Executive Magazine

Hurdling the competition

by Nabila Rahhal November 27, 2014

written by Nabila Rahhal

Executive profiled a collection of beloved Beirut venues which have been in operation for more than 35 years and evoke strong feelings of nostalgia among the city’s residents. The aim was to discover more about their history and learn the secrets of their success, nostalgia aside.

Sporting Beach Club was established in 1953 by George Abu-Nassar who had just graduated from university and was looking for a venture to have a good time with. “He was looking to have a fun time, not to establish a full time business,” says Waleed Abu-Nassar, George’s son and current partner and PR manager of Sporting Beach Club.

Back then, the plot of land Sporting is now on had only a small cafe and a small pool used by the cafe’s clients (the children’s pool in Sporting today). When Abu-Nassar found this land, he was inspired to develop a private beach club on it and convinced a partner to invest with him. “This idea of a beach club was avant garde back then as Beirut was still somehow a conservative city,” says Abu-Nassar.

What truly made Sporting Club take off, however, was the image of exclusivity that George Abu-Nassar created around it, making membership extremely sought after. Waleed Abu-Nassar recounts how the only way one could become a member in Sporting was to be recommended by a member, and, as the members list was not shared with the general public, identifying who to recommend became a challenging experience.

People took to the idea seriously and the Sporting Beach Club grew from one generation to the next with members who were the partners’ friends and friends of friends. “Our slogan at Sporting Beach Club is catering to like-minded people for over 50 years,” says Abu-Nassar, explaining how this gave them the niche of a faithful clientele base, which ensured continuity over the years and created a familial home-like atmosphere at the club.

Sporting also grew in dimension as George Abu-Nassar gradually added land to it until it reached its current area of 10,000 square meters.Today, Waleed has plans to develop Sporting Beach Club’s hospitality venues, such as the Feluka restaurant, which will offer a wide variety of fish platters and be a more dress-up venue than their current Beach Club cafe or the Sunset Lounge to be situated where Decks on the Beach parties take place in the summer.

Abu-Nassar insists that the Beach Club itself, however, will keep the same layout, save for maintenance needs, as it is what gives Sporting its spirit and identity.

November 27, 2014 0 comments

Business

Sweet memories

by Nabila Rahhal November 27, 2014

written by Nabila Rahhal

Launched by Nabih Maroun in 1957, and still under his umbrella to date, La Gondole was located on Mar Elias Street initially before moving to its current location on Corniche El Mazraa in 1962. At that time, says the original owner’s son, Mazen Maroun, Corniche El Mazraa was still developing and was not the busy area it is today.

The idea for La Gondole, according to Mazen Maroun, was conceived from the area’s need for a European style pastry shop as, at the time, there were only two such concepts in Beirut (one in Ashrafieh and one on Kantari Street).

La Gondole rapidly built a name for itself becoming known for its chocolat mou, forêt noire with raspberry jam in its center, and aish el saraya, a kind of bread pudding with rose water, whose original recipe they brought from Egypt in 1976. “La Gondole served all the bourgeois of Beirut. All the families of Ras Beirut, Msaytbeh and the surrounding areas grew up on these three items, keeping their taste and their visits with their parents to La Gondole in their memories,” says Maroun.

Today, says Maroun, the patisserie business has changed a lot as people become more health conscious and avoid the fatty, albeit tasty, way of cooking desserts. “La Gondole decided to preserve our quality. We don’t want to compete in that trend so as not to devaluate La Gondole’s value and step into the survival war of price versus quality,” says Maroun, explaining how he and his brother opted instead to diversify into other food and beverage products and brands. They are now the founders and managers of Lotus Group, which owns several restaurants like Soto, Olio and Prune.

November 27, 2014 0 comments

Business

The cafe by the sea

by Nabila Rahhal November 26, 2014

written by Nabila Rahhal

The first documented picture of Cafe Rawda is from 1935, though some say it had existed even before that. With a beautiful view of the Mediterranean Sea, Cafe Rawda is said to be the preferred venue of inspiration for writers and poets, listing the likes of Nizar Qabbani and Rafic Ali Ahmad.

Mohamed Chatila, the current owner of the venue, says it has been in the family for generations. “The fact that it has remained within our family is what has kept us going for so long. This continuity, with the older generation handing over their experience to the younger but still somehow retaining management control at the beginning ensures a link between the past and present which maintains quality. It is working well for us so far,” says Chatila.

Chatila, who has a business management degree, took over the business eight years ago and says that, like in any business, he faced some obstacles. For him, they included the economic situation of the country and real estate issues related to their land — a mix of private and public property — and long standing rent agreements with the government rendering any renovation plans extremely difficult.

Renovations may not be needed as consumers like Cafe Rawda for its simple and relaxed atmosphere. “Our clients feel comfortable coming here in their sportswear after running on the Corniche. I am not saying they do not go to the trendier venues in the area but they have to behave completely different when they go there,” says Chatila.

In a somewhat controversial move, Cafe Rawda stopped serving alcohol in 2008. Chatila feels it was the right move for his establishment’s image as, according to him, the number of conservative Beirutis is increasing and those people were avoiding Cafe Rawda because of the alcohol. “This is a family place and this move was very successful among those conservative families which come to our cafe,” says Chatila.

“I am happy we have been able to sustain our business for so long but I am sad that some big names which did not deserve to close down have been forced to do so due to the situation in the country,” concludes Chatila.

November 26, 2014 0 comments

Business

Marketing nostalgia

by Nabila Rahhal November 25, 2014

written by Nabila Rahhal

On Sunday September 28, Bliss Street was transformed into a pedestrian only zone for the day as people celebrated Hamra’s golden days of the 1960s and 1970s in an event called “Flashback Beirut.” In 2012, the book “Pure Nostalgia” by Imad Khozem was published. It is described by the author as “Lebanon’s record of the 1960s–1970s” and features images from that period. Clearly, this more positive period of Beirut’s history, now considered “retro” or vintage, holds a strong fascination for many Lebanese.

[pullquote]“I wanted it to be an escape to the past because we Lebanese are losing something essential which is the identity of our country”[/pullquote]

Why nostalgia

This fascination with the past is mainly driven by nostalgia, an emotion that hospitality venues, both old and new, are increasingly counting on to reel in or retain clients.

In describing the motive behind compiling his book, which took three years to research, Khozem said, “I wanted it to be an escape to the past because we Lebanese are losing something essential which is the identity of our country.”

Relatively recently established outlets, such as Cinema Rivoli Bar on Uruguay Street in Downtown Beirut or Café Hamra, intentionally recreate a vintage Beirut feel, while much older venues, dating back to the 1930s in some cases, maintain a loyal client base.

Many of Beirut’s older hospitality venues have developed an almost cult following, fueled largely by nostalgia, as Omar Al-Ghazzi, a doctoral candidate in communications at the University of Pennsylvania, explains. “Beirut is a city that changes a lot and Beirutis are constantly looking to eat, shop or dance in new venues. This constant change, however, induces nostalgia to the few venues that manage to stay in business for a long time. Nostalgia offers us a sense of cultural continuity through an emotional bond to the old, but it also makes us feel better about painful memories. In Beirut, nostalgia toward the 1970s and 1980s enables people to imagine happier memories than those provided by the civil war,” says Al-Ghazzi.

Executive spoke to a selection of popular hospitality venues in Ras Beirut which have been in operation for more than 35 years and found some common aspects among them. All of these venues are family operated with management passed down through generations. While this business model comes with many challenges — such as the potential for internal disputes as the family grows, mismanagement during certain phases or the risk of dying out if no one is left to take over — the majority of the outlets Executive spoke to seem to have surmounted these obstacles for now.

Another common factor is that these places are a powerful reminder of happy memories. “I sometimes hear grandmothers tell their grandchildren that they have a picture taken next to the fountain by our entrance by their parents who used to bring them here to play,” says Mohamed Chatila, current manager of Cafe Rawda. The same sentiment is echoed by Fouad Sahyoun of Falafel Sahyoun who says many of his clients who he’s known since they were little now bring their own children to the falafel outlet and introduce him as “Ammo Fouad,” telling them how they used to visit him with their parents.

Save for maintenance renovations, the outlets Executive spoke to have largely retained their decor and theme, giving them a naturally authentic vintage appeal through the years. Speaking of the Sporting Beach Club, Waleed Abu-Nassar, the original owner’s son and the place’s current marketing executive and partner, says: “While we are renovating our restaurants, the basic feel of the beach club has remained unchanged since [its establishment] and that is because our guests like it that way, it is our identity.”

These older venues, according to the owners Executive spoke to, also attract Western tourists who do not have nostalgic memories in the place but enjoy experiencing vintage venues in new cities.

[pullquote]Many historic venues in Beirut have closed despite people’s strong attachment to them[/pullquote]

Older established venues, however, should not rely on nostalgia alone to attract customers. “Given that nostalgia sells, there is an unstated competition between restaurants that have actually been there for a long time and brand new businesses that capitalize on nostalgia through branding themselves as ‘old’ or ‘retro’. New venues can easily invoke feelings of nostalgia because nostalgic sentiments are not necessarily about experiences that a person has actually had. Many scholars have argued that nostalgia is often felt toward a home one never had or an experience one has not lived through. For example, many Lebanese in their twenties and thirties feel nostalgic about Beirut of the 1960s,” says Al-Ghazzi, explaining that older businesses have to be aware that the fact they are old does not mean they can passively bank on consumers’ nostalgic sentiments, as these can be successfully produced and marketed by brand new competitors.

Quality control or good management are also important for old venues. Indeed, many historic venues in Beirut have closed despite people’s strong attachment to them. The most recent of such venues is Marrouche, a Lebanese restaurant on Hamra’s Sidani Street, which opened in the 1920s and was famous for its chicken sandwiches. The restaurant’s closure stirred attention on social media channels as people shared their memories and experiences with the venue.

With all this in mind, Executive profiled a collection of beloved Beirut venues which have been in operation for more than 35 years and evoke strong feelings of nostalgia among the city’s residents. The aim was to discover more about their history and learn from them the secret of their success, nostalgia aside.

Stay tuned as we’ll publish these restaurants profiles in the coming days: Falafel Sahyoun, Cafe Rawda, Socrate, Sporting Beach Club and La Gondole Patisserie.

November 25, 2014 0 comments

Economics & Policy

A matter of perspective

by Jeremy Arbid November 25, 2014

written by Jeremy Arbid

In a family of medical doctors, she is a statistician. A former Lebanese University professor, Maral Tutelian has been at the helm of Lebanon’s Central Administration of Statistics for nearly 15 years — influencing public, business and societal decisionmaking through quality-driven data.

Policymaking depends upon reliable statistics; do you consider CAS’ role in providing data particularly influential for decisionmakers today in creating their policies?

It’s really a very, very interesting question. It’s not only in Lebanon, but in the whole region and in other countries like Lebanon. We have luck in the statistical culture.

‘Luck in the statistical culture’, what does that mean?

It means we should implement the use of statistics in our culture. It means that every decision should be based on statistics. Statistical data should be used by all stakeholders. You cannot [formulate] a political decision related to health if you don’t base your policies on figures. Education, employment, finance — it’s very important to establish every policy based on statistical data.

We’re in the 21st century and the guesstimates should be put away. We should not guess based on our own impressions — it is not a matter of perspective. Policies should be based on statistics. And these statistics should be reliable. It’s for that reason that our policy in CAS is to improve quality. And it’s for that reason that maybe we are attacked in some way — since sometimes the data will not match the feelings of the politicians.

Is it the case that the decisions made by policymakers do not always agree with CAS data?

Yes, for example concerning unemployment. Everyone is talking about an unemployment rate of 30 or 40 percent. But our results point to 10 percent. They [politicians] are not pleased with this indicator. For my indicator I use the ILO [International Labor Organization] standard, the ILO formula and the ILO classification. We have a Lebanese specificity, but this specificity should be highlighted through the scientific work rather than through what I want to highlight. So when I’m talking about the statistical culture, one of the difficulties we are facing is to deal with a specialized media, a media that knows how to interpret the indicators and explain the data. And during the 15 years that I have been in this administration, I haven’t [encountered] any political interference in the publication and dissemination of any kind of data.

At a press conference in May 2013 you stated that CAS was not able to publish the first quarter 2013 consumer price index (CPI) for unknown administrative reasons.

Yes because we did not get the authorization of [then-Prime Minister Najib Mikati] to finish the work. This is the reason. It was really very hard for us because we stopped the fieldwork for five months. Since then we have not had any problems.

So at some level there is political interference?

You can consider it like this. During Mikati’s mandate, in general all our work was very … it was stopped [claps hands]. With the current prime minister we do not have any problems, not a single problem. I really — until now — I don’t know what the real cause of the stoppage was. But what I do know is that there was pressure from international organizations who would say: “What are you doing? We want figures and the figures of CAS are reliable.”

What I’ve heard is that the IMF put pressure on him, [telling him] that you cannot stop indicators that are published in a very good way, with very good methodology. [IMF officials asked] “Why are you stopping [this]?” He [Mikati] did not sign for five months, and then he signed and we continued. It was during the same year that he resigned.

Some critics have suggested that the new weights [introduced earlier this year] in the CPI, particularly the weights for food and non-alcoholic beverages, should be significantly higher. Do you think this criticism is justified?

On which basis are these critics making this criticism? Is it a guesstimate? An impression? If they have conducted a household budget survey on the national level based on an official database then show it to me. If you have another result, we can debate; we can argue if we have the same methodology, the same database, the same way of calculation.

Those weights are calculated through the declaration of the households. I cannot create a weight from my head. So a margin of error exists, I’m not saying that [it doesn’t]. If [CAS fieldworkers] are not convinced by the answer I cannot oblige a household to declare what I want or what I want to see. If I come and ask you what is your salary and you don’t tell me your real salary, how can I calculate it? And another thing, the highest rate of non-response is on the household budget survey. Why? Because you are going through the details of their daily expenses. Because they know very well that through this information you will calculate their line of poverty; you will calculate their social welfare; their way [of life] and the quality of their food.

There were issues though with the CPI last year, and maybe this comes back to an inability to collect the data, where the rental index was not adjusted as it should have been according to the previous year —

I think that it was analysis from the political side, because you had the [renters] and the owners. But for two years we didn’t collect. Why? Because we were preparing the new housing census, and we were waiting to have this new census to get the sample frame of houses. But once I realized it would not be so easy to have the budget and to be ready, that we made the trend over the three years. Statistically there is no problem. But you know, we are in Lebanon…

Now we publish the rental index on a monthly basis, because before 2011–12 it was published on a yearly basis. This is one of the most positive improvements of the updated CPI. The housing index is now published on a monthly basis in three sub-indexes, and the old and the new rental.

Switching gears, hypothetically, what if the public sector wage salaries were increased?

They should take into consideration any increase of salaries going through inflation rates that we have. In the CPI committee that is headed by the minister of labor — and we participate as CAS on this committee — there was a recommendation to increase on a yearly basis the salaries and the wages going from the annual inflation rate that is published by CAS.

Was CAS consulted regarding this recommendation?

They [the CPI committee] didn’t take into consideration the inflation rate. Policies should be based on statistics. It’s not a matter of point of view; it’s not a matter of guesstimation. Imagine that all these discussions between the workers and the parliamentary committees [were taking place], and no one called me. Nobody asked for details. Nobody took into consideration the inflation rate published by CAS.

When do you expect the next Census of Buildings, Dwellings and Establishments (CBDE)?

Ah, it’s related to the budget. If they give me the $4.3 million needed we will recruit about 1,000 fieldworkers. It will be a one shot action, if I have this within the cost, the preparation will take three to four months. The fieldwork should be very quick — [it] should not take more than three to four months. So within one year and a half we’ll have a new database.

So is this extra-budgetary spending?

It’s not a request for money. It’s a request [for] authorization to conduct the CBDE that will cost this amount of money which is not allocated in our yearly budget. I have asked for $4.3 million from the Lebanese government. I sent it already to his office [in August 2014]. I heard that he refused it. So from the [Grand] Serail they’ll send it to the ministry of finance. I don’t know the answer but I have heard that he is refusing to provide this money. I’ve only heard this, I am not sure.

Editor’s note: Since the interview the Ministry of Finance has declined the request and CAS will reconsider the CBDE project next year.

How does not having a [national] budget passed by the government each year impact the way CAS can fulfill its mandate of providing accurate statistics?

All the ministries are obliged to prepare their yearly budget. I don’t have a problem if the mid or long term plan is included in this year’s budget. I know that, for example, the CBDE project should take two years of preparation. I’m not asking for the entire budget in one year — I’m asking in writing that I need [for example] $1 million for this year to prepare the cartography to digitalize. Usually they give me this money. I know if I ask for all the packet I will not be able to spend it all in a single year because my work will not be finished in a year. You will freeze money, you will not give another ministry the possibility to spend money because you have already allocated this huge amount. Every ministry wants millions and millions. They do need them, but there are also some ministries that … I don’t know where or how they spend the money.

November 25, 2014 0 comments

Economics & Policy

Widening the confidence interval

by Jeremy Arbid November 24, 2014

written by Jeremy Arbid

For Maral Tutelian, something is missing from the three year old debate about the economic impact of a proposed public sector wage increase: reliable statistics. The director general of the state’s Central Administration of Statistics (CAS) tells Executive, “It’s not a matter of point of view, it’s not a matter of guesstimation. Imagine all these discussions between the workers and the parliamentary committees [and] no one called me. Nobody asked for details.”

Recent, reliable, and comprehensive data and statistics are fundamental for sound economic policymaking, as Minister of Finance Ali Hassan Khalil admitted in October during a meeting with representatives from the International Monetary Fund and the World Bank Group. Yet, true as this may be, the Lebanese state is still a far cry from providing robust and quality numbers. Tutelian insists, however, that CAS is doing its best with what it has, with an eye on further reform.

To do so, the body has partnered with international organizations to up its capacity, both through technical assistance and financial allocations. In September 2013, the EU announced grants for the CAS of €5.5 million ($7 million) for training, capacity building, new surveys and data collection.

But the primary limitation for CAS remains access to a qualified labor pool. A 2012 report published by the Lebanese Economic Association states, “The quality of statistics is hampered by severe technical problems as well as an acute shortage of human and material resources.” Gaps in the legal framework of the nation’s statistical system and an inconsistent allocation of funding also hamper the body’s capabilities, creating a void in the production of indicators that private consultancies have filled.

A troubled past

Like many institutions — indeed much of the country — the onset of the civil war brought chaos to the Lebanese statistical system. Data housed at what was then referred to as the directorate of general statistics within the Ministry of Planning — itself abolished in the late 1970s and consolidated into what is now known as the Council for Reconstruction and Development — was destroyed. “Don’t forget the war affected a lot the inventory of the database,” says Ola Sidani, an economic officer in the prime minister’s office.

Though Lebanon’s statistical system was reestablished through Law 1793 of 1979, creating CAS within the presidency of the council of ministers with subsequent organizing decree 2728 in 1980, the agency did not begin to function effectively again until the mid 1990s. “It was only in 1994 that Prime Minister Rafik Hariri decided to put statistics on track,” Tutelian explains.

For nearly a 20 year period — throughout the civil war until the mid 1990s — Lebanon did not have comprehensive, government produced statistical data, a void filled by private companies and a smattering of other public agencies.

Private sector steps in

While CAS only began producing a consumer price index (CPI) in the late 1990s, the private Consultation and Research Institute (CRI) has been producing CPI for greater Beirut since March 1977, managing director Kamal Hamdan explains.

In 1979, following the reestablishment of a public statistics agency, the government that had lost its statistical database — including its CPI data — reached a deal to purchase the methods and database maintained by the consultancy to jumpstart CAS’ capability in compiling these statistics, which it started doing on a quarterly basis in 1999.

Slowly, CAS has formalized its CPI publication with assistance from the International Monetary Fund, but it is not a standalone product. To compile a CPI, organizations must draw upon a basket of consumption and services that are weighted according to the results of a household budget survey. The more of a certain item a typical family buys, the greater the weight of that item in the CPI basket. Since most households spend more on food than on, say, entertainment, swings in the price of staple foods have a greater impact on the CPI than similar movements in the price of movie tickets.

In collaboration with the World Bank, CAS’ most recent household budget survey was carried out in 2011–2012 “to update the weights and now we have not only a CPI on the national level, but a CPI at the level of the mohafaza [province],” Tutelian explains. The publication of CAS’ household budget survey from 2012 provided the indicators needed to update the weights in the basket of goods for the CPI, adjusting the methodology accordingly.

Human resource gap

Because the framework for the country’s statistical system dates back to the Civil War, reform efforts have become imperative. “When you have a body without staff and human resources, without enough budget, how can you stand up?” Tutelian asks rhetorically. It is upon limitations in the legal framework organizing CAS — now over 30 years old — that the director general focuses her frustration. Sidani agrees, “In general, CAS is now understaffed; the whole system needs revitalization, we need more coordination so as to not have duplications, so as to have reliable numbers and quick access to data.”

With CAS’ rigid organizational law, Tutelian says, the body cannot meet its human resources needs. While CAS has recently concluded a round of hiring — it selected 24 people to begin working in July who will be joined by another 24 in December — the body still has a shortage of employees, particularly in more specialized categories, such as statisticians and economists.

Even counting the new hires, CAS only has a staff of 110, less than half of what it should be employing. Tutelian is straightforward in describing the manpower shortage at CAS, “By law, I can only have four economists. I have already the four economists and they’re not enough in a statistical institution. I have two social scientists only; I don’t have demographers. At the time in the 1970s this was the institutional structure of all the [administrations], but now we’re in 2014. I need demographers and social scientists and economists in huge numbers.”

This is a problem that CRI, the private sector statistics provider, also faces. There, Hamdan complains, “One of the major elements that make this business costly is our major competitor over this kind of [human resources] — the UN system,” where salaries are usually higher.

Towards reform

In an effort to get better at gathering numbers, the Lebanese government has enlisted the assistance of international donors. Part of this is the €5.5 million ($7 million) grant from the EU. Of this cash, €1.1 million ($1.4 million) is earmarked for training and capacity building, €3.5 million ($4.4 million) will be used to conduct a new living conditions survey and the remaining €900,000 ($1.1 million) is to carry out the Lebanese component of the Mediterranean Households International Migration Study (MED-HIMS) that aims to measure migration, remittances and related attitudes.

Others have previously committed funds for various projects. According to Tutelian, Lebanon began developing a national statistical master plan (SMP) in the 2000s to “help in setting out a medium term strategy for creating the necessary capacity to produce reliable data for policy and decisionmaking.” According to the World Bank’s website, the project was initiated in 2005 with technical assistance totaling $500,000. “It wasn’t endorsed. It was disseminated to the public on October 22, 2008, in the Grand Serail under the patronage and the presence of the prime minister with all the EU ambassadors in Lebanon, in front of all the UN agencies, public and private sectors — and we’d worked for more than two years with the World Bank,” Tutelian says.

In 2011, reform of the statistical system was back on the table, with a $129,000 grant provided by the Trust Fund for Statistical Capacity Building, a multi-donor trust fund administered by the World Bank. The objectives were similar: reform the statistical law, review and update the 2008 SMP, design an implementation plan and restructure CAS. According to Sidani, the World Bank is scheduled to visit Lebanon this month to meet with a committee of stakeholders — including CAS, the Ministry of Finance, the Ministry of Economy and Trade, OMSAR, Banque du Liban and the Ministry of Justice — to discuss the implementation of the plan.

Implementing the plan will be a crucial step towards modernizing the statistical system in Lebanon, improving coordination between the various line ministries to produce their own data for greater ease in compiling the statistical output at CAS. “The coordination mechanism may need some fine tuning; we cannot say there is no coordination because the law gives the mandate for all ministries and agencies to coordinate with CAS,” Sidani says.

Reforming the statistical system might also strengthen the flow of data from ministries towards compilation at CAS. It will have more direct effects towards empowering CAS to improve data provision — a needed priority according to a consultation mission by the IMF earlier this year: “Adequate funding and high level support for CAS, along with enhanced cooperation with other agencies, will help improve statistics.”

Modernizing the legal framework of CAS will also be affected following the implementation of the SMP. “The most important constraint is the lack of flexibility that we [CAS] have … it’s a problem,” says Tutelian, referring to constraints in the legal framework of the organization.

Finding funds

CAS had requested authorization from the prime minister to carry out a new census of buildings, dwellings and establishments — a housing survey used to indicate, in part, the household budget survey used in the CPI, and last conducted in 2004 — which would cost $4.3 million. Finance Minister Khalil’s statement in October indicated support for the work of statistical output of which CAS sorely needs, but the minister has remained committed, at least in this case, to not approving this amount as extrabudgetary spending, so CAS will have to reconsider its options next year.

Indeed CAS’ situation fits into a broader discussion on national budget reform, because CAS, as well as the other public administrations, has to use 2005 as a reference for submitting its annual budget. As Tutelian explains, “Nine years ago your needs were different; IT needs were different, scheduling was different, your working plan was different. In 2005 you spent what you’re spending now, your needs have changed, the products around you have changed.” This hinders CAS’ capabilities where it has to pinch pennies to continue its current services and rely on international agencies to piece together money for staff training, expertise and new studies.

Implementing the SMP will have a more targeted effect in coordinating the work of CAS with public entities. In the first five months of 2013 CAS did not collect CPI data.

In its report, the IMF wrote, “The CPI was not compiled during January–May last year, reflecting disputes with the prime minister’s office over funding for CAS. Funding to CAS and data compilation resumed last summer under strong Fund pressure.” An explanation for the stoppage has not yet been fully articulated; Sidani could not comment on the matter while Tutelian stated “I really — until now — I don’t know what was the cause, the real cause of the stoppage”.

[pullquote]CAS also suffers from delays in receiving data from other public administrations[/pullquote]

Working together

CAS also suffers from delays in receiving data from other public administrations — it’s not all ministries Tutelian insists — that have their own policies in producing and sharing data. Implementing the SMP would align these policies. Referring again to the IMF report provides some further perspective on the subject: “Technical staff — at CAS and other institutions — underscored the inadequate cooperation from other institutions in providing timely inputs; and thought that policymakers need a better appreciation of the importance of reliable statistics.”

For Hamdan, the private sector statistician, the problem also lies in who is using the data on offer. “There is a gap. But the shortage is in the qualifications of the human resources that should use this data that is available. The public bodies lack the managerial and the analysis capabilities that can use huge amounts of data.”

Despite these two challenges, Tutelian insists CAS’ work is both necessary and relevant, pointing to an example now nearly 10 years old. In 2005, Tutelian says, the minister of health saw CAS figures indicating that 51 percent of the Lebanese population didn’t have healthcare coverage — “So 51 percent of your population are left to their destiny, and [the minister] took the decision. It was based on CAS figures. The coverage of the services of the Ministry of Health was increased going from this indicator.” CAS hopes to be more helpful in the future, provided reform efforts finally start to garner momentum. She dismisses the guesswork and political maneuvering that guide decision making today. “Policies should be based on statistics,” she says.

November 24, 2014 0 comments

Automotive 2014 Business

Kings of the road

by Paul Cochrane November 24, 2014

written by Paul Cochrane

Car dealers are trying to keep upbeat. Weaker consumer purchasing power, and the overall economic malaise in the country are making it hard to do so, even if on paper it looks as if there is still growth in the sector due to consistently solid sales volumes.

According to the Automobile Importers Association (AIA), the number of newly registered car sales reached 28,811 in the first nine months of the year, up from a total of 26,601 cars sold during the same period of 2013. Such sales have surprised some, yet on a comparative basis the sector is down by 7 percent on 2012, and down by 12 percent on 2011.

However, compared to a decade ago, when sales were 19,100 for the whole year, in 2004, the sector is keeping its volume edge reached in 2008 of 35,400 units, with a similar figure expected to be achieved this year.

The difference to six years ago is that medium to larger cars do not account for the bulk of sales. Over the past few years, smaller cars — what the sector calls the A and B segments (sizes go from A, a compact, to large vehicles, G) — have dominated sales, with some 90 percent in that bracket, selling for as low as $9,000 (not on the road), according to the AIA.

“Small cars are still the bestsellers, allowing the industry to have some small percentage increase, but definitely the year was very tough, even more so than last year, which was tough,” says Farid Homsi, general manager of IMPEX, the distributor for Chevrolet, Cadillac and Isuzu.

It is an outlook repeated by dealers, particularly in the mid segments that do not have compact models and the same low prices as the volume sellers — the Korean brands, Kia and Hyundai.

“Overall, the trend in the sector is continuing compared to last year. People are still shifting to new cars from the old car market, and all distributors are being aggressive in offering services, warranties and good financing, which has driven sales. In terms of new car sales, I feel the mid-size range is suffering as a total segment, moving towards low cost Korean models of up to $20,000, while the upper sector, at over $100,000, is not as affected,” says Cesar Aoun, general manager of Mercedes at T. Gargour & Fils, which also sells Smart, Jeep, and Chrysler.

Luxury models however only account for 3.5 percent of the total new cars registered. That said, Maserati has had a good year, as has Land Rover, Bentley and Lamborghini, although Porsche sales are marginally down. Mercedes and BMW — long time local market favorites — have also done well, driven by new models. “Mercedes grew 18 percent this year, compared to 2013,” said Aoun.

Such relative exceptions aside, it is the middle segment that has really lost ground. “The segments below $55,000 are flourishing and having record highs. The sector over $120,000 is also doing well, as there are still people with huge wealth, but it is the middle to high middle class that is suffering, which before had not generally bought cars [below] $35,000,” says Marwan Naffi, general manager at Gabriel Abou Adal & Partners, distributor of Volvo.

[pullquote]To some, such easy financing and the rise of sales of small cars have artificially driven the market[/pullquote]

Artificial growth?

Low cost bank loans propelled the huge boost in sales since the mid-2000s, encouraging consumers to opt for a new car instead of a used vehicle. As AIA President Antoine Boukather notes, such low interest rates, some at zero percent, were never offered in the market in the past (see Q&A).

To some, such easy financing and the rise of sales of small cars have artificially driven the market, enabling dealerships to show to the outside world, to manufacturers in particular, that the Lebanese car sector is still buoyant in the face of domestic and regional instability.

“The market is growing artificially on small cars sold to mostly new time owners, which used to be used car owners, so while the market has dropped cumulatively between new and used by 25 percent, the figures provided by the AIA show the market is growing by a few percentage points. But as a matter of fact, the market is dropping, moving towards the A and B segments that weren’t there a few years back,” says Fayez Rasamny, general manager of RYMCO, dealer of Nissan and Infiniti. “Accordingly, all dealers are facing problems with manufacturers as the A and B sales are up. To negotiate with manufacturers, they say the market is increasing, whereas in sales dollars it is dropping.”

On the other hand, to those with A and B segment models the market was in need of such a stimulation and the current trend for smaller vehicles reflects market, and global, automotive realities. “It was another good year. When I say good, we are not having negative results. It means no decrease in the market, which is good for me. In a country like ours, with the negative surroundings and political conditions here, we are doing very well,” says Nabil Bazerji, managing director of G.A Bazerji & Sons, distributor of Suzuki, Lancia and Maserati.

[pullquote]“It was another good year. When I say good, we are not having negative results. It means no decrease in the market, which is good for me”[/pullquote]

To Boukather, who is also CEO and manager of ANB Holding, dealer for Mazda, the continued sales in the sector due to compact cars has provided much needed stability. “This year we’ve had a 25 percent increase in car sales. Why? Because the market is stable, we are number one in the premium category, and some seven brands are selling volume cars,” he says.

Wider selection sells

With the market having clearly shifted downwards in size, dealers outside of the A and B segments and with higher prices, have had to advertise heavily, as well as improve in-house management and services to keep customer footfall in showrooms. New models are a particular boon to get clients to trade in older models and take advantage of the current offers.

“New models have been a savior in a way, as there’s always demand for a new model. This allows you to have some air, and puts you in a nice mood for a product launch and to have some nice marketing campaigns,” says Homsi.

To adapt to changing market dynamics, dealers have urged manufacturers to cater to broader segments and reposition prices to be competitive. “We have been absent for more than a year from the B segment — the Chevrolet Sonic — as what happened in 2013 was that General Motors couldn’t give us a good price on it, so we didn’t have good volume sales, but after pushing hard for them to reposition the vehicle, they accepted, and repositioned the price, which will help us compensate for the missed sales in this segment, with our plan in the last quarter to sell 100 units,” adds Homsi.

Nissan had been the top seller in the country prior to the shift to A and B cars, and the aggressive entry of the Koreans. With Nissan not having a car below $15,000, RYMCO like other dealers globally have pushed for compact cars. “We don’t have A and B but are planning to hopefully launch models in these categories in the next few years,” says Rasamny.

Having a stronger low segment offering has certainly kept up sales for Suzuki, which only has vehicles in the A, B and C segments. “Whoever can offer more choice and wider selection in these segments will sell more. It is not about growing the market, but about getting into segments,” says Bazerji.

[pullquote]“New models have been a savior in a way, as there’s always demand for a new model”[/pullquote]

Diverse offerings have equally been a boon for Bassoul Heneine, dealer for BMW, Mini, Renault, Dacia and Rolls Royce. “This year has been better than last year for all our brands. The premium sector has improved by more than 20 percent for Mini and BMW, and the generalist sales, Renault and Dacia, is improving this year, up by 15 percent, whereas the market is plus 3 percent,” says financial manager Pierre Heneine. “This is due to two things, in luxury we have many new models and for the Renault group, the brand image is improving really well, with very reliable cars, and well positioned in terms of prices. One of our most successful cars is actually the Renault Duster, which even after three and half years into its life cycle accounts for a third of sales, while one third is for other models, and a third for Dacia.”

Keep it small

The Koreans dominate the sector, riding high for the past several years due to their affordable prices and the packages offered. Kia has 23 percent of the overall market, with 6,597 cars sold, and Hyundai is in second place — in trend with the rest of the Middle East market — with 19.5 percent share, at 5,637 units.

The A segment sales account for between 40 to 50 percent of Hyundai’s sales — similar for Kia — allowing the brand to grow by 8 percent this year. Hyundai have done so well due to low pricing, but also having a broad range of vehicles. “We have cars from $9,000 to $115,000, with over 18 models, and we can’t fit them on two floors of the showroom,” says Rachid Rasamny, general manager of Century Motor Company, distributor of Hyundai and Genesis.

The company was trying to bolster sales in its larger car segments, and to ensure the brand was not solely identified by low cost models, but the Korean brands have faced more competition this past year due to the depreciation of the Japanese Yen.

“Over the last year we’ve been trying to enhance sales of larger cars, but as the yen dropped it made the Japanese brands more price competitive, so we shifted our focus again to small cars,” says Rasamny.

[pullquote]“Next year we don’t think the market will grow, it will at best be stable, perhaps decrease a little”[/pullquote]

BDL regulations

While the sector has muddled through the year, the outlook ahead is perhaps less bright. Not just because of political and economic uncertainties, but due to the measures that had pushed the bulk of sales in recent years — low interest rates. As of late August, the Banque du Liban (BDL) issued a circular requiring 25 percent of down payment on vehicles and real estate, with only 75 percent on credit.

Dealers have different takes on the impact of the legislation. Some consider only volume sales will be affected, and not luxury, whereas others believe the whole sector will be negatively affected. Furthermore, some say they had not had reports of any defaults on loans, whereas others had, indicating that financing is a growing concern, with the BDL acting conservatively to stave off an unwanted flurry of defaults.

“Apparently a lot of clients that bought small cars have defaulted. If the [BDL move was] needed to regulate a more healthy environment, it is necessary,” says Fayez Rasamny. “But the provision they implemented doesn’t make sense, as it is too strict on banks. They will be really reluctant to finance. Although if we believe banks are not accepting clients, this will trigger in-house financing.” It is of course too early to tell the impact on the market, but overall sales volumes are likely to be affected. “Next year we don’t think the market will grow, it will at best be stable, perhaps decrease a little. Why? BDL wants to control consumer credit, whereas before you could have 85 percent, and sometimes even 100 percent credit,” says Heneine.

The BDL’s move has also drawn ire as there has been no corresponding move by the government to bolster public transportation (see “The road to more traffic“). “When you have good public transport, then this law on down payments makes sense. But with no public transport, this puts pressure on people in the lower economic category,” says Boukather.

Government Action

While dealers are awaiting the impact of the BDL regulations, they are also waiting for the government to make decisions on fuel requirements. For instance, fuel is officially of Euro 3 standard, whereas Europe is now operating at the Euro 6 level, which certain new car engines can only use. As a result, dealers cannot import such models. “There needs to be major legislation enacted to have proper fuel quality. That is why we cannot import the new Smart car, as it is Euro 6, unless [Mercedes] downgrades [the engine] for countries with bad fuel,” says Aoun.

Dealers are equally waiting for a president to be appointed to give the market a boost. “People are looking for any positive news, so if a president is elected, even though the whole country has many problems, his symbolic presence could have a positive impact on the economy,” says Naffi.

Correction: A previous version of this article misidentified Rachid Rasamny as a sales and marketing manager at Century Motor Company; he is the general manager. Apologies.

November 24, 2014 0 comments

Automotive 2014 Business

Running on empty

by Paul Cochrane November 21, 2014

written by Paul Cochrane

Executive met with Antoine Boukather, the recently appointed president of the Automobile Importers Association of Lebanon, to discuss the sector, the new regulations on loans, and regulatory issues in the transport sector.

It has been another difficult year for the sector, despite marginal growth.

Yes, the figures are the same, but they don’t reflect how the market is doing. We are suffering very much, in terms of marketing, competition and prices. Purchasing power has decreased, and in order to sell, you have to provide more advantages to customers.

So it is actually a good time to buy a car?

It is the best time to buy a car as circumstances are not always like this … Usually it is the customer that pays the interest but we — the dealers — are having to stimulate the market.

So dealers have increasingly tight margins?

Yes, for smaller cars around $2,000 and larger ones $8,000. I’ve never seen this before, as it means all profits are going toward the interest. This needs to change over the next few years because if the situation remains as it is, we’ll see a slide in sales.

Why are 90 percent of sales smaller cars?

There used to be no demand for small cars, but it is not the size but the price that is important [as small cars tend to be less expensive]. A car of $10,000 was not in demand before, as then it was common to take the bus or a service taxi, but now there are few buses and oil prices have gone up, as they have all over the world.

The government is not encouraging sales of electric or hybrid cars, wouldn’t that be part of a solution?

It will come, I am sure, as people can no longer accept prices due to low income — the minimum wage is $500, and people can’t live off of that. People are having to move out of Beirut, 10 or 20 kilometers out, which is why there is demand for cars with a low budget.

Will the new central bank requirement of a 25 percent down payment have an impact?

Definitely. With the new down payment [requirement], there will be a drop of 30 percent in sales, but I’m not only concerned about a drop in sales, but also in employment. You sell less, you don’t make money, fine, but with more people unemployed, it’ll make for a revolution. That is why they have to be very clever with financing. Before, the central bank and all the banks would provide loans to the distributor, so if there was any default, it was a major problem. But for the last 10 years it has been up to individuals, which is safer.

Was a rise in defaults one of the motivations behind the regulation?

There have not been too many [defaults] in the automotive sector till now. They fear a bubble in the making which would be bad for everyone, but you can’t force people to not move around, they need some form of transport.

Could the extra down payment be used somehow to pay for public buses?

It would be a very good idea. Have you ever been to a country without buses? They are a must. I don’t know how we’re working without buses. No wonder why there are so many cars blocking the roads, as everyone needs a car.

Which is why Lebanon has one of the highest rates of cars per capita in the world.

People would be happy to have public transport to save not only money but stress, as it is driving that is stressing people out.

So will the new traffic law help?

The law has been passed and it would make for a good system, but the government needs to enforce it.

Is there a need for carbon emissions standards and related taxes?

I don’t think it could be done in this part of the world, as the money needed to balance the budget comes from automobiles. You pay a lot on duty.

But surely for a car that costs over $100,000 the customer can afford to pay say $20,000 in tax to offset carbon emissions?

I don’t think so. People wouldn’t buy. Look at hotels, they are at 46 percent occupancy, and need 60 percent to break even, and we’re not getting the tourism we need for our economy. This is why there’s such a high percentage of sales of small cars.

What I am getting at is introducing environmental regulations with regard to vehicles.

They are thinking about it, and clean cars should pay less taxes than others. In a country that relies on tourism, we especially need this.

But in many countries, including Jordan, you pay no taxes on electric or hybrid cars.

There was a law being discussed for electric cars, to pay no tax, but it is not yet finalized.

Are you trying to pressure the government on these matters?

They have so many important issues of security and others to deal with, that we can’t pressure them. The laws are there, good laws, but you have to apply them.

It seems there is increasingly less respect for the law, especially on the roads, than a decade ago when for instance you were banned from talking on a mobile phone in the car.

Yes, I am not sure why, and it is dangerous to talk on a phone when driving. The law should be followed, it is there, and after the minister first passed the law nobody used phones, but after a few months it was forgotten about.

Last year, in the US, accidents were up by some 15 percent, attributable to the rise in use of smart phones.

Yes, with the smart phone it is even more complicated. It is practical, but we need to do things for people’s safety.

Are there plans to improve driving tests?

It is not a test; it should be reformed. They should be stricter on how people acquire licenses. It is easy to reform it. Our first priority is for people to be safe on the roads.

Another issue is that only 50 percent of cars go for the annual inspection.

Why do you think that is? So people don’t have to pay for it. If the law says that any car that has not been through the annual inspection will be confiscated, everyone would go and do it. But because that threat is not there, half of the people don’t do it.

And you can rent spare parts for the test.

Yes, everyone knows this, and it is still happening, which is bad. To change your tires — and you can die with bad tires — people rent tires for a few hours. You have to have people enforcing and checking this. It would take weeks but not months to apply.

Indeed, when parking ticket meters were introduced, many said it would not work but that has not been the case.

Yes, they are giving out fines, and it is well managed.

Update: Antoine Boukather has contacted Executive to clarify that margins are around 2 percent for smaller cars and 8 percent for larger ones, not $2,000 and $8,000, respectively, as said in the interview.

November 21, 2014 0 comments

Automotive 2014 Business

The road to more traffic

by Paul Cochrane November 21, 2014

written by Paul Cochrane

Road transportation in Lebanon is getting steadily worse. Traffic is congested, law enforcement is sporadic, half of the country’s cars skip the annual inspection, and public transport is almost nonexistent.

The good news should be that a new traffic law has been passed by Parliament, 20 vehicles to be equipped with speed radar have been ordered, and there are plans to acquire 250 public buses. There is even talk of introducing points for speeding offenses on driving licenses.

The reality is that there have been negligible improvements to transportation since the Road Transport Master Plan was drawn up in 1994. “There have been some physical achievements, there are traffic lights, CCTV camera, a traffic control system, and paid parking, but real change didn’t happen, implementing a well organized public transport system that is not only buses but something additional, a light rail or metro,” says Tammam Nakkash, managing partner at TEAM International, a Beirut based engineering and management consultancy that drew up the plan.

As for the new traffic law, it has yet to be enacted. “Who has told the police about it? I don’t think they even know about it, and the public doesn’t know about it. What’s the point of a new law if it’s not enforced?” adds Nakkash.

The police, meanwhile, go off on international field trips to assess traffic solutions in other countries — most recently to Sweden — and while the upper echelons of the force are reportedly keen on improving policing, this has not translated into any change on the roads. You can still drive through a red light without a buckled seatbelt, with one hand using a mobile phone and the other clutching a bottle of booze and the steering wheel, with near impunity. The police rarely carry out spot checks on vehicles — that is left to the Internal Security Forces (ISF) and the army, but they have a remit for security checks rather than to see if the car has passed its annual road maintenance check, or to fine someone for speeding away from a check point.

“We’ve reached a stage where the law is a point of view. Today at a junction you need three policemen just for people to stop at a red light. This is dramatic. It is all justified by the political and economic situation,” says Marwan Naffi, general manager at Gabriel Abou Adal & Partners, distributor of Volvo. “If a policeman stops someone speeding, the offender says ‘Why are you worried about this? Go worry about the border or [ISIS].’ If you talk to the government about the bus tender, they say we need to equip the army instead.”

Meanwhile, the multi-million dollar traffic control center by Qarantina has state of the art systems with traffic signals and cameras connected via fiber optics, but is underutilized and has not alleviated any traffic flow problems. “We took a software engineer to the center and he said it was three times bigger than the one in Abu Dhabi; it’s as if you bought a Ferrari and just left it parked,” says Nabil Nakkash, a transport systems engineer at TEAM International.

Mobile and fixed speed cameras have also fallen out of use, despite initial successes and the generation of income from fines, with the two months during which the system was operational in late 2010 seeing accidents drop 10 percent, the death rate by 43 percent and injuries by 12.5 percent. To get the system up and snapping license plates again, 20 vehicles were ordered by the government to be equipped with speed radar detection equipment but, while in the country, have not yet been put out on the roads. As for the new law, it brings traffic legislation up to international standards, but does not mention carbon emission standards. “The new traffic law is very comprehensive but in my opinion it needs in parallel side resolutions to make it effective,” says Cesar Aoun, general manager of Mercedes at T. Gargour & Fils. “And there is no clear direction about the future of energy consumption — diesel, liquefied petroleum gas (LPG), hybrids or gas fuel.”

[pullquote]“We should talk about fuel consumption of a car compared to the time, not the mileage per minute when you are caught in traffic”[/pullquote]

Mileage per minute

As the government focuses on security issues and finding a presidential candidate, the traffic and the pollution worsen, with the number of cars growing by 5 percent a year, adding to the 1.42 million vehicles on the roads, of which 75 percent are over 10 years old, and 50 percent over 20 years old. With 60 to 80 percent of air pollution generated by cars, this has led to dangerously high fine air particles in the capital that are three to four times higher than World Health Organization standards, according to a study by the American University of Beirut’s Air Quality Research Unit.

Congestion within the city and at the inroads to the capital has resulted in an average speed of 10 to 30 kilometers an hour, making journeys 50 to 70 percent longer than necessary, and causing estimated economic losses, as of 2010, of $2 billion per year — about 5 percent of gross domestic product — according to figures from Nakkash.

It is clearly a lose–lose situation for everyone, with even those involved in selling vehicles crying out for a solution, with some dealers admitting that they no longer enjoy driving due to the traffic, and a motorbike dealer saying he no longer rides his bike because of the anarchy on the roads.

“We should talk about fuel consumption of a car compared to the time, not the mileage — the mileage per minute when you are caught in traffic,” quips Nabil Bazerji, dealer for Suzuki and Maserati.

New, shiny buses?

In January 2013, a tender was launched by the Ministry of Public Works and Transportation for 250 public buses to be delivered and on the road later in the year. But no tenders were awarded, and 21 months later, there are still no public buses.

“The tender keeps being postponed and with the current government it doesn’t look like it will happen. I don’t think car companies are against it as they want to sell cars, and [they] get stuck in traffic too,” says Rachid Rasamny, general manager of Century Motor Company, distributor of Hyundai. New buses are certainly needed, with the 288 buses acquired in 1998 by the official public transit authority OCFTC having been gutted for spare parts to the point that less than a dozen remain on the roads. Correspondingly, the use of public transport has steadily dropped, with only 19 percent of all trips in Beirut made by public transport, of which only 1.7 percent are catered to by public buses.

While buses would be a plus, with one bus able to take 100 people on board, they are far from being a panacea to the congestion. People have to be encouraged to take the bus, and that begins with access and good routes. “Before the bus service, you start with walking. Without the ability to walk to a bus stop, public transport will not work, and we’ve a problem regarding walking,” says Nakkash.

He is also concerned that the new tender will be a repeat of the past initiative, which had trained up 400 drivers before the service went on a slippery downwards slope as buses were decommissioned and private vans took over the OCFTC routes. “If we buy 250 buses, the exact same thing will happen again. The background structure of regulations and enforcement was not put in place,” adds Nakkash.

On top of these issues, the public is not likely to opt for taking the bus if the traffic is still congested. “The problem in the city is not about what has been talked about for the past 20 years. It is not about moving the flow of cars, but people. Even if you have the best traffic controls, lights and enforcement, if there’s no mass transit public transport system that can be relied on, nothing can change. If the buses get stuck in traffic, will people prefer to be in a bus stuck in traffic or in their own car?” says Nabil Nakkash.

20 years on

The problems Tammam Nakkash highlighted in reports 20 years ago are still the same. In 1995, he wrote that “enforcement is sporadic … and not uniformly applied,” while no action has been taken on his plans for a mass transport system. Nakkash is now using Beirut as a case study of how public transportation goes wrong in order for others to learn from the experience.

“Our computer simulations for the transport model in 1995 showed that even if everything was done related to infrastructure, without a mass transport system by 2015, things would be worse than in 1994, and now I am seeing that happen, although the growth in population didn’t match forecasts,” he says.

Given the lack of improvement in public transport, Nakkash believes that campaigners should move beyond just opposing government transport measures, such as the planned Fouad Boutros highway between Achrafieh and Mar Mikhael that has met major resistance, to proposing solutions. It is a concept that Karim Attoui, a facilitator at Public Interest Design (PID), has picked up on.

“I ask people to look at things differently. We are in anarchy, and our approach to problem solving needs to change. The problem with activists is that they make demands, and when they offer solutions, they don’t take into consideration a highly corrupt government and country, so we use the ‘WWC’ slogan — work with corruption,” says Attoui. “You have to propose something to the government that people can make money out of.”

The PID advocates using stakeholder analysis to offer specific solutions to areas such as Gemmayze. With shared values taken into consideration, you see who benefits and who loses, and adapt the model accordingly. Based on research into inhabitants and businesses in Gemmayze, and how the traffic is handled, Attoui is suggesting altering traffic flows, pedestrianizing areas, and introducing shuttle buses to take people from car parks to stores, restaurants and bars.

“It’s about giving people multiple micro-scale options and not offering a Rapid Transit System, which is expensive. You will have traffic elsewhere, but that is not our issue, it is about micro spaces in the city that are teeming and booming,” he says.

Looking at the problem realistically, Attoui is also suggesting keeping valet parking as part of the shared values theme, whereby those that want to pay for valet can, at a price. “In a pedestrianized Gemmayze for instance you need to think about the valets, which are a mafia, to develop a compromise solution. The valet would still be business, although not as big as before, but you’d have former valets driving microbuses in conjunction with the valet system.”

Improve car sector

With no public transport, the country has to work with what is in place, which is private transport. The most direct way to improve air quality and reduce pollution would be to impose tougher carbon emission requirements on vehicles and to encourage the use of electric or hybrid cars. Instead the government is resisting such moves.

“Nothing has changed in the automotive sector for years, no legislation, nothing. Imagine today that you are not allowed to register and import an electric car with zero emissions. Elsewhere you get subsidies to buy electric, whereas here you pay up to 50 percent in customs, plus VAT, and you are not allowed to even register it,” says Pierre Heneine, financial manager at Bassoul-Heneine, dealer for BMW and Renault.

Increasing awareness about carbon emissions would be a start, argues Anthony Boukather, CEO Manager of ANB Holding, dealer for Mazda. “If the media starts talking more about emissions it would help, but the primary attention of the Lebanese is on politics. Few understand what carbon emissions mean. If you go to Europe, anyone aged over 10 can talk about CO2,” he says.

While a vested interest, car dealers want to push for old cars to be taken off the roads and replaced with more fuel efficient and ‘cleaner’ cars. Over the past decade, through offering low interest loans, the share of sales of old to new cars in the market has gradually shifted, with an estimated 30 percent of cars bought being new. However, as of October, Banque du Liban issued a requirement that customers have to now pay a 25 percent down payment on cars. This is likely to result in a drop in sales of cheaper cars, leaving people with the choice of buying a secondhand car or resorting to the lackluster public transport.

“It is the lack of public transport which is keeping sales of cars up. When you have good public transport then this BDL law makes sense, but people are not being given an option, of public transport or a down payment,” adds Boukather.

In the meantime, until the security situation improves and the government gets its act together, it might be worth buying an orthopedic car seat to more comfortably endure the inevitable congestion.

Corrections: A previous version of this article erroneously claimed there are 1.6 million vehicles on Lebanese roads; the correct estimate, by the Automobile Importers Association, is 1.42 million as of 2013. Also, Rachid Rasamny, general manager of Century Motor Company, was mistakenly identified as a sales and marketing manager. We regret the errors.

November 21, 2014 0 comments

Business Entrepreneurship Entrepreneurship in Lebanon

Beyond the lira

by Livia Murray & Thomas Schellen November 20, 2014

written by Livia Murray & Thomas Schellen

This company is part of Executive’s Top 20 in science and technology. Read more stories of our special report on entrepreneurship in Lebanon, as they’re published here.

Yellow Distributed Technologies

David El Achkar

Industry: ICT, financial services

Project/product: Yellow Bitcoin payment processor

Year of incorporation: 2014

Product launch: 2014

Employees: One

Board of directors: Yes, four members

Founders: David El Achkar, Ola Doudin, James Piechota

Bitcoin falls into the ranks of one of these new and emerging technologies that even those who have heard of it don’t know very much about, and only a niche clan of followers actually know how to use it. But David El Achkar, cofounder of Yellow Distributed Technologies, sees Bitcoin as “the future of financial transactions,” which he tells Executive could potentially become a replacement for the traditional financial foundation.

Such a future oriented project reflects an entrepreneurial vision and risk taking that Executive commends. Achkar expresses his ambition to grow not only the business, but also a greater awareness and adoption of Bitcoin in general, which of course go hand in hand.

The model in question is a company geared to providing Bitcoin payment solutions, with its first product a Bitcoin payment processor. Only recently launched, it gives online merchants the possibility of offering Bitcoin as a form of payment to their customers. The merchant just has to integrate the processor onto their platform and, voila, they have a new techie friendly and sophisticated payment option without having to deal with any of the technical complexities. Yellow is not currently charging for vendors to accept Bitcoin, but they are taking a 0.5 to 1 percent fee when the merchant wants to transfer the Bitcoins into more traditional forms of cash.

Achkar acknowledges that in the Middle East, their target market, Bitcoin technology is not being adopted at very high rates. But they hope that the products they build around it will make it more accessible to a mainstream audience. With no direct competitors in the region known to either Achkar or Executive, entering the market early could give them the first mover’s advantage if the industry takes off. Achkar concedes that it is a bet they are willing to take.

They currently have three customers, and are in talks with 10-15 potentials with a strong interest, according to Achkar, who adds that they vary across the board in terms of industries and maturities, though “what connects them all is forward-looking businesses.” They are currently gathering feedback, and Achkar says the push to get clients will be much more aggressive after this stage. They are currently focusing on Lebanon, Jordan and the UAE.

Their expansion plans are twofold. Geographically, they want to cover the entire MENA region, and after their three initial markets are looking to move on to Saudi Arabia and Egypt. Product-wise, they are also planning to expand into more B2C offerings.

They have just raised $250,000, mostly from angel investors with a small portion of it from friends and family, according to Achkar. He believes this will last 6–12 months, at which point they should be closing a Series A round of investment pegged at somewhere around $1–2 million. The heavy upfront investments certainly make it a ‘cash-burning entity’ for now, but Achkar thinks they can break even in the next 2–3 years.

November 20, 2014 0 comments