Executive Magazine

Time to armor your car?

by Thomas Schellen November 20, 2013

written by Thomas Schellen

South Sudan, the world’s youngest nation, is distant from and very different to Lebanon in practically every respect. The World Bank estimates that the South Sudanese GDP contracted by 56 percent to $9.3 billion in 2012. According to warnings by the US State Department, the risk of violent crime is high in the capital Juba and carjacking and banditry occur regularly outside of the city. And the country’s 7,000-kilometer road network, of which all of 60 km have been paved, makes Lebanese highway infrastructure look like Switzerland by comparison.

When South Sudan celebrated the second anniversary of its independence this July, however, the country’s top officials and visiting dignitaries benefited from automotive security made in Lebanon. This is owing to the ingenuity and expertise of Beirut-based M. Special Car Armoring (MSCA), which according to general manager Christelle Yared is one of the longest-established producers of armored sedans and sports utility vehicles in Lebanon and the Middle East.

Armor fit for kings

Back in spring 2011, Yared tells Executive, MSCA got an order from the South Sudanese government to deliver 16 armored vehicles (including presidential limousines) to Juba in time for the country’s declaration of independence on July 11. “For two months up to the Independence Day in Juba we worked day and night in three shifts in order to get the vehicles ready,” she says.

At stake were the safety of South Sudan’s president and visiting heads of state who attended the birth of the new nation. Also at stake was a promising business expansion for MSCA. When the company airlifted the 16 vehicles to Juba on time by four chartered aircraft, the resulting customer satisfaction certainly widened new roads of growth for the Lebanese company.

According to Yared, MSCA has been focusing its expansion on North and East Africa for the past three to four years. “We are doing well over there,” she says, to the point that the business “has flipped 180 degrees”. Whereas in earlier years, the market used to be 80 percent Lebanon and Middle East, today 75 to 80 percent of the company’s business is generated in North and East Africa. Besides South Sudan, her current customer base on the continent includes clients in Kenya, Tanzania, Egypt and Libya.

Christelle Yared says business is good

MSCA, which started in 1973 as a family business of two partners with roots in the importation of middle-of-the-road cars, is not the only company in Lebanon that converts regular or luxury sedans and SUVs into armored vehicles that aim to provide the political and business classes with various levels of protection against property crimes, kidnappings and terrorist threats.

According to Patrick Aouad, chief executive officer of armoring company Yaka Group in Beirut, four companies competently offer the pricey conversions in Lebanon, which can easily boost the cost of owning a Mercedes S-Class car to something like half a million dollars and involve fitting the vehicle with ballistic steel panels, Kevlar and bulletproof glass around the entire passenger cell.

Elie Makadessi, managing director of Zahle-based firm Armored Car Professionals (ACP) says Lebanese armoring companies do the job for half the cost or less than the few original manufacturers offering armored sedans.

Currently only German premium brands (Audi, BMW, and Mercedes)sell special protective versions of their up-market models. A few years ago Korea’s Hyundai came up with an armored version of its top model, the Equus, and last year presented one to Korean-born UN Secretary General Ban Ki-moon, but the armored Equus sedan is reportedly not yet broadly available.

The logic of protection

It might seem almost natural that Lebanese companies should have acquired export-grade expertise in the armoring of vehicles seeking to protect exposed persons against attacks. Far too many memories of terror in Lebanon — the ones that are not related to military invasions and paramilitary violence — involve vehicular bombs, and the number of victims has been far too large.

Most recently, with the indiscriminate terrorist car bomb atrocities against civilians in South Beirut and Tripoli, any passing traveler faces an increased danger of becoming a casualty of hideous and cowardly attacks.

Car bombs have been the primary weapons that have exacted high death tolls in Lebanon up to today; many (but not all) high-profile victims of car bombs in Lebanon were attacked while they were traveling in cars.

What is surprising, then, is that the Lebanese car armorers have their main markets outside of the country and have not actually seen massive growth in local demand over the past few months. Yaka Group’s Aouad tells Executive that he delivers to clients in Libya, Iraq and Afghanistan, has large contracts coming up in Egypt and Saudi Arabia and has regular orders from the French, Algerian and Chinese governments to provide vehicles to diplomatic missions, but he says his market in Lebanon is “very small”.

Makadessi, who took his work experience with the armoring division of Mercedes Benz back home to build a production and trade business in armored cars from Zahle, says he converts up to 20 cars a month but has “zero” focus on the Lebanese market and any business he has here is accidental. His list of clients includes companies in Germany and the United States, he enthuses, along with buyers in Iraq, Nigeria and Afghanistan. “The market is good,” he says.

Among the main reasons why Aouad and Makadessi don’t see much business potential in Lebanon at this point appear to be the market’s fickleness and fleeting demand. On the days following any recent security incident, the phones ring off the hook with enquiries but it never lasts, says Makadessi. “In Lebanon this happens: A bomb blows and I get 100 phone calls [from people] saying, ‘we need an armored car’. When they are scared, everybody asks for an armored car. The second day, nothing.”

Aouad concurs, saying his local business amounts to perhaps 10 cars a year and the inquiries he receives after security incidents are numerous but hollow: “There is a lot of demand. No one is buying.”

MSCA’s Yared, though, claims a different experience with local customers. Having introduced a basic protection package to the market in November 2011, MSCA has sold some 130 of these packages until now. Yared says she serves a stable clientele of highly exposed persons in Lebanon, namely political and business leaders, at the top end of the market. When people call to inquire about the details, they are usually serious, she claims. A very high rate, around 85 percent, of the inquiries result in closing a deal.

Pricing the armor

Cost plays a definite role in turning immediate fear into buying decisions, of course. The basic packages that MSCA trademarked as “Hijack ByeJack” are lightweight and can be implemented in most makes and vehicle sizes for about $20,000.

This type of armoring can help against an accidental bullet hit or peripheral impact from a blast that happens at some distance or against a pistol-toting wannabe carjacker or kidnapper who may shoot at a driver with a handgun or swing a hammer to smash in the car window, Yared says.

More serious protection is available in different categories, from resisting conventional magnum caliber bullets up to withstanding some armor-piercing munitions. Vendors commonly describe these safety levels with a combination of letters and numbers, such as VR4 or B6/7. According to the armoring companies, prices vary greatly and increase from one level to the next. Aouad cites an SUV B6 armoring as going for $45,000 to $60,000 and Yared says this can climb to $250,000 for a high-end sedan with the highest available, “presidential-level”, shielding.

The price tag for a high-end conversion is still lower than the cost of buying an equally armored version from the original manufacturers. The purchase of a 2012 S-Class Mercedes Guard can cost 450,000 euros ($607,400) according to Makadessi.

The core reason for the high cost of locally armoring a luxury sedan lies in the materials, says Aouad. Steel and glass that meet the highest specs make up “80 percent” of the cost to convert a vehicle.

The reason for the price differentials is not only that the European models have more complex cost structures which come to bear heavily on the special models, but when importing a manufacturer-armored vehicle into Lebanon, there is also the not-so-small matter of extra customs duties.

As customs and excise duties are levied at a rate of close to 60 percent on the value of the luxury vehicle including armor, the state share in the expenditure on automotive protection is particularly hefty. Even members of parliament, who can import one car per legislative term free of customs, prefer to have their armoring done locally, Yared says, arguing “which deputy has only one car?”

Trust and Relationships

At least for the Lebanese armorers, the marketing of their vehicles is not according to a page in the manual for transparent tendering. Trust and relationships are usually what creates the business.

The relative lack of checks and balances in who Lebanese companies are allowed to export their products to may have some positive impact on their international demand.

On the downside, the lack of distance between Lebanese people and products made in Lebanon makes it too cumbersome for a company like ACP to convince the small local market of its products, claims Makadessi.

Lebanese tend to trust products that come from Germany or the United States and some want to buy only non-Lebanese products, he says, and so he supplies his armored cars to dealers who are based in Europe or the US, with delivery to the free zone at Beirut Port.

However, he’s sometimes amused to discover one of his products later on rolling on the streets of Beirut with a Lebanese license plate or even arriving at his workshop for maintenance.

On the upside, the Lebanese prowess at developing and maintaining cordial relationships helps the local producers to connect with buyers of their armored vehicles. Having success in finding customers “is mainly a matter of relations, and being at the right place at the right time,” says Aouad.

According to Yared, one argument working in favor of Lebanese armorers is that they produce vehicles that are fit for the security conditions of countries in turmoil and for driving on poor roads. Africa and the Middle East are regions with higher security risks than Europe or the US, she says, so armor installed in Europe, which tends to rely on lightweight and composite materials, is less suitable than the ballistic steel and other shielding favored by Lebanese armoring companies.

Operating an armored sedan in the African or Middle Eastern terrain means “you need big engines and reinforced suspensions and braking systems. What makes us experts is that we know the roads and the types of ammunitions and explosives used in the region, and even our run-flats are suited to the asphalt used on our roads,” she explains.

Future expansion

Beyond this experience-based knowledge, she puts great emphasis on investing in both pre- and post- sales efforts. This means that she and her team consult with their clients, study the roads they are using and the security threats they are under, have extensive meetings with them and their security experts, and “give strong recommendations” advising them on the appropriate protection that MSCA recommends.

After sales Yared maintains strong relationships with her clients. She includes complementary maintenance visits in her contracts — MSCA experts traveled to Juba about once every three weeks during the past two years, and makes sure to tune in to high-profile clients when they deliver public statements on television, calling them the next morning if she thinks that the tone and content of a speech means that the current level of their vehicle’s armoring is no longer adequate to the threats they have to expect. To her mind, the responsibility of protecting client lives makes her role all passion and not just work. “It is a continuous job with after sales service which I love to do.”

The business reach of the Lebanese armorers with production staff in the dozens and monthly output capacities of perhaps 100 units between them is not huge. Larger armoring companies with outputs in the hundreds of vehicles per month serve Arab and African markets from the United Arab Emirates and it is hard for the Lebanese to compete against the advantages that the free-zone locations and labor markets of the emirates provide to producers there.

If Arab and African emerging markets were characterized by growth instability, low crime and dwindling corruption, the use of an armored sedan with its high acquisition and operating costs and comparatively low lifespan would be a poor investment decision. As this is not the state to describe the region today, however, it is to be expected that the expertise and products of Lebanese armoring companies will have a growing market in Africa, and very probably also closer to home, for years to come.

As Makadessi observes, the market for armored civilian vehicles in Iraq was minimal when the war raged in 2003 and 2004 but demand skyrocketed in 2005. Syria today is as yet a market that is limited and where being a supplier is complicated by political issues, but, he says, “Usually, when a war calms down, and things get stable, there are requests for armored cars.”

November 20, 2013 0 comments

The Buzz

Business briefing: 19 Nov 2013

by Executive Staff November 19, 2013

written by Executive Staff

Economics and Policy

A new stimulus package from Lebanon’s Central Bank will boost economic activity in 2014, economists have said.

‘The start-up world is now flat’

by Livia Murray November 18, 2013

written by Livia Murray

Jonathan Ortmans is the president of Global Entrepreneurship Week (GEW), and was among its founders when it launched in the United States in 2007. GEW is now held in over 115 countries including Lebanon. He is also chair of the Global Entrepreneurship Congress, senior fellow at the Kauffman Foundation and president of the Public Forum Institute. Ortmans spoke with Executive from Washington, DC on the changes in the global entrepreneurship scene, the role of policy makers, and the responsibility of entrepreneurs in creating a dynamic ecosystem for entrepreneurship.

What have been the most recent developments in entrepreneurship on a global level?

What’s changed now is that you have a global class of start-up communities all over the world. If I were to draw a picture for a magazine I would draw a flat world, with thousands of start-up communities and no national boundaries. A world where technology and communications has made it very easy for people in start-up communities to know what other start-up communities are doing, and what other methods entrepreneurs are using to try to scale ideas.

Many entrepreneurs in Lebanon get investment from family and friends or are bootstrapping to create their own start-ups, and most are still waiting to turn a profit. How hopeful should we be that initiatives such as these will be successful?

I think you can be very optimistic about that. Some of the ventures that started 2-3 years [ago] were often given advice to try to get outside capital. At the Kauffman Foundation, we advise entrepreneurs to hold out as long as you can [while] bootstrapping [your] idea because you have to focus first and foremost on getting the idea right. Too often entrepreneurs were taking out capital too soon, which was the case in Lebanon. They didn’t have the chance for failure.

The most important thing is to have more people forming teams, testing formulas — trying to find a way of making the business venture work.

How important do you think policy initiatives are for fostering a start-up ecosystem in a country like Lebanon?

Traditionally, start-up community leaders and entrepreneurs have chuckled and laughed when it comes to the government trying to help. They’ve tended to think of the government as a hindrance. First, the government sets rules and incentives, so you can’t ignore them. But I think the government is important in a new way. When President Obama opened new research, it showed that all new jobs over the past five years have come from companies less than five years old — compared to older companies, which were shedding jobs.

That’s turned government on its head. What it’s done is it’s made government start looking at entrepreneurs in a different way. Now they’re thinking: “How do we help new firms? What do we do to make it easier for them?”

In lieu of government policies, are there any other actors who can take up the role of devising policies to create a coherent system of entrepreneurial support institutions in the ecosystem?

I don’t think another entity can do it, unless they’re implementing rules and regulation. The best way to create cohesion is to form an entrepreneur-led board for the entrepreneurial community. You need to have that. You need to have people talking to local authorities. And you have to have the traditional business leaders helping. And increasingly they want to help. Sometimes entrepreneurs disrupt some of their companies, but I think the best way to get cohesion is an entrepreneur leading with businesses and universities. And that’s what we want GEW to be in Lebanon.

What role should stakeholders in the entrepreneurial ecosystem play in creating a support infrastructure for entrepreneurship?

There is a big challenge: you need to find people from within the start-up communities and you need to invite them to work for the government and help advise. To figure out what are the things that we can do. Our biggest problem in the US is that we get all this talent [from overseas] who come to the best universities, have ideas, but then the US government kicks them out. Every country has got specific paradoxes which are going to be unique. You need to start with a fresh look. The Lebanese government needs to just talk with entrepreneurs and look at the biggest problems they’re having.

I don’t think there’s necessarily a need for all of it to be neatly organized. Entrepreneurship is messy and we should let it be messy. I think when there are authorities that are implementing rules and regulations any of those kinds of institutions should be working together. This is actually the role of GEW. To get Lebanese citizens thinking about joining this community of people.

November 18, 2013 0 comments

The Buzz

Business briefing: 18 Nov 2013

by Executive Staff November 18, 2013

written by Executive Staff

Economics and Policy

The fall of imports this year has reduced the balance of payments deficit in Lebanon, a leading academic has said.

Business briefing: 14 Nov 2013

by Executive Staff November 14, 2013

written by Executive Staff

Caretaker Industry Minister Vreij Sabounjian has met with an official from the United Nations Development Program to discuss the participation of Lebanese firms in the Syrian refugee aid response.

‘We make telecoms as secure as possible’

by Yasser Akkaoui November 14, 2013

written by Yasser Akkaoui

Anders Lindblad is the president and CEO of Ericsson Middle East. Executive sat with him to discuss telecoms in the region.

Why are your clients choosing Ericsson over Huawei? Huawei is working very hard.

Overall I would say we are already in the undisputed lead in the telecom industry and that’s of course a privileged situation to be in. Of course when you are a market leader, I think, that comes with some responsibility, if you want to stay a market leader. And that means that you have to invest in research and development. You have to invest in getting the best people. [This long-term stratgey is] not for Ericsson, it’s for the society, for other businesses. Comparative advantage is all about who has more information about the consumers.

You are providing and also assisting the operator at managing their data.

The consumer data is the operator’s. It’s not ours. So of course what we can do is to extract some behaviors etc., which we do with the operators to look at trends and how consumers behave. But that’s what we do — not directly — by utilizing the data from the operators. So I think when it comes to the basket of the consumers, it’s more our customers who are in the forefront in making sure that we can utilize that kind of information and aggregate that in a way so that it becomes appealing to the consumers.

Are we going to see operators outsourcing consumer trends or this decoding of the data that they have? Is this a service you’re going to provide?

We're practically starting to see two extremes of operator types. For the last 120 years every operator did the same thing. That is changing since the value chain here is maturing — which means that to create the same revenues and profits or defend their position, operators need to start to compete with other value chains. When they do that, it becomes less relevant for them to operate a network and that’s where we feel we have a space to fit into. Some operators say, “I’m an operator. I don’t want to complicate my business problems. I want to stay, to own my network and to operate my network.” They don’t outsource, typically, to us. So I think that in the end, when the operator decides to climb the value chain, we have an opportunity to fall off. If they don’t, they’ll continue to compete.

Have you ever taken a project at a loss?

That’s a decision you have to take, especially when you’re expanding. I mean the classical one where you expand with your existing customers with new solutions, or you take your solutions to new customers. When you do that, you’re competing at a green field and you have to think like a green field. You have to invest six months, twelve months to be able to get the benefit long-term. I never take a bad deal that is a bad deal over a very, very long period. That, we try to avoid.

How much do management services account for your balance sheet or your turnover?

I would say that we are around 15 percent of our revenues. We reported now the yearly revenue of 2012 was $15 billion. And on that revenue base roughly 15 percent or 13 percent were management services. That has gone from a single digit percentage — a low single digit percentage — to actually become a relevant two-digit number.

Knowing the value of intelligence that could be obtained through companies like Ericsson or the operators themselves, how worried should we be? You managed Israel…

We put the highest standards on technical state-of-the-art technology when it comes to creating the security infrastructure as we possibly can. I think that our software and the way we treat data in our technology solution is extremely rich. That is a distinction of course between what we do and then how people sometimes use our equipment. They are the regulators. So I think that, I cannot think of any country now that doesn’t have a very strong opinion on how they actually managed that, and there is regulation in each country. And we try to of course make sure that we do not sell equipment that we believe can be of risk when it comes to these kinds of things. In the end, if somebody wants to do something bad with your technologies, they can always do that. But the positive, the technology for growth really outweighs the risks.

November 14, 2013 0 comments

Business

Entrepreneurship: Challenges across the region

by Livia Murray November 14, 2013

written by Livia Murray

Starting a business in… Egypt

Instabug’s Moataz Soliman and Omar Gabr

In the wake of Egypt’s 2011 uprising, civil society blossomed, characterized by the booming startup scene led by young entrepreneurs. The efforts have been spurred in part to counter the country’s unemployment rate of 13.5 percent and rising. With a population of 80.72 million as of 2012, this leaves almost 11 million people unemployed.

Amidst tumultuous times, Omar Gabr and Moataz Soliman launched mobile app Instabug in June 2012. Instabug helps mobile app developers find glitches in their apps by engaging users to report them through the simple process of shaking their phone. For apps that have incorporated Instabug into their system, they will have a screenshot of the bug sent straight to the developer with information on location and what network they were using. Gabr explains that this helps shorten the product life cycle to help test apps faster before they reach the store. Instabug was the 2012 winner of MIT Enterprise Forum’s Arab Startup Competition, which brings together startups from all over the Arab world.

Gabr admits that they have experienced some difficulties starting a business in Egypt at this time. “Being in Egypt in this current situation — I don’t think it was the best idea to start a tech startup targeting the world,” he says. He also concedes that there were some perks. “The good thing is that there are not too many startups in Egypt, so the whole ecosystem is trying to help them.”

That ecosystem is still nascent, but there are a lot of people working toward boosting it. “The Egyptian startup ecosystem began to develop after the revolution,” says Gabr. “People had this sense of importance and urgency that they want to build their country and develop their own business and develop their own products. I think now it’s really moving.” Startup accelerator Flat6Labs launched in Cairo in 2011, and every four months six teams move through the acceleration process. Other accelerators are beginning to appear on the scene. One was recently launched by the government under the acronym of TIEC, the Technology Innovation and Entrepreneurship Centre.

Like many startup ecosystems in their preliminary stages around the region, there are important gaps waiting to be filled. One problem that Egyptian entrepreneurs encountered was the absence of early angel investors — perhaps not surprising considering the volatility of the situation. With the exception of the Cairo Angels, Gabr says that Egypt is dry in financial resources between the small amounts given by incubators and accelerators and the larger-ticket venture capital firms (VCs). Instabug received a total of $150,000 from the Cairo Angels and regional VC firm Leap Ventures.

When asked if he would want to keep his business in Egypt, Gabr was positive. “There are many competitive advantages we have staying here,” he says, having just gotten back from three months in Silicon Valley. Though he says having a presence in the Valley is also essential, Egypt is a competitive place to run a startup in terms of process, salaries of the engineers, legal fees, etc. “So starting a startup is a whole lot cheaper in Egypt,” he says.

Starting a business in… Jordan

Gallery AlSharq’s Riham Mahafzah

Like many startup ecosystems in the Middle East, Jordan did not have much going on until about four years ago. Then two developments came about that changed everything. First Maktoob, an Arab internet services company, was bought out by Yahoo in 2009. It went on to become the Arabic version of Yahoo and became one of the first success stories in the region
This gave hope to many entrepreneurs in the Middle East, who tried to follow in Maktoob’s footsteps. It also spurred the second development, which, in the wake of Maktoob’s acquisition, started as a conversation between King Abdullah II of Jordan and now-executive chairman of Jordanian startup incubator Oasis500, Usama Fayyad. The king had seen the success of Maktoob, and wanted to replicate it. Thus was born Oasis500, with a mission to support entrepreneurs by providing them with training, funding, and mentorship. It has certainly brought some startups to the light by helping them along the way from ideas to concrete businesses.

Riham Mahafzah is one such entrepreneur. She started her business, Gallery AlSharq, through Oasis500. Gallery AlSharq is a website that sells Middle Eastern digital content — stock photography of landmarks, nature, hobbies, food, as well as illustrations. Mahafazah studied architectural engineering and launched her business after having worked for 13 years in an advertising agency for the creative fields. “Starting a business with Oasis500, they opened the door to good connections and mentors,” she says. “And most mentors are CEOs of large companies who help you develop business strategies.” The mentor Mahafzah met through Oasis500 is now an investor in her company.

Unlike many startups in the Middle East, when asked about the challenges she faced in starting her business, Mahafzah did not immediately refer to institutional problems such as lack of funding, inadequate support, problematic laws, or an unstable political situation, which is perhaps indicative of Jordan’s startup environment. Her issues were more business-oriented, such as the lack of human resources. “A real barrier at the beginning was finding the right developer,” she says. Another issue was educating contributing photographers on how to use the platform in sharing their content online. Though Jordan may be a stable oasis compared to the region, it has its limitations. Mahafzah acknowledges that businesses in the Middle East still struggle to find angel investment. “In general angel investment is not easy to generate in the MENA region. It’s not easy to generate $100,000 to $1 million because investors have to be brave,” she says, referring to the risk involved in early-stage companies, exacerbated in the Middle East’s immature startup ecosystems. Mahafzah raised her angel round of $150,000 in September, and had two seed investments prior. Total investment in her company so far has reached $200,000.

Starting a business in… the UAE

Nabbesh’s Loulou Khazen Baz and Rima Al-Sheikh

The United Arab Emirates seems like a bastion of efficiency with its business-friendly laws, infrastructure and its relative ease in attracting investment, which has drawn flocks of international companies to its gates. Oil and gas wealth income since the 1960s has permitted the country to invest in infrastructure crucial to businesses.

The UAE has well-developed telecommunication facilities, low taxation, and a hassle-free system for registering a business. For startups, there are numerous incubation programs such as In5, Silicon Oasis, SeedStartup, and i360 to name a few. Startups from elsewhere in the region have even moved operations to the UAE because of its superior business infrastructure.

Nabbesh is an online platform that connects jobseekers to employers based out of Dubai. Neither of the co-founders are Emirati — Loulou Khazen Baz hails from Lebanon while Rima Al-Sheikh is from Syria — though they stated that their reason for starting a business in Dubai was incidental to the fact that they were living there. Nabbesh was founded in 2012 out of a demand for employment in the Middle East. Highlighting flexibility, it is geared toward short-term, project-based consultancy or freelance jobs.

The Nabbesh team says the UAE’s business hub is a great place for young entrepreneurs to network and seek advice from the more seasoned counterparts in their industry. “The good thing is you get to connect with entrepreneurs from the same industry and you get to talk to them and learn from their experience,” says Al-Sheikh. “This whole network of learning or knowledge sharing is one of the pros.” The UAE also has a large expat community, which adds to the mentorship experience for start up companies. “There’s a lot of learning that you can do from different people, different cultures,” adds Khazen Baz.

Dubai is also a great place to garner investment. “There’s also access to funding here, there are more VCs, there’s more angels in this part of the world. It’s more mature,” says Khazen Baz. After winning a cash prize of 1 million United Emirates Dirhams (approx $272,000) on reality TV show The Entrepreneur, the Nabbesh team managed to secure an additional $81,700 in funding for their project.

Despite the favorable investment climate and the support from different entities, operating a business in the UAE is expensive. “I think this is a major difficulty for most entrepreneurs,” says Al-Sheikh. Particularly for a startup, which can’t afford to pay large salaries, it is difficult to convince talent to work for them instead of migrating to a bigger company with higher wages. “It’s like a war for talent,” says Al-Sheikh. “Most of the people have their jobs and not many are very excited about working in a startup,” adds Khazen Baz.

November 14, 2013 0 comments

Business

Up to the challenge

by Livia Murray November 13, 2013

written by Livia Murray

Business-bound women with zeal and determination can get far in Lebanon, where a great number of women thrive as entrepreneurs. From a million-dollar tech company incubated in the startup hub of Beirut, to an agribusiness in North Lebanon, female entrepreneurs can be seen across the country. Whilst Lebanon affords women greater freedoms than other countries in the Middle East the extent of these freedoms differs from community to community.

Urban havens

Female entrepreneurs from Lebanon’s urban areas may not even cite gender as an issue when starting and running their companies. For these women managing a business involves other challenges not related to gender. This is particularly the case for tech companies, which have a high proportion of female entrepreneurs. "The typical response I get from female Lebanese entrepreneurs is that being a woman is just not an issue. When you press women on their challenges, most of them say that their gender has never factored into their challenges, it is startup challenges that they are facing,” says Nina Curley, editor-in-chief of online startup platform Wamda. She makes the disclaimer that Wamda interacts to a large extent with a very specific tech-oriented startup community, where women’s participation in entrepreneurship is high.

Though gender is not the greatest obstacle among urbanites, gender barriers do exist. The gender conversation that is taking place globally is one worth having, according to Curley. She started a program in the summer called Wamda for Women in the Middle East targeting urban and tech-oriented women. Initially launched alongside of their Mix N' Mentor roundtables, as a separate but complementary conversation. Wamda for Women tackled issues of work-life balance, financing, stereotypes, and role models and leaders. They are planning on bringing it to Lebanon. “It just seemed like a conversation that no one was having. And it seemed like a conversation that was happening on the fringes of events,” says Curley.

Delphine Edde is a partner and publishing director with Diwanee, a group of online women’s content websites that attract 5 million users per month. At a roundtable discussion organized by the NGO Endeavour, Edde described challenges to starting a business — many of which were not related to being a woman at all. One of her major challenges, she says, is finding the right talent in Lebanon. Out of 130 employees, 80 are from Lebanon, with some in Dubai and a team of developers in Serbia. However she pointed out that women have some additional challenges when managing a business. In many cases, women did not know how to balance between work and personal life, and this dissuades many. “Women don’t know that they can have a husband, a baby, and can continue to work. They think they are bad wives,” she says.

Limited financing

Even for urban women who enjoy relative ease in starting a business compared to their rural counterparts, financial figures showing stark inequalities cannot be ignored. According to data from the International Finance Corporation, only 3 percent of bank loans are extended to female entrepreneurs. Financial institutions’ bias towards women is not confined to Lebanon or to the Middle East, but is a worldwide phenomenon. According to Tania Mousallem, head of strategic development at BLC Bank and leader of the Women’s Empowerment (WE) initiative, which works to increase access to finance for women entrepreneurs, private equity funds in the United Kingdom invest only 1 percent in women. Some banks’ initiatives in Lebanon have sought to remedy the situation through Kafalat, the government sponsored collateral-free loan program that is offered through many banks. BLC Bank has implemented programs to curb lending bias towards women. In addition to instituting a collateral-free loan that looks at a woman’s capacity to repay rather than her assets, BLC has also implemented policies to educate their employees to stop stereotyping women and belittling their capacity to run businesses. Loans to women tripled internally since the program was launched in 2012, according to Mousallem.

Cultural barriers

The impact of gender plays out differently from community to community. As a loose trend, the farther a woman gets from a city, the more prominently cultural and religious customs are manifest in skepticism toward female entrepreneurship. Meanwhile, in some communities taking out loans with interest is considered haram, meaning women must turn to informal methods to access finance, such as taking interest-free loans from family members.

“I think [women] definitely face different challenges, mostly on a family and social level, depending on rural versus urban,” says Nadine Okla, country director of Tomorrow’s Youth Organization, an NGO that supports underprivileged groups in Lebanon and in the region. “If you look at central Zahle [in the Bekaa valley], which is where we are based, and then you look at the outer parts of Zahle you can almost consider Zahle to be like Beirut. So in Zahle, although it’s traditionally an underprivileged community it’s very different from the surrounding areas,” she says.

Interestingly, cultural perceptions dissuading women from entering entrepreneurship can break as soon as the woman proves to be a bread-winner. Okla recalls one young woman who had a business plan to market her speciality chocolates but met resistance from her family.

“She had a fantastic idea, and she was super excited to be a part of the program but her family said no.” The woman’s father reluctantly agreed to let her participate in the initial four-day training after meeting with the organisation. “Right from the beginning, she started seeing profits,” says Okla, as the chocolates she produced were put in expos. “And her father started driving her to each of her sessions.”

Pulling through

Despite the barriers, if a woman has the will and ability to break through social stigmas — of varying intensity — she has the potential for success in Lebanon. “The women I’ve worked with so far who are serious and who are well-prepared have all found funding and are doing well,” says Allyson Jerab, regional coordinator of the Arab Women’s Entrepreneurship Program run by AMIDEAST. “I think if you have a proper business plan and you have your vision, and you have your matters in order then you face the same opportunities as men do,” says Jerab.

One of their successful entrepreneurs is Ameena Barakeh, a young woman from Saida who turned her passions for skateboarding and graphic design into a business. In 2011 she founded SK8 961, which sells custom-designed skateboards with parts imported from Canada. Her skateboards are available at various branches of Lebanese sport retailer Mike Sport, whilst some Lebanese skateboarders stock them at home, ready to sell to local enthusiasts.

“I don’t know if it’s international or just Lebanon, but people would rather buy skateboards from people they know,” says Barakeh. Her business idea attracted the attention of Samir Saliba, owner and managing director of Mike Sports. Now an investor and a partner, Saliba was introduced to Barakeh’s ideas when she pitched her business on television for the Ideaz Prize. Saliba was a judge on the show.

Barakeh describes the choice to start a business versus having a family as the choice between two worlds. “As a woman it is challenging to have a business because we’re expected to get engaged. Through the course of my startup my aunts got me about four suitors,” she says. At one point her parents put so much pressure on her that she drifted away from her business and got a regular job. “But through a lot of struggling and believing in the idea I got my family to get back on track with me and they’re supporting me,” she says.

November 13, 2013 0 comments

Comment

Time to pipe up

by Jihad Yazigi November 13, 2013

written by Jihad Yazigi

Competition over energy resources has played a major role in the power struggles of the Middle East over the last half century. However, its importance in the Syrian conflict remains difficult to adequately assess.Syria lies at a crossroads of energy export routes and various pipelines, existing or under plan, across its territory. The most significant of these projects involve countries such as Iran, Iraq, Qatar and Turkey.

One of the pipelines being planned is the Islamic Gas Pipeline (IGP), which should see the transport of gas from Iran to Iraq, Syria and Lebanon, and from the port of Tartous in Syria to European markets. The agreement over this project was signed in early 2011 by the four countries. In its first stage leading it to Tartous, the pipeline will be 2,000-kilometers long and will cost $2.5 billion to build. When completed, it will have the capacity to transport 110 million cubic meters of gas a day from Iran, including 20 million cubic meters that will be sold to Syria and 25 million to Iraq. This pipeline would bypass Turkey.

Interestingly, the gas is supposed to come from a field shared by Iran and Qatar — named South Pars in Iran and North Dome in Qatar — that is considered to be the largest gas field in the world.

Qatar, which has developed its side of the field much more rapidly, is also reported to have a project to build a pipeline that will transport its gas through Turkey and from there to European markets. The pipeline will have the advantage, for Qatar, of bypassing the Strait of Ormuz. However, Qatar is considering two options, one that would run through Saudi Arabia, Jordan, Syria, and then Turkey, while the other would go through Saudi Arabia, Kuwait and Iraq to Turkey.

Although these facts point to strong competition between the two countries, it is difficult to draw from them clear conclusions as to their impact on the struggle in Syria.

Iran, for instance, is not yet a serious competitor for Qatar because, for obvious political reasons, European countries have refused to sign any long-term contracts with Tehran. In the absence of purchasing contracts from the EU, which is by far the largest market for natural gas, Iran will be unable to be a serious competitor. Also, the capacity of the pipeline will be relatively small compared to the consumption of the European Union, which is currently at 1.5 billion cubic meters a day, set to grow rapidly in coming years.

Meanwhile, the Qatari pipeline will not necessarily use Syrian territory and Doha would first need the approval of Saudi Arabia — never too enthusiastic when it comes to helping its small neighbor and rival — for either of the two options it considers. It is also worth noting that in the years preceding the conflict no negotiations were reported to have taken place between Syria and Qatar on the project, in spite of the very good relations existing at the time between the two governments.

There are also two arguments that diminish the importance of the energy geopolitics in the Syrian conflict. The first is that if Iran were to develop an important gas export capacity, its first and main competitor would be Russia. Indeed, Europe is currently highly dependent on Russian gas and Moscow uses this as a lever of power in its relations with the EU. Russia was actually one of the main opponents to the defunct Nabucco pipeline, which would have transported gas from Iran and Azerbaijan through Turkey to Europe.

Also, if energy had such importance in the conflict in Syria, one would have expected the Syrian regime to highlight it much more frequently. In the two years of the uprising, the Syrian authorities have almost never mentioned the issue of the gas pipelines as a reason for the involvement of regional countries in the conflict.

There is little doubt that the Syrian conflict will have consequences on regional energy projects. It is difficult, however, to make the case that this issue is the main reason for the regional competition over the struggle in Syria.

Jihad Yazigi is editor-in-chief of The Syria Report

November 13, 2013 0 comments

Society

A home away from home

by Nabila Rahhal November 13, 2013

written by Nabila Rahhal

It is impossible to miss the three glittering towers of the Verdun Gardens compound as one drives by. The new project, at the intersection of the Qoreitem and Verdun areas of Beirut, also incorporates a collection of stores located in the green plaza beneath.

The compound is the latest development from Soligran SAL and Soligran Hotels — both fully owned subsidiaries of Bahaa Hariri’s Horizon Development, a property investment and development group.

Two of the 22-floor structures are exclusively residential, while the remaining one is the country’s first Staybridge Suites, the international long-term stay hotel franchise operated by the InterContinental Hotel Group (IHG). So far, the project’s residential branch is performing reasonably well, with 17 of the 44 approximately 575 square-meter apartments sold — mainly to Lebanese — at a starting price of $5,500 per square meter (sqm) at the first level and up to $6,775 per sqm, according to a source from Horizon Development. Of the 10 retail shops at the base of the residential buildings and along the main entrance of the complex, only one has been rented out — to Hallab, the Lebanese sweets chain. Rent for these outlets is $1,000 per sqm at the ground level.

The presence of Staybridge Suites Beirut, which is IHG’s sixth venture in Lebanon and the third Staybridge in the Middle East, is what marks the project apart from other residential developments in the country. “IHG saw that the concept of an extended stay upscale hotel was lacking in Beirut and wanted to bring something new to the country,” says Ihab Kanawati, general manager of Staybridge Suites Beirut. He further explains that in Lebanon extended stay outlets are usually 2 or 3-star properties and lack the facilities and comforts of fancier venues.

With the idea of a long stay in mind, Staybridge is truly designed to feel like “your home away from home” and no detail, from the aroma of warm cookies that greets you as you enter the lobby, to the corkboard with little post-its hung in each room, is spared to invoke this feeling. Each suite has a kitchenette, office space and a private balcony with a view of the city.

Wild Discovery is the perhaps the most famous company in the JRS family

“Staybridge has all the amenities found in all 5-star hotels but in a more cozy and natural manner,” says Kanawati. He gives the example of Staybridge’s breakfast serving style; rather than a typical hotel buffet, breakfast items are placed in a refrigerator in the cafe and guests can take what they want. Other touches of home include the Pantry, where guests can purchase food items to stock their own kitchen cabinets, rather than using a minibar in the room, and the laundry room, where one can wash clothes at any time of the day. The hotel also includes a fitness room and a rooftop pool with a breathtaking view of the city. Guests are invited twice a week for a socializing and networking barbeque, a way to get to know their neighbors.

According to Kanawati, Staybridge traditionally attracts businesspeople from global corporations who are relocating or are in the city for a particular project and he believes Beirut’s Staybridge will attract the same type of people. He says the group is in communication with companies that are already familiar with Staybridge Hotels. “Staybridge would be ideal for them as they do not have to waste resources allocating the right apartment for their employees,” elaborates Kanawati.

Within walking distance of the bustling Hamra district, Staybridge’s location makes it attractive to both business and leisure travelers who can enjoy the shops and cafes of Verdun.

Staybridge has 121 suites, divided into 33 studios, 77 one-bedroom rooms, and 11 two-bedroom apartments which range from $200 to $335 per night.

Only a month into operation, and in what is considered a low season for the hospitality industry in Lebanon, Staybridge has a 35 percent occupancy on most days, which Kanawati says is better than expected. “Selling rooms is not a problem for us, the only problem is the security in the country; once that is guaranteed, then we have no problems,” he says.

Though there are no further short term plans for IHG in Lebanon, Kanawati believes opening Staybridge in Beirut is a sign of the group’s belief in the country and its potential. “Opening this hotel shows that we are not going to give up on Lebanon and that Lebanon will remain standing and investments will continue,” he says.

November 13, 2013 0 comments