Finance

A late summer swelter

by Thomas Schellen
written by Thomas Schellen

Arab markets trended up or flat with positive bias at a rate of three to one in the 35th week of the year. Indices were intonating pretty much the same melody of small to moderate gains as in the previous week, but with a swelling in some turnovers in the last trading sessions of August.

Tadawul’s ascent

The top index performer of week 35 and of the entire month of August was Saudi Arabia’s Tadawul. The TASI got its boost from prospects of being able to attract more foreign cash starting the first half of 2015, based on the July 21 cabinet decision to open the doors for direct Tadawul participation by qualifying foreign institutions, and possibly ascend to being covered by the MSCI Emerging Markets (EM) Index in 2017, or some time thereafter.

Including its 2.9 percent gain last week, the TASI rallied by 14 percent between the July 21 announcement and the end of August. The rise in week 35 came after the program for opening the stock market to foreign investors was clarified further by the Capital Market Authority’s release of draft rules on August 21, under which, among other stipulations, foreign market participants need to be institutions with at least five years of experience and a minimum of $3–$5 billion in assets under management.

Factors that also speak in favor of the Saudi numbers are the strong oil price and correlated economic data such as growing banking sector deposits and record net foreign assets held by the Saudi Arabian Monetary Agency, which the kingdom’s central bank just reported as standing at SAR 2.75 trillion ($733 billion) at the end of July, up 7.8 percent year on year.

Risks of overheating in the Saudi market were noted by some analysts as the TASI shot up in August. According to the exchange, price to earnings (P/E) ratios in the important banking and petrochemicals sectors stood at almost 17 at the end of August and reached 18.2 for the market.

Besides top gainer Tadawul, seven of the 12 MENA exchanges moved in positive or flat-to-positive territory in both weeks 35 and 34. Up movements in all these markets were minor, with a 2 percent gain of the DFM General Index in week 34, the best weekly rise. Three small markets — Manama, Tunis and Beirut — experienced swings: in the case of the first two, from limited index gains in week 34 to small losses in week 35. In Beirut, the BLOM Index moved from a minor weekly drop to an even smaller gain.

In the view of analysts contacted by Executive at the time, the demand was linked to a planned increase in the share capital of Lebanon’s largest bank. According to filings made by Bank Audi on August 8 and August 26, the bank’s shareholders convened for an extraordinary general assembly on August 26 which, as could be expected, approved issuance of 50 million new shares. The assembly resolved to give existing shareholders as of the September 1 record date pro rata rights to acquire 40 million of the new shares along with three attached warrants per new share for acquiring shares of Turkish subsidiary Odeabank at a future time.

Statistics published by the Beirut Stock Exchange for August showed a total monthly traded value of $42 million. If the BSE’s $13.5 million traded value on August 21 could be extrapolated into daily activity (sadly, the vigor did not persist even until the next Thursday) on long term basis, the exchange’s cumulative volume of the next 2,000 years would allow the Lebanese capital market to even up to the $6.9 trillion that were traded last year on the New York Stock Exchange.

Confusion in Doha

The only index that took a noteworthy plunge in week 35 was Doha’s QE Index. The weekly dip was on account of selling pressure on August 28, which in turn was driven by transactions related to a small rebalancing in the weighing of three Qatari stocks in the MSCI EM Index. This bit of in and out was instructive on the importance that external decisions can have on market movements in an emerging environment. But the real mischief in the Qatari market actually happened a few days earlier.

At the time, MSCI put its foot in its mouth by saying in an August 13 press release that Doha listed Mesaieed Petrochemicals would be one of three additions to the MSCI EM Index, along with a Polish and a South African stock. As such, Mesaieed was named as the only regional stock to be newly included in the MSCI EM Index and also in the MSCI ACWI Growth Index.

But MSCI reversed its decision only a day later. This in and out was reflected in the stock’s volatile movements, and not to the company’s delight. As Mesaieed Petrochemicals said on August 17 in a response to stock price movements, the company saw its strength as “driven by its own performance and not by MSCI Inc. decisions.”

Mesaieed, a subsidiary of Qatar Petroleum, was floated on the QE at the end of February 2014 in an IPO that saw the company’s stock shoot up from the 10 riyal issue price to a first day close of 55 riyals. In response to the MSCI inclusion announcement, the stock’s trade volume peaked above 7.7 million shares on August 14 and the share closed the trading week 16 percent higher.

Since August 17, it has almost come back down to August 10 levels, looking like a losing bet for eventual retail investors who bought the stock on MSCI’s dud inclusion announcement. Of course, MSCI publishes these announcements with a 55 line disclaimer that entails, among countless other exclusions, limitations, caveats and alerts to propriety, the fine sentence, “The user of the information assumes the entire risk of any use it may make or permit to be made of the information.”

Noisemakers

But to end August with an upbeat tune was to be left to the conductors of the bigger economic expansion plays. Announcers of capitalism from Cairo (public sector) and Dubai (private, ahem, sector) quite unsurprisingly used the last day of August for fielding PR marching bands with bass drums and crash cymbals, making as much noise as possible.

The one noisemaker was the Egyptian orchestration of economic revenue growth from its Suez Canal expansion project. The country’s central bank governor on August 31 intonated additional patriotic financial notes in describing the — yet to be implemented — investment certificates that are to be offered shortly by several state owned commercial banks to domestic investors. According to reports based on a press conference by central bank governor Hisham Ramez, the bonds will be aiming to raise EGP 60 billion ($8.4 billion) in a first round of canal finance from Egyptians and qualifying local entities.

Certificates will be offered starting as low as EGP 10 ($1.40). There were conflicting media reports if expatriate Egyptians would be offered a dollar denominated version. The coupon rate apparently will be set at 12 percent for the EGP denominated certificates; interest for the low-value certificates will be paid at maturity but coupons will be redeemable on quarterly basis for the higher denominated bonds.

However, current plans seem to say that there will be no secondary market. The Central Bank of Egypt’s website on September 1 did not provide an official statement on the investment bond issuance and its conditions; however, the bank’s website provided a reference to the latest Consumer Price Index development, according to which Egypt’s annual headline CPI inflation reached 11.04 percent for July 2014 and annual core CPI inflation widened to 9.57 percent — not far off the bonds’ 12 percent coupon rate.

The least shocking surprise of the month finally came from Dubai, where Emaar Properties assured with stock market disclosures and press releases that the world heard about its news that the flotation of its Malls Unit on the Dubai Financial Market would take place in September.

The announcement followed upon an announcement from earlier in the month in which the company had described media reports implying a flotation in September as “purely speculative.”

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Economics & Policy

Hands off!

by Jeremy Arbid
written by Jeremy Arbid

Yet another extension for companies to submit bids in Lebanon’s first offshore oil and gas licensing round was announced in mid-August by Minister of Energy and Water Arthur Nazarian, indefinitely extending the deadline to no more than six months after the two needed decrees are adopted.

But oddly enough, the youth wings of Lebanon’s political parties — the future politicians and party leaders themselves — agree that the current batch of politicians is obstructing the licensing round with their meddling. Today’s politicians, youth leaders suggest, are keen on securing a piece of a future gas revenue pie rather than focusing on how the potential resource would benefit the country and its citizens. Related issues on the Lebanese political scene are also implicitly holding up the process — the country is without a president while the parliament looks set to again extend its own mandate.

[pullquote]Lebanon’s youth political leaders are doing something their elder counterparts are not: engaging each other on the issue of oil and gas[/pullquote]

Throughout 2014, youth leaders have been meeting to discuss the issue of oil and gas focusing on ways to maximize the benefits of potential resources to improve the lives of Lebanese. Their intention is to lobby government officials with recommendations to implement transparency and good governance measures, preempting further political influence in the floundering sector. And surprisingly, they all appear to be on the same page.

Hey, listen to us!

Lebanon’s youth political leaders are doing something their elder counterparts are not: engaging each other on the issue of oil and gas. While parliament has left the issue mainly to the Ministry of Energy & Water, with guidance from the Lebanese Petroleum Administration (LPA), to call the shots in this new sector, youth leaders are realizing the need for at least some level of policy discussion, and at best hope to remove political interference from the equation.

The discussions are part of dialogue sessions facilitated by International Alert, an international non-governmental organization, aimed at strengthening relationships and building capacity for young leaders to work together.

It has taken months of preparation since the start of 2014, a high investment cost youth leaders acknowledge, to reach a confident level of comprehension of the subject matter. This is an important point, explains Raed Bou Hamdan, a leader from the Progressive Youth Organization — the youth wing of the Progressive Socialist Party — because “We are all [all of the Lebanese population] still ignorant of this sector, which is dangerous because if we’re looking at and planning for a transparent sector [and] sustainable development of the country for future generations, we have to create this awareness first, to make all of the Lebanese aware.”

Their preparation has resulted in a foundation of knowledge, empowering the group with the confidence to draft recommendations. Once in their final form, the leaders will present their advice to the LPA, the Minister of Energy, and the Ministerial Commission studying the two needed decrees, before announcing it to the public.

Youth leaders sing kumbaya

The issue of oil and gas has been easier for youth leaders to discuss than most. When compared to rounds of dialogue sponsored by International Alert from previous years — where topics included national defense, Palestinian affairs or education policy — the consensus among youth leaders this year is that the topic of oil and gas is less contentious.

They are, however, only discussing this issue through the initiative of the NGO. With funding from the Norwegian Foreign Ministry, International Alert gathers youth leaders from Lebanon’s biggest political parties each year to discuss prominent issues facing the country.

Victoria Stamadianou, International Alert’s country manager, contends it is a needed program that empowers youth leaders to build relationships that bridge party and bloc ideologies. “There’s not really a culture of ‘let’s have our conversations based on the facts.’ So the idea was to try and explore a new role for doing politics differently,” Stamadianou says.

And by all accounts the program, now in its sixth year, has eased animosities. “At the least, the program has reduced tensions. The atmosphere is less intense,” says Rebecca El Hosry, a leader of Marada Youth Bureau, the youth wing of the political party Marada. Closer connections are something she thinks will benefit the youth leaders as they mature in their political careers, by networking and building relationships through dialogue.

Recommending some recommendations

[pullquote]“We kept the recommendations general, we didn’t go a lot into details because that’s something requiring expertise”[/pullquote]

Later this year, the group will lobby government officials to pass transparency measures governing the oil and gas sector, ensuring sound preparation of the legal framework governing a future sovereign wealth fund, and utilizing resource revenues for equitable social development for coming generations.

There are still a few more sessions to revise and finalize the recommendations, but the framework of their advice is in place. The framework falls under three branches: promoting transparency and good governance in the management of the sector and its revenues; creating a sovereign fund benefiting future generations; and utilizing revenues for sustainable development.

“We kept the recommendations general, we didn’t go a lot into details because that’s something requiring expertise. We understand the subject, but we’re not experts,” explains Antoun Souaid, leader of the Youth and Student Committee, a wing of the Free Patriotic Movement.

The group is recommending the government formulate a comprehensive national strategy that incorporates the perspectives of the private sector, political parties and civil society. This is an issue that the LPA has already begun to address through presentations at past conferences, outlining a vision centered on three main areas: upstream exploration and infrastructure, education and employment preparation, and a downstream petrochemical industry. At the LPA’s upcoming October conference, LPA members will further articulate this vision with specialized sessions for exploration and geophysics, value chain and localization, and dedicated sessions for students and young professionals. A comprehensive national strategy, though, has not been articulated, at least publicly.

According to the conference’s website, a workshop for engaging local communities and non-governmental organizations through corporate social responsibility programs is planned, while a separate workshop on the Extractive Industries Transparency Initiative (EITI) is also in the works. Joining the EITI is also a recommendation the youth leaders will present as well as recommending disclosure of the terms and results of tendered contracts.

“The example we give for access to information is the declaration of the contracts, so you have to declare after the first round of bidding. Contracts shouldn’t be kept secret all the time,” explains El Hosry. But this recommendation to clarify terms and disclose information would only apply after contracts are awarded. A more effective measure that EITI experts advocate is the adoption of EITI prior to the awarding of contracts, along with the inclusion of civil society in discussions on the fiscal terms.

Article 3 of the 2010 Offshore Petroleum Resources Law prescribes a sovereign wealth fund, regulated by a yet-to-be written law establishing the fund, for the net proceeds collected from petroleum activities. Here the youth leaders recommend adopting standards of good governance so that the fund is not mismanaged. The recommendation is not on the specifics of what should be in such a law, but the group is stressing accountability of the fund’s management body to its supervising authority as well as an independent auditor of the fund, with emphasis on institutional regulations and strict codes of conduct.

One example to draw on comes from the Ministry of Finance, which produces regular financial reports, even though the ministry is not under legal obligation to do so. For the sovereign wealth fund, the youth leaders are demanding mandatory publication of periodic reports on the financial status of the fund. The EITI will be a useful tool, if adopted by Lebanon, for guiding what financial data to publish. What these recommendations imply, which should be clarified in their statement, is a need for internal mechanisms at the fund as well as legislation both requiring the public disclosure of, and access to, information. This type of law is in addition to EITI disclosure requirements and adds another tool for monitoring, not limited to only oil and gas but government-wide.

[pullquote] “We’re not adding anything, we’re not reinventing the wheel”[/pullquote]

Finally, the group will recommend investing in Lebanon’s youth through sustainable development — prioritizing the needs of future generations. The youth leaders outline such development on separate levels: a downstream petrochemical industry focusing on diversifying the economy and creating jobs; development programs to empower disenfranchised Lebanese through services like health and education; infrastructure development to encourage investment in Lebanese businesses; reviving the education system of the country; and reactivation of the Ministry of Planning (replaced by the Council for Development and Reconstruction through Decree No. 5/1977).

Even while the youth leaders acknowledge the basicness of their recommendations — “We’re not adding anything, we’re not reinventing the wheel,” Souaid says — a final version of their recommendations might articulate more clearly how transparency, revenue management and sustainable development are interrelated.

Building a collective knowledge

Youth leaders admit their knowledge of oil and gas was quite limited at the onset of dialogue. As Bou Hamdan puts it, the group’s understanding of the subject “was approximately null. I think that we still are in an early stage of knowledge of this topic.” El Hosry says that before beginning to discuss the topic during the International Alert dialogues, her knowledge of the subject was “nothing. There was not a lot of information available.” During the initial sessions Nawar Samad, a dialogue participant representing Future Youth — the youth wing of the Future Movement — says the group increased its understanding of the topic by reading what was being reported through the media. The group, he says, “Did have information, but not official information.”

To address this deficiency, International Alert invited members of the LPA as well as experts in transparency and good governance in the oil and gas sector, to speak to the youth leaders. “We had reviewed journalistic work and studies, but [now] we were getting information from the [LPA],” says Samad. Nassim Abi Ghanem, a youth leader representing Tajaddod Youth — the youth wing of the Democratic Renewal Movement — explains that through their research the group was “much more confident in the knowledge that [they] have and very comfortable [discussing] the topic,” noting the importance of preparation prior to engaging experts in discussion. “It’s not easy for one to sit down with them, they are references [on oil and gas],” adds Samad.

Decision makers to take notice?

[pullquote]“I don’t have high expectations [to impact policy] but at least we can tell officials we are aware of this and the people are not blind”[/pullquote]

When asked whether their recommendations will have any impact on policy and the direction of the sector, most youth leaders answered with hesitation. El Hosry was initially skeptical as to whether government officials will take their recommendations seriously, “This is a big issue [oil and gas], but we’re trying our best. How much it will have a strong effect … fingers crossed.”

Defying the notion of youth leaders’ limited influence, Abi Ghanem notes, “If the youth are in this dialogue, they have this belief [that the recommendations] can be pushed and we must, we might use various ways, get it through or else we’ve been wasting our time for the past year.” But Abi Ghanem also quickly adds, “If we achieve that, we’ll have achieved [something] unprecedented.”

“I don’t have high expectations [to impact policy] but at least we can tell officials we are aware of this and the people are not blind,” Bou Hamdan explains while discussing the specifics of the recommendations. But he also emphasized the necessity for public awareness and active participation in the sector, because “maybe tens of people are totally aware” of what is happening and what should be done. Beyond government officials and a handful of experts, not many in Lebanon have even a basic knowledge of oil and gas, Bou Hamdan points out.

Several of the youth leaders interviewed for this article, however, insist they’ll lobby the recommendations with their parties’ MPs through internal dialogue. Souaid, from the FPM’s youth group, says this has been a very effective method before for his youth party to influence internal decisionmaking. Given the weight of his party in the parliament and council of ministers, he expects at least some level of impact.

The consensus of the youth leaders in drafting the recommendations, rather than their content, is what will really add weight. “It’s not the recommendations themselves, it’s the act that will have a big impact because we’re all unified behind this,” Souaid says, adding that because all youth parties are unified on this issue “It will be more powerful to put more pressure on decisionmakers.”

Strength through unity 

[pullquote]”As youth participants we are unified on this topic, so that’s a strong sign to older politicians”[/pullquote]

“Even though there are a lot of political problems in Lebanon, as youth participants we are unified on this topic, so that’s a strong sign to older politicians,” Souaid reiterates.

Their greatest strength, the group agrees, is that all the youth leaders from this round of dialogue agree on the important principle that the sector must incorporate transparent measures from the start. “The good thing about this sector is it’s new, it’s a fresh start. So by doing things right from the first step, being transparent and not having corruption. That’s why we’re emphasizing this matter,” Souaid says.

It is this cohesion the youth leaders believe will give them strength in their efforts to influence the direction of the sector with government officials, “We’re going to the ministry and to the [ministerial] committee and we’re telling them we are youth organizations representing 95 percent of the political parties in this country,” Bou Hamdan iterates.

Beyond lobbying

The recommendations will not be the culmination of their work, the youth leaders insist. They say they plan to continue following up with the issue, by potentially forming a representative committee of youth leaders away from International Alert to follow the topic, as well as within their own political parties.

Internal party discussions, Samad says, should incorporate the values that the youth leaders represent in their unity on the recommendations, forming what should become the foundation of parties’ platforms on the issue of oil and gas. “Within our parties, we want to work on making this document part of our demands in entering the [parliamentary] elections, [the recommendations] should be on the program of all parties [whereby they pledge]: ‘if we reach power, we’ll apply them.’”

Notably, the group does not anticipate presenting its recommendations to members of parliament. There’s no point, El Hosry indicates, because “parliament members don’t work in parliament. They don’t make laws, they don’t do anything.”

Political interest is not focused at all on the issue of oil and gas, says Samad. “The topic in and of itself has a problem. The stage of drilling for [oil and gas] has not begun. And the [oil and gas] law … is still awaiting some decrees. Lebanon’s political situation is leading to further delays for this topic.”

Concerning members of parliament, El Hosry concurs, “There is no one talking about it, there’s no emphasis on oil and gas in Lebanon.”

Space to breath

Abi Ghanem says when it comes to the governance of the oil and gas sector this must be separate from politics, that political influence should reinforce the values of transparency and good governance rather than focus on squabbling over who gets what. “The most important thing is this is governed away from politics. Or else all of this will go to waste.”

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A tanker truck overflows with water
Economics & PolicyLebanon's water crisis

Less blue, more gold

by Matt Nash
written by Matt Nash

Toufic Abillamaa has been making money off of the state’s inability to provide certain services for nearly 40 years. His company, Abillamaa Petroleum, delivers fuel for generators — a necessity for many in a country without 24 hours of electricity. At the beginning of this year, however, he decided to expand into water delivery.

Abillamaa is capitalizing on a booming business. Looking at the traffic clogged streets of Beirut, it is clear that Lebanon’s unregulated private water distributors are thriving. Water trucks are everywhere, and the sound of their pumps is nearly as ubiquitous as car and motorbike horns. But despite this flourishing business and the ominous water shortages it evidences, putting an exact figure on the size of the industry is just as difficult as trying to ascertain the impact extra pumping has on groundwater resources. Reliable data for both metrics is nearly impossible to get.

Driving margins

[pullquote]“Before, you had too much water and fewer clients; this year there’s not enough water and too many clients”[/pullquote]

Water delivery “is an additional service” for Abillamaa. Most of his fuel clients include “schools, hospitals [and] big new buildings in Ashrafieh,” he explains in his office one block away from Beirut’s ABC Mall. He decided in January to begin delivering water as well. Abillamaa says he spent about $210,000 to buy two delivery trucks (one has a 15,000 liter capacity and the other 20,000). The investment also paid for a red license plate that public transportation and delivery trucks are required to have in Lebanon. Not included was a license to distribute the water.

“You don’t need one,” he says. 

Abillamaa says he pays between LL 20,000 ($13.33) and $20 to fill up a truck, with the price depending on where he buys the water, not the size of the truck (i.e., he would pay $13.33 for each truck at one well but $20 for each truck at another, even though the trucks have a different capacity). He cautions that this is the price range “until now.”

“If, after 20 days, the water is low, the price will go up,” he explains.

As for how much he makes off the new line of business, Abillamaa says his margin is between “$70 and $100” per delivery, not accounting for operating expenses. He says each truck is delivering five loads per day and he plans to buy two new trucks. That said, he insists, “I’m happy if it’s raining.”

Hicham Jabre owns three wells behind a Coral gas station near the main square of Antelias, a suburb just north of Beirut. He says his family has been distributing water and filling up tanker trucks for other distributors for 30 years. “Before, you had too much water and fewer clients; this year there’s not enough water and too many clients.”

Jabre says his wells only service trucks with capacities ranging from 20,000 to 30,000 liters. He used to charge LL 5,000 ($3.33) per truck but is charging $10 this year because of growing electricity costs.

“It used to take 10 to 15 minutes to fill a truck,” he says. “Now it takes an hour.” 

Both Abillamaa and Jabre are familiar with servicing clients who buy entire tanker trucks full of water. Households, however, often rely on filling an apartment’s individual water storage tank, paying per 1,000 liters. Smaller trucks complete these fill-ups, and on August 16, Executive saw one of these smaller trucks filling up at a well next to the Saadeh Abou Jaoudeh Gas Station in Jal el Dib, another northern suburb of Beirut. Two employees at the station, queried independently, told Executive that the truck has a capacity of 5,000 to 6,000 liters and will therefore pay between LL 5,000 and 6,000 ($3.33–$4). The driver refused to speak; however, in Executive’s experience, similar delivery trucks are charging consumers between LL 20,000 and 30,000 ($13.33–$20) per 1,000 liters in Beirut.

Licensing limbo

[pullquote][T]he ministry plays no part in ensuring the water is up to any quality standard. Indeed, no one is holding this water to any standard.[/pullquote]

Most reports on private water delivery in Lebanon say that some delivery trucks are licensed and some are not. This is arguably misleading. Ihsan Atwi, head of the sanitary engineering department at the Ministry of Public Health, tells Executive that the ministry does “not deal with trucks.” The only licensed distributors of water in Lebanon are the 38 companies listed on the ministry’s website which are authorized to sell water that has been tested and confirmed to be safe for drinking. None of the 10 private water delivery trucks with names on them that Executive has seen on the street were on the ministry’s list. Atwi would not go so far as saying no trucks are licensed, but kept noting that only companies with water safe for drinking are licensed to distribute.

Like everyone else Executive spoke to for this article, Atwi has no idea how many trucks are delivering water. He notes that the ministry plays no part in ensuring the water is up to any quality standard. Indeed, no one is holding this water to any standard. Jabre, the well owner, says neither he nor the Ministry of Public Health test the water from his wells. Both Jabre and Abillamaa say that some wells are known to have salty water — the result of seawater intrusion into coastal aquifers — and many trucks are distributing it anyway. Executive has met a Beirut resident whose apartment receives refills of salty water, arranged by the building’s concierge, whenever state supplied water runs out.

Atwi says that Law 210 of 2012 was written to bring order to a different world of chaos in the water sector, namely neighborhood distributors of filtered drinking water. The ministry, he explains, knows that in just about every neighborhood in Beirut and in villages across the country, there are ‘companies’ — often unregistered — distributing drinking water for much less ($1 for 20 liters) than one would pay when buying from a licensed water bottling company like Tannourine, Sannine, Reem or Nestlé. The law was meant as a way to license these currently unlicensed and illegal distributors, but is awaiting yet-to-be-approved implementing decrees to put meat on the bones of the licensing process. Even if these decrees are passed soon — which seems highly unlikely in the current political climate — they would only regulate filtered water, and, based on observations and interviews for this article, the water being pumped from the ground and rushed to homes, schools and hospitals around the country is not typically filtered.

Unmonitored disaster

[pullquote]When asked how much water is being delivered to customers on a per liter daily basis, Ahmad Nizam of the South Lebanon Water Establishment says, “We cannot count that. No one can count that.”[/pullquote]

Jabre says that compared to previous years, demand for privately delivered water has gone up “100 percent, over 100 percent.” This number is impossible to verify, as is just how short Lebanon’s fresh water supply is this year. Asked how much water is being delivered by the state to consumers, Randa Nemer, an advisor to the Minister of Energy and Water, tells Executive, “We have no idea.” It is the country’s four water establishments — covering the North, South, Bekaa, and Beirut and Mount Lebanon — who keep that data, she says. 

Executive was only able to reach two of the four, but the results correspond to what Executive reported last month on the water crisis — monitoring is minimal. When asked how much water is being delivered to customers on a per liter daily basis, Ahmad Nizam of the South Lebanon Water Establishment says, “We cannot count that. No one can count that.”

Both Nizam and Roy Yazbek of the Bekaa Water Establishment say a lack of metering is the problem. That said, Nizam explains that the Tasseh spring in South Lebanon is metered. “On August 30, 2013, the yield was 1,860 cubic meters per hour. On July 2, 2014, it was 653 cubic meters per hour,” for the spring, which he describes as a major source for the South.

Yazbek says that many of the springs in the Bekaa that typically provide year long water supplies have dried up. He was outside his office when contacted and did not have exact figures.

Almost any report one reads on water in Lebanon includes an estimate that the country receives an average of 800 millimeters of precipitation per year, leading to a groundwater recharge of 500 million cubic meters. Indeed, these are the numbers used in the 2012 National Water Sector Strategy.

Mark Saadeh, a hydrogeologist who wrote a 2008 PhD dissertation on seawater intrusion into coastal aquifers in greater Beirut, scoffs when Executive rattles these numbers off. “It’s a black box,” he says of Lebanon. “Where are your monitoring wells?”

Ziad Khayat, former project manager with the Lebanese Center for Water Management and Conservation (LCWMC), a unit within the Ministry of Enery and Water, tells Executive that there are currently 29 wells in the country specifically drilled to monitor the quantity of Lebanon’s ground water. He says a minimum of 61 are needed to get a full picture. On top of that, there are only 87 stations nationwide collecting data on annual rainfall. Snowfall — which both Khayat and Saadeh say plays a larger role than rain in refilling the country’s aquifers — is not monitored at all. 

The LCWMC is financed by the Italian government and was initiated by the Ministry of Energy and Water as well as the UN Development Programme. Its aim is to conduct a full-scale assessment of groundwater in Lebanon. Khayat says the study, the first of its kind since 1970, was carried out between March 2012 and March 2013 using 100 monitoring wells. Twenty of the monitoring wells are still operating and sending LCWMC daily reports. In addition to the 2012–2013 monitoring, LCWMC used data from the 20 remaining monitoring wells to study the period from April 2013 to April 2014. He shared some of the results of the latter survey, which he said will be made public most likely in September, with Executive. Highlighting some of the most drastic findings, Khayat said that in the second one-year monitoring period, which coincided with the particularly dry winter of 2013–2014, the groundwater level fell 12 meters in Zahleh, seven meters in the North Bekaa, five meters in Nabatiyeh and 20 meters in both Bahsas, near Tripoli, and Miniyeh, also in the north.

Khayat notes that without much-needed data from previous years, it is difficult to make long term sense out of the numbers collected during the most recent monitoring. He and Saadeh say no one can accurately explain what impact both regulated and unregulated groundwater extraction will have on the water table without proper data collection.

“You can’t manage what you don’t measure,” Saadeh says. 

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Fire alarm
Leaders

Speak up

by Executive Editors
written by Executive Editors

Around this time last year, business leaders representing the Economic Committees, a collection of representatives of the nation’s private sector companies, met with government officials to sound the alarm bells over a tanking economy. Their contention then was that leading economic indicators suggested the economy was in terrible shape, going so far as saying the country faced the worst risk of GDP contraction since 1989, near the end of the civil war, when Lebanon’s economy recorded a 0.8 percent drop.

One year on, the country is again facing grim economic prospects. The World Bank estimates that for 2014, Lebanon’s real GDP growth will reach only 1.5 percent, far below the growth rate of about 9 percent registered in 2009 and 2010, because of the volatile political environment in the country. The International Monetary Fund is forecasting only a 1 percent growth rate. Bank Audi also sounded the alarm in its recently issued quarterly report on the Lebanese economy, howling that “domestic political uncertainties with a continuously high level of domestic political bickering” and “the deterioration in macroeconomic fundamentals amidst accentuating fiscal and external imbalances” are leading to significant and tangible negative economic implications.

Consumer confidence is also in a miserable state. The Consumer Confidence Index, jointly produced by Byblos Bank and the American University of Beirut, plummeted to its fourth and second lowest scores ever in the last two quarters of 2013. Nassib Ghobril, chief economist at Byblos Bank Group, said in a statement coinciding with the publication, “continued domestic political volatility” and “failure to form a functional government to address citizens’ concerns, and a persistently uncertain outlook” were just a few of the main factors that affected the confidence of consumers during the second half of last year. Meanwhile, the country’s exports and imports have declined from $13.1 billion in the first half of 2013 to $11.9 billion in the same period this year — with industrial exports declining 29.3 percent.

Last year’s decision by Parliament to extend its term solved nothing. On the contrary, security in the country has remained unstable and, in some instances, grown worse. The 10 month vacuum at the cabinet level following the resignation of then-Prime Minister Najib Mikati only heightened the government’s impotence. It impacted economic confidence and the ability of the government to address pressing challenges of any kind, resulting in a meager 0.9 percent growth to the nation’s GDP — worse than the 1.6 percent growth in 2006 when Israel destroyed vast swathes of the country’s infrastructure and killed more than a thousand people.

These indicators are not only disastrous for the country as a whole, but for the business community in particular. Economic confidence is severely affected when government officials and Parliament consistently disregard the law and constitution, picking and choosing when it intersects with personal interests. And this is not to mention the glut of important economic issues that will be resolved if and only if a new political regime is settled. Among these are public sector wages, management of the refugee crisis and the oft-delayed oil and gas decrees.

Extending a dysfunctional parliament is not a viable solution — it merely prolongs the pain. And while elections are no guarantee of stability, they are far preferable to the current state of perpetual economic purgatory. Lebanon must get beyond elections so that leaders — whether in business or politics — can make the decisions that will return companies to profitability and reintroduce growth into the economy.

Civil society has thrown all its tomatoes, but protests have been ineffective. Media too has called on politicians to end their clownish performance, but to limited effect. Change must come from all parts of the society, and the business community is a strong, influential part of Lebanon’s fabric. So it again falls to business leaders who have a vested interest — bottom lines are being heavily affected — and who have the financial weight to make their voices heard.

The current batch of politicians acknowledge the deteriorating situation, yet remain infuriatingly loath to take action. The only way to break this impasse is electing a new president and holding fresh parliamentary elections. Just as they did last year, economic and business leaders must voice their need for governance and pressure politicians to face up to their responsibilities. Last year, the Economic Committees whimpered their disapproval. This year, they must roar.

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Business

Pay what you want

by Nabila Rahhal
written by Nabila Rahhal

Picture this: You walk into a restaurant, serve yourself a generous helping of each of the items on the buffet, have a waiter pour you unlimited cups of water and then get up to have another helping from the buffet. Before leaving, instead of requesting the bill, you pay what you judge to be a reasonable amount for the experience you just had. You are free to pay as little as a dollar or as much as a hundred bucks or more.

Mótto, a new restaurant in Mar Mikhael and a fusion of the names of its founders Mohamad Fayyad and Tony Sfeir, has brought the concept of “pay what you want” to Beirut.

This concept in the hospitality world is not new, and is used in countries like the United States, Germany, Austria and England. Sfeir learned about the concept during his trips to Berlin and found it very attractive. According to him, the “pay what you think is fair concepts” fare well in cities where people have a sense of community and social awareness. 

It all started when Sfeir found out that Fayyad was about to close down his venue, Mó, a restaurant in an alleyway off of Mar Mikhael’s main road, and leave the country. Sfeir, who owns the neighboring guest house BEYt and Plan BEY, a design and exhibition space, had often visited Mó to eat and loved the space. So, when he saw it shutting down, he suggested this collaboration. 

“For us, it was sort of a social experiment to see how the Lebanese who are very much cultivated when it comes to cuisine will react to this setup. And we thought, ‘we have nothing to lose, so why not?’” explains Sfeir.

Mótto began by serving a daily lunch but quickly expanded with a dinner menu as well as a Saturday brunch. The menu is a rotation of global cuisines, including Sri Lankan, Ethiopian, Indonesian, Spanish and Italian, with an almost daily offering of a Lebanese dish. “It’s authentic food done by native chefs,” says Sfeir, explaining that they started with Nimal, from Sri Lanka, who has been a chef for 18 years and is their head chef at Mótto. Later they started taking on other chefs who had heard of the work they were doing with Nimal.

The chefs work on a freelance basis and Mótto shares a percentage of the sales with them (the exact amount of which Sfeir refrained from disclosing). “There is no minimum guarantee as we have mutual trust for our word and work. We trust that they are providing us with good food and they trust that we will market their food well and make the best profit,” says Sfeir.

A month and a half into the idea, the duo says the concept has received positive responses and they have no intention of changing the format. Mótto welcomes about 30 guests in its six table venue during lunch and approximately 25 during dinner and brunch, as people tend to dwell longer on their meals during these times compared to the rushed lunch hours. 

The minimum suggested amount that was displayed on the board during their first week of operations ($6; LL 9,000) has since been dropped but Sfeir declined to provide us with the exact figure of the average amount they are receiving, explaining that it would unfairly influence the client when deciding on what amount to leave. “Our customers will either start paying the average, or, based on their personalities, they will pay more to appear generous when the whole idea is that we want them to be the judges of what is fair based on the quality of the food and the service they received. There is this whole energy around it and this is why we don’t want to give away the average,” says Sfeir.

For Sfeir and Fayyad, what interests them most is the anthropological look at Lebanese society and who enjoys such concepts or doesn’t. “It is very interesting, from what we have observed, that it is not the richest people who pay the most or the poorest people who pay the least,” says Sfeir. 

The duo insists that it all balances out at the end and those who can afford to pay more are somehow covering those who pay less. Fayyad says that loyal recurring clients who see Mótto as their daily canteen pay less than those who view it as a nice place for a romantic dinner and visit only occasionally but the frequency of the former’s presence ends up being financially the same. “It’s a whole kind of equilibrium which is created and balances out,” says Sfeir. 

For dinner, Sfeir explains that people pay much more even though it could be the same meal. “It would be fair to say the average bill for dinner is 1.6 times more than the average lunch bill, and the brunch bill is halfway between the two,” says Sfeir. 

Whether the concept is succeeding in Beirut because of the novelty factor or whether Mótto has built a viable venture out of “pay what you think is fair” restaurants in Beirut is too soon to tell. For now, Sfeir and Fayyad are content, observing what they’ve created.

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Seeing is believing

by Line Tabet, Zeina Loutfi & Ramsay G. Najjar
written by Line Tabet, Zeina Loutfi & Ramsay G. Najjar

Disappointing, frustrating, surprising, uninspiring, exciting, amazing… Depending on how you experienced the 2014 FIFA World Cup, which team you were supporting or how much of a die-hard fan you consider yourself to be, this is how you would probably describe the games that ended on July 13. Without delving into the details of which team should have won or whose performance was worth watching, the 2014 FIFA World Cup was full of colors, images, impressions, illustrations and graphics.

The visual presentation of information — or visual communication, as we like to call it in professional jargon — has become omnipresent in our daily lives, more so during the World Cup fever. From posters to pictures, fans’ facial expressions, sponsors’ advertisements, interactive timelines and infographics of players as well as Jennifer Lopez’s performance at the opening ceremony and that of Shakira in the closing one, the FIFA World Cup 2014 could certainly be summarized visually. 

However, this load of visual representation of the matches ultimately compels us to question its limitations in general: Can visual communication replace a good narrative? Does it come at the expense of content? In what instances does the imagery become too much or too little? 

“Without image, thinking is impossible” – Aristotle 

In truth, the power of visual communication has been trending in recent years, whereby advocates believe that it has altered the way we communicate, experience things and learn. This is especially true in the digital age where Pinterest sells dreams, Instagram makes memories and Tumblr creates stories.

Research by New York University’s Jerome Bruner shows that we remember about 80 percent of the things we see, compared to 20 percent of what we read. Given people’s short attention span, compelling images have become critical to putting together a story, convincing people and standing out.

The most memorable images of the 2014 World Cup are definitely those of the Brazilian fans watching in despair as their team lost against the Germans in the semifinals: tearful eyes, sad faces, shocked reactions, etc. Many say that these facial expressions stirred emotions and feelings of compassion, sympathy and solidarity among the Brazilians, replacing sentiments of anger or resentment.

Visual aids also simplify information, rendering things easier to understand and grasp. Infographics with the names of players or interactive tables with the lineup of the games flooded our timelines on the morning of each game: who was playing, in which position, which strategy was going to be adopted, etc. Let’s face it, reading pages and pages of analysis would have been tedious, when a good design and drawing makes it easier to explain and much more comprehensible.

In addition to arousing emotions and simplifying complexity, visual presentation can serve to enhance stories. In fact, no one would have believed that Uruguayan player Luis Suarez actually bit Italian Giorgio Chiellini during a World Cup game if not for a video of the incident. This specific moment was captured and turned into an animated GIF that went viral, compelling us to watch it over and over again in a quick and easy to load format, ultimately proving that visual presentation is critical to make an impact. Between reading about an incident and having the chance to watch it, the latter seems to be the winning option.

Finally and most importantly, visual communication is about illustrating concepts and allowing audiences to make a direct link in their minds, just like the official brand identity for the World Cup 2014, which projects both the values of FIFA, be they unity, integrity, authenticity and performance, as well as the specificities of the host nation.

“A picture is worth a thousand words” … but never tells the whole story 

Despite the undeniable power of images, it is critical to remember that successful visual communication is all about the right purpose, the right way and the right content, whereby the success or failure of any communication hinges on knowing how and when to resort to it.  

Too much is too little  

The World Cup is one of the most anticipated events that football fans await every four years; one that creates hype among teams, sponsors and the media who bombard us with visuals prior to, during and after the games. This year, the World Cup certainly did not suffer from a shortage of visual communication. This makes us wonder whether this excitement was overdone, if the visuals from this milestone deserved to trump major regional events, such as the war in Gaza, and if we should actually expect the media to provide us with a more balanced selection of visual information. 

More generally, excessive visual representation can take away from the significance and appeal of each image, ultimately reducing its impact so we no longer examine the repetitive visuals that are overcrowding social media sites and newsfeeds — barely glancing at them, deeming them mere ornament to the overall design.

Looking at the bigger picture

In addition, images taken out of context can disengage viewers from the reality of things. The host city Rio de Janeiro is not only about pristine beaches, state-of-the-art stadiums, all-day carnivals, pretty women and handsome men. The city is also about poverty, crime and social inequality. However, when we are bombarded with images depicting only one aspect of the city, we tend to overlook reality. In fact, during the games, many local NGOs were trying to spread images showcasing the contrast between the wealthy and the deprived neighborhoods, the opulence of the games and poverty of the people, the high rises and the shantytowns. This example is one of many that illustrates how focusing on one aspect or one side of a story is very common, and how making the effort to look at the bigger picture remains nonetheless fundamental to having a broader understanding of the reality of things.

When pictures alone are not enough

Relying solely on visual communication can sometimes be deceiving or even misleading. Case in point: the story of the “most beautiful World Cup supporter,” i.e. the Belgian fan who landed a short-lived beauty contract with L’Oréal after being spotted among a crowd of fans during a game. L’Oréal later called off the contract as pictures of her during a hunting trip emerged, arguing that these were not in line with the principles of the company. To sum up, the original picture didn’t tell the whole story.

In truth, visuals are not sufficient to project the right image and convey an accurate representation of reality: No matter the extent to which illustrations have become predominant and indispensable in storytelling, especially in our digital age, gripping content remains essential when communicating. As a matter of fact, content should be regarded as more than text, whereby authentic, customized and quality information will speak to audiences, inspire them and shape their perspective of things.

Having established that content remains vital for a captivating narrative, we would expect to find the right balance of images and words, all the while ensuring that visuals go beyond words and provide an added value to the text. When all the newspapers feature the same headlines accompanied by the same pictures, what matters to the reader is no longer the image but rather the analysis.

And so, two months later, the legacy of the German team goes beyond winning the FIFA World Cup 2014. The two most memorable communication moments of these games carry the German stamp and strike the right desired balance between visuals and words: a picture, the celebratory selfie of the winning team featuring Chancellor Angela Merkel and a message, their Facebook post supporting the Brazilian team following their loss.

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A promising start

by Gareth Smith
written by Gareth Smith

Mohammad Khatami has criticized a six year jail sentence handed to journalist and activist Serajeddin Mirdamadi. In speaking out, the former president reflects a sense among fellow reformists that little has changed in the year since Hassan Rouhani assumed the presidency promising to “desecuritize” Iran’s domestic atmosphere.

Mir-Hossein Musavi and Mehdi Karroubi, former presidential candidates and leaders of the ‘green movement’ which took to the streets to contest the 2009 presidential election, remain under house arrest. Husband and wife Jason Rezaian and Yeganeh Salehi, reporters for the Washington Post and The National respectively, have been detained since July.

Many suggest that opponents of Rouhani are fighting his presidency with any available tool, using state positions to crush expectations of liberal change. ‘Principle-ists,’ or fundamentalists, fear that Rouhani, however loyal to the system, is an unwitting Trojan horse for those who would undermine the Islamic Republic.

Hence, while Rouhani has called for more tolerance of ‘bad hijab’ — the exposure of any part of a woman’s body other than her hands and face — principle-ists have organized demonstrations demanding stricter veiling. While Ali Jannati, the culture minister, last year suggested easing Iran’s ban on Facebook and Twitter, May’s high profile arrest of six young Iranians dancing on Youtube to Pharrell Williams’ song “Happy” highlighted the allegedly pernicious nature of social media.

International human rights organizations, as well as Nobel Peace Prize winning lawyer Shirin Ebadi, have criticized a rise in executions under Rouhani, although a political agenda is hard to establish. 

But it is hard for principle-ists to confront Rouhani, who has chosen his battles carefully and is maintaining support from Ayatollah Ali Khamenei. On assembling his cabinet last summer, Rouhani consulted Khamenei closely and produced a mix largely of centrists but with some reformists and, crucially, conservatives Abdolreza Rahmani Fazli as interior minister and Mostafa Pour-Mohammadi as justice minister.

Rouhani has been most robust in defense of his government’s international diplomacy, recently calling critics of nuclear talks with world powers “political cowards” who “shake” at any kind of negotiations. Khamenei’s call last year for “heroic flexibility” in the talks made clear his backing for a deal that would curb Iran’s nuclear program as long as its rights were recognized. Despite the talks’ failure to conclude by the initial deadline of July set by November’s interim Geneva accord, an agreement remains possible by the extended deadline of November 2014.

Crucially for Rouhani’s standing in Iran, there have been improvements in the economy, due partly to tighter fiscal and monetary management and partly to optimism after Geneva, which included sanctions relief, including the release of frozen assets of around $7 billion over six months.

The Iranian rial has strengthened and inflation has roughly halved from over 40 percent. In tightening fiscal discipline, Rouhani showed in April his aptitude for tough decisions, introducing substantial increases in the prices of subsidized gasoline, diesel and compressed natural gas (popular with taxis in Tehran). In so doing, he confronted Iranians’ sense that cheap fuel is a national birthright by virtue of oil reserves of 157 billion barrels, 9.4 percent of the world’s total.

The government has also claimed a dramatic improvement in two sectors eased by Geneva — auto production and petrochemicals. Geneva’s effect on crude exports, halved to 1.1 million barrels a day by draconian United States and European Union oil and financial sanctions in 2012, is less clear. Geneva envisaged a freeze, but there are signs exports are edging upward, especially with growing levels of condensates.

However, these are not fundamental changes in sanctions. According to Djavad Salehi-Isfahani, one of the most well respected analysts of Iran’s economy, “manufacturers are still using cumbersome and costly channels to procure their raw materials and parts.” Official figures do show a drop in unemployment, with the Statistical Center of Iran reporting a fall from 12.1 percent during March 2012–March 2013 to 10.4 percent during March 2013–March 2014. The latest IMF report suggested that under current conditions it will rise “toward 20 percent by 2018” and many analysts in Tehran doubt that unemployment could be falling in an economy that is not growing.

Rouhani, who has characterized his government as one of “prudence and hope,” recently suggested Iran was sandwiched between “Iranophobia, Islamophobia, and Shiaphobia” on one hand, and a fear of “interaction” with the outside world on the other. Momentous as his first year in office has been, his second will be more so.

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Society

Single and ready to…

by Jasmina Najjar
written by Jasmina Najjar

“The telephone rang. It was my 70 year old great-aunt. My heart crumbled. I knew full well what was coming next.

‘Hello there sweetie,’ she chirped.

‘So, have you met anyone special?’ Her tone became grave and stern.

‘Not yet,’ I replied in a rather ‘goodness not again’ manner.

‘Tsk,’ she snapped. ‘You’re 34 years old and still not married. You’ve reached your expiration date. No one will want you now.

You’ve missed the boat.”

Beirut Knights

This sort of conversation is familiar to Lebanon’s growing legion of singles. We live in the land of “nefrah minik” (may we celebrate your wedding) with sayings that include “a bridegroom made of coal is a blessing” (implying that any man is better than being single) and “the bride is a frog but the wedding is a cyclone” (the bride is insignificant but the wedding is a grand show).

But marriage might not be the promised path to happiness. Studies on marital status and happiness have conflicting results. Some state that married people are happier: “[A] study, published in the Journal of Marriage and Family reveals that married couples experience few advantages for psychological well-being, health or social ties compared to unmarried couples who live together. While both marriage and cohabitation provide benefits over being single, these reduce over time following a honeymoon period” (Wiley). Others claim that singles are happier, while some studies argue that both single and married individuals enjoy about the same level of happiness. If the more accurate studies are those that suggest singles are less happy, could it be because of social pressure and the way society discriminates against singles rather than the actual state of being single? Happiness is tied to many factors and there are no guarantees in life, so how can marital status guarantee happiness or sadness? And what role does our perception that ‘the grass is always greener on the other side’ play?

Singles can be happy

We live in a world where many find it hard to believe that you can be single and happy, just as you can be married and happy (or miserable depending). And we live in a culture where singles, especially single women, are constantly put down and made to feel inadequate. Whenever someone asks you what you’ve been up to and you eagerly talk about your presentation at a conference or promotion at work, pity starts to appear in their eyes. “Oh poor soul…but have you met anyone yet?” Some even take it a step further by reminding you that your ovaries are rotting.

The practice of “single shaming” is not something exclusive to Lebanon. The internet is littered with articles about “how to be single and happy,” implying that you should naturally be in tears at this predicament. Bella DePaulo, a professor and author of “Singled out: How singles are stereotyped, stigmatized, and ignored, and still live happily ever after” has an entire blog called Living Single on Psychology Today to empower singles and even coined the term “singlism” (discrimination against singles). And yet things are changing in the West. According to the Census Bureau in the US, about 54 percent of women of marriageable age are single, while the figure is 46 percent for men. And many are choosing to remain single or become single parents. “A 2006 survey of singles by the Pew Internet & American Life Project found that 55 percent of the never-married had zero interest in seeking a romantic partner” (“Single by Choice”, Boston Magazine). 

More women than men

In Lebanon ‘single shaming’ is more pronounced because behind the wild nightlife scene and beaches hides a traditional society with traditional values. In Lebanon, everyone is pressured into getting married as if it’s the only path in life. It’s rather perplexing considering our reality. In a country suffering from a lack of job opportunities, there aren’t many men of marriageable age around because of emigration. Some claim there’s a 5:1 female-to-male ratio “among university graduates.” While there seems to be no consensus on what the real ratio is, there is consensus that there are more women than men of marriageable age in Lebanon. And this unique gender ratio makes Lebanon very unique indeed.

These numbers make the stakes high and the competition fierce for women. It also makes finding a genuine partner in life (which is what many modern, educated, financially independent and career focused women want rather than a husband who is just a ‘provider’ in the traditional sense) as challenging as seeing an atom with your naked eye. Even guys are having tough times since they have to grapple with the high cost of living versus low salaries and ridiculous expectations. And there’s also the pressure that leads some to marry for all the wrong reasons just for the sake of the big wedding only to divorce soon after.

Will reality spark change in our society? Will Lebanon be kinder toward those who will remain single for life, some by choice and many because of sheer circumstance? Or will society continue to make this ever-growing portion of the population feel like they missed the boat even though the boat was simply never there to begin with? Whatever the answers might be, it’s worth remembering true happiness is found in ourselves, not in others. Married or single: both can be the true path to happiness. But happiness starts with you.

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Reclaiming Beirut’s shared spaces

by Mona Fawaz
written by Mona Fawaz

Have you ever asked yourself why property prices are so high in Lebanon? Why Beirut homes are prohibitively expensive for at least 90 percent of the city’s daily users who cannot dream of ever claiming an address in its quarters? Have you wondered why Barcelona, Marseille, Nice or Limasol display miles of public beaches accessible to all dwellers and visitors while in Beirut, the last 100 meters of so-called public beach is privately held and, in fact, currently under negotiation for the municipality to purchase, we are told, at a meager $18 million or so? Do you wonder why an iconic national symbol such as the Pigeon Rocks in Raouche and its natural surroundings can be forever transformed through the decisions of private developers? Do you buy the idea that the laws of supply and demand are regulated by some supernatural hand that sets the price of a built square meter of land in Beirut at several thousand dollars? Indeed, could that be why the residents of Lebanon’s cities and countryside find it increasingly impossible to secure not only shelter, but also recreational areas and communal spaces? Are they just bought out by other, more deserving actors? No, they surely are not.

In these few lines, two frameworks will be developed to think through these questions and derive strategies from each to move beyond the current crisis: first, market prices are highly determined by regulatory and social institutions and second, public claims should extend far beyond what is earmarked as ‘public’ property.

Determining price

Like any other good exchanged on the market, the price of land — and housing — is highly determined by the legal and social frameworks in which exchanges occur.

In order to understand why property prices have risen as they have over the past decades, we have to look first at the regulatory and institutional frameworks in which these exchanges occur. A quick review of the taxation systems and incentives that organize property transactions indicates that while efforts were deployed to facilitate property exchanges in the 1990s through the digitization of the land registry, very little was done to curtail the widespread speculative practices that dominate the real estate sector.

On the contrary, a whole set of policies and administrative practices allows developers and speculators to evade taxes. These taxes are set well below international benchmarks, preventing the profits reaped by the real estate development sector from benefiting the community at large.

To take one simple example, a developer whose project overlooks the Horsh Beirut park or the seafront may charge his clients a hefty premium for this view, but they are not cumbered by any charges for these public amenities. The developer has also no requirement to produce affordable housing or any shared or communal facilities when they build in the city, as they are required to do elsewhere. In sum, a developer is encouraged to target the most lucrative segments of the market, allowing for narrow individual profit maximizing strategies to guide building investments in the city.

We also have to recognize that supply and demand curves are socially constructed, which means that they are derived from particular social and economic choices made by social agents. Recent market studies indicate that real estate demand stems from Lebanese expatriates and other well heeled buyers looking for long-term secure investments in the country. Despite the flagrant need to balance this demand for placing capital, at least partially, with the more immediate needs of those who look for shelter, no policy is taken to curtail the long-term speculative intentions of investors. To the contrary, an entire advertising industry supplements their financial interests with constructed ‘private’ ideas of ‘exclusion’, ‘luxury’ and ‘safe living’ that are consistently pegged to highly segregated housing models. In sum, developments that drive prices up are desirable for the city.

Given that land is not just another commodity — not only because its supply is naturally limited but also because it holds a special social value due to its role as shelter — the framework organizing its exchange is expected to reflect this special nature. Here too policies have lagged behind. While developers in many US cities, for example, are required to secure a percentage of affordable housing in every building development they produce and frequently negotiate the right to build in exchange for the provision of public amenities such as playgrounds and community pools, no such provision is even considered in Lebanon. Despite the urgency of the housing crisis and the dearth of communal amenities throughout the country — with Beirut meeting only one tenth of the World Health Organization minimum required open areas per capita — neither the municipality nor other public planning agencies have revised

the regulatory framework to meet social needs.

These trends are, however, reversible. It was only after the second world war that northern European countries socialized the profit reaped by land development. These countries have heavily taxed all land developments and building rights and reinvested their profits in public amenities in ways that have made their cities routinely recognized as the most livable around the globe. And if Europe is too high a benchmark, we may instead look in the direction of Brazil, where revised forms of property taxation, introduced in 1991 through the City Statute, have socialized the meaning of land and ushered in the possibility of reversing decades of speculative building developments through the introduction of progressive taxation systems. Now studied in planning schools around the globe and emulated in other national contexts, the Brazilian City Statute shows that property taxation is not only desirable, but also necessary for building more inclusive cities. Those interested in more affordable housing and better public spaces should be looking in the direction of public regulators rather than relying on mere incentives for developers.

Hence, the fact that land prices are so prohibitively expensive as to rule out the possibility of both affordable housing and public spaces is the result of specific, clearly identified and reversible policies. To change them would require the type of political will sustained by social mobilizations of the type witnessed in Brazil throughout the 1980s. While we may not be there yet, a growing number of civic organizations are working in this direction and we may have to look toward them, rather than toward corrupt political classes, to achieve change.

Rethinking public vs. private

This, however, is not enough. We also need to restore the value of the ‘shared’ in our cities. To own land is not to disembed it from its socio-spatial context and decide alone on its development.

A common explanation for the absence of playgrounds, parks and other shared facilities — as much as for the deterioration of our built and natural heritage — is that most properties in Beirut are ‘privately held.’ Given that land is very expensive, it is prohibitive for public authorities to expropriate areas for the development of parks and other shared amenities. To counter this point, a critique of the too easily accepted conception of private property as full dominion is needed. This is deeply rooted in the revival of 18th century liberal thought, mostly associated with John Locke or William Blackstone who at the time advocated for an understanding of the natural and built environment as necessarily propertied. This conception depicts urban and natural landscape as the sum of individually claimed parcels each labeled as ‘private’ or ‘public,’ the latter reporting to the authority of the state. Numerous critics — starting with Marx and Proudhon in the 18th century, but since then with a whole body of literature in

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Angry faces are painted on port construction material.
Beirut's private coastReal Estate

No project, but no public

by Matt Nash
written by Matt Nash

This article is part of a continuing Executive investigation into public and private lands along Beirut’s western coast. For more stories in this series, click here.

When the Ministry of Environment called today for the Municipality of Beirut to deny building permits on Raouche’s coastal Dalieh area, it didn’t faze the owners of the private property. “No construction or any other permit is being or will be sought in the foreseeable future as far as I am aware,” said a representative of the majority land holders. But despite the new apparent roadblock to any development, there’s also no plans to turn the land over to the public.

Requesting anonymity to give the first interview in English on the subject, the person managing the property on behalf of GroupMed Holding and Fahd and Hind Hariri — who own most of the land — tells Executive that the owners have no concrete plans to build a resort on a large expanse of land. This contradicts the popular rumor that sprung up as area fishermen were evicted and the popular area was fenced off from the public.

Asked how the land owners will respond to the Ministry’s call to tear down this fence, the representative says, “It was put up to protect the private property from squatters and encroachments, hence, I believe the owners would oblige to calls to take down the fence, if and when a responsible and reliable authority guarantees their rights and the protection of the subject private property.”

 

Read the Ministry of Environment’s press release in Arabic or English

 

Fahd and Hind, along with GroupMed — the parent company of Medgulf Bank — fully own four of Dalieh’s 14 plots of land, according to a map the owners’ representative gave Executive. Under Lebanese law, a parcel of land is made up of 2,400 shares. When many people each own part of a parcel, their ownership is reflected in the number of shares they have. Four of the Dalieh parcels are fully owned by Hariri and GroupMed, while in two more they own half the land. In six of the 14, the Hariris and GroupMed are majority shareholders, and in the remaining two, they are minority shareholders with only 240 shares in each.

Three of the parcels fully owned by the Hariris and GroupMed are adjacent to each other, but none abut the corniche, meaning that a development built on them would need an access road along property with multiple owners. The person representing the Hariris and GroupMed explains that building on land with multiple owners needs everyone’s approval. Lack of unified vision for what to do with the land is preventing its exploitation, he says.

“The proper thing to do would be do a study, combine all these properties together into one real estate block and try to see the feasibility and economic viability of any project,” he explains. “That’s what should be done but nothing is being done as we speak.”

As for why the land is being blocked off, the representative says the land owners are trying to protect their private property from public use. As for why this wasn’t done years ago — he claims the late Prime Minister Rafik Hariri bought the land in the 1990s — the representative explains that plans from a few years ago to expand a port used by local fishermen prompted the Hariris and GroupMed to take action.

Along with what they plan to do with the land, the representative’s account of what happened with the port is the subject of controversy and rumor. Activists argue that the Hariris pulled off a back-room deal to stop the port expansion. The representative claims the contractor wanted to dynamite underwater caves near the port to facilitate the expansion, but was denied a permit to do so by the Lebanese army. An army spokesperson could not be reached for comment.

Former Public Works Minister Ghazi Aridi — at a press conference in November 2013 while he was still minister — said that the Hariris and MedGulf were pressuring him to stop the work. Reached by telephone and asked again why the work was stopped, Aridi said his successor, Ahmad Karami, stopped the work for a reason he refused to speculate on. Executive was unable to reach Karami and the Ministry of Public Works did not respond to an interview request. The representative of the Hariris and GroupMed insists the prospect of destroying the caves was what interrupted the expansion of the port, but is happy the work stopped.

“What would have happened, there would have been a port, that would have probably been awarded politically to a certain entity for 99 years, and then you would lose your private land forever,” he says, adding that the large concrete structures currently on the land — and believed by many to be part of a resort that will soon be built on the property — belong to the contractor who was supposed to expand the port.

There are rumors that the port will be moved, and the representative says the land owners he is speaking for support such a move morally and financially.

“Because it is in our interests, we offered the ministry [of public works] that we would pay the existing contractor for all the works done to date so that the funding available for the whole port could be moved all together,” he says, noting they have not yet received an answer.

As for turning the land back over to the public or selling it to the municipality, the representative is doubtful. “If it were not as valuable or expensive, it would have probably been a good idea for the city or the government to take possession of it. But then, it is worth in the hundreds of millions of dollars, so it wouldn’t be cost effective, if you will, to turn it into a public park. Very simple.”

 

Correction: A previous version of this article mistakenly stated that this was the first time the person managing the Dalieh property gave an interview to the press. Ours was the first in the English press.

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