Executive Magazine

Dancing to a different beat

by Nabila Rahhal January 7, 2016

written by Nabila Rahhal

Among the first things you hear about the Lebanese people is how much they love to party and go out. This reputation still prevails, and although those in the food and beverage (F&B) industry are facing more challenging circumstances by the year, they still say their business is performing a lot better than other sectors of the Lebanese economy.

Lebanese market and expats

The food and beverage (F&B) industry has become reliant on those residing in Lebanon and on the Lebanese expats who visit during the summer or winter holidays, says Toni Rizk, chief executive officer of TRI Concepts, which operates a collection of bar-restaurants across Lebanon, explaining that the tourists Lebanon has been attracting these past few years are not “big spenders”.

As such, continues Rizk, the industry has been able to sustain itself to a greater extent than other, more tourist dependent industries, such as hotels.

Seasons to Party

This decrease in tourists with a high purchasing power, coupled with a market catering heavily to expats on seasonal visits to their homeland, has made summer the coveted season for the nightlife industry. Many operators take advantage of the good weather to open outdoor clubs or bars which cater to the increased demand.

“The summer is generally more happening than winter. Also, there are returning expats [in the summer] so they nourish the activity. We have seen from our existing venues that we achieve higher revenues in summer and that’s why we focused on having an outdoor venue,” says Rabih Fakhreddine, CEO of ‘7 Management’, which launched the successful outdoor lounge bar and restaurant Seven Sisters in summer 2015.

However, without a similar concept for the winter, explains Fakhreddine, they would risk losing the employees they had trained and invested in as well as the client base they had developed over the summer. This is why he says his company is developing a similar concept to Seven Sisters called Black, but for winter and indoors, to be launched by the end of 2015.

Tony Habre, CEO of Addmind, which operates White in the summer and Indie in the winter, both on Dora’s seaside road, also believes in the importance of a winter venue in retaining staff. “We always keep our winter season outlets, even if they are not that profitable, to be able to keep our staff who are our secret and our strength.”

Lower purchasing power

When Lebanese expats return to their adopted countries, the main market for the F&B industry becomes the local Lebanese. With the local economic crisis causing these Lebanese to economize in their spending habits, F&B operators are witnessing a change in trends.

“The affordable concepts are the ones which are working most today while the fine dining segment is suffering because the purchasing power in the country is low,” says Tony Ramy, president of the Syndicate of Owners of Restaurants, Cafés, Nightclubs and Pastry Shops.

Marwan Ayoub, managing partner at Venture Group, says Lebanon’s F&B industry is moving more toward quick service restaurants (QSR) and low entry concepts like snack shops because of the current economic crisis, but adds that it should balance out again into the more expansive concepts (big clubs and restaurants) when the market is back to normal.

Speaking for the nightlife segment, Rizk, who operates The Bohemian in Mar Mikhael, sees that the trend in 2015 was generally geared toward smaller bars, where people can enjoy cocktails and bites, as opposed to big clubs where people usually spend more and go all out.

Indeed, main areas full of 60 to 70 capacity bar-restaurants such as Mar Mikhael, Badaro or Hamra enjoyed more sustainable footfall than many of the city’s nightclubs and large venues which were busy mainly on weekends.

“Even in the Lebanese cuisine industry, you have both restaurants and cafés but you see people gravitating toward cafés more because the average bill there is $20 while in a restaurant it can go up to $60,” analyzes Ramy in light of the public’s decreasing purchasing power in recent years.

Operators Adapting

Faced with this reality, operators in the F&B industry have had to adapt their business models and strategies to accommodate their clients’ needs for affordability.

As such, investors are shying away from the big projects and playing it safe by investing in smaller outlets, explains 7 Management’s Fakhreddine.

[pullquote] The trend in 2015 was generally geared towards smaller bars [/pullquote]

“This is why we are not seeing big nightlife concepts like White or Skybar anymore because this costs real money and it’s not the right time in Lebanon. We no longer have the crowd that can fill a place with a capacity of 1,500 for five days a week,” says Ayoub, explaining that operators in the industry have adapted their business models to go in different directions such as cluster projects or expanding into the region.

Cluster Power

While areas which have grown organically such as Mar Mikhael or Badaro remain Beirut’s nighttime destinations of choice for 2015, many operators are choosing to seek strength in numbers by becoming tenants in a hospitality cluster project.

Hospitality clusters have grown in fame in the F&B industry, with The Courtyard in Hamra opening late 2014, The Village Dbayeh opening in November 2015 and a few other such projects in the final phases of completion.

Rizk, who has recently opened Trumpet, a vintage themed bar-restaurant in The Village Dbayeh and who is finalizing his other outlet, Lily’s Lounge Bar, in another cluster called Blueberry Square, says the cluster model has positive elements. “One benefits from having a variety of pubs next to each other in an organized manner because the project becomes a destination with the potential to attract more footfall than a standalone venue,” he explains, adding that his experience with Trumpet has been favorable in relation to the cluster model and its services such as landscaping, common marketing and a well-structured management body.

Rabih Saba, managing partner of Venture Group, which has developed The Village and is in the final phases of development for Backyard Hazmieh, says that for a cluster model to be successful, it needs to create outlets with similar concepts and average check and a strong marketing campaign concentrating on its target clientele. “Clusters are successful if they reach the target clientele they want to reach; it’s all about positioning.” Saba further explains that clusters don’t need to be aimed at the “trendsetters” to be successful but can be directed towards families or lower income clients as well.

Expanding into the Region

More and more F&B operators are branching out to the neighboring regions, mainly the Gulf, as a means to cope with an unstable security situation in Lebanon.

Interest in regional expansion has gotten to the point where, according to Ramy, many F&B operators are opening their creative concepts in Lebanon solely to register them locally and prove themselves, while developing their franchise manual according to international standards and finally selling their concept to a franchiser.

“When Lebanese are designing new F&B concepts, they are thinking of concepts that would work well outside; hence you see more QSRs opening in Lebanon with the aim of moving abroad,” says Saba, adding that Lebanese operators are speaking of expansion to Europe and the United States, following the successes of Semsom and Classic Burger there, when before they had never dreamed of expanding beyond the Gulf.

Fakhreddine says plans for taking February 30, the company’s first bar in Hamra, and Seven Sisters to the region are in the pipeline. “We are going abroad for two main reasons: first of all, because of the international exposure you get when you move to a city like Dubai and second of all, stability. No one has the vibe Beirut has in terms of nightlife but the political and security situations force you to take a step out of the country to maintain a certain level of stability and to grow our talents,” laments Fakhreddine.

Addmind’s Habre, who has four successful outlets in the United Arab Emirates, supports such expansions but tells his colleagues in the industry to be well prepared. “Dubai looks easy for them [in comparison to the difficulties of operating in Lebanon] but what I say from the bottom of my heart is just be careful; it’s not at all an easy country to operate in and we have a lot of examples of bad luck in this industry.”

Downtown sorrows

Summer 2015 was not a good one for the hospitality outlets in Downtown with Habre reporting a 50 percent loss of business in Iris, their bar on the rooftop of the Annahar building, during the periods of closure and protests in the area.

Rizk says that Uruguay Street, downtown Beirut, had not been performing well from mid-2015 due to chaotic growth of the street and also because other nightlife areas were increasing in popularity and competing with it. While many years have passed since Downtown was really a hub of activity, he continues that the events of the summer – from governmental closures to street protests – hurt the area further.

When the landlord of the Fenicia Bank building which housed Gatsby bar wouldn’t give the tenants payment facilities in light of the difficult situation in the area, Rizk was forced to relocate due to no longer being able to afford the double-digit monthly rent with no footfall in Downtown.

Escaping the city

Their negative experiences in relation to security issues in Beirut coupled with the increasingly high rental fees in the city have encouraged F&B operators to invest in areas outside of Beirut.

“We are expanding regionally, which is economically much healthier than having even the F&B offerings clustered in Beirut and Downtown. You have many benefits when that happens, including creating job opportunities in the area, increasing the value of land and incurring further developments around such projects. Today people have the choice; if they want they can come to Beirut and if not they can go somewhere in their regional neighborhood,” says Sami Hochar, CEO of The Village Dbayeh, speaking of their project’s location in Dbayeh.

Rizk sees that Dbayeh will be the new “Downtown” for the Metn area, attracting people from the immediate vicinities and from Keserwan as well. “Dbayeh is a new market and does not have the security problems of downtown Beirut. It’s a big area with a big demographic and even when new places open there, which they will, it will be a healthy competition and those with the best concepts will prevail,” he says.

Whether expanding locally or abroad, and whether developing snack concepts or little bars, Lebanese F&B operators have learned to dance to a different tune and continue to waltz through it all.

January 7, 2016 0 comments

Business

Make it or break it

by Jeremy Arbid January 3, 2016

written by Jeremy Arbid

With Lebanon’s economy stuck in a rut, only limited options remain available to support the country’s struggling manufacturing sector. Executive sat down with the person at the helm of the sector for an update on industrial and agricultural developments – Minister of Industry Hussein Hajj Hassan, whose long political career as a parliamentarian includes chairmanship of the agriculture and tourism committee, and he was a former minister of agriculture.

E What can you tell us about the performance of the manufacturing sector in 2015?

Certainly it was not a good year with the war here in our region – in Syria, Iraq and Yemen. The economic crisis, the price of petroleum per barrel and the instability in the whole region led to a period of instability in the economy and in politics. So in this context I think it was a good year.

E Have manufacturers and industrialists been quite resilient given all the challenges?

We have a small decrease in exports because of transport through Syria and Iraq. The [borders] between Syria and Jordan and between Syria and Iraq are occupied by terrorists, and the authorities in Syria, Iraq and Jordan closed these frontiers. So we’ve had problems with transport but we have another opportunity transporting by sea. We have very important growth transporting by sea.

E Exporting by sea is a program recently implemented through subsidizing sea transport. Was this only for agricultural products or was the government also subsidizing manufacturing products?

The subsidization was only for agricultural products.

E Do you have figures for how much money has been deployed until November 2015?

I don’t know; you must ask Nabil Itani [head of Investment Development Authority of Lebanon (IDAL)]. How much money was spent, I don’t know. But the amount is about $20 million.

E Do you have a sense of how much it has helped?

[The amount is] enough.

E At least helping in the sense that the farmers aren’t losing so much money or are maintaining their profits – what is the indication so far?

We don’t have indications actually because we are at the beginning. We must wait. But I think it’s very important for transport because we subsidize it by sea to the Gulf and to Jordan. I think that will help enough.

E How long will the $20 million subsidization program last?

For one year, from the beginning of August [lasting until August 2016].

E Do you expect the program might be renewed in 2016?

This depends on the decision of the government.

E Are you lobbying for its continuation?

Certainly. I think this will depend on the results of sea [exports] and the line through Turkey and Erbil in Iraq, and the results on export – agricultural and industrial.

E Moving from subsidization to the opening of new export markets – have possible markets been opened?

We have a problem with [exporting] to Russia – the transfer of money and the sanctions against Russia.

E Have you been able to identify other new markets?

We tried actually to enhance our exports to Iraq, to Egypt and with Mercosur – Latin America.

E What are the expectations – will enhancing exports to those markets help only farmers or manufacturers?

Any kind of product, but certainly some kinds of products have a greater chance [than other products] – especially jewelry, fashion, IT and high technology and finance technology. It depends.

E In general do these trade agreements remove tariffs?

We’re talking about that. We try to sign new agreements sometimes and we try to change some articles in some agreements. It depends on the country. For example [with] Mercosur, we will sign an agreement. With Russia we have an agreement and we will update it.

E Which countries did Lebanon sign trade agreements with in 2015?

Our political situation has not been very good in Lebanon. We’ve prepared [an] agreement with Mercosur. Yesterday [on November 10] I received the Brazilian ambassador to talk about the agreement. Last week I was in Iraq; we have two agreements under preparation. With Russia I think we’ll prepare a meeting in Lebanon between the Lebanese and Russian businessmen.

E What about Iran as sanctions are lifted – as the minister do you view this as a huge market for exports whether agricultural or manufacturing?

No, I think in Iran it is very difficult for us to export agricultural products because they have huge production and low cost of production. I think we can export to Iran some industrial products [but only] few agricultural products.

E With Lebanese investing in Iraq, and maybe Iran, whether in factories or starting new companies – do you see that as a promising possibility moving forward into 2016?

Some Lebanese are in stages of preparation for investment in Iraq. I discussed this issue with Iraqi ministers and the prime minister and I think they have to resolve some issues and problems.

E Lebanese have already been quite active in Erbil and the Kurdistan region – what are the largest barriers?

They are active but they can be more active if the Iraqi authorities resolve some issues.

E Would you mind elaborating on one or two of these issues?

[We need] a new law of investment [and a solution to] the bureaucracy and some problems.

E For Iran a lot of investors are invested in the energy sector and in oil and gas…

They are in stages of preparing for a big visit to Iran soon.

E That would be a delegation of businessmen or a government-to-government meeting?

Both, I think. It’s possible to have a visit to Iran as minister with a delegation of businessmen or as businessmen only.

E Would they only focus on the oil and gas sector?

No, we don’t have a very important [business community] in Lebanon. I think it is possible in the sectors of banking, tourism and industry.

E You’ve been in support of women’s empowerment but are you working on any practical measures to further their economic participation?

We have an agenda certainly.

E Can you elaborate?

My duty in this agenda is to support small and medium enterprises (SMEs) for women – also for men – [through] credit financing, and to help promote trade between women, fair trade, and to [reach] markets.

E Are these programs to be implemented by the Ministry of Industry?

Yes, with [the United Nations Industrial Development Organization] (UNIDO).

E With what kind of timeframe?

I have a visit with UNIDO [in December 2015] to sign an agreement.

E What is the proposed program with UNIDO?

We will sign an agreement about our CPF – Country Program Framework. And we’ll sign a program about energy and women and youth, about medicinal herbs and about industrial park zones.

E Is the budget coming from the ministry or does UNIDO finance them – how do these programs work?

UNIDO is a technical institution; you need help to find funds.

E Are there many women starting SMEs in the industrial sector?

Certainly. In food products [and handicraft].

E In terms of helping the manufacturing sector you’ve consistently called for more incentives, whether through tax breaks…

You know we are in a very delicate period. We are in the preparation stage of many projects but there is no government and no Parliament.

E Are there ways around the obstacles – have you been able to find creative solutions to push new programs?

I hope so. But we are in the preparation stages of many projects of law – reducing or abolishing the value added tax (VAT) for some things like industrial equipment and raw materials, reducing the cost of interest on loans.

E Has the October 2015 central bank circular that makes corporate debt restructuring easier helped the manufacturing sector?

Yes, certainly, because they are in a period of transition and need help with their loans.

E The central bank in many different sectors has been stepping in to try and pump life into the economy – what sort of impact do you think this circular might have for the manufacturing sector and did they coordinate with your ministry?

This kind of decision is very important for the economy, not only for industry.

E So for manufacturers what are the possibilities?

Resistance against the economic situation. They must resist to remain alive.

E And the loans would allow manufacturers extra capital to pay salaries and keep operations running at a time when revenues are down with the hope that in five years things will get better. Is that at the heart of this circular?

You know, we have a problem in Syria, Iraq, Jordan, Saudi Arabia and Yemen. Some states have a war; some states have a budget problem because of the price of petroleum. We have a recession in the region’s economy so it is certain that Lebanon will [be affected]. In our economy, industry will suffer at some level. This circular will help [the business community] to restructure their debt, to keep [them afloat and avoid bankruptcy].

E Has the non-delivery of power plants inhibited growth in subsectors of manufacturing, for example the agro-industry?

This kind of industry will always grow because people eat every day.

E When Lebanon is able to resolve its political crisis, can we expect a brighter future for the manufacturing sector and economy as a whole?

Certainly if we have a stable situation in politics, we will see a good and positive result for the economy and industry.

E Looking forward to 2016 with the UNIDO programs and your plans for incentivizing industry – what is the outlook for manufacturing; is it going to be another year of maintaining and trying to stay alive?

My target in 2016 is to stabilize the situation. If I am successful in stabilization it will be [my pleasure] in these circumstances.

E Any specifics to achieve stabilization that you haven’t told us already?

I don’t talk about politics.

E Right.

I talk about these circumstances in politics, security, war in the region and the price of petroleum if I can.

E Waste as a raw material for industry – during the 18 month period of the waste management plan, if it is ever in fact enacted, there would not be any sorting of waste. As the ministry are you doing anything…

We will prepare some programs.

E What?

We will prepare some programs and declare our projects in December 2015.

January 3, 2016 0 comments

Business

Insuring Lebanon

by Thomas Schellen January 3, 2016

written by Thomas Schellen

Executive sits down to talk shop with Max Zaccar, who was elected in May 2015 to be the president of the Association des Compagnies d’Assurances au Liban (ACAL), the association of the Lebanese insurance industry.

E How do you assess the situation in the insurance sector in the year to date?

The figures show that we had a 6 percent increase in our premium income in the first quarter. It was less in the second quarter and growth dropped back to 1 percent but I believe we will end the year with an increase of at least 3 or 4 percent, as we did in 2014.

E Did you see any areas where demand or market responsiveness to insurance fluctuated in the economic environment of 2015?

As insurance companies we follow the development of the economy and the economy has been developing in 2015, so in fact we had an increase in all lines of insurance. The only problem is the intensity of competition. Competition has brought rates down and that is why the increase in total premiums is not as much as it should be. If we take for instance the marine business, the results of Port of Beirut were good but the premiums were going down. We also saw a lot of competition on fire insurance and other lines of business. Thus, having a 4 to 5 percent increase in premiums for 2015 will be a very good result.

E There were signs from the real estate market that transactions and issuance of construction permits were going down again. Did that affect engineering insurance?

I personally have not seen analytics of the figures in the engineering business but when you see all the construction cranes around the city [it’s evident that] there is no crisis. It is possible that many of these are small buildings that do not buy contractors’ all risk (CAR) insurance but building activity is going on and large projects insure for CAR.

E In 2015, there were a few high-profile fire incidents that were covered by the media, such as the blaze that gutted Skybar. Were there any signs that moral hazard in the fire insurance has been higher than usual in 2015, because of economic difficulties?

First of all, the insured loss at Skybar was not catastrophic according to what I know. There was probably a severe impact [to the company] due to the loss of profit, because it was at the beginning of the summer, but the actual damages were not that large. I don’t think we have any increased moral hazards in the claims that we experience in Lebanon.

E One of the highlights of the year for the insurance association was the conference you held about oil and gas insurance. Did the event fulfill your expectations?

Definitely, because we showed the authorities that we are serious in thinking about insuring the oil and gas industry. We want to make an insurance pool by the ACAL member companies that will be managed by ACAL. The conference was a good presentation to the Lebanese Petroleum Administration (LPA) and the Ministry of Energy [and Water] that we are serious in doing this.

E Has progress been made in regard to the legal question of mandating oil companies to rely on local insurers?

We have asked for a change in the [oil exploration] law and this has to be signed by the Council of Ministers. This is not yet finalized but we have the support of the energy ministry and of the LPA.

E You are preparing to host the General Arab Insurance Federation (GAIF) conference in May 2016. Is that project on course?

Yes. We have a very good team looking after the preparations and wherever we go to conferences abroad, the response is excellent. There is real good interest from international insurance companies to come to Lebanon for the GAIF.

E What are your expectations as far as overall business development or regulatory developments in 2016?

The problem with all legal statutes is that everything is frozen and so we don’t see any real change. We have a very good minister of economy who comes from the banking sector and understands the need of the insurance market.

E Any comment on the situation at the Insurance Control Commission (ICC) and the changes in leadership there?

We have an interim head of the ICC. We were expecting a new head but this didn’t happen because the Council of Ministers did not meet [on this appointment] or wasn’t in a position to approve.

E What are your plans as far as the relationship with the insurance intermediaries goes, especially as the Lebanese Insurance Brokers Syndicate (LIBS) also elected a new president in 2015?

LIBS also changed many of their board members and we welcomed the new board in early November. We have created a joint agenda that we will be working on together, so we hope to develop the relationship with them.

E The insurance industry has often not been very visible when it comes to corporate social responsibility. Does the association pursue any new initiatives in this regard?

We might be a little bit behind in this regard but I believe that each insurance company has its own CSR policies. We at the association are trying to do our part, especially in environmental issues. We are recycling as much as we can and we are making many changes to our building, to save energy and so forth.

January 3, 2016 0 comments

Business

Speed bumps ahead

by Paul Cochrane January 3, 2016

written by Paul Cochrane

Executive sat with Antoine Boukather, president of the Automobile Importers Association (AIA) of Lebanon, to discuss the industry and regulatory issues in the transport sector.

E Has it been another difficult year for the sector?

Of course. Lebanon is in political turmoil and we urge the politicians to double their efforts to find a solution to the crisis. The sector is facing increased competition, tougher regulation for bank loan approvals (higher down payments), lower purchasing power of people and many other issues. By electing a president this will give more confidence to the public, and will increase investments as well as consumption.

E Despite the economic situation, car sales are still up by 2 percent on 2014. Why is that?

People are switching from the old fuel-hungry vehicles to smaller entry segment cars, while there is no real alternative such as a proper public transport system.

E What has happened with the government plan for 250 new buses?

Plans are still pending. A good solution would be a PPP (public private partnership) that creates a proper and decent public transport solution.

E But would 250 public buses really reduce car sales?

Public buses will reduce traffic and congestion and make your daily drive more comfortable with more parking spaces available.

E What impact has the traffic law, implemented in April, had on the sector?

It is a good law, but has been implemented partially and without consistency until now. There are many factors to address. Look at the number of people paying the annual mechanic test; it is less than 70 percent. In most places in the world you wouldn’t find such a low rate of payment. The National Council for Road Safety that is supposed to follow the implementation of this law should be activated and empowered.

E Do you foresee small car sales dominating in the foreseeable future?

Definitely, as people can’t afford more expensive cars because income has dropped. Hence 90 percent of sales in the compact category are at less than $15,000, while [sales] above $80,000 are only 3 percent of the market.

E We are seeing many more sports utility vehicles (SUVs) on the roads. Is that because oil prices are low again?

No, it is mainly about safety, since there are too many accidents, and there is a perception of being better protected in bigger cars. There is also a global trend to move from sedans to SUVs, but those with smaller four-cylinder engines which are more environmentally friendly.

E The European and Japanese brands have rebounded this year.

Yes, helped by the Japanese yen at 120 to the dollar and the euro at around 1.1. This has been due to Abenomics [economic policies advocated by Japanese prime minister Shinzō Abe] and quantitative easing in Europe, making their currencies more competitive.

E Are the authorities still removing catalytic converters from imported used cars at the port?

Removing catalytic converters is really bad for the environment and should not be permitted. Reducing carbon emissions and creating a cleaner environment should be a priority.

E What are the AIA’s major priorities right now?

The association’s role is to advocate sectoral, societal and legislative changes that would benefit both the consumer and the sector as a whole. Our priority is to work closely with all stakeholders, who are concerned with public safety, consumer rights and the preservation of high standards in automotive retail, because these strategic partnerships are the catalyst for continued regulatory progress within the country.

E What is your outlook for 2016?

Let’s be positive and hope for the election of a president and fair elections.

January 3, 2016 0 comments

Hospitality & Tourism

Regulating Lebanon’s grapes

by Nabila Rahhal December 27, 2015

written by Nabila Rahhal

Winemaking is a rapidly growing industry in Lebanon. Fifteen years ago we only had a handful of wineries to speak of; today the country boasts 42 wineries, according to oenologue and Les Caves De Taillevent General Manager Paul Choueiry.

The industry as a whole produces approximately 8 million bottles (an estimate of the Union Vinicole du Liban (UVL) since there are no exact figures), more than half of which are exported to over 40 countries across the globe. In fact, jewelry and wine are the only two Lebanese products for which the balance of trade is positive, according to Hady Kahale, general manager of Ixsir.

With such growth and global distribution come serious concerns about the regulation of the sector as well as the positioning of Lebanese wine abroad.

A good and bad year

Harsh weather in 2015 – including unusually low temperatures until April, a dust storm and heatwave in August and hail in early September – led to a decrease in the quantity of wine produced this year, explains Chateau Saint Thomas’s co-owner and winemaker Joe Assaad Touma, estimating the overall production of Lebanon’s wineries to have decreased by 40 percent this year.

“It will affect the market down the line, especially for the red wine which needs to be fermented for a few years, but for the rose and white wines, this year we will have less quantity for our clientele,” says Touma, adding that the quality of the 2015 wines “have a lot of potential” because of the lower quantity of grapes produced.

The local darling

According to Choueiry, consumption of wine in Lebanon continues to grow slowly but steadily, following a worldwide trend of interest in the beverage, and also because of the increased number of local wineries. “We have many more local wineries so people are more aware [of this product]. People are trying and discovering different wines more and more, and are also going on wine tours across the country,” he explains.

Indeed, according to Zafer Chaoui, current head of the UVL and chief executive officer and chairman of Chateau Ksara, wine tourism was very active this summer, citing his winery as an example. “Since the Syrian war started, the number of visitors to Chateau Ksara had gone down a lot. This year, we had a considerable increase in visitors; not as much as in 2010, but this increase shows that people are realizing that central Bekaa is as safe as Beirut or Jounieh,” says Chaoui. In an interview conducted with Executive in September, Kahale cited 26,000 visitors to Ixsir.

However, although Kahale sees that the local market is indeed growing, it could be doing so at a faster rate. “I know that the wine market is not growing as it should in terms of consumption in Lebanon, which remains for all of us our most important market. It’s not growing as it should because of a lack of tourists and everything else we speak about,” he elaborates, adding that despite this, Ixsir’s market share has grown by 50 percent year on year, partially due to the launching of the winery’s restaurant.

Wineries that Executive spoke to report an increased local market presence especially in restaurants and bars. “With the trend of boutique wines, some restaurant owners are revolting against the traditional Lebanese wines (Chateaux Kefraya, Ksara and Musar) and choosing to go with smaller wineries. Others say the traditional wines are imperative,” says Choueiry when explaining the increased variety of wines available to Lebanese consumers in the on-trade sector.

Going Abroad

“International visibility in 2015 is by far better than in 2014 because of the natural and organic growth of exported Lebanese wine everywhere,” says Faouzi Issa, winemaker and co-owner at Domaine des Tourelles.

Indeed, all wineries Executive spoke to cited new international markets such as Eastern Europe. Chateau Saint Thomas grew its export market in the USA while Chateau Marsyas entered Hong Kong, Japan and Singapore.

With more Lebanese wineries in the global arena, our winemakers have become innovative in reaching new markets. The year 2015 saw seven Lebanese wineries (Chateaux Ka, Kefraya, Ksara, Saint Thomas, Domaine des Tourelles, Wardy and Ixsir) collaborate with Michael Karam, author of “Wines of Lebanon”, on a two year project called the Wine Traveler.

This initiative would see Karam, funded by the wineries, take a selection of their wines to key global markets with the purpose of conducting tastings either in major restaurants or through media and consumer events. These cities, explains Issa, could potentially become hubs which the wineries would build upon to have real markets there.

“It is too soon to judge the success of the Wine Traveler but I am a strong supporter of it,” says Issa, explaining that for the upcoming year, each of the participating wineries is paying GBP 10,000 to sponsor the project which is very close to the amount Issa paid to participate in and set up his medium sized stand for the local wine festival Vinifest, except that, in his opinion, the Wine Traveler is a more effective marketing tool than Vinifest. Touma says he has already made contacts from the Wine Traveler but that there is nothing tangible yet; “these things take time,” he says.

In the export markets as well, some Lebanese wineries have been moving out of the “ethnic” market, where the wines are primarily sold in Lebanese restaurants or labeled as indigenous wines on retail shelves, and into a more international and global market. “Our focus is on very high-end restaurants and we believe we need to convey that we don’t just need to be in ethnic restaurants. We deserve to be in high end restaurants because we are producing quality [wine] which people appreciate,” says Karim Saade, co-owner at Chateau Marsyas.

“Eighty percent of Lebanese wine in the world is sold in Lebanese restaurants which is not bad, but we want to be a good wine present in international restaurants and wine bars in London, Tokyo and New York. At first, it was hard because it was a niche that didn’t exist much but we started from a small volume which grew every year. Now people look at it as good wine coming from the old world and we are seeing the results,” says Kahale.

To quantity or to quality?

For all its growth in recent years, Lebanese wine production remains at approximately 8 million bottles. When asked why that number has remained steady, Ronald Hochar, co-owner at Chateau Musar, says land in Lebanon is very expensive, discouraging investments in planting more vineyards and also the small size of the country makes land limited.

It is for these reasons that most winemakers interviewed for this article say that Lebanon should focus on the quality of wine and not the production number. “Lebanese wines should be a niche; it’s not about the numbers,” says Issa.

“As Lebanese winemakers, we cannot compete in volume as we don’t have the land capacity and we will never have it. We should just target and enhance quality. We need to concentrate on quality in everything as a country because we are an expensive country so the only edge we have is knowhow in many sectors and to be able to produce whatever it is in quality,” says Saade.

Where is the National Wine Institute?

If the focus for Lebanese wine is to be a niche, high quality product, then a regulatory body to guarantee this quality becomes necessary. As Choueiry explains, back when the country had only three wineries, regulation was mainly self-initiated. “With the new arrivals, some are perfectionists but some are still learning and these might end up doing something wrong and damage the sector’s reputation. Because the players have increased in the country, there should be an authority, not to dictate what they do fully, but to set guidelines,” says Choueiry.

“It is especially important to regulate production because right now the market is chaotic. We have to guarantee the quality of what gets exported or what happened to arak will happen to wine,” warns Hochar, referring to the small export market for arak which he attributes to a history of non-regulated and chaotic production with some producers making arak of questionable quality.

By regulations, the wineries interviewed for the article mean a certification similar to the French l’Appellation D’Origine Contrôlée (AOC), whereby wine is labeled according to the environmental conditions it comes from, the percentage of alcohol and so on.

Such a certification or regulatory body is the main function of the National Wine Institute (NWI), a public private partnership launched two years ago among the Ministries of Agriculture, Industry and Economy and Trade and four private sector representatives of the wineries.

The institute’s role, according to Touma who is one of its members, is to conduct studies that would define and categorize Lebanon’s microclimate and wine production, lending structure to the sector. However, ever since it was formed, the NWI has not been able to fully operate because the budget allocated for it has not been approved by the government, explains Touma. “The guys are working and planning but the problem is they don’t have a budget and the budget should come from the government,” says Kahale.

Some wineries say market players should stop waiting for the budget and try to achieve what can be done through private funding among the wineries themselves, or through international research grants which could be available for wine studies.

In the meantime, while stuck waiting for the NWI to gain budget approval, a sector which has to date been blossoming locally and internationally could soon find itself at a standstill.

December 27, 2015 0 comments

Hospitality & Tourism

A tale of family and tradition

by Nabila Rahhal December 27, 2015

written by Nabila Rahhal

Chateau Musar celebrated its 85th anniversary in October 2015 in style with a grand party. Despite the festivities, however, the winery has suffered a solemn year, with the death of winemaker and co-owner Serge Hochar, one of the sons of Chateau Musar’s founder Gaston Hochar, on the last day of 2014.

Ronald Hochar, Serge’s brother and co-owner of Chateau Musar who is in charge of the winery’s marketing, reveals the main reasons he decided to throw a lavish celebration at the Palais du Msar, their wine estate in Ghazir, Mount Lebanon.

First, he wanted to celebrate the fact that the winery has been in the same family for 85 years with no dispute or division. “They say brothers usually meet for Christmas, Easter and court, so I wanted to celebrate a company staying in the same family and so agreeably for so long with the third generation still working in it,” says Hochar, proudly outlining that Serge’s son Gaston has been training as a winemaker for 20 years and is now Chateau Musar’s winemaker, while his son and nephew are in London and Paris, respectively, in charge of operations there.

Continuing the legacy

The second cause for celebration was closely related to the first, according to Hochar: the idea of continuity. “I am reassuring everyone that I am here to ensure the continuity of Chateau Musar through preparing the third generation to take over despite the pain I am feeling,” he says.

Eighty-five years of winemaking has allowed Chateau Musar to reach several milestones, the most significant of which was arguably its decision to establish a logistics and distribution company, which Hochar calls “the operations hub”, in England in 1979, which has since led to Chateau Musar having 80 percent of its distribution and business abroad.

This move came after a rapidly growing interest in Musar, following its “discovery” at the Bristol Wine Fair in 1978 by international clients who wanted to try the “high quality wine produced under the terrible conditions of a civil war,” Hochar recounts, recalling how surprised people were at the fact that wine could be produced under such conditions.

“It wasn’t an easy decision, especially since we were one of the key wineries locally, but had we stayed here we would have had to adapt to the chaotic situation, sacrificing the reputation of the wine, and we weren’t prepared to do that. It’s true, however, that we lost our local market share to the other wineries,” recalls Hochar, explaining that they chose to establish a company, with his son in charge, rather than go with an international distributor because it’s a more personal approach than simply selling wines.

Aside from ensuring the transmission of Chateau Musar’s philosophy of excellence in winemaking to his nephews and son, Hochar says that investing in owning more vineyards for the Chateau’s wine is foremost among his future priorities. Currently, Chateau Musar uses its own grapes in production but also buys grapes grown by farmers under controlled conditions. “When you control the fruit itself and know what goes in the soil then it’s different and you can secure the quality and autonomy of your wine,” explains Hochar.

December 27, 2015 0 comments

Hospitality & Tourism

Spreading Lebanon’s wineries across the globe

by Nabila Rahhal December 27, 2015

written by Nabila Rahhal

The Union Vinicole du Liban (UVL), Lebanon’s association of wine producers, was founded in 1997 to defend and promote Lebanese wineries’ interests and image abroad. It was established at a time when Lebanon was just beginning to export its wine in significant quantities, according to the association’s website.

Today, the UVL represents 23 out of 42 of the country’s wineries and has achieved some good results in expanding the export market for Lebanese wine through initiating and funding generic campaigns such as the “Wines of Lebanon” promotion in the United Kingdom in 2010.

Executive sits with Zafer Chaoui, current head of the UVL and chairman and chief executive officer of Chateau Ksara, to learn more about the UVL’s role in promoting Lebanese wine and its views on the wine-making industry’s growth.

E The UVL has been working hard to promote Lebanese wine abroad. Can you give us a little summary of the activities you have done or participated in this past year?

The UVL is a very united organization; we work [as a team] and we have, for the third consecutive year, a budget which has been allocated to us from both the Ministry of Agriculture and the Chamber of Commerce, Industry and Agriculture (CCIA) of Beirut and Mount Lebanon. Here I would like to extend my thanks and gratitude to the president [of the CCIA] Mr. Mohamed Choucair.

This budget allows us to participate in various events because, as you know, the producers in the union are uneven in size and some of them cannot afford individually to go to exhibitions. So when financing is provided and when there is a common stand, which is what we usually do, then expenses are much lower.

We used this year’s budget for many activities including the production of a DVD about the Lebanese wine industry in both English and Arabic which is shown in all exhibitions and conferences we participate in.

Moreover, with the support of this funding from the CCIA, 19 Lebanese wine producers were able to go to Megavino, an important wine exhibition held in Brussels, to exhibit their wines. This was the first time we participated in an exhibition in Belgium and it was a success as a number of professionals came to taste our wines and we organized eight professional master classes about Lebanese wine. We were astonished to realize that many people in Belgium didn’t know Lebanon as a wine producing country and this is very serious as we are one of the oldest producers in the world.

Then, also with financing from the chamber, we sent a representative who knows our wine well to conduct tastings in various targeted cities. This year, this took place in three locations: in Bern, Switzerland, where the chargé d’affaires, Jeffrey R. Cellars, hosted a two-day tasting event at his home, in New York where the Lebanese American University office donated their premises and finally in London where Michael Karam, Lebanese journalist and wine expert, talked about our wine.

Knowing well that the situation in Beirut is not the best, we are trying as much as we can within our financial limits and with the assistance of the CCIA to make the most of events abroad and I can tell you I am proud and satisfied with what we are doing with our small budget.

E You mention the budget from the CCIA. How big a budget does the UVL have and where does it come from?

Well, we have three kinds of income. The first income comes from the winemakers themselves as we pay a contribution to be members of UVL and for each event. The events are never financed 100 percent by X or Y; we contribute to them [ourselves] and this is very important because every member has to feel that they are contributing. For example, at Megavino the common budget paid for the stand but every member also paid for their travelling expenses and their wine shipments. When we send a speaker abroad, he or she is paid for by the common budget but every member handles their other expenses alone.

Occasionally, we get financial assistance from the Ministry of Agriculture which covers an event. In 2013, we had a big event in Paris and in 2014 we went to Berlin and both were covered by the ministry’s budget. This year, due to the paralysis of the government, we couldn’t get any financing.

The third budget, which we have been receiving for three years now, is an amount of $15,000 from the CCIA for the activities I mentioned earlier.

E To what do you attribute this increased interest in and support of the Lebanese wine industry?

First of all, wine is on top of the list of products which are comparable to the best production on an international level and Lebanese wine is easily comparable to the good wines of Spain, Italy, Chile or any other wine producing country.

Second, there has been political awareness regarding this product. A year and a half ago, Minister of Foreign Affairs and Emigrants Gebran Bassil requested that the embassies, ambassadors and heads of mission give more importance to the economic development of Lebanon abroad and one of the products which they can work on is certainly wine.

Third, there is a common desire from the industry and from wine producers to work together and perform to the highest degree possible. Lebanese entrepreneurs are the best in the world and Lebanon is a unique attraction. We just need security, stability and peace and we will sell and produce 10 times more wine than we do now.

E Which brings me to my next question. Lebanon produces roughly 8 million bottles per year which is a very small number when compared with even neighboring wine producing countries. What is needed to grow this number further?

The production is very small. We can grow it but it will be expensive; Lebanon is expensive. Land is extremely expensive and the equipment is brought from abroad: all that we call habillage from bottles to labels and corks are imported from abroad.

We have excellent knowhow and a microclimate which is ideal for wine production but we are expensive and that’s why we target quality and not quantity.

E So do you think Lebanon can market itself further as a boutique wine producing country focusing only on quality?

Well it is a fact that we are a boutique producing wine country and we hope to be able to grow and we should increase production somehow but we need stability and we need cheap land values. It’s no secret that Cyprus is producing 30 million bottles of wine per year. Certainly we can never be a huge producer like that but we can increase the level of production we have today.

E Now that the National Wine Institute has finally been formed, when can we expect it to start its work and what is its added value to the industry?

The loss of [wine-maker] Serge Hochar affected the development of this institute and also the lack of budget for the institute to begin operating. The government could not meet to allocate its budget and so they are handicapped by a lack of funding.

It has a lot of added value. I always compare the institute for wine producers to the central bank for commercial banks. It has a controlling role which it has to play and it has to adapt and adjust Lebanese regulations to conform with international standards.

E Could you share some of the UVL’s plans for 2016?

The UVL will continue to do its best and increase its activities, to raise its budgets and be present whenever and wherever possible.

We are already committed with the Consulate General in Dubai for March 2016 where he will open the [Lebanese] embassy for professional wine tasting, and this is very important as we are not alone there selling our wine. The ambassador in Abu Dhabi suggested that we do the same event there the next day and we will.

The UVL’s name has certainly developed a lot recently and Lebanese wine as a whole is much more known than it used to be. We have a lot of opportunities which are not costly and we make the most of them to be present as Lebanese wine.

December 27, 2015 0 comments

Hospitality & Tourism

New wines on the block

by Nabila Rahhal December 27, 2015

written by Nabila Rahhal

Although 2015 did not see the launch of any new wineries in Lebanon, two existing wineries have nonetheless expanded their product offerings to introduce new labels to both local and export markets.

Executive provides further insight into these new vintages in the profiles below, including their positioning within the wineries’ product lines, their target clientele and the market’s response.

B-qa de Marsyas

According to Karim Saade, who co-founded Chateau Marsyas and Domaine de Bargylus along with his brother Sandro, new wineries typically begin their productions with entry or mid-range wines before adding high-end wine to their portfolio. However, he explains that he and his brother chose to do it differently by starting their winery with Chateau Marsyas, their high-end wine, before launching B-Qa de Marsyas, a mid-range wine, in April 2015.

“It made more sense to us as we were focusing on quality, and having B-Qa de Marsyas now will not only provide consumers with an easy to drink wine but, at the same time, this process will allow Chateau Marsyas to perfect itself because our younger vines will go in B-Qa and the estate’s older vines in the Chateau,” he says, explaining that mid-range wines such as B-Qa de Marsyas are only aged for four to five months as opposed to a year and a half or more for Chateau Marsyas, and so are more readily available to the consumer.

The target production number for B-Qa de Marsyas is a total of 100,000 bottles which will be realized by the end of 2016. The wine is distributed both locally and in Chateau Marsyas’s export markets in restaurants, supermarkets and wine shops.

Saade describes B-Qa as a “cool wine”, an image which is communicated through the bottle’s minimalistic labeling and packaging which was designed internally, according to Saade. The pronunciation of the wine’s name was also designed to evoke curiosity around the brand as French speakers pronounce it one way and English speakers another. The Saades launched an advertising campaign for B-Qa early in November 2015 with billboards promoting the wine across the city.

For now, B-Qa is only available as a red wine, but Saade says plans for a white B-Qa are on the way. Entry range wines, however, will not be part of the Chateau’s future, insists Saade.

Obeidy by Chateau Saint Thomas

In 2013, Joe Assaad Touma, winemaker and owner at Chateau Saint Thomas, was approached by Wine Mosaic, an international association for the protection and preservation of local grape varieties of wine producing countries, who inquired whether a monovarietal wine [wine made with just one kind of grape] could be produced from indigenous Lebanese grapes.

After some brainstorming, Touma thought of experimenting with the Obeidy grape typically used for the production of arak in Lebanon. While some Lebanese wineries, such as Chateau Musar or Massaya, had used Obeidy in their white wine blends, no winery had yet produced a monovarietal wine from it (Wardy later produced one in 2013).

Still, Touma was excited for the project and sent a trial quantity of the Obeidy-produced white wine to Wine Mosaic. “I wanted to do it because I wanted to preserve the local grape variety of Lebanon,” enthuses Touma.

The wine was met with a lot of appreciation, recounts Touma, especially since Wine Mosaic already has a database of those who enjoy local wines and promoted Obeidy among them. This success encouraged Touma to produce a bigger number (around 8,000 bottles) for the export market in 2014.

In 2015, Touma introduced Obeidy to the Lebanese market during a launch event held at the winery’s premises midyear.

Touma says the Lebanese responded well to the wine because it is light and refreshing, which makes it good for food pairing, and also because of the grape variety’s origin. “People appreciated that it’s a local variety. They liked this idea and liked the wine because of it,” says Touma, explaining that he is marketing the wine as representative of Lebanon’s people and land.

Today, Obeidy is available at supermarkets, restaurants and wine sellers both locally and abroad.

Touma complains that the Obeidy grape variety is hard to work with as only 60 percent of its juice can be used for wine, and also because it is becoming very hard to find since farmers prefer planting more lucrative and well-used wine-producing grape varieties.

Still, he says he will continue to produce Obeidy white wine and is eager to experiment with other local grape varieties to see what else he can come up with.

December 27, 2015 0 comments

Comment Opinion

Cleaning up and going green

by Pierre El Khoury December 25, 2015

written by Pierre El Khoury

Between 2011 and 2015, the overall direct investments in renewable energy, energy efficiency and green buildings in Lebanon exceeded $450 million. According to Riad Salameh, governor of Banque du Liban (BDL), Lebanon’s central bank, more than 10,000 direct and indirect jobs were created in this sector during that same period. The records of the Lebanese Center for Energy Conservation (LCEC) at the Ministry of Energy and Water echo the statement of Governor Salameh: the number of companies working in the very specific field of solar water heaters rose from 25 in 2010 to more than 170 today. The number of companies working in the green or energy audit business, meanwhile, rose from four to more than 30 in 2015. Finally, the number of companies working in the solar photovoltaic sector increased from around five in 2010 to more than 70 today. Most of these companies are expanding their activities, thus offering new job opportunities to engineers, technicians and administrative staff. There is no doubt that the sustainable energy market in Lebanon is booming.

There is no magic recipe making this sector evolve, but rather a set of well-orchestrated national steps and initiatives that have paved the way toward its development. For once – or at least rarely for an economic sector in Lebanon – there is a vision, a strategy and an action plan for the sustainable energy sector.

Back in 2009, the Lebanese government had committed itself to reaching 12 percent renewable energy by 2020 and to curbing the demand on energy by introducing energy efficiency measures. This political commitment announced by former Prime Minister Saad Hariri during the Conference of the Parties climate change meeting in Copenhagen set a clear vision to develop the sector. One year later, the Ministry of Energy and Water developed a national strategy for the electricity sector in the country, setting renewable energy and energy efficiency as key milestones in the implementation of the strategy’s initiatives. Based on these two cornerstones, LCEC built the National Energy Efficiency Action Plan (NEEAP) for the years 2011 to 2015. The NEEAP was approved by the Council of Ministers in 2011, making Lebanon the first Arab country to develop an NEEAP.

This public framework opened the door for a vibrant private business sector in the country. A new kind of public-private partnership was on the rise. While the energy ministry, through the work of LCEC, strived to develop policy support actions, capacity building activities and awareness raising campaigns, the private sector was developing capacities, establishing companies and looking for investments. It soon became clear that the real development of the sustainable energy sector needed financing.

While BDL issued Circular 197 in June 2009 to help finance environmental projects, a more dedicated approach was needed. The real breakthrough came in 2010, when BDL issued Circular 236, and then in January 2013 with Circular 313, laying down concrete plans for the application of the National Energy Efficiency and Renewable Energy Action (NEEREA) – the government’s approach to finance energy efficiency and renewable energy projects to reach objectives set out on the NEEAP plan.

Between October 2012 and October 2015, NEEREA alone has financed more than $350 million worth of investments in sustainable energy projects. More than 321 projects used the subsidized loans of NEEREA. On the request of BDL, LCEC has worked to set high quality measures to monitor and control the market.

A spark of renewable energy

In 2015 alone, around 20 megawatts (MW) of solar photovoltaic systems were installed, mainly thanks to NEEREA. Large and small systems are being installed all over the country, and LCEC expects that more than 50 MW of new projects will be installed in 2016. In that specific sector, the government is leading by example. The first phase, comprising 1 MW from the Beirut River Solar Snake (BRSS), is now connected to the national grid, setting it as the landmark project for solar development in the country. Since the launching of the BRSS project in 2013, the market has witnessed big momentum. The 1 MW BRSS has stimulated more than 20 MW of solar photovoltaic installations within the private sector.

Meanwhile, green buildings are also expanding. While in the past many real estate developers would avoid adding environmental and energy-saving measures to their projects, the new subsidies by BDL have created a huge shift in that regard. More and more investors are now implementing the American LEED or the British BREEAM certification systems, environmental and sustainable assessment methods, in the construction sector. Currently, the annual green building investments in Lebanon exceed the $60 million ceiling.

On the other hand, the solar water heater market continued to evolve throughout 2015, with the involvement of more than 170 companies. The annual market size is currently estimated at around $20 million.

In 2009, Lebanon launched a national initiative aiming to install 190,000 square meters of solar water heaters over a period of five years. The initiative was launched by the United Nations Development Programme (UNDP) and the Ministry of Energy and Water, with funding by the Global Environment Facility. The initiative received the full support of the ministry, and by 2011, then Minister of Energy and Water Gebran Bassil launched the much-publicized slogan “a solar water heater for every house”. By 2014, the installations of solar water heaters exceeded the 190,000 square meter target.

The European Union has also contributed a great deal to the development of sustainable energy in Lebanon over the past few years. Whether through regional projects and initiatives, or through the projects managed by the EU delegation to Beirut, the impact of the EU has clearly been highly positive. Among the EU initiatives and projects implemented were MED-ENEC, SISSAF, MED-DESIRE, SHAAMS, SOLAR MED, Foster-in-Med, CES-MED and SUDEP. All these acronyms may seem a little incomprehensible, but needless to say the efforts and activities of these projects have resulted in a positive environment toward the development of the sustainable energy market in Lebanon.

For instance, the MED-DESIRE project has supported LCEC in the development of solar ordinances to be adopted by local authorities and municipalities. Another activity by MED-DESIRE has echoed the work of BDL to develop a special financing vehicle dedicated to municipalities.

According to LCEC, 2016 will witness concerted efforts to target municipalities and their unions. In fact, the EU recently launched a new regional initiative called SUDEP, offering financial support to municipalities around the Mediterranean area. Out of the 12 projects awarded under the SUDEP initiative for all cities in the Mediterranean, Lebanon was awarded four projects (in the regions of Akkar, Koura, Chouf and Zgharta). This is quite an achievement for one country alone, and is an indicator that sustainable energy is indeed becoming a priority for Lebanon.

While the current year witnessed an unprecedented growth of decentralized renewable energy systems (in hospitals, industries, residential houses and commercial buildings), the potential for major renewable energy power plants has not yet been explored. The energy ministry is striving to encourage private entities to invest in independent renewable energy power plants. For instance, three years ago, former Minister Bassil launched an invitation to bid for wind energy development investments. Following a thorough analysis by an inter-ministerial committee of the different offers received, the current minister of energy and water, Arthur Nazarian, forwarded the report of the technical committee on wind to the Council of Ministers for its consideration. Ideally, the government would sign three agreements with three different private sector entities to build wind farms in the country. It is expected that these wind farms would add between 150 and 180 MW of wind energy capacity to the national grid.

Helping hands supporting the change

Similar efforts are also being invested to promote privately-owned large solar photovoltaic farms. While little progress has been achieved so far, there is certainly great potential in the field.

With 2015 coming to an end, the sustainable energy market has proven to be growing rapidly, gaining a good reputation and positive feedback. While LCEC is now in the brainstorming phase of its 2016 activities, the outlook seems promising, especially considering that the main players are on board, including the energy ministry, BDL and the EU. During a session in November 2015, the Lebanese Parliament ratified two agreements with the European Investment Bank and the French Development Agency (Agence Française de Développement), to receive a new credit line of 80 million euros to be added to the NEEREA financing mechanism.

In 2016, more international agencies and institutions are expected to join the national momentum of sustainable energy in Lebanon. In his statement in late November 2015, Governor Salameh committed to offer a ceiling of $1 billion in 2016 to support the productive sectors of the economy, including sustainable energy. Realistically speaking, the sustainable energy market will not reach this mark by the end of 2016. LCEC believes the market size will be around $300 to $400 million in 2016 alone, which should still be considered a very healthy target.

December 25, 2015 0 comments

Economics & Policy

An unquantifiable tragedy

by Matt Nash December 25, 2015

written by Matt Nash

In January 2015, Lebanon put new visa rules in place for Syrians entering the country with an aim of stemming the flow of refugees crossing the border. In May, the government ordered the Office of the United Nations High Commissioner for Refugees (UNHCR) to stop registering new refugees. As a result, the total number of refugees has been declining in 2015. As of October 31, 2015, there were 1,075,637 Syrian refugees. The number of registered refugees from Syria in Lebanon was 1,166,760 on September 26, 2014, according to UNHCR’s website. Executive speaks with UNHCR Lebanon Representative Mireille Girard, who arrived in the country in July, about the new policies and the increasingly difficult life for Syrian refugees in Lebanon.

E Reading through various UNHCR reports throughout the year, it sounds like life for Syrian refugees in Lebanon got much harder in 2015. For example, in the first nine months of the year, you report that 15 percent more refugees are living in substandard conditions compared to the same period in 2014. Why is that?

It’s the impact of four to five years in exile. People who came with savings have no savings anymore. People are paying a number of bills every day which is difficult to afford over a long period. They pay rent. And the international community does not have the capacity to cover all of refugees’ needs. We cover as much as we can for the most vulnerable, and that amounts to over $800 million per year, but it is still largely insufficient if you look at what is needed. They’re chipping in themselves a lot. Average rent is $200 per month. They pay electricity and water. People need to renew their residency permit every year and it costs $200 for each person over the age of 15. If there are five people over that age in a family, it costs $1,000.

E What are refugees doing to cope with this shortfall in assistance?

They are reducing the number of meals they have per day, and we see that increasingly. In addition to this, [the World Food Program] had to reduce the amount of food aid per refugee they were giving by half in the middle of the year, which was extremely traumatic. Fortunately, thanks to a recent contribution, the amount went up again, but is still below earlier levels. And the WFP only has funding to continue until January. After that, what happens? We don’t know. So with the unpredictability of humanitarian assistance and the fact that the size of it only covers the most vulnerable, a larger and larger segment of this refugee community cannot make it any more. They’re falling into the most vulnerable categories. For example, last year 40 percent of the refugees told us they had to borrow money to cope and were reducing food intake or buying less nutritious food because it’s cheaper.

E In May, the government announced a new policy saying that UNHCR could not register any new refugees. What impact is this having; are Lebanon’s borders closed to Syrians?

No. People can come under the allowed visa categories – students, for example, or if you are here on business or for medical treatment – this is allowed. However, to enter as a humanitarian exception, you really have to have a very compelling situation – like a child alone whose parents are here or a person with disabilities whose caretaker is here.

E Do you have a number for how many humanitarian cases have been allowed in since the new policy went into effect?

Very few.

E What communication do you have with General Security to make sure the most vulnerable are not turned away at the border?

We have very good communications with them. We also work closely with the Ministry of Social Affairs, which has the mandate to handle the Syrian refugee crisis. We have a framework and you’re not seeing students deported or migrants deported.

E Has Lebanon been deporting refugees?

No. The government of Lebanon is upholding its international law obligation not to push people back to a war situation. But many refugees are not able to renew their residency permits because of both the cost and the documents they have to provide – such as a lease agreement. You don’t have a formal lease agreement for a tent. Over 60 percent of refugees are incapable of extending their residency permits. They live with fear that they will get in legal trouble or deported, but deportations are not actually happening, to our knowledge.

E Is General Security detaining Syrian refugees for not having residency papers?*

The General Security Office detains non-Lebanese persons including Syrian refugees for their irregular status. Most are released within a day or two.

E How many are currently in detention?*

Please refer to the Lebanese authorities for an accurate figure.

E What’s the general trend in detention you’ve seen since the crisis started and has there been a spike in 2015?*

The percentage of Syrians in prison has slightly increased from 2010 to 2015, a reflection of the increased size of the Syrian population in Lebanon.

E Was there any spike after the May decision on no new registrations?*

No.

E During the summer of 2015, hundreds of thousands of Syrian refugees began entering Europe. Do you have any sense of whether refugees in Lebanon left the country for Europe given the worsening conditions here?

There are two categories of movements that are arriving in Europe. Departing from the region, you have legal movements and illegal movements. The large, large majority from Syria are legal. People cross the border [into Lebanon, for example], get a transit visa, show their travel documents which they’ve paid for legally – whether travelling by air or sea – and go to a country where they don’t need a visa: Turkey. And at the moment, we are seeing the middle class in Syria leaving. We’ll have a better idea once more interviews are conducted with the refugees arriving in Europe, but the snapshot so far is that many were people who had things to hold on to and were reluctant to leave but have decided they cannot live another year in Syria. Once they arrive in Turkey, this is when they get into contact with smugglers and all of the movement from there is illegal.

E Where does Lebanon fit into this equation? We’ve heard that there are many Syrians transiting through the country but there are also reports of smugglers illegally taking refugees out of the country. Do you have an idea about the scale of smuggling?

Here, there are some people who do not have up-to-date residency permits, so they would have to regularize themselves to be able to leave legally. That can be expensive because you have to pay for each year you were here without papers. So, refugees either choose to do that or pay a smuggler.

E How do you get this information about refugee smuggling out of Lebanon?

We get information from different sources to try and triangulate the information. We do random surveys among the refugee population and speak to people when they come to ask for assistance. Here we try to gauge intentions, whether they plan to leave for a third country. We also measure the number of people who are not showing up [for meetings with UNHCR], and try to find out where they are.

E When UNHCR cannot reach a refugee for a period of time, that person is deregistered. There were 149,000 deregistrations in the first nine months of 2015. Is this a significant increase from last year?

It’s more than last year, but not a significant increase. Last year we deregistered 125,000 for the whole year. This year, by September there were 149,000.

E Do you attribute that increase to smuggling or legal movement with the aim of getting to Europe illegally?

It includes everything: formal resettlement, death or return to Syria. We do try to find out if there are any indications of people who tried to go to Europe. We did a random survey recently and found around 40 percent of people said they either knew someone or heard of someone who has left. Then we asked where. There was a big proportion that stayed in the region. It depends on connections people have, relatives who can help them. It depends on where they can get a visa.

E It seems Lebanon is trying to disincentivize Syrians from coming here. Are there still large numbers of people unfamiliar with the process here who are trying to enter as refugees?

In general, people know. The number of people that come to the border under the humanitarian category is very low. This means that people know there are not many being let in. By now the word has spread. People who are coming here know what they need and bring the right documents. In the past two years, we’ve seen a lot of people that came to Lebanon with savings and didn’t feel the need to register as refugees with UNHCR. As their savings diminished, or if they lost jobs they had, they would come and register even though they’d already been here for one or two years. These are the people we’ve had to stop registering since May when the new government policy went into effect. Now, we don’t see as many of these people coming, so I think the word has spread.

E If they do come, can you refer them to partners? Are these people able to get any aid?

In education, the government doubled the amount of space available for Syrian refugees, so now the target is 200,000 – which is still half the number of those who need education, but it is double the number from last year. We’ve so far registered 160,000 but 200,000 spots are available. Kids don’t have to be registered or have proper residency papers to go to school.

*This portion of the conversation was conducted via email after the face-to-face interview.

December 25, 2015 0 comments