Executive Magazine

Lebanon’s newest bottle

by Nabila Rahhal January 8, 2013

written by Nabila Rahhal

Lebanon’s long history of wine production dates back to 2,600 BC when the Phoenicians used to export the wines of Byblos to Egypt; many believe the story of Jesus Christ’s first miracle of converting water to wine at a wedding took place in Lebanon’s Qana. When the Ottoman Empire took control of Lebanon, wine production took a back seat only to be slightly revived with the French mandate, which brought with it France’s love for good wine. With the civil war, interest in wine making receded once again, and it is only in the last few years that the country has witnessed a rebirth of wine culture. Today, according to the Union Vinicole du Liban (UVL), the official association of Lebanese wine producers, Lebanon’s viticulture produces 6.5 to 7 million bottles of wine annually, with 2,000 hectares of land in the country dedicated to wine grapes. While this is but a drop in the ocean compared to other wine producing countries — such as France which produces 5 billion bottles of wine annually — interest in wine production is certainly on the increase as evident by the fact that Lebanon has around 40 wineries today.

A new bottle on the block

One of the most recent wineries to enter the Lebanese market is Ixsir, a company that was conceived in 2006, officially established at the end of 2008 and released its first wine in 2011. While most wineries in Lebanon are typically family owned and managed, Ixsir’s shareholders market themselves as “a group of friends with a passion for wine and for Lebanon.” The project started with Etienne Debbane, chairman of the Debbane-Seikaly group that owns Exotica, wine trading company Enoteca and Debbane agriculture, Hady Kahale, current general manager of Ixsir, and Spanish winemaker Gabriel Rivero.

As the three of them approached banks and would-be investors with their plans for Ixsir, they were informed that Carlos Ghosn, chairman and general manager of Nissan-Renault, was interested in investing in a Lebanese winery. Ghosn saw in the wine industry and its related grape harvesting an opportunity to support community development in Lebanon, and, after studying the available wine market, he was the second party to join Ixsir as a partner. Finally, key figures from the financial sector, such as Khalil Debs, Walid and Samer Hanna and Nabil Shaaya joined in as well. “Basically, we are three groups, the Debbane-Seikaly-Kahale group handling the management side, Carlos Ghosn’s group and the financial sector’s group,” explains Kahale, adding that all the partners are successful businessmen with an evident love for their country, otherwise they would have invested in projects abroad.

“Ixsir is the wine of the Lebanese mountains,” says Kahale, describing their product in one sentence. Unlike the majority of Lebanese wine which is produced in the Bekaa valley, Ixsir’s winery is in Basbina, a mountainous area above Batroun, North Lebanon. The grapes that comprise a bottle of Ixsir are gathered from six different hilly vineyards in Lebanon (Jezzine, Niha, Kib Elias, Deir El Ahmar, Ainata and Batroun) creating a diversity of taste rarely found in other wines. “Many people talk about the Bekaa valley, but plains never produced good wines because there is no water drainage there, something which is needed for good wine-making grapes,” elaborates Kahale, adding that many Lebanese wineries buy their grapes before the season, a move which does not usually produce good wine, as the only way to have quality wine is to have your own vineyards.

“With Ixsir, we are competing on quality and not on cost. Consumers want more than the usual local entry range prices wines, so we felt we could offer them something better at a slightly more expensive price and they will appreciate it,” says Kahale. The winery produces three ranges starting with Altitudes, which sets you back approximately $10, moving on to their second line Grand Reserve that is slightly more expensive and finally the just-launched El, their high-end wine, which costs $48.

On El, Kahale says: “For us, competition for El is from international wine, and therefore it has a good quality-cost ratio. Critics have given it the best grades given to a Lebanese wine in a long time.”

Getting out the product

Ixsir’s sole distributor is Enoteca, one of the first wine shops in the country with its own distribution arm, and a sister company owned by the Debbane-Seikaly group. Kahale explains this decision by saying: “We chose Enoteca, not just because it is a sister company, which helps of course, but they are also very good at retailing and already have their high-end restaurants and stores. Working with Enoteca also means we are almost totally hands on in distribution, which we prefer to having a strong bulldozer style distributor lacking the focus or precision you get from a smaller distributor. Our strategy is paying dividends already.” Ixsir currently produces 400,000 bottles annually, 55 percent of which are distributed locally with the rest internationally. In Lebanon, Ixsir is distributed to 350 stores, 150 of which are off-trade locations such as major supermarkets and delicacy shops. The remaining 200 are in on-trade locations such as high-end restaurants and pubs that have extensive wine lists. “Basically, we are anywhere a wine culture exists and the wine is respected,” summarizes Kahale.

Within a year of their launching, Ixsir has tapped into 11 international markets, the top three of which are England, France and Japan. “We have a different strategy for each country,” explains Kahale. “In Japan, we are the number one selling Lebanese wine because Carlos Ghosn is an icon there. In the UK, the UVL launched a strong generic campaign, which Ixsir was part of, and in France, we mainly distribute to some of the 400 Lebanese restaurants in Paris, in addition to several wine shops.”

Despite Ixsir being rapidly embraced by the public, Kahale believes that “the route to the market and to get to the consumer in Lebanon is not easy.” He explains that the Lebanese wine producers are not competing against each other but instead are working together, through fairs and promotional activities, to educate the consumer about wine, thereby increasing its consumption in the market that in turn will benefit all Lebanese wineries. According to Kahale, wine has the potential to be for Lebanon what silk was in the olden days, a major profit-making export. “The government financially supports olive tree products, but they have a sector that can make 10 times more profit. We are the only country in which generic campaigns for the industry are being paid from our own private pockets,” laments Kahale, attributing this mainly to religious concerns.

Making the market

In terms of Ixsir’s specific marketing strategy, mass campaigns are seen as unproductive and instead they reach the consumer at a personal level through targeted media and critics’ reviews. “Wine is not a fashion item. It will take time for your client to choose you, but once he does, it will also take time for him to let you go,” says Kahale, adding that a very important tool in their marketing strategy is the winery itself. The winery, designed by architect Rabih Abi Lama, won the CNN Greenest Buildings award for the year 2011 and understandably brought Ixsir a lot of publicity. The main purpose for building the winery underground was to produce the best wine possible while preserving the natural landscape and saving energy for future generations.

Costing more than $10 million, Ixsir is financed by private equity and shareholders, through capital and loans, with the shareholders expecting to start making profit in a few years. In conclusion Kahale says, “The wine business is a long-term one because you are creating value. If you are looking for quick profit and are not passionate about it, don’t go into the business.”

January 8, 2013 0 comments

The Buzz

Morning briefing: 7 Jan 2013

by Executive Staff January 7, 2013

written by Executive Staff

Economics

Brent crude futures held above US$111 per barrel on Monday, supported by signs that the world's biggest economies are on a steady recovery path, but inventory data showing weak fuel demand in the United States curbed gains.

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Gold inched up on Monday as lacklustre US jobs data supported expectations for continued monetary easing from the Federal Reserve, a session after concerns about the withdrawal of such a policy drove bullion to its lowest in over four months.

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Gulf Arab markets are seen extending gains on Monday as many investors continue to increase their market exposure ahead of expected dividend payouts.

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Current prices of $105 to $110 are “considered good” in light of the “circumstances” of some of the regional and international oil-producing countries, the UAE Minister of Energy Mohammed Dhaen Al Hamli has said.

More from Arabian Business

Bahrain Middle East Bank (B.S.C) announced the full repayment of a $17.4m legacy debt obligation – together with interest – as inherited by the present management who took charge of the institution's affairs in early 2009.

The Beirut Creative Cluster

by Maya Sioufi January 7, 2013

written by Maya Sioufi

When American author Michael Porter first introduced the notion of ‘cluster’ in 1990 in his book The Competitive Advantage of Nations, he viewed the agglomeration of companies — whether geographical or merely through collaboration — as essential to increasing productivity, driving innovation and encouraging new businesses in the field. Fast forward 22 years and Beirut-based incubator Berytech is attempting to launch, on its own, a local version of a cluster for Lebanese companies in the information communication technology (ICT) sector.

Financially supported by the European Union, Berytech’s efforts to launch the cluster began in 2011 after tasking Salim Tannous, a media consultant, with finding the ICT companies that would eventually become the members of the cluster. “Most company owners said ‘leave us alone, we don’t have time’; they associated [this initiative] with a PR stunt so the first obstacle was to get their trust,” says Tannous.

Cooperation for free

After lengthy negotiations, meetings and workshops to show companies how a cluster would benefit them, 25 companies joined and a board of directors was appointed in August 2012 made up of seven members. The cluster’s goal is to get companies to collaborate, share knowledge, partner and develop the ICT industry in Lebanon. Dubbed the Beirut Creative Cluster (BCC), the aim is to bring these companies closer together through round tables, workshops and other events. “Instead of going to Europe and finding a partner there to work with, they can find one in Lebanon,” says Tannous. An open club, the cluster aims on adding more members but wants to put in place a structure before doing so, in order not to disrupt the dynamic.

With no membership fee, the cluster is entirely funded by Berytech for now. Tannous refused to disclose the cost of the initiative, only saying, “it is not a lot”. Eventually, the board members will decide when it will start charging annual membership fees, similar to their international counterparts. The Bulgarian software cluster BASSCOM in Sofia, for example, charges its 45 members an annual 600 euro ($790) membership fee.

The BCC also differs from its counterparts in developed economies by not having government support or research and development centers underpinning the cluster. In developed economies, triple helix clusters bringing together government, industry and academia are common. The Innovation Alliance on Lithium-Ion Battery in Germany — which works to secure high-powered lithium-ion-based energy storage systems — has 60 partners from political, industrial, scientific and research fields on board and is 15 percent funded by the government (roughly $78.9 million) and 85 percent by the private sector (roughly $474 million). “Here in Lebanon, [the government] prefers to see a winning horse before they bet on it,” says Tannous. As for academia, the BCC is already communicating with Saint Joseph University — given Berytech’s founders hailed from the university — and plans to begin talks with the Lebanese American University soon.

On the drawing board

First and foremost, in the upcoming months the BCC aims to help members of its cluster to join fairs organized in developed markets. On the top of its agenda is the MIPCube, a creative platform forum that will be held in Cannes in April 2013. Tannous is preparing to have the members attend the fair at a fraction of the cost by searching for sponsors, such as the Investment Development Authority of Lebanon (IDAL) and requesting a discount from the organizers of the fair “keen on encouraging companies from the Middle East.”

The BCC also plans to organize workshops such as a cross media workshop to educate companies in the ICT industry on how to sell their content across different media platforms, with the target of holding the event within three months. “A screenwriter with an idea for a film thinks about the movie and how it will be projected on a theatre screen and that’s it,” says Tannous. “We want to help them think of the story as trans-media, exploitable on movie screens, TV, tablets… on how to monetize the story.”

Last month, the BCC and Foundation Liban Cinema, an association helping the development of Lebanon’s cinema industry, planned a script-writing workshop, in collaboration with the French Institute and the European Union Delegation in Lebanon, whereby Lebanese and French script-writing experts provided advice to up-and-coming scriptwriters. A follow-up session is planned in six months.
With a European Bronze Label for Cluster Management Excellence awarded to the BCC at the 15th Competitiveness Institute held at San Sebastian in October 2012, Tannous has big ambitions for the cluster going into 2013. His target by the end of the year? “For more members to want to join, for Berytech to stop supporting it and for the cluster to fly on its own,” says Tannous.

January 7, 2013 0 comments

Comment

A nation on qat

by Farea al-Muslimi January 7, 2013

written by Farea al-Muslimi

Lebanon is presented with the most serious challenges it has faced in the past decade. The economy is struggling, the internal security situation is deteriorating and the country’s neighbors pose real threats. In these circumstances the very fact that the country continues to operate can be seen as a success. And amidst everything, there are opportunities — not just in newfound offshore oil and gas but also within the country’s ingenious population.

As we head into 2013, what can be done to help the country unite, to overcome its challenges and ultimately to grow? Over the course of this week, eight influential figures will address seven important topics, each suggesting one proposal to help the country move forward. In this first article, former Labor Minister Charbel Nahas argues that the country’s economy needs fundamental reform.

Every new day in Yemen people chew away at their political, economic and social aspirations for the future. They chew on disappointment from the failings of their society and government, and on sorrow for friends lost and injured to violence in the country. With all of that though, and especially since the revolution, they also chew on hope. But above all else, Yemenis chew qat — a green, leafy plant that produces a mild amphetamine-type buzz.

It is a social habit and one to which many are addicted. It is everywhere, as ubiquitous as hookah pipes in Beirut and McDonalds in the West. Almost everyone does it — young and old, men and women, religious figures, politicians, technocrats — and at almost any occasion — funerals, weddings, social gatherings, during war and negotiations, whenever — for around six hours daily. After 1pm government agencies begin to close as employees head directly to the qat souk, even before going to lunch.

In most countries it is classified as an illegal narcotic, (in late 2012 a Yemeni citizen was sentenced to five years in prison in Lebanon for trying to smuggle five kilograms of qat through the Beirut airport). It is the cause of many serious diseases — especially when combined with the rampant overuse of pesticide — consumes an astronomical 40 percent of Yemen’s annual water resources (in a country that is critically water scarce), occupies hundreds of thousands of hectares of arable land, costs the economy tens of millions of dollars in lost hours of productivity and almost nothing is being done to stop its continued spread.

No one in Yemen will argue whether or not qat is bad — they all think it is a catastrophe; but they chew it anyway, and will discuss ways to ban qat while chewing qat.

While being a complex social, anthropological and environmental problem, Yemen’s qat obsession is not completely universal. Before unification in 1990 when South Yemen was under Marxist rule, it had a very practical policy toward qat, allowing it only on Thursdays (think of it as ‘Black Thursday’), and the policy was strictly applied.

In the southern governorate of Hadhrmout qat is actually widely despised. It is commonly understood that Yemen’s best businessmen and hardest workers are from Hadhrmout. In seeking a woman’s hand in marriage, the first thing a man in Hadhrmout must say to her parents to prove he is decent and responsible is, “I don’t chew qat.”

Recently, a young man made waves in Sanaa when he announced he would marry his wife at a ceremony where there was no qat allowed. It was the first time in decades this had happened. People swarmed to the event — the invited and uninvited, qat haters and addicts alike. It was like a bazar; everyone wanted to witness it and be inspired. Other young couples followed in their footsteps with qat-free weddings; including one in one of the most qat consuming and tribal governorates: Ammran.

These weddings were another sign of how Yemeni youth are attempting to creatively address societal ills that their elders have never given thought to. But, as is the danger with most progressive movements that upset the status quo, the established elites and old guard will resist.

Late last year some members of Parliament tried to broach a long-term plan to eliminate qat, but were attacked by other MPs who accused them of breaking the national consensus against even raising the idea of a ban. Needless to say the plan failed, just like every one preceding it. For obvious reasons, it was the MPs whose constituencies produce the most qat who fought most strongly against the ban, as it is a major source of revenue for their powerful local stakeholders.

As is fitting of the foreign meddling in Yemeni politics, this nascent anti-qat movement in government then sent a delegation to Al Azhar in Egypt, — the foremost institution of Islamic study in the world — asking for a fatwa (religious ruling) to say qat is haram (sinful).

There are many ways that could be taken to address qat in Yemen, from regulation to taxation to simple education. Recognizing the need to do something, young couples seem to have tried to take the first step. One can only hope that in striving to weed qat from the garden of Yemen they are not biting off more than they can chew.

Farea al-Muslimi is a Yemeni activist and commentator

January 7, 2013 0 comments

Society

Lebanon: A history 600-2011

by Sami Halabi January 7, 2013

written by Sami Halabi

Since the civil war, many revisionist historians have debunked popular theories of Lebanon as the historical bedrock of ‘Phoenicianism’ or a haven for persecuted minorities. The works of these authors challenge the rhetoric of those attempting to abuse history for political ends, and act as a rational voice amid the cacophony that is our political and socioeconomic narrative. “Lebanon: A History 600-2011,” written by the Levantine historian William Harris, however, is no such work.

Instead, the author attempts to portray himself as an outside observer chronicling the history of how our deeply torn nation, devoid of any real reform, still exists today. This outsider status does have its uses in assessing how the fragmented pieces that make up Lebanon have not yet crumbled, in that Harris lacks the sectarian proclivity that many modern Lebanese historians naturally possess.

The book proceeds in chronological order through two parts: 600 to 1840 and 1840 to 2011. The accounts of what occurred in the area we call Lebanon today are exhaustively researched and sourced from, rather uniquely, a multitude of languages. Harris’ historical assessment up to 1840 goes to great lengths to detach itself from judgement and purely states the facts. At times he doubts the work of his colleagues, but never presents an outright challenge to their assessments of why certain events occurred.

When considering the Druze accession in the ninth century he doubts the work of the late Kamal Salibi but never offers an alternative reading. Harris only sticks his neck out when considering the role of Fakhr al-Din Maan, who he discounts as the historical founder of Lebanon but rather someone who got the ball rolling.

In this, Harris employs large, and at times exhausting, volumes of the historical records to prove his argument. Indeed, up until the end of the first section of the book it reads like machinegun fire of historical bullet points: one bit of information after another with little analysis or deeper observation to keep readers interested, bar the most academic.

Yet, given that it is a work of history and sources are necessarily sparser the further back one goes, this is perhaps understandable. What is not so forgivable is why this factual barrage continues into the second half, but peppered with Harris’s contentious political pretentions that he worked so hard to conceal in the first half.

To his credit, Harris does a good job of pointing out particular historical elements that still plague our society today. He nicely weaves in socioeconomic facts and figures showing how historical cronyism in business and politics maintains the economic wealth in the upper classes; makes a point to expose the failures of the modern Lebanese state toward women (something most scholars overlook); chronicles the destruction of heritage for commercial interests; picks apart Syrian hegemony; rightfully derides the Amnesty Law for forever marring our sense of justice and accountability; and he is critical of leaders for instilling, rather than opposing, sectarianism. Yet, these positives are few and far between and none are fleshed out in a way that, for instance, changes in Ottoman tax farms are.

What’s more, Harris manages to recount the Lebanese Civil War with mere allusions to Israel’s role in the destruction, avoiding any outright criticism of this invading army and not even mentioning the 20-odd thousand civilians killed by Israel’s bombardment of West Beirut. He lays a disproportionate amount of blame for the war on the Palestinians and leftists, who come off as a thorn in the side of Western interests and Christian militias that “predictably vented their rage” in the Sabra and Shatila massacre. By the time he gets to the post-war period, Prime Minister Rafiq Hariri is “frustrated” with corruption, the Special Tribunal for Lebanon investigating his assassination signifies “hope for renewed judicial authority in Lebanon” and Hezbollah is to blame for the country’s ills.

In all, despite some merits, what starts out as a well-researched history book one could put on a shelf as a reference tool, later turns into a rather hurried and wanting attempt to boil down all the massive complexities of modern Lebanon to zero-sum politics; in doing so, Harris offers little new to the contemporary understanding of this country or its people.

January 7, 2013 0 comments

The Buzz

Lebanon security incidents 2012

by Benjamin Redd January 7, 2013

written by Benjamin Redd

For the third year Executive has mapped out Lebanon’s security incidents into one map. This year, for the first time, the data has been made into a detailed interactive map for use online.

Click here or on the map below to go straight to the data.

January 7, 2013 0 comments

Society

Automobili Lamborghini celebrates 50 years

by Nadim Mehanna January 6, 2013

written by Nadim Mehanna

In May this year, 50 years to the week after Lamborghini laid its first foundation stone in Sant’Agata Bolognese, the Raging Bull of Italy comes home. Owners and dealers, drivers and aficionados from around the world will sweep across 1,200 miles of Italian highway, turning the country, for a moment, into a roaring Pamplona of carbon fiber and horsepower steel.

The event’s organizers anticipate that this will be the largest assembly of Lamborghinis ever convened. The Anniversary Grand Tour, as it has been named, will flow from Milan to the Tyrrhenian coast, passing through Rome and concluding with a final procession to the original factory in Sant’Agata. Along the way, guests will be treated to an ongoing exposition of the brand’s evolution through time, from the classic GTs to the sports cars of tomorrow, and who knows, maybe Lamborghini’s most daring innovations like the Urus luxury SUV will roll.

The Tour is a celebration of history, but in a way it is also a triumph march — a reminder that, only a decade and a half after the struggling super-car maker was brought under the wing of Volkswagen Group (VW), Lamborghini has charged back stronger than ever.

The purchase of Lamborghini by VW subsidiary Audi marks the first period of relative stability for the company since the market crash of 1973 threatened to run it off the road. In its first decade of operations, under the leadership of founder Ferruccio Lamborghini, the company saw robust growth, turning out classic models like the 350 GTV, 400 GT and eventually the Miura. But the economic downturn following the 1970s oil crisis saw the company slip from its pedestal into more than two decades of unprofitability, its ownership passing from Chrysler to investment firm Mycom Setdco, and finally into the haven of VW’s wide wings.

Tying the knot with V.W.

It is easy now to see, with the advantage of hindsight, that the marriage of Italian charisma with German clout was a shrewd move for both Lamborghini and VW. Freed from the exhausting pursuit of short-term profits and bolstered by Audi’s unparalleled research and development capabilities, Lamborghini turned inward in the first years following the acquisition; with a relentless focus on performance, it began to test its own limits. It was in this period that Lamborghini began to make serious use of carbon fiber, and achieved advancements in power and pull that would later be featured in the Sesto Elemento ultra car. Some of the prototypes born from that period of introspection — particularly developments to the engine and gearbox — set new milestones within the industry.

VW, for its part, has seen ample return on its investment. The immensely popular Gallardo, debuted in 2001, has sold close to 20,000 units to date; thanks in part to its success, Lamborghini was listed as one of the most profitable luxury car makers in the world in 2008. To its credit, VW has taken a hands-off approach to the management of its subsidiary, offering support but allowing Lamborghini to go its own way.

There have been twists and turns along that route, but in the end, the company has remained committed to Ferruccio’s original vision of a top-of-the-line grand touring car.

May’s fete will provide an excellent opportunity to survey that journey. Car enthusiasts attending the Anniversary Tour would do well to bear a few points in mind: first, the brand is preparing to do some amazing things. The first Elementos will roll out next year, and with them a new precedent for ultra-light, ultra-fast vehicles. With a power-to-weight ratio of 1.75 kilograms per horsepower, the Sesto Elemento is a super car among super cars.
Amazingly, the Elemento’s speed and power are achieved not with turbo or supercharging, but simply through the painstaking work of amping up engine performance and shaving off ounces. Just as a master watchmaker returns again and again to the roots of his craft, refining his skills even as the world abandons gears and springs in favor of the digital clock, so Lamborghini adheres to its own tested discipline. The purpose of the brand is not to invent a new class of cars, but to refine the ideal laid out by Ferruccio half a century ago.

This speaks to the second point of consideration. More than perhaps any other brand in the world — with the possible exception of Ferrari, its main competitor — Lamborghini has remained steadfastly loyal to core super car principles. At first glance, the new 2013 Gallardo may not look all that much like a classic GT, but closer inspection reveals the same commitment to form, the same seat positioning and the same sleek refinement that came to define the company’s more sophisticated brand of sportsmanship. And when the engine roars, it still thunders with that quintessential Lamborghini sound.
That roar will sound loudly on the causeways of Italy this spring. The 50-year celebration will not be marketed widely, but will nevertheless be heavily attended. Gala dinners, resorts and entertainment will all feature in the four-day program; ultimately, though, this event is about the cars and the company behind them.

The next fifty years

While Lamborghini is certainly exploring new territory with the Urus, and more recently the revitalization of the LM series luxury off-road vehicle, as it joins a growing rank of luxury brands experimenting with hybridization, the citing of the Anniversary Tour demonstrates that the company is still very much in touch with its roots.

Like Lamborghini, Italy has had its ups and downs. The country has yet to free itself from the shadow of a Greek collapse and the prospect of falling dominos that threatens to topple the region. In May 2012, severe earthquakes rocked the north of the country, destroying many historical landmarks concentrated in the Emilia-Romagna region. Restoration is ongoing.

Through its Anniversary Tour, Lamborghini has found a way to give something back, allocating 10 percent of all sponsorship proceeds to earthquake relief efforts. No less important, the company’s resurgence is a point of pride for Italy, and a reminder that perseverance often wins out over economic uncertainty.
Heading into the latter half of its first century, Lamborghini has enough momentum to carry it far into the future. The brand has been tested, and proven itself enduring. Here’s to a great 50 years, and another 50 to come.

January 6, 2013 0 comments

Comment

Tehran optimistic after all

by Gareth Smith January 4, 2013

written by Gareth Smith

Iran is looking at 2013 with more optimism than seemed likely just a few months ago. True, tougher United States and European Union sanctions introduced in the summer have halved oil exports to around 1.1 million barrels a day, but predictions of economic implosion have fallen flat.

Likewise, the durability of the Syrian regime has confounded many expectations, with varying reports of Iranian assistance. Above all, to Iran’s satisfaction, November’s conflict between Hamas and Israel brought the Palestinian cause back up the agenda, thereby challenging the narrative of a bipolar region defined by tension between Sunni and Shia camps.

When Hamas leader Khaled Meshaal publicly thanked Iran for its “unconditional” support, he evoked a better past relationship: Six years ago, Iran transferred resources to help Hamas govern Gaza after the party won the Palestinian legislative elections and its new government was snubbed by Arab leaders and the West.

Now, the acknowledgment from General Mohammad Ali Jafari that Iran supplied Hamas with the know-how for ‘home-made’ versions of the longer-range Fajr-5 rockets painted a stark contrast between Tehran’s military help and the caution of the Sunni-led regional states. Perhaps, we wondered, Iran could now recover some of the influence lost when Hamas’ leadership moved from Syria to Qatar early in 2012 and expressed support for the opposition to President Bashar al-Assad.

No wonder, then, that Tehran’s assessment of the conflict in Gaza was upbeat. On a trip to Syria, Ali Larijani, Iran’s parliament speaker, extolled a renewed rhetoric of “resistance”, linking Hezbollah to “the victories won up to now” by the Palestinians and even claiming that Syria was playing a “fundamental role”. Hezbollah Secretary General Sayyed Hassan Nasrallah questioned whether an Israel “shaken by a handful of Fajr-5 rockets” could cope with Hezbollah’s far greater arsenal. And this too brought back golden memories, in this case the early 1990s, when Israel deported to South Lebanon several Palestinian leaders, mainly from Hamas, where they were welcomed by Hezbollah.

The Iranian media has been quoting military analysts suggesting Gaza highlights the challenge Israel might face in a war on three fronts, including Hezbollah and Hamas, if it attacked Iran’s nuclear facilities. And there was another common theme: that Israel lacks the public support and appetite for any sustained conflict.

Iran has another calculation. While the Sunni triumvirate of Egypt, Qatar and Turkey played a successful role in helping end the conflict and may be now hoping to draw Hamas into a ‘peace process’ with Israel, their chances of success hang on Israel taking a far less confrontational approach — and Tehran sees little chance of this happening.

True, there is for Iran no simple way to improve relations with the Sunni world, damaged by developments since at least the shift in Iraq toward a Shia-led government after the 2003 US invasion. And the war in Syria, while showing the resilience of the regime, is also radicalizing militant Sunnis to the extent that Khaled Oweis, former Reuters bureau chief in Damascus, spoke recently of Syria as “the new Yemen”: it seems a long time since ‘experts’ saw the demise of Al Qaeda in the ‘Arab Spring’.

Alongside discussion in Iran about Gaza has been a lively debate about the possibility of talks with the US. Some parliamentary deputies and Revolutionary Guard officers opposed to talks have extolled the values of a “resistance economy” in which sanctions encourage self-sufficiency. But there are many others taking up the notion, put forward last spring by former President Akbar Hashemi Rafsanjani, that Iran can talk to the US if there are “equal conditions and mutual respect” and that “not talking and not having relations with America…[is] not sustainable”. The pragmatists will have welcomed the reports that officials from the two sides met quietly in Qatar in October.

The Obama administration — anxious to avoid an early Israeli military attack — likes to argue that sanctions will force a weakened Iran into a diplomatic solution and the acceptance of stringent limits on its nuclear program. At the same time, those in Iran who want talks have to argue that their country can enter them with confidence from a position of relative strength. Hence, in the roundabout, interconnected way the Middle East fits together, Hamas may have helped their case.

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

January 4, 2013 0 comments

The Buzz

Morning briefing: 4 Jan 2013

by Executive Staff January 4, 2013

written by Executive Staff

Economics

Jordan aims to cut its budget deficit by about a third this year to curb the impact of soaring fuel import costs and high social spending linked to the wave of Arab uprisings.

More from Arabian Business

Iraq's monthly oil exports fell by 10 percent in December, highlighting the volatility that still characterizes the country's growing oil sector.

More from Reuters

Standard & Poor’s Ratings Services ranked Lebanon in the high-risk group eight in its latest Banking Industry Country Risk Assessment.

More from Arabian Business

Dubai Islamic Bank (DIB) has announced that its board has approved plans to buy 100 percent of mortgage provider Tamweel, in which it already holds a majority stake of 58.2 percent.

More from Arabian Business

The UAE has signed an agreement with Turkey, which will allow state-linked energy giant Taqa to develop $12 billion worth power plants and explore coal mines in the resource rich Afsin-Elbistan region.

Running Lebanon’s newest mall

by Thomas Schellen January 4, 2013

written by Thomas Schellen

Pure commercial plays are a sideline of real estate development in Lebanon when compared with the country’s mixed-use projects, and when measured against large-scale commercial projects elsewhere in the region, like upcoming new mega-malls in the Gulf and Egypt. Malls specialist Majid Al Futtaim (MAF) from the United Arab Emirates is taking its first Lebanese retail project into the home stretch as it is readying the Beirut City Centre mall for its opening in March. With 62,000 square meters (sqm) of gross leasable area, the property represents a major addition to commercial real estate in Lebanon. Executive talked about MAF’s strategy with Sleiman Mallat, senior mall manager for MAF Properties Lebanon.

Why do we need another shopping mall in Lebanon?

According to the studies that were done in Lebanon, the Lebanese market is underserved with shopping malls. That is why we need to build this shopping mall: to complement the offer that exists in the market.

Related: Battle of the Beirut Malls

Where will your customers come from? Does the mall aim to be a destination attracting people to drive in from a long distance or is it going to be a neighborhood mall?

We are aiming for both. In our study, we defined two trading areas. The primary trading area will be within a 15-minute drive from this shopping center. This will be the neighborhood around the shopping center. The secondary trading area will be a 30-minute drive from here, and for them this shopping mall will be a destination.

What will be your anchor stores and the mix of offerings you will rely on in attracting customers?

We will have a Carrefour [hypermarket] and another anchor store will be [clothing retailer] Marks & Spencer. We will also have a Magic Planet for children and Vox Cinemas.

Click here to see a promotional video of the mall

And you said the Carrefour store will be the largest in the Middle East?

Yes, at 13,000 sqm.

That means almost one quarter of the entire shopping mall will be the Carrefour?

Yes.

Is it correct that this store is linked to the mall not only as a tenant but also because MAF Holding is a partner with Carrefour in the Middle East?

It will be managed by MAF Retail. We have MAF Properties taking care of all the development and management of the shopping center. MAF Retail, which is a separate business unit of MAF [Holding], is taking care of Carrefour and other retail brands that similarly are represented by MAF Retail.

Is the Magic Planet entertainment area also under MAF Retail?

Magic Planet is under MAF Ventures and Vox Cinemas is also under MAF Ventures; the leisure offerings are under MAF Ventures.

Can you tell us about the business mix between MAF Properties, MAF Retail and MAF Ventures? What will be the most important component in terms of generating revenue?

For us this is Carrefour because it will be the biggest operation inside the shopping center. The others will complete the offering and the revenue stream. However, for us as MAF Properties, the relationship we have with Carrefour and all other retailers is on a tenant base. They have a lease and they have to pay the rent just as any other retailer in this shopping center.

But on a group level, the relationship is synergetic?

Yes, 100 percent.

So you have already an occupancy guarantee from group clients that covers more than 50 percent of the whole leasable space at Beirut City Centre?

This is the main strategy. When we study a plot to build and develop a shopping center there, we secure that our major brands will work in this location. Then we start developing the location further. We have to make sure that our major brands and some other major groups are present, such as [Kuwait-based retail group] Alshaya and [Dubai-based group] Landmark.

Will you have exclusivity to have store brands of such groups in Lebanon?

No, we don’t oblige them to have this exclusivity but what we do have is the exclusivity of opening their first shop [in Lebanon] in Beirut City Centre. After that, they can open wherever they like.

You have much experience in the mall business in Lebanon, including working with the ABC Mall. How do you see the business of building and operating malls evolving in Lebanon?

Lebanese developers mainly develop small shopping centers that are not real malls. The complete offering is what will differentiate this shopping center from the small shopping malls. ABC is a shopping mall and City Mall is also a shopping mall, but as I said, Lebanon is underserved. All studies show that we can develop more shopping malls in Lebanon and we have another project, the Waterfront City Centre in Dbayeh.

Other than those two, does MAF have projects lined up in Lebanon?

No, not at this stage.

MAF was also in the process of building a retail complex near Damascus in Syria, which had to be halted during the unrest. How important were intended synergies with the operation in Syria for you?

There is a delay in the execution of the project but what is good about Syria is that due to the situation, we are now expanding and changing the whole design for the plot there. We have big hopes for Syria after the situation settles down.

But do you not need economies of scale to economically run a mall operation?

This is 100 percent right. In the business model we have a center of operations in Dubai that can provide us with all the support we need for the purpose of decreasing the cost of operations and management, so we don’t have double functionalities between the regional offices and Dubai. In Lebanon, once we have the other shopping center [up and running], we will also have a Lebanon office that will take care of both operations.

Syria would not be under this umbrella?

Syria can be under it. They would have their own office but when it comes to major functions like for example leasing, the leasing office in Lebanon will do all the leasing for the Levant. In future, the asset management [office] will do asset management for Syria and Lebanon at the same time.

Will you charge for parking at Beirut City Centre?

We bought the equipment and will study how the market will be at the time of the opening but there will be a free hour at the beginning. We will try to implement a paid parking scheme to reduce abuses. We don’t want to be a park and ride center and at the same time we are not interested in gaining money from the parking. What we want is to organize parking.

You told me you invested in what usually would be the municipal road infrastructure directly outside the building. Can you say how much?

Around $2.5 million.

And how much is the total investment into the mall?

More than $350 million.

Do you have a fixed time expectation during which you expect amortization of this investment?

Actually, in real estate we normally target 10 years or 10 percent of return on investment.

Some malls or would-be malls in Lebanon have turned out to be empty and even at leading malls you see retail spaces that did not find demand. Are you concerned that this would happen to Beirut City Centre?

You always have to replace some tenant or change a mix inside a shopping center. But we are at this stage 96 percent fully leased. This is signed contracts. The other four percent, we have signed proposals but we are still negotiating some terms and that is why we didn’t sign the contracts yet.

Are your leases based on profit sharing?

It is fixed rent plus percentage over sales, a combination of both.

How many people do you have to hire to run this place?

The management team will be around 30 persons and there will be service providers, like cleaning, security and parking management coming to around 160 people. This is for the management of the building. Then there are around 1,300 opportunities at the retailers, at the shops that will open in the spring. We are creating around 1,500 permanent jobs.

January 4, 2013 0 comments