Economics and Policy
Gold rose more than one per cent on Monday and held near its highest level in more than a week as a rebound in prices from multi-year lows failed to curb investor appetite for the precious metal, leading to a shortage in physical supply.
The oil-rich emirate of Abu Dhabi is putting finishing touches to plans to establish a financial free zone that could resemble, and therefore compete with, the Dubai International Financial Centre.
The Association of Banks in Lebanon has reaffirmed its commitment to complying with any sanctions imposed by the U.S. Treasury after two Lebanese money exchange houses were designated as a primary money-laundering concern.
Iraqi authorities announced have revoked the operating licences of Al Jazeera and nine other satellite TV channels for promoting sectarianism during a wave of violence.
The Dubai Land Department (LD) announced that the total value of real estate transactions in the emirate in the first quarter of the year was up 63 per cent on the same period in 2012.
Companies and Business
Food giant Savola Group could become the first company in Saudi Arabia to move to Friday-Saturday weekends ahead of a wider country change.
Horizon Terminals Limited (HTL), a wholly owned subsidiary of Dubai’s Emirates National Oil Company (ENOC), has announced that its new oil terminal in Jebel Ali is on track for expected completion by end-2013.
Hassad Food Co, the agricultural investment arm of Qatar’s sovereign wealth fund, said on Sunday it has appointed a new CEO.
Oman’s No.2 telecom operator Nawras reported a 21 per cent drop in first-quarter profit on Sunday, missing analysts’ estimates as text and domestic call income fell.
Jordanian Prime Minister Abdullah Ensour's incoming government last week won a vote of confidence in Parliament, securing the approval of 82 out of the Lower House’s 150 deputies. To most observers, the outcome was never in doubt, but, as an ally of the United States, Jordan’s political process must be presented in fairly glowing terms to convince foreign donors that all is well in such a model Arab state. As such, the supposed travails in the new cabinet’s advent were sold to onlookers as an expression of popular will, without the drama of elections elsewhere in the region.
Ensour lost little sleep between his designation in March and last week’s confirmation vote. Yet, the process of seeking confidence was this time presented in better terms than other cabinets’ recent efforts.
In Jordan’s stunted political culture, there may be little room for overt sarcasm, but one catchy expression has entered the local political vocabulary: “one-eleven.” This refers to the 111 deputies — out of an even smaller Lower House than the present body — that voted to grant confidence to the last Jordanian government formed before the “Arab Spring” began in December 2010. The term is one of approbation for kowtowing parliamentarians much more in line with the King’s wishes than that of their citizens. Interestingly, however, Ensour wasn’t part of that 111, having voted as an MP at the time that he had no-confidence in the government, as well as opposing subsequent governments.
Even so, those hoping for change may be disappointed. Ensour does not claim to be ushering in revolution, and while he has an element of independence, he is to all intents and purposes a regime stalwart. Formerly a cabinet member and vice-premier, he has, especially since 2010, also been part of the loyal opposition — before becoming prime minister himself last year for the first time (this is his second stint in the top job).
An electric problem
Nevertheless, Ensour talks of major reforms and there is certainly a lot to do. Apart from anything else, an acute problem currently worrying many in the country concerns electricity prices: state-run power operations suffer an annual loss of close to $1.8 billion due to subsidized rates. If this deficit is not addressed, “we will find ourselves forced to take harsh measures including scheduled power cuts, a stage we do not want to reach,” Ensour told parliamentarians last week. However, he pledged to consult with deputies before deciding to take the potentially unpopular decision to increase electricity prices, saying that his cabinet "will not make such a move unless we have exhausted all other options."
Although he promised to postpone any such measures till the early summer, this particular question must be settled to pull Jordan back from a potential fiscal cliff. Ensour’s record on such matters is better than most in Amman: he recently pushed through an increase in fuel prices — now absorbed and forgotten by the public, especially as the global oil price has since fallen.
The way out of the electricity pricing issue may involve Ensour making some deft political maneuvers. In particular, he indicated that a cabinet shuffle will come soon — an odd statement during a parliamentary confidence debate on a new government. Ensour went so far as to declare that a shuffled cabinet team with more parliamentarians on board is "inevitable”, noting that he would add deputies to his more-or-less technocratic team before too long.
To be able to achieve reform without facing prolonged street protests, Ensour needs as broad a coalition as possible and there are indications that he may try co-opt those who currently oppose him. The current 18-member government is the smallest in decades, with merged ministries and joint portfolios appearing to signal efficient streamlining and austerity amid the country’s current financial woes.
Later in the year, however, several rebellious MPs could be brought into the government, being granted parts of currently doubled-up ministries in return for loyalty to Ensour on vital issues, including electricity.
Riad al Khouri, a Jordanian economist who lives and works in the region, is principal of DEA Inc, Washington DC
Economics and Policy
Israel shot down a drone on Thursday as it approached the country's northern coast, the military said, with Lebanese group Hezbollah blamed.
A United Nations mission to Bahrain to assess the country's progress in eliminating torture has been unilaterally "cancelled" by authorities in Manama, the organisation's special rapporteur for torture has said.
Companies and Business
A Turkish firm operating an electricity barge supplying power to Lebanon on Thursday blamed low-quality fuel oil for a sharp drop in production a day earlier, but a source at Electricite du Liban disputed the company’s claim.
Fast-growing United Arab Emirates carrier Etihad Airways said it would partner with Air Canada in a new codeshare agreement, days after the two countries put aside disagreements and eased visa rules.
Abu Dhabi Commercial Bank reported a five per cent rise in first-quarter net profit on Thursday, beating the average expectation of analysts.
Lebanon is not alarmed by the U.S. Treasury Department’s sanctions this week against two Lebanese exchange houses accused of money-laundering, caretaker Finance Minister Mohammad Safadi said on Thursday.
Tunisia's Salafis, adherents of a stricter interpretation of Islam than the majority of the country’s Muslims, are increasingly familiar protagonists in news stories. Two years after the revolution that overthrew dictator Zine al-Abedine Ben Ali, Salafis are often portrayed as violent, intimidating, resisting official decisions or stopping practices they judge forbidden by Islam.
Overshadowing all the more minor incidents is the still unsolved assassination of the leftist politician Chokri Belaid in February. Belaid was a vocal critic of Salafi ideology, which he regarded as running counter to Tunisia's liberal values. Authorities have pointed the finger of blame at those from the shadowy world of Salafi groups.
Beyond the news headlines, however, Salafism is a complex social phenomenon among young Tunisians looking for a direction in life following the 2011 revolution. While only a very small minority of Tunisia's regard themselves as Salafis – a recent report suggested their total number at around 50,000 — the influence of their worldview is extending.
Tunisians drawn to Salafism often still live in their home neighborhoods alongside the peer group they grew up with — and with whom they have often shared the demoralizing experience of unemployment. Take the example of Hergla, a pretty coastal village north of Sousse. During the 2011 revolution, Hergla did not stir: “here it was just the birds tweeting as usual,” one young man explains. With a population of not much more than 6,000, crime is low and just four officers usually staff the local police station. Like many other places in Tunisia, the town now has a small group of local Salafis.
On April 11, a mob of Salafi sympathizers tried to storm the police station to free one of their number who had been arrested. Local police described the man as a known petty criminal who had converted to Salafism. Amid the tear gas, two policemen opened fire, killing 23-year-old Mahmoud Mrad and seriously injuring a child. When the clashes continued after the dead man's funeral the next day, those clashing with the police were not Salafis, but just young men who had grown up with Mrad – a studious type who was well liked locally. Some villagers blamed Salafis for having brought trouble to the town, but were, naturally, unhappy about the police shootings.
Elsewhere, young people have mobilized against intimidation by Salafis. High-school students in Menzel Bouzelfa, east of Tunis, that same week cheerfully organized a small demo in support of their head teacher and to face down local Salafis. In line with an education ministry directive, the head had prevented a girl from attending class in the full niqab, or face veil. Local Salafis appeared outside the school with megaphones and speeches aimed, unsuccessfully, at converting students to their cause. Three masked men then attacked the head teacher with sticks as he arrived for work on April 10.
But this image of fundamentalism lacks some nuance. Aware of an image problem, some Salafi groups have avoided confrontation. When football fans in the port town of Bizerte clashed with the police for three days last week — over a decision that had blocked the Bizerte team from going through to a cup final — the Salafis told local youths "we will not revolt with you," recounts one young man. Locals appealed to Salafis for help in protecting their businesses during the disorder, he said, as "here the Salafis are more respected than the police." The fundamentalists declined, but did have contacts with the provincial governor over how to calm the situation.
One of the best analyses of the many-layered context of Tunisian Salafism is a lucid report by the NGO International Crisis Group. It reviews the full spectrum of groups, from the quietist to the fundamentalists. Those involved in violence typically have low educational levels and sometimes previous criminal records. It cites an estimate of around 2,000 Tunisians engaged in armed jihad in Syria, and notes that by February there had been 14 Salafis killed in confrontations with the Tunisian state, including two men who died on hunger-strike alleging wrongful imprisonment.
Salafism in Tunisia is still a relatively new phenomena, with limited in-depth research. The challenge for sociologists and others, therefore, is to piece together a better understanding of this most radical of movements. Looking for grassroots stories beyond the headlines will provide rich material to nuance their narratives.
For a hugely popular Lebanese-founded company, Woopra has had almost no success in the Middle East. The real-time web analytics company – which provides analysis of customer behavior on websites as well as aggregate numbers of visitors – has over 200,000 global users to its free service, while its premium service has 3,000 companies registered, each paying up to $30,000 a month. But of those 3,000, founder Elie Khoury estimates that fewer than 10 are from the Middle East.
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Silicon stars Khoury’s five tech companies to watch out for in Silicon Valley Formed by engineers from Google, Yahoo and Facebook, Cloudera is a platform for big data Allows companies to move their email infrastructure into the cloud Helps customers access their data anywhere in the world Helps companies to improve their customer support online, including one on one advice Online support to helps companies design better marketing campaigns |
“We have customers all over the world – Japan, Sweden, Germany and of course the US, [which makes up] around 40 percent of our revenue, [but] the Middle East is our weakest spot.”
The reason, he says, is that technology trends in the region, such as e-commerce and online tech startups, are years behind the rest of the world. As such the service they provide, which gives companies the ability to track in-depth their customers’ actions online and even interact with them live, is still not really understood. “Whatever they are doing in the Middle East right now, they were doing in the Bay Area [of San Francisco] like four or five years ago,” he says. “As a market size the Middle East is not very appealing for us – there are far fewer companies, [companies are] much less educated and it takes a long time to close a sale with them. We would rather skip it for now.”
It is perhaps admirable, then, that Khoury and co-founder Jad Younan made such a strong effort to remain in Lebanon despite the lack of business opportunities. Ultimately, however, they found that the lack of talented Lebanese in the technical sectors made the move to America inevitable. “I was always trying to keep Woopra in Lebanon. Not many companies manage to run a global B2B business from Lebanon. We tried everything possible with the resources that were available,” he says. “If we managed to hire the right developers I think we could have definitely left an office in Lebanon.” Perhaps, he jokes, the “Lebanese people are not made to be techies.”
So it was that in January 2012, five years after setting the company up in the northern Lebanese town of Byblos, Woopra moved its entire operations to Silicon Valley, San Francisco. The company has grown rapidly, being tipped by e-week as the top analytics company to watch out for and increasing its staff to 15. Though its share of the market remains small, with Google Analytics the dominant force, the remarkably accurate real-time service it provides has enabled the company to carve out a niche in an incredibly competitive field.
Related articles: ‘Not everyone can be an entrepreneur’
More support needed for Middle Eastern entrepreneurs
Despite this, Woopra has yet to turn a profit, a fact that Khoury is perhaps surprisingly proud of. “The second [we] become profitable, [we] hire more people to grow faster. What we are pushing to do is to stay breaking even at any point in time. As we grow the revenue we hire more people and add more expenses to the company. But we are not at a stage where we can be profitable – I wouldn’t let this happen!”
Khoury willingly admits that the company is still battling against the odds, referring to their ‘bootstrapping’ – meaning a keeping costs low to become self-sustainable without external help. But he enjoys the thrill of trying to compete in the most competitive tech environment in the world. “Honestly until now Woopra is still bootstrapping, we have done a couple of rounds of funding – we didn’t raise a lot of money. But we are still able to compete on the global level by just bootstrapping.”
Yet this small fish, big pond situation may change if they get the investment he wants. Later in the year the company aims to work on a major financing package. Khoury refuses to give specific details of the amount they expect to raise but described it as their “first mega round of funding, raising the money here in the Bay Area.”
Pining for home?
What then, of Lebanon. When Executive first interviewed Khoury back in 2008, he bemoaned the lack of support for entrepreneurs in the Middle East, saying “our universities are generally producing employees, instead of creating long-term inspirational projects.” Does he still feel that way? Yes and no.
“Some of the colleges in Lebanon are now more aware at this, [for example] the American University of Beirut now has an entrepreneurship center. Back in 2007 I remember when I was graduating if you said to anybody you wanted to build a tech company, they would look at you in a weird way. One of my professors even said ‘do you really want to compete with Google or YouTube?’”
Now, Khoury argues, there has been such a buzz around entrepreneurship in the Middle East in recent years that the problem is not lack of capital for entrepreneurs but of good ideas. “In my opinion looking at the scene there is more money than potential successful startups,” he says. “You need a better education system, you need mentorship, we have started seeing development but it is still not good enough.”
What, then, would his advice be for budding Lebanese entrepreneurs, either in the tech sector or outside. “I want people to stay in Lebanon and bootstrap the way we did. We stayed in Lebanon for four or five years building a world-class product… I think people should work on building prototypes, proving themselves – especially as first-time entrepreneurs.”
Economics and Policy
Syria hopes to clinch more financial aid from its allies Russia and Iran soon, but still has enough foreign reserves to pursue its war on rebels trying to oust President Bashar Assad, the central bank governor said.
Oman’s central bank plans to issue rules to boost lending to small and medium-sized firms, its chief said on Wednesday, in a new move to help bring unemployment down in the sultanate.
The 1,000-year-old minaret of Aleppo's Umayyad Mosque has collapsed in clashes between Syrian rebels and forces loyal to president Bashar al-Assad, activists and state media said.
Business and Companies
Two Lebanese currency exchange firms accused of money laundering by the United States Treasury Department have vehemently denied the allegations, saying they were considering legal action to clear their names.
A consortium led by Abu Dhabi-backed asset management firm Carlyle Group has acquired US financial advisory Duff & Phelps for $665.5m in an all-cash transaction.
Bahrain's Ahli United Bank posted a big jump in first-quarter net profit on Wednesday as its earnings were boosted by a one-time gain from the sale of a stake in a Qatari associate.
Dubai-based builder Arabtec will buy the 45 per cent of Emirates Falcon Electromechanical Co (EFECO) it does not already own for $45 million as it expands into affordable housing projects, two sources with knowledge of the deal said.
Emirates NBD, Dubai’s largest bank by market value, on Thursday said its first-quarter net profit rose 31 per cent, beating the average forecast of analysts.
To his admirers he is intelligent, principled and steadfast. To his adversaries he is uncompromising, avaricious and self-indulgent. All may be partly true of Minister of Energy and Water Gebran Bassil but, as he battles to maintain his position in any coming government, he certainly can’t be accused of being idle.
Rarely a day passes without a press conference covering some new development he is championing. During his tenure he has registered an impressive array of achievements; a new power plant is to be built at Deir Ammar; energy producing power ships are set to boost the grid while renovations are done on existing power stations; an extensive dam building scheme has been initiated; and even a solar roof for part of the Beirut River is in the cards.
On top of these achievements is the steady development of the oil and gas sector, which has transformed the ministry of energy and water (MoEW) into one of the most coveted positions in the cabinet. “This is an unprecedented step towards entering the oil and gas producing world,” exclaimed Bassil while announcing the 46 companies that successfully passed through the pre-qualification phase for the first offshore oil and gas exploration round last week.
However, the means by which these impressive advancements have been achieved raise important questions for those interested in trivial things such as transparency and good governance. The criticisms of Bassil’s stewardship of the hydrocarbons sector are extensive. Minister Bassil pushed the bylaws of the Petroleum Administration (PA) through the cabinet before sending them to the Shura Council – the body that checks the legal and constitutional veracity of government decrees – for prior review, as is required by law. The Shura Council subsequently raised a number of objections, which were blithely dismissed. Again the minister made a legal sidestep when he secured the cabinet’s approval on the petroleum activities regulations before the board of the PA was appointed. And finally, the PA is, of course, paid by the MoEW, which somewhat brings into questions the independence of the body as is enshrined in the 2010 law for the sector.
Warning signs
It is not just in the oil and gas sector that warning flags have been raised. Few things rouse Lebanese fervor as much as the state of the nation’s sporadic and expensive electricity supply. Currently Lebanon’s electricity demand exceeds supply by around 1000 Megawatts (MG). In June 2010 Bassil’s team at the ministry unveiled a comprehensive master plan, encompassing 42 projects to reform the sector. An initial series of schemes to boost generation capacity by 700MW at a price tag of $1.2 billion has been the defining success in this domain to date.
While significant and commendable strides have been made, the management of some of the major contracts once again raises questions over the competence of the ministry. “There is a complete lack of transparency. In many cases we were not allowed to look at the original [tender] documents. This is not acceptable,” opposition MP Ghazi Youssef complains.
From the $1.2 billion that Minister Bassil had wrestted from the government, $850 million was allocated to the construction of a new power plant at Deir Ammar as well as the addition of new reciprocating engines at the Zouk and Jiyeh power plants. The tender process, however, was bungled – leaving one consortium with its nose out of joint, projects delayed and doubts cast over the ministry’s engagement with the private sector on big-ticket projects.
The government launched the Deir Ammar and Zouk and Jiyeh contracts at the same time. The first to be awarded was for Zouk and Jiyeh – with the contract going to Danish firm BWSC for $348 million. Minister Bassil, however, was displeased with the decision and challenged it twice, for unclear reasons, at the Council of Ministers (COM) – insisting that a second company be brought on board. While the minister eventually had to back down, it took a further six months to agree on the contract when it should have taken two.
Having agreed that deal, the MoEW was left with $502 million from the allocated $850 million left for the Deir Ammar II project. The tender commission, based on the conditions of the project design and criteria that the MoEW had submitted, awarded the contract to a Spanish-Lebanese consortium between Abinar and Butec.
But shortly after, the companies were told that their bid had actually been rejected because their proposal carried a price tag of $650 million and the ministry would not be able to foot the bill with money they had remaining. “There was no price on the conditions of the tender. We should have known if there was a limit…it is not professional to do that and it reflects badly on how the government engages with private companies,” Myrna Zakaria, PR manager at Butec, told Executive.
Bassil asked the Lebanese cabinet for more cash to push the contract through, but his plea fell on deaf ears, and so it was that a very good deal for the government had to be scrapped and a second tender round was launched. “If we look to the long term and what this project entailed then I think [the rejection of extra funding] was a huge mistake by the Council of Ministers,” argued Bassil’s advisor Raymond Ghajjar.
Ghajjar reasoned that they could not have known the available funds for Deir Ammar II at the beginning of the tender process, as it was dependent on the outcome of the reciprocating engines deal. Critics would charge that this amounts to a serious lack of foresight. As one senior member of government said on condition of anonymity, “this stinks – there was surely incompetence and at best a poorly managed tender document.” To leave prospective companies, who exhaust considerable time and money in preparing bids, to guess the value of projects is opaque in the extreme.
The companies were given only a month to resubmit tenders after the minister’s engineers had shaved back the specifications on the project to save money – at the expense of becoming technically inferior. With Abiner-Butec out of the running, and the timeframe too tight for new entrants to the bidding process, the deal eventually went to the Greek firm J&P Avax.
With the ink on the contract barely dry, objections were raised that J&P Avax had misled the government and had not even met the specifications on the original document. “They were awarded the tender even though they hadn’t reached the qualifications, which called for two plants of at least 250MW. The two plants they had worked on were not of this capacity, but closer to 200MW,” opposition MP Youssef explained.
While the Shura Council finally decided that the deal should stick, Ghajjar at the ministry could only offer a somewhat spurious technical explanation for the divergence between what J&P Avax claimed in their bid and what existed on the ground. In any case, he is confident the government’s back is covered by strict penalties if the firm fails to meet the contractual agreements. “If any numbers have been cooked then they will have to pay in the end…we are very well protected. You could say we are goof-proof.”
Opaque efficiency?
Gebran Bassil’s impression on the oil and gas, energy and waters sectors is indisputable. When compared to many of his ministerial colleagues, most of whose impact on their sectors has been negligible at best, this is laudable. But pugnacious attitude has won him as many enemies as it has policy victories.
His somewhat liberal approach to the rules, regulations and laws may speed up the processes but it does little to inspire confidence in the probity of his dealings. The battle is too easily taken to the COM where it is fought with the political weight of the Free Patriotic Movement behind him. Transparency is an afterthought.
The foundations laid for the oil and gas sector cause concerns over the power being placed directly under the minister and his engagement with the institutions of the state. Furthermore, the power sector contracts fiasco is one of a number of examples where the efficacy and rectitude of the ministry in engaging the private sector is unconvincing.
So as we contemplate the flurry of press conferences we can ask ourselves, is Lebanon getting a good deal? We can only hope so.
Economics and Policy
Egypt said its economy will grow by 3.8 percent in the fiscal year starting in July as ministers outlined the 2013-14 budget to parliament Tuesday.
Morocco expects to sign a $2.4 billion loan deal next month with the Saudi-based Islamic Development Bank (IDB).
Business and Companies
The U.S. Treasury Department has designated Lebanese money exchange firms Kassem Rmeiti & Co. and Halawi Exchange Co as a “primary money laundering concern,” alleging they may be laundering millions of dollars of narcotics profits and funneling the money to Hezbollah.
Higher income from investments and fees helped National Bank of Abu Dhabi, the United Arab Emirates' largest lender by market value, to a 35.5 percent jump in first-quarter net profit, the bank said on Tuesday.
Dubai Investments, the largest investment company listed on the Dubai Financial Market, has announced that its net profit in 2012 attributable to shareholders rose 58 per cent.
Etisalat, the Gulf’s biggest telecoms operator, reported a near-flat first-quarter profit, missing analysts’ estimates as margins weakened.
Shortly after writing an article for Executive about the US drone strikes in southern Yemen, Executive's correspondent Farea al-Muslimi was contacted by representatives of the US Senate about discussing the issue in Washington.
Yesterday, in an impassioned speech in which highlighted how he believed the US drone attacks had helped Al-Qaeda, Muslimi outlined to senators how the attack had "tore my heart."
"I have personal experience of the fear [drones] cause," he told the senators, recalling how a US drone had flown above him while in southern Yemen. "My heart sank, I felt helpless — it was the first time I had truly feared for my life," he said.
See the video of the Muslimi's speech below: