Executive Magazine

Morning briefing: 4 Oct 2012

by Executive Staff October 4, 2012

written by Executive Staff

Economics

Riot police in Iran have clashed with protesters in the capital over sharp falls in the currency, the rial.

Tear gas was used to disperse the demonstrators, some of whom were setting fire to tires and rubbish bins. There were many arrests, reports say.

Eyewitnesses told the BBC that scores of people gathered outside the central bank, calling for the governor to stand down, chanting anti-government slogans.

The rial has plummeted to record lows against the US dollar in recent days.

More from Arabian Business

The airline industry is expected to continue its growth in the Middle East but at a slower pace than previous years, British Airways Middle East Commercial Manager Paolo De Renzis has said.

“I see growth due to strong demand, but I don’t know if it will continue at the same pace,” Renzis said during an interview held in Beirut’s eastern suburbs hours before the touchdown of the first British Airways plane at Rafik Hariri international airport since 1992.

British Airways began running flights to Lebanon in 1987, but ended operations five years later.

More from Arabian Business

Politics

Turkish artillery has renewed firing at targets in Syria after shells from across the border killed five Turkish nationals.

Several Syrian troops were killed by Turkish fire, activists from the Syrian Observatory for Human Rights said.

Turkey's border town of Akcakale was shelled, apparently by Syrian government forces, on Wednesday, killing a woman and three children.

Revolt in Syria

by Joe Dyke October 4, 2012

written by Joe Dyke

One of the most significant challenges foreign journalists have faced in covering the Syrian uprisings these past 18 months has been their lack of understanding regarding the country’s society. Unlike neighboring Lebanon, Israel or regional powerhouse Egypt, Syria’s decades of stability until last year had led the vast majority of Western journalists and analysts to shun it in favor of more ‘juicy’ stories. Even Robert Fisk, The Independent correspondent based in Beirut for three decades, dedicates barely 20 pages to Syria in his 1,000-plus page work on the modern history of the Middle East, “The Great War for Civilisation”.

So when the Arab uprisings eventually worked their way into the country, months after the fall of Hosni Mubarak in Cairo and Zine el-Abidine Ben Ali in Tunis, many foreign correspondents found themselves lacking the basic knowledge necessary to produce top-quality coverage. In the absence of this they often fell back upon simplistic versions of events based upon the revolutions in Egypt, Libya and Tunisia. All the people were against Syrian President Bashar al-Assad, we were told, while those that were expressing their support were regime stooges forced to do so by Damascus. The political nuances of both the country and the uprising were lost in favor of the wider “Arab Spring” narrative.

Stephen Starr’s book, “Revolt in Syria – Eye-witness to the uprising,” should serve as a counterpoint to this view, which has increasingly proved inaccurate in the past year. Starr had been based in Damascus as a journalist for five years by the time the protests broke out and had written almost exclusively about his host country. He had a detailed knowledge of the key figures involved in the regime and, having even worked for a state newspaper, understood what made it tick.

In “Revolt” Starr recounts the first year of the revolution as seen from his home in Damascus. He assiduously searches out different viewpoints to those that were given so much prominence in the early part of the revolution.

In one of the early chapters he documents the revolt through the eyes of Syria’s minorities – its Christian, Druze, Kurdish, Shia, and Alawi communities. The process is both illuminating and startling. Far from being opposed to the regime, the majority were focused on the threat posed by the opposition. One particular fear — of the uprising taking on a sectarian element as the majority Sunnis seek control over the rest — comes through clearly. At one point the writer hears rumors of three churches that had received a note saying “you’re next,” which is interpreted as a threat that Christians would be targeted following the fall of Assad. While it is disappointing, if in a practical sense understandable, that the writer did not verify those claims himself, these stories provide an insight into the atmosphere in the country during the middle of 2011.

Building upon this, Starr shows how the Syrian state media manipulated these fears by exacerbating sectarian tensions to serve its own interests. Featuring interviews with several key pro and anti-regime journalists, the book breaks down the traditional portrayal of Syrian media as a monolith by drawing a distinction between the state-owned publications and those that are independent but have tended to back the regime.

It is also at times a wonderful portrayal of the average day-to-day normality of Syrian life, far away from the conflict. While the war has now come to Damascus, for much of 2011 the city’s residents felt removed from the crisis. The Damascenes quoted in the book often talk about the war in Homs and Hama as if it were in Timbuktu. But Starr also captures the sense of regime paranoia in the city and documents how the crackdowns gradually increased in intensity even in the capital.

The book is not without fault, however, and at times it feels like both the writer and the editor failed to make the most of Starr’s unique viewpoint. Most importantly there was the perplexing editorial decision to start the book on the first day of the revolution, without allowing space for the background information to which the writer has almost unique knowledge of.

Starr has said elsewhere that the uprising was largely caused by the government’s failure to deal with the 2008-10 drought, but this kind of in-depth detail is not given much prominence. Some of the best parts of the book are anecdotes of the inner-workings of the regime before the uprising but they are not used in an intelligent manner. In a sense the writer’s unique selling point has been underplayed.

Similarly, while parts of the book are well written, with sound analysis being supplemented by fascinating anecdotes, the structure is weak — with a number of middle chapters seemingly lacking purpose. There are also grammatical errors that leave the reader wondering if the book’s editors were so keen to capitalize on the news-value of the Syrian crisis that they rushed it onto the market.

Nevertheless ‘Revolt’ will serve as a key resource for those trying to understand Syrian society during the uprising. Many books will be written on the crisis in the coming years, but this will prove a vital and rare first-hand account of Damascus during the first year of a crisis that is still unfolding.

October 4, 2012 0 comments

Society

I’m not buying it

by Nabila Rahhal October 4, 2012

written by Nabila Rahhal

Social buying seemed like such a wonderful concept at the beginning when my friends started talking about it three years ago. But it seems to me that after the novelty has worn off, so did a lot of the interest in such sites.

It is one of the standard arguments of these sites that ‘everybody loves a bargain’. But that is only partially true when it comes to the Middle East because in this culture there is a general attitude that it is somehow cheap to try to save money through bargains. When they are complimented on a nicely fitting new blouse or fashionable pair of jeans, most of the people I know will emphasize how dear that item was and would not readily admit if they had snapped up a bargain.

However, there is also the opposite trend where young professional Middle Easterners of my generation praise their bargains and social-buying sites may have quite a lot to do with that. “I feel a certain rush when I find a service I want in a place I like on these websites,” says Masha, a frequent user of social-buying sites. “It is as if I am somehow smarter than the rest who paid full price or didn’t know where to look for the deal. It makes the service that much nicer.”

Some operators of social-buying sites were obviously able to convey the image that it is both trendy and smart to score a deal, especially when it comes to services. The top-selling deals on most of these sites are for services such as personal care and for experiences like restaurants or lessons in skills such as French cooking or yoga classes.

However, the psychological appeal of a deal alone will not be enough to draw in new users and make them repeat customers. The sites also need to prove themselves in offering attractive brands and in creating a link between the popularity of these brands and their own. “Groupon and Cobone are the sites I check out the most because they have the best suppliers,“ explains Layla, a fan of social buying who lives in Dubai.

Cobone, a site founded locally in the United Arab Emirates, and Groupon Middle East, the local branch of the global market leader in social buying, are generally seen as the most popular sites of this type in the UAE. In becoming popular, sites can make their deals buzz and have a better chance to create followings. On the other hand, even a popular site may experience that, when the brand it is marketing is not strong, a deal can linger on the site for while, as is the case with certain beach resorts in Lebanon. Even a discount of more than 50 percent on an unpopular resort’s admission will not be enough to make it sell online.

Sites can be a gateway to experiences if the experience is novel and is made to be “fun sounding”. This lowers our resistance to try something new if the price is right, and this is what social-buying sites count on. “I once saw a deal for Salsa dancing lessons,” says Jad, a user of UAE-based site Makhsoom, “and it was something I hadn’t thought of trying; it sounded like fun and came at a good price, so I said why not, and gave it a try.”

This in no way implies that people who buy a lesson in the oud or the sitar out of curiosity will all sign up for enough training to become a Munir Bashir or Ravi Shankar — or even go and redeem their first coupon — but it is a fact that the sites can help foreigners access the local culture in a place such as Dubai where expats are the dominant users of social buying. “I am in Dubai for a relatively short time for work, so I take advantage of any offer I find to experience the country without spending much,” David, a British teacher in the Dubai American Academy, told me, adding that his favorite bargains are for restaurants and exclusive beach resorts.

The cloud of fraud

Among the drawbacks of social-buying sites is the potential for fraud. With stories of phishing and new viruses coming up every day, especially in Lebanon where I live, many people here are reluctant to use their debit or credit cards online. Banks offer “safe” online-buying cards, but this requires a trip to the bank and takes away from the convenience of any e-commerce experience. “I have sometimes found attractive deals online, but none have tempted me enough to get a credit card and buy them,” says Dima, a professional working in architecture. I share this view. Some local social-buying sites like ScoopCity invite you to pay at their offices, but this still seems inconvenient.

As time goes by, someone like myself who is not a full-fledged fan of social buying, discovers more downsides to the sites: they generally offer no cash refunds for unused deals, their customer service is not always as good as I need it to be, and after browsing page after page of similar offers, I ask myself, “Nabila, do you really want this?”

According to frequent users, the quality of deals goes down on most of the sites they are visiting and bargains then linger that much longer on internet shelves, catching virtual dust. If asked what social buying can do better in the region, my answer is that useful and appealing deals, combined with a safe and convenient method of payment, would have me taking a second look at social buying.

October 4, 2012 0 comments

Real Estate

The wisdom of hindsight

by Thomas Schellen October 4, 2012

written by Thomas Schellen

Five years ago it was the building frenzy and Dubai, at least on paper, looked bigger and dinosaur-crazier each month. Then an unprecedented phase of correction meant the survival only of the fittest projects and the leanest developers. Today, the emirate and the entire federation are in a new growth mode that can be likened to a natural evolution, master-planned.

On the ground this translates into a cautious buzz from visible construction activity. This entails airports and hotels and further solidification of the United Arab Emirates’ hospitality and tourism infrastructures, but in Dubai in particular it means that roads are being completed and multi-unit residential projects are bit by bit transformed into the communities they promised to be.

Put in numbers, real estate transactions executed in the UAE over the 12 months ended September 17 totalled around 15,500 with median prices of about $280,000 per transaction, according to Dubai-based emerging markets real estate information company Reidin.com.

“There is a significant revival of developers’ interest in specifically the residential and hotels market. You can expect more residential projects but on a much slower pace than before,” Ahmet Kayhan, chief executive of Reidin.com tells Executive.

According to Reidin.com the total number of registered and licensed real estate projects in the UAE as of September 17 amounted to 1,051 residential projects. The company identified some 470 of these projects as being in various stages of execution and 353 completed, plus 153 which the company believes to be on hold, and 19 known to be cancelled. In the offices segment, 151 of a total of 489 projects were identified as completed, 214 under construction, 71 on-hold and 10 cancelled.

Even though the real estate regulators in the different emirates have been improving their gathering of market information, Kayhan says it is not always easy to get a clear picture of the markets. His company, besides using official information, relies on lots of proprietary research and data gathering. “We believe some of the on-hold projects are really on-hold but most are cancelled. Some will restart soon, but mostly they won’t,” he says.

Some residual data insecurity notwithstanding, the mood in the UAE’s real estate sector entering the fourth quarter in 2012 is positive, according to Craig Plumb, head of research for the Middle East and North Africa at international real estate services firm Jones Lang LaSalle (JLL). “The current sense is one of cautious optimism, replacing the previous cycle of exuberance followed by despondency,” he says.

Master-planners at work

In engineering this moderated buzz, Dubai’s master-planners have done what they said they would. They took a close look at the boom-time mega projects to trim and adapt them to market circumstances, while continuing to build the infrastructure to base future development on. One example for the cityscape’s evolutionary adaptation is the new opera house and modern art museum cultural district announced in May for Downtown Dubai. Its anchor, the Dubai Opera House, was transplanted to the area near Burj Khalifa from The Lagoons, a 2008-announced, $25-billion paper tiger of artificial islands and high rises that is currently on-hold and likely to remain so for the foreseeable future.

A rather telling example of far-reaching adaptation to reality is Meraas Development, a corporate child of the emirate’s wild property days that was born in 2007 into the far-flung business tribe of Dubai’s ruler, Sheikh Mohammed bin Rashid al-Maktoum.

Thanks to its late birth, the company did not play a part in any of the Dubai mega projects that were ongoing in 2008 and ground to screeching halts overnight. However, it came onto the stage of breathtaking property displays at the 2008 Cityscape Global real estate show by exhibiting a vision of urban reinvention in several well-populated districts between Downtown Burj Khalifa and the seafront.

The project was inconspicuously called Jumeirah Gardens but would have involved not only a further extension of the Dubai Creek from Business Bay (canals were en vogue in new projects back then based on arguments that these water bodies would refresh the desert and that waterfront properties are more lucrative) and another 600-meter tower (always a favorite among male project owners) but also required deep cuts into the existing Al Wasl and Satwa residential quarters.

The Jumeirah Gardens $95.3 billion testimony to mega-sized planning has not yet moved any closer to becoming a reality, but the company seems to have the stamina and the land to pursue its underlying vision when conditions and interest of foreign investors make projects of this scope possible.

In the meanwhile, Meraas, which as a developer is still one of the better-kept secrets in the UAE real estate market, has been continuously adapting its master plan for market conditions. Its current line-up of projects includes the infrastructure of the Pearl Jumeirah Island and The Avenue, a 1.1 kilometer retail project to be developed in three phases along Al Wasl Road. In hints at its future, it announced the Dubai Adventure Studios theme park at the end of last year, and Dubai Properties Group (DGP) recently announced Meraas will contribute a mall in low-rise towers over the next 18 months to its popular JBR Walk. Trumpeted with a hefty AED 2.2 billion ($599 million) price tag, the theme park is to be built in Dubailand.

Controlled rise of residential

Looking farther across the Dubai developer landscape, multi-unit residential projects are making their comeback but also in a controlled fashion. “Market activity at this stage is focused on the master developers with Nakheel, Emaar and Dubai Properties all launching, or re-launching, properties this year,” Matthew Green, head of research and consultancy for the UAE at real estate services firm CBRE Middle East, tells Executive. “This trend has been prevalent over the past 18 months with the major developers generally pushing to complete their live projects and further establish master-planned communities.”

The government-owned (via Dubai Holding) DPG just announced at the beginning of September the restart of its Mudon project in Dubailand. Citing rising demand for up-market dwellings, DPG will complete some 348 villas and townhouses. Shells of the Cairo Townhouses, one of five city-themed building clusters in the partially complete development, have been gathering dust for more than two years as the project lay dormant. At its unveiling in 2007, it was touted as an $11 billion community for 50,000 residents.

Nakheel, buoyed by a 36.5 percent increase in first-half 2012 profit to AED 767 million ($209 million), has progressed with handovers of townhouses and apartments in projects it restarted in 2010 and 2011, and this year moderately increased its pipeline of new residential developments on The Palm Jumeirah. The ambitious company, which had been battered more than others during the 2008-09 downturn, needed an $8.6 billion cash injection via the Dubai Financial Support Fund (DFSF) in 2010. Part of its $10.5 billion debt restructuring is lately emphasizing the completion of The Palm Jumeirah, with both homes and commercial projects, the most flamboyant being The Pointe, a major retail and hospitality strip. The developer has been busy talking to banks about raising the more than $80 billion it will need to make it happen since January this year, claiming indicative positive responses.

Hospitality is big on the mind of Damac, which claims to be the largest private sector developer of luxury real estate in the Middle East. Among 10,000 units in its current project pipeline and a new swathe of projects to be announced in the near future, the company plans for 4,000 serviced apartments, General Manager Ziad el-Chaar tells Executive.

Emaar’s focus is Downtown Burj Khalifa where it is expanding Dubai Mall and has just announced another project, ‘The Address BLVD’ — a hotel conjoined with serviced residences that will stand 340 meters tall. The enthusiasm to snap these residences up, though, smelt of an unhealthy return to speculation, judging by reports of queues forming days before they went on sale. Back in May the developer boasted of selling all 224 units in a mid-rise apartment development, Panorama at The Views, “within hours” of its launch. Another project, the Alma 2 community within the Arabian Ranches development, has also met resonance with buyers.

Based on market indications and marketing incentives offered by developers who want to rapidly sign buyers for projects like Panorama, Executive calculates that sales prices fetched by developers of well-positioned apartments and villas these days would be about equal to where prices stood in late 2007, signifying a substantial recovery from the depth of the trough, at least for residential projects with good infrastructure and a good reputation.

“Clearly there is improved sentiment in the market and that is portrayed by a return of off-plan sales launches,” remarks BRE Middle East’s Green. “However, there is a note of caution to sound, with investor focus still firmly on completed and income-generating assets. Whilst some interest has been evident for newly launched products, this appears to be speculative rather than from end-users or long-term investors.”

Despite some off-plan selling being successful, which was not the case a year ago, the real drivers of real estate development these days should be economic fundamentals, for which JLL cites growth outlooks for both Abu Dhabi and Dubai. In the case of Dubai, gross domestic product growth prospects of four to five percent are mainly based upon its healthy tourism and trade sectors, while Abu Dhabi continues to diversify and cut its reliance on oil.

What the market needs

“What we really need to see is a more sustainable model of development being established in Dubai. Something that is built on true end-user demand and solid fundamentals rather than simply relying on speculative demand to forward-fund projects,” Green adds, reiterating what has become the consensus on Dubai’s evolutionary real estate needs.

The office sector, though, appears to be suffering from oversupply as vacancies of 80 percent in Business Bay speak loudly, while Dubai’s offices in general are half full. Single ownership offices, representing 60 percent of Dubai’s supply, would be the ones to fill up first, but the remaining ones are strata, or multi-owner, titles and perceived as a headache by potential occupants, according to JLL.

“There is definitely not enough new demand to fill up all the empty space in locations like BB [Business Bay]. Expect strata space to be more difficult to lease than that in single ownership,” comments Plumb, adding that free zones still attract an, albeit subdued, premium when compared with onshore offices.

“The only type of development we really need right now is for pre-committed tenants — there are a number of new industrial projects being built for identified tenants and there are also some major office requirements that are looking at having premises purpose built for them rather than leasing spec built space,” he says.

JLL’s second-quarter Dubai market overview states that, according to developers, 24,000 residential units should be handed over in the second half of 2012, but Plumb doesn’t expect all of them will be. “Although they cannot be delayed forever, as most of these are pretty much finished and just require the contractors to be paid and the power to be connected,” he explains.
CBRE’s Green meanwhile believes the number of units to be delivered during 2012 hovers around 14,000, which he says is significantly down on historic annual supply figures. Of those, 3,000 are villas, which Green reckons could lead to inflationary pressures being felt on rents of well-positioned and good-quality villa products.

What is clear is that the new buzz in the market has had its effect on prices, sales and leasing, and the impact is mostly positive for developers, as buyers ability over the last few years to influence prices their way is decreasing. However, what one may call a ‘great divide’ continues to rule Dubai’s real estate market: established areas — such as Emaar’s success with its Panorama and Alma 2 projects suggests — win.

“In established areas we have already seen the market move from stabilization into increase in rents,” says Plumb. “In the less established locations owners are increasing asking prices more out of enthusiasm than reality. I suspect these areas will continue to see rentals decline for the next 12 months. There is a huge amount of new stock just waiting to come on-line, such as in Sports City.”
The majority of the future supply pipeline lies in the emerging secondary locations such as Jumeirah Village and Dubailand, home to Sports City. “This may result in growing vacancy rates and further availability of landlord incentives in those areas that are most impacted by oversupply,” Green explains.

Across the Emirates

Casting a quick eye across nearby northern emirates Sharjah and Ajman, occupancies and rental incomes are looking up but also with softer spots mixed in. According to the April 2012 property update by Cluttons, Sharjah’s Al Majaz Waterfront is offering a new flair to the emirate and is likely to see higher occupancies, but Asteco’s second quarter report on the Northern Emirates highlights dropping rents in Sharjah. In Ajman, resurging building activity in developments alongside Emirates Road has made some of the residential towers rise in height but it is not clear when Ajman’s Emirates City will become a liveable place.

Taking a drive in the opposite direction to Abu Dhabi and the immediate visual impression is of new towers which seem to have sprung up over the last two years, such as Etihad Towers and Sowwah Square. According to Cluttons, Abu Dhabi has seen occupancy levels in the Grade A spaces improve in these office developments, as well as in Aldar’s HQ tower and in Grade B office spaces available on Reem Island.

The capital of the UAE is not suffering from oversupply in residences and residential rents in Abu Dhabi are still 15 to 20 percent higher than in Dubai, despite recent handovers of Reem Island, Al Reef, Al Raha Gardens and of Saadiyat Island. Rent-to-own schemes are working well in the capital, according to Cluttons.

“A large number of projects have either been put on ice or, where started, the projects have been stopped or delayed,” says Richard Paul, Associate Director at Cluttons. “This put upward pressure on any available premium property and in consequence rents have either held or are even increasing.”

CBRE’s Green, however, believes that Abu Dhabi is reaching the peak of its development cycle and that is reflected in the continued deflationary pressures on rents. “Looking forward we see further downside for rents in Abu Dhabi over the next six months,” he says. “This is particularly true given the large number of units set to be delivered in the capital over the next two years.”

October 4, 2012 0 comments

Society

Junkyard tapas

by Nabila Rahhal October 3, 2012

written by Nabila Rahhal

What do you do with your plot of land waiting for a delayed permit from the Ministry of Tourism to build a new restaurant on it? Options vary from converting it into a parking lot to watching the weeds grow as the space goes unused.

Mario Junior Haddad and Chef Tomas Reger, respectively owner and executive chef of Le Sushi Bar, however, had other ideas, and decided to have fun with their space by turning it into the ‘Junkyard Pop Up’ — a temporary outdoor restaurant located in the alleyway next to the United petrol station in Mar Mkhayel. They plan to build an Italian restaurant there when the permit comes through — hopefully, they say, early next year — but in the meantime, the Junkyard is great publicity for their restaurant consultancy company Food for Thought, and a trendsetter in Beirut’s restaurant scene — being the first pop-up restaurant in the city.

With Christmas lights hung all above a flooring of grass and gravel, the restaurant has a Mexican backyard party feel. Divided into two areas, on one side there is a square bar set on oil barrels that seats several dozen people around its four sides, and to the other a seated dining area. Even on the weekday Executive visited, the bar started filling up around 8 p.m. and was packed an hour later, while the dining area required reservations ahead of time.

For a place with relatively little publicity, the Junkyard is surprisingly popular. “As this is a temporary project with a low budget, we did not want to spend too much on promotions,” says Guy Salame, brand developer at Food for Thought. “We used word of mouth, and some social media, therefore creating some mystery, as well as a snowball effect where people tell each other about the place and create a buzz.” The temporary nature of the restaurant also created a sense of immediacy, that one needs to try it at least once before it shuts down.

In terms of décor, the Junkyard lives up to its name. Broken-down 1960s style televisions lead the way to the bathrooms, which are themselves housed in cargo containers rescued from the Beirut Port. The kitchen is located in a similar, yellow container, which has led some to dub the makeshift restaurant the ‘Yellow Container’. Charming, junky decorations — such as the old fashioned blender still used to make drinks, lights hanging off a helicopter blade above the bar and the antique water heater lying on the grass — provide nostalgic conversation cues to clientele, and also come at a low cost to the owners. Salame again talks about the low budget in relation to the décor, which he says inspired the architect to use rescued and recycled items.

In keeping with the idea of having fun with their place, Chef Reger changes the menu daily. While chicken, meat and seafood are always on offer, the methods of preparation and type of fish will differ depending on what is fresh in the market, and what the chef’s mood is that day. Executive tried the wild mushrooms dish, the teriyaki chicken and the steak with butter sauce. Though it sounds like a hefty plateful, the portions are small and are meant as tapas to share, rather than full meals. The wild mushroom plate was a medley of tasty fungi garnished in a light soy-esque sauce, the pepper-seasoned steak was rare and juicy, though the chicken was a touch oily. The average bill per person — for a drink and three tapas — was approximately $40, thus don’t come on an empty stomach unless you’re prepared to pay $120 to get full. At such prices, this ‘fun’ restaurant, with little overhead to speak of, likely also leaves the owners counting cash with a smile.

“The pop up concept is an idea Food for Thought might repeat next summer in other locations,” says Salame. “We could just take our yellow container and set up somewhere else.” In the meantime, he says he wouldn’t be surprised if other restaurateurs began copying the “pop-up” formula. While it is yet to be determined how popular the idea will be, the Junkyard is currently providing a unique and rustic dining experience — and one that will only last so long.

October 3, 2012 0 comments

Society

House of Stone

by Nabila Rahhal October 3, 2012

written by Nabila Rahhal

Anthony Shadid’s remains were scattered under the olive tree in the garden at his house in Jdeidit Marjeyoun, South Lebanon. He was not buried in the United States where he was born and raised, but in the home he had chosen as his own. This home, or bayt, as Shadid refers to it, is the main character in his third book “House of Stone”, and represents the very human concept of belonging.

Returning to Lebanon on sabbatical from his post as a journalist covering the Middle East for the New York Times, Shadid was not at peace. In his words he was “stunned by war, and shockingly no longer young, married or with my daughter Layla.” Perhaps this emotional state is what led Shadid to decide to fix his ancestral home in Marjeyoun, as a distraction from his internal turmoil and to finally have a place he could call home.

Through describing the renovation, Shadid draws a picture of modern life in a small town. His prose is simple yet well crafted, bringing the characters to life with an objectivity which allows the readers to draw their own opinions of each. Shadid enters Marjeyoun a stranger, but since his roots are from there, townsfolk immediately know his whole family history and think him insane for deciding to repair the house; others simply think he is an American spy. Gradually though, some warm up to him and Shadid’s retellings of nights around the dinner table with some of his new friends are absorbing.

The repair process clearly fascinates Shadid and some parts of the book get weighed down with the details of knocking down a pillar or building up a stone wall.

However, interactions between contractor and workers lighten the tone with humor. When he tries to locate antique tiles for his flooring and ends up meeting a dealer who strips tiles from homes destroyed by the war, the story sheds light on the lesser known aspects of home repair in Lebanon.

Rebuilding memories

Parallel to the home repairs is Shadid’s recounting of the history of the house and his ancestors who lived in it. With the same precise attention to detail he was known for in his journalism, Shadid reconstructs the life of his great-grandparents, while imagining them in the various rooms of the house and what they would have been doing at the time.

Through this, the reader learns about life in Lebanon during the Ottoman Empire and the French Mandate which brought on the beginning of Lebanese emigration.

Shadid’s depiction of his great-grandfather, Esper, and his struggle to decide whether to send his children to the United States for a chance for a better life, or to keep them with him in the perilous times he was living, carried an understanding and sensitivity for not just his own ancestor’s quandary, but one still as relevant to Lebanese families today. And while Esper’s children emigrate after all, they take their home with them in their hearts.

This is evident when Shadid describes the almost daily Lebanese gatherings his grandparents used to host in the US, which again parallels the experience of many Lebanese emigrants to foreign lands who try to build space in which to belong.

Unfortunately, the author passed away before he had the chance to really enjoy the fruits of his labor, his bayt, and after finishing the book, the reader is left with a sense of loss for Shadid, his home and a Lebanon long gone.

It was not in the house of stone’s fate to be forgotten once again, however, as neighbors say Shadid’s second wife and his son still reside there on weekends and vacations. Shadid would be pleased.

October 3, 2012 0 comments

Society

Nicolas Chammas under the cosh

by Nabila Rahhal October 3, 2012

written by Nabila Rahhal

There seems to be little end to the litany of woes Lebanon’s economy has been suffering this year, brought on by regional unrest and internal instabilities mushrooming across the country. Many industries have felt the impact. For a closer look at the implications of this soured environment on the country’s traders, Executive sat down for a frank one-on-one with Nicholas Chammas, head of the Lebanese Traders Association (LTA).

Mohammad Choucair, president of the Lebanese Chamber of Commerce, Industry and Agriculture, as well as some economists we have been speaking to, are saying the economic situation in Lebanon is the worst it has been in a while. What are the figures that alarm you the most?

In the first quarter of the year the numbers were exceptionally good where the trade sector is concerned. We had an increase of 7 percent compared to the same period in 2011, and this is because it came in the realm of a very strong fourth quarter for 2011. Unfortunately, the middle of the second quarter (April-June) 2012 saw a strong turnaround due to the events in the north and the other instabilities, which led to a barely even quarter as compared to 2011. In the third quarter, all hell broke loose due to the closures of the airport road, the abductions of foreigners and the continuing violence in the north.
These factors and the [Gulf] Arab travel warnings, led to the almost complete absence of Arab tourist. Also, Lebanese expatriates have not come back for the summer in the expected numbers. Add to that the slim purchasing power of those residing in Lebanon and you have a recipe for an economic disaster.

How much has the trade activity fallen from the beginning of the year?

So far, we have dropped a good 15 percent compared to 2011 as the third quarter accounts for about 50 percent of our annual sales and when it is hit, our entire year suffers.

What is your forecast for the rest of year?

Though Q3 has not ended, if you extrapolate and assume all things remain equal, I foresee a drop in the commercial activity of around 20 percent for the year 2012 (as compared to 2011). This is a disaster because trade constitutes about one third of the total gross domestic product (GDP) of Lebanon.

Your forecasts are based on 2011 numbers, which was already a bad year…

We have been going downhill since 2010; 2009 and 2010 witnessed a growth rate of 9 percent, which benefited the trade sector a lot. Unfortunately, we got the wrong cues and traders spent hundreds of millions of dollars on luxury retail expecting good times to come. Then the events in Syria happened, and now traders are in a debt trap; they borrowed huge amounts of money and now the cash flow is severely restricted and our expenses have skyrocketed.

So you forecast bankruptcies going forward?

Definitely. The operational costs have risen so much and at the same time the top line has dropped in a dangerous way. Either you incur more debt, which is poisonous in the long run, or you have to increase your equity or you liquidate. They are all bad solutions and there are no good options.

How much do you believe the raise in minimum wage has contributed to speeding up the pace toward bankruptcy?

Very much so, as we have stated plainly in past negotiations with the Ministry of Labor when all was well. Back then, we agreed that there is an imported inflation due to the high exchange rate of the euro versus the United States dollar and the expensiveness of raw materials like oil — raising wages only lead to home grown inflation.

Last time you spoke to Executive, you were asking the government for subsidized loans for the retail sector, which they have done for other sectors. Where do you stand on this now? Is it likely it will still occur?

We are very much in need of this and are even more strident about it as we are facing difficulties with outstanding loans, and need to renew the loan base with more favorable conditions. But, I don’t see it happening now as the government’s budget carries a huge deficit and they are unable to figure out ways to pay their dues.

What is the LTA doing to help support the sector in these challenging times?

We are a strong voice within the economic organizations of the country and we often take the lead in negotiating with the government on issues that affect the sector. In the end, 80 percent of our problems are due to security issues and the lack of law enforcement in the country, so we cannot do much more than give advice and be persistent about representing our demands.

Regarding social security, the National Social Security Fund (NSSF) is requesting that the salary ceiling for contributions to the end-of-service indemnity funds be increased from LL1.5 million to LL2.5 million. This would represent an additional burden on the private sector. What would you be rooting for in this case?

Our position has been adopted by all the economic organizations. Early on, we refused to move the ceiling, but we were outnumbered on the board of directors of the social security fund. [The NSSF board is made up of 10 representatives of employers, 10 for employees and six from the government.] The issue went to the government who stopped it because they realized it was unfair to the employers. As a concession, we agreed to take the ceiling up from LL1.5 million to LL2 million.

With the economic crisis we are facing, what sectors in your opinion are the most heavily impacted?

The most exposed sector is obviously tourism. We cannot expect hotels to fill up when there are no tourists in Lebanon. Directly after that, restaurants have been suffering and then it comes to us, the traders. We had increased our capacity in the wake of 2009-2010 to accommodate for the demands coming from abroad and now there is an increase in supply and hardly any demand.
Manufactures are also suffering and while they are selling abroad, they are facing logistic problems when it comes to shipping over Syria. The banks will be the last to suffer because they deal with us and there will be a leap time before they start to suffer. As for real estate and construction, they hit a plateau in 2011 because of increased capacity and no demand and a bubble was created, but it will take a while to pop and even then, it won’t be as drastic as it was in other countries, such as the US.

Do you think there are any economic opportunities for Lebanese companies from the increased inability of Syrian companies to meet their domestic demands?

We have noticed that imports of merchandise into Lebanon have increased 11 percent year-on-year (for the first three quarters of the year) and this is not explained by domestic consumption. So, part of it is explained by the Syrian [impact] on Lebanon.

You are threatening civil disobedience. Who are you going to strike against and what are your demands?

This is the last resort for us. We will first try to keep the discussions with government officials open and convince them of the danger of the situation we are in to reach a common ground. Then, we are willing to symbolically close down for one hour or a day, followed by an open-ended strike. For us, it is an issue of survival, so if we have to go on strike, we will. The key demands are the basic demands of order, a state of law and security.

Do you believe the situation is a cycle the Lebanese will eventually overcome, like the ones before, or is it more severe this time?

I have mixed feelings about this. Speaking about the long run, Lebanon has seen and overcome worse. But this is not just another obstacle, it is extremely painful and no one would have imagined the extent of the economic chaos due to the situation in Syria. So far we have shed five percentage points of growth in 2011 and 2012, which means billions of dollars lost that cannot be made up for.

October 3, 2012 0 comments

The Buzz

Morning briefing: 3 Oct 2012

by Executive Staff October 3, 2012

written by Executive Staff

Politics

Two car bombs exploded on a main square in a government controlled central district of Syria's second city Aleppo on Wednesday morning, a pro-government television channel said.

Al-Ikhbariya TV said the bombs detonated in Saadallah al-Jabari Square in western Aleppo, Syria's largest city which has now been split in two with forces loyal to President Bashar al-Assad mainly in the west and rebel fighters in the east.

Fighting only with light weaponry, rebels have resorted to bomb attacks in areas still controlled by Assad. Several large protests in support of the president have been held in Saadallah al-Jabari square.

More from Arabian Business

Iraq’s Finance Ministry has begun paying an initial $650 million to Iraqi Kurdistan for oil companies working in the autonomous region, Deputy Prime Minister Rosh Nuri al-Shawish told Reuters Tuesday.

Baghdad and the Kurdish Regional Government agreed last month to settle a dispute over oil payments, after the latter pledged to continue exports and the Iraqi government said it would pay foreign companies working there.

“The federal Finance Ministry has started transferring the first oil payment of $650 million to the Kurdish region,” said Shawish, a Kurdish member of the central government negotiating team.

More from Arabian Business

October 3, 2012 0 comments

Society

Retail and the economic crisis

by Nabila Rahhal October 3, 2012

written by Nabila Rahhal

After the hotels and restaurants, it is the retail industry that is feeling the effects of the current economic strain,” says Nicholas Chammas, head of the Lebanese Traders Association.

The retail industry in Lebanon depends heavily on Arab tourists and has suffered the effect of their decreased numbers this summer.

“During the good summers, we used to have an average of five Arabs daily entering our shop. This year we are lucky if we see five a month,” says a salesperson in Nine West’s Verdun branch. Walking through downtown Beirut, one quickly notices the unusual quietness relative to previous summers, and though there are a few shoppers strolling around, it appears no one is buying.

Numbers obtained from the tax free shopping services company Global Blue show there was an overall decrease in visitor refunds between the first quarter of 2012 and the second. Syria was one of the few countries whose percentage of spending evolution went up in the second quarter of 2012, which is likely the result of the increased number of Syrians fleeing the violence in their country.

While there was an undeniable economic setback this summer, major retail companies declined from commenting on difficulties they might be facing. Small shop owners in Hamra and Fern El Shebak, traditionally busy shopping areas especially during the summer, spoke freely of the lack of activity in the market, the decline in their sales and of the extended discount periods they hoped would encourage shoppers to spend, but to no avail.

“There are no tourists to buy, and we cannot depend on the Lebanese residing in the country as they barely have enough money to eat, let alone shop. There is basically no way forward until the political situation improves,” said one shop owner in Hamra, summing up the feelings of many in the industry.

October 3, 2012 0 comments

Economics & Policy Industry

Q&A: Vrej Sbounjian

by Paul Cochrane October 2, 2012

written by Paul Cochrane

Lebanon’s productive sectors are often short-changed in favor of tourism, real estate and banking. What’s more, Minister of Industry Vrej Sbounjian commands a paltry budget of LL7.71 billion ($5.14 million). In such an environment the nation’s industrialists need a well-informed fighter holding their corner in the Cabinet. Executive met with the minister to see if he has been up to the task.

The 2012 budget lacked any tangible or creative initiatives to boost Lebanon’s productive sectors. Was this not a failure on your behalf?

We can’t forget previous governments in the past six or seven years couldn’t even pass a budget, so I want to congratulate this government on even having passed a budget. With regards to industry, it is fine, we don’t have any complaints concerning the economy or industry.

Where are we at with the draft law to slash export taxes?

That law has been approved in the Cabinet and I met with [Speaker] Nabih Berri and he promised me it will be in the first parliamentary meeting. That law will mean taxes on all Lebanese products that are exported will be reduced by 50 percent. We pay 15 percent on income tax and profits, but that will be reduced to 7.5 percent.

Can the government afford to lose that revenue?

We don’t look at it from that perspective but rather at how many more jobs we will create and how many more opportunities and investments will come to the country.

One of the biggest disincentives to invest in Lebanon is bad infrastructure. What has happened to the plans to develop industrial zones in Lebanon?

There are lots of industrial zones in Lebanon that you can use. If you want to build a factory or a warehouse to produce or assemble a product you don’t need to go to an industrial zone.

In this government’s mission statement it said new industrial zones would be created…

I’m not saying I don’t want to do it. These are for places where there is no industry in Lebanon. But in a lot of areas there are factories that have been there for years. We cannot ask them to move.

It’s not about moving existing factories but providing the infrastructure to attract investment for new industries…

We are not looking to heavy industries. We are interested in service industries and assembly industries for export to other Arab countries. The investor will take advantage of the 7.5 percent tax rate, plus…

It’s not 7.5 percent yet…

It is 15 percent but it will be 7.5. There is nobody against this law.

If you are not focusing on heavy industry, what efforts are you making to develop high-skilled, light industry within Lebanon?

First of all we have great education and great schools and I would like to encourage…

The problem is that the well-educated and skilled workforce leaves to work elsewhere.

I think the reason of leaving is because the opportunities available in a large economy are more than in a small economy. This is not new. Look at Spain and Italy now and how many people are leaving.

They are going through an economic crisis and there are huge levels of unemployment.

And we are having an economic downturn. It happens.

But once intelligent and skilled young people finish their education, what strategy is there to keep them in Lebanon to help develop its industries?

We have to create the right environment and laws and then leave everyone to be creative themselves.

In your last interview with Executive you said more bilateral agreements were in the pipeline once those with Armenia and Sudan were signed. Are they?

Absolutely, we are looking to have agreements signed with Tunisia and Cyprus very soon.

Why is there no progress on Lebanon’s plans to join the World Trade Organization?

I want to ask you, is the WTO doing well for other countries?

Are you insinuating you are against Lebanon joining the WTO?

I didn’t say I don’t think it is a good idea. With my experience I have learned we have to take into consideration the size of the country and the size of the population. I don’t know all of the details of the WTO but I think that those two issues must be taken into consideration.

What have been the major impacts on Lebanese industry from the Syrian crisis and how has the government responded?

I think the major impact is the fear. People from any country that had a neighbor at war would be worried. People are seeing what is going on and are understandably worried. This is the only major worry so far.

But what about tangible impacts such as increased costs of overland freight?

We have found some ways, such as getting to Iraq going through Tripoli in the north to Turkey and overland from there. As for other countries, for some we are shipping from the Port of Beirut but in many cases the overland route is still fine.

Could the Qlaiaat airport be opened up for the freight of Lebanese produce to foreign markets?

This is one of many ideas people have…

But is it an idea you support?

Would it work? Would it be sustainable? Or would it just be another cost for the government? We are just speculating. Everything is working so far. Everybody is able to export fine from land via Syria and imports are coming in.

Lebanon’s industrialists have asked for faster reimbursement of the value added tax (VAT). What is being done in this regard?

I want to ask what are they doing in other countries? Some are doing well but all the rest are in financial trouble.

VAT reimbursements is a local bureaucratic issue; how is that related to the Eurozone crisis?

In some countries they raised VAT to say 21 percent. We are at 10. They are reimbursing but taking the money back in another way. The Lebanese enjoy very low taxes.

What is your stance on article 59, which allows industrialists to reclaim their VAT on industrial machinery and mineral materials?

If you are importing a product that you want to use to manufacture items and then you want to resell it, that should be excluded from VAT. Secondly, industrial machines that are imported should be excluded. Also whenever a product is being sold to the army we are putting VAT on it. This should be excluded.

Is this up for discussion in the Cabinet?

I need to discuss with my friend the Minister of Finance, but this is the right thing to do…

I would like to add a comment about the economy here. There is a lot of complaining but I don’t think it’s justified. There was great growth from 2006 to 2011, but in economies there is growth and then recession. Without the discipline of recession, continuous growth would bring us to a larger fall into recession.

But the lack of development of Lebanon’s productive sectors makes it more susceptible to external shocks and undermines long-term sustainable growth.

Where are the Lebanese? We are innovative, we had vision, where are these people? Why are we always complaining now? We need to be creative and have a long-term vision.

You need electricity, you need Internet, you need good roads…

We have some drawbacks, but we also have many advantages. We had six years of great expansion with an incredibly strong real estate market. We may be in a recession but that is a discipline we need to go through. We need to be more realistic and enjoy life a little bit. We don’t have to make money every year; there are many nice things to be done in the country.

October 2, 2012 0 comments