Executive Magazine

The LAF – Militarized Welfare

by Executive Staff July 3, 2012

written by Executive Staff

If you had a chauffeur driven car with free petrol, bodyguards at your side 24 hours a day, seven days a week, free babysitting and rides to school for the kids, as well as school fees for your children and health care for the family thrown in, you could be a Hollywood starlet; or, you could be a high-ranking officer in the Lebanese military cashing in on the regular package of benefits offered to you.

Addressing the costs associated with this type of spending is but one of the tasks facing the Lebanese Armed Forces (LAF) on its path to reform. “The waste in the Army is not the [number of people in the] Army — the waste is in the five or six cars following a Brigade Commander and in soldiers driving kids to school,” complains former General Elias Hanna.

The LAF is overseen by the Ministry of Defense, which enjoys the largest allocation of funds of any ministry, receiving $1.2 billion in the 2012 Draft Budget. The Lebanese defense budget ranks ninth globally in terms of military expenditure as a percentage of gross domestic product, with Lebanon spending 4.2 percent of its GDP on the military in 2010, according to the World Bank. Regionally, Lebanon was outspent in 2010 by Jordan, with 5.2 percent of GDP dedicated to military spending, the United Arab Emirates (5.4 percent) and Israel (6.5 percent), but surpassed Syria (which spent 3.9 percent that same year).

Even so, “the budget [the LAF] gets for an army in the 50,000s [of personnel] is nothing, it’s sad,” says Riad Kahwaji, chief executive officer at the Institute for Near East & Gulf Military Analysis (INEGMA) think tank.

According to internal army documents, it is estimated that the LAF need at least $1.3 billion for essential force development, including communication equipment, training and weapons.

There are two causes for the lack in funding, says former Brigadier General Amine Hotait. “The first is the poverty of the state; we have a public debt approaching $60 billion.” The second, he says, is politicians don’t see the point of adequately funding the army as they know it is impossible to compete militarily with Israel, with whom Lebanon is still officially at war.

“Why give money without use?” asks Hotait.

Paying the troops

The LAF, including the navy and the air force, comprise 59,000 personnel, 57,000 of whom serve in the Army. At least 85 percent of the Lebanese defense budget is allocated for the salaries, amenities and allowances for these men, according to the 2010 military budget — the latest approved by the cabinet. This has left the LAF largely reliant on foreign donors for their equipment, as the breakdown of the budget shows.

Israel, the region’s top military spender relative to GDP, spent 60 percent of its military budget on personnel in 2010, while arms acquisition comprised 30 percent. Neighboring Jordan, which also allocates 85 percent of its military spending to salaries, still managed to spend $1.6 billion on equipment orders between 2005 and 2008, according to a study by the Center for Strategic International Studies, a Washington-based think tank. Over the same period, Lebanon spent $90 million, mostly on spare parts and logistics.

According to the latest available information published by the Beirut-based research firm Information International in 2010, a regular soldier receives $437 per month in his first year, which increases on average $20 a month for each year of active service. A starting salary for a junior officer, such as second lieutenant, is $683, with average yearly increases of just more than $25 per month.

In 2011, parliament approved a pay increase of $76 million for the military and security forces, while in the same year military salaries, indemnities and allowances amounted to $1.64 billion, according to the Ministry of Finance. This number includes wages for the Internal Security Forces (ISF), General Security Forces and State Security Forces, though the Army received the bulk (almost 70 percent) of this money: $1.1 billion. The actual expenditure on salaries thus exceeded the budgeted salaries significantly. The 2010 budget allocated $838 million for salaries, indemnities and allowances, while in practice such costs were $1.18 billion over the period from January to November 2010 alone, according to Ministry of Finance’s wage and salary statistics.

A significant percentage of last year’s wages, $191 million (17 percent), were paid in indemnities and allowances, which also provide a social security network for soldiers’ dependents through a variety of allowances for their schooling and healthcare. These include hospital treatment expenses ($65 million), school benefits ($63 million) and illness and maternity benefits (almost $14 million).

This system has led to a ‘militarization of welfare’, say both Aram Nerguizian, an expert on the LAF and a senior associate at the Center for Strategic and International Studies (CSIS) in Washington, and Yezid Sayigh, senior associate at the Carnegie Middle East Center.

“When you can’t give welfare to everybody, you have to distinguish between population groups to justify providing only for one group,” says Sayigh. “Here they distinguish through institutions; through the military.”

Some 500,000 people, roughly 10 percent of the Lebanese population, rely on the military hospitals, and coffers, for their healthcare, according to a general responsible for a military hospital [As Executive lacked military clearance for this article, despite numerous requests, he asked to remain anonymous]. Less than 10 percent of patients treated in military hospitals are active service members, the general explained.

The Army and the Ministry of Defense did not respond to repeated requests for comment over a three-month period.

The highlife of the officer corps

For Lebanon’s 3,400 commissioned officers, amenities include chauffeur driven cars, unlimited free fuel, free cell phones, bodyguards and follow cars for the officers and their family, according to Information International’s salary breakdown and former General Hanna. Hanna is concerned that this is not only a waste of financial capital, but also human capital, as soldiers are tasked with running errands for their superiors. “Why should soldiers be driving officers’ kids to school? How is that soldier protecting the nation?” asks general Hanna.

A Brigadier General will initially earn $1,560 monthly in wages. He also receives a housing allowance, a personal budget for military equipment such as uniforms, a rank allowance, field service indemnities and a chauffeur allowance worth $1039. In addition to this, he will receive free health care and education for his family. “The benefits are why people join, not the salary,” says Brigadier General Amine Hotait, adding that this is true for all ranks. “If they cut the benefits nobody can stay in the army.”

Benefits for officers are especially costly due to the high number of top brass (see diagram). According to the 1981 New Defense Law Lebanon is supposed to have 80 generals, yet the LAF currently has 420. In comparison, Britain has 46 for a force of 109,500, almost twice the size of Lebanon’s.

“The number has accumulated due to the need to reward combat during war time,” says another former Brigadier-General who spoke on the condition of anonymity. Hotait confirmed that the situation is illegal, but says efforts are being made to reduce the size of the officer corps by offering lucrative retirement packages.

Due to the promotional structure of the LAF, which does not have an exit policy for its employees, personnel costs are unlikely to decrease in the future. “There hasn’t been a policy of stop-gaps in promotion,” says CSIS’ Nerguizian. “There are no mechanisms to weed out the incapable officers; everybody gets a B even if they are an F student.” A European diplomat who has intensive contact with the LAF, but cannot be identified due to the sensitivity of the matter, was more explicit: “Anybody who does not commit criminal errors will be promoted; you will become a general someday.”

The New Defense Law of 1978 stipulated that the Military Council, consisting of the heads of all the departments within the Defense Ministry, should advise on all promotions. However, top appointments require political backing and approval by the Council of Ministers.

“The last five years [the Military Council] have been trying to get the number of generals down to 150, but it has been politically very divisive,” says Nerguizian. “The officers are there as clients [of political figures], and as long as they are there, you have access.”

The appointment of Jean Kahwaji as Commander of Forces (COF) in 2008, at the relatively young age of 54, was supposed to be a step in the right direction, according to the European diplomat, as it is customary for generals who are more senior than the COF to retire as they no longer stand a chance of occupying the top spot; in this case however, none of the senior generals chose to retire, added the diplomat.

Lacking arms, and aim, for the army

The high personnel costs have taken their toll on arms procurement. Since 1990, the Lebanese government has not allocated more than 1 percent of the Lebanese Defense Budget for arms procurement. As a result of this lack of funds, the LAF has been mostly reliant on equipment it acquired from militias after the civil war, as well as donations.

The United States has been the largest military aid provider since Syria withdrew in 2005; until recently it provided up to $100 million annually. France, Britain, Belgium, the United Arab Emirates and the Netherlands have also donated trucks, anti-tank missiles, helicopters and border patrol equipment.

More recently Russia and Iran have offered their own military supplies to Lebanon. Such donations are not done entirely selflessly, as the maintenance of equipment is very costly, and requires reliance on donors, especially concerning specialized equipment whose spare parts are not freely available.

“The LAF isn’t hooked,” says Sayigh from the Carnegie center, “rather it has been obliged for many years to rely on donations and perhaps this is a good thing, since it partly means that the LAF has not sought to buy high-tech, high-cost prestige items that it doesn’t really need, can’t really use, and can’t afford to maintain.

Even if the LAF had the money to spend, Lebanon still lacks a national defense strategy that stipulates what mission it should be procuring weapons for. Although the Taif accord, signed in 1989 near the end of the Lebanese Civil War, stipulates the LAF’s primary responsibility is to protect the country against Israel, this role has been usurped.

“The external threat [Israel] is taken care of by Hezbollah, they are the reason Israel fears Lebanon now,” said the former Brigadier General who asked not to be named. “However, it is a partnership with the army; they are the ‘hand’ of the army. It is a partnership of the citizens, the army and the Resistance.”

Thus the LAF has effectively been pushed into the role of guaranteeing internal security, he says, which was originally the primacy of the Internal Security Forces (ISF).

A new target?

The ambiguity of the LAF’s actual task further complicates the consolidation of the military’s weapons arsenal, as taking out armed groups in a civilian area requires different gear and training than defending borders to protect the country’s sovereignty. A national defense strategy, and a clearly defined role for the LAF, may yet materialize, however, given that it was among the matters up for discussion last month at the National Dialogue sessions.

“The Army executes the policy of the government, it is not the role of the army to set its own policy,” says Kahwaji of INEGMA. “The politicians have to set a national defense policy which defines the role for the LAF, when that is done, the LAF has to fulfill its mission.”

Such a policy will also allow for a clearer assessment of personnel needs and a more streamlined policy of arms acquisition. But this is only possible if the politicians will choose to fund the institution beyond providing salaries, or enforce oversight to ensure these funds are well spent.

July 3, 2012 0 comments

The LAF – In Need of a Target

by Executive Staff July 3, 2012

written by Executive Staff

Lebanon’s military spending, relative to the size of its economy, is among the highest in the world. Given this, it is only right and proper for` the Lebanese to ask: What am I getting for my tax dollars?

The skirmishes in North Lebanon recently did well to highlight what the Lebanese are not getting from their money, with the commander of the Lebanese Armed Forces (LAF) stating that he would not deploy his forces in Tripoli until he was certain they would not have to exchange fire with gunmen in the area.

This policy of ‘soft action’ throws in doubt the image the LAF fosters for itself as a cross-confessional entity that is the single most important unifying force in the country, the ‘heart of the nation’ with no sectarian affiliation, loyal only to mother Lebanon. Were this the case, though, shouldn’t the army be able to intervene when sectarian divisions begin tearing parts of the country apart?

The Lebanese defense establishment accounts for nearly 15 percent of government expenditure. The LAF is accorded the lion’s share of the defense budget, at least 85 percent of which is spent on salaries and allowances for staff. A large part of this spending has no military application; officers enjoy extensive perks ranging from free gasoline to soldiers acting as personal drivers to take their kids to school. Meanwhile, the LAF’s own internal estimates report that it needs at least $1.3 billion for essential force development, including communication equipment, training and weapons; between 2005 and 2008 only $90 million was spent in this regard, mostly on spare parts and logistics. This has left the army with out-dated equipment, most of which was procured through donations.

The LAF’s battle against Fatah Al Islam insurgents at Nahr El Bared Palestinian refugee camp in 2007 painfully exposed the inadequacy of the Army’s equipment, with media reports that soldiers were dropping hand grenades from helicopters. The battle could not have been won without emergency United States and Gulf military support; the LAF nearly ran out of ammunition a few weeks into the three-month conflict. In 2010 the situation was so dire that then-Minister of Defense Elias Murr appealed to civilians to contribute money into a Central Bank account to buy the army arms.

While all this suggests the LAF is underfunded, evaluating whether funds are adequate is difficult when it is unclear what the Lebanese Army is actually supposed to do. A strategic plan for the LAF is non-existent, as politicians have failed to create a National Defense Strategy to articulate its mission. The recent resumption of the National Dialogue could, potentially, solve this problem.

According to the Taif Accord, the LAF mandate is to protect Lebanon against external foes, specifically Israel, with its secondary task to support the ISF. In terms of external security, however, Hezbollah has usurped the LAF’s role, being vastly better armed and trained to face the threat over the southern border. The army has, de facto, been relegated to supporting the ISF. But when the army stands aside as Sunni and Alawite militias battle it out in the north, how effective can it be in ensuring internal security?

The reason the LAF cannot intervene is because it is staffed with Lebanese: While warring with Fatah Al Islam was an easy choice — given that the militants were largely non-Lebanese — the army is loathe to move against any sect in the country, lest the army itself begin to fracture along sectarian lines.

Thus, it would seem that the LAF’s main function is as a conduit for financial support for a large portion of the nation, a ‘militarization of welfare’ if you will. The LAF and Internal Security Forces (ISF) are some of Lebanon’s largest employers — with the LAF employing 59,000 soldiers, while some 10 percent of the Lebanese population is reliant on military affiliation for healthcare, according to military sources, not to mention education for their children and pensions. This situation is not uncommon in the region; Jordan and Egypt are both examples where a heavy reliance on the military has entrenched loyalty to the state.

But is that what the Lebanese want their army to be?

Without a National Defense Strategy to end the ambiguity surrounding the LAF’s role in the country, there can be no progress. Only with an articulated mandate can reforms be given direction, training and equipment acquisitions made purposeful, and standards set against which the army’s competency can be measured. Then perhaps, the Lebanese will know what their money is buying, and salute the protectors of the country for their service.

July 3, 2012 0 comments

Real Estate

Rent a mob

by Zak Brophy July 3, 2012

written by Zak Brophy

Under normal circumstances writing about public policy in the real estate sector in Lebanon is akin to writing about the intellectual value of a parliamentary debate — there is just not much of the former to talk about in the later. Currently, however, a new draft law being discussed in the government has the potential to reshape the playing field for tenants, landlords and developers. How far it gets toward implementation is, as always in Lebanon, the major question.

The property market until now

Politicians have tended to adopt a decidedly laissez-faire approach to this lucrative corner of the Lebanese economy and policies are somewhat thin. After all, many of the men sitting in parliament have built their own fortunes from bricks and mortar and are wary of government interference. However, changes are afoot and all is not business as usual.

Lebanon is anomalous, in that while land and property prices have climbed steeply skyward over the past couple of decades and luxury apartment blocks have sprouted unrelentingly from the earth, there are tens of thousands of people paying virtually non-existent rents. These somewhat contradictory realities are the consequence of a series of laws stretching back to the end of World War II (as was discussed in detail in Executive’s March issue).

As a new world order was being forged out of the rubble of war, Lebanon enacted the ‘old rent law’ to protect tenants from unscrupulous landlords. The legislation stipulated extending the existing contracts, even if against the landlords’ will, at the same rent. This law served its purpose in the short term but as the months turned into years and the years into decades, inflation ravaged the real value of the rents. Tenants were left laughing and landlords were left seething. “For the past over 70 years we have been living under the tyrant rule of rent control,” says Joseph Zoghaib, head of the Association of Landlords in Lebanon.

With the end of Lebanon’s notorious fifteen-year civil war in 1991 began the gargantuan mission of rebuilding the nation, and in 1992 rent law 160 was enacted, which went someway to addressing the imbalance between tenants and landlords. The law liberalized the real estate rental markets and allowed landlords to negotiate new contracts, but the legislation only allowed cosmetic adjustments to the amounts paid by tenants on ‘old rents’ — that is, rents from before 1992. As such there are now thousands of tenants enjoying their old rents from before 1992 while others are struggling with soaring prices. As the debate about a grand solution has moved back and forth, the law has been extended no less than a dozen times, and last expired at the end of March this year.

The potential new game

As such, the country’s landlords and residents are currently living in legal limbo, uncertain as to whether the law will be extended once again or if a new piece of legislation, which is currently under consideration, will be passed and realign the perennial quirk of Lebanon’s old rents. A member of parliament (MP) on the Justice and Administration Committee — the body fleshing out the details on the new law before it goes to a vote in parliament — told Executive on condition of anonymity that, “Up until now I really am not sure if there will be an agreement. It could go either way.”

While there is near unanimous agreement that the landlords are being done an injustice, the dispute concerns how this can be corrected without throwing tens of thousands of tenants onto the streets. How many people are on old rents is a matter of dispute; Zoghaib claims there are 81,000 of which only 13,000 are poor Lebanese who need support; the parliamentary source claims there are around 150,000 of which up to 50,000 would not manage at market rates and argues, “If there are 50,000 who cannot pay what are you going to do with them? Are you going to send the police to throw them on the street like in America? There will be a kind of revolution in Lebanon. You simply cannot do that here.”

Executive obtained a copy of the draft law as presented to the Justice and Administration Committee and it incorporates a number of measures intended to protect the tenants during the process of the landlord’s property being liberated. The proposal is to have old rents increase over a 6-year period to an amount agreed by the landlord and tenant and overseen by government appointed experts. The landlords will increase rents by 15 percent annually for four years and then 20 percent for the final two years. The tenant also has the right to stay for an additional three years at market rates if they request it at least three months before the end of the six-year period.

There are also clauses relating to the conditions if a landlord wants to buy a tenant out during the six-year period. If the landlord wants the property for their family they must pay four years rent after four years of rent increases, and if they want to demolish the building they must pay six years rent at the increased rates. If properties are deemed to be luxurious these amounts will be halved.

For low income households there will be a government fund established to assist them with the rents over the nine-year period. What’s more there is a parallel law, which encourages the development of affordable rent-to-own housing. According to the source within the Justice and Administration the legislation stipulates, “If you make a building and you rent it on a rent-to-own basis over a long period the law will give benefits to you. It gives benefits such as tax breaks and allows developers to build 20 percent higher than what is permitted in the building code, which the developer can do with as he likes.”

The developers’ push

While the landlords have reservations about the law, Zhogeib says, “We have to accept it as it has the liberation clause, which liberates our properties after nine years.” Zhogeib is adamant that the only opposition to the law comes from the “communists”, but in reality the debate is far more complex.

The fact is that the politicians that are preparing the law to put it to the floor in parliament are at loggerheads over who should receive government support and by how much.

The unnamed MP says, “There is still conflict over how much a tenant will take from the landlord if he decides to leave in the first year to free it up for a landlord to do as he likes. Should it be six years or nine years [rent]? And also for the poor people who are unable to pay the rent, how do we determine the standard for who the government will support? Is the line households earning LL2 million per month, or LL3 million or LL4 million?”

If the politicians fail to reach a consensus on these details within the law in their next session then the old law will have to be extended once again. This is anathema to Zoghaib, who threatens: “We’re starting to make a list of the influential people in parliament and society who are tenants on the old rents and we are going to make a CV of them, on what they rent, where and for how much. We are going to scandalize them. I don’t care.”

A universal benefit that would likely ensue from the passing of this law would be the money earned by landlords that could be put towards the maintenance of buildings — the importance of which was tragically highlighted with the collapse of a neglected old building in the Fassouh area of Beirut that killed 27 people in January. What is more, if landlords are able to start earning market rental rates then there will be more incentive to protect Lebanon’s heritage buildings.

Mona el-Hallak, architect and member of the Association for Protecting Natural Sites and Old Buildings (APSAD), says, “Landlords need to be able to make money on these properties if they are going to have an incentive to maintain them and not destroy them.” After years of campaigning for the preservation of Lebanon’s heritage, Hallak is despondent about the management of urban planning and concedes, “I have come to accept anything is better than nothing. Really it is in that desperate a state.”

Corruption destroying communities

In addition to the years of heritage protection legislation being watered down or just flagrantly abused, Lebanon also has no comprehensive urban planning code.

“The Director General of Urban Planning (DGU) should have developed an urban planning strategy for the whole country but they have done nothing,” says Hallak. “They do little jobs here and there but nothing that is applicable.”

The DGU did publish a national land use master plan in 2005, but by the admission of a senior employee — who spoke on condition of anonymity to protect his job — “It is schematic and not specific.” Moreover, it is not binding.

One only needs to look out of the window to witness the consequent haphazard and incongruous development that is engulfing Lebanon.

As to the rules governing the actual construction and development of buildings, Lebanon has a building code. The unnamed employee at the DGU explains, “The building code is written by the DGU in collaboration with certain specific people and the developers have a large influence on this code.”

Referring to the code, examples were given as to how the exploitation rate — the amount of floor space that can be built per square meter of land — has been increased to increase developers profitability.

What’s more the code is full of nuances, such as allowing more floor space to be developed if underground parking is made public, but by the admission of the DGU employee this is then just made private and no one checks up on the issue. “There is something wrong in our regulation,” says the DGU employee. “It is so free that there are gaps that the developers can go through and do whatever they want.”

One of the most divisive trends in Lebanese real estate is the increasing predominance of high-rise towers shooting up around the city, and especially among heritage clusters. Any building that is more than 50 meters tall needs to get permission from the DGU, but as the DGU employee says: “Why do they always seem to get permission? Well, there are no criteria within the DGU to say when we can build 50 meters, or 100 meters. At the end of the day these big buildings belong to the nation’s major developers and they are working with political backers.”

Due to the absence of any coherent urban planning policy, and with the powerful hand of the development companies and speculators reaching into the institutions and even the laws that govern the sector, there is no holistic approach to development and construction.

“The laws have not been outlined in the interest of the community, not after a study of the socio-economic areas, not after a study of the welfare of the communities, but they are a result of the pressure from the landowners and speculators for the maximum coefficient of land use irrespective of the damage it creates to the community,” says Assem Salem, former president of The Order of Architects and Engineers.

Shifting the focus back to the suits in parliament, all property owners in Lebanon — whether they are big fish or small fry — will have their eyes on Finance Minister Mohammad Safadi’s proposed budget for 2012, as it contains a proposal for a capital gains tax on all real estate transactions. The plan that has been put forward is a 4 percent tax on the sale of properties purchased before 2009, whereas real estate owned since 2009 would be subject to a 15 percent tax.

While the government could certainly use the extra dosh and some argue it will reduce real estate speculation, many industry insiders argue the timing is wrong for such a fiscal policy maneuver.

If it was going to be done it should have been a few years ago when the market was strong,” says Karim Makarem, director at Ramco Real Estate Advisors. “Now it is plateauing and needs support. This will not help.”

Whether parliament actually passes the law in its draft form or dilutes it into impotence, or passes the budget (which last happened last in 2005), is yet to be seen. And then, even if it is passed, it will have the hurdles of political duplicity and weak institutions to vault before implementation. Given this, the continued chaos amid Lebanon’s urban development likely has some time remaining to play.

This article was published as part of a special report in Executive's July 2012 issue

July 3, 2012 0 comments

Real Estate

The love is gone

by Maya Sioufi July 3, 2012

written by Maya Sioufi

The happy marriage between Mr. Bank and Ms. Real Estate seems to have lost some of its luster of late, becoming more of a relationship that both parties are resigned to accept for the sake of keeping the house — Lebanon — together.

On the surface, if we do the math, there is no need for the couple to seek counseling over the current exposure of Lebanese banks to the real estate sector. Out of the $44 billion which was lent to the private sector by Lebanese banks last year, a total of $13 billion was handed to the real estate sector in the form of housing loans or construction loans — that is around 30 percent of the total private sector loan book of banks and 19 percent of the total loan book. By comparison, the Spanish real estate and housing market, which is under severe pressure, accounts for 54 percent of the total loans of their local banks, forcing the banking sector to ask for a hefty bailout. Demand in Lebanon, according to experts Executive spoke with, is also primarily based on end users as opposed to speculation; given this, the banking sector’s exposure may not be worth rattling about. Of the $6 billion the construction sector added to economy last year, according to Bank Audi estimates, developers received $1 billion from banks and had to fund the rest themselves either through presales of flats or their own capital. “The real estate sector relies on around 80 percent of their own financing so it is not highly leveraged and it is not pressured to sell,” says Marwan Barakat, chief economist at Bank Audi. “That’s why there isn’t much pressure on [housing] prices.”

Omar Shantouf, general manager at FFA Real Estate, concurs: “Developers are not that highly leveraged and they can afford to sit on projects. They might sell one or two apartments at lower prices but they won’t advertise this, there is no such thing as a fire sale in Lebanon.”

As for housing loans, 36 percent of total property sales were funded by loans from the banking sector in 2011, up from 9 percent in 2007, and the remainder was funded by homeowners’ capital according to Bank Audi research. “That’s a moderate level even though it increased in past years,” says Barakat.

The honeymoon is over

Many heated debates at the dinner table, however, have centered on whether Lebanon’s lady of real estate has gotten a little big for her britches in recent years. Indicators of activity within the real estate sector are starting to paint a gloomier picture. Cement deliveries, an indicator of current construction activity, dropped 4 percent in the first quarter of 2012 after increasing 6 percent in 2011. Construction permits, an indicator of future supply, dropped 4 percent in the first quarter after dropping more than 6 percent in 2011.

Economists and financial experts Executive spoke with played down any concerns: “95 percent of our projects are sold to end users, people buying to live in it and not to speculate,” says Ziad Maalouf, chief executive of Capstone, a private investment firm. “Today, there is no risk of seeing a bubble in the market explode.” In the construction sector, banks have handed out a total of $7 billion in loans, which represents 16 percent of total lending to the private sector. “The share of the construction sector to total loans is similar to the one of the construction sector to GDP so we didn’t over lend to [real estate]” adds Barakat, given that the share of the construction sector to the country’s gross domestic product stood at 15 percent, according to the 2010 National Accounts of Lebanon, the latest official breakdown of figures for GDP available.

While banks may lend according to the economic logic they devise, they are now faced with developers who are finding it more challenging to offload flats, which a few years ago were selling like hotcakes. “Banks are becoming more selective because of the situation in the real estate market today. They are worried about demand and supply,” says Maalouf. As banks become pickier, they look for trendier projects. Demand has shifted from large-sized apartments, over 200 square meters, to medium-sized apartments, between 100 and 200 square meters, and from Beirut to the suburbs according to Bank Audi research. “If you go to the bank and ask for financing for a project with flats of 600 square meters in size, no one gives you a loan. You have to go with the right project and the right sizes,” adds Maalouf. With land prices still increasing and flat prices in tow — albeit at lower levels than in previous years — homebuyers are finding it more and more difficult to pay for a roof over their heads. “Homebuyers can’t afford to buy houses anymore because the prices of land have gone up in the lift and our income is going up the stairs,” says Antoine Chamoun, general manager at Bank of Beirut Invest.

Competition on the rise

Homebuyers have also been visiting bankers more regularly in recent years. Housing loans leapt by 33 percent last year — receiving the bulk of the increase in private claims — to reach $6 billion. The central bank had a significant role to play in giving banks incentive to lend their liquidity and in helping the Lebanese folk fund their pads. The central bank’s circular of May 2009 provided an incentive for banks to lend in Lebanese lira by reducing their reserve requirements as long as rates applied to clients are within a certain limit — 40 percent of a one year Lebanese Treasury bill plus 3 percent. “It created a boost in terms of supply and demand,” says Basil Karam, head of retail at BankMed.

“The central bank helped us developers by helping home owners buy flats, helping banks to lend and helping activity in the country,” adds Maalouf. “It is the best thing that happened to the sector.” This has fueled the development of a love-hate relationship between homeowners and bankers. For bankers, it became a lucrative business. Struggling to deploy their excess liquidity — deposits stood at $120 billion, or around three times GDP, in the end of the first quarter — with interest rates globally at record low levels and a dearth of investment opportunities within Lebanon and in the shaken region, extending loans to the housing sector became a thriving business and everyone jumped on the bandwagon. Yet what that also meant was that the central bank indirectly propped up a housing market, where prices were continuously rising and thus impacting the affordability of housing in the country.

“Banks have been under pressure on their interest margins in the past few years because their liquidity is not yielding [returns] anymore both outside and inside Lebanon, so they are having to lend more,” says Barakat. As banks increase their offering for home loans, competition is getting fiercer and along with it, the advertising wings of the banks are becoming more active to lure clients their way. Billboards for home loans seem to be popping up on almost every corner.

With rates on loans in Lebanese lira being controlled by the central bank, the competition is now on the dollar loans. “Some banks are reaching their allowable limits in extending subsidized loans in Lebanese pounds,” says BankMed’s Karam. “They will have to focus more on dollar-based loans and cut prices to attract more loans. In dollars, there is price competition, big time.”

Chamoun agrees, saying that, “The competition on loans in Lebanese pounds [subsidized loans with the central bank and with the Public Corporation for Housing] is low because the features of the loan are imposed and there is very little difference among banks on these loans, but on the dollar, banks are putting their own features.”

While there is room to increase lending further to the housing sector, growth is unlikely to be as significant as in previous years given that it was coming off a low base, according to Barakat. This could lead to continued competition in the sector and “it should be like this and the best offer should win,” adds Chamoun.

Increasing competition would be a welcome respite for homebuyers struggling to keep up with the elevated real estate prices. As for developers who have funded their current projects with low leverage, they are largely sitting on their pile of stock, putting upcoming projects on hold and staying firm on prices. For developers quick to adapt to the changing dynamics, projects outside Beirut with smaller flat sizes are being developed, and thus those selling homes will likely have to do with transactions that were not as large as they previously enjoyed.

As BankMed’s Karam points out: “Lebanese will continue to borrow to buy homes but the average ticket size wont be the same.”

This article was published as part of a special report in Executive’s July 2012 issue

July 3, 2012 0 comments

Real Estate

Culture Vultures

by Jeff Neumann July 3, 2012

written by Jeff Neumann

The endless struggle over what constitutes a cultural heritage site and what real estate developers can build over continues to spur heated debates in Lebanon. There are many sites at issue. Beirut’s Ottoman and French colonial-style homes, or at least the ones that survived the civil war and reconstruction efforts, are under constant threat. Several remnants of the area’s ancient past as a center for global commerce and culture are also at risk of being lost in the name of profit.

Land scarcity only heightens property developers’ appetite for demolition of sites that may or may not be under protection. Weak government regulations, mostly holdovers from the French mandate-era, have left countless loopholes open for exploitation.

The onus to protect these sites, by protesting against great odds, has fallen on a loose affiliation of activists, archaeologists and everyday citizens. And in many ways, real estate developers are simply taking advantage of rights set aside for them by previous governments, most notably that of former Prime Minister and real estate mogul Rafiq Hariri, although other governments did their part as well.

An ancient past discarded

One of the most controversial heritage issues of late is the Venus Towers project in downtown Beirut. The original plan calls for three luxury residential towers with the promise of “recapturing the traditional context of Lebanese housing in a new modern style”. After ground was broken what appeared to be an ancient Phoenician-era port was discovered, spanning some 7,000 square meters of prime real estate. The project developer, Venus Real Estate Development Company, says the site’s significance has been overblown. But archaeologists not associated with Venus Real Estate say the alleged port is a cultural heritage site that should have been preserved at all costs.

A fierce public debate over the site ensued, followed by at least five archeological reports, which were submitted last year to then Culture Minister Salim Warde. Last spring, Warde told Executive, “It might be a port, a shipyard, or even a quay, but it is surely something very interesting, and we are seeing how we can work with the owners of the land to save this site.” An official from Venus Real Estate told Executive in late June that the archaeologists and experts contracted by the company had recently finished their assessment and submitted a report to the Minister of Culture Gaby Layoun, and were waiting on a response. “It’s in the minister’s hands now,” the official said.

The next day, Venus Real Estate completely demolished the remnants of the site after gaining approval from Layoun.

Joseph Haddad, founding member and secretary of the Association for the Protection of the Lebanese Heritage, called the action “illegal” and promised to continue with protests. Announcing the decision, Layoun said in a statement, “The entire case involves no proof that points to the presence of a Roman or a Phoenician port and the trenches within the rocks could not have been used as dry docks for ships or their maintenance.” Media reports later stated Layoun had distanced himself from the decision and his office was not avaliable for clarification as Executive went to print.

A similar dispute has arisen over a Roman-era hippodrome, also in the heart of downtown Beirut. Solidere built luxury homes directly on top of much of the site, one of which is owned by former Prime Minister Saad Hariri. The hippodrome is one of two in Lebanon, out of only five of its kind in the Levant. The second hippodrome in Lebanon is in Sour, and was added to the United Nations Educational, Scientific and Cultural Organization (UNESCO) World Heritage list in 1979, long before the construction craze took hold across the country.

Solidere has proposed moving the remnants of the hippodrome to a site nearby, where a former Roman-era bath was also moved. However, this will do little to appease preservationists. “It is very easy to protect something,” says Jeanine Abdul Massih, professor of archaeology at the Lebanese University, and a proponent of keeping the hippodrome in its original location. “The problem is, it is also very easy to move it.” For its part, the Culture Ministry seems more intent on using the episode to publicly attack Hariri on television than to preserve the site.

Outreach efforts by preservation groups such as the Association for Protecting Natural Sites and Old Buildings in Lebanon (APSAD) have proved moderately successful, at least in attracting awareness. In late May the group held a ‘National Heritage Day’ with assistance from the Ministry of Culture, and with a focus on cultural heritage sites in Sour and Hermel.

Despite its efforts, APSAD says it is up against powerful real estate companies that are tough to counter. “Anything is better than nothing,” says Mona El Hallak, architect and executive committee member of APSAD. “Really it is in that desperate a state. They do everything to make buildings fall apart and then lobby to be able to pull it down.”

LU’s Massih echoes that sentiment, saying, “We are all used to it. For 25 years we destroyed all of the history. The problem is patrimonial. Maybe the money at stake is too much, I don’t know. There must be something to do because the people cannot enjoy any of these sites.”

Foreign elements

While most preservation efforts are focused on specific buildings and historical sites in Beirut and surrounding areas, the sale of large swaths of land to foreigners across the country is also attracting the ire of activists and citizens. One example is a brewing fight over the sale of some 7,700 square meters of land near the Keserwan village of Dlebta to Saudi Prince Muqrin bin Bdul Aziz, allegedly without consultation with the local municipality. As Executive went to press, repeated attempts to contact the municipality went unanswered. A presidential decree, #7983, approved the sale in April and residents say they only learned of it once an announcement was made in the Official Gazette.

A campaign to revoke the sale has attracted attention, and local residents have mobilized. But some elements involved in protesting the transaction show hints of xenophobia rather than a genuine concern for the land. As it stands, a petition is circulating demanding the revocation of the sale and it appears that this, like other land issues, will not be resolved soon.

Past attempts at historical and cultural preservation have shown mixed results. A senior advisor to Minister Layoun, Michel de Chadarevian, touts the Sour hippodrome as a preservation success story. “The hippodrome in Tyre has been handled with great care and this is something that Lebanese should be proud of,” he says. But that effort was undertaken more than 30 years ago, and nothing approaching the level of UNESCO protection has happened since.

This article was published as part of a special report in Executive's July 2012 issue

July 3, 2012 0 comments

Real Estate

Facing a squeeze

by Jeff Neumann July 3, 2012

written by Jeff Neumann

Reading through our special report, you probably have a good idea of the challenges faced by the real estate sector over the past year. Data shows that demand for residential property is weakening across Lebanon and developers are coping with higher operating costs than before. How they adapt will determine how well they weather what some expect to be a prolonged downturn.

Overall construction costs in Lebanon were up in the first few months of 2012, due in part to the mandatory wage increase approved by the government in March. However, material costs have for the most part stayed at the same levels through the first five months of 2012. For instance, steel in Lebanon has remained at $750 per ton through June; Portland cement cost $102 per ton over the same time period.

Shaving the fat

When asked about what is being done to cut costs, most developers declined to go into detail. The one exception, Karim Bassil, founder of BREI Real Estate Investment, offered a brief insight into his company’s operations. “The main thing is we’re reducing our overhead, we’re reducing our margins. We have already reduced our margins by 50 percent this year,” he says, describing the return generated from new income on a project. “We’re just not making the same kind of money that we were making before,” adds Bassil. “In Lebanon, when you plan something for, let’s say, 30 percent ARR (average rate of return), you end up with 20 percent of 70 percent ARR.”

Cement deliveries are also down this year by 4.2 percent — another obvious indicator of a slowdown in construction. This stings developers even more due to the fact that between 2005 and 2010, average annual deliveries increased by 11.2 percent. As an example of the many factors listed coming to a head, Bassil says that “on one of my projects in Beirut, instead of putting it around 20 percent ARR, we put it at 8 percent. This is because of politics, war and project delays — they all play a role in [reducing ARR].”

Through May, the total number of construction permits issued in Lebanon was down 9.3 percent from May 2011, according to data compiled by InfoPro. Also of note, construction area authorized by permits were down 12.5 percent from the same time last year.

Indeed, times are tight for the sector, forcing developers and contractors to consider all options. As Bassil puts it, “Personally, we’re doing everything to keep our business alive for better days to come.”

construction cost

This article was published as part of a special report in Executive's July 2012 issue

July 3, 2012 0 comments

Real Estate

Q&A – Solidere’s Mounir Douaidy

by Maya Sioufi July 3, 2012

written by Maya Sioufi

The company the Lebanese love to hate is Solidere, Lebanon’s largest developer tasked with rebuilding the Beirut Central District (BCD) after the civil war. While many enjoy sipping coffee by the yachts in Zaitunay Bay, Lebanon’s Porto Fino, and walking around in the Souks, still undergoing further expansion, and even jogging by the newly built marina, there are fears the company has gone beyond its mandate and is now competing with, instead of supporting, businesses and developers. For a better understanding of how the BCD operates, Executive sat with Mounir Douaidy, the general manager of Solidere.

Solidere has signed contracts for several projects on the Waterfront district, among which are KidzMania and The One. These have been criticized as being illegal as they do not seem to be temporary structures as per the law?

For 10 years, there was only BIEL (Beirut International Exhibition and Leisure center). A few years ago, we looked at one particular area starting from the entrance of BIEL all the way to the sea. We started with the Beirut Exhibition Center and along the same line, there will be The One (a night club owned by Skybar’s Sky management) and KidzMania (indoor theme park for children). These are temporary activities with seven-to eight-year contracts to create movement and attract people. We only receive rental income and have not taken stakes in the projects. Down the line, all these areas will be sold and developed.

What will the waterfront district look like once permanent structures start being implemented?

All the buildings on the frontline facing the park and the sea will be 40 meters high. There will be one or two towers there similar to the ones on the Corniche, such as the Four Seasons or the Platinum Tower. Heights on every lot will be different: some with heights of 52 meters, some with 75 meters and others even a little higher. Concentrations of high-rise buildings will be mainly in the central part of the reclaimed area and not the outside edges, which will be composed of low-rise buildings to catch the views.

In a context of regional turmoil and lack of domestic stability, Solidere’s recently reported 2011 results saw revenues drop by 23 percent year-on-year to $296 million. How is 2012 looking so far?

Last year, we did not sign a land sale deal until the fourth quarter when we signed four deals for $220 million, which constituted the main part of our revenues. So for 2012, I don’t know yet because we still have six months. All I can tell you is we are on the right track for sales because there is demand.

What changes have you seen in terms of demand?

The negotiations to materialize a transaction are taking longer than usual. We have also had to break up bigger blocks into smaller units so that it becomes easier to sell these units. Finally, most of the investors looking to acquire land are, more and more, coming from Lebanon as opposed to the region.

Solidere’s strategy has been to reduce its reliance on land sales by increasing rental income. Where do you stand on this?

Our rental income, which stood at $50 million in 2011 up from $42 million 2010, is expected to reach $65 million by 2015 after the completion of several projects, namely the remaining component of the Souks with a cinema complex by the end of the year and a department store by 2015. Land sales will continue to be the main source of revenue over the next 10 to 15 years because we still have a significant inventory of land, mainly on the waterfront, valued at $7 billion at today’s prices.

Given Solidere International (SI)’s exposure to countries in turmoil, where do you stand with your expansion plans outside of Lebanon?

We were not impacted [by the turmoil] as we had not spent on anything yet because of the financial crisis. All we had to do was to restructure the projects. For example, Al Zorah project in the United Arab Emirates was reduced in size and changed from a mix used development to a touristic project. SI is now concentrating on identifying new markets and we think there are lucrative opportunities in Saudi Arabia where we already started one project for a tower in Jeddah and we have two to three projects in the making in Riyadh.

Solidere is venturing into the restaurant business. Is this another way to reduce your reliance on land sales?

Any revenue from the restaurant business is immaterial relative to our activities. The whole idea [behind venturing into this line of business] is to allow the creation of outlets and restaurants of a certain caliber that we felt did not exist and would support the overall real estate development activity. We did it with Stay (fine dining restaurant) and Momo’s (Moroccan restaurant and bar). We brought in an operator and created an entity — a cooperation between Solidere and the operator — that would rent out the space and pay us rent. The operator runs the concept and Solidere co-manages with the operator. Solidere is not in hospitality: We don’t know how to do restaurants. We also did this with The Venue, the 1,000 square meter space used for exhibitions.

Your critics say that you are competing with the restaurant business.

People keep saying Solidere is competing. We created these two ‘unique’ concepts that didn’t exist before so they will not compete with anything else that exists. Our intention is not to expand into this and step into the shoes of people doing this kind of business. We did this to give a push to the area, attract more people and promote cultural and artistic activities, and these restaurants came as part of this objective. If you look at the city center, there are tens of restaurants and outlets that have nothing to do with us.

Are you also co-managing outlets in Zaitunay Bay?

No. Zaitunay Bay is a little bit different. It is a joint venture with Stow Waterfront Development. Together we are executing Zaitunay Bay as a project made up of two parts. First is the restaurant part, only for lease, and the other part is a building composed of fully furnished small-to-medium sized apartments, which will be up for sale.

Doesn’t this divert from Solidere’s strategy of focusing on rental income only?

All the properties in our real estate portfolio so far were up for lease because the idea was to generate rental income and keep increasing it over the years. For this building, it was agreed with the partners that the apartments would be put up for sale as there would be higher ownership demand given the high prices, and we also wanted to recuperate our investment in the project and keep the restaurant leases to generate rental income. The building will also host a members club like the Automobile et Touring Club du Liban [ATCL] or the Golf Club, which will generate annual income.

Are you considering moving into the sale of apartments going forward?

Until last year, the decision was not to sell any assets but going forward we are considering to slowly sell some assets. We started selling some of the Saifi apartments that were leased for the past 12 years. We are eventually offloading some of the stock of apartments as we have other apartments in Zokak El Blatt and Wadi Abou Jamil that are leased. Our new projects will come to replace some assets that we are selling.

So the new projects will only be for lease?

We recently got the permit to start another 20,000 square meter project in Saifi consisting of three small residential and one office building. We intend to sell the apartments of this project. We will not start offloading a huge quantity of assets.

With demand moving to smaller sized apartments, aren’t developers having to adapt and provide smaller sized apartments too?

All the stock on the market came from developments that started a few years ago. Future developers will be looking to smaller sized apartments but this will come after Solidere has finished selling these apartments.

Wouldn’t the sale of apartments place you in competition with developers?

We are not doing anything to compete with anybody in the market. We want to support other developers, complement their activities and not go in competition with them. We want developers to do well and become repeat developers. We are doing this on a very small scale and the size of the apartments we have been putting up for sale are small to medium sized, whereas developers have been selling medium- to-large sized apartments, so we are not competing with them.

This article was published as part of a special report in Executive's July 2012 issue

July 3, 2012 0 comments

Comment

The formula to fill football seats

by Thomas Schellen July 3, 2012

written by Thomas Schellen

The Lebanese love for football warms my heart. The colors flying from windows, cars and street-corner stands during big tournaments like the Euro 2012 give me an emotional lift. The friendly coexistence of so many football allegiances — from England to Italy, France, Spain, Portugal and my native Germany — displayed this summer has a great pull on me. And what makes it even better is if you sit in a pub in Hamra, or a mall café in Ashrafieh, and fever with the action of your team while on the next table someone roots for the Dutch or Danes with the same enthusiasm. Great fun, happy competition.

But why do the public and private sector in Lebanon get the football economy so wrong? By football economy, let it not mean the exploitation of the occasion by marketers with buy-this, win-that strategies. I am talking about the primary needs of the fan: A totem (flag, scarf) and a place to watch and eat.

Now, in a small redemption for the Lebanese private sector one has to say that today it is no problem to find a big screen — unlike the days when the over-sized Sports Café in Burj Al Ghazal was about the only place that sported them (and was unhealthily empty except during big games, which is likely why it eventually closed down). The supply of Beiruti venues where you can watch Euro 2012 today ranges from 10-foot screens in comfortable restaurants to a plasma in your nearest pasta joint.

Regrettably, these choices are not all real deals. When I sat with my black-red-gold-wearing son in one cozy restaurant on the day before the Euro opener, the friendly waitress volunteered an invitation to come back for the Euro, “but there is a LL25,000 cover charge.”

Then there was the eatery on the corner near my abode. They had hired a few 24-inch screens and had the place decked out by stringing up little flags. Pity that their stroke of decorative genius was marred by hanging the German flag upside-down, but they showed even greater foolishness when they demanded a minimum bill of LL20,000 per person. Fifty bucks for munching manakeesh while bearing with a case of football culture callowness?

So I stomped my German family fan legion of four up to the rooftop of ABC and hunkered down at a restaurant that had a giant screen, sharp-enough resolution, a fair crowd, and perfectly regular prices. Guess what? At the end of the first win by unserer Nationalmannschaft, or ‘our National Team’ as the Al Jazeera commentator yelled several times, I (expectedly) not only spent more than $50, I also decided to come back for the next two games — and happily consumed more as the German game kept improving.

What’s the moral of this musing? Simply, for you restauateurs, freedom stimulates consumption. Especially at a time when the insane cost-of-living spiral forcibly converts hordes of us average Joes into penny pinchers. Learn from the football economy that fair offers and a good atmosphere open up the most paranoid of pockets.

Now to the Lebanese football public sector economy. If the country ever wants to host a big tournament, it needs to invest now. No, not into refurbishing the stadia built for the Asian Cup finals that somehow happened here in 2000. Invest in the Lebanese team and in the national sports infrastructure of training and developing youngsters — and invest in building a culture of fair competitiveness through sports. It will do wonders for the economy overall.

Lebanon made it to the fourth round of the 2014 World Cup qualifiers, proving that the country has football talents, and the team can still claw farther. And being die schoenste Nebensache der Welt, roughly translated as ‘the nicest unimportant thing in the world’, football is an opportunity to think the unthinkable.

Poland and Ukraine have co-hosted Euro 2012, despite the challenges each of them faced. Half a century before the 2002 World Cup, it was exactly unthinkable for Japan and Korea to ever co-host a dinner party, let alone the world’s greatest spectator event.

It is unthinkable so think: If Lebanon were ever to succeed in co-hosting the World Cup in this century, it will not only make bigger history than even Qatar. It will absolutely need a team that is a result of long-term public sector investment in a competitive culture and great sports. Invest in the National Team today, yallah, government. Because nothing could be more embarrassing than hosting a World Cup and not make it, at least, to the second round.

THOMAS SCHELLEN is Executive’s MENA business editor

July 3, 2012 0 comments

Finance

Iraqi intrigue in Lebanon

by Mohanad Hage Ali July 3, 2012

written by Mohanad Hage Ali

Lebanon’s propensity to host political, media and financial players from around the region and beyond is well know. Its weak government, strict banking secrecy laws, open media landscape and plethora of rival political movements provide a welcome embrace for all and sundry. Among those to have set up shop here recently is an Iraqi outfit with an intriguing network of connections trailing back into the quagmire of Iraq’s troubled contemporary history.

The operations in question are a nascent TV station, Asia TV, and Al Bilad Islamic Bank, which opened a branch in Hamra in recent years. The lynchpin that joins the two enterprises is one Mr. Aras Karim Habib who is the chairman of the TV station and sits on the board of the bank (and was responsible for the opening of its Beirut branch).

A shady past

Habib was chief intelligence officer for the Iraqi National Congress (INC) — the umbrella organization of opposition groups set up with American assistance after the 1991 Gulf War — as is documented in investigative journalist Aram Roston’s book, “Ahmad Chalabi; The Man Who Pushed America to War.” Roston also outlines how Habib was one of three principals for Boxswood Inc, a company established in the US by Chalabi through which the INC received funding from the American Defense Intelligence Agency.

It didn’t take long for Chalabi and Habib to fall from grace among certain elements of the US establishment after the 2003 invasion of Iraq, with a US intelligence official accusing Habib of passing intelligence to Iran, as was reported by the British daily the Guardian. In 2004 an arrest warrant was issued for Habib relating to his intelligence activities with the INC. Habib was not available for comment despite numerous requests by Executive.

Habib is now living in Beirut, and his connection to the Chalabi family continues; Al Bilad Islamic Bank was incorporated in Iraq in 2006 with Chalabi’s nephew, Issam al-Uzri as chairman. Issam’s son, Hussein al-Uzri, was the former chairman of the government-owned Trade Bank of Iraq (TBI), which was accused of corruption by the Iraqi government in June 2011, leading to the former chairman to flee the country, while his father left his position as chairman of Al Bilad two years ago.

The link between the two banks came to the fore following the award for “deal of the year” given by a trade magazine to Al Bilad in 2008 for being allocated a $100 million letter of credit by TBI.
Habib set up the Beirut branch for Al Bilad, the bank’s 15th branch and the only one outside of Iraq, in Hamra in December 2010. “Habib was involved directly in establishing the bank in Lebanon and he is the coordinator between Iraq and Lebanon,” says Talal Kaissi, head of the Al Bilad’s Beirut branch.

The bank is set on expanding its operations in Lebanon, according to Kaissi, it has acquired a building in downtown Beirut facing Starco for $32.5 million. The building, which is still under construction, will be the new bank headquarters and the Hamra office will remain as a retail branch.

From banking to television

More recently Habib has ventured into Lebanon’s media mosaic with the establishment of Asia TV, which according to Kaissi “is a private business” of Habib’s (which Executive confirmed banks with Al Bilad). Entifadh Qanbar, Asia TV’s general manager, goes further saying Aras Karim Habib is the chairman of the station and explains, “I run the day to day operations and [Habib] sets the general direction.” Asia TV started broadcasting on March 5 and Qanbar says, “We are a pan-Arab TV station. We cover the Arab, Muslim world with an Iraqi taste. I want English, Persian, Turkish and perhaps Kurdish news broadcasts.”

The station is one of several new media enterprises in Lebanon that endeavour, in the words of Qanbar, “to counter the Gulf invasion in the region.” The coverage of the Arab uprisings, and in particular the Syrian crisis, has severely polarized the journalistic community in the region and the coverage from outlets that enjoy support from the seemingly bottomless pockets of the Gulf, such as Al Arabiya, Al Jazeera, Al Mustaqbal, Asharq Al Awsat, Al Hayat, An Nahar and many more has created a backlash.

Among those providing an alternative discourse are several new TV stations such as Al Etejah, Al Maseera, Al Mayadeen, Iran’s Press TV and Asia TV. However, with the schisms running throughout the Middle East increasingly characterized by the rivalry between the Sunni monarchies in the Gulf and the Shia theocracy in Iran, charges have been made that these new outlets are nothing more than an Iranian-backed push into the Lebanese media landscape, thus further exacerbating tensions.

The hand of Tehran?

Aletejah and Asia TV are members of the Tehran-based Islamic Radio and Television Union, Aletejah is connected to an Iraqi military outfit call the Hezbollah Brigades (not linked to the Lebanese militia-cum-political party), Almaseera is connected to the Shia Houthi rebels in Yemen and a recent report on France 24 created waves by bringing into question the independence of Al Mayadeen from the interests of the Iranian and the Syrian regimes. Asia TV’s Qanbar says that his station receives no support from Iran and asserts further, “We have never been told what to say on our station.”

The station’s output is guided by a particular Iraqi vision of the Middle East that is perhaps best encapsulated by one of their flagship shows, Qalb al Aalam, or Heart of the World. The program focuses on the historical, cultural, political and economic relationships between Turkey, Syria, Iraq and Iran. Qanbar expands on the relationship with Iran saying, “We are in the camp of the Iraqi’s. The Iraqi establishment, including Sunnis, Shias and Kurds, now all have good relations with Iran. What’s more, we have a strategic relationship with the United States. That is very disturbing to the countries of the Gulf.”

The ties that bind

The relationship between Habib and Qanbar is a long one and is entwined with their involvement with the INC and Ahmad Chalabi. Qanbar says that, “[Chalabi] is a good friend and I ask him for advice on some issues and he will give me very good advice that I will consider but I will not follow in the steps of Chalabi.” However, Qanbar has served as his long-term spokesman and his personal account on LinkedIn, the professional networking Internet site, lists his current status as “Advisor to Dr. Ahmad Chalabi.”

With the long-standing links between the three men it begs to be asked if Chalabi has any involvement in either the bank or the TV station. The Wall Street Journal recently quoted Chalabi as saying that he is considering joining the editorial board of Asia TV but Qanbar denies he has any role at the station, saying, “We get our funding from Iraq, from a group of businessmen and a group of individuals that want to counter the Gulf invasion of Iraq but Ahmad Chalabi is not one of them.” Furthermore Kaissi at Al Bilad also denies Ahmad Chalabi has any direct involvement in the bank’s affairs.

In any case as the media war in the region intensifies the Iraqi challenge to the “Gulf Invasion” has set up shop in Lebanon and looks set to stay.

July 3, 2012 1 comment

Economics & Policy

Beirut’s secret garden

by Nabila Rahhal July 3, 2012

written by Nabila Rahhal

Many older residents of Lebanon’s capital have fond memories of the Horsh Beirut, of childhood games and family picnics in one of the city’s most beautiful parks. The current generation has no such memories. While the Horsh Beirut, also known as Horsh el Snawbar or Horsh El Eid, accounts for some 77 percent of the city’s green space, the municipality has kept it closed to the public for more than two decades; but if a growing number of civil society organizations are successful in their efforts, the gates may soon be open again.

Among the many victims of the civil war was the Horsh, whose ancient pine trees were burned to cinders during an Israeli assault on the city in 1982. In 1992, the municipality of L’Ile De France, working with the Beirut municipality, funded the restoration of 90 percent of the park at a cost of $191,000, according to Bilal Hamad, president of Beirut Municipality, with the remaining 10 percent picked up by the municipality. Once completed, the municipalities of L’Ile De France and Beirut decided the park would remain shut for 10 years to allow the newly planted pine trees time to grow and mature, says Hamad.

Today — 20 years later — only 10 percent of the Horsh Beirut is open to the public; the remaining 90 percent is closed to all Lebanese citizens less than 35 years old, and even those older than 35 must hold an authorized permit from the municipality to access the park. This classification, says Hamad, is one he inherited from the previous municipality and does not “necessarily agree with.”

Nizar Sayghieh, a lawyer who has worked to reopen the park, says that according to common law, closing a space created for public use is illegal, and people have a right to access the park.

Hamad acknowledges that the park is a public space and that “it shouldn’t be closed.” He claims he wants to give it back to the people of Beirut but says he wants to be confident it will not get ruined by opening it haphazardly. Sayghieh counters that if the safety of the park is the concern, the municipality should use the ample funds it has to hire and train security guards.

Civil society in action

To obtain answers for the delay in reopening of the park, an NGO named Nahnoo organized a debate in February 2011, between Hamad, Nahnoo founding member Mohammad Ayoub, Sayghieh and Eric Bouvard, a representative of the municipality of the L’Ile De France in Beirut.

During the debate, says Ayoub, Hamad asked for a policy paper that would outline how best to manage the opening and maintenance of the park. Provided this was presented, continues Ayoub, Hamad promised that he would open the park by the end of 2012. While Hamad confirmed asking for the policy paper, he said that he didn’t mention a specific date but that he would love to open the park by the end of the year, provided that the necessary arrangements exist.

Nahnoo took up the president of the municipality’s challenge and, two months after the debate, provided him with a detailed policy paper outlining specific solutions to the possible obstacles preventing the park’s opening, such as security issues and fire hazards, says Ayoub.

Hamad praised the quality of the paper, adding that he had sent it to a committee within the municipality that will study it and give recommendations this month. Hamad also sent it to L’Ile De France representatives for their input and, pending both, he will be calling for “a brainstorming workshop in his office within the next few weeks.”

“The purpose of this workshop is to come up with one final plan to be presented to a private company that will manage, protect and maintain the park,” says Hamad.

When asked if the municipality cannot afford to maintain the park themselves, Hamad said they can but if they could get a company to do it for them, then “why not?”

Questionable outsourcing

This has led others to cry foul, given the ample examples — such as the Beirut Central District — where private management of public land has proved controversial, to say the least. “Giving the park to a private company could risk turning it into a resort of sorts where its very purpose of being a public and free space will be defeated, just like what is happening with our beaches,” says Sayghieh.

Hamad says this will not be the case as the municipality will retain ultimate authority over the park. He does admit, however, that there might be a nominal entry fee to make the people using it “feel a sense of responsibility.”

Hamad also mentions providing park users with access cards to the park so security catching people misusing the space can seize the cards, and deny violators further entry. He believes that this will be a good way to control those who might intentionally want to destroy the park.

Dima Boulad of Beirut Green Project, a local NGO also working on public green spaces, says that while rules are certainly needed to protect the park, “We don’t need the rules to be so uptight that people aren’t able to enjoy the park experience anymore.” Boulad gives the example of the newly-opened Zaitunay Bay, which does not allow pets or eating in non-designated areas.

Nahnoo and other civil society organizations remain unsatisfied with the municipality’s evasive techniques and last month organized guerilla picnic protests at major intersections around Beirut, along with 12 other local NGOs also campaigning to the open the park.

Nahnoo’s Ayoub said that he fears the municipality is “coming up with excuses to delay the opening,” and is working with the other NGOs to pressure Hamad to set a clear target date for the opening. Hamad says he believes in the importance of public green spaces and has even launched a campaign, “Beirut is Amazing” to renovate several public parks, such as Sanayeh Park and the Sioufi Gardens, starting this summer.

According to Hamad, a landscape artist has donated plans for the rehabilitation of Sanayeh, and the retail company Azadea has agreed to donate the needed funds for the project. The municipality is currently asking private donors, companies and NGOs to donate money or resources for the rehabilitation of the Beirut’s main parks and to add greenery to the streets of Beirut, mainly on road islands and strips dividing the roads.

Notably absent from this campaign is Horsh Beirut. When asked about this, Hamad said that, Horsh Beirut, being the biggest park, requires a separate campaign. He concluded by saying of the Horsh “it is a jewel for the people of Beirut and we want to make sure it stays that way once we open it.”

Yet one wonders how valuable a jewel is when no one can see and appreciate its beauty. Until the park is opened, the children of Beirut will continue to grow up with memories of playing on hard concrete in narrow alleys, while the wide open greens of the Horsh lay in lonely silence.

July 3, 2012 1 comment