tried to communicate with the Lebanese American Chamber of Commerce, to no avail.    

Now that demand is growing in export markets, Karam plans to invest a further $130,000 in an automated production line, which would allow him to cut down on costs and produce larger volumes. He is also considering producing a line of potato chips, made from potato starch, and thus complete his savory snacks line.

Taqa

Photo by: Greg Demarque/Executive

Soumaya Merhi returned to Tripoli, Lebanon from Montreal, Canada in 2013 with the plan to work in organic foods.

Eight months prior to her arrival, her father had started Bread Basket, a brand of oat bread, produced with a single bread machine in Tripoli. Merhi, who describes herself as a “doer,” decided to help expand the brand. “I saw that something was being done, and I had to sell, so I picked up the idea and started selling cookies at Souk El Tayeb. After that, I started to move very fast in the ‘niche market,’ meaning high-end delicatessens, or farmers markets. There were a lot of people doing healthy cookies at that time,” recalls Merhi.

A year and a half after taking over Bread Basket, Merhi created the Taqa bar. Taqa (which means energy in Arabic) is Lebanon’s first locally produced energy bar and is made with Levantine flavors, such as rosewater and orange blossom.

Merhi, a swimmer, says that the idea for Taqa bar came to her when she realized that there was no healthy, locally produced, energy providing snack. “As an athlete, or even if you are just having a busy day, you want energy on the go. We didn’t have something that is easy, quick, healthy and branded in the Lebanese market,” she explains.

Merhi always had big ambitions for her company, and in 2016 she decided to set the path to realizing them. “I am not working in an artisanal mindset, I want to be able to make it (the company) scalable. When you have scalability, then you become a key player in the trade market. It’s been very difficult to get to the point where I am – and it involved a lot of pushing and shoving – but I also work very hard,” says Merhi emphatically.

Driven by the need for scalability and larger consumer demand, Merhi focused on the ability to maintain and increase the company’s level of performance. She upgraded the factory and bought automated equipment, which helped her increase volume and add products to her lines.

She then decided to rebrand, morphing Bread Basket products to Taqa, explaining that it is a catchier name for export markets and is more fitting for the company’s diverse offerings. The Taqa brand will replace Bread Basket in May 2017. Today, Taqa is a confectionery bakery that specializes in off-the-shelf products, such as oat cookies, vegan maamoul, flat bread, buns, and dried fruit and nut bars. According to Merhi, “Bread Basket Square SAL aims to offer and constantly innovate a variety of different product lines, ranging from wheat-free, GMO-free, gluten-free, vegan, vegetarian, [along with] preservative, additive and improver-free, by sourcing premium raw materials.”

[pullquote]

Nobody imposes standards on you, so I impose high standards on myself and the company

[/pullquote]

Merhi also rethought the packaging and design, with the aim of prolonging shelf life and making it competitive with imported products in Lebanon, as well as in the export market. Taqa’s new packaging, which will be introduced to the Lebanese market in May 2017, is simple and clean, with ingredient listings and nutritional facts in both Arabic and English. Products come in individual packets, as well as in single serving packets within boxes, with a shelf life of up to six months, despite having no additives. Merhi says they produced 24 tons of bread and 15 tons of baked goods and nut bars in 2016. 

To be taken seriously among established tradespeople – and because there are no reliable regulatory or certifying bodies in Lebanon – Merhi decided to work toward the ISO 22000 2005, an international food management certification, which she admits is ambitious for a small factory like hers. “In Lebanon, it depends on your tenacity as a business owner to put the regulations in place because you want to grow. Nobody imposes standards on you, so I impose high standards on myself and the company,” Merhi says. As Executive was going to print, Merhi had achieved the certification by SGS (formerly known as Société Générale de Surveillance), making her one of the only three factories in Tripoli which are ISO 22000 certified.

In May, Merhi will also be launching the Taqa coffee shop on Pasteur Street in Gemmayze to bring her products closer to the consumers. “I’ve always loved having a small coffee shop, and it’s a place for people to meet the brand. As a consumer, how often do you get to meet the business behind the food you eat?” she asks.

All these developments and improvements to Taqa required a substantial capital investment, which Merhi raised in 2016 from an angel investor, a venture capitalist and an environmental foundation based in Lebanon. Although she declined to provide the amount raised, she says it was enough to cover the costs of the ISO certification, the rebranding, the upgrading of the factory and the creation of the showcase store on Pasteur Street.

Today, Taqa and Bread Basket products are available at 150 points of sale – mostly within wellness and fitness related spaces. Merhi has also signed with a local distributor to grow the products’ reach further, and be present in chain supermarkets. She explains, “If you really want to grow, you cannot just be in health stores or places that match your image, you have to be in supermarkets to reach the highest number of Lebanese. If this brand is not able to meet the heart of the Lebanese, from the south to the north, I have failed as a business owner, because I will be relying on a very small number of people who would spend on high-end [products].”

While Merhi admits that her offerings are not mass products just yet, she says she is trying to be as cost competitive as possible in order to reach the widest number of consumers. A small packet of cookies sells for $3.50 while a Taqa energy bar is $2.

The local response to Merhi’s products has been favorable, despite the usual preference for imported goods among high-to-medium end Lebanese consumers. “The Lebanese niche who are into health food are starting to become much more open to the idea that there are viable companies in Lebanon trying to do a very good job with their products,” she says. 

Merhi has also signed with a buyer in both Kuwait and Saudi Arabia. She believes her edge over European imported brands in regional export markets is in the flavors of the Taqa bars, and the single serving sizes of favorites such as maamoul.

Although the brand is doing well, Merhi says it has been an uphill struggle. “Small manufacturers, of a sizable potential, in Lebanon need to be catered to because right now we don’t have support. If I continued the way I had started, I could not have sustained myself because I could not have grown to get interest from buyers. The niche market is too small and there is a threshold, but the good news is that it’s definitely growing,” she concludes.

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Economics & PolicyWaste Management

The long goodbye

by Matt Nash
written by Matt Nash

As could have been expected, chaos is ensuing. While the situation is not as dire as it was in the hectic summer of 2015 – when protests raged and trash burned on the streets of the capital and its environs – waste in Lebanon is still far from well-managed. One full year after Tammam Salam’s government approved a four-year trash plan covering Beirut and most of Mount Lebanon, it remains only partially implemented. And the new government seems in no rush to address the country’s lingering waste crisis. A ministerial committee dedicated to the issue met only once (in early March), according to news reports. Two sources at the meeting (and a representative of a third) ignored requests for information as to which ministry would take the lead in the new cabinet.

From Naameh to the sea

For more than 20 years, most of Lebanon’s garbage (50 percent, according to the Ministry of Environment) has been managed by sister companies Sukleen and Sukomi, children of parent company Averda. From street sweeping and bin collection to transport, treatment and disposal in the Bsalim and Naameh sanitary landfills – the latter permanently closed in May 2016 – Sukleen and Sukomi did it all in Beirut and five of the six districts of Mount Lebanon (excluding Jbeil). The status quo was meant to change in 2015, and the government – through the Council for Development and Reconstruction, a part of the prime minister’s office – tendered new waste management contracts for the entire country. A fully-implemented national plan would have been a first for Lebanon. Bidders had to commit to building modern treatment facilities and more sanitary landfills. Instead, within 24 hours of announcing the tender winners, the contracts were cancelled. Around a year later (in March 2016), the government finally settled on a new plan that – aside from the aforementioned lack of full implementation – seems to be sticking. Treated solid waste from the Metn and Keserwan districts will be landfilled in an offshore facility being built near Bourj Hammoud. Waste from Beirut and Baabda will be landfilled in an offshore facility being built south of the airport (the Costa Brava landfill). According to the cabinet decision announcing the plan, physical space to build a landfill for waste from Aley and Chouf still needs to be found.

Sabine Ghosn, head of the urban environment pollution control department at the Ministry of Environment, confirms that work on the Bourj Hammoud and Costa Brava offshore landfills is ongoing. She has no information on whether progress has been made  on finding a landfill for Chouf and Aley, and explains that Sukleen stopped collecting waste in these districts when the Naameh dump officially closed on May 19, 2016. It’s unclear who, if anyone, stepped in to fill the void created when Sukleen stopped servicing the area. Ghosn says some municipalities or unions of municipalities may be taking matters into their own hands (Executive profiled one such initiative in the higher Chouf last year). She says that while the Ministry of Environment has asked municipalities to report on their waste management plans and practices, only around 10 of more than 1,000 have responded.

New contracts, same foot dragging

In an emailed response to questions, the press bureau of Sukleen and Sukomi explained the company relinquished responsibility for several sites it formerly managed on December 31, 2016. Ghosn confirms press reports that the new contractor is al-Jihad for Commerce and Contracting (JCC), whose majority shareholder is Jihad al-Arab. The company, according to its website, has won several state infrastructure projects in the past, including the sanitary landfilling of waste from the former Normandy dumpsite, which grew into a trash mountain some 12 meters above sea level during the war. JCC is now managing the Karantina and Amrousieh waste sorting plants, a storage facility in Bourj Hammoud, the temporarily-closed Coral composting facility – also near Bourj Hammoud – and the Bsalim sanitary landfill for inert materials, Ghosn says. She explains that the new contract does not stipulate that JCC increase the amount of waste diverted from landfills for recycling. In 2015, former Environment Minister Mohammad Machnouk said Sukomi was recycling just 10 percent of the waste it collected.

According to both Al-Akhbar and the Sukleen/Sukomi press bureau, the CDR announced winners of new contracts for waste management last year. Sukleen’s service area, which formerly stretched from Keserwan in the north to Chouf in the south, was broken into three: Metn and Keserwan; Beirut and some of its immediate suburbs; and Baabda, Aley and Chouf. In their statement, Sukleen and Sukomi explained that, anticipating new contractors taking over street sweeping and collection, they have painted some of their vehicles white as “part of the demobilization plan, making it easier and quicker for us to manage the fleet that belongs to Sukleen after the last day of work.” That day, however, has still not arrived.

The CDR did not respond to an interview request for this article, and Ghosn was unsure why new collection contracts were not being implemented. Al-Akhbar reports the hold-up is related to the plan the United Nations Development Programme (UNDP) is helping draw up for the city of Beirut, which apparently still intends to try managing its own waste. Last year, Executive interviewed UNDP on the subject, and was told the plan would be a look at Beirut’s options rather than a detailed roadmap of what the city should do. Efforts to reach UNDP and the president of Beirut’s municipal council were unsuccessful this time.

Moving forward

The end goal of the current waste management plan is building waste-to-energy plants, which involve incinerating garbage and are strongly opposed by environmental activists. As with every waste management plan devised in the past 10 years, the waste-to-energy idea – which has already been adopted once and subsequently abandoned only to reappear in the March 2016 plan– requires finding land on which to build facilities in a densely populated country, where no one wants to live near a waste management plant. This challenge, coupled with a government that is clearly not prioritizing waste management, suggests we may yet re-live the summer of 2015 in just three short years.

The Costa Brava challenge

Parking baled waste next to the airport (until an offshore sanitary landfill could be completed) predictably attracted hungry birds. Fears for aviation safety led to new bird-repellent equipment being installed near the airport (among other “solutions”), but also resulted in judicial action. In January, a judge ordered the so-called Costa Brava landfill closed within four months. Executive was unable to reach the judge, however Sabine Ghosn from the Ministry of Environment offers some insight as to why there’s no scramble to find a replacement for Costa Brava in the face of the looming closure. “The judgment itself said the closure wasn’t a final decision,” she explains. Ghosn says neither the Bourj Hammoud nor the Costa Brava landfills were subject to legally required environmental impact assessments before construction began. However, she says the ministry is following up with all concerned stakeholders on “environmental management plans” for the two sites, an effort to mitigate environmental damage from the two offshore landfills.

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InsuranceOverviewSpecial Report

Vital and seeking vibrancy

by Thomas Schellen
written by Thomas Schellen

The numbers for overall premiums growth, penetration and density in the Lebanese insurance market in 2017 may not bring huge surprises. In 2016 the sector delivered 3 percent nominal growth in gross premiums, from $1.52 billion in 2015 to $1.56 billion, according to the latest quarterly report of the Association of Insurance Companies of Lebanon (ACAL). The compounded annual growth rate (CAGR) of written gross premiums for the period 2009 – 2015 was 7.6 percent, according to the latest figures published by the Insurance Control Commission in its annual report for 2015.

The 7.6 percent CAGR of written gross premiums was eclipsed by the CAGR of claims at 15.6 percent, but in line with the 7.1 percent CAGR of the sector’s net income after tax. It also is notable that year-on-year growth for gross written premiums in 2015 was better than in 2014, at 7.8 percent versus 4.3 percent, but that the last three years have witnessed significantly lower annual growth rates than the years 2007-2011. Total premiums were $727.52 million in 2007, roughly half their level in 2015. Total net profit for the sector according to the ICC stood at $93,150 in 2015.

The overall underwriting activity of Lebanese insurers is segmented into three main business lines – life insurance, medical insurance and motor insurance. The percentage split has been grosso modo stable for years, with about 30 percent in life, 30 percent in medical, and 22 – 25 percent in motor insurance. The next business line by volume is fire insurance, which according to ACAL accounted for 6.9 percent of the total market in 2016.

All other non-life specialties contribute less than 3.5, and often less than 1 percent, to the total premiums pie – incluing coverage for workers’ compensation, engineering, contractors’ all risk, cargo, travel and transportation, public liability, and credit insurance, as well as policies against perils such as political risk, hostage and ransom, terrorism, riot and civil unrest, loss of a company’s key person, directors and officers liability, and so forth.

Policies and awareness of coverage for incidents that will define the corporate risk landscape and insurance contracts of future decades, like cyber insurance, seem to still linger beyond the horizon of most companies. It seems one can insure (almost) everything in Lebanon (ironically, the ICC lists no local companies as licensed for the agriculture branch, one of six licensing categories under the regulatory portfolio), but the demand here is focused on mandatory coverage, not on the risks that might have the greatest impact on an economic entity or the whole country.

Untapped potential

The challenges in this situation, where insurance is understood as being vital for the Lebanese economy and society, while awareness of its importance is still focused on basic coverage, were highlighted in the International Monetary Fund’s (IMF) latest evaluation of insurance in context of the national financial sector. The evaluation was published earlier this year under the IMF’s Financial Stability Assessment Program (FSAP) and notes that the Lebanese insurance sector is confronted with “structural challenges” to its development.

The FSAP, research for which was completed last autumn, points to the obvious fact that the total assets in the insurance sector at $4.3 billion, or 8.6 percent of GDP, are “small compared to the banking sector,” (with $150 billion in deposits equaling 280 percent of GDP). It continues, “There might be scope for market expansion and deepening [of insurance], which would help corporates and households better manage risk exposures, support investment, contribute to financial inclusion, and expand contractual savings that could contribute to capital market development.”

The FSAP document describes Lebanon’s Insurance Control Commission positively but notes critically of the insurance sector, “There is a large number of unspecialized companies, including many small, family owned and managed companies, resulting in intense price competition. Many of these firms have made limited investments in risk management and pricing techniques, and the ICC considers some do not have adequate professional capacity, resulting in operational risks and mispricing.”

With regards to the overall financial system of Lebanon, the FSAP sees sovereign and credit concentration risks as potential vulnerabilities in the nation’s banking sector, based on solvency stress tests and sensitivity analysis. It further asserts that neither the capital markets nor the secondary debt markets are well developed. “Capital markets are small and contribute little to the financing of the economy, and expansion prospects for the insurance sector are hindered by a relatively weak regulatory and institutional framework,” concludes the document’s executive summary.

Given the overall state of the financial environment, insurers in Lebanon are facing an economic path that looks mildly challenging, but at the same time slightly promising – more promising the more the economy and regional stability recovers, and the more the Lebanese state overcomes its inefficiencies and inequities. That notwithstanding, to borrow from George Orwell, some insurers appear a bit more equal than others when it comes to thinking about the future and initiating promising new trajectories.

[pullquote]

Some insurers appear

a bit more equal than others when it comes to thinking about the future

[/pullquote]

Hopeful signs

While it is true that some insurers have outperformed the overall sector in 2016, this is not a narrative that will advance the Lebanese insurance industry on a path to new life. The real story is that some of these outperformers are the very companies that have declared themselves adherents to practices and principles which in the past were not common practice in the sector.

The first of these is a commitment to transparency and governance. Nothing currently obliges insurance companies in this country to practice either. And no Lebanese insurance company is listed in the stock market, so even if the Beirut Stock Exchange had much stronger governance requirements, this would not matter for insurers.

In this desert of transparency, void of culture and incentives for governance, it is encouraging to encounter a full and proper board structure in a sizeable Beirut-based group like Chedid Capital Holding, whose bread and butter is insurance, and find that it is indeed possible for such a group to perform well in the current economic environment. According to group chairman Farid Chedid, organic top line growth in the past year was over 30 percent (including the acquisition of Sharjah-based brokerage Al Manara, “we reached growth of over 40 percent in the top line,” he says).

Even more impressive is that the boards of units in the group are not opaque or stuffed with names of only one family, but entail credible Lebanese and foreign names among their independent, non-executive directors. There are other examples of liberated financial thinking in the management strata of local insurance companies, such as an orientation toward competition over quality, solvency and sustainable long-term profitability.           

This contrasts with the lack of a regional or national culture in Middle Eastern insurance sectors, with very poor habits when it comes to annual report writing, communication and general transparency toward analysts and the public. Sector practices have for many years given an uninspiring impression of a field characterized by politicking, narrow interests, undemocratic debate, and horse-trading or influence peddling.   

The second uncommon valor is modern positioning vis-a-vis the customer and an emphasis on employee welfare. In December of last year, Lebanon’s largest insurance company by consolidated premiums undertook its inaugural customer loyalty survey, conducted by a multinational market research company. The survey was focused on customer experiences in life insurance, but there are plans to conduct a second survey on non-life insurance, Allianz SNA’s chief market management officer Raed Labaki tells Executive.   

[pullquote]

It is not only Lebanese units of large foreign insurers but also hometown players

that are betting on customer centricity

[/pullquote]

“It was an external survey to compare the satisfaction of our customers in life insurance with our main peers and with the rest of the life insurance market. We were happy to find that we were the loyalty leaders compared with the average of the market but, most importantly for us, [the survey] helped us to identify our strengths and our weaknesses, both [our customers’] delights and pain points,” he says. According to him, the company will now consult with experts in the global group and develop a customer experience action plan to improve on the pain points that were identified. “Our aim now is to maintain this loyalty leader position,” he enthuses, adding that the group’s lead over the market in terms of loyalty was in double-digit percentages for each measured touch point.

Inspiringly, it is not only the Lebanese units of large foreign insurers but also hometown players that are betting on customer centricity as their new angle. “We decided to become not just customer focused but customer obsessed. Every single client counts enormously for us, because it is an opportunity to make the client our brand ambassador and show people that we value them. This is how we are going to grow our business,” says Anthony Khawam, the company’s 29-year-old deputy CEO and a third generation member of the family that controls Securite Assurance.   

Securite Assurance, which in the past was notable for writing a large part of its portfolio in simple compulsory third-party liability covers against bodily injury in motor insurance, has been shifting out of this market and into more complex businesses, targeting growth of its medical and no-fault motor business as a first step, with plans to focus on developing its term life insurance business.

Next to the emphasis on customer experience and, for distribution of policies, on serving its broker community with high commissions and new digital tools, a third pillar in Khawam’s thinking is employee centricity. “People – this is the most important thing in the company, not the service but the employee, because giving great service and having a great brand is nothing [compared with] having a great culture,” he says.

In his opinion, every employee is a building block of Securite’s corporate culture, and the insurer has therefore contracted employee training consultants and invested in developing a human resources (HR) department led by a chief people officer. “We want to recognize people and make sure that they are rewarded financially and morally; that is the key mandate of this department,” Khawam explains. “The most difficult thing to do is change culture. We read many books and papers about culture; and changing people’s culture takes a lot of time.”

He says the family company has worked for the past three years on building an advanced service infrastructure, and is now in the middle of developing a brand infrastructure. The company took many cues, atypically for a Lebanese insurer, from consumer branding strategies in the Fast Moving Consumer Goods industry. It also is adopting a corporate lingo and communication style that is similar to management consultants.

[pullquote]

In its overall prospects, the Lebanese insurance sector looks better in 2017 and going forward than it has for quite some years

[/pullquote]

Customer relationship management and human capital development have been established practice for years in companies that applied customer and employee retention, development strategies, and had real HR departments instead of personnel departments. But such corporate philosophies are still out of the ordinary in parts of the local economy. Having said that, managers like Arope GM Fateh Bekdache told Executive years ago of their preference for an appreciative pat-on-the-back in employee motivation, just as a handful of other insurance CEOs in Beirut have long stressed upon the importance of corporate governance in their organizations.

Even the office landscapes of some insurers are developing, with some pleasant surprises. A reporter 10 years ago might have left the premises after an interview with memories of claustrophobic dark walls, intimidating fortress-like desks, warrens of corridors and confusing office layouts.

These days, some insurance companies can be found in buildings constructed especially for them, or are engaged in building their own premises, which in the past one would more commonly see with banks (a clustering of insurance companies even seems to be happening in the Hazmieh/Jisr Bacha neighborhood). Alternatively, insurers might reside in the same buildings as a decade ago (with their uninviting lobbies and old elevators), but have invested in creating much more appealing office environments. A major example of a surprising redesign and jump into office contemporariness is the lair of Securite Assurance, where a transformation to literal office transparency is in progress this year, with the implementation of interior glass walls and new staff amenities that seem right out of a manual for achieving better work-life balance.      

Another hopeful sign of soft development in the Lebanese insurance sector is the adoption of new methods, technologies and processes. It goes hand-in-hand with empowerment of the next generation of insurance leaders, in both family-owned and operated firms and in the few corporate insurers on the local scene. For example, one large bank-owned insurer recently hired its first-ever junior digital marketing officer. Another bank-owned provider told Executive it was working on a corporate website that actually deserves to be called functional and would present something other than an online billboard. Overall, while digitization is still in its exploratory stages in the country, many sector companies have committed to or  have already implemented new websites and evidence suggests that insurers are increasingly thinking about how to communicate and live up to the behaviors of the digital age.

Such innovations and changes are part of normal corporate existence anywhere, but it gives hope to see that such things are becoming more visible from insurance companies in the local climate. Just as it takes many drops of rain or grains of sand to make a storm, culture change in an industry can only came to fruition when many small components interact. This observation comes with the caveat that the companies in the Lebanese insurance sector are far too numerous to undertake any exhaustive investigation of their new behaviors and the degree of their seriousness and sustainability, or to say what innovations or best practices may have already quietly been bred at companies years ago.

Equally, it is far from visible today where the Lebanese insurance industry might be 10 years from today. One thing that the numbers do tell is that the industry ridiculously still harbors many companies that have either an annual production of gross premiums below $1 million and/or capital that is below any rational consideration for a modern financial firm, and purely based on the outdated minimum requirement for $1.5 million in capital under the current law. Given the sector’s fragmentation, consolidation remains a key challenge, but there are hopeful signs reaching the public that this could take place. In its overall prospects, the Lebanese insurance sector looks better in 2017 and going forward than it has for quite some years.

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Editorial

The devils must go

by Yasser Akkaoui
written by Yasser Akkaoui

This year’s Arab Summit was particularly painful to watch. The pompous grandiosity of the congregated Arab leaders was nothing short of nauseating. What do they have to show for it? Collectively, these leaders are at the helm of nearly 400 million Arabs. What are their KPIs? The World Bank estimates a collective GDP of $2.56 trillion for the Arab League states. Assuming one third of that is revenue derived from resource extraction and not human productivity, we are left with a collective GDP for 22 states on par with the GDP of Italy’s 60 million people. Sixty million Italians as productive as 400 million Arabs!? Our leaders must go.

If these numbers don’t prove the case against Arab leaders, their own words certainly indict them. Speech after speech, each head of delegation took his turn addressing Arab causes and concerns, their cause célèbres. However, not once did I hear a mere mention of education, human development, social development or employment. Not once did I catch an allusion to the role of the private sector in advancing Arab economies. These decision-makers have signed international trade agreements with countries all over the world yet ignore their own neighbors.

What bothers me most, of course, is the fate that continues to plague Lebanon, my country. As a young man, I would feel a tremendous sense of pride and admiration while observing our leaders at these summits. Even during Lebanon’s darkest days – when our leaders were warlords draining us to the last drop – Lebanon could still claim to have some semblance of a democracy, and we could still proudly boast about our high-quality education and the raw talent and entrepreneurial spirit of the workforce we were releasing to the world. However, in the past 10 to 12 years, our so-called leaders have stripped us to the bare minimum. They even tried to strip us of our dignity.

There is no doubt that our country is in economic ruin for no reason other than dysfunctional management. Our politicians are so consumed with their personal ambitions and materialistic pursuits that they are only able to see the state as a tool to advance their own personal and electoral interests. The farce of the budgeting process is a case in point – a scandal that has largely unfolded behind closed doors. Why are we proposing an increase of taxes that will further bleed a populace already drained by its leaders’ lack of economic policy and vision? Where is any attempt to build capital markets that would actually boost our dormant economy instead of further burdening it?

Our inept decision-makers have no response to an increasingly discontented and livid population. These devils must go.

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Hospitality & TourismInterview

A grand hotel plots a new course

by Nabila Rahhal
written by Nabila Rahhal

The Phoenicia Hotel is one of Lebanon’s most renowned five star hotels. Built in 1961, it catered to the era’s most glamorous crowd, with Omar Sharif and Brigitte Bardot among its famous guests. After being destroyed during Lebanon’s civil war, it reopened in March of the year 2000,  and has managed to survive the various ups and downs of the Lebanese hospitality sector ever since.   

Dagmar Symes was recently hired as the latest general manager, making her the first woman to serve as Phoenicia’s GM.

Executive sat down with Symes to talk about her plans for Phoenicia and her ideas for bringing the hotel’s vintage glamour and appeal to 21st century guests’ needs and lifestyles.   

E   What  motivated you to accept the post of general manager at Phoenicia Hotel?

First of all, the Phoenicia is the Phoenicia: it’s the landmark in Beirut. I believe it has grown the hospitality roots in Lebanon, and is a fascinating hotel as such. The Phoenicia is a “Grand Hotel,” and a lot of my experience is very much linked to a refined environment; the grand hotel flair is really something I feel very comfortable in.

It’s also an amazing challenge. The Phoenicia never had a woman GM before, and not to discriminate against anybody, but we [women] have a different way of seeing teams and refinement, and we are maybe more communicative in that regard. I think this is exactly what the hotel needs right now. This is how things fell into place from all parties.

E    In your role as a GM of a grand hotel, what added value do you intend to bring to the table?

General managers are general, so we are a little bit everywhere, and this is how I perceive my role.

I’m the main cheerleader of the crowd, with a lot of specialists to ideally do the task. I see the true duty of a GM as leading the team, true leadership: management is here and leadership is here (gestures higher), and if you embrace the culture and embrace the people, you will get amazing results.

So, to align the team to go in the right direction with you is the key role to play, aside from the strategic part.

E   Would you say the job is 80 percent heart and 20 percent brain? Or 40 percent heart and 60 percent brain?

If I say 80 percent heart and 20 brain then InterContinental and the owners would have a problem with me! (laughs)

I would say 50/50, knowing that right now I am more on the brain side rather than the heart side because the team deserves it, and also because of these difficult times in Lebanon.

Hospitality has lost, to a certain extent, its sparkle. If you lose the spark, and you’re demotivated, you have a tendency to become maybe less quality driven. So I think to re-boost [morale] you have to spread the positive energy and pull everybody up again.

This is how I perceive the role of the GM: the first part is team-related and then of course it’s business-related and number crunching. At the end I am judged by the numbers, but if you have the right team, you get the numbers right as well because it is all filtering down properly.

E   What is your vision for Phoenicia, and how will you align it with the existing vision of the owning family, given that the hotel has been in operation for a long time?

We want to use the hotel’s very historical and well-established institutional roots to bring it to the modern world.

Why now? Because things are changing a lot. Beirut is very much into arts, into fashion, into clubbing, into a huge diversification of its culinary scene. This is why we have to be far more integrated to bring all that to a grand hotel, while still looking at the luxury and refinement appeal we have as an international platform.

The other part is the integration in the local market, which is through F&B primarily, and also through weddings. This is basically how we would like to move forward.

The third pillar is HR because Phoenicia has always been, and is, the breeding ground for the hospitality industry in Lebanon. So we want to also continue our duties by giving the youngsters in hospitality a good base to grow or to start their career because the education system is so amazing here.

E   Does that mean that you are investing in your HR and training with a new kind of capital expenditure, or is it only more activity?

What we need to do is to make people aware that it is an international company supporting the Phoenicia spirit, and I think honestly we have enough tools within the company that we largely exploit in a very healthy way. 

Many people believe this is linked to a training manager. I don’t believe so because on-the-job training now is far more important – and takes up literally 70 percent of your training – than the theoretical classroom-style approach.

We use that style of training in certain things because you have to, but the real training is with the right leaders and right managers on the spot. We have departmental trainers in every department, and a quality manager following up on that. It does not need to have an extra capital expenditure.

However for the talented, or in other words, those that have the right aptitude and attitude, and want to, we have put aside a budget to go beyond the classics. For example, I can send a pastry chef to France for four weeks to work with a Michelin chef. We have done this in the past and we will do it again.

E   You have a budget for it, but the system is not…

We have the budget and the system is in place, but it is a matter of where we focus on first. Pure gut feeling and where we stand today would be the F&B team.

This is because the F&B is selling to the local community. It doesn’t matter in which sense, if it’s à la carte or banqueting, or a wedding, it is all F&B linked. Usually, hotels have a challenge with F&B outlets, and the community has a challenge with them; because for you, you’re going into a hotel, and you think it’s not really a restaurant.

Here our competitors are the freestanding restaurants out there; we are not talking about hotels only anymore. In our vicinity there are 40 restaurants that I have to take into consideration.

E   Does that mean you are planning to redefine your F&B offerings?

Definitely.

Given what I just said, we are redefining all the concepts to be quite honest. Eau De Vie – which is our fine dining outlet – has a huge potential from the setting alone and will have a new touch. Café Mondo was less frequented in the recent past because of the huge security barrier that blocked off the scenery for some time, but now it’s accessible again, so we need to use the terrace and get this “living” spirit into the space.

Then you have the classics that need to be implemented. A grand hotel usually has an afternoon tea for example: does it need to be the afternoon tea of yesteryear? Clearly not!  But I think we have been very creative in that sense and we will revive that as well, although maybe not on a daily basis.

E   In the past, the Salha group seemed a little wary when they said they’ve moved from making most of their money with accommodations to F&B as the main driver of their revenue. What is your view on that?

This is absolutely true. Even last year’s strategy was rooms oriented, because profitability in the rooms’ part is far higher than F&B, and in different markets I would fully support this vision.

Having had a very challenging economic environment, you had to go with certain profitability rules to be able to have funds to invest in the hotel and everything else.

But again I believe Lebanon without food is the wrong approach, and we have to have fine balance. The food part always eats most of your share, but on the other hand, as I always tell the owning company, you wouldn’t have all those restaurateurs out there if they didn’t have a profitable operation.

E   When Phoenicia reopened, it was the only venture available for a certain class of events. Now you have had a number of competitors and halls in other places in Beirut, as far as Dbayeh, and as near as The Four Seasons and The Yacht Club. So the landscape is different, and your ambition is still to be the landmark within that landscape: how do you plan to do that with other capable operators, with international backing of their own, sprouting around you?

Phoenicia has survived extremely well in a very difficult market context, and, yes, there are competitors, but you have certain market shares toward competitors.

If I compare myself with the Four Seasons, then it is the maybe more the business client and weddings rather than anything else. If I go Le Gray, it is the upscale international travelers; if I go Hilton, it’s banqueting. So you know you grab a little bit of everything, whereas I understand that the cake is getting smaller and smaller with every new competitor in the local market.

Internationally, I think you have to be smart to focus on the right markets. Here, I think Phoenicia has always been extremely international. We are making huge sales throughout the globe, starting with the European market, our region as well as going down to South America, where there is a huge Lebanese diaspora.

When there are difficult times, we are more locally focused, so we are all somehow sharing the same cake. But we have a very strong wedding segment, and this was always one of the key segments which sustained the business in tough times. Competitors also help to position you properly, and this is what I would use for our repositioning.

E   But in your repositioning, do you aim to be known as the hotel that has a little bit of everything, or the wedding hotel or the meetings, incentives, conferences, exhibitions  hotel etc.?

I think we have to be part of everything by nature of the market. We are international, we are aiming at the corporate and leisure segment, we have a kids club for families and we have a beautiful spa. Overall, we have to grab onto everything.

However, the fact remains that Lebanon as a country is extremely attractive for tourists from the Gulf region. Phoenicia was always known as one of the hotels attracting these clientele and that will come back, but it was never our main focus to attract only, and exclusively, this market. I think it is a mistake that Lebanon does, in that we all focus on this market only, because if the ban comes, or if it collapses – this is the reality – everything collapses.

But, you know, we have never lost our position as such, as a landmark. It is a matter of getting back into a certain society, and having maybe had a shift there. I think also it is natural because [we are dealing] with the new generation, which is different.

E   Regarding this element, Generation Y’s preferences and tastes are probably not the same as their grandparents’. How do you see yourself positioning the hotel vis à vis generation Y customers?

First of all, this rejuvenation part plays a big role because Generation Y in my humble opinion is extremely visual in a way, so we will work on visual impact. We work a lot on social media; we are reaching out differently through the Facebook approach, being younger and trendier.

When I say visual it’s also everything related to images: photography and linking to old values – if you look back to traditional values such as fashion and art, most of the time you would link it to Europe – but reintroducing this in a very humble way will also automatically attract the youngsters.

E   Speaking of art, you have one of the largest presences of art in your overall hotel environment, but sometimes it feels as though it is one of the most understated with regards to awareness and visibility. Are you planning on attracting more of the art crowd to the Phoenicia?

We definitely do. It’s part of our program for this year. But I think you also have to be very careful with these things, because everybody is jumping on these kind of “new trends,” and art has a certain value which you should not use and abuse in a wrong way.Phoenicia indeed has a lot of art pieces in a very discreet way – we never made something fancy out of it.

E   Will this stay the same?

Definitely.

E  The other thing you refer to is that feeling of Phoenicia being the most secure place for a traveler to come to. But on the other hand, of course, this total openness and accessibility was lost. What is your vision on hotel security?

I think you have to have a really fine balance. Personally, I wasn’t in Phoenicia in the old times, and I’m not even sure we needed this total security environment; I don’t believe so. We have a very well established and big security team, you cannot access the hotel through any funny backdoor. If we have delegations, fair enough, we get additional support from the local authorities.

For me, security has to have the right measure of prevention while maintaining guest contentment. If somebody really wants [to do harm] I think they are creative and smart enough to make it, but this you don’t stop through getting a third barrier around your building.

E   What about the hard targets, the numbers? Do you have goals for 2017: annual year-on-year growth, anything that you can disclose? Will you be judged by how much increase in the year you can achieve?

It’s not necessarily increase only, but of course everything, at the end of the day, is based on numbers, on GOP, on profitability. That’s the nature of the business. I think, however, that we went into our budget in a very positive way, because we believe that this year will set a new chapter with the new president and the first signs that confirmed this. We feel it also in the booking situation. If nothing really upsets this year’s environment, we will definitely have a very, very positive year.

E   Any year-on-year comparison you can give us in terms of January actual, or Q1 bookings, 2017 versus 2016 ratios?

All I can really say is that we have now already well succeeded  and well passed our general forecast for January. To the extent that we revised the entire forecast again for the remaining year with the main focus on the summer months, because this is where we believe the bulk will start coming back in. And then we will see.

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Uncategorized

How to protect your email from cyberattacks

by Magali Hardan
written by Magali Hardan

The numbers are overwhelming. Ten million malicious emails are prevented by Google every 60 seconds. Hold Security discovered a cache of 272.3 million hacked email accounts last year from major providers around the world, and more than half a billion personal records were stolen or lost in 2015, an increase of 23 percent from previous years, according to the 2016 Internet Security Threat Report (ISTR).

The increase in cybersecurity threats is alarming, and given the statistics, it is difficult to feel assured that our digital lives are secure. Cybersecurity should no longer be only a concern for states, businesses and public figures. It should be a major concern for every single person.

Step one: Acknowledge the threat

Alarmingly, too many people are neither concerned with nor aware of the seriousness of the problem. They adopt the attitude that it will never happen to them as they have nothing to hide. There is no need to be harboring state secrets, however, to exersize a minimum level of privacy, protection and security. Internet users should start to actively look for ways to protect themselves. The internet’s reach and scope are increasing exponentially, and organized criminal activity on the dark web is constantly on the lookout for new techniques to hack their targets, while by and large our security threshold remains the same.

The consequences of this could be devastating. John McAfee, founder of Intel Security Group, a global computer security company, has warned: “An email hack can destroy our digital world, and we won’t see it coming.” Estimates from various hacking groups say that passwords for 75 percent of the world’s email accounts are available for purchase on the dark web. Beyond that, there are thousands of videos, tutorials and softwares online on how to hack into emails, social media accounts, smartphones and others.

Step two: Secure your password and devices

It goes without saying that the first step is to have a strong password that is a mixture of uppercase and lowercase letters, numbers and symbols. Security experts warn against reusing the same password over separate accounts, and some suggest changing passwords often to add an extra layer of protection.

Other safety steps include: installing a well known antivirus, performing constant software updates, avoiding public PCs, being cautious of public Wi-Fi at airports, coffee shops and other locations, and opting for Secure Sockets Layer (SSL)/Transport Layer Security (TLS) when available. Also, it is best to use two-factor authentication when possible.

Regarding email addresses, avoid easy to guess emails, i.e. [email protected]. Instead, add random numbers and characters, and avoid posting your email over the internet on blogs, websites and social media. Any hacker who knows an email address can click on the forgot password link in the webmail and try to guess the answers to the security questions, so make sure to give obscure answers.

If you do want people to contact you online, one trick is to post your email as a picture instead of having it written as text; spam software are not able to decode images. Avoid replacing the @ with (at) or .com with (dot) com in an email address; while people think this tricks spambots it is in fact very easy to decode.

Step three: Secure your email

The hack of Democratic Party officials during the United States presidential elections were global news, not just for their political impact, but also because of cybersecurity concerns. If those emails had the latest level of encryption, hackers would not have been able to get their content.

The two most commonly used encryption protocols are Pretty Good Privacy (PGP) and its newer successor Secure/Multipurpose Internet Mail Extensions (S/MIME). Although you can use the older PGP protocol, cybersecurity experts advise using S/MIME protocol if possible, as it is much more secure and offers authenticity (explained below), which you do not find with PGP.

[pullquote]

More than half a billion personal records were stolen or lost in 2015

[/pullquote]

S/MIME consists of two security services: digital signature and encryption. These two services combined offer a high level of email security. A digital signature is a unique code added to your email that proves authorship and assures the receiver that it didn’t come from someone pretending to be you, and that the email has not been edited or changed during its transit.

Using a digital signature alone is not enough ,however, as your email will be traveling servers in plain text, making it very easy for hackers to intercept and read. Here, the role of encryption in S/MIME comes into play. Encryption makes your email unreadable to everyone except the intended recipient.

Setting up email encryption can be a laborious process, however. Below is Executive’s guide to securing Outlook, Hotmail and Gmail email accounts.

Microsoft Outlook Desktop

application for Windows

1. Click on the File tab in Microsoft Outlook, then select Options -> Trust Center -> Trust Center Settings -> Email Security.

2. Under Digital IDs (Certificates) click on Get a Digital ID, Outlook then opens up a page with a list of some of the certificate authorities (CAs) that are qualified to issue digital certificates. (Some CAs offer free Digital ID like COMODO and StartSSL, others you will have to pay for. The price ranges between $5 per user a month to around $10 per user a month).

3. Assuming you get your Digital ID from StartSSL, all you have to do is to go to their website using Mozilla browser, sign up for the free package and your digital ID is ready to install. If it doesn’t install automatically make sure to click on the Install button.

4. From Mozilla menu tab, click on Tools -> Options -> Advanced -> View Certificates -> select Your Certificates tab.

5. Locate your certificate under “SmartCom Ltd” and click on the backup button.

6. It will then prompt you to add a password in order to protect your certificate. (Make sure to remember the password as there is no recovery option for it, and your certificate won’t work if you don’t provide the password. It’s also advisable to make a copy of the certificate file you have just downloaded and store it on a USB drive). After you complete all the instructions below, delete the file from your computer, otherwise any person accessing your computer can take it and start sending emails on your behalf.

7. Going back to Outlook, Click the Import/Export Digital ID button located under Digital IDs (Certificates) (see step two).

8. Under Import/Export Digital ID from a file click on Browse and select the digital signature file that you just downloaded on your desktop.

9. Enter the same password that you just used for backing up your digital signature in step six. Press Ok and you will be redirected to the Email Security -> Press the Settings located under Encrypted E-mail.

10. Click on the Choose button located in the Change Security Settings window to select the signing certificate. It might get selected automatically by Outlook, if not then browse and select it.

11. Press Ok and then Ok again.

12. Go back to Email Security -> under Encrypted E-mail, check the Add digital signature to outgoing messages and then Send clear text signed messages when sending signed messages.

Now you can start sending digitally signed emails, and users can differentiate them through a small red certificate icon at the right of your email if the receiver happens to use Outlook. Double-clicking on that icon will show whether the certification is valid and trusted or not.

After setting up your digital signature, the next stage is encryption. Provided you have followed the steps above, this is a simple process: click to enable encryption in your Outlook. Encryption is a two-way process, meaning that the sender and the receiver should exchange their digital signatures by email and save these in their contacts. When digital signatures are exchanged between the sender and the receiver, only then can they start exchanging encrypted emails.

Hotmail webmail client

Outlook Web Access, which runs Hotmail, only supports S/MIME on Microsoft Windows® 2000 and Internet Explorer 6 or higher. This is provided you already have a digital ID, explained in steps above. Only then can you install the S/MIME control.

Once installed, you can use the gear menu > S/MIME settings to encrypt all messages. Simply select Encrypt contents and attachment of all messages I send and Add a digital signature to all messages I send.

Gmail webmail client

Gmail supports TLS connection, which means that the connection is secure and encrypted, but not the email itself. For the TLS connection to persist when an email travels to data servers other than Google’s, then those servers need to support TLS as well. It’s important to note that Gmail emails are stored as plaintext on Google’s servers, without any encryption. Back in 2010, a Google employee was fired after being caught using information from a teenagers’ emails accounts to stalk them. Since then, Google has taken some measures to increase its security locally, although Gmail emails are still stored as plaintext on their servers.

Currently S/MIME is only active for Gmail Enterprise and not solo users, so Executive searched for an S/MIME add-on that would work on Gmail but found none. Gmail users can, however, make use of PGP encryption. As stated earlier, PGP protocol is older than S/MIME. One of the drawbacks is that it doesn’t encrypt email headers, allowing a hacker to see who an email is addressed to, though its content stays encrypted. However, when a PGP-encrypted message is additionally encrypted by a TLS connection, the sender and receiver will become encrypted as well. This solution ends up very secure, as emails are not only safely encrypted during transit, but are also stored encrypted on Google’s servers as well.

PGP relies on something called public-key and private-key, which a user must own in order for them to receive encrypted emails. Those keys are generated by third party companies that support PGP encryption. The public-key encrypts the message while the private-key decrypts it. Once a user has those keys, they must share their public-key with other users, either by uploading it to special servers or by sending it via email. Let’s say that A wants to send an encrypted email to B. A has to encode his email using B’s public-key. When the encrypted email reaches B, he can decrypt it using his private-key.

There are many free PGP add-ons available online, and they make the process very easy for anyone to use; you just have to follow their instructions. Executive has tested Mailvelope and Enlocked add-ons for webmail clients (Gmail and Hotmail), and they proved very user friendly.

However, if you don’t want to bother with add-ons, browser compatibility and so forth, you can always switch to a webmail client such as ProtonMail, as their server can’t be decrypted (though ProtonMail has become so popular you might find yourself on a waiting list), or you can use a third-party company like DocuSign where you can digitally sign and S/MIME encrypt your email before sending.

In order to be secure, you constantly need to stay up to date on the latest security releases, performing regular updates of your software, and encrypting not only your emails, but your computer, laptop and mobile as well. Act now, before you become the next victim. Stay secure, and stay safe.

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CommentCybersecurity

Cyberthreats in the GCC and Middle East

by Nicole Purin
written by Nicole Purin

Cyberattacks present themselves in a multitude of facets, although there is no absolute single definition for cybercrime in existence. From a general perspective, cybercrime can be defined as “illegal activities, internet mediated, that occur in the context of global economic networks”. The main categories of attacks are hacktivism, financial theft, data theft, ransomware, cyberespionage, cyberterrorism and cyberwarfare.

Last year shed light on new dimensions of cyberthreats in the political arena, as diplomatic confrontations erupted between the United States and Russia over allegations of Russian hacking aimed at influencing the US election. But cybercrimes are materializing globally and growing exponentially. The damages being caused by cybercrime vary from financial to reputational, as well as political and military. Cyberattacks are capable of penetrating highly sensitive and protected sectors, such as defense and national security.

What is causing the rapidly evolving categories of attacks is the augmentation of internet traffic and usage, combined with the development of new platforms for internet delivery such as tablets and smartphones, to name a few. One can affirm with conviction: wherever there is the internet, cybercrime will follow. The statistics are staggering – in 2016, there were 2,871,965 globaly registered notifications about attempted malware infections that aimed to steal money via the illegal online accessing of bank accounts, according to the Kaspersky Security Bulletin. The bulletin derives its statistics from the Kaspersky Security Network – meaning the real number could be higher. “In February 2016, hackers used the SWIFT credentials of Bangladesh Central Bank employees to send fraudulent transaction requests to the Federal Reserve Bank of New York, asking it to transfer millions of dollars to various bank accounts in Asia. The hackers aimed to seize $81 million transferred to the Rizal Commercial Banking Corporation in the Philippines and an additional $20 million destined for Pan Asia Banking.” Fortunately, according to internet security firm Kaspersky, the ploy was discovered in time, when a typo was detected in one of the transfer requests.

In one of the first cyberattacks with huge cross-national security implications, the Stuxnet computer worm targeted Iran’s Natanz nuclear facility back in 2010. The malicious computer program differed from a virus in not needing to attach itself to an existing program, and in its ability to control electromechanical processes, such as those used to control machinery on factory assembly lines and centrifuges in nuclear reactors. Stuxnet destroyed one-fifth of Iran’s centrifuges by attacking all control systems in industrial installations.

These incidents exemplify the level of damage that a cyberattack is capable of causing. A large-scale cyberattack against either systemic financial infrastructure (a major clearing house or two or three stock markets simultaneously) or critical military infrastructure has not yet happened, but  both are deemed as realistic threats by security experts. Countries of the Gulf Cooperation Council (GCC) and in the wider Middle East are exceptionally vulnerable to cybercrime due to their exposure to interests of foreign parties, including states and activist groups as well as financial criminals, their geographical location and the political structure of the region. GCC governments are on the alert and have in recent years introduced legislative remedial actions that seek to address the cybercrime tsunami.

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Transnational cybercrime requires a far more sophisticated set of laws to tackle these type of crimes

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Legislative overview of combating cybercrime in the GCC

Cybercrime cannot be limited to a single jurisdiction. It is transnational and fluid, and this has challenged legislators in developing and developed countries alike, as the current domestic and international laws and enforcement protocols are simply not designed to fit the current legislative models. Cybercriminals know this and the complexities make it more difficult for the authorities to battle against this form of crime. Cooperation and harmonization across borders is key in order to ensure the development of gold standards of legislation and enforcement. In the past, the GCC relied on traditional laws, emergency codes and criminal codes to address cybercrime. The current position is that cybercrime legislation in the Middle East is under development, with some specific laws passed and the United Arab Emirates (UAE) leading in this field.

Cybersecurity in the UAE has been a priority for some time due to the growing number of cyberattacks. According to Kaspersky Security, an average of 17.4 percent of users in the Middle East encountered cyberthreats in the third quarter of 2016. Adding to the urgency is the fact that the UAE is the second biggest target for cyberattacks in the world, after the US, according to cybersecurity company Norse. As Rabih Dabbousi of UAE cybersecurity firm DarkMatter pointed out in 2016: “The exponential adoption of technology increases the UAE’s attack surface which is becoming larger every second.”

According to Dabbousi, the volume of financial transactions in the UAE and the country’s attractiveness for investors are just some of the reasons why banks and other financial institutions are constantly being attacked. Faced with an intensive onslaught, the UAE has created arguably the most effective and comprehensive cybercrime law in the GCC. The first cybercrime law was introduced in 2006 (Federal Law No. 2 of 2006) and was replaced by a more expansive cybercrime law in 2012 (UAE Federal Decree-Law No. 5 of 2012), designed to combat information technology crimes and codify the relevant offenses such as the transmitting, publishing or promotion of pornographic material, gambling activities and indecent acts. The law was later expanded to cover new offenses and to ensure alignment between the UAE legislation and relevant international treaties, such as the Budapest Convention on Cybercrime (signed November 23, 2001).

As a deterrent, the UAE cybercrime law in 2012 detailed severe punishments that include prison time up to a life sentence and fines ranging between $13,614 and $81,688 depending on the level of the cybercrime. The law addresses specifically social media and any misuses that can be derived from it, such as fraud, identity theft and impersonation. The law categorizes cybercriminals as hackers who hack into other individual’s accounts, criminals who are highly knowledgable of the cyberworld and exploit it for financial gains, and individuals who threaten and commit malevolent acts such as impersonation, threats and solicitation.

 Similarly, Saudi Arabia introduced cybercrime legislation in 2007, but definitional foundations such as privacy and confidentiality should be made more expansive. In Bahrain, the electronic transactions law (Federal Decree No 28 of 2002) was being utilized to tackle cybercrime, but it lacked specificity. After much debate, the country introduced a new cybercrime law in 2015, designed to counter illegal access to IT systems. Anyone convicted of entering, damaging, disrupting, canceling, deleting, destroying, changing, modifying, distorting or concealing IT device data concerning any government body will face a maximum of ten years in jail. From the perspective of fighting cyberthreats in this region, this is a very positive development as it indicates that GCC governments are realizing the urgent need to modernize cybercrime legislation.

Turning to other Middle Eastern countries, Egypt has relied on the intellectual property law (Law No. 82 of 2002), the telecommunications regulation law (Law No. 10 of 2003) and the electronic signature law (Law No. 15 of 2004) to tackle cyberattacks. However, these laws contain fundamental issues related to identifying cybercrime, as they do not always offer an extensive definition of cybercrime so as to capture all parameters, and with procedural limitations in the prosecution of cybercriminals, especially the ones operating from overseas. Transnational cybercrime requires a far more sophisticated set of laws to tackle these type of crimes. A new Egyptian cybercrime law is imminent in 2017 and will likely seek to address several of the gaps in previous legislation.

Jordan can rely on the electronic transactions law (Law No 85 of 2001) and the cybercrime law (Law No 30 of 2010). From the perspective of a legal expert, these pieces of legislation can act as a starting point but should be reviewed and expanded as the relevant investigative procedures require beefing up. Oman adopted a cybercrime law in 2011 (Royal Decree No. 12 of 2011), and it addresses a wide range of illegal actions involving the internet and computer devices. It is focused on defining crimes committed in cyberspace such as cyberbullying and cyberterrorism. This can also be considered as a good starting point, as the initial approach was the extrapolation of existing criminal laws and telecommunications laws to combat crime, which lacked realism.

The Qatari government has passed a cybercrime prevention law (Law No. 14 of 2014), another very welcome development in a drive to combat online and cybercrimes. The law imposes many sanctions and several penalties for offenses committed through IT networks, the internet and computers, and it safeguards the cybersecurity within Qatar, as well as the country’s internet infrastructure.

Greater collaboration to shield against cybercrime

The field of internet communication is expanding continuously and cybercrime is evolving and adapting to the changing information landscape. The current legislative platform in the GCC has improved considerably in the last few years by providing legislative harmonization, as specific legislation has been passed in most countries. However, cyberattacks are becoming more bold, unpredictable and mainly transnational. The domestic laws require constant updating, and in order to prevent and shield countries from attacks, greater international collaboration is also required.

International and regional conventions for the fight against cybercrimes such as the Arab Convention on Combating Information Technology Offenses (2010) and the African Union Convention on Cyber Security and Personal Data Protection (2014) are encouraging, but remain limited in their reach and scope when measured against the global severity of cybercrime. It is believed that a new international convention on cybercrime is required  to address transnational attacks more effectively and will involve the global community as a whole.

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CybersecurityQ&A

The public sector’s vulnerability to a cyberattack

by Jeremy Arbid
written by Jeremy Arbid

In Lebanon, the speed at which the government is moving and the speed at which cyberthreats are developing are totally different. Cyberdefense planning, it appears, is not much of a priority for the Lebanese government. The country does not have legislation to protect digital rights, lacks legal penalties to deter criminal cyberattacks and has only patchwork solutions in place for cyberdefense. In simple terms, plans to beef up the government’s cybersecurity capabilities are moving forward at a snail’s pace.

Cybersecurity firms point to an uptick in attacks on Lebanon when compared to global averages. Due to the state’s slow moving apparatuses and the high cost of investment, the best cyberdefense solution for Lebanon to protect its public sector, its private sector and online individuals, may be to migrate to the cloud – a debate which is still ongoing. Executive met with Ihab Chaaban, Information and Communication Technologies (ICT) security officer at the Office of the Minister of State for Administrative Reform (OMSAR), to learn more about Lebanon’s cyberdefense capabilities.

E   OMSAR’s first foray into cybersecurity was in hosting government websites in the mid-2000s. How has OMSAR’s role in cyberdefense since evolved?

Historically, OMSAR began in its hosting environment with informs.gov.lb, [today is dawlati.gov.lb, the official e-governmental portal] and over the years other websites were added. Suddenly, we found ourselves stuck in an unusual situation, hosting around 90 government websites without proper planning. In addition, we didn’t have technical, networking or security staff on board. With the attacks on government websites, OMSAR recruited a security officer and created a cybersecurity committee in order to share all security measures, concerns and responsibilities with all Lebanese administrations. As such, we started working on a national cybersecurity policy guidelines to be adopted and implemented by all public agencies. Furthermore, OMSAR is planning awareness workshops directed at Lebanese employees in order to raise their awareness on [cyber]security.

E   About six years ago, government websites were the target of cyberattacks. Were the attacks a catalyst for the government to improve cybersecurity capabilities?

There were many attacks hitting OMSAR servers and many websites were going down. The attacks began in 2011, targeting our web servers, hitting many websites, especially the websites of the Ministry of Interior and the Internal Security Forces. Because we had only one web server for all the websites, all the attacks affected the other government websites. [In response], the Council of Ministers decided to create a National Cyber Security Committee [NCSC]. The committee came out with recommendations to secure our [online] environment immediately, [but these were] short-term security measures. We also decided to create a new web-hosting environment and to build it based on international standards and security measures that define all the aspects of the web-hosting environment – [in order] to be a state-of-the-art national web-hostingenvironment. This needs a lot of work and funding.

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The country does not have legislation to protect digital rights

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E   OMSAR is drafting a cybersecurity policy. Is there any update?

We are working on it right now while simultaneously improving the security measures of the current hosting environment. Each administration doesn’t have [its own] cybersecurity officers – the IT departments do the whole job. If we found a hole, we’d fix it, and if we found another then we’d fix it as well; we didn’t have a strategy, it was more like patchwork. We published a cybersecurity policy to guide the directors of the administrations on how they should create their security policies. We came up with a brief document, like a pamphlet, to make it easy to use and follow.

E   How did OMSAR assess public agencies’ readiness to adopt the recommendations of the cybersecurity policy?

Even before publishing we were wondering how to get the administrations started, so we created a checklist. This helped [departments to self-assess] where they were on cybersecurity. We published the checklist in 2015.

E   Did public agencies check it again in 2016?

It’s an internal process for the public agencies. OMSAR doesn’t have a mandate to supervise [the other adminstrations] – if they request help we are always ready to assist and provide them with the needed help.

E   In terms of measuring the assessment, is there any indication at a government-wide level of cyberdefense capabilities?

I don’t have any accurate information. In 2015, before publishing, we thought of putting the checklist online – so we could fill our database with the respective [administration’s] information. But after negotiating with decision makers, it was decided against that because of privacy and security [concerns].

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The attacks began in 2011, targeting our web servers, hitting the websites of the Ministry of Interior and the Internal Security Forces

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E   If the oil and gas industry, for example, goes active then there will be seismic data, exploration data and many other valuable datasets. This vital data could probably be one of the more attractive hacking targets in Lebanon because of its actual money relevance. Is protecting such data part of the mindset in the ministries or at the government level?

One of the recommendations of the [NCSC] was to build a national data center for the whole government. We need more time because this issue requires critical decisions by the cabinet to identify who will take responsibility for the data center, securing it and transferring data between administrations. In addition, if we want to create a national data center, all the data for the government will be residing in it and, as such, it’s a critical issue.

E   What is being done to prepare a national data center?

In OMSAR’s e-government unit we have an interoperability sub-unit. Now we are working on creating a specific design to be implemented by the government, connecting and transferring data between administrations [in a secure way]. Maybe this will lead us to the next step of creating the centralized data center.

E   Cybersecurity breaches, cyberwarfare and criminal hacks have increased tremendously, especially in the last couple of years. Some companies are claiming a 4,000 percent increase in the rate of cyberattacks in the last five years.

Yes, for sure.

E   That seems to be a cause for concern.

There have been many voices raising this issue, especially from the Internal Security Forces, who have a cybercrime unit. They’ve requested the Ministry of Justice, and maybe the cabinet, to work on such a law. If I attack your server and steal your data, the criminal code has no text defining such cybercrimes and their penalties. For now, they’re applying the standard criminal code and adopting it to cybercrimes.

E   An individual from a cybersecurity firm said that state-sponsored hackers are sent on training missions to attack another country just so they know how to attack better. So they can attack Lebanon, and even if they get caught, there is very little danger of repercussion from the state because there is no legal framework. Another individual said because internet bandwidth in Lebanon is so limited a distributed denial of service (DDOS) attack is very easy, and it takes very little effort to shut down a website.

And this is why one of the recommendations is migrating to the cloud. Estonia, for example, is a completely electronic government – they are totally digitized. Because of the very high risks of cyberattack, they’ve migrated the government to the cloud.

E   Will the government migrate to the cloud?

In 2015 we had many [consultations] from companies to advise the government on how to build a secure cyberenvironment. Those companies advised the government to move to the cloud. We came up with a terms of reference (TOR) – all our needs and requirements for securing networks – and we took it to the previous cabinet to get approval for the funds because it is quite costly, and it was signed. Now, there’s still a debate of whether to go to public clouds, such as Amazon, Google or Microsoft, or have a private cloud since data cannot go outside Lebanon.  There is a decision from the Council of Ministers in 2014 about a partnership between OSMAR and OGERO to build a private cloud for the Lebanese government, in addition to a redundant data center for the e-government portal.

[pullquote]

If I attack your server and steal your data, the criminal code has no text defining such cybercrimes and their penalties

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E   Will it be implemented?

Currently, our minister is working with the Ministry of Telecom and in collaberation with OGERO on setting a Lebanese National Cloud Computing Policy, in addition to executing a private cloud for the Lebanese administration and a secure government network for interoperability.

E   The CTO of Microsoft Middle East says their data suggests Lebanon experiences more cyberattacks than the global average, and if there was a Computer Emergency Response Team (CERT) in Lebanon, they could collaborate with Microsoft to reduce attacks to the global average.

The national cyber security committee recommends the creation of a CERT. A year ago, we had a meeting in the [prime minister’s offices] with the Telecommunications Regulatory Authority [TRA] and they mentioned that they started creating a CERT for Lebanon. But the TRA doesn’t have any mandate to create and manage the CERT I think they took it as an initiative. Currently, I don’t know of any update on the subject.

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