Executive Magazine

FATCA is due to come into force on July 1

FATCA – Region preparing for Uncle Sam

by Paul Cochrane April 30, 2014

written by Paul Cochrane

The four-year build up to the Foreign Account Tax Compliance Act (FATCA) going live is nearly over, with just eight weeks left until financial institutions have to be compliant. But the act, which is intended to rein in tax evasion by United States citizens abroad with accounts above $50,000, involves such a complex reporting and withholding regime that much of the Middle East and North Africa (MENA) will likely not be ready by the July 1 deadline, experts believe.

Such an extraterritorial law puts the onus on foreign financial institutions (FFIs) to act, in essence, as unpaid agents for the US Internal Revenue System (IRS), or face a 30 percent withholding tax on US account holders. Further impetus to comply is the possibility of being cut-off from the US financial system and not being able to deal with FATCA compliant institutions. “If a country is not FATCA compliant it will be financially sanctioned in a new way, ‘the FATCA way’, and the readiness in the MENA is not sufficient in my opinion for a FATCA go-live situation,” said Camille Barkho, chief compliance officer at Lebanon and Gulf Bank.

The potential sanctioning of the Lebanese banking sector is a grave concern in Beirut, given the high degree of the economy’s reliance on banking. Fortunately, Lebanon is ahead of the regional curve in getting to grips with FATCA. “At a FATCA Q&A session at a conference in March, some of the questions asked were very basic. You still hear regional banks asking questions about FATCA that Lebanese banks dealt with two years ago,” added Barkho.

Understanding FATCA at an institutional level has been one of the main stumbling blocks to compliance. The initial FATCA document was over 500 pages long and a further 500 pages have been released since. The starting date for reporting had also been delayed multiple times – the last one gave a further six months, to July this year – which has sent mixed signals as to how serious the deadlines are, while implementation on the US side has been badly handled.

“There are not sufficient IRS platforms to assist FFIs in better understanding the regulations. Recently the IRS released the ‘Temporary and Final Regulations,’ but how to go live with something ‘temporary’? And the W8 form was released in March, and other documents released this month. How can you prepare for an exam if the teacher doesn’t provide enough course material?” said Barkho.

Two options

The biggest stumbling block is the lack of agreement between governments and Washington. To provide information to the IRS, inter governmental agreements (IGAs) are needed, or alternatively central banks can allow FFIs to file directly to the IRS, which is what Lebanon is doing.

Other MENA countries are considering the same reporting mechanism as Beirut. With the exception of Oman and Kuwait, the rest of the Gulf Cooperation Council (GCC) countries have indicated they will opt for an IGA, although with just over two months to go before FATCA goes live time is ticking. “In the UAE an IGA is getting close but institutions are not sure if it will be wrapped up in time,” said Ranjith Kumar, Director at Keypoint, a financial services consulting firm in Bahrain.

Elsewhere in the region it is a similar story, from Turkey to Morocco. “Egypt said it will participate without an IGA. Tunisia and Libya are considering IGAs, but they’ve not progressed significantly,” added Kumar. “Institutions could register directly, but with disclosure of customer information to a government outside their jurisdiction, they are looking to regulators for guidance to decide how to go ahead with disclosure. In Algeria for instance, some of the banks have highlighted that they would get ready but will register for FATCA only after regulatory guidance.”

In Iraq, no IGA has been signed, but the Central Bank of Iraq (CBI) is pushing banks to comply. “There will be a lot of teething problems about disclosure and transparency, and lots of Iraqis are dual nationals so it will have an affect,” said a source at the CBI who requested anonymity.

Curiously Syria, in the midst of a conflict and international sanctions, is considering playing ball with the US. “The central bank has formed a FATCA committee to decide what to do, but I’m not sure if they can sign an IGA due to [US] sanctions,” said Dr Paul Morcos, founder of the Justicia law firm and President of the Banking Commission at the Beirut Bar Association. In Iraq, no IGA has been signed, but the Central Bank of Iraq (CBI) is pushing banks to comply. “There will be a lot of teething problems about disclosure and transparency, and lots of Iraqis are dual nationals so it will have an affect,” said a source at the CBI who requested anonymity.

On a global level, the MENA is not lagging behind. Only 26 countries have signed IGAs, while 19 countries have in the words of the IRS “reached agreements in substance” with the US this year, of which Qatar is the only MENA country listed.

The lack of IGAs is raising question marks. “I don’t know how they will be able to go live on July 1, with so few IGAs signed. I am not saying they should delay again, but is the market ready? Where’s Russia? Where’s China, Europe and Australia?” asked Barkho.

Three areas of impact

The lack of assistance from the IRS is a major gripe of financial institutions, especially as implementing FATCA requires major initial investment within an institution, estimated at $25,000 for smaller institutions, to $100,000 to $500,000 for most institutions and $1 million for larger firms. While a boon for the financial consultancy and IT industry, it is an extra cost that institutions would rather not have. As such, FATCA may well have a knock-on effect on banks to cut costs elsewhere. “International challenges can lead to the restructuring of the banking sector. So FATCA poses a question – will we have to restructure the banking sector here?” said Morcos.

More pressing in the immediate term is the issue of privacy and the safety of American citizens. “One thing the Treasury has not thought about is how do you protect US citizens? In a country like Lebanon, with Hezbollah and other US designated terrorist organizations, banks will identify US citizens, which could put them at risk,” said the BDL source.

Dual citizenship is a related concern, as in many MENA countries it is not allowed. “It will be a challenge as some citizens are known to have US citizenship, but now they have to explicitly declare if they have US citizenship or not,” said Kumar. “How institutions use the information once clients waive their right of confidentiality could be an area of concern for customers.”

The regional and global impact of FATCA has also not been addressed. With so few IGAs signed and banks not ready or willing to file directly to the IRS, will they be cut off from the US financial system? There is the assumption that the IRS will have to be pragmatic in the first year to prevent major reporting issues. Indeed, the IRS reported 2.7 million filing errors – out of 60.5 million tax returns – in the US in 2011. “Imagine the number of errors by FFIs reporting to the IRS? Even the most compliant banks will have high levels of errors,” said Barkho.

How will banks implement the withholding of tax, and how will compliant FFIs deal with non-compliant FFIs? Answers are also not clear.

While FATCA is likely to go ahead, it is not a 100 percent given, with members of the Republican National Committee voicing concerns recently, and the possibility of the Democrats losing the Senate to the Republicans in the fall. More questions about the viability of FATCA will no doubt arise, such as the returns versus the outlays. Indeed, in the IRS’ 2013 Annual Report to Congress, it notes that the Congressional Joint Committee on Taxation estimates that FATCA “will generate additional tax revenue of approximately $8.7 billion over the next 10 years,” while private sector implementation costs could “equal or exceed” the amount FATCA may raise.

Further questions may arise if there is a dawning realization about negative economic impacts on the US itself. “What happens when we start shorting payments on our Treasury bonds (TBs) by 30 percent? A sovereign holder is not subject to withholding, but for a private institution, what if the interest payment is done through SWIFT to a commercial bank that has not signed an IGA? Treasury will take the interest,” said Jim Jatras, Manager of RepealFATCA.com, which is lobbying against the law in Washington. “This is the kind of thing that could promote dumping TBs, and affect interest rates and the dollar as a global currency, which are issues nobody has thought out.”

April 30, 2014 0 comments

Corporal punishment is common in Lebanese schools

Comment

Time to ban corporal punishment for good

by Diana Semaan April 29, 2014

written by Diana Semaan

Many people in Lebanon reacted with outrage after YouTube footage surfaced in March showing a man in an office beating three children on the soles of their feet with a wooden stick. Media outlets later identified the man as Moussa Daher, principal of the Makassed School in the village of Daiat al-Arab in southern Lebanon. In the video, Moussa is heard saying to one of the children, “Every time you put your feet down I will beat you more.” The children are crying and pleading for him to stop.

Media reports said that Moussa was punishing the students for failing their exams. While the head of the Makassed School Association condemned Moussa’s violence, he justified the acts as “momentarily losing control” and said that, “the parents asked the principal to be harsh with their children.” Education Minister Elias Bou Saab dismissed the principal, but the parents of the children who were beaten defended Moussa’s actions, and a member of the parent’s committee at the school called on the minister to revoke his decision.

A 2012 study by Saint Joseph University found that nearly half of Lebanese students surveyed had experienced disciplinary violence at school. The study called on authorities to respect Article 19 of the United Nations’ Convention on the Rights of the Child, which Lebanon ratified in 1991, by taking “all appropriate legislative, administrative, social and educational measures to protect the child from all forms of physical or mental violence.”

https://www.youtube.com/watch?v=fW7U_GbhZnM

This disturbing video led to the school principal’s dismissal

Lebanon’s penal code, and specifically Article 186, has long permitted corporal punishment of children in schools and homes. The education minister rejected violence in the name of discipline in a memorandum issued to all public schools in 2001. While some private schools introduced anti-corporal punishment regulations in response, others did not.

On April 9, parliament voted to revoke article 186, but a day later, following complaints by religious figures, Parliament adopted an amended version of the article to criminalize corporal punishment at school but allow “non-violent disciplinary” acts at home so long as they do not lead to physical or psychological harm. The article does not, however, clearly define “non-violent disciplinary” measures or “physical or psychological harm”.

In a radio interview, Mohamad Hajar, a member of parliament who voted against revoking Article 186, argued that the article in its amended form protects family unity. “It does not make sense that every time a parent slaps his child on his hand the child would file a complaint,” he said.

While the amendment to Article 186 is an important step toward protecting children from corporal punishment in schools, it fails to provide children with adequate protection from violence in the home. Conditioning a child’s protection from violence on family status apparently would mean that Lebanon will still be in violation of the Convention on the Rights of the Child. That international treaty requires Lebanon to “ensure that the child is protected against all forms of discrimination or punishment on the basis of the status, activities, expressed opinions, or beliefs of the child’s parents, legal guardians, or family members.”

Repealing the article would bring the penal code in compliance with Law 422 for the Protection of Juvenile Delinquents and Endangered Juveniles, adopted in June 2002, which protects children from violence and mistreatment. Bassma Roumani, a lawyer working for anti-child abuse campaigners Himaya, said that the organization will continue its work toward repealing Article 186 and ensuring that children are fully protected under the law.

In a society where violence remains socially acceptable, members of Parliament need to send a clear message that all forms of violence against children will not be tolerated. The best way to do that is to repeal Article 186 outright.

April 29, 2014 1 comment

International bodies have carried out mass vaccination campaigns (Credit: UNICEF)

Polio: Steering Lebanon away from the brink

by Joe Dyke & Tiziana Cauli April 29, 2014

written by Joe Dyke & Tiziana Cauli

In the middle part of the last decade, religious figures in Nigeria brought a halt to polio vaccination campaigns in much of the north of the country. Unsurprisingly, an outbreak of the disease occurred only a few years later, with dozens of children getting sick. It spread rapidly out of control, with strands of the disease being detected across large parts of Africa and eventually making it as far as Indonesia. In total 27 countries were affected before it was brought under control.

Dr. Hassan El Bushra, head of the World Health Organization (WHO) in Lebanon, retells the story as a warning about the danger of domino effects. “One country not responding is a threat to others,” Bushra says. In response to the logical follow on question — is Syria the new Nigeria? — he simply says “exactly.”

Since Syria’s three-year civil war began, the violence has destroyed healthcare facilities across the country – meaning vaccination programs have rapidly declined. As such, millions are now susceptible to diseases such as polio.

Polio, a disease that only affects humans, can cause paralysis and even death, with young children particularly susceptible. Prior to the Syrian war, it had been eradicated in most parts of the Middle East, with Lebanon, Syria and Iraq all last seeing cases over a decade ago. “It is a disease that is almost dying, it is vanishing. We at the WHO and the whole world are about to kill this pathogen,” Bushra says.

Crisis resurrected

Yet Syria’s implosion has breathed new life into a dying plague. Hundreds of cases of the virus, which lives in water and contaminates food and sewage, have been diagnosed, with the first outbreak occurring in the eastern city of Deir ez-Zor.

“Because of the destruction of the health system in Syria, the virus has already started [spreading]. People are afraid to go to the healthcare facilities, they have become more susceptible — especially the newly born,” Bushra says. The strand that began in Deir ez-Zor has been traced as far away as Egypt, Palestine and even Pakistan. “There are no direct flights from Pakistan to Deir ez-Zor,” he says to emphasize the rapid and indirect nature of the spillover.

Informal tented settlements increase the risk of the disease spreading

Indeed, in the past few weeks the first case since 2000 was confirmed in Iraq, raising the WHO’s assessment of the threat of a major outbreak in the country to high. Bushra points out that the nature of polio as a disease means that for every child who gets severe symptoms, there are many other carriers who show no signs. “One case of paralytic polio means that about 200 children were already affected by the virus,” he says.

So far, Lebanon, the country that has opened its borders to the most Syrian refugees, has avoided the disease. While there have been a few cases reported in the media as potential polio, they have as yet all been false alarms. Part of this has been good planning — together with WHO and UNICEF, the Lebanese government has just completed a fourth campaign to vaccinate hundreds of thousands of children.

These campaigns have managed to hold back the disease, according to Dr. Salim Adib, an epidemiology professor at the Lebanese University in Beirut. He points out that the vaccine is easy to provide as it is taken orally and does not require an injection and therefore the campaign has been able to reach out rapidly to refugee communities. “The government is doing more than it was expected to do,” he says.

Looming epidemic

Yet still, more is needed. A new study, seen by Executive but not yet published, raises concerns over the level of vaccinations both within local communities and particularly among Syrian refugees. The poll, conducted by the University of Sagesse, surveyed nearly 9,000 children up to 5 years of age, around 22 percent of whom were Syrian with the remainder Lebanese. What it showed were vast geographical discrepancies in the preparedness of communities to deal with polio and other infectious diseases.

While in some areas — such as Baabda and Zgharta — all sampled children that had vaccination cards were able to show they were protected, in more at-risk areas that percentage dropped rapidly. In Zahle and Hermel, areas that have seen huge influxes of Syrian refugees, the percentage of children fully protected against the disease was just 56.1 percent and 53.9 percent respectively. Overall, 88.7 percent of Lebanese but just 66.8 percent of non-Lebanese children were vaccinated.

The report suggests that more support is desperately needed in areas most at risk. The government campaign has focused more heavily on border areas, with health professionals going door to door to find those who need vaccination.

Even still, with thousands of refugees fleeing over the border every week, keeping on top of the crisis remains a daunting challenge and one that Bushra feels they may not continue to win indefinitely. In his Beirut office, he sketches a hastily drawn chart on which a gradually rising line eventually meets a horizontal one. “That is the breaking point,” he says, pointing at the intersection between the two. “And we are here,” he adds, drawing his pen only a fraction of an inch down the diagonal line. “Outbreaks are inevitable, there will be a breaking point.”

One particular concern is over the weather. As the disease is spread via feces and water, the unusually dry winter — during which experts estimate precipitation may have been down by more than 50 percent — has heightened the risks.

This is likely to be exacerbated by poor living conditions for many refugees. As the Lebanese government has yet to make a decision on the formal establishment of refugee camps, hundreds of informal settlements have sprung up — often with little clean water. “Some of [the refugees] are living in very poor sanitary environments. One of my reports shows that we have two latrines for 400 people. People have started using open space [to defecate],” Bushra says, pointing out that the disease is likely to spread much faster in such circumstances.

Global responsibility

The strategy, Bushra says, is to continue seeking to prevent cases of polio through more immunization appeals but also to improve readiness in the event that an outbreak occurs. Talking not just about polio but the risk of other diseases, he says the key is to stockpile emergency medical supplies in at-risk areas. These supplies, if used quickly, can limit the size of outbreaks if and when they occur. “For the first three to four weeks [after an outbreak] we have to be ready. This will give us some time if we need more support from other countries,” he says.

As Lebanon struggles to deal with the threat of polio and other diseases, more funding is needed. Yet the increased risk comes at a time of growing donor fatigue, as international interest in Syria is waning and the United Nations struggles to attract the support it needs for refugees.

For Bushra the nature of polio means that it is a global, rather than Lebanese, threat. The Pakistan case already illustrates the huge dangers of ignoring the resurgence of a once-dying disease. It is, therefore, a global responsibility to deal with the crisis. “Imagine if Lebanon said: ‘We don’t have funds and we are starting to have cases of polio’,” he says. “Then the whole success of the world over the past two or three decades is at risk.”

April 29, 2014 0 comments

Lebanese tourism has suffered badly in recent years

Economics & Policy Tourism 2014

Tourism minister: Lebanon travel ban ‘unofficially’ lifted

by Joe Dyke April 28, 2014

written by Joe Dyke

Lebanon’s tourism minister believes the country may be able to convince Gulf and European states to formerly lift travel bans on their citizens visiting.

Michel Pharaon said that while states were not yet ready to formally lift the bans, which have had a crippling effect on Lebanon’s tourism industry, they were privately accepting that the country was now safe to travel to again.

“At one point in time there was a non-official travel ban, then it became official. Now there is a non-official lift of the travel ban,” he told Executive in an interview at his Beirut office.

“It is the same for some Europeans, which unofficially are lifting [the ban]. When the ambassadors are contacted they all say ‘yes, you can come’ but they still have the travel ban for the general public. This is the situation now,” he added. While Pharaon said he was working on convincing states to formally lift the bans, he would not give a specific time-frame.

In June 2012, following the kidnapping of a number of Gulf citizens, the United Arab Emirates, Kuwait, Qatar and Bahrain advised their citizens to avoid all travel to Lebanon. This was later followed by Saudi Arabia, while European and Western states have gradually increased their travel warnings as well.

At the time of the initial bans the then-tourism minister Fadi Abboud was unconcerned, but the negative effect has been pronounced. As Syria’s civil war has continued to bleed over the border, the country has seen a number of car bombs, while clashes have intensified in Tripoli and other cities.

In 2013, just 1.3 million tourists visited the country, down from a peak of 2.1 million in 2010. Numerous hotels have closed, while major projects targeted at those in the Gulf have been cancelled. Late last year, the president of the Association of Hotel Owners said that all hotels were under threat due to the terrible climate. To cap off a terrible period for Lebanese hotels and restaurants, an unusually warm winter saw the skiing season all but cancelled.

Yet the emergence of a new unity government, formed in February, has raised hopes of improving security. Pharaon stressed that the rival March 8 and March 14 political groupings had agreed to put aside their political disputes and focus on keeping the country safe.

“This security agreement [is bigger than] political differences. Immediately [after being formed] the government began working on a security plan and we saw how it succeeded in Tripoli and in the Bekaa,” he said, referring to new crackdowns by the military on armed groups in those areas. “It is holding because the security agreement [is more important than] political differences.”

In a open plea to foreigners to return to Lebanon he added, “we guarantee the security of tourists.”

The full interview with the Minister can be read as part of a special report on tourism in Executive’s May issue, out next Wednesday.

April 28, 2014 1 comment

Finance

Qatar Exchange hits new high, but Dubai still leads

by Thomas Schellen April 28, 2014

written by Thomas Schellen

Arab markets continued to grow in week 17 of 2014, performing better than the previous week – with five of the twelve markets improving and only three dropping when compared with four gainers and five losers in week 16. Top gainer of the week was the Dubai Financial Market with a 6.9 percent rise, while the Qatar Exchange soared to an all-time index high. While numerous countries in the Middle East and North Africa were gearing up for elections, the news that drove regional securities markets came from the property and telecommunications sectors.

The Gulf

Although Saudi Arabia’s Tadawul shot up 100 points on Sunday the 20th and the TASI reached a new multi-year peak on Monday, the Kingdom’s exchange did not keep that upward momentum and its weekly advance did not exceed 0.3 percent. In terms of percentage gains, Qatar was the week’s runner up to Dubai but the QE Index made a splash by floating up to all-time highs in the second half of the week, though it closed the week 10 points down from that new historic peak.

Out of the two exchanges in the United Arab Emirates, the ADX General Index in Abu Dhabi, with a meager net gain of 0.2 percent in week 17, could not keep up with the DFM General Index whose breaking of the 5,000 points line meant that the Dubai Financial Market achieved its highest reading in 70 months.

Both UAE markets saw result and project announcements from the property construction and development sectors that were extremely noteworthy. In Abu Dhabi, property major Aldar used the Cityscape show to launch three new projects worth a combined $1.36 billion according to media reports. The company’s stock, which hovered at below three dirhams at the start of 2014, reached a high of DHS 4.84 on April 22 before losing some ground in profit taking on Wednesday and Thursday.

On announcements of planned new investments and large-scale projects in the UAE and abroad, DFM-listed construction group Arabtec Holding closed the week at DHS8.74, down from an intraday high of DHS9.50 but several floors above the two-to-three-dirhams range where the stock had been trading in the two years before January 2014.

Emaar Properties fell on presumed profit taking by investors on the week’s last trading day but the annual general assembly of the top regional property company added the expected further spice to the DFM’s mood as the group announced 55 percent higher profits, at $235 million, in the first quarter of 2014 when compared with 2013. After a statement by Emaar Chairman Mohammed Alabbar that the group’s profits are projected at $836 million this year and $1 billion in 2015 and are likely to triple from that amount by 2018, an analyst cited by Bloomberg said these projections were “way too conservative” and probably meant to keep investor expectations lower than the company’s real outlook.

A cool rider on the Dubai securities storm was the market’s operating company, DFM.CO, which announced this past week that its first-quarter profit for 2014 was seven times higher than for the same period a year ago. The market operator’s share price went up 7.8 percent in week 17 and is up about 50 percent since the start of 2014.

With a net loss of 1 percent on the Muscat Securities Market 30, Oman was the period’s underperformer as its week-long index slide canceled gains made in the previous two weeks. The Bahrain Bourse Index on the other hand added over 2 percent. Up for two weeks in row, the small market looks as if it wants to put a three-year trough behind it.

North Africa and the Levant

The least to report on securities in week 17 is from Egypt where the market traded only for two sessions because of holiday observances. But the Egyptian Exchange 30 index nonetheless got one of the region’s better performances out of its mini-week, gaining 2.4 percent. The news that pushed the index up came from the telecommunications sector where Global Telecom Holding, the company formerly known as Orascom Telecom, was buoyed by an agreement for sale of its Algerian affiliate Djezzy to a state fund there.

Tunisian general elections are scheduled to be held before yearend 2014, still several months away. With the government having said earlier in April that it does not expect a lot of improvement for the economy until next year the Tunisian Stock Exchange looked un-energized in week 17; slipping for a second week but at a lesser pace of 0.2 percent when compared with the previous week’s 1.2 percent. The Casablanca Stock Exchange’s MASI gave up 0.4 percent on the week, and so did the Amman Stock Exchange Index in Jordan.

The Beirut Stock Exchange, which was closed on Monday the 21st, carefully concealed any excitement that market participants may have felt about the Parliament’s first unsuccessful session on Wednesday to elect a new Lebanese president. Traded companies may hope for a sentiment boost after a definite election outcome but that could be weeks or more away.

In the meanwhile, low volumes may well continue to be interspersed with very low volumes on the BSE and the index movements may stay just as flat as in week 17, which according to the BLOM Index saw a top-range fluctuation of 5 points or 0.4 percent in the course of the four trading days. The index ended the week almost 0.2 percent lower, testing the importance of the second decimal for an accurate depiction of its movement.

A cautionary tale

The new vigor of GCC-listed corporations is making impacts beyond index movements. As this positive trend continues, stock markets are becoming a renewed focus of enthusiastic media attention. Newspapers in the regional business hubs are deeming markets worth their regular attention for the first time in a few years, meaning that analysts from various investment firms are being buttonholed for their assumed superior understanding of the very markets that disappointed the overdrawn optimism of most investment firms and brokerages over the past few years.

While Arab stock exchanges have progressed not only in performance terms but also in structural maturity, rumors and speculative statements still appear to have more currency than they deserve, as suggested by an upward correction of a short-term drop in Arabtec stock in the middle of week 17. A resurgence from that drop followed upon the company’s rebuttal of alleged media rumors that it was thinking to stop working on a St. Petersburg 400-meter high rise for Russian energy company Gazprom, because of the crisis in the Ukraine.

April 28, 2014 0 comments

Business Tourism 2014

Travel Apps: Potential to take flight

by Jasmina Najjar April 25, 2014

written by Jasmina Najjar

There I stood, lost in translation in the middle of Moscow. All the signs were in Russian and none of the locals out and about on the streets spoke English. It was time to call out the big guns. I whipped out my smartphone. My trusty holiday apps were ready and waiting: Google Maps, Foursquare, Google Translate, World Travel Map by Triposo and TripAdvisor. We all have our “go to” apps for travel and tourism. They help us make the most of the city we live in — like Kif el Seir, a must-have to survive Lebanon’s traffic plagued roads complete with burning tires and potholes, and WhereLeb for those late-night kanafe cravings — as well as places we are discovering for the first time.

But what about the Lebanese travel app scene? In an informal online survey of mainly 30-39 year old professionals with university degrees and full-time jobs, only half used some sort of travel, tourism or hospitality app. Out of those who use such apps, none use local apps and those who tried local apps complained that some information and contact numbers were outdated, or that the functionality was slow or very minimal.

The evolution of Apps

Rafic Hage, executive vice president for products and services at eSharing Corporation, the firm that developed Talfen.tel — an extremly useful local phone directory for tourists and residents alike — explains the forces at work and the evolution that has taken place. Given changes in the highly competitive market, firms had to evolve to provide smarter services that address the needs of the entire travel experience — from flights to accommodation, tours, and beyond. By taking this comprehensive approach, Hage says, firms “created opportunities to retain customers by mining their customer’s experience and behaviour.” Hage also pinpoints a shift in consumer demands: “For travel apps in particular, users have always been able to find the ‘best deal,’ meaning the cheapest and/or shortest flight. However, customers now demand services that answer for reliability; e.g., on-schedule rate, lost luggage handling, customer service and support. Comfort; e.g., plane model, leg room, number and time of connections … and more.” So now technology coupled with in-depth insight into our behavior has powered the industry with solutions that can ideally drive targeted sales. Apps are evolving.

Lebanon’s app scene unfortunately is behind the curve. Roy Naufal, managing partner at Grind Design and Development points out that Lebanese are not travel and tourism app lovers, and yet “hospitality apps are relatively booming in Lebanon, especially with more and more restaurants offering online ordering, but they’re actually doing very poorly.” The current apps are proving more useful to check out menus rather than providing real functionality. What’s the root of all this? Naufal suspects it’s because the Lebanese prefer picking up the phone and calling. This doesn’t mean there are no popular local apps. He cites WhereLeb as an example. It lets users search for shops, restaurants and entertainment. Cinema apps are also gaining steam. Grind Design and Development has worked on a mystery shopping system for Magnolia Bakery, several apps for menus and in-shop surveys, an app for Club Senses Resort that lets users check course schedules and share photos, and recently designed SerVme, an app that supports advanced customer and venue management, which won first place at Bader’s 2013 StartUp Cup, an annual competition in Lebanon geared towards early-stage entrepreneurs.

Elie Nasr, managing partner at Lebanese app developer FOO argues that we don’t have enough local apps for the travel, tourism and hospitality sectors, and that “not all are up to the expected level.” FOO has developed local favorites, Beirut Airport and Movies in Lebanon, and has created several touristic apps for the GCC. Nasr says that the local demand for travel, tourism and hospitality apps is “very low and it has been like that since the app boom started. The region is focused on other issues and tourism is not the main focus currently.” Most of the apps are for hotels and restaurants as an extension of their marketing efforts. Nasr states: “Lebanon has always been a country focused on tourism and banking. We should have cool apps like Zawarib that display cool places on a custom map. Although the app is not user friendly, it has potential.”

Unlocking Lebanese potential

The local scene still has a long way to go, especially since, as Naufal notes, “most local apps revolve around the businesses themselves and most are just for image without real practical usability, or have general low performance. They just want to follow the trend.” This means that the international market is miles ahead. The time to get things moving on the local market is ripe though. Naufal believes “there are a lot of potentially interesting ideas that could be done … for example … an application allowing users to find sports related activities such as rafting, hiking, etc, since they exist in Lebanon but there’s no easy resource to find them.” Apps could be used to project a positive image to potential tourists coming from abroad, and could even reveal the wealth that Lebanon has to offer to locals beyond nightlife and city attractions — encouraging internal tourism and boosting the hospitality sector.

April 25, 2014 0 comments

Business

The new face of brand advocates

by Ramsay G. Najjar, Michele Azrak & Zeina Loutfi April 25, 2014

written by Ramsay G. Najjar, Michele Azrak & Zeina Loutfi

As part of their communication efforts, companies have used and abused actors, athletes and celebrities as brand ambassadors who endorse and become the face of their brands. The pairings of George Clooney with Nespresso, Roger Federer with Gillette or Haifa Wehbe with Pepsi come to mind. Over the years, another profile of ambassadors emerged. Companies started ‘activating’ real people, such as influencers and bloggers whose passions and interests intersect with their brands and help bring them to life. Red Bull, for instance, has been activating college students who are young, athletic and stylish as brand ambassadors in an effort to enhance the company’s image and gain credibility with consumers of this age group.

Lately, however, companies have started turning inwards and tapping the potential of their greatest assets, their employees, as ambassadors. And those organizations that have been investing in their internal force are reaping substantial rewards on diverse levels. While this form of advocacy already existed to a certain extent, it is now rapidly burgeoning with the growth of social media.

Indeed, the relationship between employees and social media has evolved and matured over the years, reaching a point where it has become extremely rewarding to combine the two, particularly in the increasingly connected and social world we live in. From a company’s perspective, the beginning of social media’s ascent brought suspicion and a need to proscribe its use. Then, when social media reached a certain stature, rules and guidelines were carefully crafted to limit and control what employees were saying about their brands. Gradually, and with greater understanding of the social world and the opportunities it holds for businesses, companies started to harness the potential of using the internal workforce and their voice as an extension of their brand.

We have been witnessing this high level of engagement particularly by culturally strong companies. Known for its charitable endeavors, TOM shoes, the company that gives a pair of shoes to a child in need for every pair bought, works on translating its deeply rooted values through its employees. By encouraging employees to regularly share their personal stories on social media, they have created a strong connection with customers who share the company’s level of compassion and engagement. Other examples include Google and Zappos, whose passionate employees enthusiastically advocate their company’s brand. As for Ford, the redirection of their digital communication strategy speaks loudly of their efforts to extend a voice to all employees. Beyond the communications and marketing departments who typically lead the conversations on social media, Ford is trying to further engage the public and humanize the company by allowing interaction with employees — from departments such as manufacturing and design for example — who are not usually on social media or were previously restricted to personal accounts.

This approach becomes all the more sound with studies finding that a high percentage of individuals trust social media as a source of information about a company, and others clearly illustrating that credibility in peers and regular employees is on the rise and higher than that of a company’s executives. To further reinforce this point, an IBM study found that traffic generated by IBM internal experts on social media was seven times higher than traffic generated by other official IBM sources. This strengthens the idea that employees make the brand more human and contribute to an added level of trust for consumers.

It is clear that empowering employees to serve as trusted brand ambassadors has been established as good business practice — one that leading companies have chosen to adopt, as it places the company’s internal advocates in direct contact with customers, as well as a wider audience.

So how can companies leverage the most valuable and accessible resource they have? How do they unleash employees’ potential and turn them into brand ambassadors who can help tell their brand story? Companies can start by following a few essential guidelines as part of a well-thought strategic communication plan.

Establish some ground rules

First off, companies should keep the social media guidelines for employee engagement updated and reflective of our time. The guidelines need to be clear, accessible and use a language that empowers employees, yet protects the company. While the guidelines should encompass some rules, they should also highlight the opportunities that a social media partnership between employer and employee would hold.

Training, training and training

Talking to and training employees who plan to use social media is paramount. With effective training, employees would discover how they could embrace and extend the company’s voice in their social media interactions. The aim is to enable employees to grasp the tools and social etiquette to adopt online, all the while embodying the company’s values. This includes encouraging them to build their social media proficiency internally first, thus allowing them to make mistakes in a safe environment.

Unify the message
Everyone agrees that sending out employee advocates with bothersome and pre-packaged marketing messages would only put into question their credibility as valid and trustworthy sources of information. However, simply letting them go with no guidance or support will only lead to dissonance and inconsistency in the way the brand story is told. The challenge is to maintain a fine balance between the two, continuously nurturing a shared understanding and vision of the brand, and making meaningful and relevant content available — all while trusting the employees with the freedom to use their own voice and customize the messages in their own way.

Prepare for the best and the worst

One has to acknowledge that no strategy, no matter how thoroughly designed, can avoid hitting some bumps along the road, as human behavior is unpredictable and prone to error. This is why social activity should be always be monitored; this entails keeping a close eye on where the company or brand name is mentioned and the context in which it is mentioned. Hence, a crisis communication plan should be put in place, arming employees with tools and processes that allow them to deal with the different conversations and situations they come across online.

Nurture a Strong Culture

Even if all the above is in place, the reality is that in an attempt to create brand ambassadors, some companies inadvertently unleash brand detractors who end up doing irreparable damage to the brand’s reputation. Aside from a disgruntled employee gone rogue, the underlying reason is usually poor corporate culture. This is why leading companies have understood the importance of a solid internal culture, and have invested heavily in culture development and employee wellbeing. The result is dedicated employees who are happy to take part in positive social engagement and advocacy. They have, for instance, involved their employees in the process by creating a sense of shared ownership. The same way companies allow and encourage feedback from their customers — external advocates — they also now lend an ear to their employees — internal advocates — using their feedback to improve various parts of their offerings and strengthen relationships with their customers.

Looking at the corporate landscape in Lebanon and the wider region, we are still quite far from having an empowered internal workforce that acts as an extension of companies’ brands — a fact that is surely exacerbated by weak corporate culture. While it might be premature for some companies to take the leap and unleash the power and voice of their employees, the potential rewards of employee advocacy — such as increase in reach and brand awareness and positive impact on the bottom line — should have them reflect deeply about their culture and how they can optimize internal communication to strengthen it. Assessing core values, cultivating a workforce that lives up to those values and building an optimal working environment leads to increased loyalty and employee engagement, ultimately rendering a smooth transition towards employee empowerment very viable.

While the idea of raising employee engagement seems appealing enough both in theory and practice, many companies remain too reluctant to actually trust and empower their people. Yet it will soon become clear to all that in our day and age, trustworthy companies that have strong bonds with their customers are the ones where all employees are engaged and trusted to willingly act as the voice of the organization. Until then, companies should be working on factoring their internal resources in their corporate communication strategies, and striving towards a culture that is actually lived by the organization and not simply plastered as artwork on the wall.

The views represent those of the authors alone

April 25, 2014 0 comments

Zayn Makdessi plays Said in the forthcoming short film Ash

Society

Investing in the future of Arab cinema

by Maya Sioufi April 25, 2014

written by Maya Sioufi

Ash — a short film about the sexual exploitation of children in Beirut told from the perspective of one boy — is hitting the screens of international festivals from Montreal’s World Film Festival to Germany’s International Film Week in Regensburg. The film’s success is a considerable achievement given that the screenwriter and director, Yasmina Hatem, is a rookie. It’s an opportunity that she says wouldn’t have been possible without the support of Cinephilia, a New York based independent production house.

Led by Beirut born 29-year-old Darine Hotait, Cinephilia came to Beirut for the fourth time this month, to host another six day screenwriting laboratory. Hotait established Cinephilia in 2009 after completing her Masters in Fine Arts from California’s Art Center College of Design. The production house focuses on projects from the Middle East, Africa and South East Asia with four short movies produced so far. The strategy is to pursue original and daring content: one of the movies, Command or Truth, revolves around a game of seduction between a man and a woman, and another, The Far Side of Laughter, explores the relationship between religion and sexuality.

After extensively travelling and meeting with filmmakers throughout the Middle East, Hotait found that there was a dire need for screenwriting skills. “The ideas are there but there is a technical problem with putting it together which makes the idea look weak,” she says.

The screenwriting lab

Eight to ten participants are selected to attend the training for three hours a day over six days and are then encouraged to submit a screenplay within two months. Cinephilia commits to funding the best screenplay — up to $10,000 — and to produce the short film.

The labs are not only conducted in Lebanon — they take place throughout the Middle East. Since kicking off at the end of 2012, the production house has organized ten screenwriting labs in Dubai, Alexandria and several other Middle Eastern cities. With only two other employees on board, Cinephilia has a lot on its plate. Its 2014 agenda includes five labs that are already booked with five more planned for the rest of the year and even greater aspirations for the future.

Darine Hotait is the Beirut-born founder of Cinephilia

Training for movie directors has been on Cinephilia’s palette of offerings since the end of last year when they launched their first lab for directing in Dubai. Two more directing labs are booked in the UAE this year. Cinephilia is also launching a screenwriting lab for feature films in Beirut in April and in Dubai in May for which Brad Saunders, Los Angeles-based screenwriter, film director, playwright and published novelist, will be flying in to mentor the participants.

A loss-making venture

With a $450 fee per participant for the screenwriting labs for shorts, the venture is loss making, an issue that Hotait is determined to resolve through sponsorships and partnerships with institutions and investors. Her first such partnership is in Dubai with creative space Jamjar which will be hosting the upcoming lab. Hotait is on the lookout for more sponsorships of this sort.

Cinephilia relies on New York production projects for its main source of revenues. From short films to commercials, the production house is responsible for filming to completion, but not the content.

None of the films produced on the back of the labs has generated any significant revenues. The distribution — from international film festivals to online platforms — “brings new audiences and gives life to the project,” says Hotait. Cinephilia opts for different revenue sharing models depending on the production and budget of the film. For Ash, Hotait agreed to give 10 percent of the returns to the screenwriter, but for other films the writer might only receive an upfront fee with no sharing of revenues.

Not enticing enough?

So far Cinephilia has selected four movies to produce on the back of the ten labs conducted — Ash and three others that are currently in production: one from Beirut, one from Dubai and one from Cairo. “People don’t submit to get an award in every city which is an interesting thing for us because we thought filmmakers would be very excited about this opportunity,” says Hotait. The problem might also stem from the lack of reach; in Beirut for instance, the lab only received 20 applications for its last edition.

“In Lebanon, it is very rare to have someone come up to you and tell you, ‘write a story and I will fund it,’ so it’s a great opportunity, says Hatem. “It’s definitely worth encouraging because there are not enough people doing that.”

April 25, 2014 0 comments

Ziad Baroud is a former Lebanese minister

Economics & Policy Presidential Election 2014

Ziyad Baroud — a candidate in waiting?

by Domhnall O'Sullivan April 24, 2014

written by Domhnall O'Sullivan

It is almost three years since Ziyad Baroud stepped down from his post as Lebanon’s minister of interior, yet he remains firmly in the public eye. The broad appeal which he cultivated as a hard-working and conscientious minister has not dissipated, while his central role in drafting the recently launched decentralization plan has kept him close to the heart of Lebanese policy-making.

But whether the public image is a carefully crafted ploy or a natural accident of his industrious habits is difficult to gauge. Though he remains tight-lipped on the topic, Baroud has been included in almost every short-list of possible successors to President Michel Sleiman, with a decision due to take place by May 25. In the search for a centrist consensus figure, his is a natural name to mention. But does he want the job?

To ask him this – and to discuss current events in Lebanon – Executive sat with Baroud on the margins of a recent event organized by the Lebanese Center for Policy Studies.

On Decentralization

Having just spent three hours discussing the decentralization bill with an audience of journalists and stakeholders, Baroud is in no mood to delve into the nitty-gritty of the proposed reforms. Yet he defends the idea that transparency and accountability would be improved by the initiative, despite some fears that decentralization could simply displace rather than eradicate corruption in the country.

Greater civic participation would be the key factor. “When you go on the decentralized level, you get more involvement by the people,” Baroud says. “They can monitor what’s happening, elect their representatives, and they can follow what they are doing. Those representatives become more accountable to the citizens.”

Specific transparency measures also underpin the theory. “We made it mandatory [in the bill] for the decentralized bodies to publish their accounts, publish their decisions, and we made it possible for every single citizen to get copies of any paper they would like to see,” he says. “So nothing is forbidden [from review] anymore. The elected councils have to publish their accounts on their website.”

On Security

As former minister of interior, Baroud also has hands-on experience in security management. And despite some disappointment about the lack of grand reforms during his tenure, he is bullish about his time in office. “The three years I spent at the ministry were good, security-wise,” he says. “We didn’t have any major security issues.” He mentions the organization of elections in a single day, in 2009; a first for Lebanon. Baroud was awarded the United Nations Public Service Award for the feat. “This was a security success,” he says.

Yet he also acknowledges that he governed in “different times.” The precarious security situation today, exacerbated by regional turmoil and growing sectarian and political tensions in Lebanon, requires a more concentrated focus. Baroud nevertheless sees things positively. “I think that many things are being done in the [right] direction,” he says, referring to a temporary calm in the country after increased military intervention between rival communities in areas such as Tripoli. “I don’t know to what extent it is sustainable, but we’ll see.”

On the salary scale debate

If he was sitting in Parliament today, what would his views be on the current arguments surrounding the draft law to raise public sector salaries? Baroud is critical of the entire process of horse-trading which permeates the dispute. In fact, for him, Parliament should not even be having the debate. “There is a grand Absentee here, with a capital A,” he says. “That is the Economic and Social Council, which is forgotten about.” The council was first established in 1999 to act as a consultative body of representatives from various economic and social sectors. In theory, it would be tasked with negotiating agreements on issues such as wage increases, but it has not convened in over 10 years, much to the chagrin of advocates such as Baroud. “[It] should have been created, should have been re-elected; it could have managed this whole debate.” In the meantime, “we are not seeing a real debate. It is a complete auction.”

On the Presidency

Perhaps if he occupied the highest office in the land he could have more influence over such processes? Regrettably, Baroud does not get drawn into such a discussion. He deftly yet bluntly sidesteps any mention of the upcoming presidential elections, despite being constantly listed as a possible consensus candidate. “I didn’t declare my candidacy,” he reminds us. “I am not giving any media statements regarding the presidential elections.”

In fact, the closest that he comes to discussing the presidential issue is when he mentions his support for a directly elected president in Lebanon. “I believe that [such an election] could make Lebanese more involved in the process. It would make the process more Lebanese, and we could find ways to make it possible for every single Lebanese to cast his vote in an efficient way.” Pushed on what this might look like, he describes a two-round election. Using two rounds would make the process more representative and generate a more popular mandate for the winning candidate.

Would such a system benefit a consensus candidate such as Baroud himself? Opinion polls suggest that he would do very well if it came down to a popular election. Of course, he would have to present his candidacy in such a case. For now, and under the current system, this is something which it appears he is not eager to do.

April 24, 2014 1 comment

Samir Geagea may have won the most votes, but he has little chance of victory

Comment

A vote just for show

by Ramez Dagher April 23, 2014

written by Ramez Dagher

Walid Jumblatt’s Democratic Gathering is reassembled, the March 14 (M14) coalition stands together as one unified alliance, and the March 8 (M8) coalition isn’t sparing any effort to stop M14 from winning. Welcome back to 2009.

With just 32 days until Michel Sleiman’s term as President comes to an end on May 25, Lebanon’s politicians today voted on a potential successor. Unsurprisingly, no one won, but picking apart the backroom dealings that led to the vote appears to show all sides are positioning themselves for future rounds of voting.

Firstly, here are the results:

Round I

White/Blank Ballots: 52 Votes
Lebanese Forces Leader Samir Geagea: 48 Votes
Progressive Socialist Party MP Henri Helou: 16 Votes
Kataeb Party leader Amine Gemayel: 1 Vote
Canceled: 7 Votes (For Tarek and Dany Chamoun, Rachid Karami, Elias Zayek, Jihane Frangieh)

Four MPs did not attend (Saad Hariri, Khaled Daher, Elie Aoun, Okab Sakr)

March 14’s Strategy

In an alliance known for its diversity of Christian parties and representatives, the choice of Samir Geagea isn’t a smart one if the coalition wants to win outright. But strategically speaking, it’s the most brilliant move any of the M14 parties — except the Lebanese Forces — are capable of. Samir Geagea leads M14’s largest Christian party, so not selecting him in the presidential elections – in which only Christians can run – seems unwise. The Future Movement (FM) would have angered its biggest Christian ally while the smaller Christian Kataeb Party — although benefiting from the absence of its main rival in the short-term — would eventually suffer heavy popular losses. So they decided to rally behind him, confident that he would not win.

One doesn’t have to be a mathematician to see that Geagea’s hopes of becoming president are precisely nil. You need 65 votes to become president in the 128-seat parliament and Geagea — in the best scenario possible — can gather a maximum of 60 as those from March 8 will never vote for him. So why should his allies go against him when he can’t win?

By supporting Geagea, the Kataeb and the FM are paving the way for their next moves. They threw all their weight behind the leader of the Lebanese Forces — preemptively knowing that he has no chance in winning. The Kataeb successfully eliminated the candidacy of their biggest rival in the coalition for the next rounds: If Geagea can’t gather enough votes to win, perhaps it’s time for another candidate to try his luck. And now that the Future Movement did what was expected of it and supported Geagea it is more acceptable Hariri to strike a deal with Aoun or agree with Jumblatt on a candidate. And if Kataeb want to officially propose party leader Amine Gemayel’s name, Geagea’s Lebanese Forces will feel more pressure to endorse him as the Kataeb backed him when he needed them. The proof of this theory? Even before the first session had happened, the Kataeb were already nominating Gemayel for the next electoral session.

March 8’s Strategy

The March 8 coalition voted white in the elections – meaning they left their voting sheets blank. There were reports that M8 might vote for Emile Rahme in the elections, in order to give the impression that Aoun — who refused to run against Geagea — is a moderate while on the other hand making sure that Geagea couldn’t be one. He would have been facing the pro-Syrian Emile Rahme after all.

M14’s endorsement of Geagea in fact had two aims:

To send a message to M8 that M14 is unified no matter how controversial the candidate is.
To persuade March 8 to nominate Aoun as their candidate in face of Geagea, so that both candidates cancel each other out, leaving a compromise in which a more centrist candidate might have a better chance. The Kataeb particularly wanted a Aoun-Geagea confrontation so that Gemayel would look like a consensus candidate. After all, consensus candidates have the best chance of winning in presidential elections.

M8’s response was remarkably brilliant. Instead of proposing Emile Rahme to face of Geagea, they decided to be more original and leave their ballots blank. Frankly, I don’t know what’s more humiliating: to lose the elections, or to lose the elections to no one.

A Quick Look At The Lebanese Center

While M8 and M14 are busy ‘plotting’ against one another, the centrists are reorganizing themselves. Walid Jumblatt has profited from the new M8-M14 standoffs on the new president and has reunified his bloc (the Democratic Gathering). Although some reports had confirmed that he didn’t want Henri Helou — who defected from his bloc in 2011 — as president, Jumblatt finally ended up endorsing him for several reasons.

By choosing someone that sided — unlike him — with M14 in 2011 (when Najib Mikati was named prime minister), Jumblatt is playing it smart. True, he is currently closer to M8 but he chose a candidate more affiliated with M14 for the presidency. Helou, after siding with M14 in 2011 and after being nominated by Jumblatt — separately from M14/M8 — suddenly becomes a consensual candidate representing Lebanon’s centrists. Jumblatt could have chosen someone from the National Struggle Front (the MPs who stayed by his side in 2011), but he chose one of the two Maronites who didn’t. He wants to make sure that M14 has even fewer votes in the parliament in case it wants to try to elect a president of its own and that he’ll have the biggest bloc possible in the parliament.

Najib Mikati, who was replaced by Tammam Salam with M8′s consent, is siding with Helou for obvious reasons. As a former “centrist PM” it is wiser for him to support Jumblatt’s candidate in the presidential elections. After all, Helou is the most consensual candidate currently on the table, and hence he has one of the best chances to become president after the maneuvers stop. Who’s better to serve as his PM than Mikati?

Parliament convenes again next Wednesday. Let the next act open.

The original version of this post was published at the Moulahazat blog

April 23, 2014 0 comments