Business

Think like a startup

by Joe Ayoub
written by Joe Ayoub

There was a time when the bigger and more established a company was, the more assured it felt in terms of staying power in the market. These days what matters more to a company’s relevance and future is to what extent they embrace innovation. What this means for businesses is that, no matter how big they are, if they want to survive they need to think like a startup.

A startup by nature is constantly on its toes, harboring a hunger to wake up each day and perform better than the day before. There’s a flexibility to their way of thinking that means every aspect of the organization’s strategy is open to question and can be easily superseded if a better idea is brought to the table.  

Established businesses may still ask themselves why they would need to change things, but the answer is very clear: today’s business landscape is a far cry from that of 50 years ago. Back then, the average age of a company on the Fortune 500 was somewhere around 75 years; today the lifespan is closer to a mere decade before a company goes out of business or gets bought out. What has changed is the pace of consumerism: we are living in an age where consumers are always hungry for more — everything from content to apps to games — and are looking to consume them simultaneously. Technology, the driver of this rampant consumerism, has also brought with it the ability for any innovation, whether patented or not, to be replicated within a short space of time, even months. Ultimately this is what is pushing companies to be innovators — they cannot stop in a world that does not stand still.

But there’s an additional impetus that businesses should be feeling in this call to think like a startup. In the wake of the financial crisis, the world entered an era of zero growth. Companies have to face the reality of this era, of pressures on margins, and of pressure from consumers demanding constant new ideas in the market. Their only way to survive is to stay relevant, and innovation is the engine that will not only do that but keep them ahead of the curve and in front of their competition.

Step back to leap ahead
Once the need to think like a startup has been acknowledged, a business also needs to know how to implement it. This is not about appointing one person in charge of innovation, but rather instilling a holistic culture throughout the organization. This requires commitment from top management who should be heavily engaged and act to unite all employees in this push for creativity. To get there, businesses need to take a comprehensive look at the business, the brand value proposition and the employees — and formulate a clear vision and central strategy. Questions that need to be answered include which products/services to retain and which to divest, and which processes to review to meet objectives quickly.

We are all aware that Lebanon is going through yet another crisis period. But at times like this the situation can be viewed as either a problem or an opportunity. At Brandcell we are advising our clients to look at it as an opportunity to take a small step back and redefine their business for growth. It’s not enough to think that as sales are down the solution is promotions and discounts; these will only send one signal to consumers — that you are in panic mode. Instead, now is the time to benefit from the lull to rethink every element of your business proposition and to discover how many new ideas you can create, and how many new resources you can make available to jumpstart your business when this crisis is over. Having the ability to continuously unlearn and learn again is the thus trademark of successful companies.
 

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Business

In values we trust

by Thomas Schellen
written by Thomas Schellen

Even though it was founded 90 years ago in Egypt, is owned by a United Arab Emirates-based investment fund, and is being run by a Brit, much if not most of the DNA in regional retailer Spinneys is entwined with Lebanon. The chain was reborn in Beirut in 1998; of its four countries with direct operations, Lebanon leads in number of stores and sales revenue; it suffered some of its most unwelcome challenges in the local scene; and notably, it puts all its new ideas in front of the Lebanese consumer first, before taking them to the Egyptian, Jordanian and Qatari markets.

According to CEO Michael Wright, Spinneys is a niche player in Qatar and Jordan, while Lebanon and Egypt are the current centers for revenues and profits. The brand’s largest presence is in the UAE, where almost 50 supermarkets and convenience stores carry the Spinneys logo and identity, far more than in the four other countries together. However, the group has no direct stake in the UAE market since the operation there is owned by Emirati businessman Ali Albwardy and run independently from the group under a basic franchise agreement.

Group-wide sales revenues, which do not include the UAE, were in the vicinity of $500 million in the group’s 2012/13 financial year, which ended last June, Wright told Executive in a far-ranging interview. He said Lebanon accounted for 45 to 50 percent of that, which suggests a turnover of somewhere between $200 and $275 million for the operation here, depending on whether the corner values cited by Wright were on the high or low side.
He competes in Lebanon against several domestically owned supermarket chains along with the Kuwaiti-owned Sultan Group and Carrefour, the French chain whose regional partner is the Majid Al Futtaim Group. For market share, Lebanon is Spinney’s main focus but these growth potentials are curtailed by the overall structure of the retail trade.

Evolution of ownership
In the first years after players like Spinneys rolled out super- and hypermarkets, there were strong expectations that these big stores would wipe out local stores but this has not happened in Lebanon. Large retailers with centralized buying and modern management control only around 30 percent of the Lebanese market and this number has been rather stable, Wright said. The retailer plans to increase the total number of stores from the current eight to 13 and also venture into the convenience store business in a repeat attempt at the local diversification plans that Wright first disclosed to Executive almost ten years ago.
Part of the retail brand’s story is a complicated ownership evolution whose recent chapters center on one of the region’s leading private equity players, Arif Naqvi, who is best known today as chairman of Abraaj Group. His older company, Cupola Investment acquired Spinneys in 1999 along with other assets for $116 million, in Naqvi’s first major deal from the United Kingdom-based automotive distributor and retailer Inchcape. It spun off the minority interest it held in the UAE operation of Spinneys — presumably the group’s filet piece in operational terms at the time — by selling it to the local majority partner Albwardy Group and embarked on expanding the brand’s presence in Lebanon and from there into Egypt, Qatar and Jordan.

Describing the company as a regional pace setter and innovator in major retail, Wright — who has been with the company for 26 years, beginning in Dubai after a training scheme with a British retailer —said that competitors copied the retail environment and work and training structures of Spinneys since the current operational mold was implemented in Lebanon in 1998. Retail managers with experience at Spinneys are sought after in the market and can often achieve a career leap when hiring on with other retail chains.

In 2004, Spinneys was acquired by the first Abraaj Buyout Fund (ABOF) based on diligence from which Naqvi excused himself to avert conflict of interest issues, according to Wright who was for two years a direct employee of Abraaj. According to a Middle East Economic Digest research document reproduced on the Abraaj website, Cupola retained 35 percent ownership of Spinneys Group while 46 percent was taken on by ABOF for a cash consideration of $27.1 million. Ten years on, the group is still owned by the Abraaj Fund as controlling shareholder and is actually the oldest participation among 146 portfolio companies shown on the Abraaj Group website.

The future ownership of Spinneys has been rife with expectations that Abraaj would seek an exit from the investment. This is in no way surprising given the nature of the private equity business but the current indications are that an optimum exit opportunity will come after the group realizes further expansions and when its main asset bases in Egypt and Lebanon allow for better valuations on virtue of improved macroeconomic and political realities.

Spinneys’ expansion plans over the past 15 years are a story in themselves, reflecting the vagaries of an environment where many international retailers have paid with high losses for ventures that got trapped in culture conflicts or misunderstandings of different commercial languages. Over the years, the management has been liberally trumpeting plans to penetrate a bewildering number of markets from Kazakhstan to Morocco and sub-Saharan Africa. Plans for several countries, such as Morocco, could not be realized at the times that they were envisioned for but current projects for various equity and franchising formulas are in place for Libya, Kuwait, Nigeria, and under negotiations for Pakistan, Iran, Tunisia, Algeria and elsewhere.

According to Wright, Spinneys would be valued in the ballpark of a quarter billion dollars if the investors sought to exit today but could represent a much higher value if an exit comes at an optimal time. The current restraints are the higher risk perception of the Lebanese and Egyptian markets while the future potential would be due to its brand and management experience with creating and operating modern retail stores in multiple markets that are not easy to tackle from the outside.

On the operational side, the group banks on a wildly successful loyalty program as a core marketing engine. The points-based scheme offers rewards to loyal spenders and stores are visibly busier on “double point days” when the company entices customers with the prospect of extra progress in earning these rewards, which in the base loyalty program range from household items to small consumer electronics. These rewards are moreover so popular and customer preferences for them so unpredictable that stores often run out of them near the end of a rewards campaign, to the effect of Wright acknowledging that “the loyalty scheme’s success has created its own problems.”

Rewarding loyalty
“We are very happy with the way the program is going. Almost everybody [among large retail groups] has a loyalty scheme but very few loyalty schemes will deliver to consumers the gratification where multiple products are very much in reach,” Wright said. Not at all bashful about the need for retailers to be aggressive, he conceded that Spinneys uses the program to incentivize customers to buy products where the group can achieve higher margins than the razor-thin ones that generally characterize the retail trade in fast moving consumer goods.
Spinneys has transported the concept to Egypt and Jordan and will soon launch it in Qatar. However, the loyalty program here remains the most advanced and the retailer is currently working to develop it further to tailor its suggestive power to customer behaviors on specific product types, by for example offering extra points to wine lovers to make them do more of their shopping for this margin-rich palate pleaser at      the chain.

In other customer-facing matters, Spinneys has a policy to charge customers only the lower price if a product’s shelf price differs from the price shown at the cash register, a problem that is all too frequent in their stores. However, this policy is often not adhered to by store personnel, Wright admitted, saying that the company would do more to engrain policy-compliant behavior in staff members’ actual retail practices.

Courting controversy
But while notes from customers on flawed pricing or quality of products, along with service complaints, are parts of Wright’s daily diet delivered to him from all customer communication logged at the chain’s call center, these were nothing compared to the accusations leveled against the Lebanese operation and Wright personally in 2012 of paying below the minimum wage, of bullying dissenting employees and disrespecting employee rights.

In his interview with Executive, Wright refuted the accusations as baseless and originating from a handful of activists and political players with partisan support from one or two media outlets. Wright claimed that the company was complying with all its tax and social obligations and was audited regularly by the authorities.  “We may have been the only company that absolutely paid everything although it has a big workforce. We pay all the minimum wages, all the social security contributions, we pay additional medical care. We have always been and always wanted to be the preferred employer,” he said.

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Business

Stowing the rich

by Thomas Schellen
written by Thomas Schellen

The formula is intriguing from a commercial perspective and it has pizzaz: the Beirut Yacht Club, scheduled to operate for the next two months under a soft-opening formula and celebrate commencement of business with a formal launch in April, targets the upper crust of the resident business community with a concrete space for reveling, relaxing, and rubbing shoulders — the 14,000 square meter (sqm) Yacht Club building at the end of Zaitunay Bay development in the St. Georges Bay.

The property includes areas for members and their guests in the form of bars, restaurants, terraces, a library, pool, meeting and recreational rooms, plus 53 residential units, of which nine will be operated by the club as exclusive lodging facilities. Of the remaining 44 units, 11 have been sold and the others are for sale as serviced apartments at a range previously not found in the Lebanese market — prices per square meter range from $15,000 to $25,000, according to Farouk Kamal, chairman and general manager of Beirut Waterfront Development S.A.L., the company which owns and operates the project.
The market that a developer can address with such a product is clearly the high net-worth and ultra high net-worth community, or individuals and families in the top 10 percent — those who, globally, own 86 percent of the world’s wealth according to the 2013 Global Wealth Report by Credit Suisse. The segregation of this addressable market from the averagely heeled population is reflected in the access threshold of the Beirut Yacht Club. Enrollment in the club, which will be limited to 500 members and carries an initiation fee of $15,000 for an individual and $20,000 for a couple, is precondition for buying one of the club’s residences.

Kamal is positive about the prospects of finding buyers who will happily part from their cash in exchange for a flat which will cost around $3 million based on average unit size of 150 sqm and median sqm prices of $20,000. People have already shown “a lot of interest,” he says with ostentatious confidence that his target market will jump on the opportunity to procure an apartment which is priced off the local charts but comes “fully furnished” and with the entitlement to use the “4,000 square meters of club area attached to it.”

He admits, however, that the company cannot be sure about the Yacht Club’s performance in the coming summer and is basically keeping its fingers crossed in hopes for improvements in Beirut’s tourism and general security conditions so that the inaugural season will go well in terms of the venue’s usage for events, leisure and food and beverage offerings. A good market response in these areas will also be important for the attractiveness of the real estate. “We are selling club residences and people will appreciate the residence when the club is buzzing and active,” Kamal says.

Reaching the social stratosphere
Besides the knowledge that Beirut real estate prices tend to be extremely resilient against downward pressures, other incentives for investing in a Yacht Club residence include the option to have the management short-let a unit on behalf of the owner. And of course, owners can circulate through the club basking in the feeling that they actually own a piece of the place, in contrast to the 90 percent of their fellow club members who will at least have to cross the street to get home — if they reside in one of the nearby residential structures of the Beirut downtown. Kamal sees a natural reservoir for Yacht Club membership in the district’s population of bankers, high-powered consultants and other business leaders to whom he wants to offer a community environment whose members “want to enjoy a certain level of exclusivity and at the same time rub shoulders with the right people.”

Adding a further dash of reputation, the Beirut Yacht Club might offer honorary one-year membership to select ambassadors countries whose embassies are the most active in Lebanon. Beyond the paying members, diplomatic elites and their guests, however, the club will not welcome the public to revel on its premises. This restriction to a wealthy and minuscule part of the population is perceived by critics of the project as flying in the face of the land reclamation that created the land on which the Beirut Yacht Club and the adjacent Zaitunay Bay hospitality area have been constructed.

The controversy over the transfer of these reclaimed parcels to the private sector — meaning Solidere, the company mandated with the reconstruction and development of the Beirut downtown — has roots in the 1990s that relate to the case of the St. Georges Hotel and the reclamation of land for the New Beirut Waterfront of which Zaitunay Bay is but a tiny part. A reverberation of the old confrontation recently rung through the media by way of a very public altercation between caretaker finance minister Mohammed Safadi and caretaker public works and transport minister Ghazi Aridi. In an exchange of accusations, Aridi asked Safadi if he was a “thief” and also claimed that the construction of an elevated walkway in Zaitunay Bay was illegal.

The Zaitunay Bay project and its managing company are a 50-50 joint venture of Solidere and Stow Group. As Kamal confirms, Safadi is the main shareholder in Stow Group, a real estate and investment holding with interests in the United Kingdom, Lebanon, and Oman. Besides heading Beirut Waterfront Development, Kamal is also the executive chairman and a shareholder of the group’s Stow Capital Partners.

Big fuss over a small construction

On the face of it, the argument over a building violation in Zaitunay Bay is focused on a technicality. The absence of a required decree does not put into question the legitimacy of the land’s allocation for private ownership and the construction is not a recent alteration of building plans or anything such. The 10-year-old original design for the project shows the disputed walkway leading up to the roof of the Yacht Club as terminating point (with exceptional sea view) of a promenade for broad public access.

From the perspective of its use value, the private ownership of Zaitunay Bay’s existing marina-side boardwalk and its upper promenade has caused some restrictions on activities such as skateboarding. From the area’s design point of view, on the other hand, the extension of the promenade has a consistent appeal and from the perspective of balancing the recreational interests of restaurant goers, skateboarders and so on, finding a solution appears to be a matter typical for community arbitration rather than cabinet-level action.
Much more interesting, albeit in hindsight, is the question of how the public interest was represented at the time when Solidere and Stow first forged their partnership. Solidere’s 2012 Annual Report contains an elaborate narration and an impressive pictorial on the downtown’s development that far outshines the report’s financial pages. This narration states as a fact that the two companies formed a joint venture to whose capital Solidere contributed 22,350 sqm of land with permission for 20,000 sqm of built-up area while Stow contributed $31.6 million in cash.

The report’s financial pages specify further that the joint venture was formed in February 2004 with an initial capital of $19,900 and that the partners increased this capital in 2006 by $12.8 million and that Solidere sold “properties with an aggregate cost of $10.1 million… to the joint venture for a total consideration of $31.6 million” against which Stow contributed the equivalent cash amount.

Not explained is how the partnership was agreed upon and if there were competitors for entering a deal with Solidere to develop what are today Zaitunay Bay and the Beirut Yacht Club.

What can be said is that Stow Group, whose founders in 1985 included both Safadi and Kamal, has a visible propensity to collaborate with leading companies. The company says on its website that it is engaged in three “principal industry relationships.” Solidere is identified as a principal partner and so are TAG Aviation, with whom Stow has shared interests in the UK’s Farnborough Airport and Grosvenor.

The latter partnership means that Stow enjoys a strong business link with a company that is not only one of the longest-standing property owners in the posh Mayfair and Belgravia districts of the UK capital but also represents the business interests of the richest man in the country, Gerald Grosvenor, Duke of Westminster.

Stow’s projects in London in several ways give a very different impression from its more adventurous projects in Beirut. For example, an office project in Mayfair was not only blended marvelously into its street’s architectural context but its recent delivery was “on programme” and in line with what the company had said in a 2010 press release. In Lebanon, the congruence between targeted project completion dates and actual deliveries was nil.
If they say anything beyond highlighting that Beirut is not your usual market for projects and developments, the implications of Stow’s UK partnerships and track record may be that the company is  both keen on rubbing shoulders with the most potent partners it can find, eager to abide by its contractual obligations, and very much at home in the peculiar segment of the property market where a square meter price of $25,000 is not absolute record material (in 2012, Stow UK put a 870 sqm London townhouse up for sale with an asking price of GBP 17.5 million — about $27 million at the time and in excess of $31,000 per sqm).

A Bay on course?
In Lebanon’s feeble relationship between public and private spaces, the corner that Zaitunay Bay represents in a long shoreline of atrocious vistas interspersed with a few bearable developments is definitely more accessible, more appreciable, and better developed than some of its equivalents.

The hospitality project has lost some of its initial — and quite overbearing — snobbishness during the 2012/13 downturn of tourism and in a somewhat surprising statement, Kamal today emphasizes that “we know that for a project to be successful in Lebanon, whether it is a yacht club or a strip of restaurants, you need to depend on the local people, the middle class professional people. This is because if you are successful with them, tourists will come to that place. But if it is only tourists that come here, the locals will probably not come.”

The hospitality mix in Zaitunay Bay in January 2014 evidences a stronger orientation toward the locals and their tastes and pocket books when compared with the area’s initial tone. According to Kamal, the project owners steered the development partially away from the concept’s very first ambition of creating quality public space. He says they did so out of fears that this space could be abused.

It remains to be seen which course the Yacht Club will steer in the coming years, noting that nothing much in Lebanon ever comes out as planned or expected. But in a sense, the hyper-luxury orientation of the area is not actually new. Some 50 years back, in a period which older nostalgic socialites still like to call Lebanon’s golden era, the hospitality properties in this very neighborhood were the places where the elite sipped teas and aperitifs or smoked cigars in presumed splendid isolation from the squalor of the masses.

The question to be answered in the coming years in Zaitunay Bay, the whole New Waterfront and indeed the entire downtown is whether the necessary profit orientation of a private sector stakeholder is able to put enough emphasis on the social profits of well-managed public space, serving both public and private interests in reasonable balance.

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Leaders

Time for a government

by Executive Editors
written by Executive Editors

For the past 10 months, Lebanon has been without a government. The caretaker cabinet has proved completely incapable of responding to the country’s two major ongoing challenges — the influx of 900,000 Syrian refugees fleeing their country’s civil war and a striking downturn in security conditions. Since Christmas alone, Lebanon has seen four car bombs. The political void has also fed into wider inactivity; parliamentary elections have been missed, natural gas tenders repeatedly postponed.
The coming months will see challenges just as daunting. President Michel Sleiman is due to step down in May, while parliamentary elections are scheduled for November. Tenders for natural gas must move forward lest Lebanon risk losing the interest of international oil companies and any hope for energy independence or a balanced budget. Syrian refugees will continue to arrive in Lebanon, putting further strains on state infrastructure. And the rapidly deteriorating security situation demands a strong response by the army and Internal Security Forces, backed up by political consensus.

It is good that leaders seem close to announcing a new government with broad participation. Sleiman and prime minister-designate Tammam Salam have been doggedly pushing for a cabinet. The Future Movement and Hezbollah, protagonists in Lebanon’s most fraught political dispute, have signaled their willingness to share power. As Executive went to press, it appeared that only one card had yet to fall into place: Michel Aoun’s Free Patriotic Movement (FPM).

The party’s major demand is to keep its current portfolios of telecoms and energy. There is some merit in keeping ministries under the same management: often new ministers bring coteries of advisors and erase the painstaking work of their predecessors.
Similarly both Nicholas Sehnaoui and Gebran Bassil, respectively the caretaker ministers of telecoms and of energy and water, have been effective in their roles. The two are among the only ministers that can point to real accomplishments under the last government, the former improving the country’s (still slow) internet networks and the latter pushing forward the oil and gas bids.

But these are hardly good enough reasons to sign over entire ministries to specific political parties in perpetuity. Lebanon has a long history of building political fiefdoms, rather than functioning ministries. Indeed, Bassil’s comments in late January that it was important to keep the energy ministry under the control of Christians smacks of just the kind of self-serving feudalism that has long held the country back.

This thinking must not be tolerated. Sleiman and Salam should not let the FPM get in the way of the formation of new government. Hezbollah and Amal, the FPM’s major coalition partners, shouldn’t either. With weekly car bombs at home and a devastating war still raging next door, the stakes are simply too high.

There are more pressing issues  in Lebanon than telecoms or even energy. It is time for the FPM to apply its competence in these areas as well.

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Finance

Investment banking: Small sector in search of big deals

by Livia Murray
written by Livia Murray

The investment banking sector in Lebanon is staggeringly small. With Lebanon’s history of maintaining a strong financial sector despite periods of crisis, one would expect its finance professionals to be well-versed in the notoriously lucrative industry, which registered revenues of $76 billion globally in 2013. But as the Lebanese market shows, not all financial systems are endowed with the same opportunities. Revenues from investment banking in Lebanon are so marginal that an operation could not even sustain itself if it were to rely solely on investment banking income.

Identity crisis
To compensate for low revenues, institutions that do investment banking are forced to diversify their products. What are referred to as investment banks in Lebanon commonly delve into brokerage, wealth management, long and medium term deposits and lending, alongside their advisory and capital raising services. Though it borders on an identity crisis, this combination of services is feasible and even encouraged by the specialized banking license under which these banks operate.

“This is the model that works,” says Samir Taleb, founder and partner of financial institution Lucid Investment. “It’s the central bank license which allows both together and actually encourages both together.” This specialized bank license issued by Banque du Liban (BDL) gives a wide mandate to the banks for services in corporate finance and private banking.  A total of 17 banks are registered under this license.

Investment banking is still relatively new to Lebanon. As the newest pillar of FFA Private bank, it accounted for only 10 percent of their total revenues in 2013 according to its senior manager and head of investment banking Julien Khabbaz. Their investment banking division carries out corporate finance advisory to regional companies who want to sell, restructure, or carry out a merger or an acquisition, and provides fundraising on a project-by-project basis. With the bulk of their revenues stemming from brokerage and asset management, the money they raise mostly comes from a pool of investors who are clients of the private bank. FFA acquired the specialized banking license in 2007 and has a shareholder equity of $30 million.
Cedrus Invest Bank’s founder and CEO Raed Khoury estimates that a similar 10 percent of the bank’s total revenues stem from investment banking. Out of a total net income of $3 million for 2013, investment banking profits would stand at $300,000, with the lion’s share of the bank’s revenues coming from private banking and wealth management. Established in 2011, the bank has a total paid-up capital of $52 million.

The weak appetite for investment banking in Lebanon has caused investment bank subsidiaries of larger groups to derive a bulk of their investment banking activities from divisions of their parent companies. According to Credit Libanais Investment Bank’s head of corporate finance and economic research Fadlo Choueiri, a great part of the bank’s investment banking activities come from advisory work for the Credit Libanais Group, particularly as it added a number of branches in the Middle East and West Africa.
Blominvest Bank uses a similar model. With parent Blom Bank having branches across Qatar, Saudi Arabia and Jordan, whenever one of these branches identifies a company that needs investment banking services, they outsouce these services them to Blominvest where the manpower is. “Our role will be really to provide services for our subsidiaries outside of Lebanon because this is where the deals are,” Fadi Osseiran, general manager at Blominvest, says.

slim pickings
Investment bankers in Lebanon are forced to diversify their services or outsource because of the barren landscape for such activities in Lebanon. “You might wait two years and have no transactions,” says Lucid’s Taleb. The lack of companies willing to seek investment banking services explains the meager profits of investment banking, and the need for a backup plan. “Because when it dries up, it dries up,” says Khaled Zeidan, who works on the buy-side of deals as general manager of MedSecurities.

Those in the financial sector blame the family ownership structure of Lebanese companies as hampering investment banking activities. “They want to preserve their control and going public or opening up their capital is a much lengthier and difficult process,” says Osseiran. Business owners in Lebanon will opt for taking bank loans when they need capital over selling shares, which would dilute ownership.

Though scepticism is not undue for a sector that does not have the cleanest reputation, those in the industry point to the merits of financial services and advising for a company. “You have shareholders and partners to report to,” says Taleb. In juxtaposition with the family business structure which has a reputation for being shadowy and inefficient in their finances, opening up capital can lead to fiscal transparency and institutionalized management. “Investment funds will be fighting to get a meeting with you as a company to support you, possibly partnering with you, financing the company to expedite growth,” says George Azar, managing director at financial advisory firm GA consult.

Sourcing deals
If Lebanese investment bankers are having trouble sourcing their deals locally, the appetite for Lebanese investment banking services is only slightly better in the region. But sourcing deals from the outside is more difficult than keeping active on the local market because of competition from large regional and international banks. Those who have managed have had to find space in the market. “I believe we sit in a nice niche,” says FFA’s Khabbaz. “We’re kind of in the niche of deal size where you don’t have many investment banks working on that same field,” going for deals in the $5-$50 million range.

Nonetheless, Lebanese investment bankers are forced to look abroad. “In order to be financially solid, if you want to work only in investment banking, [you need] to have deals in the region,” says Khoury. Many of the mandates currently under control of Lebanese investment banks are from Lebanese companies abroad, as regional expansion is the preferred method of scaling for these companies. In 2013, Cedrus worked on acquisitions in the UAE’s insurance sector, Saudi Arabia’s healthcare sector, and Lebanon’s food and beverage sector, with tickets ranging from $5 million to $10 million per deal, as well as smaller advisory deals within Lebanon. They could not disclose the names of the companies because of non-disclosure agreements.

Lebanese investment banks can look at bigger deals by getting work from their parent bank’s regional subsidiaries. Blominvest is currently working on two advisory mandates for a Saudi plastics company at a size of $70-80 million and a Qatari construction company at a size of $300 million, thanks to Blom Bank’s branches in those countries. They raised $100 million in 2013 for investments abroad, $50-60 million of which went to Saudi Arabia, mostly in real estate.

The future
In spite of the current limitations, investment bankers are hopeful that the next couple of decades will see an increase in investment banking activities in Lebanon. “We’re going to see exits in the next few years, people that inherited that business and they don’t want it, or people who inherited and want to grow it or need new partners or cash injection or people that need restructuring or advisory on corporate governance,” says Khabbaz. New management opting to open their capital would give investment bankers the opportunity to structure and plan these exits.

Capitalization would also allow investment bankers to sink their teeth into larger deals. “As the Lebanese companies want to grow and become competitive in the region, they need to re-capitalize. So they might ask for investment banks to advise them how to increase their capital, and find them companies for acquisitions, etc,” says Khoury. “There are a lot of things that need to happen as naturally family businesses grow and become a size where they can be more institutionalized and have a future. Maybe someday we can see some of these companies be publicly listed,” says Khabbaz.

Besides the capitalization of family businesses, some of the major sectors of the economy are still public. Privatization of major sectors of the economy such as telecoms and a major airline would drive demand for investment banking services. “You couldn’t really kick off investment banking in a place where there the sectors of importance are not privatized,” says Osseiran. Investment bankers also see potential in sectors of the economy on the verge of being developed, such as oil and gas.

Capital markets:
no exit in sight
Though investment bankers see prospects in the future for investment banking deals, one of the lingering problems they will face are the underdeveloped capital markets. Very few companies are listed on the Beirut Stock Exchange. With real estate giant Solidere and a handful of banks taking up the majority of the market, it has not seen any new equity listings since the turn of the century.

Weak capital markets provide little exit strategy — dubbed by Zeidan as the “holy grail” of the industry — for investors to sell their shares in a company and capitalize on their gains. But the current political situation has lead to an undervaluation in the price of shares that dissuades investors from buying and companies from selling. “Investors are not willing to pay a premium over and above the book value of the share,” said Choueiri, who claimed that the price of listed shares fell from roughly three times the book value in 2008 to barely over parity today.

Political deadlock limits both investments in companies and the desire for companies to list, take capital injections, and expand, as today’s climate is far from ideal for initial public offerings (IPOs). Khabbaz admitted that some of their mandates for mergers and acquisitions ground to a halt in    2013 because of insecurities relating to the political situation. “They kind of stalled and froze just because people were reluctant to do deals, to execute, to invest, to buy each other out,”he says.

But political deadlock is not the only culprit for lack of deals and IPOs. A regulatory framework has been slow in implementation, despite the establishment of capital markets as early as the 1920s.

These regulations would establish minimum requirements for companies to list and be traded on the stock market that would increase the transparency and accountability to their shareholders.

With the relatively recent formation of the Capital Markets Authority, a regulatory body to oversee Lebanon’s capital markets in 2011, investment bankers are still dubious this will lead to real change any time soon. “We’ve been waiting 10-15 years on the making of it,”   says Osseiran. A high priority in every country that wants to develop serious capital markets, a regulatory agency is a must for a highly functioning and reliable trading environment. Though Lebanese investment bankers may see more deals in the next couple of years, it is important that this is paired with a regulatory framework to limit the potential risks in this industry.

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Leaders

A frontal assault?

by Executive Editors
written by Executive Editors

Saudi Arabia’s pledge to support the Lebanese Armed Forces (LAF) to the tune of $3 billion over the next five years should be cautiously welcomed.

The army is one of the few genuinely cross-sectarian bodies in this divided country and enjoys widespread support. In 2013 a study by the Norwegian research company FAFO found that the LAF was by far the most trusted institution in the country, with over 80 percent support compared with averages of around 50 percent for the parliament and the government. Most significantly, the backing was roughly consistent across all age groups and sects (it was lower among Sunnis, but still the most trusted body).

Despite its reputation, the LAF suffers from chronic underfunding (see main article). Tasked in its mandate with juggling the daunting duties of defending the country against foreign aggressors, reclaiming Lebanese land under Israeli occupation and maintaining internal security; it is clearly incapable of keeping all the balls in the air.

This is partly about technology; while the LAF has plenty of manpower much of its hardware, such as dozens of Soviet-made tanks, are relics from previous eras. The need for investment is clear.

Thus the $3 billion could be a major moment for the country, allowing the military to significantly improve its capabilities. It will not become a regional superpower and will remain incapable of providing a realistic military threat to Israel, but it could get a much firmer grip over internal security and stop the country sliding into further strife. This best-case scenario would be welcome.

But then we return to politics. No one with knowledge of the Middle East will accept that Saudi’s motives are purely philanthropic. Indeed, the deal appears to have as much to do with boosting Riyadh’s relations with France as with concerns about Lebanon’s security.
Those that have cried foul have accused Saudi Arabia of seeking to politicize the army, or to use the funding to create a counterweight to Hezbollah. Indeed, the Hezbollah-leaning Lebanese newspaper Al Akhbar alleged that the deal was contingent on the Shi’ite group being excluded from the next government.

If the Saudis want to be seen as honest brokers — supporting the most beloved of Lebanese institutions out of concern for the country’s stability, rather than sectarian preference — then assurances are needed. Foremost among these would be a guarantee that the leaders of the LAF alone will choose what areas they wish to strengthen and what they wish to buy. Any Saudi interference, whether direct or indirect, will only pour fuel on political fires.

So far transparency has been severely lacking — as yet there are few indications of where the money might end up. To avoid perceptions of favoritism, more clarity is needed from both the Saudis and the LAF.

The widespread support for the military is to be cherished. While the need for new funding is great, it cannot be traded in exchange for independence.

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Leaders

Corporate responsibility is everyone’s duty

by Executive Editors
written by Executive Editors

It is not easy these days to find companies that are expanding in Lebanon. Uncertainty rules the economic climate and the only thing safely said about this year’s business prospects is that there are so many variables that macroeconomic forecasts are even shakier than in ‘normal’ times. But there are corporate examples for optimism — even if some can be described as hoping against probability. There also are companies that tell Executive of investments and expansions that will mean the creation of new jobs in areas such as hospitality and trade.

One company to talk new business last month was Beirut Waterfront Development, which is set to open the Beirut Yacht Club this spring (see story). Another was Spinneys, the retail chain that has more stores and new concepts in the pipeline for Lebanon (see story and interview). The two represent very different corporate narratives. With the Yacht Club, Waterfront Development is invested in a segment of the real estate and hospitality market where exclusivity is the aim and targeted profit margins in the sale of a few super-pricy apartments are a function of scarcity. Spinneys is a mass retailer of fast-moving consumer goods whose daily bread is beating the competition on price and whose mantra is winning on razor-thin margins.

But besides professing corporate optimism, both have another factor in common: they have been targets of huge criticism. Waterfront Development was accused by one media outlet of building a “boardwalk of corruption” in the St. Georges Bay — arguing that the company was part of a scheme to abuse public property for private gain. In 2012 activists attacked the Spinneys chief executive as ‘CEO against freedoms’, with allegations over their working conditions.

Media and activists are important parts of society and as Lebanon matures toward a more open and inclusive society their contributions are important. Similarly, criticism and exposure of corporate ills are an essential feature of their watchdog functions. And when it comes to Lebanon’s huge need for more social equity, the protection of the country from disgraceful private use of public property and the preservation of labor rights are absolute priorities.
However, the virtues of standing up for the little guy and for the public good must preserve the dignity of these causes. The responsibility to present facts and argue with fairness is incumbent not only on news media but also on activists. Even the simplest examination of the accusations against Spinneys and Waterfront Development showed that the companies were often not given a fair hearing.  Most significantly, the attacks against both companies were pushed forward not only by media and activists but also by leading Lebanese politicians, while a politician was also the main target in the attack on Waterfront Development.

The entanglement of political figures points to a major dilemma as the Lebanese wait for a new government to help find a solution to our macroeconomic trough. The dilemma is that the Lebanese need their politicians to be active but that the political class is perceived, often with good reason, as producing more problems than solutions.

Politicians should speak out against abuse of public properties and scrutinize economic actors for treating their employees fairly. But if politicians single out one and keep silent about all the others, they raise suspicion that their motives are not pure. And by damaging companies that otherwise would grow, it loads another straw onto the back of this heavily burdened camel that is the Lebanese economy.

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Comment

A foul reminder

by Yasser Akkaoui
written by Yasser Akkaoui

The Lebanese civil war of 1975 to 1990 did more than destroy the country — it made it impossible to put it back together again. Institutions were demolished, corruption was normalized and, most importantly, a generation of militiamen rose to power who cared little about unity.

The founding fathers of Lebanon — those brave men (for they were sadly all men) who formed the country on the basis of independence, tolerance and moderation — were sidelined, never to return.

In their place the very same militiamen who fought each other for over a decade swapped the sword for the suit and learned to call each other statesmen. But clothes do not make the man and the majority of them have not changed one bit. They claim their share of the pie and keep their foreign masters happy but do nothing to help the country develop independently.
Since 2005, Hezbollah has become the latest party to be transformed from militia to pseudo-statesman, with the 2008 Doha Accords effectively offering them a seat at the top table. And in the past year we have seen a new player on the ground — the Salafis and Al-Qaeda affiliates — pushing for influence. They may be easy to dismiss but make no mistake; they are a rising force and are looking for their share. It is clear that any global agreement over Syria, which will impact Lebanon, will include them.

For those moderates that survived the civil war, it has been a cold winter as the rule of the gun has taken hold. We have been isolated and ignored; condemned as traitors for refusing to pledge allegiance to one foreign power or another.

But we may be seeing the first signs of spring. Prominent businessman Farid Chehab and others have launched the Blue Gold project, which aims to claim the country’s vast and deeply politicized water resources for the Lebanese people. In the process they aim to nurture a strong, independent civil society that puts the country first.

Their plans are grand, utopian some might say, and they are certainly flawed. But they are laudable. Civil society has to demand the impossible, if only to force action from the political class.

The rule of the gun never lasts. One day we will get our country back, and when we do we need a strong civil society to help us move forward.

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Economics & Policy

What does $3 billion buy these days?

by Joe Dyke
written by Joe Dyke

Lebanon’s president could barely contain his joy. Speaking only a few days after Christmas, Michel Sleiman announced a late present to the Lebanese in a year that had brought little to celebrate. Speaking live on the major television networks Sleiman announced that Saudi Arabia had agreed to invest in the Lebanese army to the tune of $3 billion, a grant that he said would enable the military to “strengthen its capabilities” and “confront terrorists.” Coming only two days after the killing of a pro-Saudi former minister, the president’s message seemed fairly pointed.

The grant could undoubtedly have a major effect on the capacity of the Lebanese Armed Forces (LAF). $3 billion, spread over five years, would be a major boost to Lebanon’s defense budget, which the Stockholm International Peace Research Institute in 2012 estimated at $1.7 billion annually. If invested wisely, the fighting capacity of the military could greatly improve, as could its ability to control its borders.

 

Editorial: Saudi grant to Lebanon deserves cautious welcome

The investment is certainly needed. Currently, despite having over 60,000 soldiers, the LAF has only a token air force, relies heavily on Russian-made tanks from the 1960s and has a minimal navy. New hardware could enable the LAF to carry out its duties far more efficiently. Elias Ferhat, a former Lebanese general, cites the case of the Nahr al-Bared Palestinian camp in 2007 — when the Lebanese army took three and a half months to crush an insurgency led by Islamist groups. “Had the Lebanese had any fixed wings [planes or drones] it could have ended it in 15 days or fewer,” he said.

Yet those expecting this to be a game-changing moment which will allow the Lebanese army to justify disarming Hezbollah and even provide a military counterweight to Israel may be disappointed. Closer inspection of the deal indicates that while the benefits may be significant for the army’s capacity to control security internally, it is doubtful whether it will have a major effect on relations with Israel or Hezbollah.
Regional deal

Part of the reason the deal’s impact is unclear is that while the proclamations were bold, the details remain murky. As this magazine went to print, there had been no official confirmation of the $3 billion from either the Lebanese government, the Ministry of Defense or the LAF. Beyond the president’s statement, there are as yet no further details of where the money will go. “All we have so far is the declaration from the Saudi government and an acceptance from the Lebanese president,” said Farhat, cautioning that Saudi has a long history of promising money, “but when it comes to execution they do nothing. So it is too early to know how big [the effect will be].”

In fact, closer inspection of the deal suggests that it may have more to do with relations between Saudi Arabia and France than a sudden desire to support Lebanon’s military. At a regional level, as the United States has moved closer to rapprochement with Iran, Saudi Arabia — for many years America’s closest Arab ally — has appeared increasingly snubbed. In November, Riyadh surprised the world by turning down a seat on the United Nations Security Council after months of lobbying for it, a U-turn widely interpreted as a message to the US.

As relations with Washington have soured, leaders in Riyadh have been looking for new allies, with the French appearing to be the favored choice. They may well be voting with their wallets, with the two countries believed to be on the cusp of confirming a $1.4 billion deal to overhaul the Saudi navy — specifically the French-built F-2000 frigates.

The deal struck between Riyadh and Beirut is in fact a triangular one. Lebanon will not be allowed to invest the $3 billion however it sees fit, but will have to buy French goods and get training from France. This, said Aram Nerguizian — a senior fellow at the Washington-based Center for Strategic and International Studies and an expert on the LAF — indicates that the deal is as much about Paris as Beirut. “The deal benefits the French [weapons] industry first and foremost. No funding will be transferred directly to Lebanon and the mechanisms by which orders, payments and deliveries will play out are likely to be triangular and complicated by domestic constraints and pressures in all three countries concerned. Minimizing these pressures is incumbent upon effective trilateral engagement, not unlike recent LAF meetings in Paris and Riyadh.”

Indeed Nerguizian believes the Lebanese Armed Forces had only partial awareness of the deal before it was announced. “The LAF was consulted by the Lebanese president on its military development objectives and the Capabilities Development Plan, but they were not aware of any plan by Saudi Arabia to finance the sale of French systems, sustainment and training to the Lebanese,” he said.

What to buy

The debate around what the military should buy, therefore, is somewhat muddied as it is not yet clear by what mechanism the weapons will be selected. Will the LAF be able to prioritize areas where it feels it needs development or will the French dictate what they wish to sell?

Even if the LAF is in control, there are likely to be internal disputes over where the money should be allocated. Nerguizian points out that French naval expertise are among the world’s best and that Lebanon should seek to benefit from this. “This is not only a focus on acquiring ships. It is a bottom up effort to reshape an atrophied force of some 2,400 into a proper navy able to conduct patrol and interdiction in Lebanese territorial and economic waters. This would include dry docks, floating dry dock, ship-to-shore communications and other systems to supplement the sale of ship systems able to operate in difficult weather conditions.” Former general Ferhat, however, thinks the navy is less of a priority. “We need an air force because we don’t have a real one in Lebanon. We need also main battle tanks as our tanks are Syrian Russian-made tanks from the 60s,” he said. “These should be our priorities.”

Another potential tension may be over the percentage of the money spent on new goods. The Oxford Companion to American Military History points out that on average the cost of maintaining hardware over its lifetime is more than the initial cost of buying it.

It is as yet unclear what percentage of the $3 billion will be spent on new items and what will be allocated to maintain them. To give French industry the most short-term benefit, the focus would be on new items, but this could leave the LAF unable to foot the bill. “The maintenance of these weapons will cost hundreds of millions of dollars a year and the Lebanese budget cannot afford this,” Ferhat said. “We have a choice — can we acquire these weapons and maintain them or will they stay in a hangar for 12-15 years and then sold to countries such as Pakistan as they can afford to maintain them?”

Nerguizian believes the Lebanese army will push for finances to be allocated towards long-term acquisition. “The LAF is not looking to acquire $3 billion-worth of systems it cannot sustain… The LAF is operating under the premise that, if the $3 billion does in fact materialize, at least part of it must and will focus on sustainment.”

The need for clarity

One final element stressed by much of the media in understanding this deal is Saudi Arabia’s desire to influence Lebanese politics by weakening Hezbollah, which is the closest regional ally of Riyadh’s rival Iran. But again, the effect may be more modest than some have predicted.

If the purpose of the grant was to develop the LAF so that Hezbollah would no longer need to be armed, then it appears more than $3 billion is needed. Adnan Mansour, the caretaker foreign minister who is close to Hezbollah, dismissed the donation as “not enough to bolster Lebanon’s defense system,” pointing to the $17 billion Israeli annual defense budget. The extent of Hezbollah’s financial support from Iran and other donors is not known, but the Washington Institute for Near East Policy estimated it could be up to $200 million a year. Similarly the party has a huge network of voluntary donors, who pledge support to the party. While their total budget is significantly less than the LAF’s budget, Hezbollah has fewer responsibilities — with ‘resistance’ to Israel still its top priority. In this the party’s expert use of guerilla warfare has made it more capable of challenging Israeli aggression than traditional Middle Eastern militaries. “The Army is currently not able to be strong without [Hezbollah] at its side,” Mansour added.

Nerguizian agrees that the triangular nature of the deal makes it unlikely to be a direct challenge to Hezbollah. “$3 billion to France which will then sell as yet uncertain aid to the LAF will not lead to an LAF-Hezbollah confrontation, nor will it lead to the kinds of government formation that will seek to exclude the Shi’a and Hezbollah.”

What remains are more questions than answers. While the money from Saudi could have a transformative effect on the capacity of Lebanon’s armed forces, whether it actually will or not is unclear. The sooner more details are released, the better.

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Economics & Policy

Can Bassil go it alone?

by Jeremy Arbid
written by Jeremy Arbid

On January 8, caretaker Minister of Energy and Water Gebran Bassil again delayed the first licensing round for offshore oil and gas exploration ­— perhaps the biggest hope for Lebanon’s static economy. The reason was the same as the two previous times it had been delayed since September — two decrees need to be signed to allow the round to move forward. Political infighting has prevented the cabinet meeting to do so, thus Bassil has been forced to keep pushing back the bid.

But while this was old ground, this time there was a twist. Setting a new date of April 10, Bassil was adamant that “the [new] deadline is a final one.” He did not specify exactly what he meant by this, but this ambiguity has led some to interpret that if a cabinet has not been formed by April the minister will attempt to push through a move without the necessary decrees.

How far he could get without full cabinet approval is unclear. He certainly could not finalize any deal, as Lebanon’s 2010 Offshore Petroleum Law explicitly declares that any final agreement must be passed by decree. This procedure is supported by Article 89 in the Lebanese constitution which states: “No contract or concession for the exploitation of the natural resources of the country… may be granted except by virtue of a law and for a limited period.” Carole Nakhle, an energy economist at the Surrey Energy Economics Centre, explained, “the Offshore Petroleum [Resources] Law plainly states that the decrees should be approved by the Council of Ministers.”

What Bassil could do, however, is start to negotiate with companies on the basis of the model Exploration and Production Agreement (EPA). One of the two pending decrees declares the terms for the final EPA — the agreement between oil and gas companies and the government. But while the terms are not finalized, Bassil can begin negotiations working on the assumption that the model will form the basis for the final EPA.

An industry source, speaking on the condition of anonymity, said, “You can actually move along, and indeed it is common in resource-rich countries for terms to be agreed before formal regulations are passed approving these terms.” But, he stressed, companies will be reticent unless they are given assurances “that these are the final terms and that there won’t be a complete redraft.”

Dangerous precedent

Experts warn that moving forward without the decrees and the cabinet’s blessing is a precarious move. Oil companies are aware of the risk of investing in Lebanon’s offshore gas. However, as Mona Sukkarieh — co-founder of Middle East Strategic Perspectives, a Beirut-based political risk consultancy specializing in oil and gas — explained, “companies don’t like to operate on shaky legal grounds if their rights and licenses run the risk of being questioned at a later stage.”

These repeated delays continue to frustrate participating companies, particularly the largest companies in the bid, many of whom had only a skeleton presence at the Lebanon International Oil and Gas Summit in December.

However, these companies have experience operating in unstable political environments and have calculated Lebanon’s country risk into their strategic plans. A company’s decision to participate in a licensing round “is a strategic decision that is not reconsidered if a tender is temporarily delayed. Of course, this does not mean that the Lebanese government should keep testing their patience,” Sukkarieh explained.

The need for speed

In many ways Bassil is correct in demanding a final deadline — time is a factor for at least two reasons. In the face of political negotiations, the projected year in which Lebanon is supposed to become a gas producer, 2020, will surely be pushed back. By the next decade new sources of gas will be available in the global market. Israel has already started gas production and rumors of a proposed pipeline to Jordan are circulating. Globally, the United States, Australia, India, Canada and Indonesia are set for big increases in gas production, while regionally both Iran and Qatar are due to expand their output rapidly.

AT Kearney, a global management consulting firm, is forecasting that over the next decade, the surplus of supply will cause gas prices to fall. One of their primary indicators is gas import infrastructure, which is undergoing rapid expansion for both pipeline and liquefied natural gas, with much of this growth occurring in the Middle East. The World Bank expects prices in Europe and Asia to fall by around 10 percent in the next decade while the International Energy Agency anticipates a 30 percent decline in prices by 2020.

All this means that by the time Lebanon starts extracting, gas reserves lying offshore may not be as valuable as they are currently estimated. Thus the sooner Lebanon moves forward, the better.

The old enemy

The second reason that time is key involves the maritime border dispute with Israel over 873,000 square kilometers believed to be rich in resources.

The United States has been an active partner in resolving the border dispute, with multiple visits by high-ranking American officials. US Deputy Assistant Secretary for Energy Diplomacy Amos Hochstein visited Lebanon in November 2013 to push for a deal, meeting with several leading political officials including caretaker Prime Minister Najib Mikati, Speaker of the Parliament Nabih Berri and Bassil.

By some accounts Hochstein proposed a compromise for the dispute during his visit. According to a recently published news release by Alem & Associates, a legal firm representing oil companies bidding in the licensing round, the proposal “consists of setting a maritime blue line area between both countries in which the disputed zones will remain unexploited.” In general, the proposal prescribes freezing any exploration and exploitation activity in the disputed area until a permanent solution can be found.

But Lebanon’s political infighting may be strengthening the Israeli government’s position. Reports from Israel have indicated that Tel Aviv has rejected the compromise put forward by the Americans, perhaps a sign that Israeli leaders are feeling increasingly confident in the face of the Lebanese government’s inaction. Similarly the Israelis have a new gas exploratory site, the Karish well, with reserves estimated at up to 2 trillion cubic feet, approximately 20 kilometers south of Lebanon’s border claims.

It’s another promising find for the Israelis, who grow more concerned about their ability to protect offshore gas installations. In fact, the Israel Defense Force (IDF) is requesting nearly a billion dollars to fund operational costs for large patrol vessels, extended surveillance and intelligence capabilities, and unmanned aerial vehicles (UAVs). This allocation would be in addition to the recent acquisition of two state of the art German frigates that are bound for patrol of their Exclusive Economic Zone waters.

Each passing day provides less incentive for mediators such as Hochstein to help Lebanon retain its territorial waters — enabling Israel to move closer toward claiming parts of the disputed zone. As Malek Takieddine, an oil and gas lawyer representing companies preparing to bid in Lebanon’s first licensing round, explained, “You might see Israel granting licenses or permitting certain operations near or inside the territories claimed by Lebanon. If this occurs, it might be also coupled by military protection.”

Moving Forward

Those wishing to move Lebanon’s oil and gas sector forward are faced with two unenviable options — back the caretaker energy minister to move ahead without the support of the government, or wait for the formation of a new government. On the latter, there have been a few positive signs in recent weeks that suggest the wait may be coming to an end.

Despite the continued delays and political bickering surrounding the petroleum file, technical work at the Ministry of Energy and Water and the Petroleum Administration (PA) continues. The PA — the six-member body charged with running Lebanon’s oil and gas sector — has recently drafted both an Onshore Petroleum Law and a Petroleum Tax Law, posted advertisements for employment opportunities, begun soliciting tenders for the next government-backed oil and gas conference, and has been coordinating a series of roundtable discussions and dialogues with local policy experts. According to Nakhle the PA has performed its duties with a level of professionalism not typical to Lebanese bureaucracy. “Various departments in other relevant ministries, like finance, environment and economy, should also be working at the same speed and getting themselves ready,” she added. Perhaps this new efficiency could start with the formation of a new government. Then the country could move forward in the right way.

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