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The Buzz

Morning briefing: 17 May 2013

by Executive Staff May 17, 2013
written by Executive Staff

Economics and Policy

Bahrain, which last year boosted state spending to quell political unrest, urgently needs to reform its economy to stop its debt burden becoming unsustainable, the International Monetary Fund (IMF) said.

More from Reuters

 

Global demand for gold jewellery recorded a 12 per cent year-on-year increase in Q1 2013, owing to high demand in Asian and Middle Eastern markets.

More from Gulf Business

 

Demand for trade-related credit insurance in the GCC is expected to rise by nearly 40 per cent this year as companies seek to improve their ability to secure finance and cover risks in Europe, Africa and other markets.

More from The National

 
 
Gaza-based Palestinians can now order Kentucky Fried Chicken to go thanks to a new smuggling service which brings takeout from Egypt via a network of underground tunnels.

 
More from AFP

 

Companies and Business

Kuwait Airways Co. signed a deal with Airbus to buy 15 A320neo and 10 A350-900 planes with options for 10 more, five from each category, chairman Sami al-Nasef has said.

More from AFP

 

Abu Dhabi's clean energy company Masdar and the International Finance Corporation have penned an agreement that could see the World Bank subsidiary provide as much as $1.5 billion in financing to the company.

More from The National

May 17, 2013 0 comments
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Finance

Moody’s Lebanese warning shot

by Thomas Schellen & Thomas Schellen May 17, 2013
written by Thomas Schellen & Thomas Schellen

Moody’s rating agency this week issued two warnings to the Lebanese economy and banking sector. On Tuesday they changed the outlook for government bonds from stable to negative and the following day they did the same for the deposits ratings of the country’s three biggest banks — Bank Audi, Blom Bank and Byblos Bank.

The official reason the banks were dragged into this is their overexposure to government credit risk — investments in government securities and central bank certificates of deposits. But these ratios have been incredibly high for years and Moody’s has had little concern. What has changed, then, is the ratings agency’s confidence in the government to fulfill its obligations.

Related article: A beginner’s guide to Lebanon’s debt

While it must be stressed that this was a change in outlook rather than a downgrade, it should be taken as a warning that the latter will follow will in the coming months if there is no improvement in the country’s economic fortunes. Any such downgrade would make it more difficult and expensive for Lebanon to borrow money and also would further reduce the chance of luring investors to the country.

In order to avoid this fate, Moody’s said, the government would have to stop the country’s increasing debt to GDP ratio, currently above 140 percent,

Powerless to resist

Realistically Lebanon’s chances of doing this and thus alleviating Moody’s concerns are almost none. Ignoring the fact that the country is between governments — with both a caretaker prime minister and prime minister elect — even a fully functioning, efficient government would be unable to significantly improve the country’s economic situation.

This is partly because there are few options left to pursue. Additional austerity measures, which have been the weapon of choice for German Chancellor Angela Merkel and her European counterparts since the Eurozone crisis began, are unrealistic. Lebanon has been cutting back on public sector pay since the 1990s and, as the strikes in recent months have shown, there is little left to squeeze out.

The other option — to stimulate the economy by pumping money in — was tried in January, but the effects so far have been marginal at best. While the housing sector has seen a partial resurgence, there are few signs that the $1.46 billion stimulus will significantly improve the country’s fortunes.

More fundamentally, even if there were policy tools available they would be unlikely to succeed as the real reason for Lebanon’s woes has nothing to do with what is going on inside the country but with the crisis across the border.

Moody’s cited two reasons for the government bond downgrade, both related to the Syrian crisis. The first stated that the impact of the Syrian civil war on Lebanon “will suppress economic growth and increase fiscal deficits, and in turn lead to an increase in the sovereign’s already high debt burden in 2013 and 2014,” while the second stipulated that the deepening of the Syrian crisis could “lead to political instability in Lebanon.”

While Lebanese politicians could help assuage the political crisis (perhaps starting by stopping sending fighters across the border to die) there is little they can do about the economic effect of the war.

One silver lining, perhaps, is that while Moody’s and other leading ratings agencies are incredibly influential in Western markets, they are less so in Lebanon. Investors in the country are used to taking high risks and so any downgrade would have less of an impact than in more developed economies.

But either way, Lebanon should expect more bad news in the coming months and understand there is little any government can do. Traditional trade routes have been blocked, tourism has nosedived and confidence in the Lebanese economy has been shattered. No economic policy, no matter how brilliant, could avoid that.

May 17, 2013 0 comments
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Economics & PolicyHealthcare in Lebanon

Stem cells: worth banking on?

by Robert Biddle May 16, 2013
written by Robert Biddle

Between an executive order from United States President Barack Obama in 2009 and a papal endorsement in 2011, stem cell science has reached the forefront of medical research and is revolutionizing healthcare. Not surprisingly, the stem cell wave has reverberated in Lebanon, and the Bsalim-based Middle East Institute of Health (MEIH) is looking to take an early lead in using stem cells for regenerative medicine.

MEIH’s new project, the Regenerative Medical Center, or Reviva, takes the unique approach of coupling both stem cell storage and therapy units under one roof. Dr. Henri Azar, chairman of MEIH, first toyed with the idea when the institute was installing its genetics lab five years ago. According to him, a French specialist that came specifically for the genetics lab told him at the time, “you are the only one who is talking about this.” 

Two and a half years later, Azar and several other doctors performed a feasibility study on implementing Reviva, which began the process of laying the foundations for the project. The wing of MEIH that the $4 million project will be incorporated into is 600 square meters, and it is expected to be completed and operational this summer.

Simplifying regenerative medicine

Stem cell banking is the preservation of stem cells — which can be found concentrated in embryos, fat, peripheral blood bone marrow and especially umbilical cord blood and tissue — to be used for future operations. Patients who have stored their stem cells in the past have eliminated the often difficult task of finding a donor match, making regenerative medicine a simpler option.

Stem cell banking first came to Lebanon via international stem cell banks that offer logistical services overseeing the transportation of the cord blood to the storage facilities abroad. However, there are disadvantages to sending your sample abroad, particularly the issue of expediency. The cord blood has to be sent by plane and must be processed and frozen within 36 hours, otherwise the cells will die off. Even if there are no delays in transportation, up to 40 percent of the stem cells could become nonviable. Moreover, retrieval of the sample for use presents the same logistical problems.

Reviva’s operations are divided into three key areas: the storage of the stem cells, reconstructive cosmetic surgery and acute therapy, such as treating blood cancer. 

Although Reviva is not the first stem cell bank in Lebanon, it will be the first bank to be all-inclusive, storing any type of sample that carries stem cells, including fat, bone marrow, and peripheral blood. But the main target is umbilical cord blood, the richest and most versatile sample of stem cells. Under the MEIH umbrella are some one hundred specialty private clinics, and Reviva aims to tap this expertise to provide future uses for stem cell transplantation, not to mention those treatments that are already available.

The market for stem cells

Reviva expects to be profitable in four years, according to Azar, but admitted the target market is not in Lebanon. “For the cell therapy, there is a huge demand, but not in Lebanon,” he says, adding that Reviva will market to doctors abroad, particularly in the region. Given Reviva’s “technical knowhow” and Lebanon’s reputation for cosmetic surgery, Azar expects Reviva to be received well. Indeed, he told Executive that the private clinic already has 100 files of potential patients, 80 of whom are from the Middle East and North Africa region. 

As for the Lebanese market, Azar estimates that there are a potential 5,000 clients — 7 percent of the 65,000 births that occur annually in Lebanon — looking to have the cord blood of their children stored. Each client can expect to pay $2,700 to $3,500, depending on whether they want to store the cord blood only or also cord blood tissue.

Another stem cell facility that preserves cord blood, called Transmedical for Life (TFL), began operating in 2010 and houses both public and private banking. The idea behind public banking, according to Dr. Marwan Masri, TFL chief executive and the president-elect of the Middle East Society of Organ Transplant, is rooted in the French model,  which states that umbilical cord blood should be universally available and makes it illegal to store it privately.

Anyone in Lebanon can donate to TFL their baby’s cord blood free of charge for others to use, and the Ministry of Public Health will reimburse the recipient of the stem cells for the transplant operation. However, only 6 percent of TFL’s 280 clients have opted for public banking, while the rest went for private banking,  meaning the stems cells are reserved for personal and family use. Each paid a fee of $1,900.   

The Sin El Fil office processes the blood samples and then delivers them to TFL’s storage facility in Salima. However, the storage facility only operates for the Lebanese.

Both TFL and Reviva aim to run their programs on international standards. When asked if other companies could compete, Azar exclaims, “They will not be able to compete with us because you need the technical specification, you need human resources, and you need a lot of money.”

Masri disagrees, however, citing the fact that there are stem cell facilities, albeit on a smaller and non-multidiscplinary scale, in some of the bigger hospitals such as AUBMC, Makassad and Hotel Dieu. According to him, it would not be difficult for these established players to dive deeper into the field of regenerative medicine. In addition to the Lebanese market, Masri also cited the fact that there are stem cell facilities in Dubai, Jordan, Turkey and Egypt. 

The need for regulation

With the expansion of Lebanon’s capacity to store stem cells and practice therapy comes the need for a governing body or watchdog to oversee the appropriate use of stem cells. A representative of one of the seven logistics companies that constitute the international stem cell bank presence in Lebanon told Executive that without laws and regulation, the idea of storage in Lebanon is “scary”. “Where are the boundaries that give you the rights and freedom of ‘you can do that, you can’t do that’… What happens if something goes wrong? Did you know… that those stem cells and umbilical cord blood can be used for [human] cloning?” he asks. 

While the stem cells from cord blood can theoretically be used to clone, the idea that a few years down the road we will be able to manufacture replicas of ourselves is highly unlikely. Nonetheless, there is an onus on government and the medical community to settle on laws and regulations regarding stem cell use. 

Until a regulatory authority can be established, however, the responsibilities of applying standards and educating the public on stem cells rest with the doctors in the field of regenerative medicine. Both Masri and Azar advocate the adoption of regulatory laws and public education on the uses of stem cell. These measures would undoubtedly increase patient confidence and subsequently the market size for stem cell banking. 

May 16, 2013 0 comments
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Economics & Policy

‘Job creation is still not a priority’

by Thomas Schellen May 16, 2013
written by Thomas Schellen

The Global Competitiveness Report (GCR), in combination with the Global Competitiveness Index as its ranking component, is the hallmark product of the World Economic Forum. Executive talked about the position of Arab economies in the GCR perspective with Margareta Drzeniek Hanouz, a director of the WEF and the Forum’s lead economist of competitiveness research. 

 

We have heard that you can give Executive a sneak preview on findings related to the 2013 GCR. 

Yes, on the Arab World Competitiveness Report [AWCR], which we will release on May 23 in Amman as it looks right now.

What can you tell us in terms of highlights?

The report is based on the GCR but we go into a deeper analysis for the Arab world’s economy. In this one we actually collaborate with the European Bank for Reconstruction and Development; it is a joint report.

Is there any one single issue that you identified in the upcoming AWCR as most important in terms of the competitiveness of Arab economies?

The main thread is to solve the job creation issue in the region. [For that] we need an improvement in competitiveness and thus we need to look at the very basic reforms that are needed to strengthen competitiveness. For much of the region this means actually going back to the institutional frameworks and education. This is in particular the case in North Africa. In Lebanon and Jordan, the issue is related to institutions and infrastructure. In the Gulf region it is really more on education, skills and fostering innovation and business education.

Job creation was already an urgent topic at the WEF for the Middle East in Amman in November 2011. Has anything improved since that meeting?

We haven’t seen any major improvement in the situation. Part of the challenge is that in order to keep up with the growth of the population and the entry into the labor force you need to create growth that is really very high. Growth has actually been rather low in the region in the past few years. It is difficult to create jobs in a medium-growth context — the context we are currently facing. 

 

Related article: Lebanon stops collecting inflation data

 

The Syria crisis must have made it difficult to assess the country’s competitiveness. Have you looked at the impact of the crisis on other countries in the region?

We had to take out Syria as some of the data is based on a survey we ran of businesses and doing that obviously  is not possible in the current context. We have not directly analyzed the impact of the Syria crisis as the Global Competitiveness Index does not really lend itself to this — it takes into account some of the factors that may be important such as physical security but we don’t really look at geopolitical difficulties because we like to focus on the measures that are in the realm that the government can directly influence. We do take [crises] into account in the context of security. We have seen actually in much of the region a deterioration of the security situation that [has affected] competitiveness. 

Does that mean that most of the region would score lower in competitiveness?

No, we can’t really see a trend in the region like this. It is definitely true that the North African countries have slipped but we would have to look at individual countries. Egypt has slipped a few places but on the other hand Morocco has improved. Lebanon and Jordan [have] remained rather stable for the past two years. 

How are you looking at Bahrain today? Has there been any downgrading of Bahraini competitiveness based on the anti-government protests that seem to be persisting?

Bahrain has improved by two rankings between 2011 and 2012 but we see that it is significantly deteriorating in institutions and in security, especially in the business cost of crime and violence. But it has counterbalanced this by improvements in the macroeconomic environment.

Does this mean that the multiplicity of pillars and index components in the GCR can sometimes camouflage negative impacts that might translate into a much worse deterioration of competitiveness than reflected in the composite index number? 

The pillars are extremely interrelated and we do not claim that we give a perfect picture of the reality in this case. We just claim that we represent it according to a model that seems to be accepted by economists. 

Have you had to take any country other than Syria out of coverage? 

We did not cover Tunisia in the last report, because we had a huge structural break in the data. 

In terms of data security and the partners that you are working with in Arab countries, are they all of the exact same quality and of the same quality as your partners in Switzerland?

In general, we don’t see a lower quality of the partner institutes. We try to have very respected institutions in each of these countries and often have more than one institution. In Lebanon for example we work with the Bader Young Entrepreneurship Program.

During a discussion of these issues with one of your colleagues at the 2011 WEF in Amman, he made reference to a “halo effect” of positive bias. Do you have a formula for compensating for positive bias in the survey components, and what is that formula?

From a statistical point of view and from a survey expert point of view, there is no solution to compensate for this type of effect, especially for a survey of this size.

Is it correct that you have about 60 plus participants in the survey for each country?

No, on average we have about 90 to 100.

Is that for Arab countries or globally? 

Globally. I haven’t calculated it but it could be that it is lower for Arab countries because there are a few countries that have been difficult to get to and there are a number of smaller countries as well, which lowers the number. 

Given that the Global Competitiveness Report is not the only such report and that other institutions have issued similar reports, how competitive must a competitiveness report be?

We don’t really think about it in terms of competing with others. The focus from our perspective is rather not that we compete for the attention of policy makers but how are we able to be top-notch in terms of methodology [and] in terms of the detail we use. We see the main value of the report in being able to take out the details and use it for dialogue at our regional events.   

Would you describe the competitiveness reports as easy reads?

We do our best to make it an easy read. It is always a trade-off. We want to appeal to the research audience as well as to the policy makers, the media and to a certain extent to the broader public, although to a more restricted degree, so it is a balancing act. We don’t want to be too colloquial. After all, it is easy to lose content when you go for too easy a read. 

You are based in Switzerland, which happens to score at the top of the rankings very consistently. What distinguishes top countries?

What is interesting in the top five countries is that they all have a consistent long-term strategy for economic and social development. In a way, they have a vision of a country. I think it is very important to be persistent over a longer period of time and in a sense be free from political cycles. The ability to learn and be constantly on your toes is really important.

May 16, 2013 0 comments
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The Buzz

Morning briefing: 16 May 2013

by Executive Staff May 16, 2013
written by Executive Staff

Economics and Policy

Brent crude oil prices reversed course Wednesday and rose on the back of a rally in U.S. equity markets despite an increase in U.S. refined products inventories and data showing the eurozone was in its longest recession ever.

More from Reuters

 

A leading Lebanese banker has dismissed any short-term effect from Moody’s negative outlook for Lebanon, saying banks had already declined to increase their exposure to public debt due to the issues cited in the warning.

More from The Daily Star

 
Companies and Business

The US government yesterday targeted a UAE exchange house and a trading company for allegedly helping Iran attempt to circumvent global economic sanctions.

More from The National

Phone giant Alfa has unveiled Lebanon's first commercial 4G data service in certain areas of Beirut.

More from The Daily Star

 

Turkish Airlines said there had been little impact from a strike in protest over pay and previous sackings, saying the low turnout was a “scandal” for the company’s main union.

More from Reuters

Saudi Arabia’s No. 2 telecom operator Mobily denied claims by a software engineer that the company had asked him to build surveillance tools to intercept customers’ messages on Twitter and other services.

More from Reuters

May 16, 2013 0 comments
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Finance

‘Corporate governance helps companies grow’

by Maya Sioufi May 15, 2013
written by Maya Sioufi

The need for proper governance is perhaps the paramount lesson of the 2008 financial crisis — one the regulators worldwide are now trying to address to prevent a repeat. Ludo Van der Heyden, a corporate governance and strategy professor at INSEAD business school, gave a talk on the subject at the American University of Beirut last month, having been invited  by the Rami Makhzoumi chair in corporate governance. Executive sat with Van der Heyden to talk about corporate governance in the Middle East.

 

Is there a correlation between solid corporate governance practices and the financial performance of a company? 

More and more research shows that good governance leads to good performance, but that is not always the case. Value creation is not typically done by the board [of directors] but by executives. The board’s first job is value preservation and making sure that no irrational decision is made. In the Middle East, governance is seen as a compliance issue but governance is at the root of sustainable performance.

Shareholder activism is on the rise. Several companies are reassessing merger bids and implementing changes to satisfy shareholder demands. JP Morgan has been pressured to separate the roles of chairman and chief executive officer. Do you expect shareholders to have a more significant say in the future? 

The more there is good governance, the less room there is for shareholder activism, which is a consequence of bad governance. Some shareholder activists are there to make a quick buck. A great example of [harmful] shareholder activism is when Deutsche Börse Group wanted to buy the London Stock Exchange (LSE) in 2006, and the deal was prohibited by [LSE shareholder] activists who said it would destroy value. Lord Rothschild and other English activists didn’t create value as the LSE went out of the game. Deutsche’s board was not active because the CEO did not engage them and because they did not know much about shareholder activism.

So you are saying that having an active board of directors is key for a company to create long-term value? 

The biggest risk for a company is CEO succession, and it’s the board that manages that. Whenever you see a company in trouble, people say, ‘We should fire the CEO.’ But I say, ‘Maybe we should fire the board,’ because with the right board, maybe they would’ve changed the CEO before. I’m not saying the board should fire the CEO, but they should make sure the CEO performs well. 

There is still no internationally adopted standard for corporate governance. Do you expect a convergence toward a universal standard?

No, because governance is an answer to a question in a [specific] context. The Lebanese context is very different than the one in Dubai, which is different than the one in Abu Dhabi. There are common principles, but every country has a different context. It would be a mistake to cut and paste. The key issue is, ‘What is the quality of the debate between the CEO and the board members?’ The mutual confrontation should be very serious and it is a complex formula to get right.

Family businesses account for a large share of companies in the Middle East. If they are not listed and have no duty to report to shareholders, how would you convince these businesses to be corporate  governance compliant?

Corporate governance is about value preservation. It is the value of your money and your mother’s and children’s money. If there is one case for good governance, it’s for family firms. The first thing to do in a family business is to create a council of family shareholders and ask, ‘What is the family project? Who is going to represent us? Do we have competence in the family to appoint directors?’ Families should also ask themselves, ‘Should we be on the board?’ The answer is ‘Absolutely.’ [For the question of] ‘Only us on the board?’, the answer is ‘Absolutely not.’ 

What is the most significant challenge when it comes to implementing corporate governance in the Middle East? 

It is director competence and understanding that maybe in the family, we are not the best directors. Family businesses dislike independence. They want people to be honest but they want to be able to trust them so they hate independence. The best practice at least is to resort to specialists that can judge the quality of directors. 

May 15, 2013 0 comments
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Business

Looking for the leaders of tomorrow

by Joe Dyke May 15, 2013
written by Joe Dyke

For those Lebanese looking to study business in the world’s top educational institutions, the first step is often the QS World Tour’s annual visit to Beirut, taking place today. Leading business schools, including Fordham University, INSEAD and others, have sent representatives to meet the country’s rising stars in the hope of finding the right students for their institutions. Paras Fatnani, QS’ Marketing Managing for the United Kingdom and the Middle East, spoke to Executive about developing Lebanon’s education system.

 

Who can apply for MBAs and what support do you offer them?

The MBAs are for people who have at least a year or two of work experience and are looking to pursue higher education. While Lebanon for us is a small market, we keep coming back because we feel that there is very high potential in terms of the quality of candidates. We have a number of things that we do alongside [running meeting days], including educating people. We also offer [globally] an annual scholarship fund of $1.2 million every year for students looking to study abroad.

How much of that usually goes to the Middle East?

It really depends on quality, we don’t judge based on country — one of the key [rules] is that until the application is successful no candidate details are revealed. Having said that there are also some regional scholarships.

Are students in Lebanon still primarily interested in going to the United States and Europe to study, rather than the Gulf?

We do a lot of research and one key aspect which we pointed out last year in [our] findings was that in the Middle East there was higher earning potential [than Europe and America] for MBA graduates coming to work there, whether that be locals or foreigners.

As such, do you think attitudes towards business education are changing in the region?

Yes, I think they are and I think the demand for MBAs — qualified MBAs — is changing as well. People are valuing that a bit more and they are bringing an international flavor to the table. Most MBA programs try to cultivate the feeling of working together with people from different parts of the world.

When you talk about education in the Middle East, you are primarily talking about the Gulf — in terms of education infrastructure the Gulf is a long way ahead. What can Lebanon, Egypt and other countries do to catch up?

Lebanon I would put as high as the [United Arab Emirates] and Saudi Arabia when it comes to potential to grow in terms of education structure, because there are a few Lebanese who have the vision to make it to that level. Talking about improvements I believe there is potential because you have got a very strong undergraduate education here — you have good universities like [the American University of Beirut] and others. Going towards the post-graduate side, what happens is people tend to go out [of Lebanon] or lose out.

What are the areas where Lebanon lags behind?

The advantage clearly is the language — English being so profoundly spoken here, it makes it easy to feel a part of it. There are a few disadvantages– one of which unfortunately is the security scenario. That is something that influences people.

I think while attitudes are changing they are not changing fast enough — there is not enough effort being made by the universities to say ‘we are not what you think, but this is what you can do.

Gulf governments have been very proactive in building education hubs. Do you feel there could be more from the Lebanese government?

Yes. There are two sides to it — one you can talk about cultivating talent, so when we are talking about students there should be more scholarships available. If you look at Saudi Arabia, students have a very strong chance of getting a scholarship once they get to universities that are acknowledged. The other side is the government can support the initiatives of local universities here so they can attract students from other countries as well.

 

Those interested in learning more about doing an MBA can attend the event at the Crowne Plaza today at 4.30

May 15, 2013 0 comments
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The Buzz

Morning briefing: 15 May 2013

by Executive Staff May 15, 2013
written by Executive Staff

Economics and Policy

Moody’s Investors Service Tuesday warned it could cut Lebanon’s government bond rating over potential spillover effects from Syria’s civil war, including suppressed growth and political instability.

More from Reuters

 

A jailed cousin of former Libyan leader Muammar Qaddafi has accused Egypt of trading his freedom and its principles for US$2 billion in aid for the floundering economy.

More from The National

 

Lebanese taxpayers will soon be able to pay their taxes electronically instead of having to go to the Finance Ministry, according to caretaker Finance Minister Mohammad Safadi.

More from The Daily Star

Dubai's non-oil trade jumped 16 percent in the first quarter and recovery in the emirate's property sector will help keep the pace up this year despite a plunge in trade with Iran and global economic weakness, the Dubai customs head has said.

More from Reuters

 

Companies and Business

One of two Lebanese currency exchange firms accused last month of money laundering by the United States Treasury Department has appointed a U.S.-based legal representative, Halawi Exchange Co.’s general manager told The Daily Star Tuesday.

More from The Daily Star

 

A new round of a business competition has been launched to give a boost to some of Lebanon’s small- and medium-sized enterprises.

More from The Daily Star

 

Dana Gas has boosted its profits in the first quarter on the sale of shares in the Hungarian oil company Mol as revenues declined on lost production in the Kurdish region of Iraq.

More from The National

May 15, 2013 0 comments
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Economics & Policy

Lebanon stops collecting inflation data

by Benjamin Redd May 15, 2013
written by Benjamin Redd

When Lebanon’s central bank announced a stimulus package in January, it was largely welcomed. But for the critics the main concern was inflation — more money in the economy would lead to a hike in prices, effectively negating the effect of the new money altogether. But these critics have been silenced, not by being proven wrong but by the government’s decision to stop collecting data on inflation altogether.

Lebanon doesn’t publish much in the way of professional economic data — there are no regularly published figures for unemployment, jobs created or foreign investment. Since 2008, however, inflation has been a notable exception to this rule: being measured in a professional, systematic way by the Central Administration of Statistics (CAS).

But in January 2013, CAS failed to publish its monthly Consumer Price Index (CPI). The only other time this happened, in January 2011, it was just for one month. This time, CAS has failed to publish CPI for four straight months — and counting. The data show that inflation was at an annualized rate of around 10 percent in the second half of 2012, but since then there has been no way of knowing if it has increased or decreased. Those familiar with the matter dispute whether there are plans to resume publication in the foreseeable future.

“This is scandalous,” said Jad Chaaban, an economist at the American University of Beirut, adding that CPI “was very important for economic planning — even for consumers and employees who need to know how much of a raise they should have at the end of the month.”

Nassib Ghobril, chief economist at Byblos Bank concurred, telling Executive, “There are very big implications: companies use [CPI] for budgeting, salaries and pricing; entire sectors and labor unions use it; and it is used for calculating GDP.” He added that the country already lags behind international standards in terms of the quality of data collected. “We are very frustrated. We already have a weak statistical base, and it’s just gotten weaker.”

Administrative disarray

The reason for the lack of data speaks volumes about Lebanon’s archaic system of government. Officials both in and close to the government told Executive that the issue is not funding — CAS has the money needed to collect, analyze and publish the data — but rather administrative and political. Two sources close to the issue claim that CAS can’t do its job without authorization from the Prime Minister’s office — basically, the agency is waiting on a signature.

The reason for this reticence to sign is disputed. Samir Daher, advisor for economic affairs and development in the office of caretaker Prime Minister Najib Mikati, did not deny claims that Mikati’s office was responsible for the delay but said the real issue was a disagreement within the government, telling Executive that “it’s a technical dispute that’s taking place. They say that this is the only team that has been trained and I say I want to take a broader view and build an independent institution.” Asked to specify whom the dispute was between, Daher declined.

Speaking of the need for more statisticians and more competitive salaries at CAS, Daher continued, “This is part of a broader attempt to reform; you don’t want to make minor adjustments. We’re trying to revise the law and give more authority to this institution.” It was unclear how stopping CPI publication would give CAS more authority, but Daher added that he was committed to reaching a deal, saying: “If I don’t finish this [before leaving office], then I have partially failed.” Mikati is due to step down, along with his advisors, if his designated successor Tammam Salam can agree on the formation of a new cabinet.

Chilling effects

But broader reforms do not help in the here and now. Crucially, the issue is not that CAS has collected but not published inflation data — rather, the lack of authorization from the Prime Minister’s Office has precluded even data collection. That means when authorization resumes, there will be at least a four-month hole in the data. “You can’t go back to January and collect data,” noted Ghobril.

Not only is this a problem for local business and employees, but it also causes headaches for organizations like the International Monetary Fund (IMF), which regularly publishes economic data on Lebanon. The fund also provided advice and technical assistance when the CPI was devised in 2007-2008.

According to Ghobril, the IMF “is very concerned about this suspension. When they were here a few weeks ago, it was a big issue.” Daher took a more reserved view, saying, “The IMF is aware of the issue and understands what is happening.” The IMF declined when asked to comment.

Options for judging inflation without the CPI are limited for policymakers, companies and citizens alike. One other organization, the Beirut-based Consultation & Research Institute (CRI), collects such data. However, their inflation statistics differ in methodology and scope from CAS’s. For January through March 2013, CRI calculates that inflation in the greater Beirut area has hovered around 4.5 percent year-on-year, down from 7.75 percent in October 2012. Compare this to the CAS’s October figure of 11.1 percent, and it is clear that the different methodologies make comparison difficult.

Regardless of the high official figures, Ghobril said there was no justification for ceasing publication. “For an open country that relies on capital inflows and free trade, it’s embarrassing…. Developing a comprehensive statistical base should be a priority of any government; proper policymaking has to be based on credible figures.”

May 15, 2013 1 comment
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Economics & PolicyHealthcare in Lebanon

Licensed to slice

by Nabila Rahhal May 14, 2013
written by Nabila Rahhal

You see them everywhere in Lebanon: the women whose faces look as tight as a 20-year-old’s until their wrinkled hands betray them as septuagenarians; the television presenters whose upper lips lump to one side; and all those cute, celestial noses! As you walk down the street you see dozens of faces, male and female, all sporting the same smooth nose with pointed tip. 

It feels like an epidemic of cosmetic procedures all around you. Advertisements for liposuction and filler procedures in places such as beauty or physical therapy centers have become as common as advertisements for the latest hamburger. 

Mind you, reconstructive and plastic surgery can be as vital to a person’s wellbeing and recovery from a burn or accident as any serious surgical procedure. Lebanese specialists do sometimes perform these literally face-saving procedures, and they are to be commended for their work. 

But the bulk of plastic surgery procedures in Lebanon are done for superficial purposes. Though the free-spirited among us would like to think that the Lebanese obsession with cosmetic enhancements is a cliché, the numbers and faces around us force us to face facts. 

Lebanese doctors perform the highest number of plastic surgery operations per capita in the Arab region, and Lebanon ranks among the top 20 worldwide according to the Lebanese Society of Plastic Aesthetic and Reconstructive Surgery (LSPARS). 

Reasons for this obsession vary from an extreme reaction of a society repressed by memories of the civil war to the need to keep up with one’s peers and look as good as they do.

Some believe that physical improvements are not wrong as long as one is comfortable with oneself after seeing the end result in a mirror. While this is arguable, the danger of self-improvements becomes tangible when the practice becomes commercialized to the extent that women are getting Botox injections during their lunch breaks, and not from qualified plastic surgeons. 

Not only the nose

There are currently 83 plastic surgeons in LSPARS — founded in 1967 with just seven members — and they perform an average of 5,000 cosmetic surgery operations annually. This excludes noninvasive procedures such as fillers and botulinum toxin (commonly referred to as Botox), which make up 60 percent of a plastic surgeon’s work. 

Botched operations are increasingly common in Lebanon

 

Among the 40 percent of procedures that are invasive, the most requested operation remains the rhinoplasty, or nose job, with liposuction and breast augmentation following close behind. “We Arabs have very prominent noses, and while some see this as a symbol of masculinity or national heritage, many opt to have it softened,” explains Antoine Abi Abboud, head of plastic surgery at Mount Lebanon Hospital.  

The domestic market for invasive procedures has grown for nose jobs and breast modifications. Perhaps it is because Lebanon has become an even more image-conscious society. Practitioners tell Executive that the number of men seeking such cosmetic treatments has steadily risen in recent years. “Men mainly seek liposuction if they are overweight and body sculpting which gives them a six-pack appearance,” says Elias Nassif, plastic surgeon at the Bellevue Medical Center. 

Not all cosmetic surgery operations in Lebanon are performed on Lebanese. Arab clients, lured to Lebanon by plastic surgeons’ reputation for excellence and by the relatively low cost of treatments compared to Europe and the United States, account for a significant percentage of total cosmetic surgeries performed in the country.  Also, in an inverted form of medical tourism, many Lebanese plastic surgeons commute regularly between their local clinics and the Gulf, for added exposure and income. 

“When I first started, I could safely say that 50 percent of my clients were from Arab countries,” says Nassif. This percentage dropped close to zero in the summer of 2012 in the wake of Arab travel warnings on Lebanon, Nassif explains. “Now they are on the rise again and international patients constitute 30 percent of my clients,” he adds. Other practitioners cite similar ratios for their Arab clients and tell Executive of seasonal trends where Arab client numbers peak in July/August when many take advantage of the holidays to ‘readjust’. 

 

Crooked compensation 

The incentive of money not only motivates physicians to specialize in plastic surgery; it also attracts surgeons from different specialties to perform opportunistic procedures. 

“A general surgeon who makes a maximum of a $1,000 on a hernia operation can make $2,000 for a nose job,” explains Abi Abboud.

Legally, any surgeon can perform any surgery, and while dermatologists and ear, nose and throat specialists are technically qualified to perform certain procedures and surgeries, it seems there is ambiguity regarding this issue. “While this is legal, the danger is when a serious mistake occurs due to lack of specialty and then problems will occur,” says Abi Abboud. 

Even among plastic surgeons, there are those who are considered less qualified than others and LSPARS is trying to influence the Order of Physicians to be more selective in licensing plastic surgeons. Sami Saad, secretary of LSPARS and a practicing plastic surgeon, says the problem lies within the system: all a physician needs to do to be allowed to practice in Lebanon is to present evidence of training. 

“Some countries, like Russia, train plastic surgeons only through observation, so when a doctor from such a system obtains a license to operate in Lebanon, he is apt to make errors as he isn’t properly trained,” explains Saad, adding that the Lebanese board of physicians responsible for licensing doctors rarely has plastic surgeons as members, and so it is unaware of the field’s needs. 

Saad gives the example of medical institutions in the US, where students’ internships stretch over several years, more than half of which are spent on hands-on training under the guidance of practicing plastic surgeons. 

Dirty and ugly

Many beauty centers and hair salons in Lebanon have started listing Botox injections, filler procedures and even liposuction on their lists    of services. 

Under Lebanese medical law, it is illegal for anyone except doctors — or those under a doctor’s supervision — to perform injections. Yet these centers continue to provide such services. “These beauticians attend a workshop for several weeks and learn the basics of these procedures, but they lack the years of medical practice. They haven’t studied anatomy and don’t know how the muscles respond to such injections,” explains Saad, adding that liposuction by laser is another treatment provided by such centers, and can result in complications such as permanently burnt skin or hardened fat that becomes impossible to remove. 

“Another danger in those centers is that they use products of unknown sources in their injections, and there are no references or backup if something goes wrong,” explains Saad. “These centers are irresponsible and [in the case of liposuction], which involves anesthesia, they can cause fatal damage,” says Nassif. Plastic surgeons Executive spoke to say they see at least one case of corrective surgery per week from procedures performed in such centers.  

Beauty centers attract clients through their strong marketing campaigns, which physicians are prohibited from mounting by law. In some cases, beauticians go as far as encouraging their customers to buy a Botox injection on the spot, without giving any proper medical advice. “The beautician who was giving me a facial encouraged me to get a Botox injection, saying that it will help me look years younger,” says Hanan, a 42-year-old Lebanese woman in the waiting room of a plastic surgeon. “She said that she could give me one right now, as part of my facial treatment.” 

Hanan did not want to give her last name for fear of embarrassment as her reason for seeing the licensed plastic surgeon was that the beautician had botched the injection and Hanan hoped to have the maltreatment corrected. Other beauty seekers willingly undergo treatments in dodgy centers because of the misconception that the coveted injections cost less there, though LSPARS asserts that their prices are the same and sometimes lower than the centers, in the range of $400 for a filler procedure and $300 for Botox.

 

Faint hopes

Other than prohibiting physicians from marketing themselves, the Order of Physicians has done little to regulate plastic surgery in Lebanon.  

Consequently, LSPARS has taken upon itself the role of educating the public and raising awareness on the dangers of malpractice in this field. The organization, which has some leverage in its power to grant international recognition of Lebanese plastic surgeons, focuses its awareness work mainly on encouraging the public to only use a licensed public surgeon for any procedure.

Yet, as profits lure and marketing draws customers, it seems naïve to expect that a mere awareness effort will sufficiently alert all Lebanese beauty seekers to the dangers and criminal negligence that might come with some discounted offers of eternal beauty. 

May 14, 2013 0 comments
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