Society

Beirut, the artistic capital

by Thomas Schellen
written by Thomas Schellen

Beirut’s burgeoning cityscape of cultural and artistic endeavors may have taken a commercial downturn in 2014 compared to previous years. This, however, did not deter the city’s community of gallerists, curators and exhibition sponsors from staging highly ambitious events. Among the many impressive efforts debuting in 2014 were two openings in November with planned durations into 2015: an exposition of works by Italian artist Michelangelo Pistoletto at Beirut Exhibition Center (BEC) in the downtown waterfront district and a show by British artist and art historian John Carswell at the AUB Art Galleries and Collections.

The Carswell exhibition is a clear contrarian accent in the fine lure that Lebanon has long exercised over European cultural and artistic minds. According to AUB Art Galleries curator Octavian Esanu, while earlier generations of European artists, captivated by the Mediterranean light, emphasized color in their depictions of Lebanon, Carswell renounced it. The exhibited works were created in Beirut in the 1960s but, according to Esanu, are still awaiting broader discussions on how monochrome modernist art emerged in the Middle East at around the same time as in the, presumably more progressive, American and European art scenes.

As Esanu tells Executive in his office at AUB, Carswell’s stay in Beirut came during a vibrant period in the formative years of the university’s Fine Arts Department. Like all too many interactions between artists and the city, however, the Briton’s residence in Beirut and role as teacher at AUB came to an end in 1977 because of the Civil War.

Other examples of the country’s inspirational sway over foreign and local painters will be accessible to the public starting from spring, as the country’s venerated Sursock Museum will host a retrospective of different artists’ perceptions of Lebanon from the 1860s until the mid 20th century, according to Tarek Mitri, chairman of the museum’s board of directors.

A no less emphatic, but otherwise different, message accompanies the immersion into Pistoletto offered at BEC, thanks to an initiative by Tanit, an art gallery with outlets in Munich and Beirut. Pistoletto’s latest endeavors feature projects anchored in Cittadelarte, a building complex and foundation in his home region of Biella, perhaps known to some male fashion addicts as the original home of couturier Ermenegildo Zegna.

Cittadelarte (city of art) is linked to installations such as “Terzo Paradiso”, in which the artist seeks the convergence of man and nature in a third paradisiacal state of ‘us’, and “Love Difference”, a project that aims to bring people around the Mediterranean together in peaceful coexistence, explains Tanit’s proprietor, Naila Kettaneh-Kunigk. “We thought it was just the right thing to bring [Pistoletto’s work] here to this chaotic [environment] we are living in. It is important for us and also for the country to have exhibitions which open discussions and show that this [business of art] is not just about money,” Kettaneh-Kunigk says. 

She adds that not all presentations of European artists in her portfolio succeeded commercially when she brought them to her gallery in the hip Mar Mikhael quarter of Beirut; she attributes this, with some zeal in her voice, to shows which confronted the local clientele with “something that they were not used to.” But such exhibitions, often with low financial viability, constitute “the part of what we do that is educational,” she tells Executive in a conversation under Japanese bamboo in the garden that abuts the BEC, all the while waiting for the exhibits to arrive.

Labors of passion or commerce?

When the BEC welcomed the artsy and social connoisseurs to the opening on the following evening, November 11, some in the Tanit team of gallerists who had set up the show looked to be almost sleepwalking through the ensemble of 38 works representing Pistoletto’s oeuvre, spanning more than four decades.

This was for no other reason than the passionate labor of installing the show in the span of only 25 hours.

After the trucks delivered the precious pieces on the late afternoon of November 10, the gallerists toiled like galley slaves through the night and most of the following day to set up, among others, the mirror pieces, the “Venus of the Rags” and the circular installation offering encounters with multireligious as well as laic spirituality that formed the show’s experiential axes.

[pullquote]The drift of the local art scene into a state where art is becoming another commercial commodity is upsetting for many[/pullquote]

But beyond such investments of personal labor that escape conventional quantification via calculations of man hours, and besides the educational value that the Tanit team attributes to bringing an important European collection to Beirut, money certainly comes into the equation. According to Kettaneh-Kunigk, it cost around $150,000 to bring Pistoletto’s work to Beirut, and also entailed some “financial acrobatics” and last minute raising of contributions from donors.

As she describes it, her gallery has no expectation of financial returns from selling any of the artist’s pieces during the show because most are owned by Cittadelarte, and only a few were contributed by another gallery and could be sold. But as far as Kettaneh-Kunigk’s financial outlays, the exhibition constitutes a pure reputational investment. “The show is prestige for us, [presenting to] the Lebanese a direction of art they don’t know,” she confesses.

This puts the finger on a sore point by asking where the development of Beirut as an art hub is headed. The pecuniary issue is a definite point of debate for Saleh Barakat of gallery Agial, who adamantly argues that “art is an expression for change” and not a receptor or container of commercial value.

He is appalled by the drift of the art market, internationally and in Beirut, into a state whereby “art has become more accepted as an asset class.” That is unfortunate, he says, “as art has come to feature on the radar of financiers and bankers. I believe this could maybe be beneficial to art on one side but in the long run it is very harmful to the art scene in the sense that it is going to the wrong hands,” he tells Executive.

AUB curator Esanu confirms that the drift of the local art scene into a state where art is becoming another commercial commodity is upsetting for many, but opines that this trend is not all encompassing. “We here at AUB are protected from this world because as a university our main role is not to sell art, as a lot of institutions in Beirut and everywhere [else] do. Our role is to produce knowledge and that is what we emphasize in all our projects. We help students understand what art’s role in society is, raising questions and so on,” he says.

The natives are rightly restless 

The local debate over the perennial tension between art and commerce may be timely and called for, as the previously perhaps sleepy Beirut art market has been rudely shaken by several disruptions over the course of the past four to eight years.

As the stakeholders tell Executive, the increase in the number of art galleries, events — most notably the Beirut Art Fair — and institutions, such as the BEC and the Beirut Art Center, over the period has been prominent and positively significant. The downside of this, however, is a market that has also come to include a larger presence of galleries focused on sheer commercialism, and the monetary expressions of art transactions have been a lamentable preoccupation of media and public attention, say gallerists who describe themselves as the market’s minority by being more serious about art than about cash.

An additional magnet for curiosity in the past two years, and one quite prone to sensationalist spins on the art scene, has been the various tales of refuge-seeking Syrian artists who understandably flocked to Beirut in search for shelter, livelihood and room to produce their works.

This attracted a wave of international attention, just as the foreign interest in the Lebanese art scene was initially sparked in the 1990s by themes related to the experience of the Lebanese conflict and by the ways in which artists here were reviewing and archiving the war years, coping and coming to terms with those horrors.

Creative expressions of dealing with war and the political calamities in Lebanon and Syria were still on the forefront of two prominent galleries in the wealthy downtown of Beirut in November of 2014, as the Mark Hachem Gallery featured an exhibition by established Lebanese artist Chaouki Chamoun under the title “Peace in Waiting”, while nearby Ayyam presented a project named “Postponed Democracy” by locally based Syrian artist Abdul Karim Majdal Al-Beik. “Postponed Democracy” was the inaugural show at a space that the gallery had partitioned under the label Ayyam Projects to highlight Middle Eastern artists without the expectation of commercial return that is associated with the main Ayyam Gallery.

"Venus of the rags" by Michaelangelo Pistoletto

[/media-credit] “Venus of the rags” by Michaelangelo Pistoletto

However, as several people that Executive talked to in the art scene see it, the market has come to have “too many Syrians” and the fascination with them is fading, meaning that local gallerists are more interested in discovering new Lebanese talent and drawing attention to art with more durable impact and appreciation instead of focusing on work that commands fleeting attention.

On top of all these non-economic variables, the business environment is not conducive to the growth of galleries, confirms Moussa Hachem, who manages between 12 and 24 shows per year at Mark Hachem’s Beirut gallery. The number of clients was growing exceptionally in the first years after the gallery opened in mid 2010, but has stabilized since last year, with many clients leaving the city or simply not buying art because of “what is happening,” Hachem says. He points to a centerpiece painting in his Chaouki Chamoun exhibition and says, with a somewhat resigned laugh, “This painting is for $90,000 but I don’t have a buyer.”

As Kettaneh-Kunigk says, the number of foreign visitors has also waned at Tanit, as people have stayed away from Lebanon.

The number of galleries in Beirut is nonetheless still expanding, confirm both gallerists. Agial’s Barakat, whose gallery has been in operation since 1991, also expects the Lebanese art market to continue to grow further because of increasing demand for art from the wealthy, and because of the hype that attracts new investor generations to art. “It is clear that Beirut, in three to five years, will have more institutions than now because people are becoming more aware of this,” he says.

Flux in all, all in flux

All gallerists and art experts that Executive spoke to are in opposition to the growing commercialization of art. Barakat, most vociferous about the evils he perceives in the circus of investors and the moneyed class, says, “Bankers, who are now involved in art, don’t care about the artistic nature of the piece, they care about how much money it will make for them.”

When adding the views of real-life bankers to the discussion, such generalization may be simplistic, however. Asked about his approach to buying art, Bank Audi’s Freddie Baz says he does not know the monetary value of the pieces that he bought over the years and would have to look up receipts to see how much he invested in a standing Buddha that he owns.

He adds spontaneously, “But if you come to my house today and see the beautiful standing Buddha, I can tell you about how much I have been driven into thoughts [by this piece] … and I have a sense of that. This is what is fulfilling for me and this is why bankers are often involved in collections — because banking requires a lot of creativity, too. The common denominator between art and finance in my opinion is creativity. You cannot be an art collector if you are not creative.”

For Marc Mouarkech, who manages Kettaneh-Kunigk’s Tanit Gallery in Beirut, it is all cyclical. “Regarding the future of art, I think it’s a cycle that goes round and round. Now we are going into the commercial cycle, which is what the market wants and what the media led to by their coverage that made people see art as investment. But people will soon have enough of the commercial side and go into something more deep, controversial and interesting. And [from there we will be] going back to the commercial,” he says.

[pullquote]”All artists say they will bring revolution, but this is a joke, obviously. Artists nowadays need to find a new way to be critical”[/pullquote]

It is definitely a delicious exercise to muse about the eternal, ironic interplay between artists’ and art stakeholders’ repulsions of commerce and their embraces of the market when standing these days in the BEC in front of the “Venus of the Rags”. The Venus was created as an emblematic piece of antiestablishment uproar in the 1960s and is recognized as a leading example of Arte Povera — but pieces representing this ‘poor art’ movement are certainly on the market, and are by no means cheap.

Equally, and in the very period of the search for new meanings in the latter years of the 20th century, leading protagonists of art as the essence of social change, such as German Fluxus pioneer Joseph Beuys, were among the living artists whose works were already commanding top prices in the international art market in the 1970s and 1980s.

Emphasizing how art cannot really criticize anything when it has itself become an enterprise, AUB’s Esanu compares the situation of artists in Lebanon today to that of post-Soviet countries after 1989. He explains, “All artists say they will bring revolution, but this is a joke, obviously. Artists nowadays need to find a new way to be critical. How to do that I don’t know, but maybe someone will create a way.”

While its art market is growing and investments of passion are on the minds and books of an increasing number of wealthy residents, Lebanon is now part of this fundamental debate and dialog between artistic and commercial assets and values. The most interesting — and certainly utopian — possibility would be if an impressive new perspective on the issue were to emerge from Beirut.

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Society

Creativity in the air

by Thomas Schellen
written by Thomas Schellen

What makes for the most deplorable shortfall in all other sectors of the Lebanese economy — the infuriating lack of data — fully applies to the exercise of appraising Beirut as an artistic hub and art market. Thankfully so.

Measuring art is like selling air. In the sense that, if you live in a city where the air is so bad you have to pay for oxygen, a fundamental quality of being is not available to you as it should be.

The presence of art as a critical outcry and an asset class has increased in Lebanon over the past few years. Commercial galleries have sprouted in the ritzy parts of Beirut and are fighting for success in the tough economy; meanwhile, new street art has been permeating public spaces. Each of these two approaches clearly has its fan base. Yet each apparently attracts a minority. Gallerists and cultural establishment leaders estimate the total headcount of culture buffs in the Lebanese capital to be around 5,000.

With corporate sponsorship of art exhibitions and galleries ‘discovering’ young artists they can profit from — not to mention the portfolio allocations for art that private bankers and wealth managers advise — it is undeniable that the equation of Kunst = Kapital (art = capital) has become infinitely more commercial than intended.

But let’s not ignore the esthetic upsides. A masterpiece in the collection of a leading Lebanese bank, a 16th century portrait of Frederick the Wise by Renaissance painter Lucas Cranach the Elder, exists only because the rich provincial ruler hired the artist for his court. And the fantastic tapestries designed by the top gun artist of the High Renaissance, Raphael, were commissioned by the papal clientele that paid for the Raphael Cartoons.

The historic interaction between artist and sponsor or client makes for an endless narrative. The contemporary form of this relation in the art market entails not only benefits for — living and often young — artists and gallerists, but also for a whole auxiliary industry from specially skilled transport enterprises to appraisers and insurers.

On the next level up, where the economic angles converge into social capital and the transformational power of art is put to the test of reality, art is as indispensible as air for any society. At least that is the credo of thinkers and artistic creators like the Italian Michelangelo Pistoletto (see story page 204) whose 20 year young manifesto on the role of art includes the sentence “Art is the primary expression of human creativity, thus the constant reference for every structural, technical, economic, and behavioral activity of society.”

One can equally say that the chaotic, contradictory mosaic of talents and commerce and savoir vivre that is Beirut can best be viewed, and perhaps even managed, not as an organized assembly of dwellings and economic ventures, but as a Gesamtkunstwerk.

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Business

A bumpy ride

by Nabila Rahhal
written by Nabila Rahhal

Despite a rocky start, and a few ups and downs early in the summer season, 2014 is shaping up to be a better year than feared by many in the Lebanese hotel industry. With the number of tourists up by 22.6 percent from 2013 in the third quarter of the year, according to figures from the Ministry of Tourism, hoteliers in Lebanon finally had a reason to breathe a small sigh of relief — albeit not a deep one, as operating in Lebanon remains unstable at best and contingent on the security situation in the country.

A sluggish start 

Late in April 2014, and ahead of the summer season, Executive sat with Joumana Dammous Salame, managing director of Hospitality Services, which organizes HORECA, among other hospitality related exhibitions. She conveyed the distress that Lebanon’s hospitality sector — and specifically hotels — has been facing for the past two years, with many hotels operating at half their capacity and some considering closure.

[pullquote]Hoteliers braced themselves for another tough year and put on their creative thinking caps to come up with coping strategies[/pullquote]

The year was indeed off to a bad start, with an unstable internal security situation caused by the bombings in the Dahieh area negatively affecting tourism and causing hotel occupancy rates across the city to drop. Le Gray for example reached a 40 percent occupancy, which they considered a “disaster.”

NGOs and the media

Faced with such conditions, hoteliers braced themselves for another tough year and put on their creative thinking caps to come up with coping strategies to ride out the storm.

Members of the international media and NGOs who were in Lebanon to cover regional political developments became much sought after hotel guests. “One of our strategies in times of crisis was that we targeted the biggest segment of travelers to Lebanon, which was the media people who were here to report on and cover the crisis. We had some TV stations doing live broadcasts from Le Gray for three months,” said Hilal Saade, director of sales for the hotel.

Some hotels have to double their efforts to attract tourists in uncertain times like these

[/media-credit] Some hotels have to double their efforts to attract tourists in uncertain times like these

Indeed, boutique hotels in Beirut also boasted of hosting foreign journalists for extended periods, with Marie-Hélène Moawad of Villa Clara explaining how such guests not only benefitted from good rates but also got to experience the “artistic and cultural side” of Beirut during their work stay.

NGO employees, with their limited per diem stipends, filled a lot of Beirut’s three and four star hotels before sometimes moving to apartments, depending on their length of stay. “We get foreigners from NGOs who stay a month or maximum three, and we offer them long term stay rates. But they either finish their work in Lebanon or rent an apartment because, by then, they need to feel at home,” explained Hisham Razzouk, the manager on duty at the Marble Tower Hotel in Hamra.

Food & Beverage venues in hotels

Another coping strategy adopted by hotels in 2013, which continued in 2014, was to rely heavily on their food and beverage venues to compensate for the decrease in room yields. Le Gray’s Saade explained that normally in the hotel industry, rooms bring in more money than events because the cost of rooms is negligible when compared to food for events, which can reach almost 40 percent of the price.

Still, hotels with large reception halls, such as the Phoenicia — which often has two big functions running simultaneously — can count on their food and beverage revenues to compensate for low occupancy rates. 

A better summer

As the internal situation began to stabilize, and summer rolled in, the occupancy in Beirut’s hotels improved with Le Gray boasting 90 percent occupancy in August, beginning with Eid El Fitr. 

Benefiting from the Ministry of Tourism’s ‘Live Love Lebanon’ campaign, which developed packages aimed at encouraging rural tourism, were guesthouses and boutique hotels in Lebanon’s villages.

As more Lebanese — and especially Lebanese expats — were exposed to their country’s picturesque landscapes through the ministry’s campaign, places such as La Maison de la Forêt, an ecotourism hotel in the forests of Jezzine, boasted of an occupancy rate of 80 percent during weekends — 70 percent of whom were Lebanese — with room rates at around $250.

[pullquote]The trend now is for tourists to wait until the last possible minute before booking their trip to Lebanon[/pullquote]

Cautious optimism 

However, tourists’ confidence in Lebanon remains low, and Saade from Le Grey explained that while previously trips to Beirut were planned months ahead of time to benefit from lower rates, the trend now is for tourists to wait until the last possible minute before booking their trip to Lebanon in order to be sure, as much as possible, of the security situation. “If you ask me in November about the occupancy for Christmas, I would tell you that it is currently negligible but that does not mean it will stay that way. We might be full by then, but that will not show until at least 10 days before the holiday season,” Saade elaborated.

The length of tourists’ stays has also changed and, according to the hotels Executive interviewed, while tourists usually stay for an entire week during the Eid holidays, this year most were satisfied with only a long weekend in Beirut.

Finally, with the continuation of the travel ban imposed on the citizens of some Gulf states, the nationality profiles of tourists to Lebanon are changing. While Saade said they had a good number of Kuwaitis in Le Gray this summer, most of the tourists in the city were Europeans who are working in the Gulf and prefer coming to Lebanon for short vacations or long weekends instead of going home.

As 2014 draws to a close, hotels in Beirut are abuzz with end of year business travelers and events such as product launchings and corporate meetings. But hoteliers in Lebanon are accustomed to expecting the worst, and not wanting to get their hopes up, are going about business as usual.

“Before, we were turning people away because we were full, but in times like these, we have to double our efforts. We need to maintain our relations with our clients, even when we know they don’t have business, so that they don’t go to other hotels when times are good,” said Saade.

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Business

A break in the clouds

by Nabila Rahhal & Thomas Schellen
written by Nabila Rahhal & Thomas Schellen

Executive sat with the Minister of Tourism Michel Pharaon to discuss ‘Live Love Lebanon’, the latest campaign to attract foreigners and Lebanese expats to the country, as well as the ministry’s views on the tourism season this past summer and its plans for 2015.

 

What was the aim of the ‘Live Love Lebanon’ campaign? And how would you assess its success, now that the summer tourism season has ended?

The campaign had [several] objectives, the first of which was to revive and revitalize tourism in Lebanon after three years of deterioration on the political, economic, touristic and security levels, which saw a drop of more than 40 percent in tourism and created a real mood of depression in the country. 

When I came to the ministry, I knew that there was an agreement for security. When I arrived, I saw a real depression in the tourism sector and it was important to revitalize it through optimism regarding security … I was very optimistic concerning internal security. This proved to be true, because almost immediately after the formation of the government [in February 2014], the problems in Tripoli and the Bekaa were resolved. 

[pullquote]We came up with the ‘Live Love Lebanon’ campaign to add dynamism to the sector[/pullquote]

We came up with the ‘Live Love Lebanon’ campaign to add dynamism to the sector. We focused on social media and developed a website to reach younger generations, who were looking to have their energies [towards promoting Lebanon] boosted by an official body. We also created travel packages for less than $1,000 per week to promote rural tourism. 

This was all under one objective for us because when you aim to have a package at less than $1,000, you have to look at regions outside of Beirut. Also, to get Middle East Airlines on board with us, we had to have packages for no less than one week. We aimed to reach the young community and to convince them to come to Beirut for the summer … and also to show them that something new is happening in Lebanon. 

I think the campaign was a success and it was very well received when we promoted it in Dubai at the beginning of May. Of course, it helped that there was [an end] to what we call the Arab boycott [Gulf states banning their nationals from traveling to Lebanon], which happened under the last government.

 

Was the touristic summer season in Lebanon successful as a whole?

In proportion to the shock of the terrorist acts in June and the problems we had in Arsal at the beginning of August, we can say it was relatively successful because Lebanese expats came and activity at Beirut airport was very high in August, with over 30,000 people coming and going on a daily basis. 

‘Live Love Lebanon’ [was marketed] in Arabic [under the name] Lebanon of Life, and this message was a very powerful tool during the summer, saying that, yes, there are political problems and forces of terror in the region, but at the same time there is another battle to keep life, culture, art and activity going, and not to abandon oneself to pessimism. We had over 60 festivals arranged across Lebanon this summer. 

 

How would you compare the mood of people in the industry and the ministry today versus six months ago? Are they happier?

No, not really. Of course, there are important fears, and we cannot deny that. In Lebanon, we always have political disturbances which are acceptable when they stay under the roof of the constitution and the law, which has been the case until now. At the same time, a long term political crisis with a presidential vacuum creates fears of negative consequences for security.

But these are normal fears which are the same in all sectors of the economy. Yet, there was still some activity in tourism because we have had a kind of external and internal cover on security and stability this year compared to 2013, when we saw even bigger internal security problems, making it extremely difficult to attract tourists. 

 

Read Executive’s interview with Tourism Minister Michel Pharaon right before the Live Love Lebanon campaign was launched

 

‘Live Love Lebanon’, and tourism in general these days, seem to be driven by locals who travel to these rural places that are being promoted. Is this part of the campaign’s strategy?

This is the second objective of the ‘Live Love Lebanon’ campaign. It’s not really just domestic tourism, it’s rural tourism. Rural tourism can be domestic tourism, or it can be externally driven as well.

This is a five year strategy that we have put in place to develop all the rural areas for tourism as we think there is huge potential there. 

While developing the ‘Live Love Lebanon’ campaign, there were several NGOs and partners working on developing rural tourism and we directly got involved in that. 

For rural tourism, we created a new department within the ministry and asked for a committee involving all the ministries. We need to take this very seriously as it has a lot of implications for the environment, for people in their hometowns, for the beauty of Lebanon and for the economic development of those areas. 

 

Is rural tourism being promoted more for Lebanese tourists or for those coming from abroad?

We believe it should be for both. But there has to be some infrastructure for this: the maison d’hôtes, or guest houses, and the tourism aspects of each destination have to be organized. If you look at any region in Lebanon, each has potential and we are looking to promote the regions, each with its own unique identity, one year down the line.

This is a very ambitious plan, linked to the first goal of the campaign which is offering travel packages for less than $1,000 to different areas of Lebanon, outside of Beirut. With time, when this is more organized, it can attract British, German and Russian [tourists], as well as expats in the Gulf, as there is a huge market for rural tourism.

 

[pullquote]I am not monitoring exactly what is working and we don’t have numbers because it’s difficult[/pullquote]

Looking ahead to 2015, and as you mentioned the success of the packages, are there any packages that were particularly successful in terms of total numbers compared to others that you would want to highlight again?

Usually what we do, because don’t forget that the ministry doesn’t have endless means, is to work with advertising agencies and on organization and then let the private sector do its job. I am not monitoring exactly what is working and we don’t have numbers because it’s difficult; I’m organizing with all the syndicates a better system of monitoring as I don’t have all the tools. 

Of course, you have the traditional beach and summer packages, which still work the best, as well as business travel. 

 

What are the ministry’s main goals for 2015?

First, we are working on administrative reform with the International Finance Corporation (IFC) to simplify the administrative procedures and we will be zooming in on that in 2015. The second is rural tourism. The third is working better with the syndicates, especially the restaurant syndicate. Fourth is medical and religious tourism and the fifth is to try to have better relations with Egypt, as it is only one hour away from Beirut [by plane], and a lot of tourists now come to the region and go from Dubai to Egypt to Jordan, so we are trying to find a way for them to come to Beirut as well. 

 

Under the current restraints, do you have the budget allocation for developing rural tourism in 2015?

Yes. For rural tourism, we have a hundred tasks to do. We are now finding the 20 most important ones to put on a fast track and to budget for. We will then propose this to different organizations like the European [ones], or USAID, which has done a good job on rural tourism in the past, and also the ministry. So we don’t see that we will budget for this alone. We are also focusing with the Ministry of Culture on upgrading historical regional sites.

We won’t need more than a few million dollars to organize it but a lot of the money will be spent on studies.

 

It sounds like an interesting strategy but one of the worries we have in Lebanon is that if the minister changes, the strategy will change with him.

This is why I am trying to put different committees in place so that when the minister changes, there will still be a follow through of initiatives.

 

When you mentioned administrative reform, does this apply to processes in the ministry?

Yes, to simplify the issues. The Ministry of Administrative Reforms has done a good job and now it is [up to] the political will of the minister to go ahead or not, so fortunately I am with reform. At the same time — and this is Herculean — we are trying to put the municipality in this mood, but that touches some small powers and fiefdoms.

 

Now that the parliamentary extension and the uncertainty of presidential elections have given you more time at the helm of the tourism ministry, how are you feeling about the possibility of doing this for another two years?

The prolonging of the Parliament with all the doubts on our democratic system is less harmful than the vacuum of the presidency because this vacuum puts at stake many things and creates a paralysis in all institutions, from the government to the Parliament and so on.

 

So when you say that I would continue for two years, you mean there would be a [presidential] vacancy until then and that is a scenario which is very dangerous.

I would be happy to come back as the minister of tourism if I am doing good work and reforms, but to stay like this with no president would be very unfortunate.

 

Are you a happier man than you were about a year ago when you stepped into this role?

These few months have passed very quickly for me. I have tried to give all I can this summer, amid difficult times, and it has been a lot of work. But at the same time, I have a lot of enthusiasm, so yes I am still enthusiastic about what I am doing.

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New flavors

by Nagi Morkos
written by Nagi Morkos

New Year, new trends: when it comes to the Lebanese food and beverage (F&B) industry, 2015 brings with it its share of new places and latest fads. The trends of 2014 have been put to the test, some have died, others have remained, but all have been affected by the economic situation and judged by both industry professionals and customers.

In 2015, the F&B community will have to face difficult challenges. The first and most embarrassing being the massive food scandal that has hit the country. The Ministry of Health has unveiled the wide noncompliance to food security norms among many F&B and retail food outlets across the country. This has affected the whole industry, forcing operators to review their hygiene standards. The appointment of Tony Ramy (partner in Al-Sultan Brahim, Al Diwan, Al-Falamanki and B018) as the new head of the Lebanese Syndicate of Owners of Restaurants, Cafés, Night Clubs and Pastries may also bring new and stricter resolutions to regulate the sector. New laws on food safety, licenses and authorizations should be adopted in the coming months. The syndicate promises more involvement by demonstrating transparency, supporting investments in the sector and helping to provide professional staff training. It is definitely gearing up for a difficult and challenging year.

Other recurring issues weigh heavy on the industry, principally the economic crisis that has hit the country since 2012. The influx of Syrian refugees has brought in a large, cheap workforce, dragging down wages to the point where F&B employees face a daily struggle to make ends meet. Expensive rental fees, although they seem to have stabilized, are also a concern for owners, as well as electricity and water supplies. Many F&B outlets have been forced to close down, unable to face these high fixed costs. Some have tried to curb the problem by raising their prices, which has not always proved successful as customers have also been hit by the crisis. Many restaurants, and not those with the highest standards, now inflate prices to make profits. Exogenous challenges need to be tackled as well, road traffic is getting worse and valets struggle to find parking for customers’ cars, deterring many people from going out.

Healthy eating

2015 is likely to be a bold and difficult year for the industry, which will have to fight back both on the plate and outside. The Lebanese customer, although a food lover at heart, will expect reassuring signs. Despite 2014’s negative end of year for the F&B sector, the industry is known for its dynamism and resilience, and will overcome those challenges with new trends.

In light of the recent food safety scandal that has rocked the country, customers are reconsidering their eating habits — encouraging new health oriented concepts to flourish in Lebanon.

First, focus on the ingredients. The ‘farm to fork’ trend brings fresh ingredients straight to your plate. Restaurants buy directly from producers, offering an additional advantage: eat well while helping small farmers survive. These supplies are seasonal, forcing chefs to challenge themselves and be inventive with their menus. The trend has even been embraced by large chains abroad, such as the Mexican themed fast food restaurant Chipotle. As it has gained popularity, customers have begun to pay more attention to the quality of their meals.

Second, focus on the way you eat. Along with the new ‘back to the roots’ style of restaurant, people are more sensitive to nutrition. Professional dietician Sawsan Wazzan Jabri (owner of the Diet Center) and her partner Dina Nasser Harakeh have opened Well B in Verdun, a restaurant with a healthy menu offering nutritional advice. Kitchen Confidential in Ashrafieh is also attracting a growing number of customers concerned with their health.

Third, eat fresh items instead of junk food. The ‘fresh casual’ trend shows how lower end F&B outlets and chains can embrace freshness. It is also known as ‘healthy fast casual’. You can usually spot these concepts thanks to sign post healthy selections on their menus, like kale or grains. This trend has been a big hit among vegetarians and vegans. Even junk food giants have understood the importance of the trend: McDonald’s, for example, has been introducing meals using the Weight Watchers system.

Fourth, drink fresh juices as part of your daily diet. Juice bars — or ‘juiceterias’ — are enjoying much success. They serve fruit and vegetable juices, as well as smoothies and fruit salads, while some also offer sandwiches and salads. Newcomers such as Juice Up in Sodeco have arrived and we expect others to open in the coming months.

In 2014, café-bars were on a roll, embracing both daytime and nighttime customers. Extended service hours have enabled them to attract a varied client base, from early birds grabbing a coffee before work, to students and families going for dinner. They serve simple food in the day and in the evenings turn into lively bars, some with terraces, some with DJs. Beirut’s pioneer of this concept was Torino Express in Gemmayzeh, which has become a local institution over the years. It was followed by many other bars in Gemmayzeh and Mar Mikhael, including Internazionale, which is owned by the same person. More recently the trend has extended to Badaro, where several café-bars have opened in the recent months, such as Kissproof, Roy’s, 27, L’Avocat and Le Café de Pénélope.

New trends

Food halls are in vogue regionally. It is an emerging trend and it won’t be long before their popularity reaches Beirut. Their hybrid concept combines retail, F&B and production. Under the same roof people can eat, shop and chill in bars and snack houses. London’s Harrods and La Grande Epicerie in Paris are the main international references, both targeting high end customers. The trend has also reached the United States with New York’s flagship Eataly. Now Istanbul, Tokyo and Dubai among others have their own food halls. They are mostly populated by upmarket food professionals, artisans and chefs, mixing take away menus with refined recipes. Beirut is still waiting for its own version.

And then there are the trends that last. The US-inspired concept of food trucks is still going strong after a few years driving the streets. They serve sandwiches, pizzas, hot dogs or ice cream, and are even used for retail or PR events. Food trucks were introduced in Lebanon in 2012 and have enjoyed growing popularity. A crêpe truck is now an established feature in Mar Mikhael. Rocket sells sandwiches from its truck and Classic Burger Joint now has a mobile kitchen as well. Even the beer brand 961 has started traveling around for special events.

Socialites and ‘aperitif’ aficionados will also find their groove in 2015, with the tapas trend still attracting people. Many investors expect to increase their margin on food sales with the concept and attract younger crowds. To secure their investment, they have had to widen their reach to offer other cuisines. Outlets offering tapas range from mid to high end. Casual chains such as T.G.I Fridays, The Cheesecake Factory and California Pizza Kitchen have jumped on the bandwagon, integrating ‘small plate’ menus into their offerings, as well as more sophisticated restaurants like La Petite Maison in Ain el-Mreisseh. Divvy, a newcomer in Mar Mikhael, is a concept that only offers sharable meals from appetizers to platters to desserts. As its name suggests, expect to share all.

As always, ethnic food has found its way into the trend chart. This year Peruvian food will arrive in the region. Coya, a brand expected to open soon in Dubai, has proved to be a huge success in London. Peruvian cuisine, with its ceviche and tapas, is forging a path into several of the capital’s menus. The coming months will show if Peruvian food, a hit this year on the international scene, will appeal to the Lebanese palate.

Mixology!

And last but not least, the ‘mixology’ trend is hitting the country. This mysterious concept has been raised to the rank of an art form: experienced bartenders improvise cocktails, putting a twist on original recipes. Like a sketch artist or a DJ, mixologists create their works in front of the customer’s eyes. Central Station in Mar Mikhael uses herbs, vegetables and even cheese. Kissproof in Badaro adapts each drink to the client’s taste.

Trends involve concepts, but also areas. The Badaro neighborhood will definitely be the hit place in 2015. It showed how promising it was in 2014, and it is now flooded by F&B investors, who favor the area’s reasonable rents and its large sidewalks. L’Orient-Express, The Attic and L’Avocat are the new names to remember.

This year’s outsider, figuratively and geographically, is Beirut’s suburb Hazmieh — Mar Takla. The area, which is a booming residential hub, also saw the opening of Spinneys and the Beirut City Centre, a mall with 33 restaurants, raising the area to a prime leisure and retail destination. A new cluster of cafés, restaurants and bars is planned by Venture Holding, the group behind the concept of Uruguay Street. The area has potential, as it is ideally located halfway between Beirut and its populous suburbs and has yet to be developed. Another zone to watch is Antelias. Until recently, it was only populated by shisha cafés, but now four new F&B clusters are bringing a large number of popular brands. Major industry players are betting their cards on the area. Dbayeh has also been the focus of attention for a while, with ABC mall’s facelift two years ago, the opening of Le Mall, a shopping complex with 20 F&B outlets, and the clusters Blueberry Square and Junction 5, which are attracting enthusiastic customers.

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Local market rules

by Nabila Rahhal
written by Nabila Rahhal

As another year rolls by with a meager number of tourists, and more young Lebanese leave the country for greener pastures while those who stay complain of empty pockets, Lebanon’s food and beverage (F&B) sector has had to be resourceful as it determinedly weathers yet another storm.

[pullquote]Work is down by almost 40 percent from 2010[/pullquote]

The reality on the ground

“There is an economic crisis in the whole country, which has affected the F&B sector at all levels, from the snack shops to the clubs, and I would say work is down by almost 40 percent from 2010,” says Toni Rizk, CEO of TRI Concepts, which owns and operates several bars across Lebanon. However, he notes that 2014 was a better year than 2013 in terms of sector activity.

According to Tony Ramy, the new president of the Syndicate of Owners of Restaurants, Cafés, Night Clubs and Pastries in Lebanon, this economic crisis has led to an estimated 200 closures of F&B venues across Lebanon in 2014, citing locations like Zaitunay Bay, Hamra, Jounieh, Bhamdoun and Aley.

Yet there were still periods of high activity, such as the summer when many Lebanese expats returned for visits, according to Rizk. Overall, 2014 was a better year than 2013 in terms of sales in the sector, he adds.

Those in the hospitality sector have shifted their plans, going from catering to wealthy tourists or locals to relying on the seasons when expats visit and the local market, despite its limited purchasing power. 

Local demand

Catering to local demand with its lower purchasing power, in comparison to wealthy tourists who used to frequent Lebanon, is a different ball game from what the F&B sector was accustomed to when business was booming.

[pullquote]Lebanese want to go out and have fun, but without paying a large sum at a high end restaurant[/pullquote]

“The most important thing is to put ourselves in our customers’ shoes: it’s not like the good old days when people could afford to spend $200 on a meal without caring or when the waiting lists at clubs were a mile long. We now know that the Lebanese expat and tourism revenue is almost zero, so we all have to go for a much smaller client base — the Lebanese who live and work here. You have to give them affordable luxury, quality and service, while at the same time you have to be a very efficient organization to keep staff motivation high and deliver all that,” explains Ziad Kamel, the syndicate’s secretary general and co-owner of Couqley restaurant in Gemmayze. 

The closure of high end venues such as Momo at the Souks and some of Zaitunay Bay’s fine dining restaurants are the clearest examples of the challenges facing the sector in 2014. In fact, cafés and casual dining concepts now dominate the strip in Zaitunay Bay. Employees at the few remaining high end restaurants, meanwhile, spend more time swatting flies than taking orders. 

Speaking of the newly opened Al Mandaloun Patisserie in Dbayeh, an extension of Al Mandaloun Café’s terrace there, Michelle Souhaid, project developer for the company said: “The café concept is doing better this year than in previous years because Lebanese want to go out and have fun, but without paying a large sum at a high end restaurant. Here, our clients have coffee or a sandwich in a beautiful setting without feeling forced to order something big. Also, open air concepts are very successful among Lebanese who lack this green space in their daily lives.”

Ramy also thinks that street food, small bars, Lebanese cuisine and café concepts performed the best in 2014, offering up Al Falamanki, where he is one of the partners, as an example of a Lebanese cuisine and nargileh venue that is almost always full. 

Embracing change

Catering to the local market can be challenging because it is relatively small; there are simply not enough clients to fill up Beirut’s venues. This increases competition among those in the hospitality sector. “It is the same group of people who are going out in Beirut and they migrate from one area to another based on what is new and popular at the moment. This understandably makes our business tiring as we have to put double the effort to attract this same group whose attention is constantly being sought after by others in the sector,” says Rizk. 

One strategy to attract this smaller client base, according to Rizk, is to increase happy hours, promotions and discounts. Most pubs and bars in Lebanon are now offering such promotions, even on Uruguay Street, which targets the higher end of the market. 

Another strategy, adopted by many in the field, is to offer novelty. This is why the same group of investors will open venues in different locations, sometimes closing those in nonlucrative locations, in keeping up with what area is ‘trending’ at any given time. This year saw the continuing growth of Mar Mikhael and Uruguay Street as bar and bistro destinations, as well as the emergence of Badaro and the rebirth of Hamra, with the new courtyard cluster of bars competing with similar concepts in Mar Mikhael.

 

Read more on hospitality clusters

 

Smaller investments on the rise

Ramy and Kamel explain this somewhat surprising growth in bars and clubs despite a challenging market by the level of investment in such places. “They generally tend to be grassroot, maximum 40 seater small bars with an investment between $150,000 and $300,000, split by many investors. The risk is therefore minimal and the margins are large. Also, because the business is small, it takes six months to a year to return their investment and therefore they can cash in before another crisis hits,” says Kamel. 

“We don’t see venues that cost around $1 million to set up anymore,” says Ramy, giving the example of Sultan Ibrahim Downtown, slated to open in 2015, as a $5 million investment. Ramy had committed to the project before 2012, but says it is not something he would consider today or that is common anymore.

2015 through the eyes of the hospitality sector 

Despite all this, those in the sector remain optimistic and insistent on growth. “We at TRI are expanding our business and have recently opened a new venue in Mar Mikhael, which has been positively received by the clientele there. The Lebanese have a positive spirit and will continue to enjoy themselves, even if at a lesser purchasing power,” says Rizk.

[pullquote]Those in the sector remain optimistic and insistent on growth[/pullquote]

Several hospitality cluster projects are set to make their debut in 2015 in Dbayeh, which is predicted to be the next ‘it’ destination. Speaking of planned developments in the area, Marwan Ayoub, partner in Venture Hospitality, says: “In times of crisis, such as the one we are passing through now, people tend to stay closer to their homes and so we will benefit from the clients in Dbayeh and the immediate surrounding areas. In time of prosperity, those residing in Beirut will head to Dbayeh to avoid the crowds of tourists, so projects in Dbayeh will benefit in both cases.”

Some in the hospitality sector are expanding to Dubai, with the idea that ‘if they won’t come to us, we will go to them.’ 

“Lebanese entrepreneurs who feel that the market here is too small are taking their concepts abroad, mainly to Dubai but also to Europe and the States. They are not waiting on the security situation; Lebanon will always be the creative and emotional hub, but when we talk business, it is abroad,” says Kamel, who is expanding Couqley and Angry Monkey, a bar concept, to Dubai. 

Lebanese entrepreneurs in the hospitality sector have become experts in both crisis management and cost control, maintaining their viability, and indeed often their growth, despite the pressures and difficulties they are facing.

Correction: In an earlier version of this story, the lead photo’s caption (“Venues are struggling to fill empty tables”) improperly implied that Prune, the pictured restaurant, is struggling to fill its tables. This implication was improper to make. Apologies.

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Thinking outside the box

by Nabila Rahhal
written by Nabila Rahhal

By definition, the hospitality sector is reliant on the presence of tourists, and therefore reliant on peace and stability. It is no wonder then that Lebanon’s hospitality industry, in both its hotels and food and beverage divisions, has been only limping along for the past few years.

Yet, ever the entrepreneurs, those in Lebanon’s hospitality sector have developed coping strategies not only to survive in unfavorable conditions, but even to flourish. In the food and beverage sector, while there may not be many luxurious, high end venues performing well, smaller projects — from neighborhood bars to cozy bistros to nargileh houses — are witnessing growth, and many more such projects are in the pipeline for 2015. Lebanese hoteliers have also developed alternative approaches to make up for the loss of tourists from the Gulf. They are relying instead on local tourism from Lebanese living here who simply want to discover more of their country and enjoy a weekend away from home.

Hotels are also hosting European expats working in the Gulf or those who come to Lebanon to work with Syrian refugees.

Operators in the hospitality sector have come to accept that rich tourists won’t be rushing to Beirut any time soon and that local purchasing power is weak, but they are not giving up just yet. They are gearing themselves up for further growth, both locally and abroad, but with a new framework in mind.

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Going digital

by Daniel Diemers, Abdulkader Lamaa & Jihad K. Khalil
written by Daniel Diemers, Abdulkader Lamaa & Jihad K. Khalil

Digital technology is reshaping wealth management around the globe, according to a Strategy& survey that appeared in our Global Wealth Management Outlook 2014–2015. Interestingly, however, wealth managers in the Middle East, while generally confirming the importance of digital technologies, did so with less conviction and sense of urgency than their Asian, European, and North American counterparts. This is despite the fact that a digital approach is critical to fulfilling wealth managers’ stated priorities for 2014–2015: to better understand customer needs, generate customer centric holistic advice and deliver a superior customer experience.

According to our survey, 50 percent of private bankers in North America put digital technology at the top of the agenda, as did 35 percent of Asian private bankers. In the US, the large national brokerages offer a full spectrum of services, while wirehouses use digital technologies to profile and segment customers for targeted product and service offerings. Discount brokers see digital technology as a way to provide client centric yet low cost services. Wealth managers use digital tools, for instance, to track client interactions for compliance and risk purposes. Overall, managers in the US tend to be more on the lookout for novel digital offerings they can mimic, acquire, or obtain through a partner or platform provider. 

By comparison, no respondent in the Middle East put digitization — in the sense of using digital technology in a strategic manner to create value — as a top priority. Half of the respondents consider it an area of medium importance, while the other half consider it an area of low importance. This is due, in part, to the fact that most local banks have only recently begun to focus on dedicated wealth management and private banking offerings. In addition, other strategic priorities — such as allocating capital to pursue aggressive growth strategies within and outside home markets — may have influenced this deprioritization of digitization.

However, Middle East demographics may soon challenge these priorities since new technologies appeal strongly to the new generation of High Net Worth Individual (HNWI) clients in their 30s and 40s. We believe that Middle East wealth managers, like their global counterparts, must commit to a ‘digital agenda,’ to enhance their customers’ experience, market their products and services in a more targeted “product pull” approach, lower costs in the mid and back office, and improve risk and compliance efforts.

The digital advantage

Digital wealth management models have clear advantages over traditional models in three critical areas.The first is customer experience. As more HNWIs use technology and multiple channels to manage their financial and non financial lives, the wealth management industry will, like many others, converge toward 24/7 multi-channel, digital offerings. Unsurprisingly, younger, tech savvy HNWIs embrace the new technologies with gusto. However, they are not the only ones. The industry must keep clients of all profiles happy — including those who see their expectations for digital wealth management influenced by their daily experience on social and retail portals via devices such as smartphones and tablets. Increasingly, customers want an information rich, transparent experience at their fingertips, and the ability to move seamlessly across channels.

The second advantage is efficiency. Digital technology automates traditionally slow and inefficient processes, enhancing the efficiency across the enterprise. These digital benefits include rationalizing systems architecture, running data cleansing exercises to develop robust and insightful data warehouses, and overlaying integrated front-end client interfaces to create enhanced customer experiences. Digital technology also makes it easier to bundle products and services in tiered service offerings to target different customer segments and subsegments. All this helps wealth managers control the cost of servicing clients while tailoring the entire client experience.

The third advantage is in risk and compliance. The financial industry faces an unprecedented amount of regulation, covering a wide range of issues: capital, liquidity, proprietary trading, derivatives, corporate governance, and the transparency of offshore assets and income. These costly, complex rules and the burden they put on resources have become a major — if not the most important — factor affecting the strategy of wealth managers. Digital technology facilitates compliance with risk management standards and emerging global standards (such as Dodd-Frank in the US and the EU’s Markets in Financial Instruments Directive II) regarding enhanced client reporting, transparency on pricing and fee models, customer centricity and protection, centralized trading and execution, etc.

Innovate to compete

All that said, one of the very best reasons to embrace digital tools and innovate is to remain competitive. Besides the established players in the US and Europe focusing on digital technologies, three types of new digital innovators are targeting the wealth management market. These are: investment advisors that provide real time customized advice, including goal setting, allocation, monitoring and rebalancing; portfolio review and allocation providers that offer financial management portals to track portfolio and advisor performance, providing a finite number of investment plans with varying allocations; and investment communities that offer a platform to share and discuss investment ideas, and crowd source investment advice.

Thus far, these digital innovators have only managed to challenge incumbents by offering innovative digital services for free or at a much lower price point, but they have yet to take a significant market share. Nevertheless, these innovative disruptors along with more traditional global players will increasingly force Middle East wealth managers to make significant technology investments to keep up with the standards.

Formulating a digital agenda

Wealth managers who want to leverage these digital advantages and remain competitive need to develop a new business strategy with a clear digital agenda. Such an agenda will need to revolve around five pillars.

First, to build an internal comprehensive view of clients’ assets (both within the current share of the clients’ assets and increasingly beyond) and the corresponding behavioral profiles to provide high quality, timely and relevant personalized advice.

Second, to provide high speed, ‘always-on’ (and increasingly real time) access to portfolios, research and advice. This is done through mobile and tablet technologies and includes advisor–client chat, video conferencing and interactive applications. These tools will allow for better financial planning, portfolio simulations, push alert centers, peer communities for comparisons or crowdsourcing recommendations (e.g., Seeking Alpha). 

Third, to enhance the quality and personalization of advice and service related interactions using Big Data analytics. Wealth managers can identify the most relevant opportunities for each client based on historical behavioral data, latest cross channel interactions, or major life changes along the client lifecycle. 

Fourth, to streamline and automate mid and back office operations to eliminate time consuming, manual activities and shorten processing times. Private bankers must also create a ‘bulletproof’ risk and compliance environment, in which checks and balances are automated, validated and recorded with the least amount of human intervention possible for a highly reliable compliance environment that reduces the ‘hassle factor’ for clients. 

Fifth, to establish a social media presence to evaluate customer sentiment, enhance communication with existing clients through external social platforms such as LinkedIn groups or Twitter, and strengthen the financial advisors community such as through internal blogs or enterprise social networks.

For Middle East wealth managers, the bottom line is that keeping increasingly technology savvy clients, let alone winning more of them, will require building a robust digital agenda and pursuing it relentlessly with the same focus and visibility given to business strategy.

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Sowing seeds

by Zafiris Tzannatos
written by Zafiris Tzannatos

Much is written and more is discussed about the impact of Syrian refugees on the Lebanese labor market. Plenty of analyses and proposals are in the air. This is as commendable as it is understandable: Lebanon faces both a humanitarian crisis and a labor market crisis.

In the labor market, an already bad situation is expected to become worse in the coming year. Simple economic theory suggests that when the supply of workers increases, labor is offered in the market at discounted wages. And not only that: working conditions may deteriorate while occupational health and safety risks increase, unless employers are scrupulous and labor laws are enforced.

In addition to this shock, longstanding structural issues in Lebanese labor remain. These include the local underutilization of Lebanese in marginal or seasonal types of work, or more directly in terms of part time or seasonal employment and high unemployment, and the migration of the most capable Lebanese abroad while social protection defies the conventional use of the term as it is mostly provided privately.

The gravity of the labor market situation becomes clear when referencing the reversal in unemployment rates among youth and adults. While the unemployment rate in Lebanon has remained practically constant at around 10 percent for the past 20 years according to the International Labor Organization, there were 30 percent more unemployed youth than unemployed adults in 1990, but by 2010 there were 50 percent more unemployed adults than unemployed youth. This suggests the problem is not just the employability of young job seekers. And the situation would have been worse had adults not emigrated in such large numbers.

All in all, Lebanon is entering the new year with uncertain prospects. The geopolitical situation and the issue of Syrian refugees remain tense. Partly because of this, the macroeconomy (and tourism) has stalled. And politically, in addition to having no president, practically all (98 percent) of the parliamentarians who were present in the relevant vote this past November 2014 agreed for the second time to extend their tenure until 2017. This can be contrasted with the British Parliament’s House of Commons, whose members can eventually pass any law against the objections of the House of Lords except one: the extension of the life of a parliament.

Leaving aside these historical and political remarks, what can be said about what needs to be done in 2015?

Lagging legislation

To answer this, one should first look at another question: how effectively can a country address the issue of refugees if it does not really have a strategy and policy framework for its own citizens? Or, put differently, the refugee question is not only a national issue, but also a regional and international one, and therefore goes beyond the exclusive mandate and capacity of Lebanon.

But the labor market is a domestic issue and can and should be addressed earlier rather than later. The results will not be immediate as labor reforms may take generations to show their full effect. But as the proverb goes, if it takes 100 years to grow a tree, it is all the more urgent to plant it today.

For 2015, there are some low hanging fruit in the sense that the relevant legwork has already been done and the ‘sell by’ date passed decades ago. This includes the enactment of the labor law that has been on the books since the 1990s. This is also the case with private sector pensions under the National Social Security Fund, noting that Lebanon remains perhaps the only upper middle income country in the world without private pensions for its workers. While a law on disability has recently been enacted, its implementation is lagging. Finally, one should not forget the needed improvements in occupational health and safety, including enhancing the role of labor inspections, and the implementation of guidelines for the employment of the sizeable number of domestic workers.

Lebanon is one of few Arab countries with a mandated national minimum wage, but its role is compromised by the absence of an institutionalized framework for the social partners to set its level and then periodically revise it through an objective price index. Similarly, there has been an Economic and Social Council for years, but its involvement and impact has been minimal. These are issues within reach if there is political will.

To conclude with a modification of the aforementioned proverb: if the best time to plant a tree in Lebanon was in 1990, the second best time is 2015.

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Getting hands on

by Livia Murray
written by Livia Murray

Just as Lebanon’s startup ecosystem is growing, so is the diversity of its funding sources. Abdallah and Ghaith Yafi are the brother duo behind Y Venture Partners (YVP), a new, early stage investment and advisory firm. Prior to starting this venture, they founded Lebanese ecommerce site ScoopCity as well as Canadian ecommerce site TheVolts. Executive sat down to discuss their latest — and likely most ambitious — project.

 

Under Y Venture Partners, you launched a microfund at the beginning of the year. What triggered this?

AY: It came as a very natural extension of what we do. Ghaith and I have been in entrepreneurship, in startups for the past five years. That is, we already started a couple of ventures and scaled them … both quite nicely. One of them in Canada and one of them in Lebanon, both of them ecommerce businesses. The one in Canada we partially exited. So that’s why today we’re able to focus a bit more on the investment side of our work … Given our experience and given everything we’ve done in the entrepreneurship space over the past five years, we started getting involved in different initiatives around entrepreneurship in that space in Lebanon. And entrepreneurs were naturally coming to us for support and advice. For the longest time, we were giving coaching [and] mentorship for free. And with some of these companies that we liked, we invested a little money as angels.

It started off as something we did on the side [and then] naturally evolved into something we’re doing much more formally and much more fully today. So YVP came together at the beginning of [2014] and it’s a micro-VC, or a small seed fund, that typically invests in early stage startups. We do small tickets. We’ve done anything from $15,000 to $100,000.

 

For what equity ranges?

AY: We’ve done 15 to 25 percent.

GY: We invest cash, but we also invest our time. So it’s an in kind contribution. Basically, we get shares in return for both investment in cash and investment in kind contribution.

 

What is the total amount of the fund?

GY: Our stakes in the startups we built ourselves are in the process of being rolled into the fund. So if we consider everything we did building and investing in the past five years, the cash amount is probably around $2 million. Whatever we own today in other startups is rolling into YVP Holding. If we own a certain percentage of ScoopCity, [it] will be transferred into Y Ventures. So basically we’re transferring our direct investments into Y Ventures. And these would become portfolio companies.

We didn’t completely exit in Canada; we partially exited the business in Canada because we merged our business with the competition. We still have equity in the new business, but we’re not involved anymore in the management. So we exited management; we partially exited ownership.

 

How much more money will you be investing?

AY: We’re looking to invest around half a million dollars into three or four new companies before the end of 2014.

 

Are you going to keep adding money to this fund, keep raising?

AY: Since it’s a nontypical structure, we can just raise money and [add] capital per opportunity, as opportunities come … but the idea today is to go out and raise the proper fund with a proper [partnership] structure to provide not only for our ventures, investing with follow-on rounds, but to also increase the size of the portfolio going forwards. That’s our intention.

 

OK, so you’re planning on raising a second fund?

AY: Yes. We’re planning on raising another fund, and it’s probably [going to be] between $5 and $10 million. The average ticket size would be a bit larger. So today we’re talking like $50,000–$100,000 and in the future we would be doing $500,000 on average per venture, maybe more. Sometimes up to a million per venture.

 

For both the fund that you currently have and the upcoming one, you’ll be looking at specific businesses and specific industries?

AY: Absolutely. Our experience is ecommerce, so we have our share of experience having built and scaled a couple of ecommerce companies. This is where our expertise lies, but … [in terms of investment criteria] we want to invest in businesses we understand. Because as I said earlier, we not only provide money — we want to be very hands on. We want to support our entrepreneurs closely, so we invest in businesses we understand. And that’s tech businesses. We do ecommerce, mobile, digital; we’re looking at a gaming company right now. Everything that has to do with technology is our bread and butter. So yes, it’s very tech focused.

 

How do you compare your advisory services to what is offered by a typical VC? VCs obviously have some role in companies, but how active would you say you are compared to a typical VC?

GY: We definitely have a more hands-on approach than a normal VC. Even when we raise our bigger fund, we will continue to have that approach because we feel that, as I said, we invest in businesses that we feel we can help, we invest in businesses that we have experience in. We like to be close to the entrepreneurs because we’ve been through the entrepreneurship cycle, we understand what it takes to build businesses, to manage people, to run operations and all of that. We see ourselves as people providing them with smart capital and also access to [personal] networks. In terms of involvement, we won’t be part of management, that’s for sure, but what we do usually — and in some cases we’ve done in the past and we will continue to do — is create executive committees in the companies we invest in … where we will meet with the entrepreneurs once a month, at least, to help steer the business.

 

So kind of like a board of advisers?

GY: Yeah, it’s … closer. It’s not a board of directors. Typically a board of directors would meet four times a year, and would do the high level stuff. The executive committee would meet once a month or even sometimes more, and would do the executive level stuff, basically strategy, budget, business plan [and so on]. Because if you invest at that early stage, you want to help the entrepreneurs shape their business model, find the right scalable business model …

AY: Validate the business model.

GY: Yes, validate the business model. We want to optimize the chances of entrepreneurs and companies to actually find that repeatable, scalable business model, which would prepare them for the next stage of investment and become sort of investible. So that’s the typical involvement. We won’t be able to do more than that because we want to invest in at least 10–15 companies.

 

How many of these 10–15 companies have you invested in already, and does that include your previous companies?

GY: Our previous companies [number] a couple, and we have three other investments that we made in 2014 … By the end of November 2014, we will have invested in two or three more.

 

Why launch this fund now? Are you seeing more opportunities in Lebanon, or is this just where you guys find yourselves?

AY: There are two things. First of all, given everything that’s going on — the new supply of money via [Banque du Liban circular] 331, all these new funds that are coming out — whether it’s LEAP, MEVP, Berytech — all of them, decently sized, $35 million and above fund sizes — we feel there’s a gap that we can fill. And this gap is at a slightly earlier stage than all of these funds. It’s very good for the economy; it’s very good for the ecosystem; you want to make sure all of these funds have deal flow. This is where our expertise lies — this is where we’ve been successful in the past. We’ve been successful at taking companies from seed level to a series A type of level. We’ve done it ourselves with our ventures, and we want to be able to do it with the ventures we invested in. When the opportunity came up, and looking at where these funds [were] positioning themselves, we thought there was a great opportunity. We can benefit by placing ourselves here, but the whole ecosystem can benefit if we can … fill that gap and provide the bigger VC players with deal flow.

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