Real Estate

More Bling on the beach

by Jeff Neumann
written by Jeff Neumann

To the more timid businessman, breaking ground on another exclusive beach club in Lebanon might not seem like a sound investment at the moment — given this summer’s grim tourism receipts and the grimmer questions over the civil war next door and how long that will go on. But the doom has done little to gloom the enthusiasm of another breed of developers who see so much long-term profit potential on Lebanon’s beaches that they won’t be deterred by a bit of war.

Among the new investment destinations is Nikki Beach, a project for a 46-villa seaside resort with hotel and club south of Beirut that is being developed as collaboration between local property company Zardman and Nikki Beach EMEA Hotels and Resorts, a unit of the Miami-based brand that specializes in glamour hospitality.

Forget your troubles in luxury
The chief underlying asset for the project is a 42,000-square meter seafront property in Damour and Zardman touts the location and accessibility from Beirut as selling points sure to attract investors when sales open later this month.

According to the developer, the project will entail a boutique hotel on the property, as well as amenities that five-star resort patrons would expect: spas, multiple swimming pools, restaurants, water sports, a fitness center and more.

However the resort's biggest asset, according to general manager of Zardman, Makram Zard, is its very limited capacity. “We are being very exclusive with sales,” he says, adding that, “If a client comes in with no background or familiarity with us we simply will not give them information. You will not see billboards advertising the sale [of our villas], we know who we want to attract.”

But another key selling point will be the Nikki Beach moniker aiming to brand the resort with global glitterati appeal. “We will operate the hotel and Zardman will sell villas. We will focus on quality of service and invest heavily in staff training,” Jihad Khoury, the chief executive of Nikki Beach EMEA Hotels and Resorts, tells Executive.

Set for delivery in 2014, the resort would be the third Nikki Beach in the Middle East and North Africa region, after resorts that are scheduled to open (with different partners) in Qatar this year and Cyprus in 2013. Plans for expansion of the Nikki Beach brand in the Middle East date back a few more years but did not pan out either in Lebanon or in Aqaba, Jordan.

Lebanon's 225-kilometers long coastline is dotted with many clubs and resorts in every price range and type, from the low-key bohemian to the techno-blasting beach party. Offering a glimpse on what Nikki Beach will use as lure for its clientele in Lebanon, the group eagerly flashes that it was once called the “Sexiest Place on Earth" in a British newspaper and voted the “World's #1 Sexiest Beach Bar” by international media outlets.

“When we met with the people from Nikki Beach we clicked right away,” says Zard. “We had the same vision for the project and knew this is something we would both benefit from.” Most of Zardman’s staff are in their 20s and early 30s — "a very young company,” according to Zard — and are tapped into what the mostly young and affluent clientele that Nikki Beach attracts worldwide are looking for in a beach destination.

Villas will start at around $320,000 and reach up to $600,000, and are offered in three sizes: 105, 125 and 155 square meters. Payment plans for the villas start at 15 percent down with the remaining balance to be paid over a four-year period. For the overall design, the Beirut office of US-based Soma Architects was tapped to lay out the villas, with Gatserelia Nawar & Associates handling the interiors. 

A sunny (and sandy) future
The Damour project will be Zardman’s first resort and while eager to disclose the price range for the villas the company would not disclose the cost of the entire planned development or the value of the assets it brings to the beach. Zardman holds a 27-year renewable lease on the land but would divulge in an interview with Executive only that the deed is held by its founder, and former Lebanese Canadian Bank chairman, Georges Zard Abou Jaoude.

According to Khoury, Nikki Beach EMEA Hotels and Resorts came aboard the project in 2011 after all licenses and planning for building structures had been completed. His rationale for getting involved is that Lebanon will remain a regional reference in hospitality and high-level entertainment and Nikki Beach would be seen as missing out if it did not open a branded resort here.

Khoury radiates confidence that the new project will be a winner even as the current wind is blowing tourism straight in the face. “It is an act of faith and as Lebanese, we have to have courage. The good years will more than make up for the bad ones," he says.

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Rebuilding Syria after revolution

by Jihad Yazigi
written by Jihad Yazigi

Although now is apparently the time for destruction in Syria, hopefully, the time for reconstruction is not far off.

While it is difficult to estimate the actual cost of the damage inflicted to the country’s physical infrastructure by more than 16 months of a popular uprising — most of the destruction having actually occurred after the summer of 2011 — the Syrian National Council (SNC), which is considered by Western nations as their main interlocutor in the opposition, recently estimated that Syria would need some $12 billion in immediate financial support in the first six months after a potential fall of the regime.

While little of Syria’s large industrial concerns — such as power plants and refineries — have been hit, the urban landscape of many of the country’s cities is littered with flattened buildings, destroyed water, electricity and phone networks and crumbled roads and bridges. The cities of Homs — the country’s third-largest city — and Deir-ez-Zor have been particularly devastated, but so too have been dozens of smaller cities and towns across the country, in additional to the suburbs of Damascus and Aleppo. All-in-all, large parts of Syria will need to be entirely rebuilt.

It’s difficult to estimate what the $12 billion figure encompasses but if it were to cover only the first six months, this amount would exclude the cost of rebuilding most of the hard infrastructure, as this would obviously take much more than six months to carry out — in other words the total budget for rebuilding the country is likely to run much higher. In all cases, the question of how to source the money remains open.

Spokespersons from the SNC have said that they will seek support from “friends.” Knowing the financial turmoil the European Union and the United States are going through, they probably have in mind the deep-pocketed Gulf states, in particular Saudi Arabia and Qatar, which have been very active in supporting the opposition. Another issue to have in mind is the handling of any large disbursement of money. Indeed, contrary, for instance, to Libya or Iraq, which have vast reserves of oil and gas and therefore the means to reimburse almost any amount of debt they incur, Syrians will need to be very careful to efficiently use the money they will receive. Indeed, no one will lend money to Syria for free, and aside from the political cost that will come with such help there is also a financial cost, i.e. a debt burden that will be supported by the population for years if not decades to come.

Will any transitional government in Syria have the means to manage and spend $12 billion in financial support, let alone that it will have to be spent in only six months? From a political perspective, can a non-elected body — because any transitional authority is unlikely to be elected — legitimately spend such a large amount of money, an amount that will burden Syrians for years to come? How about the longer term and the larger amounts of money that will be associated with any reconstruction program that a future Syrian government will be in charge of? Can Syrians avoid the missteps and massive corruption that have come to be associated with the Iraqi reconstruction program?

The current and previous Syrian governments have shown a remarkable inability to handle large projects and to manage efficiently investments that carry significant costs. Indeed, very few of the large infrastructure projects announced by the Syrian authorities in the last two decades have taken off because of numerous bureaucratic and political constraints; and those that have been carried out have faced endless delays, cost overruns and suspicions of corruption.  It would be naïve to think that these obstacles will be bypassed easily. From what the opposition has shown in terms of (lack of) knowhow and capacity, and from what we know from the Iraqi experience, there is serious ground to worry.

Because of its political implications and future costs, any reconstruction program for Syria will have to make clear how it will be funded and repaid and what measures will be taken to limit corruption as much as possible; more importantly, however, it must be sanctioned by legitimate representatives of the people if it is to embody a meaningful new beginning for the country.

 

JIHAD YAZIGI is editor-in-chief of The Syrian Report

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Economics & Policy

Oil and gas as a catalog for peace

by Roudi Baroudi
written by Roudi Baroudi

The science is still in progress, but it now seems clear that the Eastern Mediterranean Basin holds oil and gas deposits that are truly mammoth. While the precise amount and locations of the resources in question are far from assured, the current estimates suggest there is likely to be some $170 billion worth of oil and almost $2 trillion worth of gas.

For Lebanon, simply achieving energy self-sufficiency would be an unprecedented game-changer, slashing costs for households and businesses, freeing up the funds for improved social welfare and enabling the government to service its gargantuan debts. Now consider that even under the most conservative estimates of the deposits and of Lebanon’s share thereof, developing the resources in question would enable the country to garner billions in annual export revenues for the next century or so.

Odds are that each of the principal entrants in this bonanza — Cyprus, Israel, Lebanon, Palestine, Syria, and the Turkish Republic of Northern Cyprus (TRNC) — also stand to reap dramatic fiscal benefits. For some, at least, it would be no exaggeration to describe the income from oil and/or gas exports as a form of national salvation.

Yes, there is that much at stake. The gas alone may be worth more than the annual gross domestic product of Canada, Russia, or India.

The problem, however, is the relations within and between these players present severe obstacles to the successful extraction, sale and delivery of whatever deposits there are down there. Turkey and Cyprus do not have diplomatic relations; Lebanon and Syria are still at war with Israel; Israel at least partially occupies parts of Palestine, Lebanon and Syria; Turkey has not officially defined their Exclusive Economic Zone (EEZ), and although Israel has made a claim to this effect, it does not have legal legitimacy because Israel is not signatory to the United Nations Convention on the Law of the Sea. Syria is also preoccupied with what is for all intents and purposes a civil war that threatens to bring down the government; Lebanon is so badly divided internally that civil war is a perennial threat; and for good measure Palestine and the TRNC are not even fully fledged nation-states.

Who gets the rights?

The combined implications of these ‘inconvenient’ facts are that getting three or more of the various claimants to discuss — let alone agree on — anything is bound to be exceedingly difficult. If the result of this were simply a stalemate, it would be relatively easy to roll one’s eyes, express regret at the time being lost, and wait for the proverbial air to clear. But a stalemate is not how the situation is shaping up. Israel and Cyprus have already reached a bilateral agreement that could prejudice the rights of both Lebanon — which has vowed to defend its interests — and the TRNC, which is strongly backed by Turkey. The Turks and the Israelis have repeatedly traded harsh words over this issue, and their air forces have reportedly played cat-and-mouse off the coast of the TRNC, even if only a few years ago they were holding joint military operations. Now Israel’s navy has officially sought almost $1 billion to acquire new warships and sophisticated missile-defense systems.

No winner in war

There may be times when going to war seems necessary, but the gathering crisis described above is clearly not one of them. In fact, for each of the countries involved, the surest way to protect the national interest is to seek a compromise, however imperfect and/or temporary, that allows them to start collecting revenues in the shortest time possible. Even for Israel, the most powerful of the direct actors in military terms, defending the sensitive equipment required to exploit a disputed field might prove impossible, or too costly to be justified.

The potential for conflict here is clear, and if war does break out no one can claim they did not see it coming. The policies being followed by some of the major players may make the outcome all too predictable and even those not engaged in provocative actions or incendiary rhetoric will share some of the blame for not having done enough to stave off the impending — though not yet inevitable — clash(es). For both weak and strong alike, a peaceful solution is the optimal solution. The absence of a viable deal will be a deterrent to investment and hinder the potential economic benefits for all parties. Prospective companies will impose higher costs for drilling and seek more favorable contract terms when operating in potential conflict zones.

There can be no real victors in such a conflict, only various degrees of losers. If cooler heads prevail with dialogue and diplomacy, however, there can be winners all around the Eastern Mediterranean. A negotiated solution will require yeoman efforts and (almost certainly) outside mediation, but the rewards will be more than worth it.

Provided all sides refrain from gestures or acts that might inflame the situation, there is plenty of scope to design and implement an agreement. The first priority, though, has to be a moratorium on unilateral acts that threaten to scuttle negotiations before they begin. Lebanon and Israel, for instance, share the obvious option of initially restricting exploration and extraction to areas that are in no way under dispute. Cyprus and the TRNC would have a harder time on this score, but the same goal — conflict prevention — could be accomplished by mutually agreed observers, escrow accounts, and/or other mechanisms to ensure equal rights, all with the understanding that economic agreements would not prejudice the terms of any eventual political reconciliation between the two sides, especially during the Cypriot six-months presidency of the European Union, which started in July.

Likewise, the logistical hurdles of conducting negotiations between countries that have no ties with one another are imposing but not impossible. Proximity talks or other forms of indirect discussions would allow the claimants to protect their interests without sacrificing principle or breaking ranks. Third parties like the EU or the UN could act as guarantors to inspire confidence, and the International Court of Justice could adjudicate disputes that were not resolved by arbitration.

For a part of the world so accustomed to wars both hot and cold, there is a chance just now to move away from — if not entirely outside of — the cycle of enmity. Although needs are greater for some than for others, all those in question stand to reap huge economic, social and political benefits by exchanging crippling energy costs for lucrative energy revenues. First, though, their respective governments have to get their priorities in order by asking one simple question: is it more important to provide for one’s own or to deprive one’s neighbors? The answer being obvious — it is time to rein in the rabble rousers and send out the diplomats.

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Economics & Policy

Women and the Arab world’s glass ceiling

by Karim Sabbagh
written by Karim Sabbagh

Based on figures from the International Labor Organization (ILO), at least 90 million women in the Middle East and North Africa are today part of what has been called the “Third Billion”, which is the approximate number of women worldwide who will be claiming their place as employees, producers and entrepreneurs in the global economy by 2030.

Until now, these women have been excluded from economic empowerment by either lack of opportunities or insufficient preparedness. Projected to number around 865 million by 2020, most of these women live in emerging and developing nations. The impact of this geographically dispersed group will be so large — equivalent to that of the billion-plus populations of China and India — that they have been dubbed the Third Billion.

The Third Billion was calculated by combining the forecast for “not prepared” and/or “not enabled” women globally between the ages of 20 and 65 in 2020. “Prepared” refers to having received a sufficient education, usually secondary school. Opportunities for basic education and literacy are prerequisites to women’s economic empowerment. “Enabled” refers to having sufficient social and political support to engage with the labor market. This support spans family, logistical, legal, and financial parameters.

The MENA's missing share

It is not surprising that more than 10 percent, or about double of the region’s share in world population, of the Third Billion live in the Middle East and North Africa (MENA) region. The World Bank places the female labor force participation rate in the MENA at just 26 percent, the lowest of any region globally. Although women have achieved equal, or better, education levels compared to men in most MENA countries, they are not making similar gains at work.

In entrepreneurship, too, women have not caught up. The World Bank estimates that women own just 20 percent of MENA companies, compared to 32 percent in countries from the Organization for Economic Cooperation and Development (OECD), and 39 percent percent in Latin America and the Caribbean.

Women must have the freedom to participate in the workforce and ultimately advance to senior positions to reach their economic potential. They should have the same opportunities as men to start their own companies. As long as women have limited economic opportunities, Middle Eastern countries will be unable to join the modern global economy.

The World Bank argues if rates of female participation in the labor force increased to levels predicted by women’s education, age, and fertility, average household earnings would increase by as much as 25 percent. For many families, that is the ticket to the middle class. If female participation rates had been at these predicted levels, per capita gross domestic product growth rates might have been up to 35 percent higher, according to the World Bank.

Entrenched gender roles

The environment in Egypt, the Middle East’s most populous country, is fluid. Women organized in a remarkable way during and after the 2011 revolution. They have since been vocal in demanding new reforms and have sought to defend previous social and economic gains. While the near-term in Egypt is hard to predict, what is clear is that Egyptian women are underrepresented in the workforce. The female participation rate was just 24 percent in 2010. Egyptian women cluster in a few sectors: agriculture, education, public administration, health and social work.

Some governments are attempting to redress the economic and workplace balance to assist female participation. Saudi Arabia is trying to integrate women into the workforce at a pace that balances economic needs with social norms. Legislation on workplace requirements is evolving to allow women and men in the same facility. Oftentimes, however, the legacies of old laws and traditions prevent female participation. There is a strong feeling within the private sector that it can be simpler for companies to retain all-male workforces than to pay for buildings that accommodate mixed gender staffs or to tackle potential resistance to female workers.

As a result, although women constitute 57 percent of Saudi Arabia’s university graduates, the participation rate of female nationals was just 12 percent in 2009. Women in the workforce often congregate in the public sector, despite government encouragement of a more vibrant, inclusive private sector. Women tend to focus on education and health because of gender perceptions and the lack of career guidance.

While each country has unique challenges, several approaches can apply regionally. To this end, Booz & Company has created the Third Billion Index, which ranks 128 developing and developing countries. The index highlights how countries have fostered economic opportunities for women, and where they can improve. To make the index relevant for ranked countries, we offer concrete recommendations. For MENA countries in particular, we see great potential in following these recommendations.

How to advance women

The first recommendation is for government-private sector partnerships to draw women into the workforce. Experience demonstrates that government mandates alone will not be effective. Forcing women into work without the necessary skills and workplace policies will damage productivity and could create an employer backlash.

At the same time, a clear official signal that female workforce integration is a priority can catalyze corporate commitment and investment. Together, government and enterprises can reinforce each other’s desire to promote female inclusion.

Second, governments and companies that employ women should establish mentoring programs. Men already benefit from informal ties, the “old boys’ network.” Mentoring programs can connect young women entering the workforce with successful women who have already broken in. We should not underestimate the power that role models, along with advice and encouragement from career women, can give to younger women entering the male-dominated workplace.

An example of such mentoring comes from the Prince Sultan Bin Abdul Aziz Fund for Women's Development. Over 1,300 women have gone through the fund’s various training programs. Similarly, the fund has provided finance to 40 female entrepreneurs. The result of these initiatives is that women have gone on to start businesses and create more than 200 jobs. Women’s business networks can also fill an important information gap on the economic status, education needs, and social roles of women. Governments, the private sector, and not-for-profits should collect this evidence-based data collaboratively. They can pool feedback to design high-impact programs.

In the United Arab Emirates, the Khalifa Fund in Abu Dhabi, Mohammed Bin Rashid Establishment for Young Business Leaders in Dubai, and Sharjah Tatweer Forum are providing such information — although their focus is not solely on women. Such organizations need to be better staffed and funded, have wider geographic coverage, and should network to share knowledge.

Third, governments and companies should examine success stories and innovative methods of bringing women into the workforce.

One example is Bupa Arabia. The company, a provider of health insurance products and services in Saudi Arabia, has a 40 percent female staff after a decade’s effort. The health insurance provider broke with stereotypes and partnered with the government to train women in job skills. By employing women in all departments — finance, human resources, information technology, operations, regulatory affairs and sales — the firm dispensed with the notion of “women’s work” that elsewhere confines them to supporting roles. Indeed, the company now has an all-female telesales team. This is good business — female customers in the healthcare market prefer female sales agents.

In Kuwait, Lebanon, Morocco, and the UAE, there is now a corporate funded program called the Arab Women’s Entrepreneurship Project. The project is run by AMIDEAST, a US educational institute. Funded by the Citi Foundation and leveraging the Cisco Entrepreneur Institute’s training program, the Arab Women’s Entrepreneurship Project will provide education and mentoring to 80 women entrepreneurs from disadvantaged backgrounds.

Fourth, companies and governments should turn social restrictions into opportunities for commerce and innovation. For example, Ataalam in Saudi Arabia has created a women’s virtual learning environment to allow women to study from home. The company is a female-owned private venture that arose from a Saudi government-sponsored innovation incubator named “BADIR.”

Combining these approaches can have an immediate impact on employment and skills building. Today, hard-working, high-profile women are chipping away at the “cement ceiling” and making it possible for others to do the same. Similarly, multi-sector cooperation will result in further success stories and role models that can alter mindsets and inspire young women. With more women at work, the Middle East can achieve its economic potential.

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Lebanon’s terrible first impression

by Zak Brophy
written by Zak Brophy

The odds are now stacked in favor of there being a treasure trove of hydrocarbons locked under Lebanon’s seabed. Nobody can be certain until the first field has successfully been tapped but it is certainly looking promising. So when the government held the Lebanon International Petroleum Exploration Forum & Exhibition in early July it is no surprise that industry players from far and wide were swarming like bees around the proverbial honey pot.

Representatives from the big guns to the small fry came to Beirut to sniff out what the government had on offer and they had two reasons to be interested. The first is the fact that Lebanon is sitting on the same geographical structures that have already come up trumps for Israel and Cyprus.

Houston-based Nobel Energy has been operating in Israeli waters since 1998 but in recent years has had two massive finds. In 2009 they successfully drilled a natural gas field of 237 billion cubic meters (BCM) and then in 2010 a 453 BCM field was tapped. With the subsequent discovery of a 226 BCM field in Cypriot waters the international oil companies (IOCs) must be salivating at the prospect of what else could be down there. 

This needs to be considered in light of the fact that the 2010 United States Geological Survey predicted that the Levant Basin Province — a geological formation in the Eastern Mediterranean extending from Syria to the Sinai — contains 1.7 billion barrels of recoverable oil and 3.5 trillion cubic meters of recoverable gas.

The second carrot dangling in the face of the IOCs is the detailed and comprehensive library of seismic data within the 20,000 square kilometers of deep water in Lebanon’s Exclusive Economic Zone (EEZ), which has been collected by the companies Geco-Prakla, Spectrum Geo and Petroleum Geo-Services (PGS).

The prospective companies’ geological experts use this data to assess if there is actually anything down there and how accessible they anticipate it would be to drill and extract. The findings are promising and suggest a number of unexplored potential hydrocarbon hotspots including the Syrian Arc, the Levant Basin Province and the Levant Margin.

So with an attentive audience of bigwigs in town it was upon the government, and more specifically, the Ministry of Energy and Water (MoEW), to show that it finally has some impetus and momentum to push the sector forward.

“Triggered by the success in Israel and Cyprus we cannot afford to idly sit by,” remarked Fadi Nader, advisor to the energy minister.

The MoEW, however, tripped at the first step. The man at the head of the ministry, Gebran Bassil, had announced triumphantly in the first week of January that the Petroleum Administration (PA) would be named within a month, as the decree approving the bylaws for body had been passed. Come late July and there is still no PA and without a PA the whole progress of the sector is stuck in stasis, as none of the other areas of the Offshore Petroleum Resources Law from August 2010 can be enacted.

The hundreds of delegates were told, of course, that the naming of the PA was just weeks away. However, many of the attendees I spoke to were not exactly filled with confidence, as Lebanon’s reputation for inter-party and inter-sectarian squabbling over who sits where at which table precedes the country.

What was more, the Ministry of Finance did a rather good job of revealing pretty much nothing about the kind of tax regime prospective companies could expect to be subject to — discussions regarding income tax, value added tax, built property tax, stamp and customs duties were at best vague, while the entire presentation had that distinct vacuousness many associate with “a waste of time.”

The ministry representative who had the unenviable job of filling the airtime told the expectant crowd, “in any case the taxation system in the whole of Lebanon is very soon going to be reviewed.” Which is funny because the new budget — the first since 2005 — passed by the cabinet just weeks later, was devoid of anything that resembled a review of the tax system.

Alas, the government regrettably missed a trick; the forum intended to convince industry players to partake in Lebanon’s embryotic energy sector but instead it gave them every reason they needed to question the wisdom of doing just that.

 

ZAK BROPHY is Executive’s economics and policy editor

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Simple measures to end Lebanon’s energy crisis

by Paul Cochrane
written by Paul Cochrane

Lebanon is going through one of its worst energy shortages in years. Even the most electrified part of the country, central Beirut, is experiencing more than the usually standard three-hour outages. Tires have been burnt in protest and people’s tempers are rising along with the mercury.

While wrangling at Électricité du Liban (EDL) over contract workers has caused interruptions of late and the state electricity provider has undoubted culpability in the chronic shortages, the rise in energy demand is also to blame. Last year, EDL produced the same amount of electricity as now — some 1,600 megawatts (MW) — while demand rose to over 2,300 MW. And what has caused more frequent and longer blackouts this summer is not the tourism season, weak as it is, but a surge in the use of high energy usage appliances.

One of the biggest energy guzzlers are widescreen LCD televisions, which have become so affordable to be almost ubiquitous, glaring away in so many homes, offices, restaurants and stores. For instance, a 40-inch LCD TV uses 240 watts per hour, and a 50-inch screen 400 watts, compared to 42 watts for a 28-inch LCD, and 87 watts for a conventional TV of the same size. While such wall-dominating screens are a drain on energy, watt usage rises again when coupled with air conditioning (A/C) units, which have risen in popularity in Lebanon as in much of the world, with global sales up 13 percent in 2011 on 2010. There are no accurate local figures, but in neighboring Gulf countries A/C accounts for a whopping 70 percent of annual peak electricity consumption and is expected to triple by 2030 to require the equivalent of 1.5 million barrels of oil per day to power.

In Beirut demand for A/C is driven in large part by what is called the “urban heat island effect,” where buildings retain heat and warm up the surroundings, which then increases humidity. On average, A/C units use 900 watts per hour, although more energy efficient ones use around 800 watts when initially turned on, then consumption drops to 600 watts and can drop to less than 80 watts if set at a high temperature. By comparison, a ceiling fan, at full power, uses just 75 watts per hour.

So what to do about this surge in energy demand? Widescreen TVs can of course be turned off or watched selectively, but turning off A/C in the height of summer is not an option for most, especially if there actually is electricity. Pleas for people to turn off A/Cs and use fans instead will no doubt fall on deaf ears — even though fans can make the temperature feel four to eight degrees cooler — as once people have made the switch to A/C it is hard to go back. But more efficient usage of A/C is possible, as was demonstrated in Japan a few years ago when the prime minister, expecting energy demand to spike in the summer months as A/C usage rose, suggested workers don more practical summer outfits, of short sleeved shirts over suits and ties, and set A/C units at 26 to 28 degrees instead of the temperature of a warmish spring day of 16 to 18 degrees. Although it is hard to judge the success of the initiative, according to one government survey, 43 percent of employees did lighten up on the office A/C. Another technique called district cooling, using available sea water, could also offer a cheap and affordable option to knock off as much as 30 percent of consumption during peak hours.

Lebanon, however, is not renowned for successful collective efforts ‘for the good of all’. Even if the president, prime minister and speaker of the house all gave a joint press conference uniformly dressed in short sleeved shirts, shorts and sandals with a message to encourage people to turn off the widescreen and set their A/Cs at 28 degrees, it would be unlikely that people would follow suit.

But the private sector could be encouraged to adopt a summer uniform and lower the A/Cs. One, it would reduce overheads through lower electricity bills; two, companies could tout such a move as part of a “going green” policy of corporate social responsibility; and three, staff will be more relaxed in the office. Even a partial reduction in energy use would help to keep the lights, fans and yes, even A/Cs on for just a bit longer in what is going to be a hot and humid few months ahead.

PAUL COCHRANE is the Middle East correspondent for International News Services

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A dwindling number of options

by Jihad Yazigi
written by Jihad Yazigi

Press reports that the Syrian government is printing money in Russia to pay civil servants salaries and to close its budget deficit have raised serious concerns.

Two issues — one political and the other financial — are at stake.

The decision to print Syrian bank notes in Russia has been known for some time, as the Minister of Finance, Mohammad Jleilati, announced at the end of May that his government was close to finalizing discussions with the Russian authorities for that purpose. It follows a ban imposed last fall by the European Union on printing Syrian bank notes; two EU members, Austria and Belgium, were among the countries printing Syrian currencies.

However, by going to Moscow, the Syrian authorities have only confirmed an increased dependency towards their Russian counterparts, with all the political consequences that this new state of affairs may entail. For months now, the consecutive rounds of sanctions imposed by the EU, the United States, the Arab League and Turkey have squeezed the Syrian government’s room to maneuver and increased reliance on Russia. Last December, for instance, the Central Bank of Syria announced that it had opened correspondent accounts with three Russian banks — VTB, VEB and Gazprombank — in a bid to avert new sanctions on its foreign assets by the European Union, which were eventually imposed in February.

Since then, there has been speculation that much of the country’s foreign reserves had been moved to Moscow, though a lack of transparency makes it difficult to confirm the location of these assets or their size (estimated at around $17 billion prior to the beginning of the uprising in March 2011). Other indications of this growing dependency include negotiations to have Syria join the existing Customs Union that consists of Russia, Belarus and Kazakhstan, or the recent series of bilateral agreements in sectors as varied as petroleum, electricity and manufacturing.

As international calls for action to stop the bloodshed in Syria grow, Russia is likely to hold an increasing number of cards in its hand to pressure Damascus. From a financial and monetary point of view, however, the main issue of concern is not where Syria prints its currency but for what purpose. Indeed, while the story initially published by Reuters quoted Syrian bankers saying that the newly printed money was meant to finance the government’s deficit, the governor of the Syrian Central Bank strongly denied it, saying that the new bank notes would replace worn out bills, an operation the central bank “has been regularly doing since it was established just like every central bank around the world.” The government has also denied it was having any difficulties financing salaries and other payables; Jleilati recently said that the 2012 budget deficit was forecast at a reasonable 6 to 7 percent of gross domestic product, in line with expectations. The Minister of Finance has an obvious interest in downplaying the difficulties his government is facing, but while there is little doubt that the treasury is increasingly strained, it is difficult to claim that a collapse is imminent.

It will not be easy to identify the purpose for the government to print new bank notes. Since May 2011, the Central Bank has stopped publishing its monthly bulletin, which reported, among other things, the levels of money supply. What is clear, however, is that if the government were to resort to the printing press to finance its expenses, the risk is an immediate inflationary impact.

While the government had managed to keep a relative lid on the consumer price index for most of last year, prices have jumped in recent months, climbing 15 percent in January on an annual basis, and more than 30 percent in March and April — including a more than 40 percent increase in the food and beverages category. Relying on the printing press, therefore, risks increased social unrest.

However, the only obvious conclusion from this debate is that both from a political point of view and from a financial rationale, the options at the hands of the Syrian government are fast declining.

 

JIHAD YAZIGI is editor-in-chief of The Syria Report

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