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Business

A scanning success

by Thomas Schellen April 5, 2013
written by Thomas Schellen

The company’s name harks back to a time when they were selling labels and systems to affix price stickers to items on Lebanese supermarket shelves. Having moved far from vending the humble label, BMB Marking Systems (BMB MS) today is in business automation software. It provides consumer goods companies, logistics firms and utilities in the Middle East and North Africa region with distribution intelligence solutions and is pressing into Western and Eastern Europe. No wonder they are working on a shinier, polished identity.

“We have grown tenfold in the past 10 years from 2003 till now, and to cope with our growth, we need to do something with our branding and on the marketing level,” says Amine Soueidy, the general manager of BMB MS. “We have to create our brand and this year is our year of marketing when we will start to do this.”

BMB MS is a core division of BMB Group, an information and communications technology (ICT) company that is part of the private Lebanese Doumet Group. The other divisions of BMB are active in ICT networking, content management and security solutions. From a headquarters building tucked away behind the Baabda Serail in the hills above Beirut, BMB MS runs its business in Lebanon and across the MENA region, with country offices in Saudi Arabia, Egypt and Algeria.

Consumers may never notice it, but BMB MS is a known entity in its field. Most recently, the company scored two major contracts to supply distributors in Saudi Arabia with software and the associated handsets from its global hardware supply partner, Motorola. The first contract was for equipping the PepsiCo distribution network in Saudi Arabia with 1,000 units, and the second contract was for sales force automation (SFA) of Binzagr, a company specialized in distribution and logistics of fast-moving consumer goods. According to its website, Binzagr covers the kingdom as distributor for 55 large brands, from Kellogg’s to Unilever’s Dove, and moves over 450,000 cases per day.  

Having implemented the first two phases of the Binzagr SFA contract from late 2012, BMB MS last month completed its delivery in the Jeddah and Riyadh regions where the nearly 1,000 Binzagr distribution vehicles were equipped. According to Soueidy, the contract also entails delivery of another two batches of 600 and 800 units for a total of almost 2,400 units. “The value of this contract was above $3 million, [making it] the biggest contract ever in this specific product in the Middle East,” he says.

Keeping up with demand

Business process automation and customer relationship management — the ICT categories that one may associate with SFA — comprise a software specialization sector with many niches. Growth of the market for automation of distribution and logistics processes was tech-driven, Soueidy says, and BMB MS saw two major leaps in the past 10 years: first, when smaller and better programmable devices came out around a decade ago and then when GPS functionalities matured about three years ago.

In the earlier stages of the technology, clients were sold on the automation part. By replacing paper invoices and verbal or handwritten reports from sales staff, software systems paid for themselves by reducing data entry time and errors. They set free — ideally for more productive work — the employees originally hired to transcribe invoices generated by the sales force.

Today, however, customers demand more from their systems. Tracking and managing distribution fleets, analyzing orders and sales patterns, evaluating  performance, gathering information on behavior of competition and sales points, and responding to promotions — these all define the distribution intelligence value of an advanced system.

Software companies that address this demand have to invest in identifying the needs of their corporate customers; this includes helping them to identify parameters and information requirements that make their custom-built software systems maximally efficient.

“What customers really want from a system today is greater understanding of what they do. You create a tool for your customer that enables him to monitor his product in the market much better,” Soueidy says, adding that the critical advantage for BMB MS as provider in this specialization is that the company has been part of the evolution of distribution automation from the days when the underlying technology was introduced globally. “In many technologies, development started in US, moved to Europe and then came here. In our case, we started along with everybody else and we are experts just as much as everybody else in the world.”

Soueidy credits this factor and BMB MS’ aggressiveness for establishing the company’s dominance in the  Lebanese market for its solutions niche.  He adds that this is also the reason for BMB MS being able to expand into larger regional markets where it has taken market share from local providers, including scooping the Binzagr contract against a Saudi supplier whose system the client had been using for several years.

In meeting international clients’ demands for solutions in MENA countries, BMB MS found that it could compete successfully against leading vendors of automation solutions. His confidence of being able to stand up as a Lebanese company against well-known European software houses was boosted further, Soueidy says, when he participated in a conference and took a booth at a trade event last September in the United Kingdom. “We feel that we are competitive, and this is why we will be in Europe this year.”

From Beirut to Britain

BMB MS has taken concrete steps toward entering the United Kingdom, where it is negotiating to acquire a majority stake of a reputable automation software company. It also harbors aspirations to enter the Eastern European market via Romania, Soueidy tells Executive. Details of the investment in the UK are still confidential but the aim is for both companies to benefit from knowledge transfers and market openings.

An important motivator for the expansion plan is market size. The UK has as much demand for automation software solutions as the entire MENA region, offering far more opportunities than Lebanon. According to Soueidy, the healthcare sector in the UK alone will need to be equipped with one million handsets to accomodate growing home care where nurses will visit patients in their residences.

Complementing this growth ambition is the ongoing investment into BMB’s corporate identity, where each division in the group will be branded with its own descriptive term that will be combined with BMB, such as BMB Mobile. In a public branding exercise, the company will soon display its logo on a large banner in the waterfront district in downtown Beirut.

The idea behind the branding effort is for BMB to become ingrained in peoples’ minds as a stalwart Lebanese player in information technology. “We are planning now for the next 10 or 15 years, because it is our objective to take this company to a global reach,” says Soueidy. “I am sure that BMB 10 years from now will be doing something different from what it is doing today but within the scope [of our expertise].” 

The growth proposition is twofold; in adding geographies and technologies. While the company’s home market is likely to account for smaller portions of future revenues at BMB, the company’s strength will remain rooted here, Soueidy confirms. “I think we will have a base in Europe but Lebanon will remain the kitchen from where we feed all these countries.”

April 5, 2013 0 comments
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The Buzz

Morning briefing: 4 Apr 2013

by Executive Staff April 4, 2013
written by Executive Staff

Economics and Policy

 

Arab countries must pursue economic and political reforms and improve their infrastructure in order to strengthen their economies, the head of the World Union of Arab Bankers has said.

More from The Daily Star
 

The American energy exploration firm ION Geophysical was awarded a contract to conduct a seismic survey of an additional 1,650 kilometers off Lebanon’s coast, Energy and Water Minister Gebran Bassil has announced.

More from The Daily Star

 

An International Monetary Fund team has resumed long-delayed negotiations with Egypt  on a $4.8 billion loan to ease a deepening economic crisis in the country.

More from Reuters

 

Elsewhere in Egypt, Cairo’s bourse fell to a new 2013 low on Wednesday as foreign investors sold stocks on fears that the country's currency would be further devalued.

More from Reuters


 

Companies and Business

Abu Dhabi state investment fund Mubadala has signed a $2bn loan refinancing.

More from Reuters

 

Telecom operator Zain Saudi has extended the maturity of a $600m facility until May 1, according to a statement on Saudi Arabia's bourse, the latest debt roll over by the loss-making firm.

More from Reuters

 

Middle Eastern airlines continued to post the strongest growth rates for the second consecutive month in February for international passengers demand and more than double the global average of 3.7 per cent, according to an international airline body.

More from Khaleej Times

 

Saudi Binladin Group, one of the largest construction firms in the kingdom, has priced a 1.3 billion riyal ($346.7 million) Islamic bond.

More from Reuters

April 4, 2013 0 comments
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Economics & Policy

Avoiding a fist fight

by Thomas Schellen April 4, 2013
written by Thomas Schellen

Bill Hewlett and Dave Packard, Steve Jobs and Steve Wozniak, Larry Page and Sergey Brin: so many of the brightest ideas that define our modern age started out as partnerships. And the power of two does not characterize just the computer age, but goes back in time. Friedrich Bayer and Johann Weskott, Henry Royce and Charles Rolls, Gottlieb Daimler and Wilhelm Maybach were the key partnerships of the industrial era that shaped our modern societies.

But imagine that all these innovators had spent their time in litigation against one another as soon as they had their first disagreement. We will never know how many great inventions or deals have remained unrealized because businesses fell apart when the partners failed to solve their minor disagreements amicably.

A slow process

Fallings out exist in every country and certainly in Lebanon where the danger of fraternal disputes is documented in the high number of failed enterprises and, very visibly, a number of long-abandoned skyscrapers.

A report by the International Finance Corporation (IFC) and World Bank says that enforcing a commercial contract in Lebanon – in other words, litigation – takes an average of 721 days, nearly twice as high as in Eastern Europe and over 50 days longer than the average for the Middle East and North Africa.

The cumbersomeness of settling business disputes in Lebanese courts is a turnoff for foreign investors and a huge burden on local companies, especially small and medium businesses which lack the resources to seek expensive arbitration, says Dala Ghandour, the coordinator of the one-year old Lebanese Mediation Center (LMC) at the Chamber of Commerce, Industry and Agriculture for Beirut and Mount Lebanon (CCIB).

The Lebanese Ministry of Justice last week signed an agreement that opens the door for informing judges about mediation. “This will be a great thing for making mediation more credible in Lebanon,” Ghandour says.

Established by collaboration between the CCIB and the Tripoli Bar Association with the IFC, the center has been developing its capacities to provide what in international lingo is called alternative dispute resolution (ADR). With operational priorities being confidentiality, impartiality, and mutuality of the mediation process, the LMC is offering its services as a solution for commercial disputes as an option that could help disputants from having to see each other in formal arbitration or court.

Wherever a business partnership, trade or commercial relationship is running into disagreements, the LMC can facilitate an attempt at mediation that both parties can walk away from at any time but that will be a great time and cost saver if concluded successfully with a contractual agreement between both parties, Ghandour says.

Fees for mediation of disputes at LMC currently are set in a range of 10 percent for a $5,000 case value to about 2.5 percent of case value when claims are over $60,000. In any event, mediation is far cheaper than litigation, with the IFC estimating that on average victorious parties in court expend 30.8 percent of the claim’s value on the process.

The IFC supports the establishing of mediation centers in order to make economies more efficient and attractive to investors. According to Carol Khouzami, the IFC’s ADR project manager in Lebanon, experiences with a mediation center in Morocco have been successful and Lebanon is one of three Arab countries where such an institution is being developed.

Two factors in Lebanon today make mediation look like an interesting proposition. The country, when compared with developed economies, has a high share of small and medium-sized businesses that are often established as partnerships within families and extended families or among friends. If such ventures go south, emotions have a great propensity to become intense and result in conflicts. Mediation aims to find ways to avoid the all-or-nothing outcome of court confrontations and meet the needs of the parties through non-conventional routes.

The second factor to make mediation attractive, especially at this point in time, is the slide of the Lebanese economy. Executive has reported these depressing trends enough, but it is well evidenced that slowdowns in business often translate into stresses on or the collapse of business relationships.

Lebanon may, however, not be easy terrain for a mediation model whose primary references for success are developed economies applying Anglo-Saxon models in settling commercial disputes.  However, the timing seems very opportune to give ordered mediation a chance. 

April 4, 2013 0 comments
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Society

Not just another Italian…

by Nabila Rahhal April 4, 2013
written by Nabila Rahhal

Italian food is one of the most common foreign cuisines in Lebanon — so much so that at first glance one wonders what the added value of Villaggio, the latest culinary destination of the Kazami Group, will be. The distinction, however, may find its foundation in the charming setting. 

Driving by Kantari road you cannot help but notice, on the corner of Hamra and Downtown, two prefabricated huts nestled in a vast area covered with lush trees, greenery and anchored by a giant clay fountain; Villaggio radiates a warm ambiance which invites the passerby to stop by and give it a try. The restaurant is modeled after the outdoor eateries of Capri in southern Italy and so the emphasis is precisely on this authentic and relaxed setting. “We always wanted to create a garden inside of Beirut, which is something Italian restaurants in Lebanon lack,” explains Melissa Bakhous, senior manager at Kamazi Group. “The location and size of the land helped us in creating that. To express the freshness and zest of Capri’s restaurants, the lemon fruit was chosen as Villaggio’s theme.”

Neither sour nor squeezed

This theme radiates through the soon-to-be blossoming lemon trees planted in the garden, the lemon motif plates on which the meals are served and the baskets of lemon fruit scattered around the premises, all of which add to the summery feel of the place. The garden seats 200 clientele, but the layout indicates that these patrons would not feel overcrowded if the garden were filled to capacity.

Villaggio’s interior complements the outdoor setting in that it has a high ceiling with glass panels all around, allowing those inside to still feel like they are sitting outside. The interior — which seats 150 — is detailed, however, with such things as a gray brick lining in the back of the bar area, and dark wood tables, which is at odds with the warm Italian vibe and ends up being somewhat awkward.

Compared to the setting, the food is average. That is not to say that there aren’t any outstanding dishes — such as the perfectly al dente frutti de mare pasta and the slice-of-heaven that was the chocolate fondant. The pizza, however, came dry with a powdery crust, and the eggplant parmesan was nothing to write home about.

Not the cheapest bill in town, but Villaggio is decent value

 

 

Open from noon to midnight, the restaurant is currently receiving 300 people per day, and according to Bakhous, it takes a staff of 45 people on the floor and 25 in the kitchen to attend to this number of customers.

Villaggio does not target a specific clientele, but rather hopes that everyone will feel at home. “If you come during the day, you will find us full with society ladies who lunch, businessmen from the neighboring banks and companies,” says Bakhous. “At dinner time, you find couples enjoying a meal over wine and groups of young friends dining out. On Sundays, we cater mainly to families as parents feel comfortable having their children play in our garden and we also provide entertainment for them in terms of face painting and games.”

To reflect this attitude, prices at Villaggio are reasonable and one can enjoy a full meal without going bankrupt.

Villaggio is the third creation of Kazami Group, owned by Jihad Mikati and Mounir Zaatari, with each of these in close proximity to each other: Osaka Sushi Lounge, Chenbao high-end Chinese cuisine and now finally Villaggio, which is divided it into outlets: Limoncello coffee house and Villaggio Italian restaurant. The Kazami Group has recently sold Patrick’s Irish Pub on Uruguay Street.
In the case of Villaggio, the owners expect a return on investment in two years, if everything stays the same. While there are no future plans for the group to expand in Lebanon, they are betting on regional franchises, especially Osaka, which has been running for six years and has proven successful.

Villaggio is likely to experience continued success as the setting is beautiful, the prices are right and the food is reasonable. Those in the mood for high-end Italian cuisine, however, should probably go elsewhere.

April 4, 2013 0 comments
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Lessons of hindsight

by Gareth Smith April 4, 2013
written by Gareth Smith

The diplomatic pond rippled when Hossein Mousavian, the former Iranian nuclear negotiator, visited London’s Chatham House in February. Home of the Royal Institute for International Affairs, Chatham House famously has rules whereby proceedings are not reported, although some were streamed on the Internet to members.

Suffice to say that Mousavian, now a research scholar at Princeton, thinks opportunities were lost in nuclear talks between Iran and three European states from 2003 to 2005. I recently heard the same from Sir Richard Dalton, associate fellow at Chatham House and British ambassador to Tehran from November 2002 to March 2006.

The 2003-05 talks took Tehran closer to a substantial diplomatic agreement with Western powers than at any time since the 1979 Islamic Revolution. During the talks, Iran suspended uranium enrichment and signed up for intrusive United Nations inspections. However, former diplomats chatting does little. What is moving the ripples is that both Mousavian and Dalton sense a return to a serious search for an agreement under which Iran would limit its program beyond its obligations under the Non-Proliferation Treaty (NPT). 

They are encouraged, in other words, by the current series of talks: February’s meeting of Iran and world powers (the so-called ‘P5+1’, the permanent members of the United Nations Security Council plus Germany) and a conclave of senior officials in Istanbul late last month.

The P5+1 has asked Tehran to limit enrichment to 20 percent and offered to ease sanctions. Details are complex and there are differences from 2003-05: Iran has expanded its program and advanced its technology. Sanctions are more punitive, and the domestic situation in Iran is more charged. But at least some of those who in the 2003-05 talks looked into the whites of their counterparts’ eyes believe that there are lessons for today. Arguably, the crux is the same: Iran would limit its program beyond the NPT and below ‘break-out capacity’ to quickly weaponize; and would accept intrusive UN inspections. All in return for economic and other benefits, largely unlinked to the nuclear program.

Looking back, a possible deal in 2003 can seem a no-brainer in that it would have curbed the program far more than what would seem possible today. But we should remember that things then were far from easy. The ‘exposure’ of Iran’s program by the opposition group Mujahedin-e Khalq in 2002 added to calls in the United States to ‘deal with’ Tehran. The following year’s collapse of Saddam Hussein’s Iraq in the face of American might sparked a ‘real men go to Tehran’ slogan among neo-conservatives. 

Europe was wary of the Bush administration’s desire to refer Iran to the UN Security Council over the nuclear program as a possible step towards force, and this led foreign ministers of Britain, France and Germany (dubbed the EU3) to Tehran in October 2003, when at the Saadabad palace, Iran agreed to suspend enrichment during negotiations and improve UN inspectors’ access. 

While suspension was partly to allay concern over the program and to split Europe from the US, Iranian negotiators, including Mousavian, thought a sustainable agreement was possible. Iran’s problem was that the EU3 maintained a formal condition that suspension should be extended, and that they only offered ill-defined political and trade incentives as a carrot.

Hence talks had run their course before Mahmoud Ahmadinejad was elected in June 2005, after which his messianic enthusiasm for the program made it harder for talks to progress and the US persuaded the International Atomic Energy Agency (IAEA) in 2006 to refer Iran to the Security Council, leading to UN sanctions and tougher sanctions from both the US and European Union.

Part of the 2003-05 talks were informal. Paul von Maltzahn, German ambassador from July 2003 to September 2006, told me recently of conversations between European ambassadors and Mousavian where ideas bounced around. That was consistent with word I received at the time in Tehran of proposals “discussed” in which Europe would accept some enrichment. But part of the failure of the talks was the US. When this changed, after Barack Obama came to power willing to ‘engage’ Iran, things were different in Tehran. Von Maltzahn told me that a big lesson of 2003-05 was that ultimately the nuclear program is a bilateral Iran-US matter.

In the end, all politics is local. Much whispering in the run up to Iran’s presidential election in June centers on matters of nuclear and what to do about Washington. If there is focus in the P5+1talks, it is partly because, 10 years after Saadabad, time is running out.

 

Gareth Smyth has reported from around the Middle East for nearly two decades and is the former Financial Times correspondent in Tehran

April 4, 2013 0 comments
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The Buzz

Morning briefing: 3 Apr 2013

by Executive Staff April 3, 2013
written by Executive Staff

Economics and Politics

Egypt hopes to finalise a $4.8 billion loan agreement with the International Monetary Fund this month.

More from Khaleej Times

 

Egypt aims to boost its foreign currency reserves to $16 billion by the end of June, the planning minister said Tuesday, offering a lower target than the government had previously announced.

More from The Daily Star

 

Saudi Arabia’s government spending is likely to increase at a more moderate pace in coming years, Saudi finance minister Ibrahim Alassaf has said.

More from Reuters

 

Lebanon’s Internet connection speeds could leap to 20 megabits per second within the next three months, the chairman of a major ISP has said.

More from The Daily Star

 

Syria's government decided on Tuesday to issue an "exclusive" tax exemption on fuel imports from Iran until the end of June, state news agency SANA said.

More from AFP

 

Abu Dhabi’s non-oil trade fell 14 per cent in the fourth quarter of 2012, due to drop in imports.

More from Khaleej Times

 

Companies and Business

Dubai World Central, the emirate’s second airport, will open to commercial flights for the first time later this year.

More from Gulf Business

 

National Bank of Abu Dhabi (NBAD) appointed Alex Thursby from Australia and New Zealand Banking Group as its new chief executive on Wednesday, tapping his international experience to bolster the lender’s overseas push.

More from Reuters

 

Oman’s central bank has granted Islamic banks a one-year relaxation of rules on the amount of foreign assets which they can hold, to give time for Islamic financial instruments to be developed domestically.

More from Reuters

 

Lebanese banks are reluctant to lend any new Cabinet more money until they see concrete efforts to reduce waste.

More from The Daily Star

 

Nissan has announced the appointment of Samir Cherfan to the role of managing director, Nissan Middle East, with immediate effect.

More from Arabian Business

April 3, 2013 0 comments
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Fueling the fitna

by Moe Ali Nayel April 3, 2013
written by Moe Ali Nayel

On a quiet Sunday night last month the fraying coexistence that is Lebanese society suffered another tear. Two scholars from Dar Al Fatwa, Sheikh Mazen Hariri and Sheikh Ahmed Fakhran, were assaulted while walking in the Khandaq Al Ghamiq neighborhood of Beirut, while simultaneously, two other Sheikhs were beaten in the Chiyah area of the city’s southern suburbs.

In Lebanon they say bad news arrives faster than good and that it did. Angry protesters blocked roads in the Beirut areas of Tariq Al Jedideh, Qasqas and Corniche Al Mazraa, as well as the entrance to the southern city of Saida and Al Masnaa in the eastern Bekaa. Anger built to such intensity that some Sunni protesters were calling out for jihad.

The two Sheikhs in Khandaq Al Ghamiq were assaulted on Shar’a Al-Harameyeh, or “Street of Thieves”. This name has been earned, for close to a decade now a group of zouran, or thugs, have made this alley their haunt. Locals I spoke with after the incident say the gang runs a small-time criminal network there. Many are wanted felons and most have spent time in jail. 

People in Khandaq Al Ghamiq generally seemed to disown and despise this street, saying the thugs are not from their society, and that Sunni and Shia coexist peacefully here. Locals I spoke with washed their hands of the “embarrassing incident”, as some called it, and insisted that it was organized by outsiders to stir a fitna — meaning discord or chaos — between the Sunni and Shia in Lebanon.

Indeed, the gruesome videos of beheadings and sectarian killings posted to the Internet from the war in Syria and the vitriolic public diatribes of sectarian leaders here in Lebanon have incited much of the tension brimming across the country.

But on that night, just as belligerents on both sides began calling for blood, these same agitating politicians, perhaps shocked by the violent street reaction, scrambled to curb the rush toward sectarian vengeance. In an unprecedented display of professionalism and efficiency, the Lebanese Army had, within 45 minutes, arrested five alleged perpetrators of the attacks, with residents of Khandak Al Ghamiq praising the efforts of the major Shia parties — Haraket Amal and Hezbollah — for assisting the Lebanese army in the arrests. On the other side, in Tariq Al Jedideh, the chants for jihad amongst some Sunni demonstrators were met with calls for calm and self restraint by local politicians and the Mufti. 

The sectarian battle also took to social media with two Facebook pages leading the virtual clash. Ashbah Al Daheyeh and Tariq Al Jedideh News Network swapped sectarian insults, threats and vows of revenge online. Luckily, a number of secular Lebanese youth worked through the night, reporting both pages to Facebook administrators until they were taken down, silencing the virtual showdown before it manifested in realilty. 

But while cooler heads managed to tame the outrage that night, the cumulative toll on Lebanese society is showing. Tariq Al Jedideh, better known these days as a ‘Sunni stronghold’, has historically also been home to many Shia families and business owners. Khodor Khalefeh, for one, has worked in clothing shops in the neighborhood since he was a boy, learning the craft of commerce here and eventually becoming a small-time trader himself. When I met Khodor, 35, he was packing to relocate his clothing business.

“My trader neighbors are telling me to stay under their protection but I’m tired, things have been unbearable lately,” he said. “Zouran have been harassing us; they say they don’t want Shia amongst them. They super-glued my business locks four times, they sprayed insulting graffiti on my door, and each time [Sheikh Ahmed] al-Assir incites hate, I lock my business and go home to avoid becoming a victim of his outraged supporters.”

While Khodor says he knows these thugs in no way represent the majority of people in Tariq Al Jedideh, the growing hostility has prompted an exodus of Shia families over the past year.

A handful of hoodlums beating up a couple of religious figures should not, in itself, risk the eruption of armed sectarian street battles. That it did is a testament to how much tolerance has thinned to sectarian provocations, whether intended or perceived. As is fashionable these days, one could reasonably assume someone recorded the thugs shaving the beard of one of the two Sheikhs on their camera phone. If, or perhaps when, that video is uploaded to social media, expect another round of sectarian fury.
 

Moe Ali Nayel is a freelance journalist based in Beirut

April 3, 2013 0 comments
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The Buzz

Student voices vital to education reform

by Leila Hoteit & Mounira Jamjoom April 3, 2013
written by Leila Hoteit & Mounira Jamjoom

There is a palpable sense of urgency in the Middle East to improve employment levels and job options for the region’s growing youth population. Half of the Middle East’s population is under the age of 25, a quarter of whom are unemployed — one of the highest youth unemployment rates in the world.

One reason for widespread unemployment is the mismatch between the skills businesses need and the skills being taught in schools. Indeed, even the most educated suffer high unemployment. In Saudi Arabia, for example, more than 40 percent of those with university or vocational school education are unemployed, while in Morocco and the United Arab Emirates the rate is over 20 percent.

To their credit, governments around the Middle East are aware of the youth employment challenge and some seek to address the problem by making “human capital development” core to their policy agendas. Governments of the Gulf Cooperation Council states have increased education spending and introduced regulatory and governance reforms. Nevertheless, problems persist, and one particular problem is in stakeholder engagement.

The necessary changes in the education system in the GCC currently involve a range of stakeholders such as governments, local authorities, schools, academia and the private sector. Yet students, the most important stakeholders, are often overlooked.

This is a grave error. Bringing students into the process of improving education is good policy and effective practice. They are, after all, the ones seeking gainful, satisfying employment in just a few short years. And, as a practical matter, reforms are more likely to succeed with student “buy-in” and enthusiastic participation.

The pupil’s point of view

Experience from around the world shows that bringing students into the process of improving education is good policy and effective practice. Places as different as Alberta province in Canada and Shanghai in China regularly survey and consult with their students.  The government of Alberta operates “Speak Out”, an online and offline platform that gives students a greater voice through blogs, podcasts and real-time surveys as well as forums and conferences. Shanghai uses student evaluation instruments, such as the National Survey of Student Engagement-China and the High School Survey of Student Engagement-China, to measure student engagement at undergraduate and high school levels respectively, which were developed by Indiana University in the United States. We recommend for all GCC states to emulate best practices of student engagement in upgrading their education systems.

As a first step, Booz & Company recently commissioned a survey of high school and university students in the GCC to help education leaders and policy makers understand student perceptions of the education system. The findings are currently being compiled into a white paper, but through Executive we provide you with a first look at the results. We are confident that policy makers can use them to great benefit to engage with students and anticipate changes in students’ needs and attitudes.

YouGov, a research and polling firm, conducted close to two dozen in-person interviews along with a broad survey of over 1,300 students in Saudi Arabia, the UAE, Kuwait and Qatar. The male and female students included nationals, Arab expatriates and Asian expatriates who attended public, private local and private international schools.

The theoretical “maximum sampling errors”, that is assuming that half of those surveyed chose a particular response, come in at a 95 percent confidence level for the various samples in the study with a margin of error of plus or minus 3.1 percent.

The students have strong and surprising opinions. On the issue of choice, GCC students told us that the range of courses is too narrow and few regard available education offerings as very relevant to their career goals. The result is that students do not deeply engage with the subject matter. Students are particularly upset by the lack of opportunities to study English, which they believe is crucial to their future success. Only 17 percent of students from Saudi Arabia are satisfied with their English options.

The desire to have better trained teachers is particularly strong among GCC students. Unfortunately, teacher quality suffers because the profession lacks prestige and teachers receive little professional development or support. Poor quality training is perhaps the greatest hindrance to good teaching. Most GCC training programs create “lecturers” who talk at students, not “facilitators” who inspire students with creative methods, such as new technologies.

Students also want schools to treat extracurricular activities as an essential part of their education. Rote learning will not prepare them for the changing, knowledge-based economy in which they will compete. Hence, students need a well-rounded education that puts creativity at the heart of academia. They want more activities related to arts and literature, such as drawing, poetry, digital technologies, writing, drama, music and dancing. In the same vein, students want more field trips for education and entertainment.

The students’ desire for more creativity fits well with the official desire to base the economy more on knowledge than natural resources. Education providers should therefore consider embedding creative subjects in the classroom alongside traditional academic subjects, to inspire the next generation of creative talent and provide a boost to job creation.

For example, the fusion of computer science, arts, design, along with creative subjects (such as music, film, or photography), can develop the skills needed for the creative and digital industries that the region needs. These activities lend themselves to the eventual establishment of small and medium-sized firms, again an area that governments want to see thrive.

Looking beyond school to the workplace, roughly a third of students told us they want to work in the public or government sector, while another third hope to land a job at an international private company. Only 11 percent are interested in working for a local private company, with an equal number focused on starting their own business. Men were more likely to be aspiring entrepreneurs than women (14 percent compared to 9 percent).

Having a role in reform

The focus on public sector jobs may be because schools provide little, if any, academic advice and career counseling for students. As a result, students simply don’t know their options and rely mostly on parental advice and aspirations. They told us that it would be helpful to have access to career advisors, career fairs and other forums to learn about the pros and cons of public and private employment, along with the chance to meet business people who might serve as role models.

What is heartening is that students want to play a role in reforms through school student councils, as well as through social media such as blogs, Facebook and Twitter. Indeed, 60 percent told us that social media has already made it easier for them to personally influence education reform. This view is especially prevalent among UAE residents (25 percent), compared to Saudi Arabia and Kuwait (19 percent each) and Qatar (8 percent). Policy makers and educators must seize on this youthful enthusiasm.

Today, nearly two thirds of the in-depth interviewees in our survey trust the leaders of the education system to provide good secondary schooling. However, students also grumble that school officials don’t want to listen to them and they give low scores to their interactions with administrators. In fact, 26 percent of those from Saudi Arabia and 22 percent of those from the UAE complained that they have no influence at all over school reform.

According to our survey, leaders still have students’ trust, but they must act now by including them in reform efforts before it is too late.

 

Leila Hoteit is a principal at Booz & Company and Mounira Jamjoom a senior research specialist at the Ideation Center, Booz & Company’s think-tank in the Middl

April 3, 2013 0 comments
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Finance

Why its time to invest in gold

by Ziad Abou Jamra April 2, 2013
written by Ziad Abou Jamra

Investors in gold have to be on alert today. After a secular bull market with more than 10 years of new highs, the gold price has been in correction since spiking at an all-time high of $1,920 per ounce in late 2011. Measured from peak to trough, gold prices fell some 19 percent between then and now. However, a secular bull market will include bear periods and a drop of such a scale is common for a correction, which we have witnessed in the past 12 years with gold prices.

In contrast, gold equities are in a deep bear market. Gold stocks usually overreact to swings in bullion prices and that is exactly what we are currently witnessing. After dropping around 17 percent in 2011 and more than 10 percent in 2012, gold equities have plunged a whopping 20 percent in the first two months of 2013.

This latest, prolonged correction of gold equities has tested the resolve of even the staunchest believers in the inherent value of gold stocks. We believe nonetheless that gold stocks today are a compelling investment proposition, basing our view on two concepts that are crucial for consistent, long-term investment performance, namely value investing and contrarian investing. 

Value investing is defined as the purchase of an underlying asset that is extremely undervalued. This value gap is commonly measured by either using profitability as benchmark or by gauging the asset’s existing discount to Net Asset Value. In contrarian investing, an investor’s decision is based on simply betting against the crowd or the prevalent “common wisdom”.

In our view, gold stocks today provide for value investment and contrarian investment strategies. To elaborate on this, we examine the gold price in the context of global monetary trends, under the notion that gold is a currency — one that has been around long before paper money existed.

We are currently in an environment of huge additions in money supplies in three major economies: the United States, Japan and the United Kingdom.

Hot off the presses

In the US, the aggressive quantitative easing (QE) program targeting mortgage-related securities (QE3, announced in September 2012) was followed swiftly by a new program (QE4) targeting US government bonds. The result of these two open-ended programs is the creation of a monetary base at the rate of more than $1 trillion per year.

This amount of liquidity created by the Federal Reserve Bank out of thin air is sufficient to fund the US government’s annual trillion dollar budget deficit. In propelling assets higher and stimulating growth in the economy, the American QE programs have found imitators in other parts of the world.

The Bank of Japan (BOJ) has, since early 2000, implemented eight rounds of quantitative easing to no visible effect as they are still suffering from deflationary forces. Nonetheless, the Japanese government has been signaling further easing as the new Prime Minister, Shinzo Abe, came to office on the promise of uninhibited and unlimited money printing.

In the UK, the Bank of England (BOE) is on QE round number six (around $700 billion in total) in an environment where the latest numbers indicate a still very weak economy. As long as this weakness persists, we can expect new rounds of QE.

The dollar is still strong against the yen and the pound. The new wave of money printing from the BOE and BOJ, with the aim of giving their national companies (especially exporters) a competitive edge in a beggar-thy-neighbor approach, has resulted in driving their currencies lower. As other economies have been using the same approach, the world is faced with the constant danger of currency wars.

In conclusion, as a currency holder earning negligible interest rates on the dollar, pound, yen or any other currency, we advocate including gold as a currency in your portfolio. When bullion crossed $1,900, everyone was talking about a target of $2,500. Now when it is at $1,600, sentiment has turned extremely negative and talk is that it could be headed into the vicinity of $1,000.

Judging from recent sales of gold equities, investors are betting on the probability that gold is headed to that low target. Should this prove erroneous — and we strongly believe it will — gold stocks have significant catching up to do and investing in them now could prove to be extremely profitable.

To capture this potential in gold mining companies, we recommend two electronically traded funds that are sufficiently, inherently diversified; namely, GDX (big cap gold miners) and GDXJ (junior mining companies).

 

Ziad Abou Jamra is the deputy general manager of Fidus, an affiliate of Societe Generale de Banque au Liban
 

April 2, 2013 0 comments
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Comment

Sponsoring slavery

by Paul Cochrane April 2, 2013
written by Paul Cochrane

Every minute, one person is sold over an international border. Human trafficking is now the fastest growing international crime; it is second in size only to the drug trade and ahead of arms trafficking, according to the United Nations Office on Drugs and Crime.

Due to its nature as a hidden crime, there are no precise figures on human trafficking, but profits are estimated to be $32 billion annually — $4 billion from forced economic exploitation and $28 billion from forced sexual exploitation. In terms of trafficked people, some 20.9 million people are victims of forced labor, of which 9.1 million, or 44 percent, are moved either within or outside of their country and therefore likely to be trafficked, according to 2012 data from the International Labor Organization (ILO). 

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Shocking though such numbers may seem, they are just the tip of the iceberg. Part of the problem is defining exactly what human trafficking is, while a United Nations resolution was inked in 2003, many countries do not have a precise definition, yet alone laws criminalizing the trade. Getting the legislation right is essential to tackling this crime. Furthermore, there needs to be increased focus on targeting the financial side of what is a low-risk, high-reward activity.

Only recently has the financial side of human trafficking become a focus, with the intergovernmental Financial Action Task Force issuing a report in 2011 on human trafficking and including it as a predicate offense in its latest anti-money laundering recommendations for countries to adopt. 

Non-governmental organizations (NGOs) are also increasingly active, such as Finance Against Trafficking, which is soon to release a manual for businesses to identify suspicious financial activity and human trafficking. The delay in taking on human trafficking at the financial level is by and large political. Since September 2001, the major focus by the world’s de facto regulator — the United States — on tackling financial crime (after the drug trade and money laundering) has been countering terrorist financing during the “War on Terror” years. A ‘war on human trafficking’ has not yet started, but the momentum is building. As the focus grows, the Middle East and North Africa will inevitably come under the spotlight, with the Gulf Cooperation Council (GCC) countries in particular. 

In Lebanon, the parliament, under American pressure, passed an Anti-Trafficking Law (No. 164) in 2011, adding a section to the criminal code prohibiting and punishing all forms of human trafficking; enforcement, however, has been lackluster. The GCC, on the other hand, is lagging seriously behind on the legislative and enforcement side, and a primary reason is the sponsorship or kafala system. Under kafala, foreign laborers have to have a sponsor, who typically charges the worker for the privilege and takes the worker’s passport until he or she is allowed to leave the country. 

It is a big business, with the ILO estimating there are 15 million guest workers in the GCC. In Kuwait, for example, a sponsor normally charges between $5,260 to $8,770 per worker, depending on the nationality. Sponsor 100 people, and you are making some seriously easy money. According to Jamal Abdul Raheem, founder of the Business Crime Bureau in Kuwait and an outspoken critic of the kafala system, the sponsor is in effect breaking the law by not declaring the source of income, therefore committing a money-laundering crime. 

The ILO has urged “major reform” of the kafala system and human rights groups have called for GCC states to designate foreign laborers as migrant workers not as guest workers. Changing the designation is important to provide more legal rights for workers. Additionally, while migrant workers are not initially trafficked persons, as they leave countries such as India, Pakistan, Sri Lanka and the Philippines voluntarily, many become trafficked persons by being deceived and exploited by sponsors, which fits into the ILO criteria of forced labor: debt bondage, where a worker is not paid but works to pay off a debt; restriction of movement; and retention of passports or identity documents so a worker cannot leave or prove his or her identity. Tackling this issue is going to be a long and hard process as it goes to the very foundations on which many of the GCC’s skyscrapers and economies are built.  

As income inequality continues to rise around the world, human trafficking is likely to only grow as an international crime. Getting the financial community on-board to red flag suspicious transactions related to human trafficking is essential to tackle the monetary reward and help curb this nefarious trade.

 

Paul Cochrane is the Middle East correspondent for International News Services

April 2, 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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