Banking & Finance

Financial quotes of the month

by Executive Editors
written by Executive Editors

“Our real GDP for the year 2011, according to national estimates, exceeded 5 percent in light of the significant improvement of activity following a freeze in the first months of the year.”

Prime Minister of Lebanon Najib Mikati on GDP growth in 2011

“Supply from the Middle East has been reliable despite perceived disturbances in the region… there is no shortage of oil.”

Mohammad Saleh al-Sada, Qatar’s Energy Minister

“We want a price around $100, that’s what we want.”

Ali al-Naimi, Saudi Arabia’s Oil Minister

“We made a revolution only to go now from one dictatorship to another.”

Naguib Sawiris, Egyptian telecom tycoon

“Europe is watching us, austerity can no longer be the only option.”

Francois Hollande, France’s new president

“German chancellor Angela Merkel has to know that the politics of austerity have suffered a humiliating defeat.”

Alexis Tsipras, head of Greek political party Syriza, a coalition of radical left and green parties

“Grexit [the possibility of Greece leaving the Eurozone] path: election, default, exit, capital controls, deposit freeze, drachmatization of euro claims, depreciation, return to growth/jobs.”

A tweet from global economist Nouriel Roubini,on the potential  exit of Greece from Europe

“This puts egg on our face and we deserve any criticism we get.”

Jamie Dimon, CEO of JP Morgan after suffering a $2 billion trading loss

“Jamie Dimon, the head of [JP Morgan], is one of the smartest bankers we have got, and they still lost $2 billion and counting.”

United States President Barack Obama on why there is a need for Wall Street reform

“There are issues that we need to look at specifically with respect to Facebook.”

Securities and Exchange Commission Chairman Mary Schapiro following the significant drop in the share price of Facebook after its IPO

“I wouldn’t appoint somebody to do my job because nobody would run the business the way I do. You might as well have asked Frank Sinatra who he would appoint to replace him. Somebody can sing but can they sing like Sinatra? No.”

Bernie Ecclestone,CEO of Formula One, on why he intends to remain CEO after the the company goes public at the end of June
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Banking & Finance

The expert opinion MENA stock tips

by Executive Editors
written by Executive Editors

European elections and Facebook’s IPO rattled the markets last month leaving investors skeptical and perturbed. Continuing with our initiative to seek investment advice from financial experts, Executive sat with Joe Nader, head of private banking at Byblos Bank and Hatem Rafii, head of asset management at Royal Forex Trading (RFXT).

Joe Nader

Thoughts on the global markets?

Nader takes a conservative stance, as he does not see an improvement from a macroeconomic perspective. Even though the markets have corrected, he believes this is due to an “absence of bad news and optimism over a third round of quantitative easing [introduction of new money by the US Federal Reserve Bank] which has not occurred”. He does not believe that markets will go up in the immediate future.

Main concerns?

Worried about  Greece and Spain, Nader believes that we have not yet seen the worst of the crisis engulfing Europe. “I am wondering why the euro is at these levels, it has to go down further”, he says.

Markets to invest in?

His preferred market to invest in is the United States and he would go for defensive sectors such as consumer goods, utilities and healthcare. Europe would be his second choice. He does not see potential in the Middle East and North Africa except for Saudi Arabia, where he favors the banking sector.

How about Lebanese securities?

Nader recommends buying stocks at the Beirut Stock Exchange at these levels but warns that the lack of liquidity and paltry diversification of stocks is an issue in the Lebanese market. “When you invest in equities your main objective is capital gain but in Lebanon, your objective is the dividend yield because investors look at equities as a fixed income instrument.”

How about Lebanese government bonds?

Nader believes they are overvalued mainly because Lebanese individuals and banks are investing in the government bonds and “we are seeing some interest from international institutions”. He would avoid investing in them.

Your top investment recommendations?

 Cash and short-term corporate bonds in the US market.

Would you invest in Facebook?

“For a small amount why not,” he says, while highlighting that the IPO was managed badly as Morgan Stanley, the underwriter, and Facebook executives decided to boost the offering size by 25 percent and push up the price to the higher end of the range.

Hatem Rafii

Thoughts on the global markets?

 Rafii is bearish on commodity markets but very bullish on equity markets as he believes the recent accommodative actions by central banks worldwide should spur economic activity in next two to five years, leading to an appreciation of equity prices. He does not expect a repeat of the 2008 financial crisis in the near future, as the major banks in the US and in Europe are more stable and holding lots of cash.

Favorite markets?

Japan is one of his favorite markets as it is cheap and one of the top economies. “Today the top four economies are the US, Japan, China and Europe. If any of these top four markets gets cheap, at some point money will move around,” says Rafii. He expects these markets to start rallying first, followed by emerging markets. “If you have confidence, you will go to the top tier first.”

Would you buy Facebook?

“Never” he says, as it is “hard to price, it has no history and it is based on projection and hope for the future.” Rafii believes the future of the stock and of the company is uncertain. He would rather wait for a year or two before looking at the stock.

Thoughts on MENA markets?

Rafii would only invest in these markets once the top economies have gained momentum. He recommends accumulating on weakness for investors with patience and a long-term horizon.

Best ideas in the MENA markets?

 Rafii would invest in the Dubai Financial Market stock as it is a “great stock to accumulate once volumes come back to the exchange.”  He also likes the banking sector in Saudi Arabia.

Top investment ideas?

 He would buy two indices: Japan’s Nikkei 225 and the S&P 500.

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Banking & Finance

Boardroom talk

by Executive Editors
written by Executive Editors

“Compliance officers have a lot of powers now. The joke between bankers is that they are running the banks.”

Fadi Osseiran, general manager of BlomInvest

“After a streak of eight years of positive double-digit growth in net profits, the environment is now more difficult for bank profitability. It is true that banks are still growing and standing very good in terms of liquidity, asset quality, capital adequacy and risk coverage but the level of profitability has been adversely affected by the operating environment.”

Marwan Barakat, chief economist at Bank Audi

“You can not take these deposits and say I want to reduce exposure to the Lebanese sovereign to zero percent and place all my money in international markets, you will lose. You cannot convince a depositor by saying,  ‘I’m an international bank, I don’t invest with the government, all my money is outside of Lebanon’. Will he accept to be paid a 1 percent deposit rate?  Would you put your money with us?”

Alain Wanna, deputy general manager and head of Group Financial Markets at Byblos Bank

“In the past, banks internationally made money by taking in lots of risks, which is now forbidden. So banks have to become utilities. The decision has been taken by regulators worldwide. The real business for banks is to take deposits, lend the money, support the economy and provide services. It is going to be very challenging. Competition will be much tougher.”

Jean Riachi, chairman of FFA

“Banks are the police today. Our job is to know more about our clients than we did 20 or 30 years ago and to make sure they are not conducting transactions on behalf of other undisclosed persons. We have to do as much as we can. It is a challenging and difficult job.”

Walid Raphael, chairman of Banque Libano-Française

“We have sought and are currently seeking new sources of revenue to maximize our profitability levels. Some of these sources are traditional and within industry norms, such as fees and commissions, and others are more creative and, frankly speaking, out of the box.”

Nahla Abou Dib, chief operating officer of Al Mawarid Bank

“A higher interest rate would give comfort to the banks to take on more government debt; but if [the government] wants to try to decrease the rate further, it will be against the benefit of the government. Banks will stop buying risk on the republic. Government should understand that they should increase the rate to a bit of a higher level.”

Najib Semaan, general manager of First National Bank

“There have been talks about a new world order… a shift in the balance of economic and financial power, from West to East. This could also be translated into companies that have businesses linked to the East. Such firms will need safe and secure access to international markets, especially through trade finance to support their expansion.” 

Pik Yee Foong, CEO of Standard Chartered Bank
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Banking & Finance

The tally rises

by Maya Sioufi
written by Maya Sioufi

While it is still too early to assess the wider repercussions of the government- mandated wage increase this year, it is already irking Lebanese banks, coming at a time when banks are also compelled to increase spending to comply with mounting regulations both locally and internationally.

As one of the largest private sector employers, with roughly 21,000 employees as of the end of 2011, the salary increases, applied to all bank employees across all brackets, are “significant money,” says Nassib Ghobril, chief economist at Byblos Bank. As of February 1, the government has raised the minimum wage by 35 percent to LL 675,000 ($450) while increasing salaries by an average of LL 299,000 ($200) for income brackets above LL 675,000.

“As competition for talent in the region was increasing in previous years, we had to raise salaries and so we had already experienced a significant cost increase in the whole sector, ” says Walid Raphael, chairman of Banque Libano-Française. “Now, along with a reduction in growth of the economy, we are imposed with an increase in the cost of human capital. This has a major impact on the sector.”

In the first three months of this year, staff expenses at Alpha banks — the 12 banks with deposits in excess of $2 billion that account for 85 percent of the banking sector’s deposits — were up by 12 percent year-on-year to total $293 million, according to research firm Bankdata Financial Services. By comparison profits totaled $370 million during the period.

While the banking sector has strong fundamentals — it is still witnessing growth in assets and deposits albeit at a slower rate — its declining growth in profitability is making it more difficult to swallow the additional costs, a pain felt more vigorously by the smaller banks than the larger ones. “For the big banks which have large enough profits, they can manage, for the smaller ones, it is more difficult,” says Fadi Osseiran, general manager of BlomInvest Bank.

The regulation burden

The increase in salaries has been accompanied with an increase in costs for complying with additional international and domestic regulations — more software and staff needed. Those new regulations include Basel III and the United State’s Foreign Accounts Tax Compliance Act, while domestically Lebanon’s central bank has introduced new regulation aimed at curbing money laundering.

While the actual cost of compliance has yet to be calculated, the smaller banks are in a less favorable position to absorb the shock — as reflected by the drop in profits of the total banking sector relative to the Alpha banks. The sector’s growth in profits dropped by three percent in 2011 but the Alpha banks’ profits were up one percent, highlighting the struggle of the smaller banks. “Given that competition is increasing and that the larger banks are better prepared to face competition, I think the smaller ones will be impacted the most,” says Ghobril.

To pull through in more difficult times, consolidation may have to be considered. “We have been hoping that consolidation would eventually happen and it did not,” says Raphael, who added that he expects this to change. “We need the right people with the right skills, we need to train them so it is becoming a big burden for smaller banks.” 

 Jean Riachi, chairman of FFA Private Bank, believes that as competition  gets tougher, smaller banks will have to merge with larger ones and he expects this to take place “in the future.”

As Byblos’ Ghobril says: “When you have a growing pie, there is enough for everyone but when the pie stops growing, then definitely the better prepared players are ready to adjust to this environment.”

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Stung by the small print

by Paul Cochrane
written by Paul Cochrane

You are in the car and your mobile rings. It is another annoying text message from a bank offering you a loan at X.X percent. You look up at a billboard and another bank is offering a loan at an equally preferential interest rate so you can fund that dream boat, vacation, nose job or any other burning desire. With Lebanese banks’ assets having reached $144 billion, equivalent to around 370 percent of gross domestic product, the banks are highly liquid and looking to lend, hence the marketing barrage touting consumer loans.

While the banks’ greater willingness to lend is no doubt a boon for the economy, borrowers could well be stung if they have not looked closely at the “conditions apply” section and read the small print; a loan at a rate of say 7 percent could well end up being in the double digits. What’s more, you will certainly not get that kind of information from a text message or billboard advertisement.

But it is not just on loans where the banks can hit you with unexpected costs. The same can apply to hidden costs on credit cards and on certain accounts, such as in foreign currencies, where the banks should tell you about incurred fees but more often than not don’t until you query a charge you’ve already paid and it is too late. High interest rate accounts are another potential trap, such as in Lebanese lira — where the rate is much higher than say the US dollar — but the bank charges you an amount for holding the account in the first place, which can put a dent in returns, even if only marginally.

The problem is that while Lebanon has a consumer protection law, which includes an article on misleading advertising, it has not been applied with much vigor  since it was enacted in 2005. Furthermore, Banque du Liban (BDL), Lebanon’s central bank, has not issued circulars to require greater transparency when it comes to loans, even though the BDL governor, Riad Salameh, is reportedly keen on consumer protection.

There is a pressing need for the consumer protection law to be applied and for the establishment of small courts to deal with such issues cheaply, swiftly and impartially. This is an issue which concerns not only Lebanon. Throughout the world, with few exceptions, consumers are not adequately protected or fully aware of their rights. Just last year, non-profit organization Consumers International launched a set of recommendations to the G20 countries on consumer protection in financial services. And lest it not be forgot, it was cheap and easy credit, as well as highly complex financial products, that triggered the 2008 financial crisis that the world is still reeling from.

Lebanon may be in danger of following the same route if consumers are not adequately protected and have legal recourse, while for banks a slew of bad loans could seriously disrupt the balance sheets. Admittedly, Lebanese banks are by nature conservative and do not make taking loans easy — it has not reached the stage it did in the West where the unemployed, students and low-wage earners were offered ridiculously high loans that were nigh on impossible to pay back. But with so much liquidity sloshing around the banks, diligence is required and easy credit should not be the solution to economic woes and low consumer confidence. It would be supremely ironic if the Lebanese banking sector was hit further down the road by a credit crunch or the like after having successfully weathered the fallout from the global financial crisis due to conservative banking policies.

As for false advertising, such enforcement is sorely needed beyond banking fees. Supermarkets tout value you can trust, yet the same products are available in corner stores at cheaper prices. And when it comes to food, there have been more than enough food poisoning scandals going around to make you not want to eat outside your home.

Ultimately, rigorously enforcing the law would not only be beneficial to the consumer but would also be a good revenue earner for the government, with perpetrators of false advertising able to be fined, under article 11 of the consumer protection law, “from LL 10 to 50 million ($6,666 to $33,333).”

PAUL COCHRANE is the Middle East correspondent for International News Services

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From problem to petty

by Nicholas Blanford
written by Nicholas Blanford

In the not so distant past, Lebanon’s southern border with Israel was a byword for instability and periodic violence. It was the frontier upon which the diplomatic community in Beirut would continually focus their attention for signs of another outbreak of fighting with Israel. These days, however, it is Lebanon’s northern border that is under observation and a source of unease. Small wonder, given the recent spate of cross-border shootings, kidnappings, arms smuggling attempts and brief incursions by Syrian troops.

But anyone following the news in early May would have thought it was still the southern border that was the more volatile, given headlines that spoke of Israeli “incursions” and “violations and incidents”, of “tensions” building along the Blue Line, and UNIFIL calling on all parties to “avoid misunderstandings”.

The source of this troubling news was an Israeli incursion into Lebanese territory to a depth of 65 centimeters. Yes, 65 centimeters!

Memories are still fresh of the time when Israel occupied a large chunk of south Lebanon; residents of the area suffered daily artillery shelling, air strikes, explosions, detentions and all the other joys of occupation by the army of an enemy power. It was not so long ago, in the greater scheme of things, that Israeli troops were patrolling up and down Hamra Street in Beirut in the late summer of 1982.

The violation, of course, was Israel’s new concrete barrier being erected along the Blue Line, the UN delineated boundary to verify Israel’s compliance with UN Security Council resolutions,  in Kfar Kila. The Lebanese border road runs beside the Blue Line and Israel’s security fence at this point. It seems that the Israeli troops who patrol the frontier here daily have tired of insults being hurled at them by passing Lebanese motorists. It is hard to understand why the Israelis would otherwise build this wall. It won’t be high enough to stop someone of an athletic build tossing a hand grenade over it. But then, the whole exercise was about posturing — on both sides of the border.

The Israelis were determined to build their concrete wall and the Lebanese authorities were just as determined that the construction activity not stray one centimeter (literally as it turned out) across the Blue Line.

Why is it posturing? Because the GPS systems used by the Lebanese army, UNIFIL and the Israeli military are simply not accurate enough to determine violations of less than a meter. All three sides could take individual GPS measurements multiple times during a single day and would likely record different readings every time on all three handsets.

This little drama in Kfar Kila in early May echoed the large and more contentious effort to delineate the Blue Line on the ground in the summer of 2000 following Israel’s troop withdrawal. It was an exercise that, with a modicum of goodwill and common sense, should have lasted no more than a week. Instead, it took two months due to Israel’s repeated — and petty — violations (an Israeli army concrete block two meters north of the line was an example) and Lebanese nit-picking to ensure that the Israelis got away with nothing.

The irony regarding the Lebanese border road between Addaisseh and Kfar Kila, along part of which the new Israeli wall runs, is that a stretch of the route actually lies on the Israeli side of the Blue Line anyway. This anomaly resulted from a mistake made by UN cartographers in drawing up the Blue Line in early 2000, who were using maps of too small a scale. When the mistake was realized, it was too late to change the path of the Blue Line and instead everyone just decided to quietly forget about it.

Nonetheless, the unfortunate deaths last month of Sheikh Ahmad Abdel-Wahid and his companion at an army checkpoint in Akkar and rising hostility felt by aggrieved Sunnis against the military, as well as continuing violence along Lebanon’s northern border appears to have belatedly refocused attention away from the south. There are more pressing concerns facing Lebanese security than a slab of Israeli-manufactured concrete straying a few centimeters onto Lebanese soil. And if the most serious concern along Lebanon’s southern border today is an Israeli violation of Lebanese territory that is only 65 centimeters deep, then that should be an occasion for rejoicing.

NICHOLAS BLANFORD is the Beirut-based correspondent for The Christian Science Monitor and The Times of London

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Editorial

An absurd state of being

by Yasser Akkaoui
written by Yasser Akkaoui

The Lebanese state of being is an odd mixture of denying reality and accepting the absurd. The former often leads to deferring difficult decisions and necessary actions, while the latter creates acceptance for when the consequences of inaction come into bloom.

Take water and electricity. Infrastructure has been collapsing and pushed passed capacity for years — the World Economic Forum has rated Lebanon second last in the Arab World in infrastructure development, behind only Yemen — yet politicians pretended it was beyond their purview and that these utilities could somehow hold out, letting corruption, inaction and ineptitude reign in place of actual policy making. The result now is that Lebanon — a country priding itself on its modernity, culture, education and sophistication — has massive rolling blackouts daily, dry faucets in the summer and yet we simply shrug bitterly and say: “That’s the way it is.”

Much more dangerous has been the Lebanese obliviousness in addressing the seeds of conflict — such as animosities between sects, the massive proliferation of weapons, and the lack of developmental, economic and educational opportunities in many parts of the country that lead to ever more entrenched poverty. These are the fuel for the clashes we saw last month; the Syrian uprising spilling over into Lebanon is simply a spark.

The reality today is that we are a populace ready to spray bullets at the tiniest provocation while our national army and security forces are so riven with sectarian divisions that they cannot intercede. Even if they are overturned, travel warnings by Gulf countries regarding Lebanon will likely scare away hundreds of millions of tourist dollars this summer. The most important pillar of the economy, the banking sector, is watching profits evaporate as the mess all swirls around, and just received another kick last month when Standard & Poor’s global credit rating agency lowered its long-term outlook for Lebanon.

Perhaps most of us are already aware of these factors. Yet, as the summer approaches, we cannot allow ourselves to hit the beach and become complacent while our country is lead into another internal conflict. Unless we recognize the need to deal with our underlying issues, rather than simply treating the symptoms, our problems will be much larger than a little sunburn.

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Concepts of conception

by Thomas Schellen
written by Thomas Schellen

Without children, there is no society. Thus any society that seeks perpetuity will support the raising of children and in some form provide toward needs such as nutrition, education and medical care. But what about financing the beginning of life when the biological method has misfired? Should artificial conception be funded by society, whether through state provisions or via private health insurance? 

The issue is under debate in almost every society, including here in Lebanon. The debate revolves around advanced techniques in reproductive medicine, such as in-vitro fertilization (IVF), and it is charged with ideological, religious, cultural, demographic, financial, medical and bio-ethical aspects. But to bring the issue down to earth, the question that people ask if they desperately want a child is: “Why is IVF not paid for by health insurance?” Private providers, still behind the curve in terms of even maternity leave, are probably not the best place to start.  However, as the Lebanese state and its agencies have provided maternity-related medical care at overall rates of almost 95 percent in public hospitals, and more than 75 percent in private ones, it is a valid question for Lebanese society if the state shouldn’t fund IVF treatments for childless persons who want to conceive and cannot do so otherwise.  

Admittedly there are many aspects to this issue, but here we will look at IVF from a strictly economic perspective. On the simplest denominator, the fertility branch of the medical economy is a business activity that displays pronounced profit-seeking behaviors. It moreover is a market where there is a tight supply of qualified medical providers and a demand that is not only growing but also urgent, in the sense that a successful conception by IVF statistically requires numerous attempts and has to be accomplished before age 40 or 42, depending on local regulations. Attempts later in life have a dramatically reduced chance of sucess. The combination of desperate demand and a poorly regulated market opens the possibility for deception and abuse. This means that society needs to assume oversight of the supply side through precise operating standards that go beyond supervision of technical or medical competency, and of the market through a competent regulatory framework. Society must also decide what controls there must be over the demand side of fertility seekers. (An example of a country in our region that has been proactive on the issue and has departed from stonewalling against IVF was interestingly, the Islamic Republic of Iran.)  

Lebanese society, with its well known bent for ignoring the rule books, will need to very carefully regulate all three elements of supply, market, and demand side if it desires a platform where the pleas for children by the childless can be answered without opening the doors for unbearable supply-side corruption and market distortions.  There is another locale in the neighborhood that not only accepts IVF, but also claims to be the paradise of IVF. According to a May news article by Israeli writer Viva Sarah Press, the health ministry of Israel has announced that the number of babies conceived by IVF has risen to more than 4 percent of all births, and a 2011 story in the New York Times (NYT) called Israel “the world capital of in-vitro fertilization”. The practical factor driving Israel’s high rate of IVF treatments is that they are fully covered by the mandatory national health insurance. The rationale behind the societal willingness, according to the NYT story, was on one hand appreciation of family and on the other hand the desire to counter birth rates in Palestine.    

Political demographics aside, the fundamental issue is that life is not to be denied and that children are the greatest opportunity to fill it with meaning — Lebanese society needs to discuss where it stands on helping those who cannot have children.

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Economics & PolicyMonaco

Bechara el-Khoury & Mustapha el-Solh

by Maya Sioufi
written by Maya Sioufi
The relationship between the principality of Monaco and Lebanon started developing from the independence of Lebanon under the rule of Bechara el-Khoury, Lebanon’s first president and Riad el-Solh, Lebanon’s first prime minister. Today, Lebanon’s consul in Monaco is Mustapha el-Solh, the great grand nephew of the first prime minister and Monaco’s consul in Lebanon is Bechara el-Khoury, the grandson of the first president. Executive sat with both consuls to discuss this enduring relationship between the two countries.
Bechara el-Khoury 

How would you describe the relationship between Lebanon and Monaco?

There has always been a consul of Monaco in Lebanon, ever since my grandfather was president, as we are riverains de la Méditerranée. The relationship has always been very good and now we couldn’t have it better. Mustapha el-Solh is very well connected and I am not badly connected either [laughs]. The access is easy. That is what is the most important in bilateral relationships. 

How many Monégasques are there in Lebanon? 

Three: Eric Bessone (director of sales and marketing middle east at Monaco’s Société des Bains de Mer), the wife of my father, and myself. My brothers and sisters also have the nationality but they live in Paris and so does prominenet Lebanese businessman Toufic Abou Khater. Those are all the Lebanese with a Monegasque nationality. 

What are the ongoing projects between Lebanon and Monaco? 

Monaco is cooperating to finance projects in Lebanon such as sea cleaning, planting cedars and a few health programs for the United Nations Relief and Works Agency (UNRWA). There is a non-governmental organization (NGO) called Les Amis du Liban, which distributes 250,000 to 300,000 euros ($320,000 to 380,000) per year to different sectors of activity. When Prince Albert II came two years ago on a state visit to Lebanon to see President Sleiman, we organized training for the Lebanese fire brigade to go to Monaco and be trained to deal with fires in towers, because they had no previous training and we have more and more towers. This program is still ongoing. We also have a Maronite priest who stays at the Monaco cathedral on a revolving three-year loan. We are always working on projects to improve the relationship between Monaco, Lebanon and the Middle East. 

Do you also represent the Middle East? 

My job is not just for Lebanon. It is also for the area because Prince Albert II knows I have relationships across the Middle East. Whenever he goes to the region, he takes me with him. We can attract a lot of Arab tourists to Monaco. There is potential for the Middle East clientele to come and develop projects in Monaco. 

Where are the investment opportunities in Monaco?

They are in real estate primarily. Also there is a law in Monaco which allows you to have worldwide revenues come in with no taxes and go out to pay your worldwide employees with no taxes, making it attractive for companies to set up an office in Monaco. That is why all the big ship owners are based in Monaco today. This is important because it is an enormous facility. Also there is no personal income tax in Monaco and a small corporate tax. 

What can Lebanon learn from success story of Monaco? 

Lebanon needs to attract more tourism. One of the strengths of Monaco is that every single day there is an event and there are conventions. Lebanon needs to do that too. Also, Monaco was promoting heavily the healthcare industry. This could be done in Lebanon. For instance,  Monaco has fantastic heart surgery unit. We have very good doctors so we [could] have more specialized centers. 

If you had to choose to live in either Lebanon or Monaco, where would you choose? 

Obviously, I was born in Lebanon and I carry a very famous name, but for my own personal choice I would live every day in Monaco. 

Mustapha El Solh 

As consul of Lebanon in Monaco, what does your role entail? 

The Lebanese consulate in Monaco is an honorary one and has existed since 1996.  We represent the interests of Lebanon across all sectors and we look after the interests of all the Lebanese residents in Monaco. We conduct all consular administrative services, such as passport renewals and visa issuance, and we organize many events throughout the year to promote Lebanon in Monaco. Last year, I organized the official trip of Prince Albert II to Lebanon with an economic delegation of 80 people during which many bilateral agreements were signed.  For example, four Lebanese TV stations signed distribution agreements with the local TV cable operator to transmit locally in Monaco. 

And as president of the Association of Consuls Honoraires de Monaco, what does your role entail? 

The Prince and the government of Monaco look highly to the consular corps for reinforcing the bilateral relationship between Monaco and the rest of the world; there are more than 80 consuls accredited in Monaco. In 2009, I was elected by all consuls in Monaco to become president for a five-year mandate. My main role in this post is to promote the consular function and most importantly to represent the interest of the consular corps during all the official events in Monaco.  

How strong is the current relationship between Lebanon and Monaco and how can it be further developed?

The relationship between the two countries is exceptional. In the past 20 years, there have been numerous agreements and exchange programs. On the economic side, companies have signed trade agreements allowing exchange of services and products (mainly in jewelry, insurance, shipping, etcetera). Major environmental agreements were executed between the two countries.  Bank Audi, Lebanon’s largest bank, opened a branch in Monaco two years ago.  A representative office for Monaco’s largest tourism and service company, the Société des Baines de Mer (SBM), opened in Beirut in 2010 and since then many cultural events have taken place in Beirut coming from Monaco.  

Do you have figures on how many Lebanese live in Monaco and how many visit Monaco per year?

There are more than 300 Lebanese living in Monaco and Lebanon features among the top 20 countries to visit Monaco. 

What can Lebanon learn from Monaco’s success story?

Up until the early 1970s, Lebanon used to be the success story of the whole Mediterranean basin. Whether for its touristic or financial infrastructure, Lebanon excelled in attracting visitors. Unfortunately, the civil war and the recent political turmoil impacted negatively Lebanon’s potential. On the other hand, Monaco always prioritized offering its residents and visitors a great experience and the principality has developed a sophisticated financial infrastructure with an absolutely secure environment. It manages the country as a large corporation and its general interest is to service a profitable and satisfactory business model. It also offers rich cultural programs including ballet, theatre, museums and art exhibitions. I strongly believe that once the political stability is regained in Lebanon, it would offer equivalent conditions and would become a key destination for people to reside throughout the year, as well as visit to discover the richness of our ‘patrie’.

How many years have you been living in Monaco? What do you like best about living in Monaco that you can’t find in Lebanon?

I have been in Monaco for 18 years and have been greatly welcomed by its society and people. The special thing about Monaco is that it is a cosmopolitan city but also maintains certain traditional and conservative habits. With time, Monaco grows on you due to the warmth and care of its citizens.

If you had to choose between living in Lebanon and Monaco, which country would you live in?

I left Lebanon almost 30 years ago and I have lived across many continents and cities. Lebanon has and will always be home. Monaco is a great place to live, it offers my family the best conditions and continues to be a second stable home.

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Economics & PolicyMonaco

The East floats into town

by Maya Sioufi
written by Maya Sioufi

It is early May and the famous Place du Casino — wherein lies one of the world’s oldest gambling houses, the renowned Monte Carlo Casino — is overflowing with tourists. 

Californias, 911s  and Continental GTs line the casino entrance for tourists to gawk over and take the cliché Monte Carlo postcard shot beside overpriced luxurious wheels with the Monte Carlo casino behind: the ultimate photo of lavishness. 

The European sovereign debt crisis engulfing the principality’s neighbors does not seem to have reached Monaco, but the faces flocking to these alluring two square kilometers do seem to have changed, with Asian and Eastern Europeans tourists replacing Western European and American ones. 

A look at the recent financial results of the Société de Bains de Mer (SBM), Monaco’s biggest employer and the company behind some of the principality’s most prestigious assets, does not paint the same rosy picture as the Place du Casino. 

SBM is the main economic actor of the principality and its assets include fours hotels, among which are the famous Hotel de Paris and Hermitage hotel, five casinos, including the Monte Carlo Casino, 33 restaurants and bars, three spas and the legendary Jimmy’z night club, a celebrity hotspot. Being 70 percent owned by the state of Monaco and the ruling Grimaldi family, with the remaining stake listed on the Paris stock exchange, “the SBM and the state are almost one” says Bechara el-Khoury, consul of Monaco in Lebanon. 

As the financial crisis hit the pockets of tourists, the profits of the SBM reversed from 31 million euros ($39 million) in fiscal year 2006/2007 (ended March 31) to a 22 million euros ($28 million) loss for the fiscal year 2010/2011. Its stock price got hacked too, down some 50 percent from the start of the financial crisis. Year to date, it is down 10 percent (as of May 18). In response, the company reshuffled its management in November 2011, appointing a new chief executive who replaced the former CEO of nine years, creating a deputy CEO position and adopting a new strategy. 

Attracting new customers

Sitting at the cozy yet refined Bar American in the Hotel de Paris, Axel Hoppenot, marketing director at the SBM, talks through the new strategy, which aims to identify how to develop revenues and readdress the cost structure. He reveals that they have witnessed a pickup in activity so far this year. 

While the European sovereign debt crisis is still weighing on their results, Hoppenot is confident that the “engines of growth from the new markets will help the company overcome this difficult period.” He confirmed that there has been a focus on attracting new markets to Monaco, most notably focusing on Russia, Eastern Europe, Asia and the Middle East. 

To cater to the Middle East, the SBM opened a representative office in Beirut at the end of 2010, headed by Eric Bessone, from which the company aims to cover the region. According to Bessone, the role of the Beirut office is to present offers of leisure, business, and well-being from the 50 institutions of the Monégasque company. 

Currently, the Middle East accounts for approximately eight percent of their total hotel revenues and can reach up to 10 to 12 percent in the summer. The Middle Eastern clientele has increased in the past couple of years, adding some two to three percentage points, according to Hoppenot. He does, however, warn that this year will not be as solid due to Ramadan falling in the middle of summer. 

Bringing Monaco to Lebanon

The interest in the Middle East was most striking with the opening of Saadiyat Monte Carlo Beach Club in Abu Dhabi last year, SBM’s first venture outside of Monaco. 

“Today it is more complex to set up a business in European capitals as the entry cost is much higher, and because of quality control we can only set up in prime locations” says Hoppenot. “Abu Dhabi is, in the Middle East, one of our most important markets.” 

When asked if SBM was considering more investments in the region, Hoppenot stated that for now, given the economically challenging times, SBM is focusing on consolidating their current assets in order to ameliorate the quality of service. 

As for Lebanon, SBM has been focusing on bringing the glamour of Monaco closer to home. The aim is to “get closer to our guests and help organize ‘tailor made’ stays in Monte Carlo”, says Bessone. In 2011, SBM organized the exchange of DJs between Monte Carlo’s Jimmy’z and Beirut’s famed Sky Bar. This successful exchange will take place again this year. 

It also brought the Les Ballets de Monte Carlo’s “Cendrillon” to the Casino du Liban in November. This year, it organized the exchange of chefs between La Posta’s Maroun Chedid and Blue Bay’s Marcel Ravin, with two events occurring in April and May. 

“Many Lebanese love to visit Monaco and these events make them feel like they are in Monaco,” says Bessone, “at least for a night, until they visit again.”

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