Business

Filling the gap

by Matt Nash
written by Matt Nash

When international oil companies refused to fund a new survey of Lebanon’s onshore, private investors stepped in, to the tune of $7.8 million. The survey, being conducted from the air with two specially tweaked planes, will cover 6,000 square kilometers and will offer insights into Lebanon’s onshore oil and gas potential. Data acquisition is currently underway, with fully analyzed and interpreted results expected in the third quarter of 2015.

The point of the aerial survey is to collect data on Lebanon’s as yet understudied subsurface. While a 2-dimensional seismic survey was supposed to be completed in 2014, the work that began in late 2013 is currently on hold. Instability on the Lebanese–Syrian border and the country’s mountainous terrain both played roles in temporarily derailing the seismic survey, the Lebanese Petroleum Administration (LPA) told Executive in October. Border instability also influenced the area the aerial survey will cover, explains Ziad Abs, a founder of Petroserv, the local agent for US based NEOS GeoSolutions, the company conducting the survey. Initially, NEOS planned to survey nearly all of Lebanon north of Beirut. The new plan, according to Abs and maps released by the company, is to avoid the borders but still fly over much of northern Lebanon. The company’s maps indicate the onshore survey area will cover the area stretching from Jounieh in the south past Tripoli in the north. To the west, the planes will actually fly over the sea but will stop short of the border going east. In an effort to still cover 6,000 square kilometers but avoid the borders, NEOS will also be surveying most of Lebanon’s coastal waters, known as a transition zone between offshore and onshore (see map below). The offshore seismic surveys conducted so far have not gathered data on the transition zone.

Cash problems

NEOS was unavailable for comment, but Petroserv’s Abs explains that NEOS was among three companies speaking with the Lebanese government about doing an onshore survey in late 2013. Petroserv, which Abs helped found in 2012, was envisioned as a platform to bring Lebanese expatriates with oil and gas experience back to the country to service the country’s nascent sector. In fact, Abs says, there is a Lebanese American working at NEOS, which is how the two companies were initially introduced and why Petroserv became their local agent. “When NEOS was shortlisted to do this project, the three shortlisted companies refused to do a multi-client agreement because they usually get paid for the project, and we were the agent, so we said, ‘Fine, look, let’s use this opportunity. We’ll underwrite this project for you.’”

 

Survey area

[media-credit name=” NEOS GeoSolutions” align=”alignnone” width=”580″]PETROSERV_MAP[/media-credit]

 

The funding problem is something the LPA also faced in trying to do more offshore surveys, as Executive reported in September. One way to fund both onshore and offshore surveys is through a multi-client mechanism, meaning several entities — usually the state, along with international oil and gas companies keen on a first look at whatever data the survey will produce. With the onshore survey, however, NEOS and the other companies were dealing with the Ministry of Energy and Water, not the LPA, because there is still no onshore exploration and production law in Lebanon — and the LPA’s remit is limited to offshore. 

Petroserv created a special purpose vehicle called Geo Data World to raise the $7.8 million needed to finance the project. Abs didn’t go into the details of who exactly fronted the cash. According to a presentation about the Lebanon survey on NEOS’ website, the data should be available for sale to interested oil and gas companies from March 31, 2015. Abs says the Geo Data World investors are not expecting huge returns, at least initially.

“There are no high expectations. The target is to recoup the investment. The higher expectations depend on a few things. There’s no onshore law yet,” he says. “All the investors know they will return their investment. We know from the offshore [experience] that a lot of companies bought the data for their own library, even some that didn’t apply to prequalify to bid.” Indeed, offshore data sales brought in at least $33 million for the Lebanese government as of 2012 (Executive has not been able to get a more up-to-date figure for total revenues.) Abs opines that interest in onshore data may be minimal at first, but should an onshore law be passed — or if there is ever an onshore licensing round — international oil and gas companies may want this data.

A look beneath

While there have been seven onshore wells drilled between the 1940s and 1960s, information on Lebanon’s onshore remains scant. A NEOS presentation about the Lebanon project notes that Syria has many onshore discoveries and that there could be similarities between the two countries’ subsurface geology. Chris Friedemann, NEOS’ chief commercial officer and executive vice president, explains in a presentation of the project that “additional questions [about Lebanon’s onshore] of fundamental importance — including the location of faults, burial and thermal histories and basic basin architecture and morphology — all remain unanswered. In part, these questions remain unanswered, especially onshore, because of a lack of information and basin geological and geophysical data.”

The NEOS planes will be gathering five different types of information: gravity, magnetics, electromagnetic, radiometric and hyperspectral. With this data, the company will create 3D models of the survey area and identify prospective locations for exploration drilling. As with any survey, it will either produce useful information for exploration purposes or indicate there is not much to drill for. However, nothing is certain until wells are actually drilled.

Cheaper onshore

Despite the hype surrounding Lebanon’s offshore, onshore may prove to be even more attractive because of the difficulties offshore presents. Most of Lebanon’s offshore exclusive economic zone — where any future drilling will commence — is largely composed of very deep waters, which makes drilling very expensive. Stephen Dow, a lecturer in energy law at Scotland’s University of Dundee, explains, “Onshore, and in shallow water, costs aren’t too bad and the potential reward is significant. Deepwater costs tend to be astronomical and payback, even if you hit something, is not fast. The statistical hit rate for deepwater commercial finds is lower than the worldwide (including onshore) average of about one in nine.” Dow was speaking of onshore versus offshore in general, not about Lebanon specifically.

Data gathering for the new survey began in October and is expected to last, weather permitting, until the end of December. Data processing is slated to finish at the end of March 2015, with fully interpreted data available by the end of September 2015. NEOS, according to the presentation, will incorporate data from the seven dry onshore wells drilled decades ago and will tie data on the transition zone to existing 2D and 3D offshore surveys.

When interest in Lebanon’s onshore will really pick up, however, is anybody’s guess at this stage. The LPA has drafted an onshore law, and told Executive in October it should be submitted to parliament “within a few days.” When parliament will meet to discuss and eventually approve the law, however, remains unclear.

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Economics & Policy

Refuse crisis

by Matt Nash
written by Matt Nash

The Syrian refugee crisis is paradoxically helping Lebanon solve its longstanding trash disposal problem. The refugees are themselves producing more garbage, and since Lebanon has long struggled with the problem of where to put much of its refuse, the European Union was prompted to donate €14 million ($18 million) in 2014 to build more landfills along with sorting and treatment plants, much needed infrastructure projects. While change will not come overnight, this money — and a second €21 million ($27 million) grant that the EU is also expected to approve shortly — will mean that 95 percent of Lebanon will be covered by waste management facilities, says Mohamad Baraki, manager of the solid waste management program at the Office of the Minister of State for Administrative Reform (OMSAR), which oversees the spending of the EU money.

Baraki tells Executive that Lebanon will use the EU funding to build five new sanitary landfills (in addition to the three it currently has) and rehabilitate an existing landfill in Zahle. This, in theory, will go a long way toward ending the relatively common practice of simply dumping unsorted, untreated trash onto empty land. A 2011 study by Earth Link and Advanced Resources Development (ELARD), a local consultancy, found there were 670 uncontrolled, open trash dumps spread throughout Lebanon. The vast majority, 504, contained standard household trash, or municipal solid waste in garbage jargon. Construction debris filled the remaining 166 dumps, ELARD found. This rather unsanitary state of affairs predates the influx of more than one million Syrian refugees in the past three years. According to Sweepnet, a regional project focused on waste management funded by Germany, 29 percent of Lebanon’s 2.04 million tons of solid waste was open dumped in 2013. Sweepnet’s numbers do not include waste from informal tented settlements, where 171,476 Syrians refugees were living at the end of August 2014 according to UN estimates.

More open dumps

A study published in late September 2014 by the Ministry of Environment estimated that refugees will produce 889 tons of garbage per day by the end of 2014, equal to 15.7 percent of waste which Lebanon generated per day in 2011, the year used as a baseline for the study. Farouk Merhebi, author of the study’s solid waste section, tells Executive that, because of the refugee crisis “the numbers [of open dumps] have probably increased, but we have no solid data. We assume there are new ones. We have seen that next to some informal tented settlements there are new dumping grounds.” However, Merhebi adds that he did not conduct enough field research to quantify exactly how the crisis is impacting open dumps. He notes, however, that in the settlements he did visit, there was evidence that trash was also being burned to minimize volume.

Once solutions are in place — Baraki from OMSAR estimates it will take two years to build a landfill — it is unclear whether Syrian refugees will still be in Lebanon and, if they are, who will collect their trash. By law, municipalities are responsible for garbage pick up, and Sweepnet reports that — excluding refugee settlements — Lebanon does collect 99 percent of its garbage, even if nearly one third of it is open dumped. The 2014 Ministry of Environment study estimates that 48.4 percent of the garbage created by refugees will end up in open dumps, but as Merhebi, the study’s author notes, limited field visits suggest at least some of the trash is being dumped on the settlement sites, meaning that no one is collecting it. Olivia Maamari, with the local NGO Arcenciel, works on recycling initiatives in settlements and says trash problems vary from settlement to settlement. “You can’t generalize,” she explains. In Tripoli, for example, she says the municipality was not collecting trash from settlements, resulting in mini-landfills within the refugees’ living space. Littering in the settlements was also a problem. “So we lobbied the municipality to collect more and did an anti-littering campaign,” she says, noting that both were successful. 

She stressed, however, that trash remains a problem in most of Lebanon’s Syrian refugee settlements. The Lebanese government on October 9 once again deferred a decision to approve a national solid waste management plan, something governments have been vowing to approve for over a decade. While the EU grants will help alleviate Lebanon’s trash problem a few years down the road, until landfills and sorting and treatment plants are completed, the garbage will continue to pile up.

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Economics & Policy

High and dry

by Maya Gebeily & James Haines-Young
written by Maya Gebeily & James Haines-Young

In an informal tented settlement just outside of Zahle, dozens of Syrian refugee women and girls crowd around faucets pumping water out of a large plastic tank. The “UN truck,” as they call it, has just filled their settlement’s communal tank with thousands of liters of water, and they rush to collect their share before it’s gone. After filling their buckets and bottles, they return, water sloshing, to their tents to drink, cook and clean.  

But barely 100 meters down the dirt road is a drastically different story. In a settlement of the same size, refugees are experiencing the full brunt of Lebanon’s water crisis. No ‘UN trucks’ come by to deliver potable water here — instead, refugees buy their drinking water from costly private companies. Mothers keep their children inside, in the shade of their tents, for fear of dehydration were they to play in the sun. The water they use to cook and clean is pumped out of a small well behind their settlement, depending on whether state electricity is on long enough to fill their tanks.

This difference in resources is representative of the difficulty in access to resources for refugees. Although Lebanon’s water crisis is a national one, some communities have been hit harder than others. And as one of the most vulnerable populations in Lebanon, Syrian refugees living in informal housing are some of the most severely affected.

[pullquote]Most of the issues we’re seeing are actually due to poor management of water resources, water supply and use. The influx of the refugees from Syria is just making a pre-existing problem worse and bringing it to the surface”[/pullquote]

Lebanon’s water crisis

The news that Lebanon has a water shortage will not be a surprise to anyone who has lived through another long, hot and dry summer here. Water cuts have been common in Beirut and elsewhere. Last winter, Lebanon had less than half the normal annual rainfall and, crucially, very little snow, which is important as snowmelt is a major contributor to the aquifer recharge rate. This has left the water table much diminished and most wells, springs and rivers well below their usual level. Indeed many of the country’s main sources of water have dropped by upwards of 50–60 percent. This is already a less than ideal situation for Lebanon to be in, but once you add the additional population of well over a million Syrian refugees, the already scarce resources are stretched to the breaking point.

The private trucks which have become a common sight in many communities are filling the gap — for a price. While lack of water is an issue that has affected everybody in Lebanon, according to Chad Walker, one of NGO CARE International’s water specialists, refugees are among those hardest hit. “The reason for the big impact on the refugee population over other communities is simply that they’re at the bottom in terms of the resources they can provide,” Walker said. “So when prices go up they are the ones most affected.” The precarious situation that many of Lebanon’s refugees live with on a daily basis prevents them from making long term provisions for issues like paying for water and so, without assistance from the likes of Care International, many have to go without.

However, there are two sides to Lebanon’s water crisis. The majority of water comes from groundwater, so low precipitation means shortages. But management of the resource is also key. “It needs to be emphasized that Lebanon, in one sense, is blessed because it has more water resources than many of its neighbors. But because they have quite a bit of water, it is managed quite poorly,” says John Stiefel, a water, sanitation and hygiene specialist for international NGO World Vision. It is generally estimated by many NGOs working in Lebanon’s water sector, and the government, that the aging infrastructure leads to a loss of between 50–70 percent between the extraction of water and its arrival at the end user. This is mostly through broken piping.  “Most of the issues we’re seeing are actually due to poor management of water resources, water supply and use. The influx of the refugees from Syria is just making a pre-existing problem worse and bringing it to the surface,” continues Stiefel.

[pullquote]A lack of clean water resources in these settlements creates significant health risks[/pullquote]

Vulnerable communities in informal housing

As costs of living in urban areas get higher, an increasing number of Syrian refugees in Lebanon are moving to informal shelters, like unfinished and abandoned buildings or tented settlements such as those in the Bekaa valley. Here, they become the most vulnerable to water and sanitation issues. A July 2014 UN report showed that, especially in informal settlements concentrated in the north and the Bekaa, water scarcity is considered high and the populations are the most vulnerable.

One such informal settlement is the water-scarce one described above, just outside of Zahle in Fayda. Local camp leader Yehya Madhalla described a dire situation. The settlement’s 500 families, who have rented land from a local farmer to set up their camp, pump water out of a small well behind their tents to individual household tanks — whenever the power is on long enough. Since the water has a strange taste, Madhalla says families are forced to buy drinking water in gallons, while using the well water to cook and clean. The pipes transporting the water from the ground run through piles of debris, and an old well sits half-covered in a mound of trash and dirt. Because of the water shortage, some families are still forced to wash in water from this old well, which they say has brought on strange skin diseases. Layali, a five year old girl covered in white spots, hugs her mother’s leg. “We’re showering in water from the well,” her mother said. “Her whole body was like this and she’s itching.”

Without a proper waste management system, families are forced to live in close quarters with their own waste, creating dangerous health risks. “We’re worried that the tanks will be affected by contaminated water,” Madhalla said. “There are families living here, right where the sewage comes out.”

While access to water for consumption is difficult, it’s only part of the issue. “We are saying water, but sanitation, hygiene and public health are all linked to that, so water is [just] the key word. But food, health, wealth, productivity and stabilization are all linked,” says CARE’s Walker. A lack of clean water resources in these settlements creates significant health risks, according to the UN’s Water, Sanitation, and Hygiene (WASH) Working Group, the coordination group for all agencies providing water related aid to Syrian refugees. In a February 2014 report, it admitted that testing done so far indicated a “high level of contamination” in many of the water supplies to which refugees have access — as much as 10 times the accepted chemical amounts set out by the World Health Organization. Because of the extensive agricultural use of the Bekaa valley, high nitrate levels and other contaminants can be found in the surface water there. When testing water quality at some of the camps they work in, CARE also found worrying biological contamination and fecal coliform. While Walker stressed that this didn’t necessarily mean that there were pathogens in the water, it did indicate that there was a direct path into the water for waste and represented a significant public health risk.

This water is then run through systems that are not always clean — including water trucks that haven’t been properly disinfected or chlorinated, storage tanks that have been used for unclean water, and pipes or containers that have been contaminated by rats or other animals.

Many of the biggest health risks stem from inadequate waste management containers. As of June 2014, at least 29 percent of refugees registered with UNHCR needed improved sanitation facilities like latrines and solid waste facilities. In one case handled by World Vision, a group of refugees living in a building in the south of Lebanon had covered a hole leading to the septic tank in their shelter with a raggedy mattress. “It’s to keep the rats in,” the head of the family told World Vision staff. In Madhalla’s settlement in Fayda, refugees who spoke to Executive frequently mentioned improper waste management as one of their biggest health concerns.

[pullquote]“Most Lebanese, if they’re not getting water from the grid, can generally afford water trucking. With Syrian refugees, that’s not the case”[/pullquote]

Some of these health issues are already manifesting themselves. The WASH Working Group’s February report noted that a full 25 percent of refugee children had reported cases of diarrhea within the two weeks that the report had been written. Last year, the World Health Organization noted a “high risk for most water-borne diseases” in Lebanon, including shigella, typhoid, and hepatitis A and E.

Besides health implications, the water crisis has also imposed significant costs on refugees in tented settlements. Executive spoke to Madhalla in the middle of September, as Lebanon’s blazing summer was coming to a close. His settlement had experienced a particularly difficult few months: in June, the camp’s only well had dried up, leaving the 500 families there without a steady source of water. Families began to fill their water tanks with ‘unclean’ water for LBP 8,000 ($5.33) from water trucks, but it “wouldn’t last them two days,” Madhalla said. Since then, the landowner has built a new well for the refugees — but again, they had to cover the costs. “He took $20 from each family … There’s no work, so we can’t pay for more,” Madhalla added.

“We can safely say that the Syrian refugee community has less resilience,” said World Vision’s Stiefel. “Most Lebanese, if they’re not getting water from the grid, can generally afford water trucking. With Syrian refugees, that’s not the case.” As funding for NGO projects are short lived, there are often gaps between the end of one project cycle and the beginning of another. Between projects, refugees are left on their own to pay relatively exorbitant costs for water.

An emergency response

To address the immediate water needs of refugee populations in informal tent settlements, WASH actors are providing water tanks, pumps, filters and water itself to vulnerable refugee populations in informal settlements. Many NGOs have also relied on regular water deliveries to some of the most vulnerable areas.

But as with Madhalla’s settlement, not all tented communities have access to the same resources. Madhalla’s camp was provided with a large communal tank, individual 1,000 liter tanks and portable filters for each family. But since that initial delivery, Madhalla says his settlement has received no further support. “They brought us tanks and filters, but no clean water. Even after we filter it, we don’t drink it,” he says. “Sometimes we go buy water from the other camp, even though they get it for free.”

The ‘other camp’ near Madhalla’s is run by Talal Majalla, a Syrian farmer from Homs. Majalla’s camp gets water deliveries every two days from humanitarian organizations. Still, even the well that his settlement uses is starting to dry up and become unusable. With refugees increasingly relying on the water deliveries, Majalla says that problems typically associated with shortages are beginning to crop up. “If you can get there fast enough to get more water, you get more,” Majalla said. This first-come-first-served method has sparked several fights at the pump, which Majalla says he’s had to break apart.

Seeking sustainable solutions

With growing provision problems, WASH actors are turning towards more sustainable solutions. To do so, they’re seeking to link informal settlements to existing municipal systems, while adhering to the Lebanese government’s insistence that all structures remain temporary. WASH actors are linking settlements to municipal grids by thin blue pipes laid above ground and metering this water so that municipalities can recoup the cost of provision.

This is part of a comprehensive move by Lebanon’s WASH actors to support host communities as a whole, as the water crisis has affected resident and refugee alike. As part of that move, these NGOs are targeting general infrastructural programs that will increase the amount of water available to the whole system by rehabilitating disused pumping stations and installing larger pumps capable of pulling more water out of the ground. By ensuring that whole towns have access to more water, these groups say, they are also granting more access to refugees. CARE and the International Committee of the Red Cross (ICRC) have developed strong links with municipalities, and almost all their projects now have a community-wide component. “When we come in and say we’re willing to work with you and mitigate that stress on that system for the whole community, then this becomes a much greater advantage for us in terms of working,” says CARE’s Walker.

[pullquote]“We pay for the electricity, for the water, for the generator and our other expenses — but the most important thing is the water”[/pullquote]

But infrastructural projects can only go so far. NGOs have lamented the Lebanese government’s focus on ‘temporary’ structures, which limits their development options. Thomas Batardy, in charge of ICRC’s water and habitat programs in Lebanon, also commented on the interrelatedness of the country’s infrastructure problems: “The first problem with water is electricity. They’re pumping 12 hours a day because, in the best case, you have electricity for 12 hours,” he says. “You double that capacity, you double the water.”

As well as making more water available, NGOs are making sure people pay for it. According to Walker, many Lebanese are simply not paying for the water they receive which means that the service providers don’t have the resources or incentive to maintain or improve the infrastructure, leading to huge waste. Walker says that in the Bekaa valley three years ago, only 17 percent of registered subscribers actually paid their water bill. But since then, a large capacity-building investment program by the US government has raised that number to around 34 percent. Both CARE and World Vision are working to educate Lebanese communities about how their role in water management could help build a more robust system.

“Lebanon is at a crossroads … No one would have asked for the conflict in Syria — not the Lebanese, not the Syrians,” Stiefel says. “But how can Lebanon use this as a blessing?”

As refugees try to recover from a blistering summer, and as NGOs focus on sustainable, resilient solutions, everyone’s asking the same thing: what will happen this winter?

Citing a report by the Ministry of Energy and Water, World Vision’s Stiefel said that, in the past 100 years in Lebanon, rainfall patterns have usually lasted two to three years — so if history is anything to go by, another winter of below average rainfall wouldn’t be unlikely.

“The long and short of it is that water gets more expensive. Every time you have to pull water from deeper in the earth and transport it farther then the water gets more expensive,” says Walker.

For Lebanon’s weary Syrian refugees, these costs may be getting unbearable. “We pay for the electricity, for the water, for the generator and our other expenses — but the most important thing is the water,” Madhallah says. “It’s too much, but water is life.”

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Leaders

The root of good

by Executive Editors
written by Executive Editors

The international community’s response to the Syrian crisis is growing even more shameful with the passage of time. Since Syria’s war began in 2011, governments in the developed world have very obviously put political and military considerations before humanitarian concerns. Not surprisingly, the consequences have been disastrous for millions of Syrians — both refugees and those internally displaced — and are only likely to get worse.

While the United Nations High Commissioner for Refugees says it needs $3.7 billion to provide basic care for Syrian refugees in the Middle East and North Africa in 2014, as of October 23, the agency reports it has only received 51 percent of the money. The situation in Lebanon is yet more dire. UNHCR, as of October 23, says it still needs a staggering 57 percent of the $1.5 billion it asked for in 2014 to assist the country bearing the brunt of the burden.

Whether it is living in lockdown in Jordan’s Zaatari refugee camp, risking death being trafficked across the Mediterranean from Egypt or bracing for winter in a tent on a floodplain in Lebanon, Syria’s refugees deserve more help from the international community for two simple reasons. First, it is the moral thing to do. Refugees are victims, full stop, and it is the world’s responsibility to make sure they are taken care of. Developed countries need to either open their own doors to these refugees or pay to make sure they are well taken care of in the states hosting them.

Second, it is in everyone’s interest to make sure Syria’s refugees are not forced to live in desperate and often disgusting conditions. As the Ebola outbreak has reminded us, infectious disease is a global problem, and the more squalid the conditions Syria’s refugees are forced to live in, the higher the risk. Further, angry and poor refugees — or opportunists exploiting a poorly monitored situation — can very easily breed instability in host nations, a problem we’ve already seen in Lebanon. And finally, paying for a lost Syrian generation will almost certainly cost more than pitching in now to make sure refugees have a decent opportunity to return home as educated, skilled workers eager to rebuild a nation. 

The case for meeting UNHCR’s regional appeal, therefore, is clear. However, at the risk of sounding biased, Lebanon deserves special attention. For all the criticism Beirut receives for its inadequate — and sometimes racist — response to the crisis, one must remember how heavy a toll this crisis is putting on Lebanon. The country could certainly do a better job assisting and accommodating Syrian refugees, but a state that cannot provide basic services to its own citizens cannot be expected to deal with a sudden 25 percent increase in population. Syrian refugees in Lebanon face housing problems, scant access to safe drinking water and a waste management disaster among other concerns. The risks of letting the squalid conditions so many refugees live in worsen are great, from infectious disease outbreaks to increased extremism. It is an understatement to call the refugees’ need urgent. The international community must contribute now as the cost of doing so far outweighs the cost of doing nothing.

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Economics & Policy

Transit and turmoil

by Jeremy Arbid
written by Jeremy Arbid

Executive sat down with Elyas Salameh to discuss his documentary “Transit” and the situation of Iraqi Christian refugees in Lebanon.

 

With “Transit,” what were you asking yourself that convinced you to make the documentary?

I focused on Iraqi Christians because [they] still have their own identity and if they flee Iraq it will disappear. It’s not only a Christian identity; if they leave Iraq Christianity will remain one of the biggest religions in the world, but Mesopotamian identity and linguistic identity will disappear. Yes, I am a Christian, but to be honest it’s obvious that the Christians of Iraq are facing ethnic cleansing. I don’t want to be — as a human being — a witness to a culture going extinct. For that reason I decided to make this film.

 

Do the Iraqi Christian refugees face the same problems as other refugees, even with a sizeable Lebanese Christian population?

Yes of course. But Iraqi refugees in Lebanon don’t have status. Lebanon has not signed [the Convention relating to the Status of Refugees]; especially in comparison to the Syrian refugees — who have more freedoms — because we have [bilateral] agreements with Syria; but for the Iraqi refugees it’s completely different. Iraqi Christians face the same challenges [within] Christian society and there are a lot of hints [in the film] of how some churches and NGOs treat Iraqis. There is no doubt about it.

 

You’re telling us through the lives of one family that something bigger is happening; what’s the bigger picture you’re trying to convey?

This family is a mother and her seven children. She has a daughter still in Iraq, a daughter in France and another one in Sweden. She also has a son in the United States. And she’s been stuck in Lebanon with two daughters and one son waiting to go to a third country. It’s what all Iraqis have been facing. The whole family will be displaced.

When they leave Iraq their identity will disappear. First their language then their traditions. The family [will be split apart]. Especially when they leave to the United States, lots of divorce cases start to happen. You can see many old ladies in the film … how can they live in America or other European countries? They don’t know the language. Maybe the younger generations can adapt [assimilate into the culture] but how will the older generations?

 

You say in the film that there were approximately 1.5 million Christians living in Iraq before the fall of Saddam Hussein. What were the Christian population figures at the start of 2014, before events involving ISIS?

I don’t know the situation now, but it is a disaster. Because before there were still some Christians living in the Nineveh plains in the villages of Qaraqosh, Bartella and Batnaya, but now they are empty. Take for example Qaraqosh, the biggest city in the world for the Assyrian Catholics. They were around 52,000 and now virtually nobody [is] left there.

 

In making this documentary did you think about what kind of change the  film might instigate?

I decided to cast a child in the film — I know it’s not easy for the audience — he suffers from spina bifida. When an NGO found out that I filmed this child they got mad. But it’s representative of how the Iraqis are bleeding. I included it in the documentary how they give aid to the refugees. I don’t think it’s a secret. Refugees equal funds, and it’s sad to be some NGO’s investment. Many NGOs insist their projects have a lot of [oversight] from the UN or from the funder. But there are a lot of Lebanese ways — you know what I mean — the Lebanese way of working under the table.

Nobody has a solution like that [snaps fingers]. We have to highlight the problems first and then try to find solutions. Thousands of refugees are coming to centers for help. Go to any center and look at how they’re treated and then you will see for yourself what dignity is. Give the refugees dignity. Give them back their dignity and it will be enough for them. Because no refugee lives in dignity, especially in Lebanon. Nobody lives with dignity, nobody treats them well. Neither Syrian nor Iraqi.” 

 

To read more about Salameh’s documentary, click here.

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Economics & Policy

The new lens

by Nadia Massih
written by Nadia Massih

“The Interior Ministry is going to build camps, even if they are not approved by all.”

Nouhad Machnouk, interior minister and member of the Future Movement, September 27, 2014.

“The cabinet … is against setting up camps. Imagine if we had 500 Ain el-Hilweh camps.”

Elias Bou Saab, education minister and member of the Free Patriotic Movement, October 3, 2014.

The minister of education and minister of interior’s comments may have only been five days apart, but they reveal just how wide the gulf is within the government over how to manage Lebanon’s swelling Syrian refugee population. 

[pullquote]A very angry public backlash ensued as politicians from across the spectrum reassured citizens that they remained wholeheartedly against establishing camps[/pullquote]

As the violence across the border morphed from a civilian led uprising to a full blown civil war and families began to flee the country en masse, NGOs and the United Nations became convinced that camps in Lebanon would be the easiest way to safely house and feed hundreds of thousands of vulnerable people. But from the outset concerns were voiced by politicians and ordinary Lebanese about how long Syrians would stay if they had the opportunity to live in formal sites. Fears were implicitly tied to the history of Palestinian refugees in the country, whose camps, built as temporary settlements 60 years ago, still stand today and are often branded as hubs of instability and militancy. Whatever their practical merit, camps for Syrian refugees have slipped down the political agenda and, in recent years, been largely dismissed.

It came as something of a shock, therefore, when Social Affairs Minister Rashid Derbas announced in mid-September that an agreement had been reached to build two pilot refugee camps on the border, one at the Masnaa crossing and the other at Abboudieh, a northern crossing. However, this apparent political breakthrough was short lived. A very angry public backlash ensued as politicians from across the spectrum reassured citizens that they remained wholeheartedly against establishing camps. Five days after the initial announcement, the ministry performed an effective U turn. A spokesperson for Derbas was rolled out to say that their construction was being “put on hold,” later clarifying that the two camps would not be built at all.

Executive sat down with figures across the political divide to try and wade through the apparent contradictions and confusion at the cabinet level. While the border sites have now been definitively ruled out, frantic deals are currently underway to secure fresh endorsements for camps inland as one of the most divisive refugee issues is dragged unceremoniously back to center stage. At the heart of this sea-change lies one key variable: Arsal.

The Arsal crisis

“Arsal has been hijacked,” says Khalil Gebara, advisor to Nouhad Machnouk, interior minister and member of the Saad Hariri-led Future movement, who has been working alongside his coalition colleague Derbas to push the camps agenda.

In the worst spillover of violence since the beginning of the Syrian war, the Al-Qaeda affiliated Jabhat al-Nusra and their rival Islamists, ISIS, teamed up to fight the Lebanese Army for control of the border town in August. In the ensuing battle, some 12 civilians were killed and hundreds injured. The militants took dozens of soldiers captive and have so far executed three. Although the Islamists have been ostensibly pushed out of the town into the Qalamoun mountains, the Army believes that terrorist cells are still living among refugees in informal tented settlements (ITS) and raids are still commonplace.

“The Lebanese and some refugees are finding themselves trapped between the militants and the Army. That is a serious problem …We must act,” Gebara says. With the town virtually on lockdown, aid agencies and the UNHCR are also struggling to reach the refugees.

It is only these very particular security concerns in Arsal that have pushed the contentious camps debate back into the spotlight. 

“We are not talking about establishing several medium sized formal camps, like the initial plans of UNHCR and MOSA [Ministry of Social Affairs] from a couple of years ago. We are not talking about formalizing informal settlements … We are not trying to solve the whole refugee problem here. We are talking about something very specific. Today our priority is Arsal and the security threat. You need to ease the pressure on Arsal and one of the ways to do that is to reduce the number of refugees by at least half, so we propose to take 30,000 or 40,000 refugees and put them in camps,” Gebara explains.

Yet, despite vocal opposition, Gebara maintains that the U turn on the border sites was not down to political maneuverings, but rather to security and financial challenges. After Derbas announced that he had managed to scrape together enough support within the cabinet for his pilot camps, a team of technical assessors from MOSA and the UNHCR traveled to the proposed sites. Their conclusions were not what the minister had hoped: as Masnaa was just a few kilometers from Syrian army positions, it was deemed too dangerous and would likely cost $10 million to keep 10,000 refugees safe. The Abboudieh site, meanwhile, was simply too small.

Political stalemate

Makram Malaeb, however, who worked as an advisor to Derbas at the time he spoke to Executive, admits that political maneuverings played a part in the collapse of the plan.

[pullquote]“What are the guarantees that [with the new camps] we are not disseminating terrorists among civilian populations in other villages?”[/pullquote]

“There was political progress and then there was political backing away,” Malaeb says, cryptically. “At the crisis cell [which includes the prime minister, the MOSA and the interior and foreign affairs ministries], the decision was taken to establish these camps. Then there were some reservations at the cabinet level, so we withdrew the offer.”

The advisor refused to be drawn on exactly who had given a tentative nod to the plans and then withdrawn support, but the former Labor Minister Salim Jreissati says that his party, the Free Patriotic Movement, has remained vehemently against establishing camps, whether for Arsal or in general. The party holds two cabinet seats, but with its allies, the eight-strong bloc wields significant veto power.

“The [informal Arsal] camps have effectively bred jihadists who are now fighting against the Lebanese Army and the Lebanese population, taking our soldiers hostage, and causing problems all along our borders … This is why we say we have no intention at all to create camps,” Jreissati says. “What are the guarantees that [with the new camps] we are not disseminating terrorists among civilian populations in other villages?”

Over the past few weeks, Machnouk has been engaged in determined consultations to try and win around FPM and Hezbollah leaders. While Gebara tells Executive that progress has been made, Jreissati says the meetings have not been positive and he does not envisage his party changing their official stance. He also slams Machnouk’s lack of combat experience, saying it contributed to his inability to meaningfully tackle the Arsal crisis.

“He is an honest man, but he has no military experience. That is my problem [with him] … Hezbollah shares our point of view and our fears. They are fighting terrorists in Syria, they know about the whole issue. They are in the field. This is the difference between Machnouk and Hezbollah.”

Meanwhile, Machnouk’s advisor Gebara — without explicitly pointing his finger at the FPM or its allies — admits that he was frustrated with the inflexible attitude of many of the political elite toward camps. “I really don’t understand this complete boycott of any discussion of camps. I might understand concerns about a general strategy to scatter camps all over Lebanon … But this [Arsal proposal] is not bringing in new people, it is simply moving people who are already here. So we are not changing demographics; the demography has already been changed,” he says, referring to widespread concerns that Syrians, like Palestinians, are mostly Sunni and that a prolonged stay in Lebanon could threaten the country’s unique religious coexistence, which sees power carefully divided along sectarian lines. 

Rabih Shibli, director of the Community Projects and Development Unit at the American University of Beirut, who has worked extensively with refugees and Lebanese host communities, says that he would be “extremely astonished” if the Future Movement’s ministries find backing for their project.

“To many Lebanese, the Palestinian question is a cause of much anxiety. The sectarian balance is very fragile and people feel conscious of that,” he says. “[Meanwhile] the political situation is extremely polarized … The only way [an agreement] will be possible is if [Machnouk] reaches a regional agreement with Hezbollah; everything in Lebanon has a regional link. Without this, the stalemate will continue.”

NGO response

While the political debate rumbles on, aid agencies say they are on standby to begin construction as soon as an agreement is reached for Arsal. Dana Sleiman, spokesperson for UNHCR, says that the body “stands ready” to act.

[pullquote]By amassing several thousand families in one space, the sites would also offer more logistically manageable mechanisms of distributing aid[/pullquote]

Niamh Murnaghan, country director of the Norwegian Refugee Council, an organization that works closely with shelter projects for refugees, also reiterates that most NGOs “will have preparedness plans in place” in the event of a breakthrough. But she also believes that “there is still significant resistance to camps in Lebanon. I would say that if there is an agreement, it is likely to be carefully framed to be limited to just the Arsal situation. I don’t yet see the formalizing of ITS or trying to group refugees more together.”

Camps could be a cheaper way to manage the refugee population, the NRC’s Camp Management Advisor Kristin Vestrheim says, as within formal sites “you can access so many more, and you can particularly reach the most vulnerable who often cost more to reach.” Official settlements would be built on government land, meaning residents would have so called ‘security of tenure’, protecting them from the whims of landlords, who currently have the right to evict refugees from informal outposts. By amassing several thousand families in one space, the sites would also offer more logistically manageable mechanisms of distributing aid, and enable the monitoring of women and children who could be at risk of sexual exploitation.

No room at the inn?

While a virtual stalemate on camps for those in Arsal persists and constructing sites for refugees across the board continues to be dismissed out of hand by many, the government has turned to a series of alternative draconian measures to stem the flow from Syria. And whatever the disputes about camps, when it comes to these fresh plans to slice the refugee numbers, it seems there is support across party lines.

Malaeb, the advisor to Derbas, tells Executive that the current government’s overarching refugee strategy is twofold: to significantly reduce the numbers of Syrians entering Lebanon and to properly manage those who are here. “At least one of those plans seems to be working,” he says.

Malaeb was referring to a proposal signed off in February — but only made public when it began in August — to drastically reduce the numbers entering through Lebanon’s four official borders. Strict new measures mean that people will only be allowed in if they can prove the following: they are using Lebanon to transit to another country; they are in need of medical treatment; or they have the financial means to support themselves. All others are being turned away.

“We are of the opinion that Lebanon cannot host any more refugees. Since we have a quarter of our population, or even 30 percent, as Syrian refugees and considering that Jordan and Turkey have effectively closed their borders, we should be able to close ours if we choose,” Malaeb says.

According to a source at General Security, the average number of people crossing the Masnaa border dropped by roughly three quarters during September, with men between 16 and 30 being the most likely to be turned away.

The policy has alarmed human rights observers, but Malaeb argues that statistics show the number of Syrians crossing into the country has been decreasing significantly since November of last year. He also emphasizes that restrictions would be eased in the event of a major outbreak of violence near the border.

“We believe that most people who want to flee violence [to Lebanon] have already fled.”

In tandem with the harsh restrictions, the Interior Ministry has announced plans to strip Syrians of their refugee status if they cross the border several times in a month, hoping to catch out those who the ministry says are supported by the Lebanese state and the UN, but are still able to partially work and live inside Syria. Although Gebara says the policy is directed at Syrian businesspeople accused of leeching off the state, the move will likely also bar refugees who take regular trips to Damascus to visit family or check on property.

A widespread legalizing of refugees’ permits has also taken place in recent months. It is a proposal that the Interior Ministry says is designed to help refugees who fear being stopped by the police with expired papers, but Malaeb concedes that the architects of the scheme hope it will also encourage Syrians to return home voluntarily, easing pressure across the country and particularly in Arsal.

These proposals to incentivize Syrians to return, and in some cases force them out, appear to represent the government’s way of tackling the refugee crisis while the camps stalemate persists. And it is here, if on little else, that the FPM and Future parties appear united.

Jressati tells Executive: “Our position is that since there are large areas in Syria that are completely secure and that aren’t affected by war … the idea would be for [refugees] to return to villages and cities that haven’t been completely destroyed.”

“All of the political factions that once accused us of racism have now come to us and say we were right at the time to ask for stricter regulation of this enormous influx of refugees coming into our country. That is not a racist position. That is the only solution.”

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Business

Beyond Barbar

by Nabila Rahhal
written by Nabila Rahhal

On the corner facing Barbar’s large and always busy outlet on Hamra’s Piccadilly Street is Beit Halab, an unassuming, modestly sized venue which opened three months ago. Like Barbar, it has a variety of meats on display, ready to be grilled for sandwiches.

Unlike Barbar, which is almost always packed, there is only a trickle of customers around Beit Halab. Yet Musaab El Hadri, the Syrian owner of Beit Halab, believes that, given a year, his restaurant will be giving Barbar a serious run for its money.

Moving to Beirut 

Before the war, El Hadri taught education at one of Aleppo’s universities and was a manager at one of the city’s well known restaurants, the biggest in Aleppo, according to him. With the onset of the war and the gradual worsening of the situation, El Hadri decided to move his family to Beirut and start his own restaurant here with some employees from the Aleppo team.

Explaining why he chose Beirut for his restaurant — as opposed to Cairo or Istanbul where many Syrians have chosen to establish their businesses due to the good services offered there — El Hadri says language was a barrier for Turkey and Egypt’s market was too big for his restaurant to be recognized. 

A thorough market study 

[pullquote]“The venue location had become associated with failure in people’s minds and I knew I had to put in a lot of work to change this perception”[/pullquote]

Upon arrival to Beirut, El Hadri embarked on a seven-month market study to understand the Lebanese hospitality market and the consumer mindset in the country. He did so in order to be able to identify the right concept and location for his investment.

Eventually, El Hadri decided that the Hamra district was the best location for Beit Halab, due to the large Syrian community there as well as the abundance of snack restaurants. He believed he would benefit from the economics of proximity. The study had also convinced El Hadri that the food concepts which work best in Hamra are those which offer a mix of both Eastern and Western platters and sandwiches.

The only location El Hadri could find in Hamra was one that had previously housed an Arabic sweets shop followed by a Syrian restaurant that closed down after only a few months of operation. “The venue location had become associated with failure in people’s minds and I knew I had to put in a lot of work to change this perception,” says El Hadri.

Competing with Barbar 

[pullquote] The setting is reminiscent of typical Syrian interior design[/pullquote]

The other problem with the location was that it was directly facing Barbar. Since El Hadri planned to offer a very similar menu to Barbar’s, he decided to assess how he could compete in this challenging location. He focused on a thorough observation of all aspects of Barbar from the presentation of its delivery food items to the thickness of its grilled kafta fingers.

To differentiate itself from the competition, Beit Halab’s menu features a full Lebanese and international cuisine snack menu which even includes steaks, along with typical Aleppine dishes such as kebabs and shakerieh, or lamb and stuffed grape leaves in yoghurt. Beit Halab also offers a daily plat du jour of both Aleppine and international platters, another element which distinguishes it from Barbar.

In order to attract a wide client base, El Hadri opened a cafe on the second floor of his venue, complete with argileh — using a tobacco mix he himself designed to produce the best flavor — and a band with an oud player, creating a traditional and cozy Syrian ambiance. The setting is reminiscent of typical Syrian interior design, with mother-of-pearl inlays and heavy wood paneling.

Hard work ahead

[pullquote]”I don’t like generalizing but I have encountered many people here who simply don’t want to work”[/pullquote]

Ever since he arrived to Beirut, El Hadri has been working tirelessly to ensure the viability of his venue and now that his restaurant is in full operation, he feels the work is just beginning. “Working in the hospitality sector in general is difficult, as it requires that you sacrifice all of your personal time. You also have to stay on top of your game by constantly monitoring your competition in order to succeed. So imagine starting this kind of work in a new country,” says El Hadri.

Before his move, El Hadri had only been to Lebanon for tourism and had in mind mostly glamorous images of Beirut as a cosmopolitan city. After almost a year in the city, three months of which included restaurant operation, this image has changed. “Beirut is a lot smaller than I imagined and it is a lot harder to find qualified and hardworking people here,” says El Hadri.

Admitting his view could be colored by his slim list of contacts in Beirut — and that it may completely change in the coming months as he establishes himself — El Hadri shares stories such as the time when his new oven broke down and he was told by the repairman it would take three days to fix as the repairman refused to come to Hamra during peak traffic hours, or the time when the electrician simply looked at his generator before demanding he be paid $50 for going up the stairs. “I don’t like generalizing but I have encountered many people here who simply don’t want to work, whereas back in Aleppo they would be knocking each other down to make some money,” muses El Hadri.

Beit Halab’s clients

[pullquote]Lebanese pay more attention to the display and presentation of food items while the Syrians don’t usually notice such details[/pullquote]

Still, El Hadri remains optimistic and says that business is gradually expanding. Beit Halab has an average of 80 customers a day, excluding the home delivery service. Initially expecting to cater primarily to Syrians, El Hadri was pleasantly surprised by the Iraqi community, which makes up half of his clientele. “We have so many Iraqis coming in that I have started catering to them by including Iraqi specialties on the menu,” says El Hadri.

The Syrian community accounts for 30 percent of Beit Halab’s clients, while the remaining 20 percent is Lebanese. Though the percentage of Lebanese clients may seem quite low, El Hadri is happy with it and says it has gone up since the restaurant opened. He hopes to expand this client base even further as he believes that, since the restaurant is in Lebanon, having a high number of Lebanese clients will bring security.

El Hadri is still trying to fully understand the Lebanese clientele. Although they are quite similar to the Syrians in their tastes, he notes, they differ in that the Lebanese pay more attention to the display and presentation of food items while the Syrians don’t usually notice such details.

Asked what he would do when the situation in Syria stabilizes, El Hadri says he honestly doesn’t know. “If you ask me right now what I would do, I would tell you I’d pack my bags and go home. But who knows what will happen in the future? I might decide I love Lebanon and stay to continue running Beit Halab. I might even become more successful than Barbar!”

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Economics & Policy

Refugee purgatory

by Jeremy Arbid
written by Jeremy Arbid

Elyas Salameh needed extras. Back in 2010, while on set shooting a TV commercial in Beirut, Salameh needed people to fill one of the scenes being filmed that day. There was one small hiccup with the extras he found — a language barrier. They were Aramaic speakers — Assyrian Christians from Iraq.

“Lebanon is a transitory place for them,” says Salameh, explaining the layers of intertwining storylines in his new documentary — “Transit”. Iraq’s Christian refugees in Lebanon provide an exceptional case in point. It is this population — Assyrians — that has belatedly captured the world’s attention.

“We cannot allow these communities to be driven from their ancient homelands,” US President Barack Obama said in a statement released in September. In many ways, it could arguably be too late. While the Islamic State in Iraq and Syria is the latest group to target Iraqi Christians, the community has been persecuted for over a decade.

[pullquote]“Iraqi refugees speak of severe psychological problems including anxiety and suicidal ideation and attempts”[/pullquote]

Around the time the Americans invaded Iraq in 2003, Salameh explains, the Iraqi people — especially Christians — began fleeing the country and coming to Lebanon to seek a safe haven. Iraqis languish in transit awaiting resettlement and they — like other refugee populations — struggle to survive. The film documents their daily struggle for food and clean water, access to healthcare and shelter, all the while hoping for the chance to resettle in a third country.

UNHCR determines resettlement on a case-by-case basis. Resettling to a third country is a lengthy process and difficult to achieve, given financial constraints and a whole host of other variables. According to a US State Department fact sheet, “Less than one percent of refugees worldwide are ever resettled in a third country.”

A policy memo introducing a forthcoming study on Iraqi refugees’ status in Lebanon by Jihad Makhoul at the American University of Beirut notes that “their illegal status in Lebanon requires them to stay mostly hidden, and makes them vulnerable to exploitation with no recourse … Iraqi refugees speak of severe psychological problems including anxiety and suicidal ideation and attempts. They exhibit hopelessness, and report sleeping problems, decreased appetite, and continuous crying.”

Refugee status in Lebanon

It is an existential struggle, as Salameh puts it, because, “It is not only a Christian identity; if they left Iraq, Christianity will remain one of the biggest religions in the world, but Mesopotamian identity and linguistic identity will disappear.”

In Lebanon, Iraqi refugees have been cast into the shadows. Human Rights Watch, a global organization dedicated to advancing human rights, published a report in 2007 recommending the ratification of the 1951 Convention Relating to the Status of Refugees and its 1967 protocol, and for donor countries to “respond quickly and generously to UNHCR referrals of Iraqi refugees for resettlement.”

Lebanon still is not a signatory to this convention, leaving a hodgepodge of local laws as the determinant of legal status for refugees. The convention would provide refugees the right to work and would permit refugees to work in specialized professions given they had the proper qualifications and credentials. It would also provide the right to housing, education, public relief and assistance.

Refugees treated differently

[pullquote]In “Transit”, Salameh has intertwined their struggle into the larger picture of refugee policy and humanitarian aid distribution[/pullquote]

Syrians, thanks to the 1993 bilateral agreement between Lebanon and Syria for Economic and Social Cooperation and Coordination, receive greater leniency in freedom of stay, work, and employment in Lebanon. But still roughly only 30 percent of Syrian refugees can find work according to a 2013 International Labor Organization report. Iraqis do not even have access to this benefit. This is due, in part, to obvious gaps in the legal framework concerning refugee populations; the way the Lebanese government has structured its relationship with the UNHCR in regards to the Iraqis, and Lebanon not being a signatory to the convention.

There are indeed financial impediments that Lebanon alone is not capable of overcoming; but for even the most basic needs of food security, access to medical care and housing protection, the country is not willing to help. When Lebanon’s Foreign Minister Gebran Bassil visited Iraq’s Christian regions in August he acknowledged the suffering of that country’s refugees in Lebanon, telling media outlets that yes, the Lebanese government supports Christian Iraqis, but that they must remain in their country: “The Lebanese government and people are all involved in supporting Christians,” Bassil said. “Not to welcome you on our land but to help you remain on yours.” 

In other words, they’re on their own.

The rapid decline of Mesopotamian culture, the exodus of its people and personal struggles for daily survival form the characteristics of Iraqi Christian refugees in Lebanon. In “Transit,” Salameh has intertwined their struggle into the larger picture of refugee policy and humanitarian aid distribution. This is their story.

 

 

Read our interview with Elyas Salameh where he discusses his documentary “Transit”.

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Finance

Jumping in with the big dipper

by Thomas Schellen
written by Thomas Schellen

Middle Eastern and North African equities plunged between October 10 and 16 in a regional dip that was big, widespread and not caused by anything local or even a real change of economic conditions elsewhere. With double digit falls in Dubai, Riyadh and Cairo, plus drops of more than five percent in Muscat, Doha and Abu Dhabi, the year’s deepest single week fall in several Arab markets in week 42 was a testimony to edginess of investors here and abroad who appear over determined to not be caught with their hands full of stocks at the moment when the developed economies’ bull market swings to a baisse.

This fear of a global dive has been around for weeks and weeks. So when the Dow, the S&P 500, the Nikkei and various European indices ran into turbulence in early October and tumbled even more on October 10, Arab markets saw overselling of real estate, banking, petrochemical, industrial and other stocks starting on October 12 and throughout the following week. The psych pressure was apparently exacerbated by the fact that the Saudi, Kuwaiti, Qatari and Omani markets had been inactive for Eid al-Adha observances in week 41.

As Gulf markets came under sudden pressure, some MENA based analysts immediately, and with hints of glee, sent out I-told-you-so messages while other latter day augurs and market beat lackeys ventured into guesses of reasons for the bad week that ranged from oil price conspiracies to October 7 warnings which the International Monetary Fund had vaguely directed at overheating stock markets.

While global markets were still topsy turvy in week 42, news agencies meanwhile reported that IMF managing director Christine Lagarde on October 17 called the week’s stock selloffs “a correction and perhaps, at this point at least, an overreaction.”

The big MENA dip for the moment thus ended as it had begun, wholly because of mental global contagion. Positive numbers on the US economy and recovery of some calm in Europe stemmed the slide in the developed markets towards the end of the week. The Nasdaq, the S&P 500 and the Dow moved up by between 1 and 1.6 percent that Friday, October 17.

As global markets showed green arrows on October 17, the next MENA trading session on October 19 saw the deep fall of Arab equities halt with the same abruptness with which it had began. Some oversold indices immediately leapt higher — 3.5 percent in Dubai, 2.4 percent in Saudi, 1.6 percent in Qatar. Of the big losers in week 42, only Egypt on Sunday still slipped another 0.8 percent.

On Monday October 20, however, GCC equity investors were conservative with their enthusiasm. Only the TASI advanced with a 1.1 percent gain; Abu Dhabi, Doha and Dubai indices dropped by between 1.5 and 1 percent. The other three GCC markets recorded lesser or minute drops on Monday, but drops nonetheless. The EGX 30 for its part looked better on Monday than Sunday, but also in a very subdued way as it rose only 0.1 percent.

This leaves questions as to whether the recent enthusiasm for new listings on Gulf and North African markets will be dampened by the return of doubts about the sustainability of growth in regional share prices. With subscription periods of two initial public offerings — of leading Saudi bank NCB and of Amanat, a Dubai based startup holding in education and healthcare — having commenced at the start of week 43, some indications on the actual current IPO appetite in the Gulf might be forthcoming in about two weeks’ time.

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Finance

Acket on economics

by Thomas Schellen
written by Thomas Schellen

Janwillem Acket is “the longest serving guy in the Zürich banking place” in his role as chief economist of Julius Bär, a Swiss private bank that has expanded its profile in emerging markets, including Lebanon, with the acquisition of Merrill Lynch’s international wealth management operations in 2012. He sat with Executive for a wide ranging interview from the perspective of a longtime banking insider.

  • In your assessment, what measures will help the Eurozone?

What we actually need in the Eurozone is more sensible fiscal spending, and in many places [this means to] cut public spending. This public spending should be somehow replaced with private spending but the problem is when will private spending step in? This is a question because you have to go on a second front, on taxation. You have to incentivize, through taxation, economic agents, in particular the entrepreneurs.

  • Why entrepreneurs specifically?

Entrepreneurs are the ones that are providing the growth in this world and are moving things to the positive, to the benefit of not only themselves and their own portfolios but also for a large majority of societies. That is why I believe in entrepreneurs. It is also an important point in our philosophy of investment [at Julius Bär] that at the moment we rather have a latent distrust in public entities because of the moral hazard issue.

  • Are you in favor of taxing cash?

No. The taxation of cash will happen when interest rates go up and that is not happening yet. Taxing cash thus would be an artificial or non-conventional measure.

  • The argument appears to be that banks and even corporations are holding too much cash today and need to be forced to push that into the economy.

TLTROs [the ECB’s targeted longer term refinancing operations] will be one such tool. But what is being decided now in the Eurozone has a lag of nine months [according to our research], and the problem is that when this starts to work out, the other big competitor, the central bank of the US, will start to change policies. In that period when the Eurozone will be better off and the Fed is considering interest rate hikes, we might have a very uneasy situation in the market and this could be a very volatile phase of transition. Nevertheless, we firmly believe that the recovery will be on.

  • Seeing how responses to economic challenges in the Eurozone are made more difficult by politicians’ vying for votes and the preservation of their own jobs, would you rather get rid of all politicians?

That would be nice but someone has to run the show. We need politicians and there are certain elements in the economy which you can’t privatize. As an economist, I just want to say that the political front has to do its homework and they are reluctant to do that as long as you have central banks which can alleviate stress with very cheap money.

  • But might a Chinese solution work to fix this issue of politics? Could you give all the power to someone who then empowers a positively capitalist class which doesn’t have to worry about intrusions in economic development by democratic elections?

You have indeed touched [on] a subject which is very peculiar. China is a dictatorship and if there is a slippage in the economy, something that deviates from the five year plan, very harsh action is taken and they don’t care if someone feels hurt. They don’t care if there is some opposition, they just do it. You can say that this is a sort of advantage in a crisis situation because you don’t have to ask too many people. [But although] China, because of its dictatorial structure, is at a relative advantage when things slip, it is not a role model that I would see. They may have less of the disadvantage felt by democracies but I’d rather be in a democracy with a disadvantage than in China as a citizen.

  • What do you think of the prospects for authoritarian governments as facilitators of national wealth?

I believe in democracy and there is a tight positive correlation between democracy and wealth. I think it is very clear that you need long term democratic structures if you want to increase wealth in this world. The big exception is Singapore, which is an authoritarian government that allows a lot of economic freedom. China will be studying the Singapore model but Singapore is tiny and China is so huge. People say that the Chinese are so anarchistic that democracy will fail. I think the Hong Kong model shows that democracies can be a success model in China, but you have to have a really very strict legal structure and property rights, which Hong Kong has. Democratic structures are an essential component if you want to develop a market driven economy to bring wealth into a country and I think Lebanon is a very good example. It is one of the few democracies in [the Middle East] and has created for itself a good legal system and democratic setup. That is an advantage which Lebanon has for example over Egypt, which somehow has always been a dictatorship.

  • From the group’s perspective, are you targeting the Middle East as an investible target market or more as a market for sourcing new money?

To be honest with you, I would think just the sheer limitation of investible vehicles at the moment in the Middle East will have as a consequence that the larger part of funds that are placed with us are just invested not in the Middle East but elsewhere. But we are global operators [and] we are not just focused on one thing. When we have a client who says, “I am Lebanese and I [would] like to place a part of my investment portfolio in this country,” do you think we would say, “No, go away with your money; we don’t want to see you?” I can’t give you a general answer on this but we are by no means dogmatic.

  • How about if you look at growth, prospect wise?

We will go where the growth is.

  • Taking the case of the largest Arab economy, Saudi Arabia, Julius Bär would easily be able to qualify as direct participants in the Saudi stock market as of sometime next year, according to the rules and draft regulations that the Saudi Capital Market Authority has published recently. Would a move into this market for investments be interesting?

That is something you must ask our board of directors. It is not up to me.

  • How about from a macroeconomic perspective?

From an economic perspective, our board has its philosophy and it sticks at the moment to what it is doing and it is up to them to decide what they want to do. To get back to my point, if we have a client base in a market somewhere and the client base has a stake in the local market, we are not the guys to say no. The problem is the research. We would have to invest money in that but we can’t if the sheer size of the venture is not satisfying our requirements for investing [our own] research into it. What we then do is go to the best local partners and obtain their research.

  • What can all your insights on the dynamics of policymaking and factors that help economies grow tell us in Lebanon?

I can talk as a Swiss now. Switzerland has four different languages and many cultural minorities and they are all integrated in Swiss society. For me this model has one amazing foundation: it is the capability to compromise out of mutual respect for the differences [among] the different communities. That is an important aspect of the success of Switzerland, which is a prosperous nation with an overvalued currency in the middle of a Eurozone that is in economic trouble. Decisionmaking takes a long time in Switzerland but the people all have the patience to go through the process and in the end a compromise is reached. There is always a minority that is not happy with the compromise but here comes the behavioral aspect: the [members of the minority] are capable [of accepting] the verdict of the majority and the minority that did not want to agree to the compromise nevertheless respects it. Everyone can have her or his culture, format, difference in religion and convictions but nevertheless, all share a joint aspect and the aspect is, we are Swiss. Switzerland has this really fantastic capability for compromise.

  • Do you think Lebanon has the same potential?

This has to develop. What you can do is start providing measures of confidence, such as setting up rules together and focusing on the common denominator which is living together here in Lebanon. The diversity that Lebanon has is its cultural richness. Let’s use this richness to synergize capabilities and talents and together create something called a new Lebanon. You have to positively infect the population through influential leaders. The fish stinks from the head and the head must not only stop stinking, but do more. The head has to show the world how to solve the issues that have to be solved. Put up an example, a positive one and infect everybody with a positive example. Lebanon has exercised democracy for a long time and so I think you have better chances than many nations in the Arab world. Go back to making Lebanon the Switzerland of the Middle East.

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