Executive Magazine

A third way

by Moe Ali Nayel November 1, 2012

written by Moe Ali Nayel

Armed thugs attacking demonstrators protesting against the regime was a hallmark of the early months of the Syrian revolution. The thugs were at it again early this fall in the Syrian city of Homs; this time, however, the demonstration was in the opposition stronghold of Wa’ar, and the armed men who roughed up the crowd and yelled at people to go home were Islamist rebel fighters who were provoked by protesters’ chants for a peaceful and secular future for their country.

“It felt as if our revolution was stolen,” said a friend who was there. In the beginning it was simple enough to say you were against the regime, it was the people against their oppressor — in the suburbs of Damascus, in downtown Homs and elsewhere people were demanding freedom, reforms, an end to corruption and a united Syria for all sects. The Syrian people were the ones who sparked their own peaceful revolution, without any support from the world’s so-called champions of freedom and democracy. Now, however, the intensity of foreign meddling has fragmented the unity around their cause.

Syria has become an arena for a geopolitical battle of global proportions: on the one hand there is the Syrian regime backed by Russia, China and Iran, and on the other hand we have the various insurgent groups being armed, aided and inflated by Saudi Arabia, Qatar, Turkey and Western nations. The Syrian people, by and large, have been forced to choose between supporting the regime or partisans of the revolution. In this game of thrones, those who actually started the revolution, and their message, have been largely swept aside. Some of those supposedly fighting for Syrian freedom also seem to be adopting the same practices as the regime they are trying to topple.

Ghaith Abdul Ahad recently reported in The Guardian about a young man who was stopped at a checkpoint in Aleppo manned by the Free Syrian Army (FSA). He was taken by the FSA for a torture and interrogation session; when he offered them nothing of value he was taken by “the Islamists” who didn’t allow anyone to see him after. How dissimilar is that to stories one hears of regime practices? Had it been the regular Syrian army who stopped the young man, he would have likely been interrogated and tortured on the spot, and later transferred to the dark cells of the mukhabarat (secret service), where he would vanish. The Guardian story shows revolutionaries, supposedly the fighters for change, mimicking age-old regime practices.

Twenty months into the uprising and Syrian society is splitting in many ways — between the religious and secular; deepening divisions between sects and communities; rich and poor; even men and women. With the raging internal conflict and greater geopolitical battle clearly polarizing the country, the need for the emergence of a khat thaleth, — a ‘third line’ or a ‘third way’ — is paramount, and indeed, these voices do exist. They are people who are trying to awaken the public consciousness and bring the essence of the revolution back to its early stages, when the quest for a better life for all was the hope.

Concerned Syrians — average citizens, activists, artists, journalists and others — are trying to open a window, a space for a third line to grow, though their efforts up to this point have been scattered. An image from an opposition protest, widely circulated on Facebook, sums up the situation; in it there is a placard depicting a man with the Syrian revolutionary flag on his chest being torn to pieces from all directions by hands holding dollar bills; at the top it reads: “Support for loyalty.” The awareness that Syria is being fragmented by external forces is clear. Another sign at a protest last month in the city of Kafr Nabl called for “the support of the revolution to get back on track”, while another stated: “To the opposition: Do not tire yourself, our revolution will produce its own leaders”, as opposed to foreign support choosing who has the power to lead.

Until now, outside intervention in Syria — from all sides — has amounted to dumping huge amounts of arms into the fray to fuel the bloodshed while outside powers bicker over a political settlement. This situation is reminiscent of Lebanon’s civil war — a war Lebanon has yet to recover from — that left the country with a divided society, a dysfunctional government and ultimately a monopoly on power for local elites backed by foreign powers. Neither this, nor a new regime in old clothes, will justify the sacrifices Syrians have endured, and have yet to endure. A third line must be taken.

Moe Ali Nayel is a freelance journalist based in Beirut

November 1, 2012 0 comments

Economics & Policy

Governing our oil

by Valerie Marcel November 1, 2012

written by Valerie Marcel

Following the recent gas discoveries off shore from Israel and Cyprus, Lebanon is keen to kick off exploration activities in its waters. Like many other prospective oil and gas producers around the world, it must draft contract terms, regulations and laws to direct investment behavior in the country and set up institutions that effectively control the actors involved in its nascent petroleum sector. Of course, it will want to do it right.

Successful governance of the petroleum sector is only possible with capacity. The state needs qualified people and competent institutions to design the terms of oil and gas investment and to steer the petroleum sector according to the government’s broader resource development plan. Capacity is also critical for monitoring the performance of oil companies, assessing their development plans, auditing costs and collecting revenues from the sector.

Prospective petroleum producers must focus on building this capacity. But the hitch is that they must do so at a minimal cost. After all, their resource base is still unknown. They do not yet have an accurate picture of their reserves to know whether, how much, when and for how long oil revenues will flow to the treasury.

If general state institutional capacity is high enough, they can draw on these people and processes to build up an existing ministry of natural resources. The experience of countries like Trinidad and Tobago show that in countries where state and human capacity were relatively high at the beginning of petroleum development, the ministry of petroleum has successfully managed the sector.

Conversely, in countries where state institutions are weak, concentrating power in the ministry has not brought about successful governance. For instance, in Gabon, the Democratic Republic of Congo and Sierra Leone, accountability has been poor and the technical and financial performance of the sector has also been low.

The World Bank’s Governance Indicators rank Lebanon in a somewhat similar position to Uganda, a new African oil producer. Both countries rank in the mid-range percentile globally for government effectiveness (Lebanon 43rd and Uganda 37th,) and regulatory capacity (53rd and 49th), but they score a low 19th percentile for control of corruption. In such a context, Uganda’s major discoveries and new production justify — and even require it — to build up its petroleum, legal and accounting capacity. In contrast, in Lebanon, building administrative and regulatory capacity is desirable, but significant investments will only be warranted when discoveries are made.

The existing state institutions are capable enough to devise the terms of exploration activities, with select inputs from sector experts. Clearly, in the immediate term, Lebanon’s strongest efforts in terms of capacity building will have to be focused on establishing strong processes of transparency and accountability. An oil sector in which decision-making and executive bodies are accountable, both to the country’s leadership and to the public, is most likely to promote broad-based national development and avoid some of the most serious governance maladies that often stem from oil.

Accountability is strengthened by a clear, formal delineation of roles and responsibilities among actors involved in the sector, with strong processes for data collection, auditing and public disclosure; and the ability of government institutions to exercise effective control over the activities of public officials and other actors with responsibility for the sector.

As was Uganda’s experience, the interest of both government and the public in the governance of the sector rises exponentially with the size of discoveries made. Strong accountability processes are best implemented before discoveries. A political commitment to getting it right sets the tone for the future.
At the beginning of 2012, Lebanon’s Minister of Energy and Water Gebran Bassil promised the appointment of the board for the Petroleum Administration (PA) within a month, the beginning of the tender process within three months and for the first contracts for exploration to be enacted within the year.

As yet, come November, the sector is stuck in a stasis without the PA; due to political bickering and horse-trading, Lebanon’s political oligarchy is yet to name the board. This does not bode well for the future of this nascent sector.

Valerie Marcel is an Associate Fellow at Chatham House, where she leads a project on Governance Challenges for Emerging Oil and Gas Producers. She is also the author of ‘Oil Titans: National Oil Companies in the Middle East’

November 1, 2012 0 comments

Economics & Policy

A decline into uprising

by Jihad Yazigi November 1, 2012

written by Jihad Yazigi

While there is a general consensus that the uprising gripping Syria since March 2011 is part of the broader regional movement for better governance and more freedoms, there has been little debate as to the extent to which the economic and social conditions prevailing in the country contributed to the uprising. The question of whether Syrians revolted because of their thirst for freedom, justice and dignity or whether they did so because of their poor economic and social conditions remains, however, important if one wants to understand the reasons that led to the uprising and produce viable economic reconstruction plans.

At the beginning of 2011, Syria had been witnessing for several consecutive years an average annual growth in its gross domestic product (GDP) of between 4 and 5 percent, limited current account, trade and fiscal deficits, a stable foreign exchange rate, rising foreign investments and a curtailed inflation rate. These positive macroeconomic data hid, however, many imbalances that lay behind them, and other longer-term trends must be taken into account in order to better understand the dynamics of the revolution.

The level of GDP growth, for instance, may be high by Western standards but is wholly inadequate by Syrian ones. Indeed, according to most analysts, an average growth of 8 percent is required to generate enough jobs for new labor-market entrants. For more than three decades GDP growth has fallen short of that level, meaning an uninterrupted increase in unemployment for some 30 years in a row.

The fiscal deficit may be limited but this is largely a result of government investment expenditures lagging, thereby contributing to long-term infrastructural shortfalls. As for the trade balance, it remains highly dependent on oil exports, which, in 2010, represented 46 percent of Syria’s total exports. With the volume of crude reserves rapidly declining, there are serious longer-term concerns. Meanwhile, private sector investment is largely geared toward real estate and the services sector, away from more long-term labor-intensive industries such as textiles, which has seen the closure of scores of factories in the last decade. Finally, the foreign direct investment Syria attracts every year may be on the rise but it remains below Jordan’s, a country with a population a fifth of the size as Syria’s, and none of its vast natural resources.

Booms and busts

A look at longer-term trends helps puts things in perspective. In 1946 Syria was a founding member of the General Agreement on Tariffs and Trade (GATT), the predecessor of the World Trade Organization — out of only 23 countries in the world. In the 1950s, when Algeria was still under French rule and the majority of ‘third world’ countries were still fighting for independence, Syria had a buoyant economy and a vibrant political life. Then, three decades of strong state investment in the country’s physical infrastructure and in its health and education services helped boost the country’s development indicators. In the 1970s, Syria’s Human Development Index — a composite statistic of life expectancy, education and income calculated by the United Nations — was growing at a rate among the highest in the world. In 1983, Syria’s per capita GDP, at $1,901, was higher than that of Turkey — $1,753 — and almost on par with that of South Korea ($2,187). That was only 30 years ago.

Surveying what followed in the 1980s is important in order to trace back the economic challenges the country now faces. At the beginning of that decade the Syrian economy contracted sharply, partly as a consequence of the fall in global oil prices and the decline in remittances and aid from Gulf countries. The foreign currency reserves dried up, leading to a rapid devaluation in the value of the Syrian Pound starting in 1986; this year marked the beginning of the implosion of Syria’s middle class. This was only further compounded by a rapid decrease in spending and investment by the government, which, at the time, played an overwhelming role in the economy. The country never fully recovered.

In the last part of the decade oil began to be extracted from new fields in the country’s northeast, around the city of Deir-ez-Zor. A short boom followed, fueling hopes that the state would lead the recovery by investing in infrastructure and by opening up the economy. The opposite came to bear: revenues from oil income gave new fiscal margins of maneuver for the government as well as a new source of foreign currency earnings, and as a consequence reduced the pressure on the authorities to open up — Syrian economists call the 1990s the lost decade.

Starting in the 2000s, and coinciding with Bashar al-Assad succeeding his father as president, the decline in oil production again threatened the government’s fiscal position and serious economic reforms finally began. Geared toward the services sector, the gradual liberalization of Syria’s economy improved with a modernized legislative framework for investment, reduced taxation on private corporations, an unfencing of trade borders and increased private sector investments in new industries.

These developments spurred the creation of modern and relatively sophisticated banking and insurance sectors with the entry of some two dozen regional banks and financial institutions in the market. The expansion of retail trade and of the tourism industry was evidenced with the construction of large malls and the entry of global hotel operators. What is more, concessions were awarded to private international companies for the management of the country’s two ports of Tartous and Lattakia and there was a general boom in the services sector.

However, this policy of economic liberalization was marred with mistakes typical of similar processes in other developing countries.

The downside of opening up

The free trade agreements signed with Turkey and Arab countries, for instance, were implemented with little safeguards to protect or promote Syrian manufacturers. The reduction in customs tariffs led to an invasion of foreign products that put countless industrial plants and workshops out of business and, consequently, thousands of people out of work, while only limited mechanisms were established to promote exports and improve competitiveness.

More significant is the divestment of the state from the agricultural sector. While the sector had for decades been a major contributor to economic output and to the labor market, it had to face a steep decline in subsidies at the worst of times — amid a severe drought.

In 2008, after three consecutive years of drought, the government announced a threefold increase in the price of gasoil — which is used by farmers to fuel their irrigation pumps — and an increase in the prices of fertilizers to world market levels. The combination of these factors — a drought and poor policy decisions — played a major role in the staggering decline in the share of agriculture in the economy, from 25 percent of GDP in 2003 to 16 percent in 2010, or a decline of a third in its contribution to the country’s economic output in some seven years. At one point, the production of wheat, a major staple food for the population, fell by half.

The crisis of Syria’s agricultural sector led to the migration of hundreds of thousands of people from eastern parts of the country, in particular around the city of Deir-ez-Zor, to the working suburbs of cities located further west, including Damascus, Daraa and Homs.

These twin crises in the agriculture and industrial sectors — or the crisis of the “working world” as one Syrian intellectual put it — converged in many of Syria’s rural and suburban areas; the geographical roots of the current uprising very much mirror the impact. Protests began in the city of Daraa, which lies at the center of a large farming area to which fled many of the people living in the drought-affected northeast. The wildfire of popular discontent soon spread to the rural areas of Idlib and Aleppo provinces, where livelihoods depend largely on agriculture, and to the working suburbs of Homs and Damascus — home to many of the artisans who lost out from the process of trade liberalization.

But the state divestment from this “working world” is also a reflection of a more subtle generational change in the composition of the governing elite in Damascus. While farmers, for instance, historically represented a pillar of the ruling Baath Party and a large share of its rank and file — Bashar’s father, President Hafez al-Assad, called himself a peasant — the current generation of Syrian officials were largely born and raised in the cities, disconnected and therefore insensitive to the plight of rural areas.

While there is little doubt that the struggle of Syrians for a better life was driven, before anything else, by their thirst for dignity, justice and freedom, one should make no mistake: The dispossession and injustice felt by large segments of the population cannot be understood without taking into account their economic shades. Poverty, forced displacement, loss of assets and property, and gradual deterioration of living conditions are all major contributing factors to the sense of lost dignity and justice, and hence, in the eruption of the Syrian revolt.

November 1, 2012 0 comments

Finance

Q&A: Mastercard’s Basel el-Tell

by Maya Sioufi November 1, 2012

written by Maya Sioufi

Today’s smartphones increasingly resemble “mini laptops”, allowing users on-the-go access to the Internet. They are about to get more useful and addictive, becoming wallets as well, allowing users to pay with their mobile phones. Google Wallet, launched in 2011, is an example of a system allowing users to tap their phones for payments. It is still early days and the adoption of phone payments is still nascent. In the Middle East, cash transactions remain the primary means of payment but Basel el-Tell, Levant regional manager of MasterCard Worldwide, is calling for the region to increase its adoption of electronic payments. While in Beirut, he sat with Executive to discuss the technological changes in electronic payments and their implementation in the Middle East and Lebanon.

Have you witnessed a change in consumer patterns during the Arab revolutions?

While there is a tendency to save, there has not been a shift in spending habits and overall spending is still growing across the region. Point-of-sale transactions are up 32 percent in the first half of 2012 relative to the same period last year. Some countries have been affected by a reduction in tourism but overall spending in the region is still steady.

One year on from MasterCard and Visa’s ban on all Syrian issued cards, how have you been affected by this ban and how many cards were impacted?

We don’t issue figures on cards in Syria but everything was halted: debit cards, credit cards etc. The United States placed sanctions on Syria and we don’t see [our ban] changing unless there is a change in regime.

What percentage of Middle East consumers holds a credit or debit card?

In the region, electronic payment methods account for less than 10 percent of total payments as cash and checks still account for more than 90 percent of payments. In Europe and in North America, electronic payments reach 20 percent; cash and checks still dominate. This is one of our drivers: we want to see a world beyond cash. Our competition is cash and checks. Cash is very expensive as it costs between 1 and 1.5 percent on average of a country’s gross domestic product to print cash, transport it and secure it. We are working with governments to replace cash and checks with electronic payments.

For instance, in Egypt we are working with the Ministry of Finance on a program enabling the payment of employees’ wages by payroll cards. In the United Arab Emirates, we are working with the Ministry of Labor on a wage protection system whereby all migrant workers are paid electronically. This will allow the government to make sure that people are paid on time. In Lebanon, we are working on several projects with local partners. We have made inroads but we don’t have anything to declare today. We see momentum and we think we will shortly see projects where government payments start taking place electronically.

With the ‘Gauss’ virus attacking Lebanese banks recently, what is MasterCard doing to help alleviate consumer concerns regarding electronic payments?

We are aware of this issue and we are working with our technology and security teams to monitor the situation as it evolves, to prevent any impact to our business and our cardholders. We recommend that consumers continue to be diligent when it comes to protecting their personal financial information when they are online. It’s important to take steps such as making sure your virus protection software is current and features the latest updates. Also, consumers should refrain from clicking on links in emails that come from unknown sources for their own protection.

Near field communication (NFC) is gaining more and more traction among mobile phone developers recently, and it was a disappointment for Apple fans when the new iPhone 5 did not offer this technology. Tell me a bit about it and why it is so important.

Imagine you are walking around in New York City and you want to eat a pizza. You go on Google maps and it shows you the closest pizza place. You can then book a table, order your pizza online and you can pay while you walk to the pizza place. It saves time and it is very secure. In 15 to 20 years, plastic will disappear in most of the world. Currently, many issuers are using NFC technology and we are working on it in the region too.

With the region still behind in adopting plastic but with mobile penetration on the rise, can we go straight to mobile payment and jump plastic?

Mobile penetration in the region shows this is the way forward but we need the infrastructure to make sure the mobile partners are ready. Some telecommunications operators in the region are not able to execute such technology. In Qatar, we launched a Qatar Telecommunication and Qatar National Bank solution so Qataris can walk into a Pizza Hut and pay with their phones. At the beginning, people will be hesitant but the learning curve will take place. We know that the Lebanese culture is one of entrepreneurship, innovation and early adoption of technology. We think PayPass (MasterCard’s “Tap and Go” cards) will be a hit.

How does PayPass work and how successful has it been in the region?

PayPass cards are made up of a radio chip that resides in the card and when it ‘sees’ a contactless reader, it starts communicating. It is designed for low value payments and does not require a signature or a PIN. If the value exceeds the limit put forth by the bank, you need to input the PIN. In the future, you will just tap your phone and not the card. It has been adopted in 41 countries in the world and four in the region: the UAE, Qatar, Egypt and Lebanon.

How many banks in Lebanon offer this technology?

Two banks in Lebanon offer PayPass: Fransabank launched it in 2006 and Bank Audi [launched September 30]. It has been mostly used by Fransabank’s international travelers and some local clients.

How many readers are available in Lebanon for this technology?

There are around 300 PayPass readers in Lebanon currently but we will see many more in the future. There is currently an aggressive marketing plan with retailers and ABC Group, one of the biggest retailers with seven outlets and two big malls, is deploying readers. Bank Audi, which is deploying the readers for ABC, will be installing 2,000 readers in the next 12 months and another 3,000 readers after that.

When do you think Lebanon will be “tapping and going”?

Some banks are still offering magnetic strips and some are moving to chip now. Remember ‘zip-zap’ payments? It used to be zip-zap then magnetic then chip then contactless (such as PayPass) and then NFC. There is a learning curve. Less than 10 percent of the current available readers are Bluetooth GPRS enabled machines, the ones that move to you, and that is because they cost three times more than the regular readers (a Bluetooth reader costs $500 to $1200 vs. $150 to $300 for a regular reader). The acquirer — the MasterCard or Visa licensed financial institution — pays for the reader and often charges the retailer a fee for using it, with an average 2 percent of sales on machine paid to the acquirer.

What does the future of electronic payments look like?

Everything will be on your phone in the end. Your life is on it. It is becoming a big part of our lives.

November 1, 2012 0 comments

Society

Book review: Superman is an Arab

by Faisal al-Yafai November 1, 2012

written by Faisal al-Yafai

As cultural editor of An Nahar, Joumana Haddad has long been a presence in the vibrant media landscape of Lebanon. But until recently, she was better known outside of the country for her poetry than her journalism. That changed two years ago, after the publication of ‘I Killed Scheherazade’, a furious tirade about the state of women in Lebanon, the Arab world and elsewhere. It was widely praised, particularly in liberal circles and in the West, a fact that provided Haddad’s critics with ammunition.

‘Superman Is An Arab’ is the follow-up to that book, less a sequel than the continuation of a conversation about what Haddad thinks is wrong in the battle of the sexes.

Haddad turns her attention to men in this book, decrying the ‘Superman’ of the title, a man whose “muscles are just a facade for his insecurities”, who “confuses manhood with machismo, faith with fanaticism, ethics with stale tradition, love with possession and strength with despotism.”

There are, she argues, many of these men “in my dear old Arab region” and happily lists them. It is a long list. “The father, the brother, the boyfriend, the husband, the priest, the sheikh, the politician. In short, the guy next door.” Haddad contrasts these Supermen with the Clark Kents, men who are “timid, clumsy, honest, sweet and mild-mannered. In short, genuine.” Lebanon and the Arab world, she writes, need more Clark Kents.

Despite the title, Haddad isn’t specifically taking aim at Arab men, but men in general. It is clear, however, that she feels especially angry about the treatment of women by men in her own country, Lebanon.

Haddad has said before she feels her country hates her, but she exhibits genuine care for Lebanese. She is just furious at their treatment.

And her fury has many targets. Haddad is outraged by what she sees as sectarianism pervading daily Lebanese life, from the assignation of a child’s religion at birth, to the lack of civil marriage in the country, to the division of political spoils. She fumes at the emphasis on women’s virginity, which she writes leads the bodies of women to be religiously regulated, even mutilated, to be “buried under burqas” and murdered for the sake of “honor”.

Even the social freedom of Lebanon, the “illuminating exception” of the country in the region, provokes her. This freedom is illusory, a glaze of liberty in a conservative country, always compared to places with much less freedom, like Saudi Arabia.

Yet Haddad reserves most of her anger not for individuals, but institutions. She writes sympathetically of women, whom she feels have been victimized and, on occasion, have participated in their own victimization.

Interspersed with the book’s polemical essays are amusing, telling biographical sketches. Haddad is reflective in her writing and recognizes that she has too, on occasion, participated in unhealthy relationships — she speaks of men she has loved who were wrong for her from the start.

But ultimately Haddad is arguing for the freedom of individuals from the bonds that restrict them. She is scornful of marriage. It is a “disastrous invention”, she writes, a patriarchal institution that promotes male superiority over women.

Haddad’s latest work will delight those who enjoyed ‘Scheherazade’; her anger is clearly undimmed and she ranges widely in her exploration of this new territory. The criticism of her critics will remain the same; those who find her shrill, or argue she is perpetuating Western notions of liberation, will find little here to change their minds.

One can disagree with what Haddad says and even the way in which she says it. But it is difficult to argue that Lebanon’s Germaine Greer — still angry, still vibrant, still worth reading in this tirade against manufactured men of steel — does not for the people she writes about.

Faisal al-Yafai is an award-winning journalist and essayist. His book about feminism in the modern Middle East is forthcoming from I.B. Tauris, London

November 1, 2012 0 comments

Finance

MENA stock tips, November 2012

by Maya Sioufi November 1, 2012

written by Maya Sioufi

Markets appeared to be on the downward slope of the rollercoaster last month. After rallying following monetary easing measures in the United States and in Europe in September, markets have headed back down as companies report their third-quarter earnings, with some corporates guiding the market lower. Executive sat with Abdulla al-Hosani, general manager of Emirates NBD Securities, the brokerage arm of Emirates NBD, and Nadim Kabbara, head of research at FFA Private Bank for investment recommendations.

Abdulla Al Hosani

In which markets would you buy?

Hosani would invest in three regions: South America, for its significant growth and increasing population, the Far East (mainly China), which he says is still booming, and the Gulf Cooperation Council (GCC), where Hosani is seeing investor demand coming back. For more developed markets, he prefers to wait for now. Hosani is mostly concerned about the unresolved European issues.

Key concerns with these markets?

"Accountability of management” says Hosani. “Management makes a wrong decision and then they take their bonus and leave.” He would also like to see stricter investment banking and auditor regulation.

Favorite asset classes?

Hosani favors fixed income, equities and property in the three regions mentioned above. For property, he would also consider “one of the big cities such as London, New York or Paris if there were unique opportunities.” As for sectors, Hosani prefers exposure to more defensive sectors, mainly the telecommunication sectors across the three regions.

Thoughts on Middle East equities?

His preference would be for markets in Saudi Arabia, the United Arab Emirates, Qatar and Egypt. He likes Saudi Arabia, Qatar and the UAE for their stability and growth potential. In Egypt he sees strong demand from investors following the uprising. He would also recommend investing in Libya and Tunisia.

Top investment ideas?

Hosani believes that “the Middle East would be one of the best areas to invest in if the ‘Arab Spring’ settles, especially Syria.” He would break down his investment in the Middle East as follows: 45 percent in equities, 25 percent in real estate and another 30 percent in fixed income.

Nadim Kabbara

Time to buy on third-quarter result weakness?

Kabbara would be selective in what he is buying. He believes that the US’ quantitative easing measures limited the downside of the markets but “it won’t take us forward.” Kabbara is focusing on quality US companies at good valuations and would stay away from Europe as “it is still challenging for now.” He favors betting on increased spending from US consumers, choosing discretionary sectors such as apparel manufacturers and food and beverage.

Kabbara is also waiting to invest in cyclical companies, with a preference for industrial companies such as Caterpillar and Cummins, and technology companies such as Intel. He also likes the US healthcare sector as the baby boomers are retiring and “are going to need more medication.”

Concerned about the upcoming US fiscal cliff (the massive legally-mandated tax increases and spending cuts coming into effect in 2013 if no budget-balancing deal is found)?

“Extremely concerned” says Kabbara. He does not know what US politicians will do and would not be surprised if “they look to do things at the eleventh hour” just like they did with the increase in the debt ceiling last year. “It is a very big headache for the markets,” he adds.

Thoughts on Europe?

Kabbara believes that expectations have risen in Europe following the bond-buying program announced by the European Central Bank in September, and would not invest unless there are selective opportunities. He wants to see “less talking and more doing from Europe’s politicians”.

Thoughts on MENA equities?

Kabbara believes that MENA equities present good opportunities with some companies “trading at very attractive prices to free cash flow with generous dividend yields.” He would avoid countries in the region that are oil importers or that have a lot of political risk, mainly Kuwait, Lebanon, Syria, Bahrain and Egypt. He favors Saudi Arabia, which is looking to use its revenues to boost non-oil sectors. He also recommends investing in Qatar, Oman and the UAE.

Top investment ideas?

His top picks are Spirit Airlines, a US-based regional ultra-discount airline company, and Etihad Etisalat, a Saudi-based telecommunications company that he considers an “attractive way to play Saudi consumer spending with a nice growth profile and cash-flow generation capacity.”

November 1, 2012 0 comments

Last Word

Smiling through our pain

by Sami Halabi November 1, 2012

written by Sami Halabi

An economy that can serve the interests of all our people requires confidence. The necessary conditions for that economic confidence are both security and straight talk from those who are entrusted to protect our nation’s growth. That is why it is so damaging that no one called out the president or the prime minister for inflating Lebanon’s economic progress to the public and international community last month.

According to our Prime Minister Najib Mikati’s office, “estimated results” for last year’s economic growth have come to 5 percent and growth in the first quarter of this year increased by “leaps and bounds”. If that makes you think that one of his speechwriters has a substance abuse problem, you are not alone. No one — from the international financial institutions, to local academics, or even the humble journalists who monitor our economy — thinks growth last year exceeded 1.5 percent, not to mention those who believe the economy has been contracting since the third quarter of 2011.

Not to be outdone, at a United Nations conference last month President Michel Sleiman heralded the achievements of the agricultural sector, claiming it now makes up 6.5 percent of the economy while it had previously made up 5 percent. Of course, he neglected to mention that value added in the sector fell in 2010. There are no national accounts for 2011 and certainly not for 2012.

The relatively productive agriculture minister, Hussein Hajj Hassan, who flanked the president at the conference last month also trumpeted his ministry’s development platform for the sector, issued in 2009. A paper was issued in 2009 that contains a laundry list of issues facing the sector, followed by bullet points and badly drawn Microsoft Word Tables stuffed with the keywords governments love to use: “enhance” this, “develop” that, “reduce costs”, “create jobs”. Naturally, the only real targets in the document are those aimed at increasing staff (read: patronage) within the ministry. Since then none of the laws he proposed have passed parliament and the strategy ends next year anyway.

Instead of trumpeting overly rosy figures and touting their outstanding visions, perhaps some more humility would befit a political class that has not managed to have a census in more than 80 years, or even knows what the country’s gross domestic product, employment or inflation rates really are. The statistical, administrative and monitoring frameworks needed to accurately calculate these things are still some way off. In the meantime, there are real indicators that can be monitored in a much easier fashion to appraise the government.
Take, for instance, another half-nation of around five million hard-nosed people with limited government ability to make decisions: Scotland. In a surprisingly successful effort to reform government, the Scots have come up with a system that, on the surface, reads very much like the agriculture ministry’s ‘strategy’. Their ‘National Performance Framework’ starts with a purpose (basically ‘increasing sustainable economic growth’), drills down into five purposes of equally loose language: ‘safer & stronger’, ‘healthier’, ‘smarter’, ‘greener’, ‘wealthier & fairer’. Each category then has indicators (such as improved levels of educational attainment) and measurement criteria (such as gaps in student performance between Scotland and countries from the Organization for Economic Cooperation and Development), with progress reports posted online and updated regularly. The government doesn’t meet all of its targets, in fact they maintain the status quo much of the time, but people believe them when they succeed and listen to them when they explain why they fail. This approach to governance was a contributing factor to ruling Scottish National Party winning an outright majority in 2011 in an electoral system that was designed not to allow that to happen.

Lebanese politicians should take heed: honesty and transparency in governance builds confidence — from international institutions and partners, from the business community, and from those who are supposed to be paramount in all this, the Lebanese. When our economy is suffering, smiling to us and telling us everything is fine will not make it easier to pay rent or get a decent job. Rather, what is needed is an honest appraisal of where things are failing and what is lacking — at least then we will know where to begin to fix things.

Sami Halabi is a Masters of Public Policy candidate at the University of Edinburgh and former managing editor of Executive

November 1, 2012 0 comments

Society

Presidential beyond words

by Line Tabet, Zeina Loutfi & Ramsay G. Najjar November 1, 2012

written by Line Tabet, Zeina Loutfi & Ramsay G. Najjar

“Obama’s weaknesses on full display in debate”; “Obama admits debate performance a flop”; “In debate style and body language, Romney trumps Obama”.

These have been the sort of remarks making headlines since the first of the three United States presidential debates in the run-up to the vote between Democratic incumbent, President Barack Obama, and Republican candidate Governor Mitt Romney. As expected, the debate has been extensively analyzed in the hopes of predicting who might become the next American president. What was especially striking about the media coverage this time was the excessive attention given to the candidates’ physical language, across both serious and comedic media, which seems to have played a major role in their proclamation of the first debate’s winner.

While the analysis of body language might seem trivial to many, becoming the preferred subject of comedy and spoof shows, some studies have shown that only 7 percent of communication is conveyed through actual words, whereas 93 percent is nonverbal communication. The most telling and over-used example of this is the first American televised presidential debate: The 1960 Richard Nixon versus John F. Kennedy debate. It has become a popular reference that Nixon, the accomplished politician, failed to impress in the face of a young and novice candidate, mainly because he refused to wear makeup.

Whether the above percentages are accurate or whether we agree or not with the analysis of the Nixon debate, one cannot discount the importance of body language in a public or media setting, whereby posture, facial expressions, hand gestures, voice and dress code have become key components to be taken into account, alongside messaging and content. Trying to predict the winner of the American elections through body language is no doubt a fortune telling assignment. However, given that the whole world is closely watching this event, and that all eyes are riveted on American media screens, we cannot but stop and examine the presidential and vice-presidential debates to illustrate the basics of body language and extract key takeaways, as well as some ‘Dos’ and ‘Don’ts’. Furthermore, keeping in mind that the victor of the elections may well be known by the time you read this article, it is worthwhile exploring whether all this hype about the two candidates’ nonverbal performance had any real value.

Posture: the manifestation of confidence

The reason some viewers may have confused Obama’s first presidential debate with that of a daily press briefing is because of his perceived “defeatist” attitude and posture. His body language communicated stress and anxiety: leaning on one foot, tilting his head to the side and slouching his shoulders. He came across as unsure of himself, lacking energy and outright bored. On the other hand, Romney seemed calm, projecting passion and motivation, whereby his overall posture was straight and upright, conveying confidence and poise, all of which translated into positive energy.

Facial Expressions: telling it all at a glance

A month prior to election day with polls providing all kinds of forecasts as to voter intentions, candidates need to speak to voters and rally them, be they supporters or opponents, and especially the undecided ones they are trying to win over. Therein lies the importance of appearing to address each and every one of them. And what better way to do so than establishing eye contact so as to give every viewer the impression of being spoken to directly. Both Romney and current Vice President Joe Biden played this card successfully, as they stared straight at the camera to address voters, conveying both candor and caring.

On the other hand, Obama’s genuine smile, one that has become his trademark over the years, looked dull and faded because of the negative energy he exuded. He was often seen pursing his lips, especially when listening to Romney’s arguments. This brings us to one of the main challenges that face incumbents during such debates: to avoid appearing condescending and patronizing or looking at their opponents with disdain and arrogance. A challenge both men failed to meet.

Hand gestures: adding punch through motion

The art of hand gestures may seem like a secondary element of body language, one that comes naturally and spontaneously. However, it can strongly affect the image of any politician or public figure, either by making them appear tense or agitated or by adding emphasis and impact to their messages. Indeed, those with overly animated hand gestures often distract viewers, as their attention is drawn to the hand rather than the content and messages. As such, the “Golden Rule” when it comes to hand gestures is to avoid excessiveness. When it came to persuading voters with gestures, Romney outdid Obama in the first debate. Indeed, they were in sync with his speech, reaching out to his audience, creating a feeling of openness, and ultimately making some messages more memorable to the audience.

Voice: conveying impactful messages through delivery

Recent award-winning movies, including The Iron Lady and The King’s Speech, have shown the importance of voice in conveying leadership: Margaret Thatcher in the midst of vocal training, working on the pitch of her voice to project power and authority, and the lessons of King George VI with his speech therapist to cope with his stammer. These have become iconic scenes that support the claim that voice can accentuate leadership attributes and is an effective means to influence and impact the audience. During election time, the debate’s objectives are to inspire people and mobilize them to vote. Hence the importance of one’s voice, as it transforms lexis into impactful messages and memorable sound bites through the appropriate use of pitch, tone, volume, rate and articulation. Varying the tone of voice allows one to convey dynamism and enthusiasm, which are key to emphasizing pivotal ideas.

Whereas Romney was confident in delivering his messages, speaking eloquently and clearly, Obama had a slower delivery, resorting to verbal fillers, and making long pauses. This did not play to his favor, despite succeeding in projecting empathy and compassion when he softened his tone of voice to mention his grandmother in the context of social security and his fight for the American middle class.

Dress code: the clothes that make the man

Red is typically the color of the power tie, a memo that Romney received and understood, with his dark red striped tie popping on screen during the debate, compared to Obama’s royal blue tie which blended in with the purple background and reinforced his sense of fatigue. The specific choice of color is of course not the point here; what is important to remember is that speakers must always choose attire that accentuates their presence and aura. This example confirms that dress code goes beyond style and can actually influence the image of a public figure, clearly helping to make a strong and positive impact.

Everything comes

in pairs

Jon Stewart dedicated an episode of his satirical show, “The Daily Show” to the exaggerated hype given to the candidates’ body language after the first debate, with some media going to extremes by counting the number of blinks for each candidate. However, this definitely subsided following the second debate, with the focus shifting toward content, arguments and promises made by each.

With the parliamentary elections in Lebanon, Jordan, Qatar and Egypt “theoretically” around the corner, potential candidates can stand to learn a lot from the US elections’ experience when it comes to polishing their body language in the hope of possibly compensating for the huge gap in their rhetoric, which remains sorely lacking. When it comes to media performance, and as the saying “everything comes in pairs” goes, it boils down to content and physical language, two ingredients that need to complement each other in order to ensure a successful recipe.

November 1, 2012 0 comments

Society

Szechuan in style

by Nabila Rahhal November 1, 2012

written by Nabila Rahhal

Driving down the highway from Antelias into downtown Beirut, one cannot but notice several huge billboards advertising the latest Asian cuisine restaurant, Chenbao — the Chinese word for castle. Curiosity aroused, Executive decided to pay a visit.

Chenbao is the newest conception of the Kazzami group, which brought us the high-end sushi restaurant Osaka and is planning for the opening of the Italian garden restaurant Villagio on Kantari Street, Beirut. Since Chenbao is also promoted as luxurious dining, expectations were high. Situated on the main road in Saifi Village II, with glass panels allowing diners to see the streets outside and be seen themselves by passersby, glamor is projected before you take your first step inside.

At the entrance, Executive’s party of two is greeted by an Asian hostess wearing a Chinese-style dress, who escorts us to our table and offers us the traditional wet and warm hand towels. The restaurant’s glossy granite flooring and black and gold trimming gives off a subtly luxurious vibe, though the excessive use of dark wood finishing on the walls, perhaps meant to accentuate the Asian feel, lends a somber and somewhat heavy feel to the place. The tables and chairs are placed at such angles so as to allow enough privacy for the diners’ conversations while at the same time allowing them to see most everyone in the spacious setting. The dark wood tables themselves are artfully set with little flowers on the chopsticks holders and upholstered, cream-white chairs prove comfortable for the meal. (An interesting feature of Chenbao, showing particular sensitivity on the owner’s part, is the electric sliding chair attached to the stairs leading to the bathroom — a facility for the disabled, the elderly and those too full to walk down the stairs.)
Menus are provided minutes after we’re seated by another Asian waitress who remains attentive throughout the dining experience, refilling water glasses and removing empty plates almost as soon as the last bite is taken.

sweet and sour
Prepared by the experienced Malaysian chef Eddie Chua, the menu offers traditional Chinese fare, from Szechuan-flavored stir fried meats to rice and noodles, as well as Thai fusion dishes. Matching the high-end image of the restaurant are the prices. A single serving of vegetable noodles costs $11, appetizers are between $20 and $25, and main dishes are as much as $40 if one orders seafood. Upon the waitress’s recommendation, we ordered the wasabi prawns as appetizers, the chicken cashew nuts with vegetables noodles for the main course and finished up with jasmine flavored macaroons — totalling $85 for two, drinks excluded. The artistically arranged dishes of generous portions arrive in perfect sequence, one after the other — the wasabi prawns drizzled in cream sauce offered a unique, harmonious blend between the spicy and sweet adjuncts to the shellfish; the chicken a light and pleasant, if somewhat uninspired, main dish in terms of Chinese cuisine, while the jasmine macaroons were the highlight of the meal, a bouquet of the sweet and the bitter to wrap up the flavor experience.

Having arrived at 9 pm, new customers were still coming in two hours later when we left, keeping the place half full at all times. The clientèle were mainly young professionals, between the ages of 30 and 40, who, according to those who sat around us, were also prompted by the billboard advertisements.

In the months to come, the tables at Chenbao will likely continue to be filled with inquisitive patrons out to see what all the fuss is about, and while they will certainly not be disappointed by the ambiance and the service, some dishes will have to find a stronger identity to pull their weight in an establishment banking its reputation on high-end and original cuisine.

November 1, 2012 0 comments

The Buzz

Morning briefing: 31 Oct 2012

by Executive Staff October 31, 2012

written by Executive Staff

Economics

The prime minister of the United Arab Emirates has announced approval of a 2013 federal budget that is heavy on social spending but without the deficits of the last two years.