Executive Magazine

Omnicom’s Dani Richa talks Lebanese dominance

by Maya Sioufi March 11, 2013

written by Maya Sioufi

With 25 years of experience at Impact BBDO, a leading regional advertising agency, Dani Richa has assumed different roles within the company, including chief creative officer. Chairman and chief executive of the Omnicom subsidiary since 2009, he is one of the most influential ad executives in the region. Executive sat with Richa in his Beirut office to discuss Lebanon’s prominence in the ad industry and the main changes in the market in recent years.

How did the Lebanese become so dominant in the region’s advertising industry?

It was triggered by the [Lebanese] Civil War [which started in 1975]. You had clusters of regional clients and agencies that moved to Cyprus and started operating out of there. We were all offshore [in Cyprus] and covering the Middle East from there. Then Dubai started becoming what it is today and in the late 1980s and early 1990s, companies started moving their head offices to Dubai. This is how the Lebanese took the industry from Lebanon to the region.

Why did Lebanese agencies partner with multinational advertising companies?

A lot saw the need of partnering with multinationals to be able to attract multinational clients that tend to work globally with agencies. The trend was to sell a part or to affiliate with an American or multinational agency and from the 2000s onward, as the region gained importance, those international groups became majority shareholders. In our case, three years ago Omnicom became majority shareholder of Impact BBDO.

Why are multinationals in the region still run by Lebanese CEOs?

At first, it was because they started the industry. Now, we are still running the show because we developed it, were very successful at it and we have an equal intellect to our Western counterparts with a language and cultural advantage. Also, on average, we have 25 to 30 years of relationships in the region with key clients. They trust us because we helped them build their brand. For the foreseeable future, I think you will continue to see Lebanese leadership in advertising.

What are the main changes that the industry has witnessed in the past couple of years?

We went through a phase where brands were talking at people through ads on TV, in newspapers, in magazines and on the radio and then it evolved and we started having a two-way dialogue through direct marketing and direct response. Now, it’s not just brands talking to people and people talking to brands, it’s people talking to people about brands. The brand has to work three times as hard to be there and be talked about in a good way. The successful brands, the ones people are talking about, are the ones that have a positive [impact] on people’s lives.

In 2007 and 2008 in particular, allegations surfaced of serious corruption in the advertising and media industry. Has the advertising industry cleaned itself up?

Corruption was part of the world back then, it was everywhere. It’s not relevant today. There is a much greater focus on compliance, with absolutely no room for gray area. You are operating by American laws and they are strict. I would say that in this region there were cases [of corruption] but in recent history I think the industry has become more professional in that regard.

How has the industry performed in recent years and what is your expectation for 2013?

The big hit was in 2009 and 2010. Lots of agencies had to restructure; it was survival of the fittest. In 2011, recovery started and in 2012, there was a small growth. The year 2013 is a big question mark because of the change that happened in the region. We are yet to see the result of this change. I am optimistic; we have adjusted to a new reality. We are almost continuously in crisis management mode and we work accordingly. The only way you can do it is by saying, ‘I can’t change the economy or the regional turmoil but what I affect is my business.’ I see 2013 as a good year looking forward.

What campaign are you most proud of so far?

It is “Cheyef Halak” [‘look at yourself’ in Arabic] as it was all about purpose. [Cheyef Halak is a social awareness campaign created by Impact BBDO and endorsed by LBCI].

March 11, 2013 0 comments

MCN Group’s Tarek Miknas discusses a changing industry

by Thomas Schellen March 11, 2013

written by Thomas Schellen

The MCN Group is a partnership of New York-based communications conglomerate Interpublic and the Miknas family holding. The Group gathers media, creative, public relations and corporate entities under one roof — and does so in the literal sense since the turn of the year. Executive visited Tarek Miknas, chief executive of the group’s flagship FP7 agency and board member of MCN, in the brand new corporate hive in Dubai’s Tecom district.

The top advertising agencies in the Middle East ranked

The look of your space here seems a bit in-between, as if you wanted to emphasize the creative side…

Yes, and I can take you to the different offices [of group companies] on different floors… each has its expression of its personality, values and what it is all about. Normally you move into an office space and make this space yours. Here, we have the whole building of 14 floors. It is still a work in progress — even the car park is full of people carpentering and this sort of thing. As we get settled in, we will do a lot more meetings and we will use the space on the ground floor and make it come alive.

We met before for a conversation at the 2011 MENA Cristal, about one year after you took on your role at FP7. What has changed in the agency in the past two years?

When you start a company, you are involved in each process and bring in the people you feel comfortable with from scratch. Moving into a company that has already been established and all this, it felt like there were pockets of people and people talking about people, and this clearly takes a lot of focus away from what people should be doing, which is advertising. Today, we don’t have those conversations anymore. It is now about ‘do you know this client? I am sure we can do this, this, this and this and improve their business.’

Was that a simple migration?

It takes a lot of effort to get there. First of all, you have to let go of all the “bad elements”, whether or not they are good in what they are doing. If they are creating a negative culture, you waste so much time.

Can you give us some information on the size and structure of MCN Group and the performance evolution of FP7?

MCN is our holding company, 51 percent owned by IPG [Interpublic Group] and the rest of it is private. Under that holding, there are diverse communications companies, most of which represent the big IPG companies that work together around the world. The biggest two companies are FP7 and UM, and total employment in the group is about 1,400 people. As FP7, we started out as a network, and, two years ago, we were actually in the red. So our focus was to build a solid, sound financial base that would allow the required growth plans to be initiated. After 2008, we’ve experienced a dip of about 10 percent in our top line; however, we have now steadily built ourselves back up to those top line levels, but with 200 percent growth in our profits. During this time, we’ve put a lot of focus on upgrading our talents and bringing in a lot of new, young energy into the organization, which has proved to be a successful strategy.

What is the greatest achievement of Lebanese media personality Tarek Miknas?

Me specifically? I thought this is about the Lebanese in general. I am so new at this.

Will Lebanon be able to maintain, or perhaps grow, its role in regional advertising?

Lebanon is a source of talent for this industry no matter where in the region. It makes sense economically to have a place in Lebanon; people have their homes there and there are no relocation issues, those kinds of things. Will Lebanon continue to expand and take on more geographies? I am not sure. One thing that troubles me is that even in my generation, people emphasize divided communal identities. I thought that people were over all of this [but it seems] there will always be this kind of conflict, and it will always keep Lebanon one step behind. I don’t know how this is going to be solved in Lebanon. I don’t see a new leadership that is trying to be more inclusive and will say, ‘guys, let’s forget about all this and start to act with economic thinking, not sect-based’.

March 11, 2013 0 comments

Economics & Policy Lebanese in advertising

WPP’s Roy Haddad talks Middle Eastern advertising

by Maya Sioufi March 11, 2013

written by Maya Sioufi

Appointed in July 2012 as Middle East and North Africa’s director for WPP, the London-based multinational advertising agency with a $20 billion market capitalization, Roy Haddad is among the most prominent names in the region’s ad industry. Formerly MENA chief executive of American ad agency JWT, Haddad is now responsible for a network that covers around 4,000 executives in the region and has under its umbrella several networks including JWT, Grey, Young and Rubicam, Ogilvy Group and many others. Executive sat with Haddad to discuss his new role, his thoughts on the region’s advertising market and the prominence of Lebanese in this industry.

The top advertising agencies in the Middle East ranked

What do you aim to have achieved within five years?

In China, there is a WPP academy, and we are contemplating launching something similar in the Middle East. It would provide training to executives in the marketing industry. [I also aim to] bring in more transparency to the market: this is the most significant challenge. [Lack of transparency] affects the MENA industry more than other markets and part of the problem is the lack of reliable research. The industry will gain from encouraging better data.

What are your expectations for the advertising industry in 2013?

I think it will be a tough year. Marketing works best in stable markets as it’s long term by definition. With very volatile markets, today becomes more important than tomorrow. Therefore I think we will see more aggressive promotion versus brand building. The other factor is the digital rally. The industry as a whole is in stage of reinventing itself. We are moving from [targeting] sociodemographics to targeting mindsets. When you start targeting mindsets, the whole brand experience lives better in digital than traditional media.

Why is the share of advertising expenditures relative to GDP at low levels in the region?

In the past, it was due to a lack of knowledge and the scarcity of media and distribution. [Today], one of the main reasons is volatility. Stability is key for long-term brand planning. Multinationals don’t invest at the right level here. We are victims of volatility and the lack of data in the region. This is a huge issue.

How is the presence of smaller advertising agencies affecting fees?

I think the lack of growth [in the advertising industry] in 2011 and the oversupply of smaller shops [led to] fees not being at the level they should be. At the heart of that is the doubt of clients’ over how much transparency is being dealt with. Big multinationals have a duty to be more transparent in their dealings with clients.

Would you look to acquire smaller agencies?

Organic growth is becoming harder to come by, so growth is coming from acquisitions. That’s why you see the Omnicoms and WPPs of this world. We are looking at opportunities here and there. There is a weakness in the region, as there are not enough startups. As for Lebanon, we are looking and searching [for acquisition opportunities]. To do an acquisition, it has to bring added value to our current offer and not more of the same.

In your opinion, why are Lebanese prominent in the industry?

Lebanon’s free economic system encouraged entrepreneurial thinking, so the advertising industry developed earlier than everywhere else [in the region]. What helped us is that we are very cosmopolitan. Lebanese executives can fit anywhere in the world because of their multilingual ability and their upbringing in a free economy. Another thing we need to realize is that Lebanese excel abroad because the local market is very small. The largest account in Lebanon is not enough to sustain [the industry] with the fees applicable in this market. The total ad market in billing terms is around $150 million in Lebanon so about $25 million in fees maximum. It is barely enough to sustain three or four decent agencies.

What is your advice to graduates looking to join the industry?

It’s about blood, sweat and tears. You need to have curiosity, as there is a high curiosity level that should go in understanding the consumer. You need to have the culture to be able to synthesize that curiosity into an actionable plan and have the courage to go out and implement it. We are in the business of imagination but in the art of creating conviction.

March 11, 2013 0 comments

Economics & Policy

Welcome to the snake pit

by Zak Brophy March 11, 2013

written by Zak Brophy

The relations between the countries of the Eastern Mediterranean are, to say the least, a tad complex. Centuries of invasions, occupations, liberations and alliances have carved a map that is both ill-defined and often disputed. In recent years, the major gas discoveries under the sea floor and the prospect of more to follow have added new intricacies and calculations to the region’s geo-political hodgepodge.

The countries at the table of the Levantine hydrocarbon bonanza are at different stages of exploration and production, and the dynamics being forged between the major players encompass a cocktail of saber rattling and fraternal embracing. The fact that the lines demarcating ownership of the sea floor and what lies underneath have not all been agreed upon further complicates the unfolding play.

Why Lebanon's oil and gas may not solve the electricity crisis

“You’re always going to have problems when there are discoveries before the maritime borders have been agreed upon, and then you have regional disputes such as Turkey and Cyprus or Lebanon and Israel,” says Walid Khadduri, the energy and geopolitical risk editor at The Middle East Economic Survey.

Cypriot sprint hampered by Turkey

At the nexus of the Levantine basin is the island of Cyprus, whose territorial waters border those of Lebanon, Turkey, Syria, Greece, Israel and Egypt. In late 2011, the discovery of somewhere between 85 and 250 billion cubic meters (bcm) of natural gas, and potentially additional oil, in the Cypriot Aphrodite field marked a major step forward for the island’s hydrocarbon sector, and they are now pushing ahead toward production and further exploration. But as Greek Cypriots have progressed with exploration, Turkey has raised the alarm on behalf of the northern, Turkish portion of the island, crying foul and seeking to hold back Nicosia’s endeavors.

“Turkey can make a lot of noise and flex their muscles but I don’t think they will be able to delay Cyprus’ progress as their train is very much on track,” says Bassam Fattouh, director of the Oil and the Middle East Program at the Oxford Institute for Energy Studies. Ankara has repeatedly called for a freeze on Cyprus’ hydrocarbon activities and responded to the first drillings in Cypriot waters by sending warships into the island’s exclusive economic zone (EEZ).

Turkey has, from two fronts, argued that certain blocks within the Cypriot EEZ are still contested and therefore not game for exploration. In response to the Greek-Cypriot government’s advancement into the second offshore licensing round in February 2012, the Turkish Republic of Northern Cyprus (TRNC) awarded a concession to Turkish Petroleum (TPAO) for the exploration of hydrocarbons in areas that overlap with seven of the 12 oil and gas research blocks in the Republic of Cyprus’ EEZ to the east and south of the island. The move by the Turkish authorities is based on a weak legal argument that has elicited little serious response from global players. This is primarily due to the fact that their claim is premised on the continental shelf rights of the TRNC, which is not recognized by the international community.

Turkey has also claimed that five of the Cypriot oil and gas research blocks on the western flank of the island infringe upon their continental shelf. Not only have they warned international oil companies (IOCs) against “unauthorized oil/natural gas exploration and exploitation” in these areas but they have also granted TPAO exploration and production licenses in their own blocks within these contested areas.

It seems that Ankara’s blustering has done little to deter investors. Bids were made for three of the disputed blocks in the west in the second licensing round, and whether the lack of interest in the other two is due to political instability is far from certain.

“For blocks that received no bids, it is possible this could be linked, for certain companies, to Ankara’s threats, including the threat of exclusion from energy investments in Turkey,” says Anastasios Giamouridis of Poyry Management Consulting UK Limited. “However, there is always the chance that these and other IOCs simply did not identify a good fit with their own upstream or midstream strategies; or even sufficient prospectivity in the region.”

While Turkey may fume at Cyprus’ progress, their hands are tied by a lack of support; The European Union, the United States and Russia all back the Greek Cypriots and many of the major IOCs have participated in the tender rounds. With Ankara diplomatically isolated on this issue and with military threats amounting to little more than, well, threats, Turkey is employing what economic weight it can to lean on prospective companies to dissuade them from working with Nicosia.

In the fall of 2011, Prime Minister Recep Tayyip Erdogan cautioned IOCs that they would be excluded from Turkish energy projects if they invested in Cyprus upstream. This is not an insignificant commercial threat to prospective companies considering Turkey’s growing downstream market and the existing investments by leading IOCs such as Shell, BP and GDF Suez. What is more, Turkey is making moves towards its own upstream activities in offshore exploration and production in the Black Sea and the Eastern Mediterranean.

Israeli collaboration

While Cyprus faces hostility to the north, it has been fostering a much more amicable relationship with Israel to the east, which has had its own recent windfalls in offshore gas discoveries. In 1999 around 32 bcm were discovered in the Noa and Mari-B fields, which are Israel’s only productive gas fields to date and currently provide for some 60 percent of the country’s domestic natural gas demand. However, it was two major finds in 2009 and 2010 that really changed Israel’s energy prospects: The Tamar field, estimated to hold some 274 bcm, and Leviathan, which is around twice the size at 460 to 566 bcm.

Cyprus and Israel are several years ahead of Lebanon, Turkey or Syria in terms of their offshore programs so it is little surprise that they are forging greater cooperation in the this domain. “Lebanon has been preempted by Israel and Cyprus,” says Khadduri. A telling sign of the growing affiliation between the two countries was Israel’s response to Turkey dispatching its navy and air forces when Cyprus started drilling activities in block 12, which ultimately led to the Aphrodite discovery. Then-Deputy Foreign Minister of Israel, Danny Ayalon, said during a trip to Athens, “If anyone tries to challenge these drillings, we will meet those challenges,” in a clear rebuff to Turkey.

Strategic geo-political motives, such as a counter to Turkish pressure on Cyprus or a friend in an unfriendly neighborhood for Israel, are of course a significant part of the reason for Israel and Cyprus forging stronger ties. However, it is at the commercial level that the two countries have the greatest compulsion to build foundations for future cooperation. “The main question, and it is both technical and political, is will there be joint monetization?” asserts Giamouridis. While scores of articles have been written about the different proposals for cooperation between Israel and Cyprus with regards to getting their gas to market, nothing has yet been set in stone.

In March 2012, Israel, Greece and Cyprus failed to put pen to paper on a previously agreed memorandum of understanding (MOU) on joint cooperation on energy matters, despite the fact that it had been left intentionally vague. “Any deal to build a pipeline between Cyprus and Greece is unlikely to be commercially viable and the MOU did not meet the security concerns of the parties involved, especially Israel, which would like to keep control of its infrastructure,” says the Oxford Institute for Energy Studies’ Fattouh. “Also, Greece and Cyprus would have to consider their fragile relations with their Arab neighbors, which would be strained by a closer alliance with Israel.”

Profits of partnership

There are several proposals on the table for cooperation between Cyprus and Israel for the unitization and monetization of their resources. While such joint projects may offer political and commercial benefits to both countries, they also hinge on a number of uncertain factors and could carry significant risks. Considering the long-term binding nature of these agreements, it is understandable why there is some trepidation.

One proposal under serious consideration is an approximately 1,100 kilometer-long pipeline between Cyprus and Crete that would continue on to Greece, from where it would connect to southeast Europe. The potential benefits to both Israel and Cyprus include access to a market with relatively high gas import prices, increased political leverage within Europe and economies of scale. Also, the scheme is complementary to existing and planned infrastructure developments in the region, such as the Trans Adriatic Pipeline; a pipeline linking Turkey, Greece and Italy; and another between Greece and Bulgaria.

However, the commercial feasibility of this project is still far from assured, and a number of political and technical uncertainties are also curbing enthusiasm.

Being tied into one market presents a risk on numerous levels. In the current market, southeast European buyers tend to purchase their gas through relatively long-term oil-indexed pricing mechanisms, which suit suppliers handsomely. However, by the time Cypriot and Israeli gas would be entering the market there is a chance that the markets will have liberalized and moved towards the model prevalent in Western Europe, where buyers are tending toward short-term hub-indexed prices.

If the pipe plans do not come to fruition, then the most credible alternative is to export via liquefied natural gas (LNG). Again there are strong commercial and political arguments for cooperation between Israel and Cyprus. Different Cypriot officials have announced on a number of occasions that they envisage LNG as the most likely monetization option.

Having Israel on board to develop liquefaction infrastructure would be commercially advantageous for Cyprus because it would allow the two states to achieve economies of scale. What is more, the commercial viability of the Aphrodite field alone is still unassured, but increased gas supply from Israel could increase profitability of an LNG plant in Cyprus. This would allow progress without having to wait an extra three to four years for gas reserves to materialize from Cyprus’ second tender round.

From an Israeli perspective, the motivations would also have a commercial dimension, but perhaps an even greater security calculation. “Every country wants to liquefy its own gas. Why would Israel take [its gas] to Cyprus?” says Khadduri. “This is for security reasons. They are worried missiles from Lebanon could attack their plants.”

A political plug in the pipeline

Israel’s internal politics are perhaps one of the major obstacles to successful cooperation between Israel and Cyprus for the monetization of their gas reserves. Israeli politicians and strategists have always sought energy independence and now that they are unearthing their own resources there is a reluctance to sell off their bounty. However, it is primarily through energy exports that investors reap rewards and so Israel will be compelled to strike a deal if IOCs are going to be brought, and kept, on board.

In October 2011, an inter-ministerial board, the Tzemach Committee, was tasked with fashioning a strategy on how Israel’s gas will be used. In August 2012, the committee recommended the export of up to 500 bcm of natural gas. It also advised that half of any field containing more than 200 bcm should be reserved for domestic use.

Three month’s later Charles Davidson, chief executive officer for Noble Energy Inc — the main investor in the consortium behind Israel’s major gas finds — warned, “[the committee’s recommendations] need to be finalized by the government. It’s a critical component. We can’t make any decisions about how to go forward on any of these projects until we know what [exports] are going to be allowed.”

“There are definitely tensions,” says Oxford’s Fattouh. “The gas companies are saying that the only way that they can explore and exploit the resources is if they are allowed monetization, and that will be through exports. Of course some circles within the government are resistant to any exportation of Israeli gas supplies. Eventually they will have to reach some kind of compromise.”

Lebanon awakens

While Cyprus and Israel have been making considerable progress, Lebanon has by and large been inactive and watching on from the sidelines. However, now that Lebanon’s first tender round is in the offing and the legislative and administrative groundwork has at least partially been laid, a new dynamic will move from the theoretical to the actual.

In terms of joint monetization of its hydrocarbon resources, Lebanon is highly unlikely to partake in any project based in Cyprus if there is any Israeli involvement. “Lebanon could not export via any shared Cypriot and Israeli infrastructure,” says Khadduri. “Lebanon is in a state of war with Israel, of course this could not be accepted.”

If and when Lebanon finally becomes a producer with export potential, and that is highly unlikely before 2020, its main two options to export gas will be as LNG from its own shores or overland via the Arab Gas Pipeline.

The main issue regarding Lebanon’s entrance onto the hydrocarbon scene in the Eastern Mediterranean is the as-yet unresolved dispute over 850 square kilometers of overlap between the Lebanese and Israeli EEZs.

In the short term, at least, the dispute is unlikely to provide any major problems, yet it remains a thorn that will one day need to be torn out.

It has been the Americans, in the form of Deputy Assistant Secretary for Energy Diplomacy Amos Hochsteinat and, until recently, the Head of Lebanese Affairs for the State Department, Frederic Hof, that have been the main interlocutors, but with no concrete success.

“It seems the idea is to give two thirds to Lebanon and one third to Israel,” says Khadduri. “[Parliamentary Speaker Nabih] Berri is with this, behind closed doors at least. The one who is against this is [Free Patriotic Movement leader Michel] Aoun. ‘Why?’ you may ask. Well, you explain Lebanese politics to me.”

As Lebanon launches its first tender round, it can avoid blocks that fall under the disputed zone, but eventually it will be in the commercial interests of both Israel and Lebanon to explore in this zone.

“A conflict could arise if they don’t agree on the disputed zone and one side started using it without the agreement of the other. It would be suicidal for either side’s industry to aggravate this,” calculates Khadduri.

Time will tell which Lebanese politician, if any, will be able to pull off the compromise that will be required for these 850 square kilometers to become fair game for the IOCs.

In the past the Minister of Energy of Water Gebran Bassil has vehemently rejected the idea of any concession, but perhaps tellingly, at the last industry conference in Lebanon, no mention was made by the minister or his representatives on the EEZ. A public shift in stance from Bassil or Aoun is unlikely, especially in the pre-election period, but perhaps the cooling of rhetoric reflects a realization that sooner or later Lebanon will have to engage in some tough-nosed compromise.

The wealth to be made from, and the energy security implications of, further oil and gas development in the Eastern Mediterranean are likely to eventually overcome the political obstacles. Yet, a complex web of commercial and strategic considerations is in the process of shaping the national programs and the affiliations between them.

As Fattouh reasons, “The politics will not so much affect the pace of development of the reserves but they will affect the flow and trade of this gas. By that I mean how and where it goes.”

March 11, 2013 0 comments

The Buzz

Morning briefing:11 March 2012

by Executive Staff March 11, 2013

written by Executive Staff

Economics and Policy

Gold edged up on Monday, off a two-week low hit in the previous session on better-than-expected US jobs data, as the Federal Reserve is expected to continue to prop up the economy through 2013 with monetary stimulus, giving support to gold.

More from Arabian Business

Authorities in Saudi Arabia are moving closer to introducing a two-day weekend for the private sector, which would bring the working week in line with the kingdom’s public sector employees.

More from Arabian Business

March 11, 2013 0 comments

Comment

Israel openly pulling America’s strings

by Ahmed Moor March 11, 2013

written by Ahmed Moor

Congressional monitors, members of the media and others have observed that the level of partisan rancor in Washington is as high as it’s ever been in the modern era. Bitter public fights over spending limits, the healthcare bill, economic stimulus packages and the overall legislative agenda have all worked to reinforce that argument. The degree of partisanship has contributed to the politicization of “support for Israel” — formerly an issue that commanded broad support from Democrats and Republicans. The participation of Israel’s prime minister in lobbying on behalf of the Republican presidential candidate strengthened the tendency. And the recent Israel-related fight over the confirmation of Obama’s choice for Secretary of Defense has seen it develop into a deepening cleft.

American presidents typically possess the prerogative of deciding whom to appoint to cabinet-level positions within their administrations. The norm is one real manifestation of the American “checks and balances” system of governance whereby the executive, legislative and judicial branches are co-equal and sometimes adversarial. The subordination of a presidential pick to congressional politicking begins to violate that balance. For that reason, the congressional confirmation process is generally procedural and the president’s choice almost always prevails. Or, as the New York Times explains, “even in the current political environment, a president’s nominee with a Senate pedigree is supposed to have an inside track to confirmation.”

For that reason, the Republican decision to delay a vote on the confirmation of Senator Chuck Hagel — the Department of Defense nominee — is truly extraordinary. While Hagel has since been confirmed, the Republican act of defiance is even more notable because it comes in the service of the Israel lobby which regards Hagel as ‘insufficiently pro-Israel.’

In the past month the former senator from Nebraska has been vilified by members of his own party (he served as a Republican). Unnamed congressional staffers have attempted to portray him as unqualified, when in reality he only suggested that Israel constrain its colonization of the West Bank. The Council of Foreign Relations’ Elliott Abrams even called him “anti-Semitic” on National Public Radio.

The unrestrained and unsubstantiated attacks on Hagel carry implications for the Israel lobby and the US more broadly. The non-political elements of the American government and foreign-policy apparatus — in other words, members of the State Department and Department of Defense — will see their credibility in international forums and bilateral meetings diminished.

The perception that American policy-making and execution are coordinated and efficient began to suffer with the bungled Iraq fiasco, as described by the likes of former US Ambassador to Saudi Arabia Charles Freeman. Now the dignity of executive branch representatives is being similarly assailed and the effectiveness of those representatives will be diminished by it. One consequence of the undignified conduct at the Hagel hearings is that the Israel lobby, which historically thrived through its use of tactics designed to silence critics (a charge once highlighted by Hagel himself) has now been fully understood by a large segment of the American public. Any claim that a coordinated effort does not exist to steer and manage US policy on issues such as settlements and Iran is demonstrably false in light of the Hagel hearings. That the Israel lobby is so powerful, and that it works brazenly to align US policy with the policies of the Israeli government, is now an incontestable fact in Washington.

Another consequence of the public vilification of the former senator from Nebraska is that his tenure at the Department of Defense will likely be marked by a lack of faith in his subordinates. Or, as The Atlantic’s James Fallows notes through a quote attributed to a Republican senator’s former staff member, “It will be more important for a Secretary who will have to impose budget reductions and other policy changes on the services to show he’s not just a nice, thoughtful guy. He’ll need to show people in the Pentagon he can’t be taken advantage of — and also that he’s strong enough to stick up for them should they come under political attack. My sense is that Hagel didn’t clear that bar.”

In other words, Hagel may now be so damaged by the confirmation hearings, that he will struggle to effectively manage the Department of Defense, never mind the Chinese military.

Whether the Israel lobby’s active effort to sabotage the future Secretary of Defense’s effectiveness carries further consequences is an open question. And it remains to be seen whether members of the American foreign policy establishment will openly begin to challenge the Israel lobby’s influence on national security policy — and how their elected officials will react if they do.

Ahmed Moor is a master of public policy candidate at the Harvard University Kennedy School of Government

March 11, 2013 0 comments

Economics & Policy Lebanese in advertising Special Report

Why the Lebanese rule advertising

by Maya Sioufi & Maya Sioufi March 8, 2013

written by Maya Sioufi & Maya Sioufi

The game of advertising has a paramount survival rule: adaptation. Successful strategies and campaigns inject creativity into marketing messages that are tuned to the demands of clients and the psyches of their customers. Good marketing communications agencies sniff out trends just when they are about to bud and blow them up into big balloons of consumer attention. It is a game that the Lebanese are apt at, to the point of being the industry’s dominant players in the Middle East and North Africa.

This year, Executive has taken on the mission to highlight successful and influential Lebanese across industries and countries to inspire the country’s youth and start building a global Lebanon. Aware of the immense role of Lebanese expatriates in the regional advertising industry and aided by the MENA Cristal Festival held in the snowy Faraya mountains in Lebanon, Executive kicks off this series of very special reports by meeting with the Lebanese top guns of advertising communications.

A holy trinity

Lebanese leaders in regional communications today constitute a community spanning several generations. The founders’ generation are unforgettable characters, personifications of advertising godfathers and charismatic entrepreneurs who spin great tales of pioneering the Arab advertising market by setting up shop in Kuwait, Greece and Cyprus in the 1960s and 1970s.

A second generation, in their 30s and 40s, are already running numerous advertising agencies and media planning companies, and a third generation of millennial Lebanese are nipping at their heels.

Members of the founders’ generation, many of whom have been active in the industry for 40 or more years, today are chairmen of regional advertising groups and subsidiaries of global communications conglomerates. Others of these network pioneers have given up their official positions — usually to ‘retire’ into new applications of their skills in cultural, social, environmental and even political spheres.

One will find Lebanese of this generation wherever one looks among the ranks of top executives in regional affiliates of the big four global marketing communications groups: London-based WPP, Paris-based Publicis, and Omnicom and Interpublic from the United States. How the Lebanese ad men (in the founders’ generation, the frontline faces were all male) swept the region with their bravado, charm, wit, entrepreneurship and advertising skills is a question that industry leaders answer in different ways, but they usually refer to two common elements: the openness of the Lebanese to business and the displacement pressure they experienced from conflicts ravaging their home country between 1975 and 1992.

Lebanon’s advertising diaspora

One explanation for Lebanese dominance in the Arab advertising industry, provided by MENA head of British multinational WPP, Roy Haddad, is the country’s choice of adopting a free economic system that encouraged entrepreneurial thinking. Lebanese started setting up their own advertising agencies early on.

With the onset of the 1975 Civil War, several ad men and their clients left the country. Alain Khouri, founder of advertising agency Impact, for instance, fled to Cyprus as the civil war wreaked havoc on the country.

“Automatically, you had clusters of regional clients and agencies operating out of Cyprus,” says Dani Richa, chief executive of Impact BBDO, a company under the Omnicom umbrella. “We had no business in Cyprus, we were all offshore, covering the Middle East from there.” Athens was another hot destination.

As Dubai started gaining importance in the region in the late 1980s and early 1990s, several Lebanese ad agencies started moving their head office to the emirate. And as they moved to Dubai, they continued hiring from Lebanon.
As the Gulf economies developed, their governments needed to hire locals to join the workforce and help build the infrastructure. Large institutions, from banks to insurance companies and with deeper pockets than ad agencies, soon followed suit.

“When it comes to us [advertising agencies], we could not compete with the big boys because [our industry involves] hard work and little money,” says Eddy Moutran, chief executive of Memac Ogilvy — and one of the first Lebanese ad men to move into the region by setting up an advertising company in Bahrain in 1984. “The Gulf people had a choice: work for a bank and earn X or work for an agency, put in 12 to 16 hours a day and earn half of X. That’s why it was practically impossible to recruit locals.”

The increasing attractiveness of regional markets to multinational companies manufacturing anything from soft drinks to luxury sedans meant that the global advertising conglomerates started to hunt for regional partners, and the Lebanese agencies welcomed them.

“A lot of agencies saw the need to partner with multinationals to be able to attract multinational clients, as they tend to work globally with agencies,” says Impact BBDO’s Richa.

This trend, which, in the case of Impact’s partnership with BBDO, went back as far as 1979, built up over the years.

In the early days of the current century, partnerships turned into larger shareholdings by the multinationals, and progressive integration into the global corporate structures and governance patterns of the big companies followed suit.

The second generation

The next generation joined the advertising fray beginning 20 years ago and saw massive changes in their work environments while growing into the business. The leaders of this generation are today highly positioned in operational management. They describe their roles, motivations and targets differently from the first generation in a number of ways.

One significant difference is the replacement of Lebanon’s civil war by the ‘Dubai factor’ as a main motivator to seek regional fortunes. As Tarek Daouk, regional managing director for StarcomMediaVest Group (SMG) puts it, Dubai for him was a career opener and “a destination of hope, like America in the early period of the [last] century when everyone was looking for opportunities in the New World.”

Having had a quality education in Lebanon, Daouk found that there was good work for him in the Lebanese advertising industry, but Dubai provided much broader opportunities. “The size of the business and the whole economy in Lebanon doesn’t allow you to grow as much as you can,” says Daouk.

Shadi Kandil, chief executive of rival media planning agency OMD MENA, sees the shift from international affiliations of regional networks to full ownership by global organizations (SMG is part of Publicis, OMD part of Omnicom) and the awakening to good governance practices as the biggest changes for the middle generation.

“Our preceding generation was a generation of entrepreneurs who passionately loved advertising and owned companies,” Kandil says. “Today, we live with companies that are owned by big conglomerates that are publicly listed on stock exchanges around the globe and driven by governance protocols. We are supposed to be aligned along compliance rules, and there are certain cultures that drive us. [The industry] was entrepreneurial; now it is institutional.”

In his view, Lebanon missed two opportunities; first in the 1990s and again in the past decade when it could have claimed more of a hub role in the regional advertising industry. “As far as the communications industry is concerned, the train left the station a long time ago. Dubai has created such a solid gap that Lebanon can’t compete against it,” he says.

Indeed, the physical evidence of the regional head offices of media groups in Dubai speaks volumes to the growing width of that gap. In February 2011, when Executive made the rounds to advertising and media agencies in Dubai, its visits included quite a few experiences of meandering hallways, darkish meeting rooms and offices that real estate agents politely call “Grade B” spaces. On a similar visit this year, every regional group with a Lebanese DNA component was found residing in a building with their name on top, branded with the group’s regional identity.

Although some of the agencies in Lebanon are nicely done in the creative-welcoming matrix, no agency’s space in Beirut comes even close to what the big agency hubs in Dubai Media City and nearby areas provide, the most recent example being the MCN Hive, a brand-new tower housing the agencies of Interpublic-affiliate MCN.

Talent above all else

The geographical shift of head offices notwithstanding, regional companies still thrive on their strong Lebanese components. As Tarek Miknas, chief executive of agency FP7 and board member of MCI Holding, sees it, Lebanon holds its space in the industry because advertising leaders like to live in the country. “You have the art schools, the new ways of thinking, [and] new young talents like crazy. Lebanon is a source for talent for this industry, no matter where [it is based] in the region.”

An important consensus between the two leadership generations that Executive engaged with was the assertion that this industry is driven by talent, not by nationality, communal affiliation or “flag waving”. According to Miknas, today’s mantra in the Dubai hub is about, “preaching inclusive, participatory cultures. When you look at a CV you don’t look at the name, you look at a person’s portfolio and when you see bloody good work, you say, ‘that is the person we want’”.

Raja Trad, chief executive of Leo Burnett Group MENA, says, “Lebanese are still playing a major role, but it’s not just Lebanese anymore. In Leo Burnett Dubai, there are 38 nationalities in one building; things are changing.”

Nonetheless, around agency offices in Dubai, the realistic chance is that you will find a Lebanese who knows other Lebanese working in advertising. An elevator test demonstrated the idea: sharing a ride down from the office of media agency Mindshare with two people, Executive asked if one of them knew a Lebanese advertising leader of the middle generation and immediately was given two names. The young woman who provided these leads in the Dubai elevator was Lebanese and in advertising.

The Lebanese ranks in regional advertising are joined by European nationals and enterprising global career seekers, as well as Egyptian and Jordanian talents. Integration of more Gulf nationals into the industry is happening, but thus far, as Elie Haber, the Lebanese general manager of Mindshare UAE, tells Executive, “In the way that the media industry is structured in the UAE, 60 or 70 percent of the people are Lebanese.” He adds that the industry has to overcome its deficits in reaching out to universities, attracting young male and female professionals locally, and showing young people in the Gulf how much fun it actually is to work in media and get the satisfaction of sweating out late hours to meet client needs.

From Executive’s experience covering the industry, ambitious young people who join communications companies in Saudi Arabia are not impossible to find. However, Saudis and Emiratis who join a Dubai agency office are still precious exceptions, birds-of-paradise and hopefully augurs a future where this industry’s opportunities for creativity will motivate more young talents from Gulf countries.

This unfortunate scarcity of Gulf talents explains the concern of some industry leaders that the emphasis on Saudization and Emiratization by the respective governments could bring in some individuals who are not driven by the passion, skills and experience needed for this job. “They are not there necessarily because they went to a communication school, received training or managed large budgets,” says Ramzi Raad, chairman of TBWA\Raad. “With no proper training, growth in any particular market will be greatly affected by the [potentially deficient] quality of the people running the process. I don’t want to be insulting of young nationals; all I’m saying is that we have to accept that professional training is a must.”

Talent worries in the regional advertising industry have fluctuated in recent years. In the pre-2009 boom period, any newcomer could get hired, however inexperienced. However, after the crisis, firms had to work hard to keep the best talent while restructuring.

All agencies confirmed in their interviews with Executive that they count young Lebanese among their ranks of promising potential. Lebanese talents of the current, millennial generation will play a role in regional advertising and have the drive to become leaders.

“I am happy where I am today and I obviously hope to get to the top level one day,” says Cirine Mazloum, a Lebanese millennial and American University of Beirut graduate with four-and-a-half years of experience in a media agency.

She definitely can envision herself handling a management role on the regional level. Still, in Cirine’s words, “if you look around in the UAE, you notice that the industry is dominated by the Lebanese, but it doesn’t really matter if you are Lebanese. It matters how good you are… and how passionate you are in this job. You have to like it in order to excel in it.”

March 8, 2013 0 comments

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A disappearing border

by Nicholas Blanford March 8, 2013

written by Nicholas Blanford

The deadly February 1 gun battle in the Bekaa town of Arsal illustrates two dangerous ongoing developments in Lebanon: firstly, the rising sectarian bitterness felt by Sunnis against Shias, and secondly, the volatility of the northern Bekaa. The details of the incident are still shrouded in uncertainty. What is known is that a unit from military intelligence shot and killed Khaled Hmayed, a resident of Arsal, as he was driving to a mosque for noon prayers. What is also known is that a crowd of some 200 to 300 armed residents of Arsal chased the army unit into the wilderness south of the town and caught up with the soldiers when their vehicles became stuck in snow and mud. An officer and a soldier were shot dead in the ensuing firefight.

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Stop the Syria spillover: towards a security pact

The army subsequently said that Hmayed was a wanted terrorist and had been shot when he resisted arrest. Some townsfolk say that Hmayed fought with Syrian rebels and was “executed” in a hail of gunfire and that there was no attempt to arrest him. They further charge that Hezbollah members were present with the army unit and that an additional four people dressed in civilian clothes were killed in the gun battle. These same townsfolk also suspect that the dead were Hezbollah fighters, pointing to the fact that the army has not disclosed their identities. Hezbollah vehemently denied any role in the fight.

Still, the ramifications of the incident are of more consequence than the details of what actually happened. The town was surrounded by special forces troops from the Air Assault regiment and a checkpoint was established on the single asphalt road that leads into Arsal.

Several residents have been detained and arrest warrants for some 35 people have been prepared. But the crackdown on Arsal has deepened already widespread feelings of Sunni grievance over the perceived domineering behavior of Hezbollah, and by extension, the government and army. In the days that followed the army’s restrictive measures on Arsal, Sunni delegations flocked to the town, including from the Future Movement and Sheikh Ahmed al-Assir, the ubiquitous anti-Hezbollah cleric from Saida. When Assir sought to visit Arsal himself, Shia demonstrators in Baalbek blocked the Bekaa highway with burning tires, forcing the cleric to postpone his trip.

Not for the first time, it is the army that finds itself caught in a Catch-22 situation. If the encirclement of Arsal persists, it risks a backlash from the residents. Ali Houjeiry, the mayor of the town, has warned that the patience of residents is finite. The men of Arsal have a well-established reputation for stubbornness and militancy. The town is also an important logistical hub for Syrian rebels, especially those fighting in the Qusayr district just north of the border.

The army’s measures around Arsal have effectively neutralized the town from war in Syria to the disadvantage of Syrian rebels, further building resentment among the local population.

However, if the army pulls back without apprehending the suspects involved in the shootout, it risks undermining the integrity of the military. Arsal’s leaders are aware that the eyes of the Sunni community are upon them and they feel little pressure to yield fully to government demands.

Furthermore, the northern Bekaa is being gradually sucked into the vortex of Syria’s war that is raging just a few hundred meters from the border. Hezbollah fighters are battling Syrian rebels, including Lebanese volunteers from Arsal and other Bekaa villages, in the Qusayr area.

So far, both sides have refrained from dragging the conflict into Lebanese territory, seemingly mindful of the consequences that such a step would have on internal stability. But the border is slowly dissolving as the conflict next door intensifies. Syrian rebel forces allege that Hezbollah has been firing Katusha rockets against their positions from Hawsh Sayyed Ali, a belt of orchards north of Hermel on the border. Then mid-February, General Selim Idriss, chief of staff of the Free Syrian Army, issued an ultimatum to Hezbollah — desist from operations in Syria or the FSA will take the war into Lebanon.

Residents of Arsal say that Hezbollah has deployed fighters into the rugged barren mountains east of Ras Baalbek to set up observation posts and ambush points to block rebels from moving between Arsal and the border. If true, clashes can be expected in these remote hills. Even if a face-saving deal is reached over Arsal to resolve the immediate crisis, it is unlikely that the town will stay out of the news for long.

Nicholas Blanford is the Beirut-based correspondent for The Christian Science Monitor and The Times of London

March 8, 2013 0 comments

The Buzz

Morning briefing: 8 Mar 2013

by Executive Staff March 8, 2013

written by Executive Staff

Economics and policy

Qatar will sell QR4bn ($1.1bn) of three-year and five-year bonds and sukuk, its state news agency has said.

More from Arabian Business

Tourist numbers to Dubai increased by 9.3 percent in 2012, with the city welcoming more than 10 million visitors in a year for the first time, according to official figures.

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Lebanon’s Union Coordination Committee ramped up its rhetoric Thursday, warning that nationwide sit-ins and strikes would continue until demands to adopt a new salary scale were fully met.

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Banks in the GCC are expected to maintain issuance levels this year as they aim to capitalize on investors' global search for higher yields, according to Standard & Poor's.

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Etisalat expects 2013 revenue of up to $9.4 billion, according to a presentation the company gave to analysts, with the former monopoly also looking to consolidate its smaller assets.

TBWA’s Ramzi Raad talks success

by Maya Sioufi March 7, 2013

written by Maya Sioufi

Kicking off his career in advertising in 1967, Ramzi Raad is one of the architects of the industry in the region. Based in Dubai since 1986, Raad is the chairman and chief executive of TBWA Raad, a subsidiary of New York-based advertising agency TBWA. In Faraya, Lebanon for the MENA Cristal Festival, Raad sat with Executive to talk about the prominence of television in the Middle East, the growth of digital advertising and the challenges of the region’s industry.

How did advertising on television become the prominent media avenue in the region?

At one stage in the [Middle East and North Africa] region, back in the 1990s, television was the main communication medium because of the high percentage of illiteracy in large markets such as Saudi Arabia and the Gulf states. Oil money made a lot of consumers have disposable income and become interesting prospects for international clients. At that stage it was government-run TV stations and news was about what the king, the sheikh or the prince did. Then, when Kuwait was invaded by Iraq, we discovered satellite TV as CNN covered the war. Arab TV stations were in a state of denial; no one was covering the fact that an Arab state was invading another Arab state. We woke up and discovered there is a different kind of TV that shows you the world as it is evolving at the moment: live TV. Egyptian satellite TV channels were the first [in the region] as they had huge libraries of material. Then commercial satellite stations proved to be popular because they delivered to the viewer what he or she wanted.

How are the Arab revolutions affecting the advertising landscape?

In the bigger markets in the [Arab region], you don’t have a lot of cultural and entertainment opportunities, so people are accustomed to get entertained by TV. To advertise on TV is expensive and in today’s world, you have to invest and not all advertisers can invest. Local agents don’t have the money to do that. Then came digital media and the Internet and access to new ways of communicating with the public. With the Arab Spring came the realization of the penetration of these types of media, how popular and how much they are used among local populations, and then “poof” everyone moved [to digital advertising].

What are your expectations for the performance of the advertising industry this year?

We are hopeful the growth seen in 2012 will continue. Our region from the dawn of the advertising history has been underspent, so one expects that there should be two-digit growth year after year.

What campaign are you proudest of so far?

The campaign we did this year for the Dubai Shopping Festival. This campaign, which has been going on for a number of years, tried to appeal to everybody but in the process, it was about to lose its distinct identity. Was it a place where you can take the family, was it for entertainment, for discounts? To develop the campaign we ran this year, we brought together all the stakeholders in one room for two days and together we looked at shopping festivals, carnivals and annual events from all around the world. Collectively we tried to come up with what Dubai festival is about.

What are the most significant challenges that the industry is facing?

The industry needs to realize that we need to get together and apply a lot of discipline to the way research [on media in the region] is done. We realized in recent years that the whole system sometimes gets abused. Now there is a move across Gulf states to provide job opportunities for nationals and there are lots of young nationals coming on board and running businesses. They are there because they are young nationals with a general education and not necessarily because they went to a communication school or received [specific] training or managed large budgets. If they are not trained well, growth in any particular market will be greatly affected by the quality of the people running the process. I don’t want to be insulting of young nationals. All I’m saying is that we have to accept that professional training is a must.

March 7, 2013 0 comments