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Comment

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? 

See also: Buses bought to die

Photos: Lebanon's historic train route

Because this city has so much underused potential, even in transport. First, Beirut is a comparatively small city in geographic terms. Unlike Istanbul or Cairo, it is no mega-conurbation of 10 million or more inhabitants. Its metropolitan area is 27 to 33 times smaller than those two cities. With such compactness and a well-educated populace, it should be a piece of cake to implement an urban commuting structure that can make Beirut one of the most productive knowledge cities in the world. Second, this city has mystifying survival qualities, even in transport. The total breakdown of Beirut traffic, while a daily and always increasing possibility, has not happened. I believe this is owing to the amazing flexibility of the Lebanese, their readiness to use the smallest opportunity and live with chaos as a co-operating principle of society.

But be not mistaken. While Beirut traffic is a no-entry-fee entertainment option with a highly reliable thrill factor, it is a painful burden on the national economy. When activists credibly claim that a two-hour commute from northern and southern suburbia could be condensed to 30 daily mass-transit minutes, what they are really saying is that many of us waste 15 or so percent of our economic productivity on vehicular insanity. Imagine that as an annual deduction from your savings account.   

Assessing the real price of having no true public transport in Lebanon is important because cities are organisms of opportunity and cost. Even mega-conurbations with more than 10 million inhabitants can keep growing and improving if they can magnify economic opportunities. However, in a recent work on the decline of economies, Scottish historian Niall Ferguson said, “The net benefits of urbanization are conditioned by the institutional frameworks within which cities operate.”  

This raises the specter that Beirut and its urban economy could soon be doomed to perennial net losses and abandoned in non-competitiveness. Our road infrastructure is already in shambles because of dysfunctional institutions and so is our public transportation. 

In this situation, we don’t need populists in politics or media who take the bus once every decade to show off their commonness. We don’t need negative role models of traffic misbehavior from people in business and officialdom who treat the whole city as their park-where-I-please fiefdoms with their obnoxiously massive personal vehicles. 

Beirut and Lebanon definitely cannot afford losing more time bemoaning old toll-road concepts or betting on imported consulting schemes, and we certainly cannot afford sequels of corruption in procurement and hasty implementation of some half-assed public transport network.  

Quite simply, Beirut needs to invest in real urban transport solutions immediately, and in any which way possible. Perhaps we can get ourselves motivated to do so if we study the real cost-benefit story of investing in urban infrastructures and understand that we will lose big money if we further postpone creating privately managed, accountable and economically beneficial public transport.   

 

Thomas Schellen is Executive's MENA business editor

April 15, 2013 0 comments
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The Buzz

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.

More from Reuters

 

 

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.

More from Arabian Business

 

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.

More from Reuters

 

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.

More from The Daily Star

 

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.

More from The Daily Star

 

Saudi Arabia's largest lender by assets, National Commercial Bank (NCB), posted a 19.4 percent increase in first-quarter net profit on the back of higher special commission and fee income, it said on Sunday.

More from Arabian Business

 

Dubai Islamic Bank (DIB), the largest sharia-compliant lender in the emirate, said on Sunday its first-quarter net profit climbed 17 percent, after the bank posted strong asset growth since December.

More from Reuters

 

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.

More from The National

 

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.

More from Reuters

April 15, 2013 0 comments
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Economics & Policy

Buses bought to die

by Zak Brophy April 15, 2013
written by Zak Brophy

Transportation within Lebanon, especially within the greater Beirut area, has become synonymous with congestion and chaos. The system is built, almost entirely, around the personal car with a road network that is severely wanting in both quality and structure. Tragically, public transport has become little more than a scarce afterthought. “If we carry on along this path then we are just building one giant car park,” warns Elie Helou, transport engineer at the Council for Development and Reconstruction (CDR).

See also: Photos: Lebanon's historic train route

Public policy missed the train

The Minister of Public Works and Transportation, Ghazi Aridi, has been grabbing headlines for months with promises to deliver on a signature policy of his to purchase a fleet of 250 buses. In mid-January the ministry proceeded with the tender for the fleet and the delivery of the buses is expected by late summer. Could it be that Lebanon is finally moving towards integrating public transport initiatives into the mix? History gives reason for caution and the fact that past mistakes have compelled negligible reform gives reason to be outright cynical.

Crash and Burn in ‘75

Lebanon used to have the most advanced transport system in the Middle East, with trams, buses and trains accompanying the rise of the personal automobile. However, the fraternal infighting that ripped through the material and social fabric of Lebanon during the civil war from 1975 to 1991 laid waste to this sophisticated transport network. 

In the postwar period the emphasis has been almost entirely on more cars and more roads, and there is now almost one car for every two people in the country. It is no small irony that the Lebanese addiction to the motorcar is one of the most immobilizing ailments within this society.

“We missed a great opportunity in the 1990s… to rebuild the system in a modern and sustainable manner,” says Youssef Fawaz, executive director at Al Majmoua Lebanese Association for Development. As the tarmac capillaries of the nation were restored and built upon, insignificant consideration and calculation was given to the design of this system. Instead, outdated plans from the pre-war period were dusted off, superficially tweaked and put into action. And so it was that the foundations for gridlock were laid. 

The organs of government were even more battered and incapacitated by the war than the nation’s infrastructure. To overcome this hindrance, the reconstruction program, led by former Prime Minister Rafiq Hariri, encompassed the creation of the CDR, which is essentially a contracting agency for the government whose projects are primarily financed by external donors. 

The theory back in the day was that the ministries would eventually be developed and staffed to a level where they could implement their own infrastructure programs. That never transpired, and it is still the CDR that designs, raises the funds for and implements the country’s major transport infrastructure projects.

In 1995, the government sanctioned the CDR to carry out a greater Beirut transport plan, which included detailed road building projects, traffic management schemes and public transport proposals. Almost 20 years later and projects, such as parking meters and a centralized traffic control center, are only now coming into effect. 

A number of the road developments have been constructed, although often piecemeal and delayed. One of the major mistakes of postwar transport regeneration was to postpone the building of the Greater Beirut ring road, which was to be the “backbone to all the other roads,” according to the CDR’s Helou. If this vital artery were to be built now, the government would have to stump up around $1.2 billion for expropriation due to highly inflated land costs — international donors will not fund these expenses.    

Most of all, there is a glaring gap between the CDR study’s public transport recommendations and the reality. The mass transit network was meant to include bus, rail and metro systems and was slated to capture about 15 percent of all trips in the greater Beirut area. What has actually come to transpire is a handful of bus lines running ad hoc, unreliable and slow services on outdated and dirty buses. There has quite simply been no political will to advance the proposals regarding public transport, write them into policy and mandate the CDR to turn them into reality. 

Aside from the bus service, one of the main components of what could, at a stretch, be called public transport is the service system of shared taxis. This however, is also highly inefficient and ill conceived, and any kind of reform is likely to be highly costly. The red plates that all services and buses hold are the private property of their owner and are almost completely unregulated. “The red plate services have an occupancy of around 1.2 people, which is very low. It is a hugely polluting and congesting system, and the drivers only scrape by a living,” explains Fawaz. 

As far back as 1994 Nakkash and planners within the CDR proposed that the government buyout a significant share of the plates as they were relatively cheap and it could have helped lay the groundwork for other transport reforms. But it was not to be, as the lawmakers, inspired by little more than political expediency, decided to issue thousands more red plates. The consequence today is that any efforts to reduce and regulate the red plate system is likely to be highly politically contentious and involve significant payouts.

 

Bad policy piles up

With this rather ignominious track record on public transport during the postwar era, the minister’s plans to buy a fleet of buses clearly requires some inspection. Buying things is easy for politicians — in fact, it serves their cause with vote-winning headlines and budget boosting funds for their ministries — but sustaining those purchases is much more taxing. “Buying buses is the first and simplest process in a long cycle,” says Nakkash. “It needs management and organization behind it, and frankly this is not present.” 

Ingloriously dumped in the old train yard in the Mar Mikhael district of Beirut, lie dozens of rusting, deflated and broken bus carcasses, testaments to public transportation policies tried and failed. Many are the remnants of 200 buses that were purchased in 1998. Due to bad policies and half-hearted implementation, however, only a dozen or so remain on the roads. Those that were scrapped to Mar Mikhael are a sad reminder of how ill conceived policies only add to the detritus of Lebanon’s neglected public transport sector. “Public transport is beyond being sidelined. There is no real debate,” laments Fawaz.

So what of the 250 buses that the incumbent ministry is purchasing? The intention is that they will form part of a fully integrated network with 910 bus stops throughout greater Beirut, for which the government has already allocated $33 million. With a World Bank grant, American IBI Group and Lebanon’s Team International were selected to carry out initial studies for the                  bus network.

“Buses will have Global Positioning System (GPS) with a control center in the ministry [of transport] to overview all the lines; the bus stops will have message signs which show the number of lines, the destination, the expected arrival time, etcetera, and the ticketing system will also be of international standards,” explains Abdel Hafeez Kayssi, director general of Land and Maritime Transport since 2000. 

While beginning with greater Beirut, Kayssi expects the network to eventually cover all of Lebanon within five years, at an estimated cost of $75 million. As for funding, he says that the goal now is to have success with the pilot project in greater Beirut, “then international funds can be encouraged [to finance the network] for outside greater Beirut.” 

Sounds good, right? The problem is that the same administrative and organizational inadequacies that ultimately resulted in the scrapping of the bus fleet in Mar Mikhael have not been addressed. As things currently stand in the sector, there are a number of overlapping bodies with unclear jurisdictions that are oftentimes understaffed and under-resourced to fulfill their mandate.

At the top of the pile is the Ministry of Public Works and Transport, a feeble public body with scant resources subject to the same obstructionism and political tomfoolery present throughout most government departments. There are a number of skilled and concerned individuals within the ministry, as Kayssi seems to exemplify, but in its entirety the ministry does not have the institutional wherewithal or talented workforce to lead such large-scale projects. “How can you run a ministry with just a handful of good people? It’s not possible,” frets Nikkash.

One of the largest obstacles to the implementation of this bus network is the fact that the ministry has put the cart before the horse by pushing ahead with the procurement of the buses before defining its relationship with the local municipalities. In almost every city in the world, public transport is managed at a municipal level, but in Lebanon successive ministers of transport have ensured that it remains under their purview. 

Public transport is rarely financially self-sustainable, so municipalities have to subsidize it — normally around 10 to 22 percent of ticket prices. The alleviation of  congestion justifies the cost. “How can you have public transport managed by the Ministry of Public Works and Transport and financed by the municipalities? It is not possible,” reasons Rachid Achkar, council member and transport specialist within the Municipal Council of Beirut. 

Even if the ministry had been engaging in meaningful cooperation with the Municipality of Beirut — which it has not — there would still be a major problem in that the greater Beirut area is actually a conglomeration of around 50 municipal councils. The folks at the Municipal Council of Beirut are pushing for both a high authority for transportation within government and a federation of municipalities of the greater Beirut area. The Minister of Interior at least has given a verbal agreement to the creation of the federation of municipalities. “We are ready to cooperate and share in the costs of operating this system,” says Achkar, “the Ministry [of Public Works and Transport] is perhaps starting to be ready.”

The other gray zone that should be of concern to any observer is the role of the private sector in the operation and maintenance of the bus network. The government’s track record of private sector engagement could be called shoddy at best and few measures are in place to suggest the case would be any different in the case of public transport. 

It is common international practice for transportation regulatory agencies to plan the system, set routes to be tendered to the private sector and to ensure the safe, efficient application of these agreements. However, “the regulatory capabilities are very, very, very weak and there is currently no organization which has this function,’ warns Nakkash. 

Decongestion derailed

The regeneration of the old coastal train line is an idea that has been regularly aired over the years as another area of Lebanon’s looming public transport revival, and sure enough it is part of the transport reform Kayssi states the ministry is pursuing. With the coastal line of Abboudieh to Beirut as a first priority, its upgrade has been divided in three parts: first, the 35.5 kilometer northern coastal line from Tripoli’s port to Abboudieh; the second part goes from Tripoli’s port to Tabarja and runs 70 kilometers; and the final part covers the 20 kilometers from Tabarja to Beirut.

These, however, are old plans and there is little reason to suspect that their implementation will be realized any time soon. Not because it is impossible but because there has been little demonstrable political will.

Although there has been some encroachment on the route, it could easily be restored and put to use. A wise use of this throughway could substantially alleviate the traffic load on the corridor running north of Beirut, which is perhaps the most chronic bottleneck in the whole of Lebanon. Peak time traffic is reduced to a crawling, smoggy column of cars and trucks and there is virtually no scope for extra road capacity. An alternative solution is clearly a necessity.  

Numerous studies have analyzed the different potential uses of this unused causeway including heavy rail, light rail or bus rapid transit (BRT) – a route that is only used by buses but functions like a light railway with fixed passenger platforms. All offer different benefits but the BRT is the least capital intensive and perhaps the easiest to implement. But alas, “You need to have a clear policy and someone to champion this policy, but sadly neither of these exist,” laments Nakkash.

A badly needed tune-up

The lack of any serious public transport program within Lebanon means the country is riding on a crumbling chassis. The economic, social and health costs of traffic congestion are only going to get worse until there is a serious political will to cede some authority to those specialists who actually have the ability and vision to advance a meaningful public transport policy. 

It will take a lot more than a bunch of buses to solve the problem. There are achievable solutions and there are talented and experienced people to implement them, but reform and rejuvenation of the administration need to precede headline grabbing shopping sprees. Until that happens, the slow choke toward gridlock will persevere.      

April 15, 2013 0 comments
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Economics & PolicyLebanese in New York

Q&A-Nawaf Salam

by Yasser Akkaoui April 12, 2013
written by Yasser Akkaoui

There is only one Arab seat on the 15-member United Nations Security Council, which rotates every two years among the 22 Arab countries. That means Lebanon is offered the seat only once every 44 years. It can only be called serendipitous, then, that when the most sweeping change to come to the Arab world in the modern era began in early 2011, Lebanon was in this seat. Nawaf Salam, the permanent representative of Lebanon to the United Nations, sat with Executive in New York to discuss what it was like being privy to, and influential in, the international power plays that took place in constructing the collective global response to these historic times in our region.

 

You have acted as the Lebanese Ambassador to the Untied Nations during very exciting times, when political and economic powers have been shifting worldwide. What can you tell us about the changes you have witnessed?

They are indeed exciting times. First… it was a big challenge. You may recall the Lebanese political establishment was divided as to whether we should go for the seat in the Security Council or withdraw our candidacy. Not running at the last moment would have sent the worst signal, I think: that we are incapable of making decisions, that we are a failed state. I was supported by President Sleiman and [Fouad] Siniora, who was then Prime Minister, to see this as an opportunity to prove to the world that we are a state that is recovering and rebuilding its foreign policy, and also to project a different image of Lebanon, far from the images of a battle ground or divided country. 

Related articles: Eight top Lebanese on Wall Street

When the Lebanese aimed for the stars

Two: the exciting times were mainly because of the Arab Spring, and I was on the council when it started in Tunisia and the fall of Egypt. In both cases, the council didn’t interfere but in Libya, the council played a critical role and Lebanon, being the only Arab member in the council, was the most critical country in the council.

[Also], we had to present, as the only Arab country in the council, the Palestinian case for membership in the UN, and so we had to develop the legal and political briefs in defense of Palestinian statehood and the right to be a full member in the UN.

Finally, we had to handle Syria. I think the lessons to be drawn from the handling of Syria are in the disassociation policy we ended up adopting and are important to the future of Lebanese foreign policy. 

 

You represent a Lebanon, whether on the council or not, that is divided into extremes. How do you manage this equilibrium when it comes to, for example, the ousting of former Libyan leader Colonel Muammar al-Qadhafi?

Qadhafi was easy for the world, easy for the Arabs and easy for Lebanon. Syria was much more difficult. Yemen was not very easy. Qadhafi was easy because he managed to antagonize everyone: the Americans, the French, the Russians were not very happy. He also isolated himself in the Arab world to the point where it was really easy… for the Arab League to decide to suspend Libya’s membership. 

Domestically, the unity against Qadhafi was easy, despite of his Arab alliances… because of the Musa Sadr affair. Libya is actually a good example because it shows you that when you have a united domestic front, your margin to maneuver becomes significant and we were really able to play a leading role on the Security Council and in the Arab group because I had the clear support back home.

On other issues, yes Lebanon is divided, but we are not an exception as many countries are divided — Belgium, Bosnia… we are not a unique situation. However, because the situation was so polarized in Lebanon, we had a much more difficult time than others, but the general rule is the following: despite the outcome of unity you see in positions of any state, foreign policy is the result of two processes, domestic negotiations and international negotiations. 

Within each and every state there are different domestic players with different interests who seek to influence the decision of their country… for example, [with regard to] Iran, where Lebanon was divided, I voted for abstention, though Lebanon was divided on that and we were not alone in abstaining… our main agenda is to protect the interest of our country, to preserve our national unity and stability… These are the most important factors for us and there is no shame in that. Lebanese are not used to thinking like that. We always think of the interests of other countries, but the unity of this country is the most important.

 

How difficult was taking a stand in Egypt compared to Libya and Tunis?

We did not have to take a position in the council regarding Egypt as it never reached the council since it ended in 18 days and [President Hosni] Mubarak fell.

Libya was hard in several places. It was the first time that the responsibility to protect involved the use of force. [Qadhafi] was heading to Benghazi so how do you stop him? The use of force was authorized [by] all members. The Russians and Chinese [abstained]. What turned it into an operation was that NATO took the lead. In the referral to the International Criminal Court, we were seeking to influence Qadhafi’s entourage more than Qadhafi himself. But here we had Qadhafi and his son Saif who said they will show “rivers of blood”. It was not a hypothetical issue and the end game is known on his part. 

 

The reaction of the international community after the assassination of [Lebanese security chief] Wissam el-Hassan seemed to show a determination to preserve the then government and that it is not our turn for change, until Syria’s situation is over. Are there winds of change coming toward Lebanon?

There are winds of change blowing in the region. They are good winds because they shook the stagnation that has been there for so long. But what really has changed between before [former Tunisian President Zine El Abidine] Ben Ali and Mubarak and after Ben Ali and Mubarak? Under them, it was more of the same and there was no perspective whatsoever, nothing was possible. Now everything has become possible, post Mubarak and Ben Ali. These transitions are going to see ups and downs, of course, but you now have real empowerment of the people and this is irreversible: the genie and people are out of the bottle. They may not get it right from the beginning or consistently but there is a mechanism that will auto-correct. 

 

You witnessed the Palestinian quest to become a member country in the United Nations and the powers within the U.N. for and against. What are the lessons learned?

It’s true that I followed the bid for statehood from day one. I spent hours with them and they are both unprepared and facing a tough lobby. But, big scale, it shows that though slowly and in an incremental way the question of Palestinian statehood and its recognition, and ultimately its membership in the UN, has been put on the right track and it is very difficult to stop. 

Even though it is a state under occupation, it is still recognized as a state. They have all the requirements of a statehood: people, territories, government… the problem is that it is a state under occupation but that does not undermine its statehood but places a burden on the international community to end its occupation and grant it a full membership in the UN.

I think that the elements of a final solution are known, whether what to do with the settlements (two percent [of built-up area]) or frontiers (the 1967 borders, plus or minus). Jerusalem will remain united but the capital for two states and with a sort of internalization of the Holy Land. 

There is more than one formula to address the refugees and the right of return to Palestine… what is missing are two things: the right package of frontier and security and international guarantees to the two parties. The only player that can do this is the American administration; they have to show leadership. They need an end-game package deal approach. Step-by-step confidence building will take us nowhere today. 

Putting the parties on the same table and getting them to talk will lead to nothing as they have been talking since Madrid, for 20 years, and yet nothing has really happened to close the deal… Without the [United States], this will not be achieved and yet the US, left to its own devices, will not do it. So here you need the European community and you need greater Arab involvement [to pressure the US]. I really believe in this. 

April 12, 2013 0 comments
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The Buzz

Morning briefing: 12 Apr 2013

by Executive Staff April 12, 2013
written by Executive Staff

Economy and Politics

Egypt’s bourse hit a two-week high on Thursday after Qatar and Libya pledged $5 billion in funding to the cash-strapped Arab country, while most Gulf markets also gain in earnings anticipation.

More from Reuters

 

Standard & Poor’s Ratings Services affirmed the long- and short-term foreign and local currency sovereign credit ratings of Lebanon at B/B, meaning the outlook remains negative.

More from The Daily Star

 

The cost of bailing out Cyprus has swollen to €23bn ($30bn), with the crisis-hit country having to take on the lion's share of the measures needed to avoid bankruptcy, according to a draft document by the country's international creditors.

More from Associated Press

 

Palestinian Prime Minister Salam Fayyad has offered to resign because of an increasingly bitter dispute with President Mahmoud Abbas over the extent of his authority.

More from Associated Press

 

Companies and Business

Arabtec Holding climbed to the highest in a month on investor bets the shares of the Gulf's largest publicly traded builder are cheap compared with Dubai-based property developers.

More from Bloomberg

 

Mubadala, the Abu Dhabi investment fund with a mandate to boost the emirate’s local economy, swung to a net profit in 2012, helped by improved margins at some of its core businesses and lower impairments, it said on Thursday.

More from Reuters

 

Lebanon needs to generate around 20,000 additional jobs per year over the next decade, the World Bank said in a highly critical study released Thursday.

More from The Daily Star

April 12, 2013 0 comments
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Economics & PolicyLebanese in New York

Rony Zeidan

by Maya Sioufi April 11, 2013
written by Maya Sioufi

Based in San Francisco working as an art director at eluxury.com — the e-commerce site of French luxury goods giant Louis Vuitton Moët Hennessy — flying out to New York every couple of months for photoshoots, staying at the Soho Grand Hotel, earning a decent salary: Rony Zeidan had it good. But in 2002, he left it all behind, moved to the Big Apple and crashed on a friend’s couch.

“Everyone thought I was insane because I had a great job, but the company was going down a more commercial and less creative direction and it wasn’t my vision,” says 35-year-old Zeidan as we sit in the offices of his four-year-old company, RO New York, a boutique modern luxury design and advertising agency. Eluxury.com eventually closed down in mid-2009.

As a child in Lebanon attending Saint Joseph School in Cornet Chahwan, Zeidan wanted to become a fashion designer, drawing sketches to show his uncle who had an atelier in Beirut. As he eventually decided to study a broader spectrum of design, he moved to California and graduated from San Jose State University with a graphic design and photography degree — entirely self-funded through different jobs from working as a file clerk at a technology company to working at a fried chicken restaurant.

With a passion for fashion, Zeidan was naturally drawn to New York, the trend- setting capital. With an internship and some freelance experience at Donna Karen, Zeidan’s first full time job in the capital of fashionistas was as art director at Ralph Lauren, “not my favorite brand at the time, as what I liked was Balenciaga,” he says.

Three years after moving on from Ralph Lauren to join advertising agency Kraftworks, Zeidan’s not-so-favorite brand was back to push him up the career ladder again. This time as global creative director for Ralph Lauren fragrances at French cosmetics and beauty company L’Oréal. The odd thing is Zeidan does not even wear a fragrance, though that ended up being a turn in his favor. “I walked into the interview, they asked me what fragrance I wear and I said, ‘I don’t wear a fragrance, I never designed a fragrance model nor packaging for fragrance’, to which the answer was ‘this is exactly what we are looking for, someone who can come in with a fresh point of view,’” says Zeidan, who went on from there to manage the launch of six fragrances.

In 2009, in the midst of the economic meltdown, his career path took a sharp turn. As L’Oréal attempted to save costs, Zeidan was asked to consider getting rid of the entire creative team, outsourcing the work and becoming creative director. “I said, ‘I’m not interested in being a traffic manager; I’m ready to open up an agency. Give me part of the work and I will take a few of the employees that you want to lay off’,” he recalls. Lengthy negotiations ensued and RO New York was eventually set up with the help of his sister Dina and with a first contract from Ralph Lauren — probably his favorite brand by then.

For his new agency, Zeidan opted to offer several services at lower prices as opposed to specializing in a particular aspect of design — a less attractive offering during the economic crisis. His approach proved profitable as RO generated $700,000 in revenues in its first year of operation. After dropping up to 15 percent in the next two years, revenues were up again in 2012 (though he did not disclose absolute figures). For this year, Zeidan hopes that revenues will reach $1.2 million and ultimately $3 million within five years.

His 10-member team caters to clients from different regions in the world including New York’s Calvin Klein, Switzerland’s Chopard, Austria’s Swarovski and Lebanon’s fashion designers Georges Hobeika and Joseph Abboud.

Returning to Lebanon is not on his foreseeable agenda, but Zeidan said he would love to have more opportunities to provide Lebanese companies with an international perspective. He hopes to corner new markets, mainly hospitality, with two New York restaurants already on his roster. A Lebanese gourmet café “Man’oucherie”, founded by Sara Trad, will be opening in the Chelsea district by the end of the year and features in his upcoming projects.

“That’s very exciting to me because it goes back to my heritage with a cool New York vibe to it,” says Zeidan. As our meeting comes to an end, I am left wondering how much Beirut’s own vibe is missing out with such Lebanese talents abroad.

April 11, 2013 0 comments
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The Buzz

Morning briefing: 11 Apr 2013

by Executive Staff April 11, 2013
written by Executive Staff

Economics and Policy

Gold fell to its weakest level in nearly a week on Thursday as strong shares boosted demand for riskier assets.

More from Reuters

 

Qatar's prime minister has announced $3 billion (Dh11.02bn) in aid to Egypt, reducing pressure on Cairo to finalise a $4.8bn loan from the International Monetary Fund that would require cuts in subsidies.

More from The National

 

Lebanon is planning to raise $1 billion through an increase of its outstanding 2023 and 2027 Eurobonds.

More from The Daily Star

 

The number of departing and arriving passengers at Beirut’s Rafik Hariri International Airport rose by 17 percent in March and 11 percent in the first quarter of this year, according to the Civil Aviation Authority.

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Companies and Business

The chief financial officer of Abu Dhabi conglomerate Al Jaber Group, which is in the midst of a $4.5 billion debt restructuring, has resigned.

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Dubai International Airport will have overtaken London Heathrow as the world's busiest international airport by 2015, according to the man who runs British Airways and Iberia.

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Mashreq, Dubai’s second largest bank, has filed a US lawsuit accusing Netherlands-based ING Groep NV of losing 40 per cent of a $108 million investment by improperly putting the money in risky debt.

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Telecom operator Zain’s Bahraini unit has received government approval to launch a long-awaited initial public offering (IPO), the company said on Wednesday.

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April 11, 2013 0 comments
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Economics & Policy

Lifting the lid on extraction

by Joe Dyke April 11, 2013
written by Joe Dyke

Oil and gas industries in the Middle East are among the least transparent in the world. According to the pro-transparency group Revenue Watch, Saudi Arabia, Kuwait and Algeria fall into the lowest category of “scant transparency” — meaning they publish almost no information about where their billions of dollars in oil revenues go — while Yemen, Iraq and Iran are in the slightly better “partial transparency” category.

So when the European Union backed a deal on Tuesday demanding that all payments to governments over 100,000 euros ($130,000) by EU companies be made public, it may not have been well received in Riyadh or Algiers. Under the law, firms must report payments per project as well as on a country level. Major energy firms had pressed for exemptions, but none were granted.

The legislation follows the passing of the 2010 Dodd-Frank law in the US that set similar requirements for American companies, but crucially the EU law also requires companies that are not listed on stock exchanges to declare their payments.

It is expected to be confirmed in the coming months, with Ireland — current holder of the rotating EU presidency — saying it aims to push through the agreement before the end of its presidency in June.

Johnny West, founder of the OpenOil campaign that demands transparency in the extractive industries, told Executive that he expected the legislation to “yield fundamental shifts in the way business is done in the oil and gas industries."

"The EU has confirmed by this decision that there is a new norm emerging now in international business of a system-wide transparency. By confirming the same broad lines as the US Dodd-Frank legislation — project level reporting, no exceptions, all payments over $130,000 — the EU has created another major point of triangulation in analyzing the business of the extractive industries worldwide,” he explained.

Closer to home

For the Middle East, this means that the majority of oil and gas payments may now face some degree of public. Revenue Watch estimate that companies registered on EU and US stock exchanges represent 85 percent of the global value of companies in the oil and gas industries.

More on this topic: Transparency is not enough

A positive start for Lebanon's Petroleum Administration

Carole Nakhle, an energy economist specializing in international petroleum contractual arrangements, said the publication of payments that affect the Middle East could force governments to be more transparent, while tax avoidance could also be tracked. “The disclosure of such hitherto confidential information risks creating something of a feeding frenzy for NGOs and academics that will wish to enquire further,” she said. “With such detailed disclosure at the project level, governments will find it easier to benchmark their tax regimes against others with comparable characteristics. Companies will face greater scrutiny and pressure to explain tax discrepancies or variances.”

In Lebanon, which is beginning the process of awarding contracts for its newly-discovered offshore oil and gas, the ruling is likely to have a significant effect. Of the 52 companies that applied for pre-qualification for the right to bid on the country’s offshore resources, 17 are from the EU, with another six from the United States.

More crucially, eight of the 14 companies that have applied to be operators — meaning they are primarily responsible for organizing production and absorbing costs in the three-company consortium bids — are either from the EU or the US. If these firms are awarded contracts, they will be obliged to reveal payments.

Diana Kaissy, the Middle East and North Africa Coordinator for the Publish What You Pay lobbying organization, told Executive civil society and NGOs could then use the information to identify and prevent corruption in Lebanon's extractive industries.

“They can use the information to push the government to reveal actual revenues they received and start comparing numbers. With simple analysis you can discover if there has been any money disappearing into pockets or anything else illegal,” she said.

“It is going to be a great tool in the hands of civil society organizations. Even if the numbers match then civil society will have the amounts to put on the table to demand to know where it has been invested.”

April 11, 2013 0 comments
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Economics & PolicyLebanese in New York

Capelli

by Maya Sioufi April 10, 2013
written by Maya Sioufi

Ranked the number one football club in New Jersey for boys under 12, George Altirs’ Cedar Stars Academy is “almost his full time job now” he jokes. Established in 2011, the club currently trains up to 125 children between the ages of three and 12, including Altirs’ own boys. It was not the ball that carried Altirs up the ranks of success though. It was hair — or capelli in Italian.

Altirs is the founder and chief executive of Capelli New York, a privately held company which designs, manufactures and markets private-label and branded products in the accessories, apparel and footwear industry for women, teens and kids. 

We meet in the company’s headquarters in Midtown, during the busy market week when buyers visit to view the upcoming winter collection and Altirs asks me where my hair clip is from. “Claire’s,” I answer, and then he asks me where my scarf is from. “Accessorize,” I reply, and then he concludes, “so both are from Capelli”.  With a wholesale distribution network expanding beyond the United States to Europe and Asia, the company’s clients include Wal-Mart, the largest retailer in the world, as well as large department stores such as New York’s Macy’s, Paris’ Galeries Lafayette and Britain’s Marks and Spencer, in addition to 31 retail stores in the US. 

 

The story behind Capelli begins in the town of Mijlaya in the Zgharta district of Lebanon, where the Altirs family is from. After attending College Mont La Salle and earning an engineering degree from Ecole Polytechnique Supérieure d’Informatique Liban (EPSIL) in Kaslik, Altirs moved to New York in 1988.  Shortly after arriving in the big apple, he and his brother opened a hair accessories company. “I saw an opportunity and thought we could do better than what people [were] doing, so we started,” he says. With a factory in Brooklyn, Capelli sold to wholesalers and retailers in the US. The product offerings expanded to include everything from hats and scarves to hosiery, footwear, apparel — and of course sportswear for the Cedar Stars Academy.

Capelli even has three franchise stores in Lebanon: one in Ehden, one in Zgharta and one in City Mall on the Dora highway. “It is nice for people in Lebanon to know what we do,” he says. Besides Lebanon, the Middle East remains untapped, though, as Altirs’ focus is on faster-growing emerging markets, mainly China. “We are well established in China; it is big enough for us so we see no need to go somewhere else,” he adds.  With revenues of $200 million last year, production is undertaken in three factories in China, where 1,700 of Capelli’s 3,000 employees are based. With a total floor space of 140 thousand square meters, the factories have an annual total capacity for 42 million pieces and 16 million pairs of shoes — that’s four pairs of shoes per person in Lebanon. 

Entirely owned by the two brothers, Altirs never considered a complete or even partial sale of the company, whether to a private equity group or on the public market. “I have a vision, I don’t want to sell,” he says,  adding that he has the necessary capital to finance future growth. 

As for his main challenge, it’s “a constant race; everything is transparent now and retailers are buying from the Chinese, the Indians, etcetera. When Wal-Mart bids, we have competition from everyone in the world.”  

In 2009, at the height of the financial crisis, retail sales in the US dropped by more than 6 percent, the largest drop on record since 1992, and some retailers did not make it. “The pie became smaller, it’s a lot more competitive,” says Altirs, but with products on offer anywhere from $1 to $30, Capelli’s sales are somewhat “recession proof”. That’s not to say that it made it unscathed; volumes dropped 30 percent during the recession, compelling the company to lay off 30 percent of its workforce. Retail sales in the US have picked up since, growing 5 percent in 2012 after 8 percent growth in 2011, and the National Retail Federation is expecting further growth this year, albeit at a subdued 3.4 percent. “Now we are ok. We are doing well,” says Altirs.

As we wrap up our meeting, he gives a word of advice for Lebanese back home looking to kick off their careers: “Be patient; being rich quick also means it goes quick. Establish your reputation first, let people trust you.” He then goes back to the busy showroom to join his workforce in doing what he does best — enticing more customers to Capelli’s budget-friendly and trendy items — while looking forward to taking his boys on a football trip once market week comes to an end. 

April 10, 2013 1 comment
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Syria can’t afford to break apart

by Jihad Yazigi April 10, 2013
written by Jihad Yazigi

As violence expands across Syria, fears over the future of the country are increasing. They range from the potential use of chemical weapons in the conflict to the unleashing of a full-fledged sectarian war and to the potential disintegration and partition of the country along sectarian and ethnic lines.

Regarding the latter risk, it is likely that economic factors will play an important role in terms of its impact on the centralization/decentralization debate and on how any future partition of the country could affect economic policies.

See also: Could a Syrian Kurdistan work?

Trade between Iran and Syria increasing

The issue that comes first to the mind is obviously the north-eastern part of Syria, inhabited to a large extent by a Kurdish population. While prior to the conflict the demands of the Kurds were mainly limited to linguistic and cultural rights, there are now increasing calls for the creation of an autonomous region. The issue is particularly sensitive because Syria’s northeastern region is home to the country’s largest reserves of crude oil.

Indeed, while fields located near Deir Ez Zor, where the population is overwhelmingly Arab, generated most of Syria’s crude output in the 1990s, their production has now fallen from more than 400,000 barrels per day (b/d) in 1996 to around 100,000 b/d in early 2011. The fields around Hassakeh, near the Kurdish region, now extract more than 250,000 b/d of crude and hold most of the country’s reserves; these fields are now to a large extent under the control of the Kurdish Democratic Union Party.

Besides oil, however, the northeast is also host to most of Syria’s wheat and cotton crops. Because bread is Syria’s main staple food and cotton is key to the development of the large textile industry, keeping control of the region will be of utmost importance for any future Syrian central government.

The fears over a Kurdish region with wide autonomous powers may be exaggerated in view of the relatively small size of the population, the lack of a major urban centre — Qamishli, the largest city in the Kurdish region, is home to only around 200,000 people — and the fact that Kurds are actually spread across the country; the largest concentration of Kurds is in Aleppo, which has a majority Arab population. Still, the debate on how to share the resources of the state between the central government and the various provinces making up the country will be of particular importance when it comes to the Kurdish-dominated parts of Syria.

Another region of Syria that matters in the debate over decentralization or partition is the coastal area, where a large portion of the population is Alawite. While the issue of a potential independent Alawite state was raised during the French mandate, it has largely died out since and was reignited only in the last few months with the growing sectarian tones of the conflict gripping the country. Besides the fact that Sunnis and Christians probably represent up to 50 percent of the population of that region, the economic challenges that such a region would face would be numerous.

Syria’s coastal region has very limited manufacturing and agricultural basis. Except for a refinery in Banias, a single power plant and an old cement plant, manufacturing is limited to light industries and agriculture to tobacco and citrus fruits.

Some argue that Lebanon has managed to remain independent with as little resources. However, Syria’s coastal region has none of Lebanon’s large expatriate community, significant human resource wealth and excellent know-how in the financial, touristic, education and health sectors.

The debate over the sharing of the resources of the central government goes, however, beyond the sectarian/ethnic issue. Syria’s small cities, spread across most of the country, such as Rastan, Talbisah and Tel Kalakh, have paid an extremely heavy price in the uprising and are likely to demand a much larger share of the government’s money and investment programs than other less affected regions — including parts of the country inhabited by minority groups, such as Suweida or the Christian city of Mhardeh.

What will the policy of any future government be on these issues and what impact will it have on issues such as development programs or political representation? With more time passing, the challenges for future Syrian governments are increasing. It is time the opposition starts thinking about them.

April 10, 2013 0 comments
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Since its first edition emerged on the newsstands in 1999, Executive Magazine has been dedicated to providing its readers with the most up-to-date local and regional business news. Executive is a monthly business magazine that offers readers in-depth analyses on the Lebanese world of commerce, covering all the major sectors – from banking, finance, and insurance to technology, tourism, hospitality, media, and retail.

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