InsuranceSpecial Report

Tied up in risk

by Thomas Schellen
written by Thomas Schellen

Lebanese entrepreneurs traditionally have approached risks with the attitude that they prefer to carry them themselves rather than pay for risk transfer, unless there is a compelling reason to buy insurance. Companies insure their vehicle fleets and some contract medical coverage for staff as add-on benefits beyond the obligatory payments to the social security system. Larger companies are usually more insurance-aware and acquire basic asset protection, such as property, fire, and cargo insurance. But the vast majority of commercial enterprises are small ventures and their insurance blankets reveal more risks than they cover — small and medium-sized Lebanese companies are underinsured on several and perhaps even most fronts.

The only insurance that has been compulsory for Lebanese companies until now, with some level of enforcement, has been workmen’s compensation, a basic accident policy for employees. This year, the Ministry of Industry introduced a new requirement for industrial establishments, which from this summer on have to obtain a fire insurance policy in order to renew their industrial licenses.

Interestingly though, demand for fire insurance has already been on the rise before the Ministry of Industry introduced its decree. According to the quarterly statistical report of the Lebanese insurance association, ACAL, premiums in the fire business increased 14 percent to $81.7 million in 2011 and represented a 9.3 percent market share of non-life insurance.

The corresponding numbers for the first and second quarters in 2012 show continued growth at 14 percent for January to March, and 16 percent for April to June. According to the report for the second quarter, the share of fire premiums in total non-life premiums has expanded to 10.3 percent of non-life premiums in Lebanon.

One factor that insurance leaders say influenced the demand — and also the consideration to create a mandatory fire package for industrial establishments — was a $12 million industrial fire that was settled by the insurer, Arabia Insurance, with quite some public fanfare in November 2011.

An unsure fire-sale

The latest statistics on insurance sales in the first half of 2012 do not necessarily enable growth estimations for fire insurance in the coming years. On one hand, implementation of the decree requiring coverage in industrial establishments still has to be shown in practice; companies in Lebanon are noted for their inventiveness when it comes to cost avoidance. On the other hand, the insurance providers do not have market data that would reveal how many industrial establishments and of what sizes are currently lacking fire coverage.

The new requirement, which insurance companies — no surprise — are supporting enthusiastically, has already generated applications from industrial companies that never before felt the need to buy fire insurance. The application surveys of these companies have shown that many do not conform to important standards, said Fateh Bekdache, general manager of Arope Insurance.

“Every insurance company has its own strategy on this but the companies that look for fire insurance have some risks that they need to work on, a lot, in order to be insurable,” he said.

It is a different case with managerial and professional liability insurance coverage in Lebanon, where growth is not led by any new regulatory initiatives. A discussion at the Ministry of Tourism regarding the introduction of mandatory liability coverage for restaurants and hospitality enterprises, to protect patrons if they suffer an accident or a food-related illness, was recently aborted.

But some factors have sparked interest in liability covers. When judicial authorities in Mount Lebanon ordered a doctor arrested in a dispute over medical treatment in June, it was the first case where alleged negligence and malpractice by a physician resulted in such action by the public prosecutor. According to Bekdache, the doctor’s arrest triggered inquiries by medical practitioners asking for quotations on malpractice insurance.

In parallel to newly malpractice-risk aware physicians, lawyers are also asking for professional liability coverage, but do so mainly for reasons of wanting to enter international partnerships. “A month ago I got a call from a prominent law firm which asked about the price indication for this kind of professional indemnity cover,” Bekdache said.

Demand for professional liability insurance by a law firm is attractive for the insurer, but these inquiries cannot be answered with a ready-made policy, he added. “It is a big proposal,” said Bekdache. “I have to know the track record of the law firm, how many cases were lost and won, what kind of litigation they do and what their turnover is.”

D&O’s and Don’ts

Another complex need is management liability insurance. Directors and officers, or D&O in insurance-speak, are today held responsible for a growing range of risks that range from unintentional errors and omissions in delivering projects, as well as products for financial and managerial liabilities. Regulators, shareholders and stakeholders such as employees and competitors represent a pool of litigation threats for both companies and directors as individuals.

Cases, which can be both civil and criminal, are brought for issues as diverse as a violation of anti-money laundering rules, failure to fulfill duties, keep adequate records or apply regulations, harassment, wrongful termination, or abuse of power. The range is so broad that insurance covering corporate errors and wider management liabilities, subsumed under the term D&O insurance, is “a must for any large company in Lebanon,” according to Bekdache.

Against the severity and frequency of this risk, however, the number of D&O policies issued in Lebanon is falling seriously short and the market is underpowered. Chartis, a prominent name in global D&O insurance that has presence in each of the six Gulf Cooperation Council countries and Lebanon, has seen demand for D&O coverage grow in some Arab markets. The United Arab Emirates and Saudi Arabia are leading demand developments for D&O insurance, said Muhannad Abdul-Majeed, an expert on financial insurance lines with Chartis Middle East.  “Unfortunately, Lebanon is a challenging market for management liability covers.”

Roger Zaccar, business development manager of Commercial Insurance, an independent Lebanese insurer, was blunter. “There is no demand [in the Lebanese market]; you have only two or three clients who are buying [D&O]. People don’t know why they need it and insurers don’t have the volumes to create specialized departments for it” he said.

Local providers are not equipped to assess and underwrite corporate liability policies, said also Arope’s Bekdache. “Nobody has a facility on those policies so we go via international brokers. It doesn’t make sense to have facility for such a product.” Among the reasons why D&O insurance in Lebanon is a tougher sell than in the GCC is so few companies are publicly traded on the Beirut Stock Exchange and very few international investors are looking to acquire stakes in Lebanese companies, according to Abdul-Majeed.

Regional D&O growth

At Chartis Middle East, 61 percent of premiums underwritten on management liability coverage in 2011 came from first-time buyers, evidencing demand growth, he said. “The majority of buyers were companies that were publicly listed, and/or had exposure to international jurisdictions via their customers, shareholders, suppliers, and so forth.”

However, the insurer also found that regional D&O insurance demand is still mostly reactive, as companies respond to demand from international investors and business partners, or to high-profile incidents where executives and corporate officers are scrutinized.

In the UAE and other GCC countries, regulators are popularizing D&O as they are stepping up investigations of corporate managerial liabilities. Chartis observed 20 percent more notifications of claims brought against D&O in 2011 when compared with 2009 and 2010.

Corporate and managerial liability insurances are just some of the protections that companies in Lebanon and the region will need more of in future if global markets are the guidepost. While no concise data on the presence of D&O insurance is available, Chartis estimates that current premium volumes invested in D&O liability protections is no more than 5 percent of non-life premiums across the GCC and Levant.

The level of coverage in the region is definitely lower than in more mature economies, Abdul-Majeed noted, even though corporate liability protection is anything but a than needless luxury.  “In terms of [a] corporation’s budget, a D&O policy is usually much cheaper than other more traditional insurances, such as property insurance or group medical, but whereas companies are prepared to pay the higher premiums for these covers, they unfortunately do not give much thought to management liability insurance.”

Circumstances could however boost adoption of some insurance policies for corporate decision makers and key persons. Besides seeing more corporate demand for insurance against terrorism, political violence and war risk, insurers in Beirut and the Middle East have been starting this year to get more calls asking about kidnap and ransom policies.

0 comments
0 FacebookTwitterPinterestEmail
Economics & PolicyElectoral Reform

Blank the ballot

by Rabih El-Chaer
written by Rabih El-Chaer

Parliamentary elections in June 2013 will define both the ruling majority for the next four years and the identity of the future Lebanese president, and the Lebanese electoral law will play a crucial role in this process. But the country’s opposing political camps — the March 8 and March 14 coalitions — are not willing to risk any change in the balance between them. For this reason they are not likely to accept the proportional electoral system as it will open the door for independent candidates to take part in the elections, and this new blood would pose a serious threat to the established oligopoly in the Lebanese political system.

Prime Minister Najib Mikati’s government promised in a ministerial declaration shortly after taking office that the electoral law, which includes all the related reforms, would be effective one year before the elections. However, it was only sent to the parliament last month — 10 months before voting begins — meaning government is already in violation of this commitment. Furthermore, it is widely expected that Parliament will procrastinate in its review of the electoral law to use up time and make implementation of any reforms impossible before the election. For this reason we should not get our hopes up regarding electoral reform. Rather than presenting an opportunity for change, voting citizens will most likely be left with little choice but to reinforce the status quo.

Those of us campaigning within civil society understand the cynical game that is being played out before us and have therefore changed our strategies and priorities. There are other crucial reforms to the elections that should be implemented, whether they are instead of or in addition to the proportional electoral system.

For starters, an independent and permanent committee (IPC) that organizes and supervises elections needs to be established. It is disconcerting, but not surprising, that the draft law submitted by the Minister of Interior and Municipalities to the Council of Ministers, Lebanon’s cabinet, did not suggest the creation of an IPC. Without such a body, however, we should not accept the interior minister’s authority to conduct the elections, especially since he is a member of a monochromic government. The Civil Campaign for Electoral Reform (CCER) conducted a feasibility study that proved that there is still enough time to create the IPC if an honest will is expressed by the Council of Ministers and the Parliament.

We are also insisting on the adoption of pre-printed ballots and vote counting procedures in polling centers, instead of polling offices, in order to increase transparency and to limit bribery and vote buying, among the other various aspects of election corruption. What is more, logic dictates that the electoral law is also supposed to ensure candidates state publicly their electoral expenses in order to increase transparency and to limit electoral excesses. In reality it increases the limit candidates and parties can spend on electoral campaigning, further eroding the credibility of the political class.

We denounce this shameful behavior practiced by politicians and are increasing our lobbying efforts. However, the task at hand is not an easy one and a number of tough questions need to be addressed: How is it possible to apply pressure on a corrupted political class that regularly and successfully distracts public attention by creating alarming situations? How can we raise enough awareness to force our politicians to change when it is they who control the major media outlets? How can we persuade the silent majority of the Lebanese people to express their opinions without burning tires and blocking roads? The answers to these questions seemed far from reach before the Arab uprisings, but if our brethren in the region can overthrow their fierce dictatorships, then there is hope that we can change the Lebanese political system as well.

If civil society is to have any kind of success then it must find a common voice. If the active organizations and the potential army of thousands of volunteers can agree to submit one single list composed of 128 candidates for the parliamentary elections in 2013, or by default, one candidate for each electoral district respectively, then they will be heard by both the street and the establishment. However, if civil society as a whole is not able to unanimously reach a compromise, we will invite all those citizens who are fed up with the political class in Lebanon to cast blank votes. A blank vote, which is usually used to demonstrate dissatisfaction with the choice of candidates, would in this case be used to pressure the whole of the political class to take heed of the disenchanted masses.

 

RABIH EL-CHAER is managing director of the Lebanese Transparency Assosication

0 comments
0 FacebookTwitterPinterestEmail
Economics & PolicyElectoral Reform

Linking electoral and economic reform

by Sami Atallah
written by Sami Atallah

The approval of the new electoral law based on proportional representation by the Council of Ministers, Lebanon’s cabinet, has the potential to be a historical moment but will most likely be cursed to an early grave. When it comes to a show of hands in Parliament, the Future Movement, the Progressive Socialist Party and the smaller Christian parties are likely to succeed in voting it down. This is because under such a system they would likely lose seats in the upcoming elections and see their power wane in the next Parliament.

Putting aside the zero-sum game between the two main rival political camps, voting down the proportional representation electoral law is a blow not only to better political representation, but will allow the existing majoritarian system to continue stifling Lebanon’s economic and social development, particularly in the regions. Quite simply, under the current system politicians do not need to deliver any concrete policy platform to run on, or even deliver successful reform while in office, to win seats. Under a majoritarian system, politicians with the most votes win the seat even if they don’t secure a majority. Districts where politicians are ahead of all the other candidates are considered “safe” and little effort is exerted to win them. Instead, the focus shifts to districts that are competitive or where there is a swing-voting constituency. Campaigning for votes in these areas thus becomes an essential strategy for the party. Add to this electoral system three other features — bloc voting, sectarian polarization and clientelism — and parliamentary seats are won based on a small coalition of voters within these tightly fought districts. Most political parties in Lebanon have benefited from the majoritarian electoral system, explaining why it has been in place for so many years.

The three cruxes

Bloc voting, which is common in rural Lebanon, reduces voting power to a few members of the community, that is tribal or family elders, who decide on behalf of the tribe or family members who to vote for and everyone else follows suit. Sectarian rhetoric is the cheapest political strategy to mobilize citizens to vote, but this works only in districts with an ethnically homogenous population (otherwise it can backfire). Finally, electoral clientelism is, effectively, buying votes by giving cash or services to targeted individuals, particularly in swing districts.

By expedient exploitation of these tactics in a majoritarian system elected politicians end up in parliament with the support of a relatively small but active coalition of voters. By keeping this coalition relatively content, politicians have no incentive to push for any socioeconomic development programs in the less contested regions, since they will get elected in any case and are rarely held accountable by their own constituents. 

The proportional representation system radically changes the relationship between voters and parliamentary candidates. Under this system every vote counts and seats are allocated based on the proportion of the votes won. This encourages people to vote even in districts that are dominated by a political party not of their choosing. Having more people voting will make clientelistic strategies vastly more expensive. Parties may eventually find themselves unable to buy all the votes they need directly. It could also encourage family members to break away from bloc voting since their votes would count even when they vote for the smaller and less powerful parties.

Rather than falling back on safe seats while coopting small but active groups of voters in swing districts, the political parties would have to address the electorate as a whole. This means they would have to actually devise and deliver concrete policy programs that will provide public goods and services to the larger community. Politicians would be held to account on their ability to deliver on critical issues such as infrastructure, education, health or electricity. As such it would be an impetus for socioeconomic development, particularly in the regions.

The bigger game

Proportional representation has ramifications beyond political representation, with most of the debate surrounding reform failing to recognize the link between electoral representation and economic development. The political and economic angles are intrinsically intertwined but too often discussed and debated by stakeholders, including civil society organizations, as two separate problems.

Proponents of proportional representation seem to appreciate its political end only, while those who advocate regional development seem nostalgic for the era of President Fouad Chehab, when regional development plans were drawn but never implemented. Sadly, little thinking goes into why the Chehab program did not stick: electoral reform is key to regional development.

 

SAMI ATALLAH is executive director of the Lebanese Center for Policy Studies

0 comments
0 FacebookTwitterPinterestEmail
Economics & PolicyElectoral Reform

The vice of vested interest

by Rony Al-Assaad
written by Rony Al-Assaad

If there is one thing that has become clear since the debate over electoral reform resurfaced in Lebanon, as it does every four years, it is that the main political forces in the country consider elections to be a form of leverage over the people rather than an opportunity to ensure fair and democratic representation. While the Council of Ministers, Lebanon’s cabinet, passed an electoral reform law in August, whether this passes Parliament — and if it does, how it will have been altered — is still yet to be seen. Unfortunately, the election law that governs next year’s ballot will likely resemble the previous one: Distorted legislation that comes out of an 11th hour negotiation and falls short of basic democratic standards. In short, it is unlikely that the ruling elite will allow any significant rocking of the boat.

In any case, the public should know why our so-called leaders will let us down once again, specifically with regards to adopting a system of proportional representation. An analysis of politicians’ motives and their public statements, which are constantly adapted to fit changing political and electoral interests,  reveals much.

Behind the bluff

Let’s start with the opposition, specifically the Future Movement. They consider proportional representation as an electoral “weapon” which aims to undermine their dominance and position as the main representative of the Sunni sect, given the number of independent Sunni candidates. At the same time, Future is convinced that proportional representation will not break the monopoly their main political opponents — the Amal Movement and Hezbollah — have over the Shia sect, as these parties enjoy overwhelming representative power in their districts of popular support, such as South Lebanon, the Bekaa and Hermel. Future also rejects the proportional representation system as long as Hezbollah maintains its arsenal of weapons, as it firmly believes that arms undermine democracy, freedom to run for elections and even the security of candidates if they win; an example they often cite is Hezbollah’s direct interference in the municipal elections to deter candidates from running or pressuring them to withdraw. Do, however, keep in mind that this practice is prevalent in any area in Lebanon where one political party enjoys overwhelming hegemony. Future also fails to explain how the excuse of Hezbollah’s arms does not apply in a ‘winner take all’         electoral system.

At the same time, the Future Movement is waiting for a clear position to be declared by its Christian allies, who are generally more supportive of smaller districts since they fear that larger districts may erode the share of parliamentary power allocated to them under the 1989 Taif Accord, which is 64 deputies. It is worth noting that both demographic changes and the 2008 electoral law detracted greatly from the ability of Christian voters to choose their representatives — in six out of the 12 districts where there is a Christian majority, Muslim votes determine the election results. Future Movement deputies have stated that their party might support Fouad Boutros’ draft law if it was proposed as a serious alternative; this law proposes a mixed electoral system where 70 percent of parliamentary seats are elected according to the majoritarian electoral system at the qaza (or district) level, and 30 percent of seats are filled according to the proportional representation system at the mohafaza (or governorate) level.

The Christian parties in the opposition (the Lebanese Forces, the Kataeb and independent politicians) support small districts, and through the Bkerke committee — which brought together the four main opposition and governing Christian parties — they have put forth two proposals: either a modified version of the electoral law 25/2008 where Lebanon is divided into some 50 districts of four seats each at most, or a proportional representation system in 14 to 15 districts. Many see the position of the Christian opposition parties stemming from their wish not to go against their Sunni ally, as well as the fact that proportional representation is not viewed favorably among most Christians or in Christian political circles. This latter point is somewhat odd for opposition Christian parties, however, as proportional representation could help weaken the monopoly on parliamentary representation the Free Patriotic Movement (FPM) currently enjoys in some areas in Mount Lebanon (the district with the largest concentration of Christians), as a first-past-the-post ballot renders opposition votes in these areas inert.

The government’s side

As for the parliamentary majority, they have an interest in adopting the proportional representation system based on statistics from the 2009 parliamentary elections. According to repeated public statements by some of its leading members and its own polls, Hezbollah believes its popular base is large enough to ensure positive results within any system. However, it is also possible that the proportional representation system would go against Hezbollah’s interests, for it would certainly contribute to breaking (even if initially to a small extent) the bilateral monopoly of Hezbollah and the Amal Movement over Shia representation as independent Shia candidates gain more confidence to run, given that they have a chance of winning a seat. Hezbollah’s position is also linked to the position of its main Christian ally, the FPM, as Hezbollah needs their support in the districts with a Christian majority.

The most recent FPM position called for adopting proportional representation with Lebanon as a single district. This is mainly an attempt to gather the Christian votes that are scattered across the country outside of Mount Lebanon, which the FPM believes would go to its candidates. The FPM believes that its political power could be maintained by proportional representation since it should guarantee it a number of seats despite a perceived, but unproven, decline in popularity.

Deputy Walid Joumblatt (the main representative of the Druze sect) has outright rejected the proportional representation system. This stems from his belief that it will reduce his representation in Parliament, which is “exaggerated” in the present system where he is able to ensure the election of loyal Christian and Sunni deputies through Druze votes. Hence, even though the cabinet has voted in favor of the law it is unlikely to garner sufficient support in Parliament (at least in the form passed by the cabinet), given that Joumblatt has the ability to sway the final outcome. That is unless a new political tradeoff is struck among the different political blocks, which is not uncommon for Lebanon’s opportunistic political parties.

Lebanon may have a long history of elections, but this has rarely translated into the creation of functioning national institutions. If we are to transform our “culture” of holding elections into a state with accountable institutions and a participatory body politic, then we need an electoral law that ensures fair representation and the secrecy of the ballot within an independent and transparent organizational structure. Sadly this looks like it will not be the case, and now we know why.

 

RONY AL-ASSAAD is director of the Civil Campaign for Electoral Reform (CCER). This article expresses the personal views of the author and does not represent the official policy of the CCER.

0 comments
0 FacebookTwitterPinterestEmail
Last Word

Cairo’s new deal

by Ahmed Moor
written by Ahmed Moor

The Egyptian-Palestinian relationship has been strained recently, but this trial by fire may forge stronger ties in the medium term.

On August 6 gunmen attacked an Egyptian army checkpoint on the Sinai Peninsula border with Israel, just south of Gaza. Sixteen soldiers and an unknown number of assailants died in the initial clash. The surviving assailants dashed across the border where they were promptly killed by the Israeli army. The brutality of the strike — the soldiers were preparing to break their day-long Ramadan fast when they were attacked — shocked both Egyptians and Palestinians.

Swift condemnations came from all sides as the search for additional assailants and their enablers began in the Sinai and among the Palestinians in Gaza. The Egyptians also sealed the Rafah border crossing with the Gaza Strip, casting a pall on previous optimistic signs from the new Egyptian leadership regarding their intention to ease the Gaza siege — yet that may still be in the cards. The Egyptian revolution resulted in the election of the country’s first overtly Islamic leader, Mohammed Morsi, a member of the Muslim Brotherhood. Before he was elected, the Supreme Council of the Armed Forces (SCAF), which had ruled since President Hosni Mubarak was deposed, stripped the role of the presidency of much of its power. The new president faced the choice of either accepting this truncated rule or pivoting to confront the country’s military.  Another precarious relationship the new president had to maneuver was with the Palestinians in Gaza — long on the Muslim Brotherhood’s agenda. Under Mubarak, Egypt had actively maintained the siege of the distressed Strip, but Morsi signaled early on that he was prepared to work with the Hamas-led government — further straining his relationship with SCAF, the principal executors of the Mubarak-era policy.

Among Morsi’s motivating factors may have been the popularity of the Palestinian issue in Egypt. Average Egyptians may not have prescriptions for how to resolve the Palestinian-Israeli conflict, but the moral force of the Palestinians’ claim resonates with the overwhelming majority of Egyptians. While popular opinion was a negligible feature of Cairo’s political landscape pre-January 25, 2011, today it carries much more weight.

The Muslim Brotherhood also has deep institutional ties to Hamas, as Brotherhood members, including Sheikh Ahmad Yassin, founded Hamas. While operationally independent, the two organizations’ foundational affinity has remained. Morsi’s election was loudly celebrated in Gaza — not only because of the expectation that he would ease the siege, but his election was also taken as an affirmation of Hamas’ political legitimacy.

Egypt’s new president met with both Mahmoud Abbas — the head of Fatah and the Palestinian Authority — and Ismail Haniyeh, his Hamas rival. The meetings came after Morsi eased restrictions on travel to the Gaza Strip that have long been in place. 

While it is unclear who perpetrated the attack in the Sinai, Palestinian concern was that the killings would end the relatively friendly treatment they had been receiving from the new government. The president would have to distance himself from any group or policy perceived to have been lenient on security in the enormous and largely vacant Sinai, and at least one figure in the Egyptian government claimed publicly that the assailants had received support from Gaza.

Initially it seemed that the Palestinians’ concerns were justified — the Egyptians closed the Rafah crossing despite comprehensive Hamas cooperation with the Egyptian security forces in the hunt for the groups behind the attacks. But developments quickly gained a new trajectory.

The president used the Sinai attack as a pretext for wresting control of the country from SCAF. He first sacked the chief of intelligence and head of police in Cairo; several days later the president retired both Field Marshall Tantawi, the head of SCAF, and one of his main subordinates from public life. This ouster coincided with the conditional reopening of the border with Gaza. It appears Morsi used the attacks to double down on his first policy instinct vis-à-vis the Palestinians: more cooperation and aid.

The election of a new president in Egypt meant a reconfiguration of the relationship with the Palestinians in Gaza. And when it appeared that Morsi’s agenda would be threatened by an Islamist attack, he recast the episode to yield an unambiguous victory for himself, his party, his agenda and ultimately the Palestinians.

 

AHMED MOOR is co-editor of “After Zionism: One State for Israel and Palestine” and a Masters in Public Policy candidate at Harvard University’s Kennedy School of Government

0 comments
0 FacebookTwitterPinterestEmail
Companies & Strategies

Behind the silver screen

by Nabila Rahhal
written by Nabila Rahhal

“The movie business is a gambling business,” says Salim Ramia, chief executive of Grand Cinemas. “When you buy a movie for a million dollars before it is even filmed, isn’t that a gamble?”

Indeed, Ramia himself placed big bets by selling his successful company in the United Arab Emirates to start up the same business in Lebanon and the Levant. Yet, he has faith his lucky star will shine through.

Beirut to Dubai and back

Ramia is no stranger to the film business in Lebanon, he had a film distribution office called Phoenix Film Distribution in Hamra during the civil war back in the 1980s. “In 1986, the office was occupied by one of the warring political factions, and it was then that I took the decision to move back to Dubai, as Lebanon was in a state of war and there was no room for professional growth, ” says Ramia.

In 1989, Ramia and an Iranian partner established “Gulf Film” for film distribution. Three years later, they entered the theater operation business and established their first cinema in Dubai. He recalls “Unforgiven” was the first movie he brought to Dubai. “In Dubai back then, the film industry was dominated by Bollywood movies and my partner kept telling me that I was dreaming because I believed American movies could be a success in the UAE, but I wasn’t dreaming and they did succeed,” says Ramia.

Gulf Film’s venture into movie theaters kept expanding and they set up two cinemas in the Hyatt Regency in Dubai in 1994, as well as theaters in Sharjah. “The big boom was in 2000 when we established the first multiplex cinema Al Maria in Abu Dhabi,” says Ramia. “The year 2000 was also when we launched the brand name Grand Cinemas, inspired by the Grand Hyatt Hotel, which faced the Dubai Cineplex.”

“In 2005 we saw the most rapid growth for Grand Cinemas, as we expanded from having 38 screens to having 94 screens” he says. They acquired these screens by buying Century Cinemas in Dubai, an African-owned company that was closing down, and also buying Al Massa cinemas. “It is relatively easy to take over cinemas, as the theaters and employees are already there. You just have to trim the excess and reshape where needed,” explains Ramia. Finally, in 2007, Grand Cinemas opened their last multiplex in Dubai, called the Grand Festival Cineplex, to have a total of 106 screens in the UAE.

After having ventured into the Levant market in 2007, Ramia and his partner took the decision last year to sell the Grand Cinemas operations in the UAE and Qatar. “While the Grand Cinemas name is 100 percent the property of Salim Ramia and Sons, I sold Gulf Films Distribution and all the Grand Cinemas theaters already in operation in the UAE [which were owned by Gulf Films]. I also sold the rights of operation in Qatar, so as not to create any competition with the new owners for whom we are still consultants,” says Ramia. In explaining his decision, Ramia says he has reached his peak in the business, a good time to bank in on his success and relax. “It was easy to sell because of our successful name and also because the cinema business is a lucrative business where you can begin cashing in the next day after operation,” explains Ramia. 

Building the family business

“My business in Lebanon is different because it is a family one. My wife and my children work with me here and I will never sell it.” Ramia’s wife is the general manager during his absence on travels, and his daughter Carly is the marketing manager.

Relaxing, however, does not seem to be in Ramia’s cards: “I have built a successful business in the UAE, and I will do it again here,” he says.

Grand Cinemas’ expansion to Lebanon began in 2007 with a phone call from mall operator ABC Ashrafieh’s management team. They wanted Grand Cinemas to manage their cineplex, which at that time was run by Circuit Empire, so Ramia came to Beirut and “closed the deal”. That year, Ramia and a Lebanese partner of his also bought Concorde Cinema in Verdun and Las Salinas Cinema in Anfeh, North Lebanon. In 2007 Ramia also expanded into Jordan with cinemas in Amman’s City Mall.

Speaking about his start in Lebanon, Ramia says they had to improvise and deal with things as they are since they acquired theaters which were already in operation — albeit theaters that were not doing so well, thus he had to turn them around, revamp them physically and introduce more efficiencies, such as electronic ticketing booths and online services.

Grand Cinemas in ABC Dbayeh Mall was their first “from scratch” cineplex in Lebanon and Ramia says the reviews have been great. Of the Grand Class cinema, Lebanon’s first luxury cinema which includes champagne and caviar canapés as part of the viewing pleasure, Ramia says the 20 seater theater is full for at least two shows per day. “The Lebanese love to show off and so will encourage each other to try out our theater,” says Ramia, adding that while the champagne and caviar are not cheap, they are a marketing gimmick which is working in attracting viewers. 

With its latest cineplex in ABC Dbayeh, and the Grand Cinemas in Saida Mall, Grand Cinemas now has 32 screens in operation in Lebanon — including the country’s first 3D theaters — and plans to open a cineplex in the Landmark on Riad El Solh. The company’s headcount totals 136 employees in Lebanon between management and theater staff.

The movie market

Today Grand Cinemas has 41 percent of the movie market share in Lebanon, Circuit Empire has 46 percent and the rest is distributed among Planete Cinemas and others. Ramia explains that since Circuit Empire owns the largest cineplex in Lebanon in City Mall, which has 2,200 seats, it dominates by sheer numbers — by comparison, ABC Ashrafieh has 1,039 seats. He believes this will change with the introduction of ABC Dbayeh’s theaters, which opened in July (a notoriously slow movie season as would-be customers flock to beaches instead).

After Empire’s Cinema City, the next three theaters topping market share belong to Grand Cinemas (ABC Ashrafieh, Concorde and Saida Mall). While Ramia declined to go into revenue details he did say that three of his theaters were losing money, but added that this is something he can afford, and one has to be a good loser to be a successful businessman. 

In the rest of the Middle East, Grand Cinemas has nine screens in operation in Kuwait and 10 in Jordan with a new partnership for 16 theaters. The company also has a deal for 14 screens in Erbil, which will make for a total of 100 screens for including their Lebanese operations. Comparing his other businesses to Lebanon, Ramia says people in the Gulf go to the movies more. “In Lebanon, they have bars, rooftops and theater as entertainment options. In Kuwait, what else is there to do besides watch a movie and eat out?” says Ramia. He also speaks of censorship, which is much harsher in the Gulf and vetoes nudity, religion and politics. In Lebanon, according to Ramia, censorship is limited to issues of religion.  Besides being a movie theater operator, Ramia still deals with film distribution and says the Lebanese market is now open, where any theater can run any movie, though with a certain percentage paid to the distributor. “Distribution rights to a movie could cost between $100,000 and up to $1.5 million depending on what you are getting. It is a gamble because you are buying a movie based on the script, and on the name of the actors,” he says, adding that to be a successful distributor, you need to have the right contacts.

“In short, the movie business is an entertaining and glamorous one where you get to meet people,” concludes Ramia. “But it is also one with a lot of risks.”

0 comments
0 FacebookTwitterPinterestEmail
Comment

An illogical conspiracy

by Moe Ali Nayel
written by Moe Ali Nayel

It was an apparent fall from grace for Lebanon’s former Minister of Information Michel Samaha, still in his pajamas as he was hauled from bed on August 9 during an early morning raid by heavily armed Internal Security Forces (ISF) personnel. His wife reported that it seemed as if the officers from the ISF’s Information Branch had “come to liberate something.”

Samaha, a close friend and ally of Syrian President Bashar al-Assad, was widely acknowledged to be Assad’s man in Lebanon, and his arrest shook his Lebanese allies in the March 8 coalition as much as it garnered fanfare from his opponents in the March 14 political alliance. Information leaked from the Information Branch indicates Samaha — whose house was reportedly found filled with explosive devices — was plotting to plant bombs in Sunni and Christian areas in Akkar, North Lebanon, under orders from Syrian intelligence chief Ali Mamlouk. The attacks were planned for the following week, during Maronite Patriarch Beshara al-Rahi’s scheduled visit to Christian villages in the area.

Samaha started his political life as a member in the students’ branch of the Kataeb political party, later defecting to the Lebanese Forces under the leadership of Elie Hobeika. Known to have close ties with the French intelligence and a Canadian passport, Samaha was also a renowned intellectual with in-depth knowledge of political theories, and had spent the past five years as a Syrian regime spin doctor, while also advising President Assad on foreign policy.  Shortly after his arrest, Samaha confessed to taking orders from Mamlouk and transporting bombs himself, in his own car, and handing them over to a “secret witness”, who filmed the whole exchange through the lens of a pen-like camera. Lebanese media later exposed this “secret witness” as Milad Kfouri, the head of a security company that provides security services for politicians and businessmen; among his clients is Finance Minister Mohamad Safadi. Kfouri has since disappeared without a trace.

Notably, the Information Branch, which carried out Samaha’s arrest, is headed by Wissam al-Hassan, previously a bodyguard for the late former Prime Minister Rafiq Hariri, with Hassan under the authority of ISF Director General Ashraf Rifi, himself known to have close ties to the Hariri family. As with every public department in Lebanon, the Information Branch operates under the unofficial sectarian quota system, and favors Sunnis from the Hariri camp. Thus, Samaha’s arrest is seen by some to be a blow in the internal war currently under way between the variously aligned security apparatuses in Lebanon now divided over the Syrian situation. Samaha, however, confessed to taking orders from the Syrian regime to plant bombs inside Lebanon and implode the country by pitting Christians against Sunnis: the regional instability Assad has warned about since the beginning of the Syrian uprising seems to be itself crafted in Damascus. Given the evidence and Samaha’s confessions, Hezbollah, Syria’s major ally in Lebanon, has kept quiet on the affair. When Member of Parliament Mohamad Raad, part of Hezbollah’s ‘Loyalty to the Resistance’ parliamentary block, condemned Samaha’s arrest, Hezbollah announced that Raad’s comments reflected his own opinion and not that of the party.

Could the surrender of Samaha — a man of often shifting political allegiances — be seen as another defection high in the ranks of the Syrian regime? The simplicity of the plot and Samaha’s personal involvement in the minutiae of the operation make one wonder what happened to the massive human resources and agents operating on behalf of the Syrian regime in Lebanon. Remember, Samaha’s role with the Syrian regime was always in an advisory and scholarly capacity, but never as mercenary. This whole operation does not fit with Samaha’s historical precedent, expertise or style. The criminal aspects and viciousness assigned to the operation simply seem outside of Samaha’s purview, and his CV would show none of the necessary prerequisites for the job. Why was this intellectual suddenly operating as an undercover bomber?

Government deputy Commissioner to the Military Court Judge Sami Sader has charged Samaha and Mamlouk with conspiracy to commit crimes in Lebanon. The Samaha case is another episode of Lebanese upheaval stemming from political and security developments in Syria. Whether Samaha defected, or was caught red-handed, his arrest diffused a plot that could have had similar results to the 1975 bus shooting in Ain Al Roumani — that sparked the 15-year-long sectarian civil war that we have yet to recover from.

 

MOE ALI NAYEL is a freelance journalist based in Beirut

0 comments
0 FacebookTwitterPinterestEmail
Society

Making them like they used to

by Nabila Rahhal
written by Nabila Rahhal

What was once a relatively quiet bohemian street parallel to the Mar Mikhael main road has begun bustling in recent months. While artistic types have long visited the art and architectural book shop Paper Cup and the Spanish library here, the increased footfall seems due to a little diner called Frosty Palace, which boasts the best burgers in town. The diner has been a well-kept secret since it opened its doors in February 2012 , but as word of the quality of food spread, customers came to taste what the fuss is all about.

Tell me more, tell me more!

Frosty Palace is originally the name of the diner from the movie “Grease” where Sandy, Danny and the rest of the gang used to enjoy their burgers and shakes. Today, Zalfa Naufal has brought Frosty Palace to Beirut, with three booths and a bar running the length of the place. Frosty Palace is not for those who want “to see and be seen” while enjoying their meal, nor does it pretend to be: its small size sends the message that the focus is on the food itself, and not on catering to extroversion.

To step into the restaurant is to walk back into the American 1950s. No detail is spared to invoke the essence of a classic American diner; even the sugar and straw dispensers are reminiscent of those in the old time eateries. A checkered black and white floor, monochrome photos on stark white walls and icy blue booths all set the mood. The atmosphere is completed by the music, which features old time classics as “It’s Raining on Prom Night” and “Heartbreak Hotel”.

The crystal chandeliers dangling from the ceiling may seem out of theme, but can be considered a quirky charm, and one can tell a woman’s taste is behind the retro yet elegant setting.

Like the original Frosty Palace, burgers, shakes and fries comprise the menu’s signature items. Other offerings, (including vegetarian options) include sandwiches and salads. The chicken salad, a Thai style conception, is well done and the portion is generous. The brunch menu, offered from 11:00 am, sports tantalizing sounding items such as poached eggs and buckwheat pancakes with strawberries.

However, Frosty Palace’s reputation is built between the buns, and one must stay focused. The Frosty Palace Burger arrives alone on a plate, topped with salad leaves, tomatoes and pickles. Additional toppings, such as caramelized onions, cheeses or bacon, come at prices which vary from $0.75 to $2.60. The burger itself does not come cheap, priced at $13.50 without the side orders which usually come with burgers (fries cost $3 extra). It is, however, a delicious gourmet burger, with premium quality Australian meat cooked just right, with that barbecue taste in every bite. The bun is soft, and goes well with the burger, not overwhelming the taste of meat. The thick fries are served with dipping portions of homemade mayonnaise and tomato relish, a fresh alternative from ketchup.

In the tradition of 1950s diners, Executive ordered a shake to wash down the burgers, and again found it to be on the expensive side at $8. While the taste of the homemade strawberry ice cream in the shake was amazingly fresh, the drink could have used extra milk to make it more of a milkshake, and less of a fruit smoothie.

Frosty Palace isn’t easy on the pocket, but for those with the cash to burn it’s worth a visit, serving up a burger the 1950s would be proud of.

0 comments
0 FacebookTwitterPinterestEmail
Comment

Vroom a la Libanais

by Thomas Schellen
written by Thomas Schellen

The concept of fantasy cars is well established on the wide avenues of automotive fiction. Think Transformers. And it has been exceedingly difficult to get these and other octane fairy tales out of my mind this summer because of a prospective car maker called W Motors, author of a new and absolutely presumptuous automotive project, the Lycan hyper car.

Although this $3.4 million car won’t have capacities to shape-shift into a super-robot (it won’t even be able to fly or swim), images of impossible dream cars became inescapable the more I was being told of the vehicle by its inventor and eventual manufacturer, Lebanese entrepreneur Ralph Debbas.

It is perfectly healthy for an entrepreneur to have a strong sense of self-worth and dreaming up a new supercar seems to have come naturally to Debbas, who graduated a couple of years ago from Coventry University in the United Kingdom with a masters degree in automotive design, and whose ambitions loom larger than his entrepreneurial credits. This perhaps excessive confidence plays out in high gear as Debbas claims that what he is creating is a whole line of Arab supercars, emphasis on ‘Arab’.   

However, the Lycan (like most things in W Motors, the name is wolf-themed) will come with German engineering, Austro-Canadian workmanship and Italy-based assemblage plus a hologram derived from a Californian inventor’s work. All very respectable as far as partnerships and the expertise involved, but it sounds more like a mongrel of multi-nationality than a pure breed racer of Arab pedigree.

What makes the car Arab, Debbas counters, is that he did the design and that the company is registered in Lebanon; plus, W Motors will open shop in downtown Dubai later this year. “The showroom and the design center and the virtual assembly line, everything is being done in Dubai.”

The virtual assembly line, however, is not to be confused with the car’s real assembly at a plant in Torino, Italy. The Dubai virtual reality will happen in an office tower where car buyers can peep, high-tech of course, while their vehicles are put together. Such reasoning still seems thin. There is a more important issue, however, than whether this hyper car’s links to Beirut and Dubai are enough to earn the brand the status of first Arab supercar.  

All successful car brands have identities. These identities of manufacturers and whole national automotive industries are tied to their accomplishments in engineering, efficiency, safety, convenience, affordability and so forth. The question then is if this car will make a contribution to the region’s automotive future, and technically will prove to be more than a marketing label and anachronism in a time of global manufacturing cultures. As Debbas admits, the Lycan’s highly-touted hologram, for example, won’t provide positive tech impulses for the mass market.

Debbas put the car’s price point at stratospheric $3.4 million (in Lebanon it would be $5.6 million, after taxes) in a calculated move to attract attention and avoid having to compete with established names in the ultra-high-luxury niche. No other maker asks that much, on top of which W Motors has copied a page from the playbook of off-plan real estate developers and requests buyers put 30 percent down before the assembly crew even starts on the car.

Despite all this playing with pricing to create a market for the car, Debbas naturally says that the exorbitant cost will be fully justified by the car’s engineering and extras, not found in the average Aston Martin One-77 or Bugatti Veyron, such as a door mechanism that costs a million dollars to develop and not one but two holograms (a “W” on the hood pops up before the car is put in motion).

While Debbas downplays some of the conspicuous things about the car — he says the gold armatures are only a very small cost factor and the 1.5 millimeter diamonds in the LED lights will create but a “beautiful glow” and practically no bling at all — it remains the designer’s secret if the car is going to provide value for money even by the insular standards of invidious consumption. 

Aside from leaving questions unanswered that regard his own capital — and how he got up to $15 million in capital financed from family and friends without submitting to the pesky scrutiny of a bank or private equity capitalist — Debbas simply projects promise in response to whatever queries arise. But while waiting for W Motors to deliver its product to market, there is a distinct chance that the characteristics of this “Arab supercar” will be captured by the question: “What goes bling, vroom, vroom, bling, bling, bling?” Answer: A supercar à la Libanaise.

 

THOMAS SCHELLEN is Executive’s MENA editor

0 comments
0 FacebookTwitterPinterestEmail
Society

Many plates at the table

by Nabila Rahhal
written by Nabila Rahhal

When your meal is served at a wedding or when you grab a canapé at a cocktail reception, you do not often stop to think of what happened behind the scenes to put that food on your fork. Starting the day before the event, the kitchen is abuzz with chefs over their stoves, assistant chefs cutting and arranging food on plates and waiters lining up those plates on trays to be served to guests. Behind the kitchen staff are the various management teams working on the day-to-day operations and ensuring all is running smoothly. With almost 100 catering companies registered in the yellow pages, catering is big business in Lebanon.

Though there are no official figures regarding the industry’s total revenues, some experienced caterers estimate its total value at more than $1 billion annually. “When one considers how many weddings take place in the summer,” says Wael Lazani of Jai Catering, “and multiply it with how many guests are in each and knowing the minimum charge for catering is around $60 per person, then one can begin to get an idea of how big the catering business is in Lebanon”. This also does not count all the other events requiring catering, from store openings, company lunches to home dinners, as well as industrial and institutional catering for company cafeterias. 

The catering business also generates a significant number of jobs as, depending on their size, catering companies can employ between five and 150 people, with additional staff, mainly waiters, hired during high seasons. “A high-end catering company usually handles between four to eight large events per week [meaning between 500 and 2,000 guests] and a few smaller ones such as home catering, cocktails or corporate meetings,” says Roger Zankoun, general manager of operations at Dream Holding, which owns Sofil Catering. Such an operation requires, according to Zankoun, 25 chefs and 20 permanent operations and logistics staff, with extra waiters hired when necessary.

Medi Resto, which Fleur De Lys catering is a part of, has 150 employees divided between administration, the sales team and those who handle and prepare the food, according to Michel Ferneini, chairman of Fleur De Lys Catering. Fleur De Lys had already catered 40 weddings between May and July this year. For his part, Hisham Saad, chief executive of Le Blanc Catering, employs 62 people and handles an average of 12 events per week during the high season.

Competitive cook-off

Catering is not without its challenges, the biggest being competition as companies vie for clients, and sometimes corners get cut. Zankoun speaks of chefs and head waiters who leave the companies they were with to set up their own establishments, sometimes in under-equipped kitchens.

“When a chef with a kitchen designed to cook for around 50 people takes on an event of 200 people to make more money and serve more clients, thereby staying in the competition, he will not be able to maintain control of his output and the food’s hygiene might be sacrificed,” says Zankoun. Indeed, hostess Salma Mrad speaks of the time when, as a sign of support, she ordered salmon fillet from a chef who had recently started his own business. The fish she received stunk from afar. “I had planned it to be the main dish at the dinner I was hosting but when I smelled it, I knew there was no way I could serve it! I learned my lesson though and now only order from established caterers.”

Unlike restaurants in Lebanon, who get their operation licenses from the Ministry of Tourism, catering company licenses in Beirut fall under the jurisdiction of the office of the governor of Beirut and under the Classified  Institutions Department. Inspectors are theoretically being sent to the kitchens of catering companies, but some caterers see this process as sporadic and are asking for more governmental oversight to separate the professional and hygienic companies from the ones who might be skimping on safety standards. However, all catering companies interviewed cited their health and safety certifications from Hazard Analysis and Critical Control Points (HACCP), an international management system regarding food safety, to International Standards Organization (ISO) 22000, a food quality control system.

Food poisoning, however, can and does occur, especially at outdoor weddings where heat and humidity make it easy for food to go bad. At a buffet style wedding catered at an outdoor venue on a hill overlooking Jounieh in July 2009, a third of guests reported cases of food poisoning, some of which led to hospitalization. One of the guests humorously recalls being in the hospital emergency room and seeing people she recognized from the wedding walk in with expressions of pain on their faces.

Precautions some catering companies take to avoid such scenarios include displaying the food a maximum of 15 minutes before it is served and removing it an hour after the guests have visited the buffet. While this means you might not get second helpings, the risk of food spoiling is avoided.

Such precautions are costly. According to signature chef and caterer Hussein Hadid, outdoor weddings are more expensive due to the added cost of the cooled transport trucks and “stoves on the go”, as some of the food is prepared in the venue itself to guarantee freshness.

Michel Khalifat, general manager of Faqra Catering, believes that all measures should be taken in such cases to maintain quality but says a challenge they face is clients who want the same quality of food without the added cost. With basic costs rising (the foods and beverages supplies’ inflation index has risen 7.6 percent from last May according to the Consumer Price Index Report) such expensive extra measures put the squeeze on catering firms. Dream Holding’s Zankoun says they would rather refuse some outdoor weddings, especially those where the venues charge an operations percentage from them, as the cost of their investment is sometimes more than the return.

Hadid says that when wedding caterers stay competitive by lowering charges it necessarily means the quality of their food will suffer as they use the cheaper supplies. But, says Hadid, many couples care more about appearances than food, and so would be willing to cut corners on the catering and spend more on entertainment or display.

“No one will remember what the food was like at my wedding in years to come, but they will remember the superstar I am bringing to sing,” says Hala Baydoun, a bride-to-be planning her wedding for this September. “All I care about, regarding food at my wedding, is that no one gets poisoned.”

The price of a moving restaurant

Catering’s high season is the summer which, aside from the increased weddings, also sees a higher number of luncheons, with many people hosting company in their mountain homes. “Last year saw a trend of inviting out to restaurants rather than hosting at home, but this summer there is a high demand on home catering again,” says Khalifat. Most caterers agree hosting at home costs more than inviting guests to a restaurant (prices start from 65$, according to caterers interviewed). “At home, we are bringing the restaurant to the client which understandably costs more,” says Wissam Zeidan, managing partner of Socrates Catering. “We can even bring chefs for live cooking stations.”

During the winter, caterers generally rely on corporate and charity events, which increase around holidays. Some explore other catering avenues: Faqra Catering, for example, does industrial catering for schools and hospitals which Khalifat says helps them make up for the winter when less weddings and house parties take place.

The political events this summer seem to have affected the catering industry, with Zankoun reporting some 15 weddings being canceled and quoting planners who have told him they have had 50 weddings canceled. Catering companies are also complaining of weddings having shorter guest lists, due to less expats and Arab tourists coming to the country. The government-mandated wage increase has added to caterers’ costs, while Ferneini, of Fleur De Lys Catering, also talks about losing his talents to careers abroad, and indeed Hadid and Zankoun both speak about the difficulty of finding qualified staff and service people in Lebanon. “In a competitive business such as ours, one has to have presentable service people who know how to talk to and attract clients, and it is a challenge to find qualified people or even to train them here,” says Hadid.

While the catering industry undoubtedly faces challenges, by its nature it still retains its lucrative potential and massive market — among the oldest of human customs is to gather around food, and as long as this stays the case, there will always be a business to feed them.

0 comments
0 FacebookTwitterPinterestEmail