Executive Magazine

Questionable ethics

by Executive Editors February 6, 2015

written by Executive Editors

When Executive asked Joe Saddi, senior partner in PricewaterhouseCoopers’ premium consulting arm Strategy&, and before that global chairman of predecessor firm Booz & Company, if there was a shared greatest challenge for Arab companies, he answered without a hint of hesitation: “There is. It is capacity building.”

Our subsequent research into the defining challenges of consulting firms working in the Middle East and North Africa (see “Strategy & war“) led us to conclude that there was a more than slight whiff of irony to that answer. As evidenced by the regional consulting industry’s ongoing talent war — which is a symptom of a shortage in human capital — the strengthening and development of human capital appear to be still an enormous need not only for the average Arab corporation but also, and perhaps more crucially, for any player in Big Consulting attempting to cover the region with competent services.

In a second finding of our brief research into regional consulting, we can again confirm that Lebanese talents, trained at our business schools and universities, rank with the top, if not totally at the top, of the region when it comes to supplying native management consultants across the entire advisory industry in the MENA region.

[pullquote]If a greater than usual human capital battle has recently been playing out behind the scenes of the regional consulting industry, Lebanese, it appears, were right at the center of the fray[/pullquote]

At the same time, however, as Executive encountered evidence for the need of improvement in human capital standards and ethics across the region’s consulting ranks, a Lebanese element to these problems seemed unmistakable. When checking social networks for regionally based seniors and juniors of all consulting levels who had recently defected from Booz — by its own claims the region’s dominant premium consulting firm — the resulting list of names reads like something from a directory of Lebanese university graduates, stretching from Abou Jaoude to Khoury and from Matar to Ziade. If a greater than usual human capital battle has recently been playing out behind the scenes of the regional consulting industry, Lebanese, it appears, were right at the center of the fray. The two basic findings of our investigation highlight a number of needs: first, the need to address the still persistent deficits in the number of superbly qualified local decisionmakers in regional corporations. This need requires that companies accelerate the formation of native Arab human capital.

But the fact that consulting firms appear to be embroiled in a regional talent war is also a reminder of more fundamental needs, beginning with the imperative that even wars need ethics. It would be silly to assume simple good vs. bad, black against white categories for antagonists in a talent war among top consulting firms. Consulting firms operate in the capitalist system and are subscribing by default to capitalist ideals of self fulfillment and gratification of greed amidst harsh competition, not to monastic ideals of denying world and self or socialist theorems preaching ‘from each according to his abilities, to each according to his needs’.

Seeking control of vital resources is integral to the contemporary capitalist environment and all protagonists will follow the ‘survive and succeed or be swallowed’ logics of competition, including talent poaching and headhunting, and use every trick in the book of how to win clients and bring competitors down.

[pullquote]Consulting organizations of high repute of course swear by their ethics[/pullquote]

Even under those paradigms, however, rules of conduct and proven best practices must be respected if one does not want to lose the real war by destroying one’s own assets of credibility and reputation. For example, if a consulting organization in the Middle East describes the audit conflict — the problem that destroyed huge economic value in the United States some 15 years ago — as mainly a matter of the jurisdiction where you operate and thus not applying to many countries in this region which don’t have the requisite laws against overlapping consulting and auditing, the occurrence of a MENA Enron or Tyco case sounds like just a matter of time.

Under such a scenario, the self destruction of any implicated double provider of auditing and consulting would be pretty much guaranteed and not be a question of laws but of failure to learn existential business lessons.

The negative consequences of ethical failures apply by necessity to both organizations and individuals and the higher the visibility, the greater the consequences. A consulting organization will risk facing incredulity if it, for example, proposes to instruct a client company in employee training and talent retention, but cannot demonstrate a track record of providing a career path that motivates its own consulting workforce.

And by way of other purely hypothetical examples, management consultants who massage their own career histories can certainly teach lessons to managers. But will these be the right lessons? Strategic consultants who have a totally superior view of themselves and who calculate their billable time based on their own inflated sense of importance can also certainly convey messages on profit maximization and impart such lessons to corporations. But can such strategies be sustainable?

Consulting organizations of high repute of course swear by their ethics. For one pertinent example, the historic parent of both Booz Allen Hamilton and Strategy& had a code of ethics which, according to company timelines, was first written up in the 1930s. As one of its 10 points, this code required its undersigned to have “willingness to subordinate one’s personal interest to that of the firm,” said several promotional publications of the Booz Allen Group from different time points in the last decade.

Given that such a demand implies that a firm sees itself — and not a larger purpose beyond itself — as the principally desirable ‘greater good’, it is in itself worthy of critique, and ever more so if the demand for self subordination is not balanced by an equal emphasis on the firm’s ethical commitments to society, environment and crucially, every single employee.

[pullquote]The term human capital is a value statement that is totally meaningless without affirmation of ethics and unalienable human dignity[/pullquote]

If a corporation, consulting or otherwise, affirms that human capital is its greatest asset, a very similar need for cautious examination arises. The term human capital is a value statement that is totally meaningless without affirmation of ethics and unalienable human dignity. If ‘human’ is not the ruling element in the concept’s DNA, then this word combination is just a hollow euphemism and buzzword for the practice of deploying human beings as dehumanized parts of the economic equation.

The consulting profession has dealt in human capital before almost any other profession. It was a consultant at McKinsey who popularized the term ‘talent war’ first, back in the 1990s. Frankly though, it appears that the number of ethical failures in strategic and management advice throughout the first 100 years in the history of consulting can fill volumes of moral and economic bankruptcy stories.

One urgent, albeit hardly new, need for the future validity of the highly concentrated Big Consulting and correlated Big Auditing industries is that the dominant players in this space have to become credible models for the insights and recipes they propagate.

A correlated need is that premium consultants are well advised to make every effort for building up stronger values that qualify them on universal terms and not only from business performance angles and profit principles.

Finally, from the knowledge that consulting will be in regional demand in the foreseeable future and that Lebanese can be a key current and future resource in regional consulting, business schools and stakeholders in such education are advised to prepare our young talents ever better for consulting career opportunities — and do that both in technical terms and by equipping them more abundantly with the moral tools that will assist them in future wars for their talents where they will face myriad black and white decisions.

February 6, 2015 0 comments

Business

Strategy & war — Part III

by Thomas Schellen February 5, 2015

written by Thomas Schellen

In consulting, human capital is everything. Real experts are rare and have long been fought over, especially in a growth region like the Middle East where cultural compatibility is a key need. Now it looks as if the region’s scarcity of qualified consultants is taking the war for local talent to a whole new level. This is the second installment in a three part investigation into recent developments at Strategy& since it combined forces with global services organization PwC. Read part I and part II.

[pullquote]Consulting has now surpassed investment banking as the primary career choice among newly minted MBAs[/pullquote]

With bountiful profit potentials in the Middle East, it is basic business logic that premium consultants will compete fiercely not only for new business — Booz Allen Hamilton (BAH) for example triumphantly announced the win of a $22.3 million contract with the Royal Saudi military on the occasion of its first anniversary of its “reemergence in MENA” back in August 2012 — but even more for the scarcest and most vital resource: human capital.

In theory, this shouldn’t be a problem over the long term as international experience shows how such enhanced demand motivates more young talent to aspire to consulting careers. The Economist reported in October 2014 that consulting has now surpassed investment banking as the primary career choice among newly minted MBAs. The publication cited studies showing that almost 30 percent of MBA graduates from ‘elite business schools’ in North America and Europe take employment at consulting firms. The tendency to seek work at consulting firms increased by six to seven percentage points between 2007 and 2013 among graduates from the likes of London Business School and the University of Chicago’s Booth School of Business. At the latter school, four big consulting firms — McKinsey, Bain & Company, Boston Consulting Group and A.T. Kearney — hired 19 percent of the 2013 MBA class.

[pullquote]In the immediate term, what matters is experience and reputation. No fresh MBA graduate has that[/pullquote]

But in the immediate term, what matters is experience and reputation. No fresh MBA graduate has that — instead, it is the added value provided by partners, whose primary job often isn’t to consult, but rather to bring in clients and business. Joe Saddi, senior partner and chair of Strategy&’s Middle East business, and George Sarraf, a partner and veteran of Strategy&, concede that the loss of tier one human capital has been significant, but both emphasize that Strategy& had immediately embarked on refilling the partner ranks. “We elect partners every year or every six months. Frankly, within one year, we expect to be back at full deck,” says Saddi.

Sarraf points out that the PricewaterhouseCoopers (PwC) merger deal was similar to any such transaction in the corporate world in leading to “its own wave of departures. It is frankly very common that people either have the desire to change or are not satisfied with the transaction itself,” he says. High turnovers in personnel were moreover a common occurrence in the premium consulting industry due to high performance pressure, he argues, claiming that only a minority of departees would join a competitor as most left for reasons such as joining their family business or setting up their own companies. And in tune with Saddi’s perspective, Sarraf downplays the outmigration after October 2013 by emphasizing that Strategy& was on course to replenish its partner ranks.

[pullquote]The loss of so many partners — and with them, decades of experience — looks, by the size of the regional consulting industry’s partner ranks, like a mass defection[/pullquote]

As the Strategy& partners page has been replenished to 25 and while the outmigration provided new career opportunities to ambitious risers from within legacy Booz, the loss of so many partners — and with them, decades of experience — looks, by the size of the regional consulting industry’s partner ranks, like a mass defection whose consequences for Strategy&’s position in the Middle East consulting market are yet to become clear. BAH, which two years ago had announced that it would be “actively recruiting” regionally based specialists to increase its “traction” in MENA, in particular appears to have used every opportunity to snatch up human capital, right down to new analysts whose prior experience was an internship with the erstwhile ‘sister Booz’ in Beirut.

The picture of legacy Booz–BAH migrations suggests that the combination of the former’s sale and name change with the latter’s aggressive hiring approach — anecdotal evidence is that BAH’s new hires in their majority were fitted with fancier positions than they had held at Booz — created a specific, and for the acquirer BAH presumably very expensive migration. Another BAH-friendly factor in this particular case may have been the ring of the old name, which BAH cheerily exploited by using its bragging rights to the Booz Allen Hamilton brand legacy of 100 years in consulting, and also the joint history of the two now-competitors until 2008. Some of the most experienced career migrants in the scenario had already worked under the BAH brand before 2008 and a couple of these veterans, known as Booz & Company people in numerous conference bios and publications, curiously purged their career histories in LinkedIn profiles by posting histories of working uninterruptedly with BAH since 1999 and 2002.

[pullquote]The aim of the PwC–Strategy& merger was to reach faster growth than Booz could have achieved on its own[/pullquote]

This emergence of new competition from known people under an established name must be more than an inconvenience for Strategy&. Yet Saddi and Sarraf emphasize with joint vigor that the aim of the PwC–Strategy& merger was to reach faster growth than Booz could have achieved on its own. That long term goal may yet play out if Strategy& can stem the outflow of talent and use this experience to take their team members’ self confidence and trust in the organization to a new level. But it is clear that the future of Strategy& will require overcoming not just internal challenges such as the stratification of premium and value consulting, but also market challenges faced by the globally evolving consulting and auditing profession and, on regional terms, dealing with growing competition over clients. In the meantime, any coming battles over talent and clients in the Arab consulting space will be welcome news to the market — as long as this increased competition remains within the realms of human decency and does not deteriorate into full fledged, dirty commercial wars.

February 5, 2015 0 comments

Business

Strategy & war — Part II

by Thomas Schellen February 4, 2015

written by Thomas Schellen

[pullquote]What happened was “a meeting of the minds” between PwC and Booz, says Saddi[/pullquote]

From the C-suite narrative, there was a straightforward logic behind the decision to combine Booz & Company with PwC, a move that Booz’s global layer of top stakeholders approved in December 2013 and that was formally sealed in April 2014. What happened was “a meeting of the minds” between PwC and Booz, says Joe Saddi, senior partner and chair of Strategy&’s Middle East business.

For Booz, the process started with introspection into the consulting industry and its future challenges. “It dawned on us that the industry was going through an inflection point in that clients were no longer asking only for strategic advice but also wanted you to [implement] and deliver tangible impacts. To deliver tangible impacts nowadays requires having much more capabilities,” says Saddi. To gain those needed capabilities, the company’s only choices were to either build them internally over time or find a partner that already had such capabilities, he adds.

Having opened the mental doors to the possibility of joining forces with a partner, the leadership of Booz responded to overtures which according to Saddi originated from PwC. The caveat was to engineer the partnership in a way that would have a greater chance of success than other such moves that had accompanied the turbulent growth of the accounting and consulting industries since the days of the Enron scandal. “We spent a lot of time understanding what would make such a partnering succeed,” says Saddi.

Both of the two firms, PwC and Booz, had already lived through complicated exercises in searching for winning corporate formulas of the sort that they expect from their new alliance. PwC’s experience in this regard was shaped by the divestment of its Management Consulting Services unit in 2002. The path of Booz had included the split in 2008 that created Booz & Company as an entity focused on international business and Booz Allen Hamilton as a consultancy initially working on US government contracts, many with military and security flavors. And in 2010 Booz & Company said it had aborted discussions with consultancy peer A.T. Kearney over a possible merger.

In going with PwC, the deal was shaped in a very different way from any other in the consulting industry, “where the smaller company was merged and integrated into the operation of the bigger one,” says Saddi. “This is not the case here. Both sides agreed that in a first step what was Booz & Company would remain intact as a structure. Legacy Booz is going to remain as an entity and have its own identity within the PwC family.”

[pullquote]“I prefer the term ‘combination’ rather than the word ‘merger’ because it is more of a combination than a merger”[/pullquote]

‘Legacy Booz’ is the term by which members of Strategy& frequently refer to their company since joining PwC. Not even the term ‘merger’ appears to express the way in which partners in the consultancy perceive their new identity. “I prefer the term ‘combination’ rather than the word ‘merger’ because it is more of a combination than a merger,” explains George Sarraf, a partner and veteran of Strategy&’s Middle East business.

In addition to the client demand for implementation of strategy that Saddi had discussed, Sarraf mentions three other key benefits to legacy Booz, all related to the much larger scale of the PwC operation when compared with the old Booz & Company.

“In the consulting business you need to invest, and the combination has allowed us access to a much larger pool of investments because of the sheer size and financial strength of a global firm like PwC,” Sarraf says, going on to cite access to new capabilities “that we didn’t have and which we needed access to” and enhanced geographic reach as the second and third new advantage. “Although Booz surely was a global firm and had in excess of 50 offices around the world, there were many countries where we were not present. If you today want to serve in areas like Africa, as an example, the wide geographic presence of a firm like PwC is a big plus,” he explains.

The ‘bigger is better’ argument is well supported by numbers. According to its annual figures for its fiscal year ending June 2014, PwC achieved $33.95 billion in global revenues of which just under 3.5 percent were generated in the Middle East and Africa (MEA). In terms of total revenues, PwC was the world’s number two in the advisory–accounting–consulting multiverse, just behind Deloitte, which reported $34.2 billion in revenues for the 12 months ending May 31, 2014.

PwC’s revenues growth rate for MEA was shown at 9 percent versus 5.8 percent globally. Unpleasantly, as with other global corporate reports, the growth rates shown in the annual overview don’t give details on the performance of MENA markets by themselves. However, the report says that the growth rate for MEA was 15.9 percent at stable exchange rates — which makes it unlikely that growth in the dollar pegged markets of the region, such as the GCC, was as strong as growth in markets against whose currencies the dollar appreciated over that period.

[pullquote]Booz had “hundreds of partners and thousands of employees” worldwide before joining forces with PwC[/pullquote]

A world in need … of consultants

Unlike PwC, Booz as a private partnership organization did not report global or regional revenues but the size differential is shown in the human capital accounts. According to Saddi, Booz had “hundreds of partners and thousands of employees” worldwide before joining forces with PwC; PwC, according to its online data sheet, accounted for 10,000 partners and over 195,000 total staff by the end of June 2014. On a global level, then, Strategy& will rely on PwC’s strength to tap into the lucrative and growing market for consulting services.

Big consulting is at home in the United States and Europe, where top players achieve varying but generally dominant portions of their turnovers. Data from the US market, still the mother lode of consulting activities, say that revenues of management consulting firms grew from $120 billion in 2009 to $138 billion in 2013 and $143 billion in 2014. These figures were compiled by information portal statista.com from US Census data on industry.

In another statistical view on the international consulting industry, a company called Source Information Services found in the autumn of last year that big consulting groups, meaning firms employing more than 50 consultants, achieved revenues surpassing $41 billion from the US market in 2013. The same company, which acts as an analyst and consultant on the consulting business, said on several recent occasions that Southeast Asia and the Middle East and North Africa region — or more exactly the Gulf Cooperation Council bit of it — offer the best growth prospects for big consulting firms.

The Southeast Asia region benefited from political stability and the ASEAN economic area was projected to achieve 5 percent annual growth for the next five years, it said but acknowledged that among the two consultancy growth regions, the GCC market generates higher revenue per consultant and also has a higher propensity to buy consulting services.

[pullquote]The Saudi and Emirati consulting markets have been leading the world in growth rates[/pullquote]

While Source Information Services described the GCC consulting clienteles in unflattering terms as fidgety by comparing typical GCC client behavior to that of a “petulant teenager” and also named MENA markets with $2.2 billion in 2013 in consulting turnover as rather small revenue generators for big firms, it highlighted that the Saudi and Emirati consulting markets have been leading the world in growth rates, respectively registering 26 and 16 percent expansion in 2013.

With such growth rates, it is no wonder that the GCC market is an arena for the ambitions of global consulting firms such as Boston Consulting Group, Booz Allen Hamilton, Bain & Company, McKinsey and Accenture, as well as the consulting units of the globally leading ‘Big Four’ audit firms: Deloitte, KPMG, Ernst & Young and PwC.

Continue on to Part III

“Booz vs. Booz: An agressive challenger”

February 4, 2015 1 comment

Business

Strategy & war — Part I

by Thomas Schellen February 3, 2015

written by Thomas Schellen

In consulting, human capital is everything. Real experts are rare and have long been fought over, especially in a growth region like the Middle East where cultural compatibility is a key need. Now it looks as if the region’s scarcity of qualified consultants is taking the war for local talent to a whole new level. This is the first installment in a three part investigation into recent developments at Strategy& since it combined forces with global services organization PwC. Read part II here.

Their offices are located on what feels like the central corner of downtown Beirut. From their conference rooms and executive offices the view sweeps across the headquarters of Lebanon’s largest bank and the premises of the nation’s top couturier to the city’s flashiest high end office addresses.

But what makes the presence of consulting firm Strategy&, formerly Booz & Company, at the physical core of the Lebanese business landscape truly noteworthy is not the location’s air of money and corporate importance. It is the company’s history of stay. It has been here since this part of downtown was rebuilt — which means operating a top tier Beirut office for more than a decade, even though the Lebanese consulting market is strictly little league.

A tale of two Edwins

Strategy& is an uneasy name for a consulting firm. Many will tell you — and opine — that the old name, Booz & Company, was so much more memorable as it carried the storied image of a full century of consulting dating back to one Edwin Booz who hung out his shingle as presumably the world’s first commercial consultant in Chicago back in 1914.

However, in 2013 the global partners — and hence owners — of Booz & Company had no choice but to give up that brand in order to join forces with another storied name (and much bigger company): professional services corporation PricewaterhouseCoopers, today branded as PwC. The merger meant that a clause in an older deal between Booz & Company and sister consultancy Booz Allen Hamilton had to be obeyed — a stipulation of the demerger of the company that was operating globally as Booz Allen Hamilton until 2008. This demerger had established BAH as a US focused firm whose revenue stream originated more than 90 percent from defense, intelligence and other government work and provided Booz & Company with a hold over international markets. The newly segregated siblings were not to penetrate into each other’s territory for three years, until late 2011, and if Booz & Company were ever to merge with another player, it would have to discontinue using the Booz brand.

Yet the new deal with PwC did not deprive Booz & Company of association with a time honored name. PwC’s roots date back to the mid 19th century and to prominent London based accountants, including one Edwin Waterhouse.

When compared with the Gulf region, “we don’t have many clients in Lebanon,” acknowledges Joe Saddi, senior partner and chairman of Strategy&’s Middle East business. “In business focus, the firm follows GDP, from the biggest down,” he says, and names the region’s primary markets for consulting services as Saudi Arabia, followed by the United Arab Emirates and then Qatar and Kuwait.

Ask the top person at the Lebanese lair of this globally active consulting firm why they maintain an expensive presence in Beirut, and Saddi will tell you that they are here because of Lebanon’s most valuable resource: “We are in Lebanon mostly because of the talent.”

And while the name Strategy& may not yet ring a bell with people who look up a consulting firm only when they need to restructure or reinvent their company, this company has been plugged into the industry’s spinal cord since its beginnings in the industrial environs of Chicago 101 years ago. Then, the company’s name appears to have been “Business Research System”, but it became known through a succession of later monikers which all included the term Booz, after its founder. Last year, however, Booz & Company made a big move by combining forces with another global services organization, PricewaterhouseCoopers (PwC), and had to drop anything ‘Booz’ from its official identity because of a contractual obligation (see box).

Making it on the local stage

While other consulting firms with global repute — the likes of Boston Consulting Group (BCG), Bain & Company, McKinsey and so forth — have bypassed Beirut in recent decades and put all their regional offices into the GCC basket or perhaps into Egypt, the Strategy& organization’s Beirut office has given the company an edge in recruitment and boosted its human capital.

George Sarraf, a Strategy& energy partner and veteran of its Middle East consulting activity reminisces on how the company has been accessing Lebanese talent ever since he joined its then regional base in Abu Dhabi in 1996. “Lebanon is an important source of talent for us and it always has been since we first opened an office in the region,” he muses.

[pullquote]12 of 27 Middle East based partners left the company between December 2013 and January 2015[/pullquote]

According to both Saddi and Sarraf, talent — and competition for talent — are defining issues in what they call the premium consulting industry, whose management and strategic advisors regularly have to interact with senior leaders in large corporate and public sector organizations. “The biggest challenge you have is access to talent and to maintain talent. This is the element that constrains growth the most and that is why there is a lot of fighting around talent within this industry,” Sarraf explains.

In Saddi’s words, Strategy& was able to draw in local talent more effectively than other premium consultancies over many years, but as he concedes, outbound talent migration at the top tier of partners in the company was part of the company’s transition from a standalone firm to alignment with global giant PwC. While the majority of regional partners, according to him, voted in favor of the tie up with PwC in the fourth quarter of 2013, “around 10” partners left the firm between the vote and mid 2014. According to comments by Sarraf in September 2014, the issue was under control at that time, because the majority of partners remained with the organization, only a minority of departees from various ranks went to the competition and new hires came aboard. “[When looking at] the net — net of how many people have left and how many have joined during this period of time — I would not say it is a wash but it is a near wash,” he enthused.

A small wrinkle

But when wrapping up and rechecking its research into the regional human capital of partners and consultants in January 2015, Executive found signs suggesting that Strategy& has been recently embroiled in a veritable talent battle.

Where they went

As of December 10, 2013 — a mere fortnight before Booz & Company partners took the final vote to join PwC — the company’s website listed 27 partners in the Middle East. As of mid January 2015, here’s where each of them were.

Strategy&
Olaf Acker
Samer Bohsali
Alessandro Borgogna
Gabriel Chahine
Georges Chehade
Bahjat El-Darwiche
Chucrallah Haddad
Hilal Halaoui
Andrew Horncastle
Fadi Majdalani
Joe Saddi
George Sarraf
Richard Shediac
Chady Smayra
David Tusa

Boston Consulting Group
Jad Bitar
Leila Hoteit
Christian Reber
Peter Vayanos

Booz Allen Hamilton
Walid Fayad
Raymond Khoury
Ramez Shehadi

McKinsey
George Haimari
Mazen Ramsay Najjar

Ernst & Young
George Atalla

A.T. Kearny
Sean Wheeler

No affiliation
Tarek Elsayed

Source: The Internet Archive, firms, individuals’ LinkedIn profiles

Comparing the lists of partners on Strategy&’s website and other sources from last month with a version of Booz’s cached by nonprofit outfit The Internet Archive, one finds that 12 of 27 Middle East based partners left the company between December 2013 and January 2015.

While this sounds grave enough in a business where partners are crucial players for reputation, expertise and also for bringing in clients and contracts, the defections of partners over a slightly longer period from March 2013 until January 2015 seemed counter indicative to Sarraf’s suggestion that “only” a minority hitched with regional competitors.

Of partners who vanished from Booz in that period to reappear elsewhere in the consulting industry, one moved to Ernst & Young in a global role; two others became partners at McKinsey in the UAE; and a fourth claimed on their LinkedIn profile that they moved from Booz to join A.T. Kearney in Dubai in January 2015 (however, their name had not appeared on the A.T. Kearney website as Executive went to press).

Taking the total count to eight, three partners jumped to BCG in the Middle East and one to BCG in Europe. Lastly, as the hammer in this game of rotation, consulting firm Booz Allen Hamilton (BAH), which started pushing into the Middle East after a noncompete agreement with former sibling Booz & Company expired in Q3 2011, in October 2014 presented three recently departed Booz seniors plus another Booz alumnus as new BAH partners and part of their new MENA leadership team — led by yet another Booz outbound migrant as the MENA team’s new “executive vice president and managing director”, according to the press release (see box).

Moreover, the migratory pressure has not been limited to the top tier of partners, vice presidents and so forth. For an informative, albeit not statistically representative assessment of migrations in the rank and file of the Strategy& and BAH organizations, and in an effort to find direct crossings from the former to the latter, Executive reviewed some 42 LinkedIn profiles of analysts, associates, senior associates and principals who indicated employment by either of the two companies in their online profiles.

According to their profiles, most of which were posted by persons with last names that indicate a possible Lebanese nationality, 20 individuals — almost half of the interconnected profiles which we accessed — left Booz–Strategy& between mid 2013 and end 2014. And all but a few of these individuals indicated that they moved without any intermediary employment to BAH.

That, one assumes, cannot be a boon for an organization whose defining capital is human.

Correction: When counting partner departures from Booz–Strategy&, a previous version of this article inadvertently put the time period under consideration as March 2013 to January 2014, instead of to January 2015. Apologies.

Continue on to Part II

“Booz and PwC: It made sense on paper”

February 3, 2015 0 comments

Beirut's private coast Real Estate

Achour-ed success

by Matt Nash February 2, 2015

written by Matt Nash

[pullquote]“The land, I think, [is worth] less than this amount, but the amount was [acceptable] like this because we’re not paying immediately”[/pullquote]

Even with the smell of untreated wastewater wafting into the air and urban waste effluents annoying bathers in the sea, the property shown on the Beirut cadastral map only as land parcel 3689 was clearly valuable. Real estate developer Wissam Achour must have seen these 5,188 square meters of sandy beach at the southern edge of the upscale Ramlet al-Baida district as a veritable treasure — judging from the fact that his Achour Development in 2011 agreed to pay $175 million for parcel 3689 and the larger plot behind it. The price reflected the undeveloped land’s terrific location and potential for a tourism project, Bahij Abou Mjahed, a lawyer for Achour Development, tells Executive. He admits, however, “The land, I think, [is worth] less than this amount, but the amount was [acceptable] like this because we’re not paying immediately.”

As is standard in the industry, Achour Development created two special purpose vehicles, Beirut Marina Gate and Achour Marine Development, to manage and build, respectively, what is planned to be the Eden Rock Resort, a seaside project with an estimated investment value of $500 million, Abou Mjahed explains. As per a special purchase contract between Beirut Marina Gate and Eden Rock Real Estate and Tourism — the company that owns parcels 3689 and 3687, the 17,107 square meter plot that abuts 3689 on the land side — the developer handed over around “12 to 13 percent” of the amount upfront, he says.

This computes to an initial payment of around $21 to $23 million for the land, with the balance to be paid as the project — where prices for a low rise apartment start at $15,000 per square meter — begins drawing in revenue, Abou Mjahed says. Once the price is paid, ownership will transfer to Beirut Marina Gate as project owner and operating company, he adds.

All indications — such as the telltale merging of smaller parcels into 3687 and 3689 — are that Eden Rock Real Estate and Tourism, which is selling the land to Achour, clearly wanted to turn the property into a profit making asset. It entered the process of acquiring the permits needed for building beyond the scope of what zoning laws in the area allow and, after receiving a green light for a ‘grand project’ from the Directorate General of Urban Planning (DGUP), the Council of Ministers signed off on Decree 14814. Published in the Official Gazette in July 2005, it cleared the way for structures with a height of more than 5.5 meters above road level to be erected on the land.

It is unknown why Eden Rock Real Estate and Tourism abandoned its project and further details on its approved 2005 plans were not available, but Abou Mjahed confirms that Achour Development has submitted its drafts for the project with modifications and says that these blueprints have been making their way through the approval process without any real obstacles. Approval of the updated plans from the DGUP was required and granted. He insists, however, that no new approval from the Council of Ministers is required — a point some dispute.

[pullquote]Another lingering question concerns when construction can legally start[/pullquote]

Lingering doubts

In January, a DGUP official directly contradicted Abou Mjahed’s claim that no further action is needed by the Council of Ministers. The official, who spoke on condition of anonymity, said that the DGUP had approved the new plan and sent it on to the Council for consideration. Abou Mjahed denies the need for further Council action, claiming that the existing Decree 14814 is sufficient and applies to the resort. The decree itself is vague, and Executive was unable to reach Tourism Minister Michel Pharaon — who said at a launch event for the resort in October that the file was still with the DGUP — for clarification.

Another lingering question concerns when construction can legally start. An official with the engineering office at the Municipality of Beirut, again insisting on not being named, tells Executive that the permit for 3689 is “on hold,” but he did not know why. The official explains that the hold means a developer can begin excavation but not construction. Manar Jaber, head of sales at Achour Development, acknowledges the inability to begin construction at the moment, but insists the permits will come and blames the delay on extra red tape related to a recent change in leadership in the Beirut governor’s office.

In addition to the delay, there remains an outstanding legal case related to plot 3689 between Walid Rassi, an engineering consultant, and Eden Rock Real Estate and Tourism. A Lebanese court, according to the land ownership paper from the Directorate of Land Registration and Cadastre, put a hold on developing the land until the matter is settled. Andre Bouchaaya, a lawyer who specializes in real estate, confirms that the legal action against the landowners will prevent development. “The court put a hold on; only the court can lift it,” Bouchaaya says as he looks over the land ownership papers.

Jaber says Achour Development is working to settle the issue with Rassi, who does not deny that he’s been in touch with the company, but says “no serious efforts” to resolve the case have been made recently. Either way, according to Abou Mjahed, if the case with Rassi is not resolved before the final payment is made to Eden Rock Real Estate and Tourism, a clause in the transfer contract stipulates that Achour’s Beirut Marina Gate will be legally allowed to settle the case for any amount of money, but Eden Rock Real Estate and Tourism will have to pay.

Works underway

The current hold on construction does not mean a full stoppage of work — excavation began in January, according to a company spokesperson.

This isn’t the first work to be done. Prior to beginning any work on the resort, Achour had a sewage problem. As is the case in several spots along Beirut’s coast, raw sewage used to meet the sea near plot 3689, contaminating the waters off Ramlet al-Baida. The Council for Reconstruction and Development (CDR), which is tasked with building the country’s wastewater collection network, has “for years” been meaning to stop the outflow of excrement into the Mediterranean, but work is slow and costly, Assem Fedawi of the CDR told Executive in September.

Interestingly, in 2013 South for Construction won a contract to build a pumping station to transport the wastewater pouring on to the Ramlet al-Baida beach to a treatment plant further south, according to the company’s website. Abou Mjahed explains that Achour personally stepped in to help speed up the tendering process. “He provided what they needed to make this pumping station happen. I don’t want to say he paid, he provided … You know the bureaucracy of the regulation, the Ministry of Health, the Ministry of Environment, the CDR — which is a state in itself — so to [effect] accord between all the parties, Mr. Achour did this job. He’s investing. He believes in Lebanon,” Abou Mjahed explains.

[pullquote]Prices for units range from $15,000 to $20,000 per square meter[/pullquote]

The vision

According to the current designs, the Eden Rock Resort will comprise a residential tower, a hotel tower, low rise apartments and a hospitality and recreational complex that includes almost 130 chalets. Cabins and a ‘summer marina’ round off the project. In an artist’s rendering of the project, the hotel is depicted at about the same height as the 22 story residential tower.

Prices for units range from $15,000 to $20,000 per square meter, implying yet another surge in what Lebanese developers regard as achievable in marketing to the one percent.

This is the vision Achour is staking out. While he declined to comment for this article, he appears relentlessly undeterred by dysfunctional bureaucracies or lengthy litigation. Yet still, Abou Mjahed — as one would expect from a lawyer — says the letter of Lebanon’s various laws regarding development will be followed religiously. “We cannot afford any violations of the law. We’re taking the risk, putting up the big investment and, most important, our reputation,” he promises.

Correction: A previous version of this article claimed that excavation began late last year. While preparations began late last year, actual excavation began in January according to a spokesperson for Achour Development. Excavation on the site had also been conducted previously.

February 2, 2015 2 comments

Real Estate

The house of culture

by Nabila Rahhal January 30, 2015

written by Nabila Rahhal

(Greg Demarque | Executive)

As in all historic cities across the globe, there are certain architectural structures in Beirut, such as the Egg in downtown or the old Manara in Ain El Mraisseh, that have become landmarks and a major part of the Lebanese collective memory. Even as the city progresses and develops, these buildings should be preserved, in one form or another, as part of our national heritage.

Exhibition in the Pink House

One such landmark, at least according to nearby residents, is the Pink House, situated on a green hill just off Bliss Street and overlooking the Riyadi Club in Manara. This house has long been fascinating for tourists and Lebanese alike who often pose for photos in front of it on their walks along the Corniche.

Recently, the Pink House has been the subject of documentaries and articles discussing its rich history. It was thrust into the media spotlight again in early November with an exhibition that British artist Tom Young organized in it, which ran until the end of December.

Young had done a similar project in 2013, in “Villa Paradiso” a heritage home in Mar Mikhael. The house was being renovated by the Feghali family, who had recently bought it and was wondering what to use it for, when Young met them and suggested it become a cultural space, beginning with his exhibition. Ever since, a number of artistic events have been held in the villa.

The Rose House Exhibition, as Young dubbed his show in the Pink House, was one of the few times in the last decade that this private residence was open to the general public. Hundreds flocked to see the house that had piqued their curiosity. During an interview with Executive in late November, Young estimated that more than 2,000 people visited the exhibition, with about 200 guests on the opening night alone.

[/media-credit] Tom Young, host of the Rose House Exhibition

A brief background

The Pink House, or La Maison Rose as it’s known among the francophone community, is no stranger to cultural activities and events. The ground floor of the house was built by Mohamad el Ardati as his hunting lodge and he added the first and second floors in 1882. The house is actually a three story building, and each level is a separate apartment with no interior connection between them.

Young has researched the house’s history and had dedicated an entire room of his exhibition to this subject. He recounts that half the Ardati family lived in the Pink House until 1959, after which it was rented to notable figures including the American cultural attaché and his family, the Indian ambassador to Lebanon and his family, and the American artist John Ferren who lived in the house until 1964.

The Khazens move in

But it was Selim Khazen’s family who lived there the longest, starting in 1964, and hence had the greatest effect on its development. The Khazen family is one of Lebanon’s aristocratic families and Selim, its patriarch, was a lawyer credited with initiating the development of the Faraya Mzaar ski resort on the land he owned in the area.

[pullquote]Although Fayza kept the first floor of the house in relatively decent condition for her to live in, the ground and second floors were left to decay and the house began to show its age[/pullquote]

It was Sami, Selim’s son and a well known architect and artist in the 1960s, who came across the Pink House and fell in love with it, renting it from the Ardatis. He moved his parents onto the first floor, where the exhibition took place last month, and redesigned the ground floor as his living space and studio, doing such a good job with the design that it was featured in Architectural Digest according to Young. The Khazens lived in the house, which became known as a cultural and artistic hub, and the parties the Khazens held drew the crème de la crème of Lebanese society.

With the onset of the Civil War, the Khazens left the country, save for Margo, Selim’s wife, who stayed — leaving only for a year in 1982 when the Israelis invaded Beirut and the house was badly damaged — and kept the doors open for guests from all over the world, says Young.

After the Civil War, in 1994, Margo became paralyzed so Fayza, her only living offspring (Sami and Hoda, the two other children of Margo and Selim, had passed away) returned from Paris to be with her. Aside from taking care of her mother, Fayza continued promoting the family tradition of cultural activities through establishing her own publishing house, Terres du Liban, which released coffee table books on the Levant and life in Lebanon.

Although Fayza kept the first floor of the house in relatively decent condition for her to live in, the ground and second floors were left to decay and the house began to show its age.

New owners take over

Shortly before Margo passed away in 2011 at the age of 94, the last remaining son of the branch of the Ardati family who owned the house, Adel Ardati, passed away in Germany where he had lived almost all his life. With no one left to inherit the house, the family lawyer sold it to Hisham El Jaroudi, the current president of the Riyadi Club and a prominent architect with many projects across the city.

[pullquote]Fayza was asked to vacate the house by November 2014 in preparation for its new owners[/pullquote]

Fayza was asked to vacate the house by November 2014 in preparation for its new owners and it was during her last months there that she met the artist. Young says that he had been always fascinated by the house and curious about who lived in it. Recalling the day he met Fayza, Young says, “It was after the Villa Paradiso exhibition and I was looking for a similar project as I was sad at leaving that Villa, and missing it, after having invested so much of my heart in it but in the end it’s not mine; maybe I sort of wanted to replace it and I was a bit lost in my direction. Early in April 2014, I was walking down the Corniche with my wife Nour and we looked up and saw some [clothes] hanging on the balcony, so Nour suggested we try and find an entrance and we found the back door and knocked.”

Young paints the Pink House

So began a fateful encounter that led Fayza to invite Young to live in the Pink House and work on paintings depicting the final days of the house, with the idea of preserving its memories and showing its haunting loneliness as its final Khazen tenant prepared to move on. Young’s paintings are of the house itself and surrounding scenes, such as the Ferris wheel and the lighthouse, which are considered part of Manara’s heritage.

Upon learning that the house was bought by the president of the Riyadi Club, which is in close vicinity to the house, Young says he went down and talked to him, asking his permission to open the Pink House to the public for a two month exhibition after Fayza leaves, as well as creative and educational activities, from teaching children art to hosting AUB architecture students for discussions.

Through these two months and such events, Young says he was hoping to show Jaroudi that the house should be preserved as a cultural center. “This is what art can do and this is my concept: that art can reach the highest level of powerful individuals and entice conversation among them and work with them on saving and preserving these heritage places to make sure they stay for the whole city. It should be open for everybody as public spaces are being eradicated at an alarming rate in Beirut and in a divided society, we need cultural spaces where people of all kinds can mix.”

[pullquote]It seems that the Lebanese will not lose their landmark view during their strolls by the sea[/pullquote]

The house remains

Jaroudi says he is intending to renovate and preserve the house. “The house, which is a significant part of our city’s history, is currently in a bad condition. I want to preserve it and restore it to its former glory as a Beirut landmark and part of its heritage. It is my duty towards my city,” says Jaroudi, adding that his initial plan, after the restoration, is to live in it with his family, but that he is also considering having a floor dedicated to cultural activities.

Meanwhile, Young is trying to prepare a team who could help Jaroudi create a cultural center, if he decides to do so. Young himself, who had sold most of the Rose House Exhibition paintings halfway through the exhibition (with prices ranging between $500 and $15,000), plans to take a break before attempting to embark on yet another project in a “key building which everyone knows and is in the city center.”

At a time when heritage homes are being destroyed at a breakneck speed to make room for the more lucrative high rises, it is heartening to know that the Pink House will be spared such a fate. Whether Young gets his wish for the house to be permanently open to the public remains to be seen, but it seems that the Lebanese will not lose their landmark view during their strolls by the sea.

Correction: A previous version of this article erroneously claimed that Young’s work sells for as much as $1,500. The correct figure, according to the artist, is $15,000. Apologies.

January 30, 2015 2 comments

Economics & Policy

No rest for the weary

by Maya Gebeily January 29, 2015

written by Maya Gebeily

After decades of a relatively open border policy with its eastern neighbor, the beginning of 2015 saw Lebanon take unprecedented steps to monitor the entry and residency of Syrian nationals. Spearheaded by the ministries of interior and social affairs, the policies are an attempt to regulate the nearly 1.2 million Syrians already in Lebanon — as well as others seeking entry in the future.

The first of these measures came in the form of new visa requirements for Syrians and went into effect on January 5, 2015. Despite political pushback and concerns by human rights groups, Lebanese authorities insist this new policy is only the beginning.

Neighborly relations

Prior to the conflict, entry for Syrians into Lebanon was easier than for any other foreign nationality. According to the Treaty of Brotherhood and Cooperation, signed in 1991, Lebanon and Syria share “distinctive fraternal ties” and did not require travel visas from each others’ citizens. The lax requirements meant that borders remained relatively open, allowing hundreds of thousands of Syrian laborers to enter Lebanon seasonally for work.

Syrians could enter Lebanon at any border checkpoint using a valid government ID and would be issued a onetime-renewable six month residency for free. At the end of their year in Lebanon, Syrians would have to return to Syria. Palestinian refugees from Syria had to have pre-approval from Lebanon’s government to enter.

[/media-credit] Children in refugee communities are particularly vulnerable to the harsh winter weather

With the onset of the Syrian uprising in 2011, the policy changed. Instead of returning to Syria at the end of their one year stay in Lebanon, Syrians could renew their residency for another six months through General Security, paying $200 per family member over 15 years old. For Palestinians from Syria, the pre-authorization was lifted, and the transit visa they received at the border could be exchanged for a three month residency, also renewable for free until the $200 yearly fee.

Now, Lebanon’s policy has changed once more. On December 31, General Security announced that Syrians entering Lebanon would be issued entry documents based on the proven purpose of their visit. Their stays now fall under eight categories: tourism, study, work, medical treatment, transit to another country, checking on property, visiting an embassy, or being “sponsored” by a Lebanese citizen. Instead of the one-size-fits-all, six month residency they had previously received, the length of stay for each of these categories now varies, and strict documentation is required.

The change was pegged as part of a new, three point policy statement that the Council of Ministers approved in October. To manage the refugee influx, the October statement said, the government would seek to decrease the number of Syrians registered with UNHCR (the refugee agency in Lebanon coordinating relief efforts for Syrians), tighten up security within Lebanese territories and lift the socioeconomic burden on Lebanon.

General Security’s new residency requirements are the first step of this statement’s implementation. “We’re trying to find out who is trying to come in and why — and this is something we have the right to know,” explains General Security press officer General Joseph Obeid.

But the decision has already sparked controversy — some of it based on semantics. Syrian Ambassador to Lebanon Ali Abdul Karim Ali said requiring visas from Syrians violated the bilateral agreements that had kept borders between the two countries open for decades. Speaker of Parliament Nabih Berri and a number of ministers from Hezbollah and the Amal Movement similarly criticized the move.

Timeline of events

General Security, however, insists that the documents it is issuing to Syrians upon entry are not “visas” and therefore do not violate these treaties. “It’s entry documentation — it’s not a visa. It’s not like an Egyptian coming into Lebanon,” Obeid insists. Although procedures for Syrians entering Lebanon do remain distinct from those for other foreigners, the strict categories, required documentation and limited stay are exactly what constitute visas in other countries.

And despite claims in the Lebanese daily Al-Akhbar that the visa policy will soon be retracted, Obeid says the measure will continue to steamroll forward. “There will be no change in this policy. We’re moving ahead with it as planned,” he assures.

Beyond this disagreement, Syrians and human rights organizations are worried about what General Security’s new border policy might mean for those trying to flee Lebanon’s war torn neighbor. Noticeably absent from the eight category statement is a provision for refugees — Syrians trying to enter Lebanon after being displaced by violence. According to General Security and to Khalil Gebara, advisor to Minister of Interior Nouhad Machnouk, these “humanitarian entries” will be granted on a case by case basis.

Both Amnesty International and Human Rights Watch expressed concern that the measures would limit access to safety for thousands of Syrians fleeing conflict at home. At the time of writing, UNHCR had yet to issue a statement. “We’re still studying it. We’ll let you know more when we get it,” says spokesperson Ron Redmond.

[pullquote]Even prior to General Security’s new measures, the refugee influx into Lebanon had slowed dramatically[/pullquote]

Border policy

Even prior to General Security’s new measures, the refugee influx into Lebanon had slowed dramatically. The number of refugees registering with UNHCR saw a drastic drop in the last months of 2014 — in October and November combined, only 29,477 Syrians registered with the agency, compared with 31,158 in September alone. Even that month produced relatively low numbers compared to the rest of the year — until August, at least 42,000 refugees were registering every month.

Part of this drop is likely due to the fact that the active battlefronts in Syria’s war have shifted to the country’s north and east. Indeed, months of clashes in Syria’s western Qalamoun region in early 2014 saw the most concentrated refugee flows into Lebanon to date. As battles shift away from Syria’s west and south into the north, refugee flows into Turkey continue to increase, while those into Lebanon and Jordan have markedly dropped.

But even many of those Syrians who made it to the Syrian–Lebanese border at the end of 2014 were having difficulty entering the country. Aid organizations including Human Rights Watch and the Norwegian Refugee Council say that toughening border controls saw “most” Syrians being denied entry. For Palestinian refugees from Syria, entry was nearly impossible — very few exceptional cases were allowed access.

Although the new policy specifies entry requirements for non-refugee Syrians, the criteria for those entering Lebanon as refugees are still being developed. “How do we know who’s really a refugee? They could be lying to us,” says General Security’s Obeid. He adds that UNHCR would determine refugee status on a case by case basis, but dodges questions on the specific criteria that would be used to make such a determination.

Gebara has worked closely on the government’s new policy. He says the Ministry of Social Affairs might have an active presence at Lebanon’s border crossings and would be giving approval for extreme humanitarian cases in line with the Council of Ministers’ October decision. When asked what kind of criteria this would entail, Gebara hinted at two potential standards: place of residence in Syria and number of people. “If one man comes from the center of Damascus and says he’s a refugee, it won’t work,” he tells Executive. “When there’s fighting in an area, the whole village shows up. The last thing that would happen would be that there would be a mass influx along the border that would get denied entry.”

Unfortunately, human rights agencies say General Security doesn’t have a great record of identifying vulnerable cases. “Even after the [Council of Ministers’] October decision, General Security officers were not inquiring about humanitarian need,” insists Lama Fakih, researcher at Human Rights Watch’s Beirut office. “The process of entry was arbitrary and discriminatory.”

[/media-credit] Most Syrians live in dwellings ill equipped to deal with Lebanon’s harsh winter

According to Human Rights Watch and Lebanese rights NGO LIFE, instead of taking humanitarian factors into consideration, General Security was allowing entry based on perceived affluence, religion, and origin in Syria. Nabil Halabi, director of LIFE, says that “social discrimination” saw those who appeared to be from a higher social class — traveling in private cars, well dressed, often from the capital — waved through Lebanon’s checkpoints. Nadim Houry, deputy director of HRW’s Middle East and North Africa division, says Syrians with traditionally Christian names received the same treatment. Meanwhile, those coming from Raqqa or Deir Ezzor — eastern provinces in Syria which are now Islamic State strongholds — were facing significant difficulty.

Houry adds that this practice is contrary to Lebanon’s international obligation towards those seeking safety. “If a Syrian businessman from Damascus wants to come spend a weekend in Beirut, and the Lebanese government says no, then we’re not going to complain,” says Houry. “They’ve actually done the opposite — they’re happy with those with money to come spend the weekend, but they don’t want the others to come in.”

General Security’s Obeid emphatically rejected these claims. “Nothing about this is true. Everyone is on the same level with us,” he tells Executive. “If the government says let people in, we do.”

[pullquote]Holding legal status in Lebanon isn’t just a matter of convenience; it’s central to almost all aspects of refugee life[/pullquote]

“It’s impacting everything else”

Holding legal status in Lebanon isn’t just a matter of convenience; it’s central to almost all aspects of refugee life. Unfortunately, rapidly changing policies, inconsistent implementation, and inadequate dissemination of information mean that many refugees in Lebanon are living here illegally. In September, Lebanon’s government gave refugees who had limited legal status as of August 21, 2014 the opportunity to regularize their stay with General Security for free. Thousands who had either entered illegally or whose legal stay had expired were able to become legal residents without paying the LBP 950,000 ($630) regularization fee.

Still, hundreds of thousands of Syrian refugees are not living in Lebanon legally. UNHCR declined to provide Executive with numbers on how many of the 1.2 million registered refugees in Lebanon fall within this category. However, the agency’s planning figures in early 2014 anticipated that over 800,000 Syrian refugees — two thirds of those registered with UNHCR — would be living with limited legal status by the end of that year. With the government’s stricter policies on entry and residency, this number may now be even higher.

Lack of legal stay severely restricts refugees’ ability to move around Lebanon. In a detailed March report on the topic, the Norwegian Refugee Council interviewed 1,256 Syrians, over half of whom were in Lebanon illegally. NRC noted that over 73 percent of respondents reported curtailed freedom of movement as the biggest consequence of their illegal stay in Lebanon. Fear of harassment by security forces at checkpoints, local municipality police, and even regular Lebanese citizens has kept many Syrians sedentary. Refugees with limited legal status who are arrested by security forces are usually given an order for departure back to Syria, but are rarely forcibly deported.

Nonetheless, this lack of mobility has a major effect on refugees’ access to resources. For some, their limited legal status has prevented them from registering with UNHCR. Several refugees who had crossed over illegally from Syria’s Qalamoun region told Executive they felt “trapped.” Too afraid to cross Lebanese Army checkpoints, they could not register at the UNHCR center in Zahle.

According to the NRC report, illegal stay has also pushed families towards increased child labor. Male heads of households without legal stay are often too afraid to leave their homes to seek work for fear of arrest. Since children are less likely to be stopped by security forces and asked for paperwork, fathers often send their children to work or beg for money instead of going to school. NRC says this practice exposes children to potential abuse and exploitation. Furthermore, Syrians without legal stay cannot access Lebanon’s healthcare system, and crucially cannot register the birth of their children with the Lebanese authorities.

“It creates anxiety, uncertainty. It prevents them from organizing their lives … It’s impacting everything else,” says HRW’s Houry.

Follow the money?

At the time of writing, the Lebanese government and relevant security agencies had yet to issue decisions on the renewal process for the new visas that Syrians will hold. In their reaction to the decision, Amnesty International announced that refugees who had legal status prior to January 5, 2015, would continue paying the $200 per adult renewal fee as usual, but this has not been confirmed by the Ministry of Interior or General Security.

For many refugees, the renewal process presented a significant financial burden. NRC’s report notes that refugee families typically pay $100 per month to rent out a small bedroom in an unfinished building. Securing food costs more than $200 per month, and fuel comes at a cost of $100 per month. Given that the average Syrian refugee family earns $250 per month, according to NRC, the renewal fee is one of the first expenses that families forego when money gets tight.

Indeed, the NRC’s March report notes that almost one third of those interviewed stated they could not renew their stay, with 85 percent of these cases saying the cost had prevented them from being able to do so. Others reported that poor treatment and a fear of General Security offices had caused them to skip renewals.

[/media-credit] Birth rates among Syrian refugees are significantly higher than neighboring Lebanese populations

Despite the pervasive negative effect that limited legal status has had on Lebanon’s refugees, international aid groups have declined to cover the cost of visa renewal. In 2012, when refugees were nearing their first one year stay in Lebanon and would have to pay the $200 for the first time, aid agencies agreed that they would not cover the yearly fee as part of their support. Now, only one or two NGOs provide the $200 for very extreme cases. “It would be a huge fee. It would potentially contradict our advocacy towards waiving that fee,” says Dalia Aranki, advisor to the NRC’s Information, Counseling, and Legal Assistance Program. A mere 100,000 renewals — less than 20 percent of the refugee population over 15 — would cost $20 million.

Keeping refugees, and those helping them, informed

Refugee and aid agencies alike have said it is difficult to keep up with the government’s changing policies. Some organizations, like NRC, have two tiers of information-gathering: the official government statements about its policies, and the observed and reported practices of security forces. They aren’t always consistent.

“If you go to General Security offices, they’ll tell you your kids don’t need to be registered. But then you take them to the border and they tell you you’re violating Lebanese law,” complains Leila, a Syrian refugee living in the Burj al-Barajneh camp in southwest Beirut.

NRC’s Aranki says she’s seen the same inconsistency. “You can see how complicated this is. There have been so many changes, and how this is implemented is not written down somewhere in one place,” she explains. Practices differ in areas with different local administrations, and NRC has even had to step in to retrain local authorities who were incorrectly registering Syrian refugee births.

[pullquote]Making sure refugees are aware of the legal procedures is no easy task[/pullquote]

Making sure refugees are aware of the legal procedures is no easy task, either. In countries like Jordan or Turkey, where large numbers of the refugee population are concentrated in government controlled camps, dissemination of information can be done much more easily. In Lebanon, refugees live in informal tented settlements, rented apartments, and unfinished buildings — and they don’t always want to be accounted for. “Over the last year, where there has been more tension between the Lebanese and refugees, people have not wanted to make themselves known very much,” Aranki added.

A developing policy

Week by week, more details are coming to light about the Ministries of Interior and Social Affairs’ revamped refugee policy. Social Affairs Minister Rachid Derbas has explained that refugees already in Lebanon and registered with UNHCR would not be forced to regularize their stay as part of the new eight category visa. “However, if the refugee decides to go back to Syria and then return to Lebanon, they will have to comply with the new measures and justify the reason behind their return,” Derbas told Lebanon’s As-Safir.

Simultaneously, however, Lebanon’s government has been working with UNHCR to deregister Syrians from the refugee list. From June 2014 until October, 68,000 Syrians were removed from UNHCR’s list for crossing back into Syria frequently or failing to pick up aid packages. The Ministry of Interior’s Gebara says that these deregistrations go hand in hand with tighter border control.

“Until we can audit every single refugee that’s in Lebanon, let the number of new, registering refugees be lower than the number of those being deregistered,” he tells Executive. “So negative growth.”

Both Gebara and General Security’s Obeid promised additional measures in the coming weeks. But several challenges remain, not least the growing political opposition to the new regulations and the lack of clear criteria for “extreme humanitarian” entry cases.

For refugees and the aid organizations facing the renewed test of understanding and accurately relaying this policy, the period of tumult isn’t over. “Expect the policy to keep changing based on the security and political situation in Syria,” Gebara says.

January 29, 2015 0 comments

The Buzz

Cleisthenes, meet Ares

by Executive Staff January 28, 2015

written by Executive Staff

February marks the 10th anniversary of the Second Intifada’s conclusion. Since then, Israel has held three elections for its parliament, the Knesset, and been involved in at least four major military offenses — facts that some suggest are related. With today’s escalation along Lebanon’s southern border and Israeli elections due in March, we decided to see if the two might be related. Of course, with so few data points, we can’t meaningfully measure correlation, but we can look at sequencing. Indeed, Israel conducted major operations 1–3 months before two of its three post-Intifada elections, but it also launched offensives that don’t quite fit the bill: both the July 2006 war with Lebanon and last year’s devastating war on Gaza didn’t directly precede parliamentary elections.

So the result? It likely depends on your point of view. Decide for yourself using our interactive timeline:

January 28, 2015 0 comments

Leaders

Take the lead

by Executive Editors January 27, 2015

written by Executive Editors

It’s too soon to say whether Lebanon’s potential oil and gas resources are truly a game changer or not. But if the resources might significantly alter the trajectory of the country — its economy, its businesses, its people and their way of life — then Lebanese civil society must vigorously impress values of transparency and accountability upon the management of this sector. One important component of this is the Extractive Industries Transparency Initiative (EITI, see “Not just a pipe dream“); civil society must demand that the government commit to implementing its standards.

While instilling values of transparency and accountability can be realized in part through the EITI, differing opinions — for example, the timing of its application and the flexibility of its requirements — found within Lebanon’s civil society must first be calibrated. While some believe the EITI can be useful now, even before petroleum contracts are signed, others argue this could be dangerous: if EITI standards were implemented now but then stalled, citizens might further lose confidence in the government. There is also a suggestion that EITI requirements might be too radical to apply in the Lebanese context. These differences must be ironed out if civil society is ever to make a concerted push for EITI implementation specifically, and greater transparency generally. To be a true — that is, influential — partner with the government on the EITI, civil society must first articulate a common stance.

The EITI embraces transparency by building trust among stakeholders: government, companies and civil society. Fostering this trust is key to the good governance of Lebanon’s potential resources, and the EITI encourages this spirit by helping shed light on the farthest and darkest corners of this notoriously shady industry. The initiative does this by reinforcing access to information, wherein dialogue among stakeholders determines the pertinent information to include in an EITI report — informing public debate and enabling citizens to better grasp how the sector is managed.

Ideally, a government would already collect much of the information that the EITI requires, even if it is spread across several databases; the report compiles hard to find information into one easy to read publication. In certain instances, Lebanon’s government is already collecting information that would satisfy EITI specifications, but in many cases it may not be collecting any relevant information — as of today, we can’t be sure. Civil society should work with the government so that when EITI standards are implemented, the compiling of information can be a smooth and painless transition. Furthermore, it should put in place a culture for the straightforward compilation of information for public dissemination through the EITI report, so that unnecessary, parallel disclosure systems are not constructed.

Making information easily accessible through EITI reporting holds value for all stakeholders. It improves the investment climate environment by indicating government commitment to transparency; it helps mitigate reputational risk for companies operating under opaque governance; and it enables access to public information, increasing government accountability to citizens.

Even though Lebanon’s first licensing round for oil and gas exploration has stalled, peripheral avenues can be traversed in moving this sector forward. Civil society must begin agreeing on EITI standards and articulating the merits the initiative holds for everyone, thereby coercing the government to declare its intention to implement.

What the government needs from civil society is a suitable partner in the governance of this sector — both contributing to sound governance, but also pinpointing areas of deficiency. The government should announce its intention to implement EITI standards, but it is up to civil society to push them toward the microphone.

January 27, 2015 0 comments

Real estate

A walk in the park

by Executive Editors January 27, 2015

written by Executive Editors

Beirut Municipality is upgrading several of the city’s aging and often trash strewn parks. Last year, René Moawad Garden — more commonly known as Sanayeh Garden after the area in which it is located — opened after being closed for two years during its renovation. The $2.5 million project was paid for by the Azadea Foundation, an arm of the fashion and retail focused group of the same name. Part of the city’s plan for renovating parks is bringing in private sector investment to both save the city money and avoid a tendering process that would see the lowest bidder win. Late last year, Beirut Mayor Bilal Hamad explained that choosing the lowest bid does not ensure the highest quality for the park’s redesign.

The only other renovated park to open is the Hawd el Wileyeh park, more commonly known as Karm al-Arees or the Burj Abi Haidar park. Among the other parks with facelifts scheduled are Sioufi Garden, Mufti Hassan Khaled Garden, St Nicolas Garden and Horsh Beirut. The first three, according to a book the city printed in 2012, were slated to have design plans finished in 2013. Hamad told Executive in December 2014 that Horsh Beirut has a new master plan and will hopefully be open in 2015. Executive visited each, and saw no signs of imminent redevelopment work.

January 27, 2015 0 comments