Executive Magazine

Morning briefing:17 Apr 2013

by Executive Staff April 17, 2013

written by Executive Staff

Economics and Policy

Tunisia's government has cut its economic growth forecast for this year to 4 percent, down from a previous forecast of 4.5 percent due to events at home and in Europe.

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Cyprus is expected to remove the restrictions on the withdrawal of nonresidents’ deposits from the island in a move that would induce depositors to withdraw most of their money, Lebanese banking sources said Tuesday.

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Iran's economy should emerge from a recession caused by international sanctions over its disputed nuclear programme, but not until 2014, a year later than previously forecast, according to the IMF.

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Elsewhere in Iran, the huge earthquake that hit the southern part of the country on Tuesday did not cause damage to nuclear plants, government officials have said.

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Egypt and the IMF failed to agree on terms for a $4.8 billion loan that could ease a worsening economic crisis in the country

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Companies and Business

Saudi Arabia's King Abdullah has ordered government ministries to facilitate a 250 billion riyal ($66.7 billion) housing construction programme that he originally announced in 2011, state news agency SPA reported on Tuesday.

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Electricite du Liban said on Tuesday it had stopped 317 cases of electricity theft across Lebanon and vowed to step up its crackdown launched earlier this month.

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EFG-Hermes, the Middle East's largest investment bank, has said it has not received notification from Egypt's financial regulator of clearance for its merger with QInvest of Qatar.

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April 17, 2013 0 comments

Finance

Save thousands sending money home

by Joe Dyke April 17, 2013

written by Joe Dyke

Taavet Hinrikus is perhaps being generous when he compares his home country Estonia to Lebanon. While he may be right that both countries are small with a lot of expatriates, if Beirut’s newly developing entrepreneurial community can have anything like the successes of those in Tallinn in recent years then the country is due for a boom. The small Baltic nation has seen a series of huge hits, with Skype being the most famous but Erply and ZeroTurnaround also proving popular. Now Hinrikus, himself the first employee of Skype, has a product that could ultimately improve the lives of millions in the Middle East and across the globe.

Lebanon is, as has been well documented, an economy heavily dependent on remittances from the country’s diaspora. In total, around $7.5 billion dollars a year is sent to Lebanon from around the world — incredibly representing almost 20 percent of the country’s entire gross-domestic product. Millions of dollars, however, are paid to banks and firms like Western Union to transfer that money from across the globe.

Hinrikus’ TransferWise targets these payments and aims to make them up to 20 times cheaper. “If you are sending 1000 British pounds [$1530] in a bank you would pay around 20 pound [$30] for a transaction and in addition we would pay around 3 percent for the currency conversion,” he says. “So this ends up being about 50 pounds ($76), whereas with TransferWise it would cost you 5 ($7.60).”

The mechanics

How does TransferWise do this? Hinrikus explains the system through its formation, when himself and co-founder Kristo Käärmann worked a way around the banks. “We are both from Estonia. I was working for Skype in London, but I was still getting paid in Estonia and was transferring 1,000 euros ($1,317) from Estonia to London every month. But a lot less money arrived than I thought should have. At the time I met Kristo he was working in London but had to send money back to Estonia to pay for an apartment he has there, also paying big fees.”

Taavet Hinrikus (left) with TransferWise co-founder Kristo Käärmann

“We met and said ‘bloody hell, we are both being screwed by the banks’. So what we started doing was I would transfer money from my account in Estonia to his account in Estonia, and he transferred money from his account in London to mine. Very soon we had saved thousands of pounds in bank fees.”

Turn the principle of that transaction into a company and the result is TransferWise. The system the two men designed skips banks altogether by finding people making reverse transfers and effectively swapping their money. As transactions are then in country, no fees are paid, while the market exchange rate is taken for the transaction. Moreover, the two transfers need not be made at the same time – by crowdsourcing trades the company creates enough traffic to guarantee all transfers.

Related articles: How Lebanon could raise $1 billion a year

PayPal: A breakthrough for Lebanese e-commerce?

One problem with this system, however, is a lack of reciprocity. For example, in the UK (where the company is now based), a lot of money is sent to Poland but less is sent back. This, Hinrikus says, can be dealt with. “We have built our technology in a way that we can deal with an imbalance so we go and find external sources that can help us. Of course if we are talking about smaller corridors there will be imbalances but if you talk about the bigger picture then we think it is fairly balanced,” he says.

“In Poland, for example, there are lots of individuals sending money to Poland, but we can always find some larger corporate peers that are sending money out of Poland. So we have built our system in a way that it balances automatically.”

With average growth rates of more than 25 percent per month, and backing from some of the elite of the online entrepreneur world, the company has made a positive start in the past eighteen months. In total over $60 million was transferred via the system in 2012 and Hinrikus hopes to increase that number exponentially in 2013 – particularly as they are embarking on their first major advertising campaign in the coming months.

The company has ambitious targets — Hinrikus names his three biggest rivals as Lloyds, Barclays and Natwest — but the potential market is massive. “Remittances are about 500 billion British pounds ($767 billion) a year, and that is defined as transfers from the first world to the developing world. If we add to that transfers from first world to first world we are speaking about a market which is a few tens of trillions of dollars a year. Whichever way you segment that market, you have enough room to have a few very large companies,” he says. “We are seeing more and more demand on the consumer side and as we are building up more awareness there are more people coming to us.”

Sadly, the Middle East lags

For Lebanon and the Middle East, however, customers will have to wait a little while longer before they can start saving. The service primarily remains a European one, with eight currencies currently offered, including the dollar. And Hinrikus admits that the legal and regulatory frameworks of countries outside the EU are a little more challenging and therefore may take some time.

“We are looking at where we have consumer demand. So clearly the Middle East is on our radar,” he says. Asked if we were talking months, years or decades, Hinrikus remains coy: “It is definitely not tens of years, but there is nothing specific I can tell you. Just to say it is coming.”

April 17, 2013 0 comments

Real estate

A privilege to live here

by Executive Editors April 16, 2013

written by Executive Editors

Beirut is in the global top 10 when it comes to upscale expatriate rental costs and in the top third for the cost of offices, according to survey results cited last month by Byblos Bank’s “Lebanon This Week” (LTW). EuroCost International, a French consulting firm that surveys expatriate living costs in some 170 locations worldwide and has been doing this survey for five years, declared Beirut to be the eighth most-pricey place to rent an apartment of all the cities listed in its annual survey of house rental costs for 2012, as reported by the LTW. Better-known real estate firm Cushman & Wakefield ranked Lebanon’s capital as the 24th priciest office market of 63 monitored cities — both surveys showed Beirut as the Middle East’s most expensive locale. Cushman & Wakefield bases its assessment of Beirut on office prices in the Beirut central district. EuroCost said it zooms in only on high-end units in areas frequented by expatriates.

Need for Alignment

According to an international body of chartered surveyors, real estate valuations are among the core investment assessment tools and the time is ripe for global standards. This message was well received last month at MIPIM, a leading global real estate event held in Cannes, with 20,000 attendees. Investors and real estate professionals at the event showed very strong interest in the growing role of chartered surveyors, reported the Royal Institution of Chartered Surveyors (RICS). The organization is promoting the alignment of standards that will minimize the risk for investors in land, property and construction in volatile global environments. The real estate industry has a lot of catching up to do in standardizing of valuations and in the management of rapidly increasing data, says RICS, which operates globally. It has a head office for the Middle East and Africa in Dubai and is regionally represented in Lebanon, Bahrain, Oman and Qatar besides the United Arab Emirates.

Cheap Dubai rents? Nice while they lasted

Tenants aching under Lebanon’s rising rents can take some small solace in knowing that for Lebanese expatriates working in Dubai, the recent period of property bargains is coming to an end. This trend of increasing prices in the once-again booming emirate was confirmed last month by the Real Estate Regulatory Agency (RERA) in an update to its rental index. Unsurprisingly, top dollars are demanded in the Downtown Dubai and Dubai International Financial Center areas. According to REEA, a two-bedroom flat in Downtown Dubai could be rented for $30,000 to $38,000 annually, an increase of 16 percent from the previous rental index published in the second half in the 2012. Small units in International City, a development on the eastside of the urban area, are shown to be among the most affordable in the latest RERA index, at AED 20,000 to 25,000 ($5,400 to $6,800) for a studio per year, but have increased one third in price when compared with six months ago, reported the Emirates 24/7 news site. In the fancier and better-connected areas of Dubai Marina and Jumeirah Lake Towers, apartment prices in premium addresses have increased by 8 to 10 percent and by 3 to 5 percent in second-tier towers in the past six months, said a report by real estate agency Hamptons MENA, citing figures by the Dubai Land Department.

To build a people’s kingdom

Affordable housing developments and home finance took center stage in the Cityscape Jeddah real estate show in Saudi Arabia’s main commercial city last month. Top projects exhibited at the show included a pair of residential communities by Ewaan Global Residential Company, a Saudi developer established at the end of 2007. The conjoined Al Fareeda and newly announced Al Mayaar projects, respectively covering 1 million and 330,000 square-meter territories, are located north of Jeddah and the Al Fareeda project will cost at least SAR 1.2 billion ($320 million), a figure quoted by Ewaan. No investment value was provided for an even larger suburban project in Jeddah, the 2.5 million sqm, 8,000-unit residential and mixed-use Al Raeda development by Rayadah Investment Company, a firm under the umbrella of the Saudi Public Pension Agency.

April 16, 2013 0 comments

Banking & Finance

FOREIGN INVESTORS CURB THEIR APPETITE FOR LEBANON

by Executive Editors April 16, 2013

written by Executive Editors

Investments coming into Lebanon from abroad totaled just $1.1 billion in 2012, down almost 70 percent on 2011 and the second sharpest decline amongst emerging markets, according to a report by the Institute of International Finance. In the Middle East and Africa (MEA), Lebanon was the smallest recipient of foreign direct investment (FDI) and Saudi Arabia the largest, with $17.3 billion flowing into the kingdom. As for FDI outflows, a total of $650 million left the country for investment abroad, down 13 percent on 2011, and representing the third lowest in the MEA. As a percentage of the size of the economy, FDI accounts for just under 3 percent, a drop since 2008 when FDI accounted for 14 percent of gross domestic product — the MEA and emerging market average was 2 percent, according to the study.

Lebanese banks – the Cyprus exposure

There are 12 Lebanese banks operating in crisis-ridden Cyprus, constituting one third of the island’s 37 foreign banks according to Makram Sader, the secretary general of the Association of Banks in Lebanon. As of the end of 2012 the Lebanese banks’ deposits accounted for less than 3 percent of the total deposits of the country’s banking sector, which stood at $128 billion and for slightly less than 2.2 percent of the total $88 billion of deposits in the Cypriot banking sector as of January 2013. Some 74 percent of the total deposits in Cyprus are held by the top two banks, Bank of Cyprus and the Popular Bank of Cyprus (Laiki Bank), which is being wound down as part of a 10-billion-euro ($13 billion) bailout agreement between Cyprus and an international group of lenders.

Banking on pretty tiles

Lebanon’s Credit Bank has dashed ahead of current demand and competition by implementing the region’s first e-banking solution on Windows 8, Microsoft’s multi-device operating platform. Credit Bank’s Windows 8 app gives users access to online services across the contemporary gamut of connected computing devices, from PC to tablet and smartphone. The range of Windows 8 is still limited, especially in the important mobile segment, but the bank went ahead with commissioning the app because it wanted its online services to be compatible with all platforms in the market, said Hanadi Saad, Credit Bank’s assistant general manager of retail banking. “The main vision was to provide our customers with what they will look for, in anticipation of consumer demand. Sooner or later they’re going to ask for it so we wanted to be the first.” According to Saad, the adoption rate of e-banking by the bank’s clients is around 20 percent, with expectation of significant growth. While glowing in colorful tiles, the app offers a meager set of standard options. That the advertised functionalities are skewed toward offerings such as “Checkbook Request” or “Change Session Time-Out” is no fault of the bank, as no platform innovation can change that Lebanon is an awful laggard in online banking regulations. “We definitely need the central bank to follow us with legislation and further e-banking functionalities,” Saad said. E-banking plays a major role in Credit Bank’s ongoing redesign of its identity and branches.

April 16, 2013 0 comments

Economics & Policy

Economy goes from slow to sputtering

by Executive Editors April 16, 2013

written by Executive Editors

Lebanon’s real economic growth was a meager 0.8 percent in 2012, according to the most recent evaluations from The Institute of International Finance (IIF), compared to an expansion of 1.8 percent in 2011. The downturn was primarily attributed to rising political tensions, declining domestic security and the Syrian conflict. Real private consumption was calculated to have increased by 3 percent in 2012, compared to 3.7 percent in 2011, while private investment contracted by 3.7 percent following a fall of 3.5 per cent in 2011. What is more, the IIF stated that the foreign direct investment represented a paltry 2.7 percent of gross domestic product in 2012, whereas it had amounted to 8.8 percent in 2011. The most recent figures from the Ministry of Finance (MoF) compound the bleak reflection on 2012, revealing a 67 percent increase in the fiscal deficit to reach $3.93 billion compared to 2011. The MoF based its monthly fiscal results on the Ministry of Telecommunications estimate of telecom receipts, which reached $1.3 billion in the first 11 months of last year, rather than on the funds actually received at the treasury. Although the MoF’s figures revealed that the cost of debt servicing decreased by 3.1 percent year-on-year over the first 11 months of 2012 to $3.4 billion, the IIF noted that the debt-to-GDP ratio actually increased to 140 percent, compared to 136 percent in 2011. This was the first such increase since 2006 and the IIF called on the government to implement measures to reverse the widening fiscal deficit.

Mikati, Hariri families’ billionaire rankings

Six people from Lebanon feature on Forbes Magazine’s annual survey of the world’s billionaires; four hail from the family of former Prime Minister Rafiq Hariri and two from the family of recently-resigned Prime Minister, Najib Mikati. Indeed, Najib and his brother Taha Mikati ranked 384th place, down from 377th, despite the fact that their net worth grew to $3.5 billion each, up from $3 billion in 2012. The Mikati brothers are followed by Bahaa Hariri in 613th place and his brother, former Prime Minister Saad Hariri, ranked 792nd, down from 764th on the 2012 list, despite his personal fortune being estimated to have increased $200 million to reach $1.9 billion. The Mikati empire was built in telecoms, with the brothers founding Investcom in 1982 and selling most of their stake to South Africa’s MTN group in 2006; they remain the largest single shareholder through the holding company M1 Group. M1 Group investments include real estate, jet leasing, retail and industry. The Hariri family fortune includes investments in Saudi Arabia, other Arab countries and Europe, in the real estate, banking, telecommunications and media sectors. The richest man in the world is Carlos Slim, a Mexican national of Lebanese descent, and his fortune is estimated at $73 billion.

Modified stimulus

The Banque du Liban (BDL), Lebanon’s central bank, made some modifications in late February to the stimulus package mechanism announced in mid- January. Intermediary Circular 318 stipulates that banks operating in Lebanon can benefit from financial facilities from the BDL totaling up to $1.47 billion against guarantees from beneficiary banks, compared to $1.46 billion in the mid-January circular. The loans are to be extended on a first-come first-served basis with a fixed rate of 1 percent per month. The banks can take from the BDL advances equivalent to between 15 and 60 percent of loans offered to the productive sectors, 60 percent of non-housing loans extended in local currency, 100 percent of loans to small and medium sized enterprises (SMEs), 100 percent of loans that finance higher education, 150 percent of credits allocated to research and development in local currency, between 30 and 150 percent for loans extended to finance environmentally friendly projects and between 60 and 100 percent of allocated housing loans. Intermediary Circular 318 indicated that banks would not benefit from reductions in reserve requirements for these loans. The BDL also announced that it had allocated $817.2 million to housing, $353.6 million to environmentally friendly projects, $146 million to productive sectors, $79.6 million to non-housing loans, $33.2 million to education loans, $14.9 million to research and development projects and SMEs with $6.6 million.

Pricier power

Between January and October 2012 the treasury transferred $1.8 billion to the national energy utility, Électricité du Liban (EDL), an increase of $446 million from the same period in 2011. The most recent figures released by the Ministry of Finance show that over the first 10 months of 2012, $1.8 billion of the transfers were used to reimburse Kuwait Petroleum Corporation (KPC) and Sonatrach for fuel oil and gas oil purchases, $71.27 million for debt servicing and $9.33 million as treasury advances for value added tax payments. The increase in transfers was partly offset by a $36.67 million decrease in natural gas purchases from Egypt. The largest increase came in the fuel bill from KPC and Sonatrach, which increased by 31 percent year-on-year, mainly due to increases in international oil prices. 2012 payments reflect consumption over the period May 2011 to May 2012, where the weighted crude oil average prices were $113.35 per barrel. The January to October 2011 payments reflect consumption over the period June 2010 to May 2011, where crude oil prices averaged $93.3 per barrel. The proportion of the oil bill funded by EDL in recent years has declined; from January to October 2010 EDL paid 11.4 percent out of an oil bill of $1.08 billion; over the same period in 2011 they contributed 6.4 percent of $1.47 billion; and for the same 10 month stretch in 2012 EDL stumped up just 3.7 percent of a $1.8 billion fuel ticket.

Strikes build steam

As his parting shot before resigning from his post in late March, Prime Minister Najib Mikati referred the public sector pay hike proposal to Parliament. Teachers and staff across the public sector had been on open-ended strike since February 19, staging a series of protests at key ministries, the airport, the Beirut Port and the Presidential Palace. The Union Coordination Committee launched the industrial action after Mikati had previously failed to refer the law to Parliament. Following Mikati’s decision, Minister of Finance Mohamad Safadi said the draft law would be “economically devastating” for Lebanon. The pay scale hike, which hasn’t occurred in 16 years, is expected to cost around $1.2 billion dollars per year. The draft law contains, among other measures, increased valued-added tax on certain luxury items, charges for construction violations and a 15 percent capital gains tax on real estate transactions. The proposal would also see the working week increase to 35 hours and the retirement age rise from 64 to 69. The proposal has faced fierce opposition from private sector lobby groups citing sluggish economic growth, inflation of around 10 percent and a fiscal deficit that ballooned last year by 67 percent to reach $3.93 billion.

Damming the Jeita Grotto

The Ministry of Energy and Water (MoEW) embarked on the first construction phase on the Janaa Dam along the Nahr Ibrahim river, despite warnings about the efficacy of the project and potential harm to the world-renowned geological tourist attraction, Jeita Grotto. The dam would be the second largest in Lebanon after the Qaraoun, at 165 meters, and a storage capacity of up to 95 million cubic meters and is slated to provide 18 million cubic meters for the Jbeil area and 20 million cubic meters to the capital Beirut. A report drafted by the German Federal Institute for Geosciences and Natural Resources warned that the dam is being built in an area that leaks large quantities of water into underlying networks that feed the Jeita cave network. If the initial findings are correct this could undermine the intended water storage purpose of the dam as well as the stability of the cave network, yet the MoEW has staunchly denied the veracity of the report’s findings. A further 10 dams are scheduled to be built across Lebanon this year.

April 16, 2013 0 comments

Finance

‘Lebanon remains a growth market’

by Thomas Schellen April 16, 2013

written by Thomas Schellen

London-headquartered, finance multinational HSBC is a stalwart of foreign banking in Lebanon, and Executive has consistently inquired with its senior management over the years about the bank’s strategies and views on the country. Logically, we did not let the opportunity skip by to be the first to sit down and chat with Peter Yeates, the British banker who has just taken the baton from Francois-Pascal de Maricourt as the new chief executive of HSBC Lebanon.

What are your first impressions of the Lebanese business climate?

It has been an exciting four weeks since my arrival and my first impressions are that this is a busy place, there is a lot to do and people are extremely welcoming. I have a really good feeling about our customer base and our staff and the enthusiasm that we have for business. I am picking up from somebody who has built a very well-managed and profitable business and am looking forward to the future.

In today’s global banking terms, where risk-based capital and the Basel regulations are paramount considerations, how can a market like Lebanon remain interesting for a global bank of the size of HSBC?

In 2011, we came out with our new group strategy that is based around five filters to determine if we like a market we are in or a job we are doing. The first one is to have a decent return on equity. Lebanon has been a growth market and we have been able to generate a good return on equity. The group set a benchmark of 12 to 15 percent. We are able to generate return on equity in excess of that, which is important. The cost efficiency ratio is the second filter and the group set a target for 48 to 52 percent cost efficiency. This is an important target to hit and we are investing in places that have the revenues to justify the cost that you spend. Thirdly, you have to be able to generate your own liquidity. It is important to generate that deposit base in order to fund your lending and we have been able to do that.

What are the other two filters?

The fourth one is the size of the economy. The economy of Lebanon obviously is not the United Kingdom or the United States. But the connectivity of the economy and the connectivity of the business is the fifth filter and Lebanon has incredible connectivity around the world. In terms of being an international bank connected to the region and the world and being able to fund trade business and cater to individuals and businesses that have connections around the world, that is really where we have an advantage.

Is your recent experience in private banking with HSBC in Miami an advantage for working in Lebanon, particularly in the area of connectivity?

Definitely. I have been with the bank for 29 years. Having worked 14 years in Asia, seven in Europe, three in the Middle East and seven years in the Americas, that experience, I think, gives you that connectivity to the world. You know the group, you know the geographies, you know people and the business lines. I haven’t always worked in one business line either. This is an advantage for me and I hope will it help in connecting Lebanon to the world as well.

Does the Lebanese market in Africa play a role for HSBC?

Africa is a market where we have a presence but it is not our strongest presence. The Lebanese diaspora has a big presence there but it has an even bigger presence in Latin America where we are extremely well represented.

Are you free to disclose some numbers on how well you perform on return on equity and cost efficiency filters? Are we within the 48 to 52 percent cost ratio?

We are comfortable with where we are in Lebanon in terms of this.

You said you are above 15 percent in return on equity. Can you tell us the exact return on equity ratio HSBC Lebanon achieved in 2012?

We try to be in that space, yes. However, I am afraid that I have to say that we don’t publish those numbers.

A main concern for international banking in the Levant is in the area of sanctions and compliance with requirements coming from the US and the European Union. Do those sanctions regimes and restrictions change your proposition for value generation in Lebanon in any way?

Obviously our focus is to comply with all the sanctions and all the regulatory requirements wherever we operate. It applies to us here in Lebanon as it will apply to any entity in the group anywhere in the world. In Lebanon, we do have geographic proximity [to sanctioned countries] and there might be more of an opportunity to come across this sort of business, but we are extremely diligent to make sure that we meet all the regulatory requirements. We are conscious of the fact that we haven’t always been perfect and we definitely made mistakes. We need to make sure that we don’t make any more mistakes.

Do you have your own compliance department in Lebanon?

We have our own compliance department in Lebanon and we invested hugely in our governance structure around the world. Investment in risk and compliance clearly reduces operational risk.

Can you put some numbers to that investment?

We have increased compliance staff to more than 3,500 globally and spent over $290 million on remedial measures in the US as of the year-end of 2012.

Would it be fair to say the emphasis on global compliance involves a specific mandate for you in terms of supervision of governance and compliance here in Lebanon?

Absolutely. It is very key to us that we are fully compliant with the local regulations and with the global standards that we have set ourselves as a bank. We no longer run ourselves as federation of geographically distributed banks. We have a global standard and run ourselves along business lines and functions and do so much more today than historically.

Where, then, is compliance positioned in your ranking order of priorities in managing the operation in Lebanon when compared with targets such as increasing the customer base or improving financial performance?

I would put it as probably our highest priority that we are fully compliant, in line with the regulations, and that we have the highest standards and values in what we are doing. I think our stakeholders are very focused on investing in a well-run, well-governed institution that has the highest possible reputation.

As an international banker on your level, what makes Lebanon attractive in your career planning?

[One attraction is] having the opportunity to lead a team like we have here and lead a business that is doing well and is well established. To learn about the Middle East and its complexities, this is also a very interesting challenge and something that I always wanted to do. I am enjoying the challenge of being here. It is tremendous.

Coming here I passed a billboard where your brand was exhibited with a smiley face on a golf course. Does that imply that you are expanding into the leisure market, or are you targeting as customers mainly the kind of people who can spend the afternoon on the golf course?

This is our customer relationship campaign. It is based around making people smile. There are things in HSBC that will make you smile and you will find them just by having the relationship with HSBC.

So what makes you smile the most?

[Laughs] That is a difficult question. Me as an individual? I think friends, family, enjoying good moments with people that are both warm and open and friendly and trusting, challenging situations and overcoming challenges, those are the sort of things that make me smile. And working with a good team, with people that are engaged and actually enthusiastic about what they do.

April 16, 2013 0 comments

Comment

Negotiating chaos

by Farea al-Muslimi April 16, 2013

written by Farea al-Muslimi

It was like a scene from a great novel: Yemen’s most famous feminist screaming incandescently at the country’s most powerful tribal sheikh. Cameramen gathered round, eager to record history as Amal Basha told Shiekh Sadiq al-Ahmar exactly what she thought of him inside the conference hall that hosts the country’s already faltering National Dialogue.

Like most good rows, it started over something seemingly innocuous – the choosing of chair of a committee. The day before it seemed that consensus had been reached behind closed doors meetings that feminist Nabila al-Zubair would take charge of the body debating the future of the disputed city of Sada’h. But Ahmar, under pressure from his religiously conservative Islah party, changed his mind, sparking Basha’s ire.

For both the Islah movement and the Houthis of the north, Sada’h has particular resonance. It has been the scene of many of the most brutal clashes in the country in recent decades, with tens of thousands killed. For both sides, the city is roughly akin to what Leningrad meant to Stalin.

Both Islah and the Houthi leaders had agreed that an “independent” figure should chair the committee, but they were both pushing frantically for the right kind of independent to suit them. Ahmar initially backed Zubair but pulled away and tried to get a friendlier figure into the role.

Eventually, following his public flaying, the sheikh backed down and the secularists won this particular struggle. Speaking after Zubair’s appointment was confirmed, Basha smiled and commented, “the battle was won”.

While arguments should rarely be celebrated, the confrontation was a truly unique event. Rarely before has a citizen been treated on an equal footing to a high-level sheikh. The fact that she is a woman makes it even more special; in a highly patriarchal society such debates do not happen.

Outside the conference hall, it is unlikely the sheikh would have had to defend his actions. Normally he is surrounded by tens of heavily armed tribal bodyguards preventing critics from reaching him. But one of the conference’s rules is that all participants enter without any weapons, regardless of their status. In order to guarantee their safety the Movenpick Hotel – the most expensive hotel in Sana’a – has been turned into a fortress. Citizens are not allowed close to the premises and security forces prowl the perimeter. Yet even this has not stopped all violence. Last month, Abdo Abu Ras, the Houthis’ representative at the negotiations, survived an assassination attempt as he left the debates, though three people were killed in the attack.

Strange bedfellows

The irony, of course, is that two years ago Basha and Ahmar were on the same side – calling for the downfall of Yemeni President Ali Abdullah Saleh. Ahmar’s decision, in May 2011, to formerly back the uprising was a key moment in Saleh’s downfall, with numerous other tribal leaders following suit in the months that followed.

Saleh has now gone — though he continues to have significant influence — and the two sides that shared a political cause are now at each other’s throats over social issues. In the middle of her tirade, Basha accused Ahmar of treachery for claiming to support the goals of the revolution yet refusing to back a woman for a senior position.

These kinds of disputes are perhaps an inevitable consequence of such a fundamental debate over the future of a diverse country that has suppressed debate for so long. The dialogue has brought 565 delegates from across Yemen’s diverse society together — revolutionaries, businessmen, sheikhs, politicians and warlords all rubbing shoulders. While the decision by key southern separatist groups to refuse to attend has hurt the dialogue’s legitimacy somewhat, it is still possibly the most diverse group of Yemenis ever found in one hall.

With a country in flux, strange alliances form and break apart in the hall. Revolutionary youth movements chat to those who two years ago were calling for them to be crushed, tribal sheikhs that were at war a year ago embrace as if long lost brothers. For the representatives of peaceful secular movements, they have to hope the negotiations can succeed – outside the Movenpick their words are much less powerful than the AK47s that Yemenis have become all too accustomed to solving their debates with.

Yet no matter the result, there are positives to be drawn from the forced interactions of the country’s myriad of different political groups. Pessimistic Yemenis are convinced that the dialogue will end in a vicious civil war, while those of a more optimistic nature hope to see meaningful solutions to the country’s biggest issues. Either way, the national dialogue is the most diverse political rally in the history of Yemen.

Farea al-Muslimi is Executive’s Yemen correspondent

April 16, 2013 4 comments

The Buzz

Morning briefing: 16 Apr 2013

by Executive Staff April 16, 2013

written by Executive Staff

Economics and Policy

The IMF and the Tunisian government have reached agreement on a $1.78 billion precautionary loan which will be announced later today.

More from Reuters

Bank employees in Lebanon have vowed to stage fresh protests and sit-ins on April 28 to press their demand for the renewal of a 2008 collective labor agreement.

More from The Daily Star

Syria’s central bank set the exchange rate of the pound at $95.30 Monday, in a move aimed at propping up the country’s currency.

More from Reuters

Odeabank AS, owned by Lebanon’s Banque Audi Sal-Audi Saradar Group, said it may consider acquisitions in Turkey, where chief executive officer Huseyin Ozkaya is seeking to attain a top-15 position for the bank.

More from Bloomberg

Qatar Petroleum International and Exxon Mobil Corp signed a memorandum of understanding on Monday to assess jointly unconventional gas resources in North America and global opportunities in liquefied natural gas (LNG).

More from Reuters

Emirates NBD, Dubai’s largest lender, expects its retail lending to jump between 25 and 40 per cent in 2013 as consumer confidence returns in the United Arab Emirates, its retail banking head said on Monday.

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Indebted telecom operator Zain Saudi said it narrowed losses in the first quarter as revenue rose and financing costs fell.

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April 16, 2013 0 comments

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Public policy missed the train

by Thomas Schellen April 15, 2013

written by Thomas Schellen

I enjoy action thrillers. But when it comes to cinematic car chases, I suffer from acute thriller fatigue. Why am I bored by watching unrealistic, brain-numbing races in urban or rural traffic? Perhaps it’s because I live in Beirut.

No ride down San Francisco’s Lombard Street or race along the Cote D’Azur holds half as much opportunity to observe risky and stupid — not to mention rude and reckless — traffic behavior as time spent at a Beirut intersection. I never know if first to scream, weep or laugh. I usually end my corner time just shaking my head and walking away laughing at the intensity of our human folly.

The buses and taxis that comprise the totality of the country’s public transport system play a role in this urban traffic disaster. In Beirut, you find no privileged lanes for mass transit and no rules giving buses priority over cars. Information flows only on the individual level and one would be an idiot to ask for schedules. Bus drivers are steering outmoded and polluting wheeled boxes with worn-down seats along impossible streets, and mini-bus passengers are ferried by drivers without a trace of professional driver training. And if you want to honestly discuss train service, be ready for a sad story. Why should it matter then, to talk about public transport options in Beirut?

Morning briefing: 15 Apr 2013

by Executive Staff April 15, 2013

written by Executive Staff

Economics and Policy

Iran wants oil prices to stay above $100 a barrel, its oil minister said on Sunday after crude touched nine-month lows near $101 on Friday and ahead of OPEC's next meeting on May 31.

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Lebanon's public debt rose 8 percent to $58bn at the end of January from the same month a year earlier, according to data from the Association of Banks in Lebanon.

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Egypt expects its economy to grow by 2.5 percent in the fiscal year ending in June, its planning minister said in remarks run by state news agency MENA on Sunday, cutting the forecast for a second time this year.

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Elsewhere on Sunday, Cairo’s central bank held an exceptional foreign exchange auction for $600 million to cover strategic imports such as wheat, meat and cooking oil.

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Companies and Business

Leading Lebanese banks’ profit growth will be on the upswing in the first quarter of 2013, according to FFA Private Bank market research.

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Private companies need to do more to attract Emiratis, focusing on career progression and other benefits rather than wages, a UAE government official has said.

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Dubai Islamic Bank (DIB), the largest sharia-compliant lender in the emirate, has announced its first-quarter net profit climbed 17 per cent, after the bank posted strong asset growth since December.

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April 15, 2013 0 comments