Entrepreneurship

Economena Analytics

by Thomas Schellen
written by Thomas Schellen

There is a tremendous link between what Lebanon needs in terms of information, transparency and planning, and what improved data can help deliver. In this context, Executive followed up on developments at Beirut-based data services provider, Economena Analytics, with company founder Tamim Akiki and deputy chief executive Amani Kandil.

E   What has happened with Economena since Executive interviewed you for our entrepreneurship report on tech companies which was published in November 2014?

Tamim Akiki (TA): October 2014 was when we launched our flagship product, the Economena User Station. Starting with the launch, we have seen some good uptake of our services from the market. We signed up several more clients in Lebanon, including banks and universities. In the year 2015, we improved the product a lot and added new features, including a cool feature called Tables. This feature facilitates visualization of data from different sources and allows clients to manipulate data to see different rankings and changes. This is a first in Lebanon and it is completely dynamic.

E   Was the development of data and tools your main focus in 2015?

TA: We also launched the Lebanese Economic Outlook survey. We published three editions of the survey where we poll our clients and other economists in the local market about the outlook for the economy to try to separate the good sectors from the bad sectors.

E   Did you take steps in relation to overall business development?

TA: We have invested a lot in our outreach and in the optimization of our platform, some of this based on client feedback. We also grew our revenues in 2015 by around 35 percent. In organizational terms we established two new businesses, an offshore enterprise which helps our foreign clients, who represent two thirds of our revenues, and a joint stock company. For the coming year we are looking to sell more subscriptions to the United States, breaking into the academia sector.

E   What happened on the team development side? How much did you grow?

Amani Kandil (AK): We did not grow much, in Lebanon that is, but we have focused on developing our team. We added a team in Nepal that helps with data extraction and we now have one team member in Egypt as well.

TA: The reason we invested in the Nepalese and Egyptian teams is also because we are focusing on developing our coverage this year. We are going to add a lot more countries with extensive coverage to help existing clients in Lebanon save costs in their expansions and coverage. Thus the banks that are investing in Egypt as a growth market will now have access to a full Egyptian database at Economena. We also did a lot of stuff internally [to upgrade our team’s capabilities] and Amani is now managing the business altogether.

[pullquote]“Our five-year business plan through 2020 foresees annual revenues of $3 million to $5 million from subscriptions and the Economena User Station”[/pullquote]

E   How did that feel, to move into this responsibility?

AK: The nice thing about working here is that it is not a one-person responsibility. It is a shared responsibility. So [being deputy CEO] is just having a fancier title.

E   How large is the Economena team now?

TA: We are 12 full-timers here, five in Nepal, one in Egypt and one sales and marketing in the United States.

E   Did you do any fundraising in 2015, and specifically did you approach any venture capital funds for Circular 331 money?

TA: We did not but we are currently in negotiations with two different parties to raise money or finance part of our expansion into the Gulf Cooperation Council and the US. This would mean either specific financing for our sales and marketing expansion into the US and the GCC or an investment into the core business, which would possibly be through Circular 331. We expect to obtain funding in 2016.

E   Was there a reason why you did not seek to obtain equity finance from local VCs in 2015?

TA: We wanted to wait and see. Circular 331 was issued in August 2013 and has not been in effect for a very long time, so we wanted to see how the relationships between the VCs and the startups develop. Our business is more of a long-term value proposition and we want to be very careful about who we are working with.

E   When someone asks you if you are a startup or an entrepreneurial company, how do you describe yourselves?

AK: As an entrepreneurial company, not as a startup.

TA: One of our key advantages is that a lot of our business is based on contracts that are ongoing and will be ongoing for several years into the future. At the same time, our core product, the Economena User Station, is still very early in its life cycle, so it is a startup project by itself.

E   How large do you see your growth potential in the next three to five years?

TA: Our five-year business plan through 2020 foresees annual revenues of $3 million to $5 million from subscriptions and the Economena User Station. A large part of that revenue will come from North America and effectively international markets, excluding the Middle East. The Middle East will contribute approximately one third of our revenues.

Can you tell us in closing how much in terms of investment amounts you will be shooting for in your fundraising in 2016?

TA: We are looking for anything between $500,000 and $1 million in 2016.

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Entrepreneurship

Tech entrepreneurs update

by Thomas Schellen
written by Thomas Schellen

When hiking through an aging natural forest, did you ever accidentally burst your foot through an old log and see the wood fibers crumble while bugs and worms scuttle away into the moss or wiggle around your hiking boot? That is a moment to not only gaze at the young shoots, but also appreciate the secrets of an ecosystem’s functionality. Effective decomposition is vital, contradictory as this may sound, to every functioning ecosystem. It liberates resources for re-composition into new uses and, eventually, new structures.

Another characteristic of a successful ecosystem is its ability to respond to disruptions and function with resilience. All ecosystems, science says, are exposed to disturbances. They can range from your boot interrupting the decomposition of that rotten tree to a volcanic eruption that spews an ocean of hot ash for miles around. Either event will disrupt the ecosystem and change it but even a mass destruction event might not eradicate it; when Mount St. Helens blew in 1980 in one of modern history’s most devastating volcanic outbreaks, no one was more surprised than the scientists observing the area after that violent event to see how quickly new plants broke through the cover of ash and how tenaciously life grew back in the surrounding mountains in the United States’ Pacific Northwest.

Natural environments will not deliver this resilience if they are put together by a landscape designer. Both the sheer number of constituents and complexities that are encapsulated in an ecosystem, and the unpredictability and specificities of external variables that are testing its resilience, make it a thankless task and fool’s errand to try and construct a perfect biological ecosystem; and quite probably this is equally true for business environments.

Judging acceleration

Because digital ecosystems are human-driven and thus exposed to Murphy’s Law even more than they follow Moore’s law, it stands to reason that their resilience will only be proven after they have withstood the impacts of external disruptors and risks from new tech to politics, geo-economic forces and climate change factors. Developing and proving this resilience, however, is not a short-term task.

In the days of the New Economy, when the media buzzwords were incubator and cluster (instead of accelerator and tech hub), every aspiring economy, including the Lebanese, was talking about emulating the US information technology revolution by having their version of a Silicon Valley. Shortly thereafter, however, the burst of the New Economy bubble eliminated countless dot.com ventures (London-based fashion site boo.com, which failed in 2000, was one of the bubble’s top destroyers of Lebanese investor money). The massive disturbance, in ecosystem terms, taught investors and entrepreneurs important and hard lessons of decomposition and set the digital economy back to square one of the long journey to real profitability.

[pullquote]Resilience will only be proven after they have withstood the impacts of external disruptors and risks from new tech to politics, geo-economic forces and climate change factors[/pullquote]

In the current iteration of the innovation ecosystem concept, the digital economy has shown that the lessons of the dot.com crash did have positive impacts. But this neither means that the current system is perfect in any way nor that it has already reached full maturity or resilience.

A case in point for yet-to-be-proven value propositions are the accelerator programs. According to the 2016 report by the Seed Accelerator Ranking Project (SARP), a research initiative by US-based scholars Yael Hochberg and Susan Cohen, proliferation of accelerator programs in the US in the past few years has resulted in the emergence of hundreds of programs that do not meet the criteria for calling themselves accelerators. “Even within the group of programs that meet the criterion of an accelerator – a fixed term, cohort based program that includes educational and mentorship components and culminates in a public pitch event or ‘demo day’– there are differences on many critical dimensions, including program structure, management, goals and, most importantly, efficacy. For an entrepreneur considering an accelerator program, finding reliable data regarding the performance of programs is difficult, and there is much confusion and debate regarding how ‘performance’ should be measured for an accelerator,” Hochberg and Cohen write in their report, which was published last month.

Entrepreneurs need more transparency on the performance of accelerators because the exercise is prone to incur a high cost in form of equity. “Equity is an entrepreneur’s most valuable currency, so the non-monetary benefits such as mentorship, network and exposure to future investors are an important part of the decision to attend a program,” they note.

Another scholar, visiting fellow at the Brookings Institution Ian Hathaway, concludes from his research that startups which graduated from “top programs” achieved milestones in fundraising and gaining customer traction. “However, these positive effects dissipate when looking at a broader sample of accelerators: many programs do not seem to accelerate startup development, and in some cases may even slow them down,” Hathaway cautions in a contribution to Harvard Business Review.

While these scholarly findings derive from research into US-based accelerators – whose numbers according to Hathaway have skyrocketed from 16 in 2008 to 170 by 2014 with a flattening of the curve since then – the positive implications and the cautions very likely apply to international programs, with the extra remarks that international programs are still younger and much less researched than their US peers. From the Middle East, at time of writing, only two accelerators in Arab cities met the criteria for inclusion in the Global Accelerator Network (GAN) list of members; one in Cairo and one in Jeddah.

Growing with diversity

According to Hathaway’s paper Accelerating growth: Startup accelerator programs in the United States, there are indications that accelerators bring benefits to participating companies and broader startup communities despite little systematic research having been done because of the newness of the accelerator programs. “Regional development leaders need to recognize that ideas, talent, capital and a culture of openness and collaboration are all vital to regional startup communities, which are best thought of as innovation ecosystems involving complex interaction among entrepreneurs, investors, suppliers, universities, large existing businesses and a host of supporting actors and organizations,” he advises.

The recommendation resonates with what Executive has experienced as stakeholder in complex interactions that are shaping and are expected to sustain an innovation ecosystem in Lebanon. Situated outside of the narrow network of organizations and actors with vested interests in running the system, the magazine has for years been committed to analyzing entrepreneurial companies and the system itself, as evidenced by the magazine’s role in the Global Entrepreneurship Week and our annual selection and recognition of the top 20 entrepreneurs starting in 2012.

Thus when examining the current state of development in the Lebanese innovation ecosystem we opted to review perspectives from both stakeholders and companies. We moreover looked at both intrinsic factors such as the latest new investment funds that have entered the supply chain of funding companies in the stage of formation, and at extrinsic and intangible factors that play a role in Lebanon – mindful of the insights regarding complexity that real-life ecosystems afford us.

The first thing that emerges from the Top 20 selections since 2012 is a strong correlation between the Executive list of top entrepreneurial ventures and the company names which one encounters as winners in competitions, funding events and highly rewarding exits. Just to give one reference, the companies Diwanee and Shahiya, which achieved notable exits in March and November of 2014, were recognized by Executive as Top 20 Entrepreneurs in 2013 and 2012, respectively. Fundamentally, companies recognized by Executive as entrepreneurs have since their Top-20 listing created positive impacts in areas from health-tech and fintech to communications, software, entertainment and beyond that to developments in the agriculture, environmental and alternative energy sectors.

For our present reality check on the evolution of the Lebanese innovation ecosystem, we turned to three companies from the Top 20 Entrepreneurs in Science and Technology, which Executive had recognized in November 2014. We selected companies working on three hot topics, namely cyber security, economic data and renewable energy.

One of the companies – cyber identity protection vendor myki (see interview here) – has participated in several startup competitions and acceleration exercises abroad; the two others – Economena Analytics and Sharp Minds (interviews here and here) – have pursued their growth without the use of acceleration programs. Their choices have also differed in financing: Sharp Minds and myki have negotiated fundraising rounds in 2015; Economena has chosen to seek no funding in 2015.

When it comes to their view of the financing environment, the verdict is two-and-a-half-thumbs up between the three companies. The experiences of all three validate the progress that has been made possible by Circular 331 and the gradual diversification of the funding landscape through the formation of additional providers (see story here). The comparatively minor hiccups that still mar the funding side are a certain lack of transparency – as Economena’s Tamim Akiki points out, no such thing as an annual report on Circular 331 has been produced – and cumbersome bureaucratic requirements, which both applicants and fund managers confirm to Executive on or off the record.

[pullquote]Entrepreneurs need more transparency on the performance of accelerators[/pullquote]

Three thumbs are also pointing skywards in terms of access to talent. All three companies speak highly of their human capital; Antoine Saab and Nadia Moussouni at Sharp Minds tell Executive that they found top-notch talents among fresh graduates at local universities and among people in the labor market. “We have been very lucky to find true talent among people who came back from abroad but then found themselves in the crisis in Lebanon,” Moussouni says.

For myki, being located in Lebanon at their present stage of development was an advantage that was too good to give up even in exchange for an investment when this would have come with a requirement to relocate to another country. According to myki’s co-founder Priscilla Elora Sharuk, the benefits of having a strong local network and market knowledge were non-negotiable.

While all three firms confirmed the value of their involvement in the growing Lebanese innovation ecosystem, there were also thumbs-down verdicts in important areas. The insufficient size of the local market made all three firms scoff at the possibility of focusing their growth strategies here. Moreover, using Lebanon as sole operational base is not a proposition from the perspective of a self-respecting tech startup.

As other young entrepreneurs like the goggle-with-heartbeat-monitor producer Instabeat (Top 20, 2012) and automatic-guitar-tuner maker Band Industries (Top 20, 2014) have also found out, Lebanon is not a place for prototyping a hardware device and the industrial logistics are at best cumbersome. This important deficiency seems to have informed decisions of aspiring companies such as myki and Sharp Minds to the point that the latter established a subsidiary to set up what Saab describes as testing & certification and quality control center, plus logistics hub in the city of Burgas on the Bulgarian Black Sea coast.

With respect to the values and lessons of organic development, the entrepreneurship environment is clearly benefiting from the diversity and engagement of its people. Taken all together as a batch of corroboration, the experiences of the entrepreneurial teams both validate and challenge the Lebanese innovation ecosystem.

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Entrepreneurship

A stroll through the ecosystem

by Matt Nash
written by Matt Nash

The most common ecosystem disturbances are fast and furious. Earthquakes. Floods. Fires. Not so Circular 331. The initiative by Banque du Liban (BDL), Lebanon’s central bank, provided a long-awaited capital injection into the country’s entrepreneurship ecosystem. But it’s a disturbance more akin to climate change than a meteor strike. Organisms long part of the ecosystem are adapting to the new disturbance, and it’s acted as a draw to bring new biomass into what is still a relatively small space for the startup-minded.

In late March, central bank Governor Riad Salameh indicated Lebanese banks had committed $243 million to the ecosystem, around half of what 331 makes available (i.e., 3 percent of commercial and investment banks’ Tier 1 capital, an amount that grows year-on-year as bank profits increase). To date, only around $50 million has been deployed.

While Executive heard no shortage of complaints (some of them contradictory), no one the magazine spoke with for this article feared the money would go uninvested. The newness of the idea and associated processes as well as the ecosystem’s relative immaturity, several interviewees say, are among the factors hindering a more speedy deployment. After all, according to Executive’s research on the topic and an engagement with the country’s new Startup Ecosystem Think Tank, Lebanon is the only example of a central bank orchestrating and executing a policy to nurture an entrepreneurship ecosystem (as opposed to a country’s executive or legislative branches of government taking such a policy initiative).   

Clearing the backlog

Prior to 2010, venture capital (VC) and private equity (PE) funds were not doing much in Lebanon. Between launching in 2006 and losing two of its key investors four years later, entrepreneurship organization Bader’s Building Block Fund (BBF) invested in — and quickly exited — exactly one company. And it wasn’t even Lebanese. A local bank’s attempt at a VC fund in the same time period folded before deploying a dime. The only success story during these years was the 2008 launch of Berytech Fund I. For two years, Berytech basically owned VC and PE space in Lebanon. A competitor emerged in 2010 with the birth of Middle East Venture Partners (MEVP), which launched its own MENA-focused fund that same year and took over management of the BBF, currently known as the BBEF.

Combined, these three funds totaled around $23 million. Post-331, both Berytech and MEVP raised new funds focused mainly on Series A investments with a combined total value of $120 million ($50 million for Berytech and $70 million for MEVP). Berytech has deployed around $20 million (announced in one batch in December 2015) and MEVP $29 million, representatives of each tell Executive. Both Berytech Fund II Manager Paul Chucrallah and MEVP Managing Partner Walid Hanna say that these deployments are largely backlog investments, meaning the deals are not exactly new, but neither had the cash available before 331 to make them. Aside from that commonality, the two men have divergent views on the months and years ahead.

Chucrallah says he’s comfortable doing one or two investments over the next few years and is not overtly concerned about deal-flow in the ecosystem. Hanna, on the other hand, focuses almost exclusively on pending pipeline problems in a 30-minute conversation with Executive. “The problem is Lebanon is very small and [existing and new] VC funds are competing for pipeline that doesn’t exist,” he says.

Concerning fund efforts to fill the pipeline in the future, both point to Speed@BDD, to date the country’s only startup accelerator — an ecosystem component meant to help early-stage companies mature at a rapid pace. Berytech Fund II and MEVP’s 331-compliant Impact Fund each invested in Speed, and both Hanna and Chucrallah say they’re hoping for more capital soon. In October 2015, the central bank’s 331 point person, Marianne Hoayek, told Executive that Speed would be receiving investment from local banks with a 100 percent guarantee (even safer than the standard 331 guarantee of 75 percent). She explained that the central bank was giving banks 100 percent guarantees if they invest in ecosystem components like accelerators. Hoayek was not available for an interview for this article. Hanna says Speed’s investors are still pushing for 100 percent guaranteed money. Chucrallah was less specific on how the funds were lobbying the central bank for more capital for Speed. “Whatever happens, we will take it,” he says.

Closing a gap

Seed funding for startups – a need angel investors meet in many other markets – was largely lacking in the first two years after 331 was published. While Speed pumps $30,000 into the companies it accelerates, it became the only game in town after AltCity’s Bootcamp – a pre-accelerator, meaning they nurture entrepreneurs from the idea stage, earlier than the ventures Speed accepts – stopped doing equity investments in late 2015. That won’t, however, be the case for long. Lebanese entrepreneurs – and twin brothers – Ghaith and Abdallah Yafi found success abroad and returned to the country with the goal of raising their own VC fund after doing some angel investments in 2013, they tell Executive.

By the end of April, they say, they plan to formally launch a seed-stage focused fund, dubbed B & Y Venture Partners, making use of around $40 million in 331 money. As the Yafis spoke to Executive in late March, they explained the exact fund size was still being finalized as the fund’s 20-plus investors were busy putting final signatures on the fund’s legal documents. When it launches, it will have a temporary advantage of being the sole seed-only fund catering to the Lebanese market. Moreover, the Yafis describe it as a “hybrid” fund, meaning between $10 and $15 million comes from private investors and will not have the same limitations as the $40 million in 331 money local banks have contributed.

“We understand private investors today will not invest in a fund where only the banks are subsidized,” Abdallah explains. So, he says, they adjusted the risk-reward profile to draw in non-bank money.* 

B & Y may not for long be the sole seed-only fund in the market. Other new players are looking at early-stage opportunities including Cedar Mundi Capital. The fund has an appetite for seed investments, according to Bassel Attieh, co-principal at Cedar Mundi and executive VP at Kuwait’s International Financial Advisors KPSC. Attieh speaks to Executive in a short email exchange, and explains that Cedar Mundi is a joint venture between International Financial Advisors and Spain’s Alma Mundi Ventures. The fund, Attieh explains, received central bank approval in October 2015 and hopes to raise between $50 million and $70 million. He adds that “at least nine banks and one financial institution have firmly committed so far.”

Like B & Y, it will have a hybrid structure, with around 10 percent of the fund’s capital raised “committed by the founders of the fund” and not restricted by 331. “The fund will be investing between $500,000 and $1 million in Seed Stage opportunities and between $1 million and $5 million in Series A&B opportunities,” Attieh says, without specifying how much equity the fund will be asking for.

Cedar Mundi announced its first ticket of $1.5 million in December, investing in ChefXChange, an online portal for finding private chefs. While it will help close the seed funding gap, Cedar Mundi is arguably also the kind of adaptation BDL was hoping for when drafting 331. The managers are foreigners whose expertise will theoretically benefit the entire ecosystem, and their first investment – which has a Lebanese expatriate co-founder – is only now moving its headquarters to Beirut in order to receive an investment under 331. Cedar Mundi has “nine other active deals in the pipeline.”

When Executive last spoke to BDL’s Hoayek in October, she said there would soon be two or three seed-focused funds on the market. Reporting for this article, Executive heard rumors that five new funds would begin operating soon. One, Azure, will focus on fashion with a digital component as was first revealed in Executive in November. The magazine was unable to reach the managers for this report. Executive could not reach the four other funds that will allegedly be launching soon.

VC funds, of course, are not the only funding source for Lebanese entrepreneurs. As noted above, angel investors play a prominent role in seeding startups in other markets. However, as Theo Khoury of AltCity’s Bootcamp explains, “There isn’t an angel culture in Lebanon.” Bootcamp has not seen much interest from angels in the startups it’s incubating. That is not to say there are absolutely none in the country. Sami Abou Saab, Speed’s CEO, says the accelerator has piqued the interest of at least four high net worth individuals, three of whom offered investments which respective startups have yet to accept.

Investing in human capital

Although Circular 331 does not actually include the word “technology”, it mandates that banks (and the funds managing their 331 money) invest only in startups that rely “on knowledge economy and support of creative intellectual skills (Intellectual Capital).” In the field, it is being interpreted as a “tech-only” initiative and there are no shortage of complaints about human capital deficiencies in coding as well as software and application development. Startups can’t grow without the right talent, so the lament goes.

While Lebanon has private coding crash courses — such as Teens Who Code and Le Wagon, founded in 2014 and 2015, respectively, and SE Factory, a Bader and Nawaya Network initiative launched in March — there’s a new player on the market making use of the aforementioned 100 percent guarantee offered by BDL. Also launched in March, Torch offers a free, three-month coding course with an eye on both servicing and helping further develop Lebanon’s startup ecosystem. Co-founder Youssef Jalloul explains that Torch aims to graduate coders with ideas for startups (and would take a 4 percent equity stake in any young companies it graduates) but concedes many coders “don’t have an entrepreneurial mindset.”

He says he expects many graduates to simply look for better jobs in the fields they’re interested in than the ones they have now. Jalloul explains that some of Torch’s first batch of students studied computer science but could only find work answering phones in call centers. Even if Torch does not itself produce a high volume of startups the way Speed and Bootcamp are expected to, Jalloul still sees the program adding value to the ecosystem through these talent investments. He adds, while giving Executive a tour of the company’s expansive top-floor office, that Torch may add startup incubation to their portfolio of services as they certainly have the space.

Scaling up

On its naturalist foray into the ecosystem, Executive also finds an adaption at the UK-Lebanon Tech Hub. Initially focused on accelerating early-stage startups (and taking them to London for international exposure), Director Nadim Zaazaa tells Executive that future acceleration cycles will focus on more established startups looking to scale their operations. Part of the reason, he says, was a feeling at the Tech Hub that Speed and Bootcamp are helping the early stage companies well enough. The initiative, brokered by the UK and Lebanese governments, has a two-year lifespan. Asked if that’s also something that might mutate soon, Zaazaa smiles and says “April”, in reference to an event the Tech Hub was planning at the time of the interview in March.

New market, new model

Flat6Labs, an accelerator founded in Cairo in 2011, will be launching in Beirut this summer, CEO Ramez Mohamed tells Executive. This news comes on the heels of back-to-back announcements in 2015 and 2016 at Arabnet, a regional technology conference hosted in Beirut, that the company would be coming to Lebanon soon. Mohamed says Flat6Labs has been in contact with Arabnet, its local partner, and the central bank for one year. And, unlike in other markets, Flat6Labs in Beirut will not be an accelerator, he says. Rather, it will be a fund but will offer startups in which it invests the same sort of accelerator services it offers in other markets. He adds, however, that because the company will not be registered as an accelerator, it will not be seeking a 100 percent investment. Flat6Labs’ Lebanese fund will total $20 million, Mohamed says.

Elephant in the room

One factor neither the ecosystem nor the central bank can control, however, is the regulatory framework in which the system is operating. Lebanon’s capital markets are laughable, says Henri Asseily of Leap Ventures, which is managing a $71 million Series B fund, and the legal procedures for setting up a fund and making investments are cumbersome and time consuming, he adds.

Since Lebanon actually lacks a law governing venture capital and private equity funds, all funds in this country are legally registered as holding companies. Asseily adds that the risk aversion of pre-331 investors into startups produced complicated term sheets that also make it difficult for Leap to make follow-on investments into existing startups. He says Leap is eyeing two big investments that, if they go through, would mean the fund is more than 50 percent deployed. And aside from the legal troubles, Asseily is worried there is not enough series B money in the system. “We have to go bigger,” he says.

* This article has been modified from the print version.

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Business

Money talk

by Natacha Tannous
written by Natacha Tannous

Financial markets have rallied significantly from mid-February to mid-March, supported by several events including, but not limited to, the G20 summit, the Chinese National People’s Congress meeting, the expansion of the European Central Bank’s (ECB) quantitative easing and the Federal Open Market Committee’s March session being more dovish than expected.  So what’s next for global financial markets?

Short-to-medium term, it now seems that we are due a slowdown in the markets, given that they have already rallied from the year’s lows.

“In a context where it is difficult to imagine that there is much left in central banks’ tool box, especially the ECB, that now pushes for fiscal measures, we believe that a correction is likely as investors will focus on fundamentals,” explains Christophe Barraud, chief economist and strategist at Market Securities, who, according to Bloomberg, ranks as top forecaster of the United States and Eurozone economy in 2015.

Highs and lows

It is indeed difficult to imagine what more the ECB could do, given that Germany will likely be opposed to further easing and, as suggested by the ECB statement on March 10, it is now time for governments to implement structural reforms.

In the US, overwhelming economic pessimism is dominating the 2016 presidential campaign, whether from an economic or geopolitical standpoint, which should lead markets to come down from current highs.

Furthermore, Marc Malek, founder and portfolio manager at Conquest Capital Group, highlighted that we are now witnessing a bubble in government bonds which is “why you are seeing these desperate actions.” So it is hard to see equity markets rally sustainably, with all else remaining constant, without first seeing a market correction.

The consequences for the world economy if China starts to falter and the Chinese central bank fails to successfully intervene will cause further turmoil to the global markets, as it has in the last year.

Whether a global market slowdown or a bigger correction is imminent, it is essential to differentiate the impacts on financial markets between regions.

In fact, unlike the Eurostoxx 50 index, the Dow Jones Industrial Average finally turned positive on the year (+0.4 percent year to date, as of March 29). We’ve also seen the Standard & Poor’s index outperform in the US over its European counterparts YTD (the S&P has outperformed the Eurostoxx by 7.7 percent YTD as of March 29, with S&P -0.5 percent YTD, and Eurostoxx -8.2 percent YTD), which has been the trend in recent years. This gap might widen even further this year, given that, as Barraud maintains, “political uncertainties surrounding Spain, Ireland, Greece and Brexit will be a drag.” This is in addition to a stronger euro which will be weighing on European equities, the ECB running out of tools, and a Europe that is facing the largest migration crisis on the continent since World War II. This trend is also reflected in Bloomberg’s company earnings expectations for 2016, with S&P forecasted to outperform Stocks Europe 600 by 4.4 percent.

The ECB believes it's time for governments to implement reforms | AFP

The ECB believes it’s time for governments to implement reforms | AFP

Meanwhile, in the US, the correction might be less pronounced. It’s an election year and if Hillary Clinton becomes president, as is widely predicted, this alone should help US equities. This is because Hillary is a well-known figure worldwide with a somewhat predictable policy portfolio (despite being market negative for sectors such as healthcare and banking). Donald Trump, on the other hand, is a much more unpredictable figure who will not bode well for the markets, unless he presents a very precise and efficient economic program.

Furthermore, the Federal Reserve is turning more dovish, with only two rate hikes expected, rather than the predicted four, which should also help US equities rally.

Investment advice

So where should one invest their money today, given the pessimism in which we started the year and given that equities have already rallied from year lows? It depends on duration. Short to medium-term it seems that US equities are a safer bet than Europe for a long position, while Europe is probably a good short, or hedge to a long, as it is a good time to “sell the news”.

Going back to fundamentals, and picking cheap stocks who are disconnected from their fair value, whether buying undervalued defensive sector names (healthcare, staples) for the more conservative ones among us, or even buying the dip in cyclical names such as European banks, could make much more sense for a longer-term horizon investment. Personally, I wouldn’t buy European luxury names yet, given the sector’s exposure to and correlation with China, but note that most European luxury names have low earnings expectations for Q1 already. Nonetheless, whichever the index or sector, investors should not wait for the absolute bottom, as many have unsuccessfully been trying to do for the last three years, given that, despite the market volatility, the trend has been upwards. Moreover, momentum trading (buying when markets rally and selling when markets are going lower) has probably hurt more than it has profited investors, due to the extent of the moves and the fear to re-initiate a position too early, while the long volatility trade is most likely also over.

The best way to look at the markets and invest today is on a relative-value basis, the old adage: studying the fundamentals and buying undervalued assets and equity. In fact, Domenico de Sole, the chairman of auction house Sotheby’s, emphasized that there was a notable “slowdown in the art market today”. From speaking to art collectors, it does seem like US and European buyers are somewhat waiting for prices to stabilize, galleries to give decent discounts, and some top-level buyers are even expecting a correction in the New York May auctions. There is no better opportunity to invest than when the market slows down and asset prices have dislocated from their fair value.

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Economics & Policy

What lies beneath

by Roudi Baroudi
written by Roudi Baroudi

Lebanon has missed several opportunities to grow its nascent oil and gas industry at an ideal pace, but now regional developments threaten not just further delays, but also permanent losses unless the country acts to protect its national interests.

The new urgency stems primarily from two principal events. The first was last summer’s discovery of the giant Zohr gas field off Egypt’s northern coast by Italy’s ENI, a find estimated by some to have doubled the North African country’s natural gas reserves overnight. It also significantly increased the likelihood of commercially viable deposits in nearby offshore acreage belonging to Cyprus, Lebanon and Israel. This has sparked renewed interest in this section of the Eastern Mediterranean basin from major international oil companies.

The second event – in part at least a consequence of the first – was the Cypriot government’s approval in late February of a two-year extension for an ENI-led consortium to conduct exploration and production in Blocks 2, 3 and 9 of Cyprus’ exclusive economic zone (EEZ), the first and third of which are adjacent to Lebanon’s EEZ. Apart from general location, these blocks also share similar geology with Zohr and other Egyptian and Israeli fields, and undersea hydrocarbon deposits obviously pay no heed to political or other borders, so it’s possible that Cyprus’ Blocks 2 and 9 have reservoirs that extend into Lebanon’s maritime area.

This prospect should be good news for all Lebanese because it offers a chance to share in any revenues derived from any reservoir that may be discovered, even if this country’s energy sector has yet to undertake any production operations of its own. It would also offer an opportunity for Lebanese individuals, companies and government departments to gain experience by cooperating with Cyprus and ENI, helping to prepare our public and private sectors alike for the day when this country starts actively exploring for its own resources. 

Friends without benefits

All it takes to start reaping the early rewards of these happy circumstances is for the Lebanese government to exercise a modicum of self-preservation through a little initiative. The only things missing are a maritime border deal with Cyprus to define the line between the two countries’ EEZs and a Framework Unitization Agreement (FUA) that would establish terms for joint development and exploitation, including the formula(s) for any revenue sharing.

Herein lies the problem; Lebanon and Cyprus enjoy friendly relations, neither has staked out an extreme position in this process, talks on an FUA have made progress and a delineation map was agreed upon way back in 2007. However, the unitization talks have been stalled since 2013, and the map has yet to be ratified. Absent of such agreements, the scope for legal disputes over potential resources will be considerable, exposing the interests of both sides to unnecessary delays, but hurting Lebanon more because it would prevent this country from assisting and learning in the process – and rob its people of revenues to which they are entitled.

No such questions hang over Egypt’s Zohr field, which lies adjacent to Cyprus’ EEZ, because the modalities of any shared reservoirs have already been set by Cairo and Nicosia. Time is running out for Beirut to protect its long-term interests with a similar agreement that would, inter alia, insulate it against any kind of “rule of capture” claim if and when Cyprus starts recovering oil and gas from areas adjacent to Lebanon’s EEZ.

The solution is clear: Lebanon needs to re-engage with Cyprus as soon as possible and, when it does, to remain focused and keep its priorities in order. If recent history is any guide, there will continue to be distractions that limit the pace of oil and gas development, including the ongoing stalemate in Lebanon’s political class and various obstacles attached to (and compounded by) the state of war that still exists between this country and Israel. To further complicate the situation, the latter is one of three regional states, along with Syria and Turkey, that have neither signed nor ratified the United Nations Convention on the Law of the Sea (UNCLOS), usually the most reliable mechanism for resolving offshore resource disputes.

No matter. None of this prevents Lebanon’s diplomats and energy officials from getting on with the business of finalizing the necessary arrangements with Cyprus. The politicians may not get around to activating Lebanon’s energy industry as a whole any time soon, but this aspect is a no-brainer: in order to ensure Lebanon receives any revenues to which it is entitled from shared reservoirs, all it has to do is reach an agreement with a friendly country. And although there is no agreement on the tripoint where the EEZs of Lebanon and Cyprus meet that of Israel – leaving an overlap between the Israeli and Lebanese claims – this has no bearing on the rest of the bilateral line between Lebanon and Cyprus, or, for good measure, on the 90 percent or more of Lebanon’s EEZ that is not in dispute with anyone.

Sharing the spoils

Lebanon and Cyprus can accelerate this process by jointly enlisting the support of the United States to help define the aforementioned southern tripoint. The Israeli failure to commit to UNCLOS is a significant obstacle, as is the absence of Lebanese-Israeli relations. At present the only country with the diplomatic heft to ford this impasse is the US, which, through separate discussions with Lebanon and Israel, has already made progress in narrowing the gap between the two sides’ respective maritime claims.

Timely cooperation with Cyprus will also preserve Lebanon’s interests by garnering fuller recognition of our EEZ. The same partnership may allow Lebanon to start collecting revenues from shared oil and gas fields even before its own production begins. Further down the road, if and when Lebanon is producing enough natural gas for export, Cyprus can be an important outlet to crucial markets in Europe and elsewhere.

Of course, it would be nice if more politicians would provide these and other negotiations with all the support and cover they deserve. Most of Lebanon’s political institutions have been hamstrung by partisan wrangling, but parliament still has considerable resources. Having the legislative branch resume its role could be pivotal on this score.

Lebanon is not the first country to face the unique challenges of developing an oil and gas industry during a prolonged period of turmoil, and luckily one of the best examples is Cyprus itself. A third of that country has been occupied by Turkey since 1974 and its political landscape is a raucous one, populated by outsized personalities with sharply different views, and with an economy that is still struggling to regain the ground it lost since the global financial crisis of 2008-2009.

Despite these handicaps, and some decidedly unsubtle Turkish threats, successive Cypriot presidents and their ministers have kept their eyes on the prize, methodically laying the groundwork for its future as a modern oil and gas producer and, quite possibly, as the region’s premier energy hub. Successes at home have been matched by effective diplomacy abroad, integrating the tiny country into an interlocking web of bi- and multilateral partnerships that give it a voice on the regional stage. In addition, far from acquiescing to the continuing division of the island nation as an insurmountable obstacle to this process, Cyprus has turned the tables by holding out future energy revenues as an incentive for reunification.

These attitudes have allowed for meaningful progress across the legislative and regulatory spectrum, encouraging investments and partnerships that even now are fleshing out the infrastructure and support systems for a thriving oil and gas sector. Even more importantly, they have demonstrated the effectiveness of dialogue and cooperation, showing a way to break the cycle of conflict and instability that has gripped much of the region for so long.

That may sound like a lot of ground for Lebanon to cover if its energy sector is ever to catch up with those of Cyprus and other neighboring countries, but the facts are not quite so bleak.

Before the current political stalemate spread into virtually every nook and cranny of the Lebanese public sector, parliament and cabinet designed and even began to install many of the necessary administrative and legal structures, including a suitably empowered Lebanese Petroleum Administration to oversee the sector. While not quite “plug and play,” most of these can start functioning as soon as the right levers are pulled and crucial pieces of enabling legislation are passed. Therefore, while it is probably too much to hope that Lebanon’s deeply divided politicians will act with unity of purpose any time soon, if and when sufficient numbers of them get serious about serving the people they are supposed to represent, the right tools for the job will be close at hand. 

Finally, Lebanon should also strongly consider joining the emerging club composed of Cyprus, Egypt, Greece and Jordan. Apart from the technical and economic advantages to be gained, the various cooperation agreements linked to this grouping give each member greater influence over how the Eastern Mediterranean’s energy resources will be developed. Signing on would radically enhance Lebanon’s standing, and while the immediate goals of such membership would be economic, the resulting relationships would do much to promote regional stability. That, at least, would offer some hope that all of the peoples in the Eastern Mediterranean might one day know both peace and prosperity.

Roudi Baroudi is CEO of Energy and Environment Holding, an independent consultancy based in Doha, Qatar.

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LeadersOpinion

Education is key

by Executive Editors
written by Executive Editors

No woman should have to take it. Sexual harassment is one of the many prevalent issues Lebanon has yet to solve. Not only is it not reprimanded by the Penal Code, but sexual harassment is the product of socially reproduced gender discrimination indoctrinated through education or lack thereof, so much so that it has become an inevitable reality of what a woman will go through in our country. While government officials are neglecting the need to eradicate sexual harassment, it is time we become our own leaders and put an end to it.

With MP Ghassan Moukheiber’s draft law criminalizing sexual harassment still pending in Parliament (see Prosecution of sexual harassment), Executive urges economic, religious and social influencers to push for the law’s enactment and to create a well-rounded campaign that highlights the inequitable repercussions sexual harassment has on a woman. The campaign will include clauses from each think tank upholding the need to favor the law by confirming the sociological and mental effects sexual harassment can impose on a woman, which inhibit the latter from climbing the social and professional ladder.

Parliament is not our only target; we must forward the campaign to stakeholders who represent mainstream economic entities in Lebanon and invite them to join the campaign. This will help enforce sexual harassment prohibition into the code of conduct of Lebanese companies and offices to protect employees subjected to sexual harassment and discrimination in the private sector. Devising a plan to assess companies on gender-sensitive codes of conduct will also help make the workplace a safer environment. Once the assessment list is finalized, it must be publicized to inform people which companies did not instill a nondiscriminatory code of conduct and boycott it if they wish. This approach would encourage companies who do not have an inclusive approach to implement it, or least do so out of fear of reputational damages.

In 2013, a photograph portraying a woman with a bag over her head being pulled back with a belt attached to her neck was released to celebrate the collaboration of luxury handbag designer Johnny Farah and photographer Joe Kesrouani. The photograph immediately sparked outcry and women’s rights activists called for a boycott of Farah’s products. Although the designer issued a statement explaining the reason behind the photo, he ultimately changed it due to consumer pressure. 

Of course, campaigning for better protection and safety of women goes beyond the law. We must not forget that real change can only come with proper awareness. First and foremost, it is crucial to introduce gender-sensitive education in schools where activities and exercises can challenge students’ reasoning and expose them to different situations regarding issues of gender. Teaching gender equality in schools provides a base for students’ understanding which they will then carry into their lives beyond the educational system. In addition, students should be taught about the prevalence of sexual harassment against women in society, different ways to prevent it and the cruciality of consent. Secondly, Executive urges educational institutions to partner with NGOs to arrange seminars to shed light on sexual harassment from local experts’ points of view armed with real-life experiences and developed knowledge on the subject. Third, the media should grant NGOs airtime by inviting them onto primetime shows or by teaming up with ad agencies to create fairly-priced awareness ads in order to maximize their visibility and influence. We know that social efforts should not be limited to organizations because change starts with each individual. Harassers should be punished  and exposed at every level; be it through public shaming, scolding or sharing experiences on social media platforms, the word on sexual harassment should always be out in order to familiarize people with its prevalence and allow it to become a common cause. One way we can raise awareness is by creating support programs through which anyone who is harassed can share their stories as well as give and receive advice. Earlier this year a website called HarassTracker was developed to help people identify where sexual harassment occurs and to collect the received data for upcoming campaigns fighting sexual harassment. Ultimately, however, the onus is on society to educate men not to harass women.

Change in social behavior cannot happen overnight, especially not in a society that puts women in secondary societal and economic positions and portrays them as the weaker sex. Equality is at the heart of national progression, and as long as we are dealing with prejudice, women will not find their deserved place in society. Sexual harassment in Lebanon must become a thing of the past.

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Economics & Policy

Up to standard

by Jeremy Arbid
written by Jeremy Arbid

With the mid-April implementation of the Hezbollah International Financing Prevention Act (HIFPA), signed into United States law in December 2015, Executive inquires whether Lebanese financial institutions face an increased level of American scrutiny. The new law places liability on any financial institution, not just Lebanese banks, if they were to knowingly facilitate financial transactions connected to Hezbollah. In the lead up to HIFPA’s ratification and immediately after, Lebanese banks took notice. De-risking ensued, accounts were closed and, according to local media reports, the opening of new accounts were denied for some politically exposed persons.

In the month preceding the law’s ratification, in mid-November, Lebanon was in danger of being cut off from the international financial system due to out of date anti-money laundering rules. After many months of complacency, and despite urging from Banque du Liban (BDL), Lebanon’s central bank, Lebanese politicians rushed to Parliament to pass anti-money laundering (AML) and counter terrorism financing (CTF) legislation to comply with international standards.

Within this context, Executive was in search of answers as to the impact of HIFPA, though the Americans have yet to write its implementation rules, and as to how Lebanon is complying with AML/CTF standards. Executive posed these questions to Abdul Hafez Mansour, head of the central bank’s Special Investigation Commission – the responsible authority for investigating suspicious financial transactions. To the latter the response is one of confidence – Lebanon has put in place the necessary compliance measures to shield its financial system. But to the former, in the face of American pressure, uncertainty persists as to the consequences for local banks should the Americans accuse them of servicing accounts linked to Hezbollah – the outcome of which will be answerable only through testing actual conflict scenarios, as Executive has previously reported.

E   Since the closure of the Lebanese Canadian Bank (LCB) in 2011, the United States Treasury has only targeted Lebanese nationals, not institutions, with financial sanctions. But, last year, the Treasury sanctioned two individuals for their connections to local banks. Is there again a growing concern of alleged money laundering through Lebanese financial institutions?

No, we don’t have this feeling. After the LCB case, banks heightened their awareness to the risks – whether they are local or international [banks], it is now much clearer. When I compare what [Lebanon’s] banks are doing, I think we’re doing well by regional and international standards. Our set of laws and regulations are pretty much complete now. The new laws and regulations passed last November complete our legislative [framework], and on the regulatory front the central bank has issued the necessary regulations. So what we need from the regulatory and legislative perspectives we [have], it’s quite complete and is one of the best set of [rules] in the region. I would say the situation is quite acceptable – is it perfect? No, we’re never perfect.

E   In early November, before the AML laws were passed, you said that the Financial Action Task Force (FATF) – the body coordinating standards on anti money laundering and counter terrorism financing – would not hesitate to blacklist Lebanon if its legal framework were not amended.

Yes, there was a list of 23 countries already shortlisted – they were about to go out with a report and a shortlist of the countries that are not compliant or have fundamental problems with their regulations.

E   So with those laws passed and with the rules from the central bank regulating cash transfers and requiring banks to have compliance officers, Lebanon has addressed its weaknesses and alleviated the concerns of FATF?

Essentially yes. FATF was doing a fact finding initiative on countries’ compliance with the regulations that are needed to fight terrorism. Many countries in the world, including countries in the region, did not have the chance to elaborate on existing legislations and we argued that FATF should not apply double standards – [Lebanon was one] of the countries that made the point that other countries had the chance to explain their situation, which really helped them to not be on the shortlist. So on that basis countries were given until February to have a look at the report’s findings and to come forward with comments, which [Lebanon] did. In the timeframe running from October to November we managed to have the legislation passed – [the laws] were already ready but the legislative process is quite slow in this country.

E   Were the laws ratified because of lobbying by the central bank?

Absolutely – it was public lobbying. We were out in front of the media – the governor of the central bank, myself, the bankers’ association – we were all working to raise the awareness of the possible risks of Lebanon being blacklisted and the need to comply with international standards. That helped to a good extent in putting the necessary momentum for these laws to be issued.

E   How did it go at FATF’s February plenary meeting?

It went pretty well. The new laws were reviewed and Lebanon was found to be in compliance and that there was no further action to be taken in this regard.

E   That is essentially what BDL governor Riad Salameh announced after the meeting: that the FATF asserted Lebanon was in full compliance with international standards to curb money laundering and terrorism financing, and that no further follow-up was necessary. But a FATF spokesperson told Executive following the February meeting that the FATF’s official stance was that Lebanon was not discussed and therefore the FATF could not say what Lebanon’s status is in terms of compliance. Can you clarify?

Possibly because you did not ask the right question. I said there was a special initiative that all the countries were subject to, which is on the terrorist financing legislation – it’s not a comprehensive set of reviews. This is too technical, in a short amount of time I cannot explain, but countries are subject to what they call mutual evaluation reviews – a mutual evaluation is a kind of exercise carried out periodically every four to five years.

E   Can you explain how the FATF writes the standards for anti money laundering (AML) and counter terrorism financing (CTF)?

The standards that FATF issues on AML and CTF are labeled as recommendations for countries to comply with. Countries that do not comply could be subject to public listing. This short listing is a very influential tool. A public listing of a weak system on AML would probably lead to the cutting off of [the country’s] financial system from the rest of the world. This is how it works – there are standards that are issued by the FATF, who also reviews the extent of compliance with these standards, and countries that are not compliant – there are varying degrees of compliance – could reach the status of being publicly listed as a non-compliant country or a country with substantial weaknesses in its regulations. And the international financial community would take that into consideration when dealing with a country – they could opt to not deal with the banking sector of the specific country that was labeled a weak country when it comes to the AML / CFT regulations.

E   Just to be clear, what FATF is doing in setting the standards for compliance is completely different than what the Americans are doing with their financial sanctions.

Absolutely, the FATF is a different setup. We have to distinguish between the FATF’s work and the United States’ work. The United States passes designations and enforces its own laws and regulations on US soil but sometimes these laws have long arms and are far-reaching.

E   Many officials in Lebanon seem to be very concerned by the coming implementation of the Hezbollah International Financing Prevention Act signed into US law in December 2015. Why are government and banking officials so worried?

This is a US law that [might] affect nationals in this country and now we are in a position to see what measures will be taken as a result of this law. It’s a matter of concern to them because if Lebanese banks and the banking sector want to remain part of the international financial system they need to play by the rules of the game. So if a law is passed in the United States that would prohibit US banks from dealing directly or indirectly in certain types of transactions, or with certain individuals, then Lebanese banks cannot deal with such individuals – otherwise they will expose their correspondents, themselves and the sector to the measures that may be taken. This is pretty clear. Banks have to KYC – know your client. So the correspondent banks in the United States, which deal with a large number of banks all over the world, have to know exactly how their clients, i.e. banks, in Lebanon and elsewhere operate – and what degree of compliance is observed, what is the professionalism of their compliance officers – in order to feel comfortable dealing with them. This is a connected kind of system and in this respect you have to understand this kind of relationship in order to stay in business and stay connected: first as a bank to your correspondent and second as a country to the community worldwide. A Lebanese bank should not operate as a front. When they deal recklessly with clients not observing international regulations then this is, in a way, almost fronting. And they’re saying ‘no we’re dealing with normal clients’, when in fact they’re not – this is the general case all over the world. Lebanese banks or banks anywhere in the world could be, if they don’t apply the appropriate compliance measures, in effect, covering for illegitimate clients.

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Special Report

Extra! Extra!

by Matt Nash
written by Matt Nash

After 200 months of continuous publication, we at the Executive editorial team could fill a whole book with the stories behind our stories and with lists of our own favorite issues, articles, covers, photos and illustrations. More important than what we think, however, is what our readers think. You, after all, are the reason we try so hard. We’ll never sacrifice our identity and commitment to quality to chase more clicks or magazine sales, but we have an obligation to understand which stories reverberate with our readers. Plus, we actually like to know what you think. Therefore, we’ve dug into our physical and digital archives to see what our readers liked most (as best we could ascertain).

Top 10 Print

Lacking the means for a scientific study of what inspires and entices our readers, we had to rely on raw numbers from newsstand sales to highlight our top selling issues. Unsurprisingly, as per the global trends for media consumption, newsstand sales tended to be higher before online reading became a full partner to offline content perusal. We’re not sure what story or stories drew so many in, so we highlight our cover article for the month. This lack of specific data does not, however, prevent us from drawing some conclusions. For example, prior to the war breaking out in July, 2006 was a great year (with four of the top 10 issues). We also get the sense readers appreciate our coverage of the fundamental sectors driving Lebanon’s economy (banking, real estate and hospitality). It seems you also like our in-depth looks into the country’s shadow economy, as evidenced by two issues on the sex industry making the top-10 cut. The declining fortunes of Idarat and Synergy.

1. Is the party over? The declining fortunes of Idarat and Synergy. June 2003, Issue 50. What went wrong with two hospitality companies that very publicly flopped?

 

2. The development game: Executive charts the Beirut property surge. April 2006, Issue 81. Beirut’s Central District was on fire with grand plans, so we made sense of who was buying what and looked at Downtown’s potential future.

3. Adult entertainment: Lebanon’s sex industry. August 2004, Issue 63. Sex sells. We’re surprised this wasn’t number one.

4. Girls, girls, girls: The business of prostitution. August 2009, Issue 121. See number three.

5. Death traps: Is our air safety on the line? October 2005, Issue 76. An in-depth look at safety practices at Beirut’s airport.

6. Straight talking: Nasser Chamaa explains Solidere’s new strategy. July 2004, Issue 62. We asked the company’s president tough questions about new plans to boost land sales.

7. Standing tall: Banks bear fruit in the Lebanese economic wilderness. June 2006, Issue 83. It seems readers appreciate one of our strengths: the annual banking special report.

8. Urban perspectives: Lebanon’s architects talk real estate. July 2006, Issue 84. A look at the value-added local architects brought to the building boom.

9. Rulers of the night: Who’s who in clubland. September 2003, Issue 53. Competition was fierce, patrons had deep pockets and life was good for Lebanon’s party scene.

10. Getting to know Tony: Aïshti’s boss on business, brands and beauty… And why he’s totally clean. May 2006, Issue 82. We landed a one-on-one with Lebanon’s top luxury retailer and confronted money laundering rumors head on. 

Top 10 Online

Unlike print, we have more specific data from our website about what readers like, but the timespan is shorter. Our analytics for this list are based on data as of February 23, 2016 but only include visits to the re-designed version of our website launched in March 2014. All of our archives are online – which is why some pieces older than the re-designed website made the list – but they never appeared online fresh with dedicated time on the homepage. Readers could only find articles before March 2014 if they appeared as “related articles” below a newly published piece or if the articles showed up as part of a web search result (see number 6 below). The Diaspora dominates this list, but the country’s terrible Information Communication Technology (ICT) infrastructure is also clearly a topic of interest.

1. The Deepest of Ironies: Gebran Bassil is suing us, but he should be the one answering questions. March 6, 2014. Yasser Akkaoui. We asked where data revenue related to oil and gas was and the reply was a lawsuit.

2. How the Lebanese conquered Brazil: Success came through hard work. July 3, 2014. Joe Dyke. The country has drawn our talent for generations and benefited in the process.

3. Eight top Lebanese on Wall Street. April 8, 2013. Maya Soufi. A theme emerges: our readers like Diaspora stories (ahem, increase our travel budget, dear accountants).

4. Four reasons Lebanon’s internet is so slow: Broadband in Lebanon faces layers of obstacles. April 8, 2015. Livia Murray. In a nutshell, government control is killing development in ICT.

5. PayPal is not coming to Lebanon: A year on from announcement, company has ‘no plans’ for launch. February 28, 2014. Joe Dyke. Long memories are useful, and we too love a good update story.

6. Prostitution – The business of sex:  On- and off-line, sex is still a top seller. August 1, 2009. Ben Gilbert. Sadly, our analytics suggest readers weren’t looking for information when this came up in their search results.

7. Waste [mis]management: How our politicians got us into this mess and what they’re not doing to sort it out. September 1, 2015. Matt Nash. A hard look at the trash crisis and how we got there.

8. The most powerful Lebanese person alive: Brazilian Vice President Michel Temer explains how his roots allowed him to rise to the top. July 2, 2014. Joe Dyke. A profile of Brazilian Vice President Michel Temer, whose family hails from the land of the Cedars.

9. High expectations: Lebanon’s exclusive economic zone holds good prospectivity for petroleum reserves. October 8, 2014. Jeremy Arbid. The country’s search for oil and gas looks good, but only drilling can prove anything.


10. Lebanon’s grand plans for a new capital: A new capital to invigorate the Lebanese government. April 1, 2015. Thomas Schellen. Timing is everything. This April Fool’s joke went viral.

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EditorialOpinion

The good old days

by Yasser Akkaoui
written by Yasser Akkaoui

Love him or hate him, Rafik Hariri had a skill set that worked for Lebanon. He was good at amalgamating the competing interests of Lebanon’s various groups and defending this country on the international stage with a unified vision of what Lebanon was and where it was heading. He also had foreign connections he could use to help Lebanon punch above its weight when dealing with powerful players such as the Americans. He considered Lebanon a package, and he included and defended everyone. And the Americans hated him for it. Hariri would have fought an attempt to single out Hezbollah for sanctions that risked destroying our economy. He embraced our divisions and believed that the prosperity a free market economy promised for the entire country would have made them moot.

Today, we not only lack solid diplomatic representation in Washington, but we’re also speaking as a cacophony, without authority and vision. The country’s top political bosses have their own teams in DC who compete and undermine each other with no regard for the fact that they’re embarrassing this country in the process. Worse, we still haven’t figured out how to work with the American system. When Lebanese politicians go to Washington, they are far better at convincing their hotel manager to let them smoke a cigar in their room than they are at convincing American officials of anything that would benefit this country.

Our internal divisions make it easier for us to be pushed around and punished. It’s an embarrassment for which I see no easy fix. We do, however, have an opportunity to fill an empty seat in Baabda that has been vacant too long. We need someone strong who can once again speak in a united voice for Lebanon. I see no viable candidate at the moment. But nonetheless, I sincerely hope that this time next year, our economy will have survived the American onslaught and we will once again find a strong leader who has our back.

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LeadersOpinion

Spinning circles

by Executive Editors
written by Executive Editors

Lebanon is in a sticky situation. The Hezbollah International Financing Prevention Act (HIFPA), a United States law targeting Hezbollah, places Lebanon between Hezbollah and a loaded gun. It is the latest fire encroaching on the Lebanese economic house and comes on top of domestic catastrophes, such as the garbage and political crises, as well as the turmoil roiling throughout the region. All of these are troubles that are, in theory, throwing our national economy back to the stone age that Israel wanted to send us to nearly ten years ago. The worst thing about HIFPA is that Lebanese leaders could have done much to protect the house from the political firestarters across the Atlantic.

In a roundabout way Lebanon has almost done so. The banking sector has complied with central bank regulations for anti money laundering and counter terrorism financing, and the government has adopted laws to satisfy international standards (see SIC Q&A). But that won’t be enough to completely shield the country’s financial system. The Americans look to label Hezbollah a criminal organization because of its alleged key role in international drug trafficking and money laundering networks, using local and foreign banks to move its money. American pressure aimed at Hezbollah is a warning to financial institutions not to deal with Hezbollah lest they become the focus of American investigations.

This is a problem that Lebanon should have begun dealing with when draft versions of HIFPA first surfaced in 2014. Instead, recently Lebanese government and banking officials have been rushing to the US to assess the level of damage heading its way. If Lebanon had an effective diplomatic presence in Washington then this problem could have been dealt with sooner. Lebanese officials tell Executive that the country has negligible bilateral relations with the United States and that the embassy has had virtually no role in communicating Lebanon’s concerns to the Americans regarding HIFPA (see Damage control). Yet scaling up our diplomatic presence in DC would only be treating the symptom rather than addressing the root cause of the problem.

The main reason why Lebanon has virtually no voice in Washington is because there is no common foreign policy strategy. For the last quarter century, but specifically in the period since the assassination of Rafic Hariri, there has been no common denominator strong enough to rally everyone behind a decision on what Lebanon’s foreign policy vision should be. Lebanon has not done a very good job at presenting foreign policy positions to bilateral and multilateral counterparts. In Washington, specifically, deficiencies in diplomatic representation have resulted in reactionary responses instead of strategies to proactively influence policy there.

The dilemma regarding HIFPA is the inverse of what we saw last month when Gebran Bassil, Lebanon’s minister of foreign affairs, refused to sign Gulf Cooperation Council and Arab League anti-Hezbollah statements. Bassil took a specific approach to those statements that differed from the state’s. In that instance, Lebanon was caught between the opposing interests of Hezbollah and Gulf countries, specifically Saudi Arabia.

Lebanon can begin to address its diplomatic deficiencies in the US by nominating an ambassador for cabinet to approve. More effective representation in Washington means having a stronger voice to explain what is happening and will also help safeguard Lebanon’s national interest, but doesn’t necessarily mean it will be able to push those interests onto a US agenda.

Lebanon lacks basic representation in DC because we don’t know what those interests are and because we don’t have a diplomatic identity. Taking anti-Hezbollah legislation up with US lawmakers is a particularly difficult quagmire because representing the interest of the Lebanese government – in which Hezbollah is a stakeholder – is not in the interest of the Lebanese government.

That is due to Hezbollah’s role as the Resistance – many Lebanese outside its core constituency credit Hezbollah for rooting the Israelis out of south Lebanon – and the fact that Hezbollah has been assuming quasi state functions in parts of Lebanese territory. So the idea of America treating Hezbollah as a criminal organization doesn’t sit well for Lebanon. In that context, the label of criminal organization is a matter of definition and Hezbollah, from the Lebanese perspective, cannot be declared an enemy of the state. That in turn means Lebanon has to make a choice on what is in the best interest of the Lebanese. On the one hand it is of vital Lebanese interest to have America as a friend for business and trade relations, not to mention being cut off from the international financial system led by the United States would effectively kill our economy. But on the other hand we cannot ignore Hezbollah and the Shiite constituency it in large part represents – nor can we declare them to be enemies of the state or secessionists.

While we’re capable of adapting to the challenges we face, it’s impossible to satisfy opposing interests at the same time. But we need to take care of our national interests, however difficult that may be.

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