Executive Magazine

Tablets on the boardroom table

by Jad Hajj March 3, 2012

written by Jad Hajj

With the explosive growth in demand for smartphones and notebook computers in recent years, it is hard to believe that corporate technology users are still finding room in their bags and attachés for yet another device. The rising popularity of tablet computers, though, suggests they are somehow finding a way.

Although corporate demand for tablets is still low relative to consumer demand, it is already significant — and rising rapidly. Global market research firm IDC sees worldwide demand for tablets and other Internet mobile devices rising sharply in coming years, from 41 million units in 2011 to 235 million units in 2016. A significant driver of this growth, according to IDC, are corporations, which are seen doubling their share of tablet purchases to nearly 10 percent of total shipments in 2015, up from about 5 percent in 2010. Apple, for its part, claims that its iPad tablet is being used or tested at 80 percent of Fortune 100 companies. In the Middle East and North Africa, technology-consulting firm Ovum sees growth doubling in 2012 alone, from two million units to four million, and rising to 11 million by 2016. A recent IDC survey found that roughly half of all Internet users said they plan on buying a tablet in the near future.

In hopes of gaining a better idea of what is driving the popularity of tablets in the business world, Booz & Company and Motorola recently undertook a global research effort, interviewing chief information officers (CIOs) from a wide variety of companies. Three factors stood out.

First, much of the interest in tablet computers is due to the ongoing consumerization of corporate information technology (IT), as more and more employees insist on using their favorite devices in the workplace. IT departments are scrambling to put in place new IT infrastructure and policies to run and manage these devices. CIOs have needed to devise programs and processes that support workers who bring personal devices — not just tablets but also smartphones — into the office and use them in their regular work activities. Some companies have even gone so far as to give employees an allowance to buy the devices they prefer.

Mobility is a second factor, as more companies recognize the value in empowering employees to consume content — check e-mail, review PowerPoint presentations, manipulate downloaded sales data — on the go. Very few notebook computers are mobile broadband-enabled (less than 10 percent, according to our estimates), compared to roughly half of tablets. Our CIO interviews suggest that mobile broadband tablets are being strongly considered as alternatives.

Finally, there are the added security benefits that mobile broadband offers over Wi-Fi connectivity, including the ability to erase a tablet’s sensitive data remotely, if necessary. “We need encryption at rest [data physically stored in an encrypted manner], policy enforcement via active sync, remote data wiping, encryption, and associated policies,” a CIO at a global workforce firm told us. “It is all basic stuff, but it needs to be supported out of the box.”

In the coming years, enterprises in the MENA region will be further investing in information and communication technologies (ICT) as they strive to catch up with their counterparts elsewhere. Although enterprises account for as much as 6.5 percent of all mobile SIMs in some European countries, they have not even reached one percent in any country in the MENA region. By some estimates, the size of the MENA enterprise ICT market will almost double over the next five years, from an estimated $14.8 billion in value in 2010 to $26.1 billion in 2015.

The next two to three years will see a very interesting battle for the corporate share of mobile device spending, and CIOs in the region will need to think about what part tablet computers will play in their overall ICT strategy. Cost, of course, will be top of the list. A current major drawback of the iPad is its relatively high price, which is difficult to justify if the device is to be used in conjunction with both smart phones and laptops. Other cheaper tablets have not gained sufficient momentum in the corporate market, but this may change, as developers create more business-oriented apps and companies develop their own.

The extent to which MENA enterprises adopt tablet computers may also depend on other factors that lead to benefits that are harder to quantify but should still be part of a CIO’s calculations for return on investment. Among them:

Structured creation: Tablets’ initial use in enterprises is primarily centered on applications where mobility matters and where content is consumed rather than created. The new frontier of mobile productivity will be driven by what the industry terms “structured creation,” in which users can enter information in standard methods, such as drop-down menus. This results in data sets that can be easily compiled and analyzed, meaning faster processing of data and gathering of insights. In the MENA region, increasing Arabic language support for tablets — along with greater numbers of Arabic-language applications — will drive this kind of structured creation.

Unanticipated productivity gains: Because tablets can significantly increase employees’ connectivity, they will likely result in higher productivity as employees respond to questions faster, review materials more frequently, and plan work activities in advance. An IDC survey shows that 40 percent of UAE organizations have deployed mobile devices to at least 10 percent of their employees for work purposes.

Increased retention: Consumer technology is taking over every facet of people’s lives. Employees want access to the newest and best technology at work because they most likely are using something even more cutting-edge at home. Providing employees with new technology to help them become even more productive can boost retention by improving their engagement with the company.

Unexpected creativity from employees: In their push to persuade management to invest in tablets, employees will likely search far and wide for new ways of using them, in order to justify the costs. Those engaged in sales demonstrations have found that the tablets provide a level of interaction not previously possible. Client response is stronger, and salesmen report better results, suggesting that companies will need to be open to evolving applications of the technology.

Competitive advantage: Inevitably, the use of tablets will become standard in virtually every industry. Companies that can devise new applications and uses for tablets may be able to gain real advantage over competitors. Tablets can offer an advantage in industries where it may be important for customers to see that the company is on the cutting edge of technology. CIOs should consider whether there are ways the workforce interacts with customers that could be standardized through the adoption of tablets to improve customer perceptions of the company.

With manufacturers releasing more advanced tablets every month, the increasing use of these devices in the business world is not likely to slow down anytime soon. In the MENA region, senior managers are driving technology purchase decisions much more actively because of their own at-home use of tablets and other devices. CIOs in the MENA region are responding to this interest from senior managers and are seeking to ensure support of the new devices in corporate environments. Understanding how tablets are evolving — and how they are likely to benefit enterprises in the years to come — can help position enterprises and their employees on the leading edge of this technological change.

March 3, 2012 0 comments

Naturally selected

by Maya Sioufi March 3, 2012

written by Maya Sioufi

To say that Internet and social media usage in the Middle East and North Africa is expanding exponentially has become a truism of our time, but like the dinosaurs that failed to adapt as the ice age covered the globe, many companies’ marketing strategies now resemble bewildered cave men soon to be run over on the information highway.

So how fast is the online world changing? Well, the number of Internet users in the Middle East has increased from 3 million in 2000 to around 77 million today, of which 18 million are on Facebook, according to Internet World Stats.

In the past year alone, the number of Facebook users tripled in Algeria, doubled in Egypt and Saudi Arabia, and increased 75 percent in the United Arab Emirates, according to an analysis by Omnicom Media Group (OMG). Advertisers have been among the first species to take note of the sea change in consumer behavior and realize the value of the increasing attention online.

While Internet advertising in the Middle East is still in its infancy, online advertising spend in the Arab region is estimated to reach $266 million by 2013 and $1 billion by 2016, up from $56 million in 2009, according to Zenith Optimedia. Advertising companies, web development companies and small start-ups specialized in digital marketing all want a piece of the growing digital pie.

Ahead of the wave

Lebanon-based Eastline Marketing (ELM) is one of the companies offering digital marketing tools and claims to have grown rapidly from its inception in 2006 to cut itself a 20 percent slice of the domestic market currently, with other clients in Qatar and Saudi Arabia. Its founders, Nemr Badine and Marc Dfouni, both graduates from Canada’s Concordia University, say their headline offering is Sweepz, the only proprietary platform in the region that supports the Arabic language. Through Sweepz, clients of ELM can launch social media promotional campaigns such as contests, quizzes and sweepstakes, which are linked and regularly updated to social networks such as Facebook and Twitter. The company expects this product, which costs $1,000 to $10,000 depending on the project, to represent 30 percent of revenues in 2012.

ELM offers several other services, such as social media marketing (which includes managing the online presence of a customer) and display advertising: the acquisition of media space, planning campaigns and search engine optimization.

ELM’s founders believe that they have now reached an inflection point and in order to grow further they need more capital, and thus are seeking a strategic investor to fuel expansion. Badine and Dfouni estimate their company’s value to be at least $3 million.

“Our objective is to position ourselves as the regional leaders in digital marketing solutions whereby international brands would come to us to market their brands in the region and regional brands would come to us to market their brands both regionally and internationally,” says Badine. ELM is considering several options: venture capitalists (VCs), angel investors and another round of ‘family and friends financing’, though “we are in that spot where we are a bit too large for smaller VCs and too small for larger ones,” remarks Badine.

As the Middle East becomes ever more wired and the number of users who are ‘Facebooking’ and ‘Tweeting’ increase, the prospects for the nascent digital marketing industry seems abundant. ELM has been one of the early movers in this space but their future expansion in a fast changing industry will depend on their securing strategic capital.

March 3, 2012 0 comments

Economics & Policy Technology

Q & A – Hamadoun Touré

by Thomas Schellen March 3, 2012

written by Thomas Schellen

The United Nation’s International Telecommunications Union (ITU) partners with governments to define the global rules that underlie the development of the information society. It has also assumed a growing role in seeking to employ information and communications technology in reaching the UN’s Millennium Development Goals. Executive sat down with the ITU’s Secretary General Hamadoun Touré after his February visit to Beirut to discuss the ICT policy in Lebanon and the wider region.

You have referred to broadband Internet access as an essential infrastructure for participation in today’s economy. In the case of Lebanon, how do you assess the importance of broadband in the country’s participation in the global economy?

As I said [during my visit], Lebanon had a fixed broadband penetration rate of about 4.7 percent at the end of 2010, which is the highest in the non-GCC countries of the Arab region. Lebanon also has a relatively extensive fixed telephone network at about 20 percent fixed-line penetration, which is again the highest penetration in fixed-lines in the Arab region. It has been estimated that by end of 2010, 20 percent of households in Lebanon had a high-speed DSL broadband connection and therefore, Lebanon will have to prioritize increasing the number of households with internet access if it is to reach the global target put in place last October by the [ITU’s] Broadband Commission for Digital Development, which is that by 2015 40 percent of all households in developing countries will have broadband internet access at home.

How about pricing of broadband and mobile access?

Lebanon is providing relatively affordable fixed broadband penetration; according to our price basket that we published last year, entry level Internet broadband access was at 3.5 percent of average monthly income at the end of 2010, which is below the five percent target identified by the broadband commission… One must say that Lebanon has been late to introduce 3G mobile Internet penetration. Operators launched 3G only in 2011 and that was late; due to the nature of the annual contracts they have, mobile operators will not upgrade the networks through long-term investments.

Do you have figures showing the correlation between broadband penetration and ease of access and economic growth?

There are publications by the World Bank and other agencies showing that each 1 percent of broadband penetration translates into 1.38 percentage of growth in gross domestic product. You could also argue the contrary that each seven percent of GDP translates into 10 percent penetration of broadband; we will never be able to say which one is the cause and which one is the effect.

A concern in Lebanon is the political indecisiveness that could delay a new board for the Telecommunications Regulatory Authority (TRA). Would in your view a non-functional TRA affect the development of telecommunications in Lebanon?

Can you imagine a game without a referee? It could be chaos; and therefore you need a referee that is not only fair but also balanced and neutral and ensures that players play a fair game. You need rules and regulations — light-touch regulations, as we always advocate, but they have to be in place. To have authority, the referee should come before the game starts. Otherwise he could be ignored. Continuity in this area [of regulatory authority] is very important.

Do you see that the political upheavals of the Arab Spring have been affecting the operating environment, from the ITU perspective?

We as ITU are assuming that today, except for one country — Syria — the Arab Spring is over and that we need to talk about economic development issues in order to start creating jobs for the people who are the most in need of them. This is why we are organizing the Connect Arab Summit in Doha for March 5 to 7 to which His Highness the Emir has invited all the heads of state and governments in the Arab region and to which I am inviting all the Arab private sector and the international private sector as well. We want to bring all the stakeholders together and talk about not only investments in infrastructure but also in content development because the region has so many things in common and could develop heavily upon common Arab heritage, Arabic language, and Arab culture.

March 3, 2012 0 comments

Economics & Policy Technology

The apper class

by Thomas Schellen March 3, 2012

written by Thomas Schellen

Times always seem fortuitous for those companies in information and communications technology (ICT) that focus on the newest and fastest growing demand. This is even truer when other outlooks in the economy are, to say it nicely, as subdued as is the case today. So it come as no surprise that the handful of Lebanese companies which specialize in the emerging business of developing applications for mobile devices are buzzing with aspirations.

By the reckoning of the members in this new Lebanese branch of the global ICT industry, the field of developers in Lebanon today comprises about five companies that are focused exclusively on mobile app consulting and development. Approaching the market with innovative names such as FOO Solutions, Eurisko Mobility and Apps2U the larger of these companies employ between 15 and 25 professionals apiece and have on average produced 20 to 30 mobile apps in the past three years or less.

A second group of Lebanon-based companies with supply-side mobile app business interests include developers that produce apps as a value-added service to their existing ICT business or are expanding from their existing business into the apps space. A third group of companies are startups and young companies that are product centric, meaning they are in the business of developing games or financial payment solutions and use the mobile as one of their channels to engage customers. These companies, however, do not seek to address third party demand from companies that are looking to have apps developed by specialist services firms.

For FOO founding partner and CEO Elie Nasr, a crucial value gain since the company’s formation in early 2009 was the acquisition of skills. “Part of the process [is] where clients invest and the company benefits from delivering the project but also from the learning involved in producing the app,” he said.

Eurisko’s co-founder and CEO Zack Morad told Executive that the company has become a regionally known entity in less than 18 months of operations. “We started marketing our services in late 2010 with all cold calling,” he said. “In the first six weeks of 2012, there was almost no cold calling. Now, a lot of people call us.”

Up-sizing

The growth rates for the relatively small, in terms of employment numbers, have been impressive. FOO and Eurisko expanded from founding teams of two and four entrepreneurs in 2009 /10 to teams each numbering just under 20 professionals at the end of 2011. For 2012, each of the two competitors looks to reach team sizes of 30. Like the other mobile app developers in Lebanon, FOO and Eurisko have been financed from own funding resources of the founding entrepreneurs and their business partners, not by small and medium enterprise investment funds, venture capital groups, or private equity firms. Morad and Nasr also both said that they are entering a phase where their respective companies are looking for injections of capital. The company has grown organically until now and is bent on reinvesting its earnings, Morad said, “We are not taking anything out of the business. We will always be investing and growing because we see the big picture and we want to grow and help grow the market.”

Going viral

Similarly to Eurisko and FOO, the headcount at Apps2U is advancing toward 20 specialists. What is different in the genesis of Apps2U is that this enterprise grew out of the business of parent company MT2. This firm, although having worked for many years with relatively low profile, is well established in regional ICT. Its corporate DNA is rooted in telecommunications and MT2 acts as a content and services provider in partnership with network operators and audiovisual media across Arab markets. “We are a telecom company and we are offering all kind of mobile app services to all kind of customers in the region, not only in Lebanon. MT2 has connections with over 30 operators,” Apps2U managing partner Mario Hachem told Executive. The content formulas of MT2 include highly profitable features such as subscription-based delivery of Islamic content – e.g. guides to the proper observances during Ramadan and hajj – via SMS to mobile phone users across regional markets from Saudi Arabia to Iraq under revenue sharing agreements with network operators.

This business sparked the formation and growth of Apps2U, said Hachem, who is also chief technical officer at MT2. “For the last three years, operators have been asking for apps and for the last three years our team has been increasing in numbers and experience,” he said.

Scheduled to be turned into a standalone company under ownership by the current MT2 investors, Apps2U plans to increase team size from 16 developers to between 25 and 30 before the year’s end. The growth is in part for adding new technical expertise, as the firm wants to build skills in developing apps on the Microsoft 8, Facebook, and SmartTV platforms. As it has been expanding into the mobile app sector, the latest addition to the interactive portfolio of MT2 and Apps2U in February 2012 was a dedicated television channel on Nilesat where Blackberry users in the Middle East can flash their chat messages on the TV screen while communicating within the Blackberry community as well as with users of different smartphones.

Also sporting a strong business profile in providing value-added services to telecommunications operators is Inmobiles. Established in Beirut as startup in 2003, the firm has grown to a current team size of 80 by delivering products to telecoms operators or the banking sector, but until now never to end users, Inmobiles CEO Charbel Litany told Executive. The company made its first foray into the provision of an app to end users just at the end of 2011. It did so with a big splash, as the “whozcalling” app went viral in the space of weeks.

According to Litany, the roll out of the free app and its success nicely links to a strategy to convince network operators of a value proposition involving operator-owned app stores to push into the space currently controlled by device manufacturers. “I am trying to push value-added services on the device side and have network operators change from the network side to the device side. With the huge growth of the smartphone market, we have decided to test the market with one of the free products,” he said.

The company has so for not been monetizing its successful app in favor of using it as “proof of concept” in demonstrating to regional telecom operators that they can generate their own revenue with their app stores. This notwithstanding Inmobiles’ first free app appealed equally to regional and global users.

Market potentials

Corresponding to the limitations on assessing the value of enterprises on the supply side of mobile apps, searching into the demand side value for Lebanon’s mobile app developers does not provide a picture with clear and sharp contours.

According to Fadi Sabbagha, the chief executive of Born Interactive, local market potentials for mobile apps are limited by the small budgets that most Lebanese companies allocate to digital. For his firm, apps are not a standalone business but a natural extension of its communications services on a basis of client demand. What’s more, most of the business is in the region, not in Lebanon.

In all likelihood, the small budgets in Lebanon are directly correlated to the small size of the Lebanese market which translates into small revenue potentials, he told Executive, noting that hype over mobile apps here is paired with restrictions on budgets whereas in regional markets he observed, “a bit less hype but clients are more comfortable with budgets.“

While acknowledging that apps are still on the slow burner in the Lebanese market, Ralph Khattar, CEO of 2010 startup Virtual, added that the launch of every app developed for a major Lebanese company provides a boost to the business.

“Each time a company launches an app, they are promoting it, and each time is advertising [app development]. There are a lot of companies that need an app and we can have a good market share. Twenty percent is a good number,” he said.

Reality tests

Responses from the firms that have ordered apps give a clue that the experience is a bit more differentiated. Some high-profile companies which had apps developed for them in the past two years gave Executive overall positive and satisfied feedback but added that things could still get better.

According to Jihad Murr, the Chief Operating Officer of television station MTV, the station’s strongly advertised app is not yet highly used but among the most downloaded Arab applications on all platforms.

“For Lebanon, it is too early to make money from mobile apps but I think mobile apps and related revenue streams in the future will be a big part of the income for our media. We wanted to be the first in this market,” Murr said. MTV’s mobile app is linked to the station’s website, which has 70,000 unique visitors per day.

According to Eurisko Mobility, which developed the app for MTV, the station’s app has been downloaded over 300,000 times. The company embarked on the mobile app project with the intent to monetize it through revenues streams from paying advertisers, he added. The ad activity has been scheduled to start in March and MTV will also seek to obtain revenue from in-app sales of specific programs. Both projects are in progress but have advanced slower than planned. “We were late in monetizing it. We are starting now but I expected to start six months ago,” Murr said.

Similarly, business development director Michel Aji at restaurateur Roadster Diner enthused about the company’s mobile app in general but could convey no positive message about harvesting financial rewards from the year-old gadget.

The app was the number one among the free-to-download apps for the Lebanese market in the first two weeks of its launch in the first quarter of 2011 and had reached 15,000 downloads by mid February 2012, Aji said. The company serves in the range of 200,000 monthly visitors across its 12 eateries in Lebanon.

“On return on investment on this particular application, there is no reliable data,” he conceded, pointing to the Lebanese issue of unreliable data connectivity as a reason why the app does not facilitate online ordering.

No cheap feat

Costs of commissioning a mobile app are certainly an issue in the small local market. Companies that ask a Lebanese provider to custom develop a mobile app for them look at a cost of “at least $5,000”, Sabbagha said. This appears to be a consensus figure in the industry. The ceiling of possible cost for an app is not really defined, and Hachem said it can reach “$100,000 per platform”.

For entrepreneur Bahi Ghubril the cost of having a high-end app developed for several thousands of dollars per mobile platform is certainly a barrier. Ghubril is CEO of Zawarib, a mapping company with a declared mission to make Beirut easier to navigate. But although maps and mobiles make a natural fit and location-based services are among the reliable performers in application stores, the value proposition in Lebanon is not strong enough for his company to go it alone in commissioning an app.

“People consider apps to be a sign of success but users expect everything in apps and online to be free; at the same time it costs a lot of money to develop a strong app that would have good interactivity and a good search function for Zawarib while the market for this in Lebanon is very small,” he said, adding that the proposition of developing an app could be interesting in a partnership with online portals but not as a branding tool or mere image project.

Competitive edge or just edge?

The developers agree that infrastructure problems and high cost of connectivity are barriers to the industry’s growth in Lebanon. However, the better-late-than-never rollout of 3G services by the mobile phone operators Alfa and MTC Touch since last November has resulted in some 400,000 users who by February 2012 have taken to the services.

The outlook seems to be moderately positive also on the structural side of telecoms as latest annual management contracts between the government and the two network operators, which went into effect at the beginning of last month, contain two, albeit somewhat vague, management objectives of positive relevance to mobile applications developers: network operators are each to enable at least one Mobile Internet Service Provider by deadline of May 31 and to establish a mobile applications platform by 2013 “that hosts and offers mobile applications to subscribers”, with the added stipulation that four fifths of the applications have to be sourced from Lebanese developers. The two propulsion factors for competitiveness of Lebanese developers are the high quality of the human capital and its low cost in Lebanon. “Beirut has a highly-educated human resources pool, highly motivated, highly creative, and very cost efficient,” Morad said.

From Inmobiles, whose Charbel Litany said the company has seen zero attrition in its headcount since starting operations in 2003, to Virtual whose Ralph Khattar referred to the country’s leading universities as ready sources of talent, the developers describe Lebanon’s rich human capital as a core strengths that the industry can build on. This comes with the downside of losing staff to players abroad. As Nasr said, “the problem is not migration to competitors in Lebanon but people going overseas.” For FOO, a loss of four staff members who went abroad to join companies or pursue further education represented 70 percent of employee turnover since the company started.

As all mobile app developers in Beirut are aware of the threat of losing high-value talent to multinational firms, each company said that it is investing substantially in employee loyalty and retention, offering profit sharing or stock grants to its existential talents.

As every developer Executive talked to also has aspirations to grow its business internationally, foreign competition is an issue to consider. According to the Lebanese providers, India, the world’s leading country in ICT outsourcing, is not the biggest competition, because, as Nasr argued, Indian supply comes with a price-value caveat under which high-quality apps will be just as expensive as those produced here.

The GCC countries are also not on the radar as big competitors because of their low availability of native human resources and high costs of production in the knowledge economies. This leaves countries closer to Lebanon as main sources of competition in developing mobile apps under similar price and quality matrixes. One serious contender is Egypt, which was one of the rising stars in the outsourcing globe, before running into disruptions of economic reliability in 2011. Other countries with competitive potential vis-à-vis Lebanon are Jordan and, according to Nasr, Palestine.

Mobile applications developers represent the third wave of potential knowledge economy progress via ICT made in Lebanon. It serves to recall here that the first two waves — the introduction of mobile telephony in 1994/95 and the new economy take-off in 1999/2000 — also saw the country start out at the forefront of ICT adoption and native entrepreneurship. Both times, the natural competitive advantages of Lebanese innovativeness and richness in human capital were eroded, at least in part, by systemic, political inabilities to support the economic competitiveness of Lebanese ICT firms.

Business Models in Mobile apps

The business models underlying the development and delivery of mobile apps by serial app developers come in three main categories:

First — the free to download, which is still the largest group. When such an app is ordered by a client, the app developer produces a customized product according to demand specifications that include interactive features and the number of operating systems and platforms that the app needs to run on. These apps can function as enterprise tools within a company (for example as catalogues for the sales team), as marketing, branding, and customer relations tools toward a company’s end customers, or as instruments enhancing the company’s corporate social responsibility portfolio. As the developer produces the “free” app for a corporate client, he is paid like any other software consulting and developing company. In many cases, developers also produce free apps at their own cost and push them into the markets to build reputation or to generate advertising or sponsorship revenue streams.

Second — user paid and individually priced apps which can be downloaded for a onetime fee. This bazaar or mall-like business model has been pioneered by Apple’s App Store and benefits both the developer, who in case of the App Store reaps 70 percent of revenue, and the platform, which takes the rest. This model has proven to work well for popular apps as users pay fees that in many cases amount to less than one dollar for each download. If an app goes viral through peer-to-peer recommendations by users or effective marketing schemes, the monthly revenue streams can scale into very handsome sums and high profit margins. Apps in the ultra-long tail of available products, however, until now are not likely to generate enough income to recover development costs. The owners of leading platforms and application stores — currently the device makers (with Apple on top) and Google — are beneficiaries of concentration in consumer capital, but network operators and other players are not going to leave this attractive market place un-staked in the rising mobile technology economy, or mobitech.

Third — apps that rely on recurrent revenue streams from users. Under this model, a basic app is often offered for download at no cost. However, the free download acts as teaser. To succeed, the app needs to convey attractiveness and inspire loyal and habitual usage. Customers are either asked to pay for the continuous use of the app after the initial free usage period, or are offered premium services for which they pay either time-based, recurrent subscription fees or per-item charges. This in-app purchase model unlocks income streams for content providers and network operators.

March 3, 2012 0 comments

Real Estate

A skyline of skeleton towers

by Peter Speetjens March 3, 2012

written by Peter Speetjens

Reflecting the blue skies above, the Jordan Gate towers are the tallest — and arguably the emptiest — buildings on the Amman horizon. King Abdullah II in 2005 laid the foundation stone for the prestigious project, which was said to become the business address in the Hashemite Kingdom. Since 2009 however, the two giant cranes standing next to the towers have remained idle. The top floors have never been built and part of the glass exterior has come off. Today, the $300 million project remains a grim reminder of the days when the sky seemed the limit for Amman real estate.

The Jordan Gate was an initiative of the Gulf Finance House (GFH), a Bahrain-based investment firm badly hit by the 2008 financial crisis. GFH needed a $300 million loan to stay afloat and in 2010 escaped default only by agreeing to postpone the final repayment of $100 million. According to a prominent Jordanian contractor, who wished to remain anonymous due to fears public comments could jeopardize his business, GFH was not able to pay Al Hamad Contracting (AHC); instead, it offered the Sharjah-based firm the unfinished towers. Executive asked GFH and AHC to comment, but both declined.

“What happened is simple: the bubble burst,” said Wael Jaabari, owner of the large Jordanian real estate agency Abdoun Real Estate. “The developers had a business plan based on selling office space for some $4500 per square meter (sqm), which was, perhaps, feasible before the 2008 credit crunch. Yet they better get used to the new reality and swallow their losses. Maybe they can still rent out part of the building.”

“Compared to the peak prices of early 2008, prices in west Amman, depending on a property’s location and quality, have decreased by some 25 to 60 percent, while prices in the outskirts have decreased by some 80 percent,” said Jaabari. As an example, he refers to his office in Abdoun, a prime location, which he bought in 2010 for $1,200 per sqm, while a few years back people were paying up to $3,000.

And yet the Jordan Department of Lands and Surveys (DLS) last January reported that the real estate market grew by 8 percent in 2011 to amount to nearly $9.8 billion, following a 25 percent increase in 2010. Hopeful signs of recovery, although the increase follows upon a decline of more than 30 percent in 2009 alone. When compared to 2007, the 2011 market is only 14 percent larger.

There are other reasons to treat the DLS statistics with care. “One government measure to boost trading was to abolish the real estate registration fee of some 10 percent,” said economist Yusuf Mansur, chief executive officer and owner of Jordanian consulting firm EnConsult. “Today, a government employee estimates the value of a property or land, which is generally higher than what the contract states. What’s more, the sales of a small number of commercially viable plots of land boost and obscure the overall picture.”

Boom & Burst

The reasons behind Jordan’s real estate boom prior to the crisis are well known. The 2003 United States-led invasion of Iraq forced many Iraqis to flee to Jordan. Some arrived, quite literally, with suitcases full of money, which they used to buy homes in Amman’s affluent western section. Price increases of up to 400 percent were recorded and real estate trading increased by a whopping 74 percent and 48 percent in 2004 and 2005, respectively. The Amman market was awash with cash and seemingly everyone wanted a piece of the pie, including many foreign investors. An ABC Investments report states that 1,247 new construction companies were established between 2004 and 2008, of which 339 companies were established in 2008 alone.

Today, the days of plenty seem long gone indeed, if only for the fact that loans are not as easy to come by. The Central Bank has imposed a strict ceiling of 20 percent of customer deposits on the amount of facilities granted by banks to the real estate and construction sector. “Banks are less lenient regarding real estate loans,” said Jaabari. “For a while, they permitted firms to postpone payments. Pay a bit now, a bit later. Now they just want their money. As a consequence, we no longer have pinball property development. No more building to speculate and sell; it’s a buyer’s market.”

The Jordan Gate project was not the bubble’s only victim. The GFH initially also intended to build the $800 million Royal Village — a project that never saw the light of day. The same is true for The Living Wall, a project that is anything but alive. An enormous billboard still reminds Amman of the six luxury towers and Buddha Bar that were set to arise. In 2006, the project was even named Best Future Commercial Project at Cityscape Dubai. Today it remains a huge hole in the ground.

The Living Wall was the brain child of Mawared, a state-owned developer with close ties to the military, which has been tainted by a series of corruption scandals. Its former CEO, Akram Abu Hamdan, has been detained for allegedly pocketing millions of dollars.

Dubai World’s Limitless Towers did not even dig a hole. A massive marketing campaign prior to the crisis stressed the towers’ height: at 200 meters they would dwarf even the Jordan Gate, while the suspended swimming pool, at 125 meters, would be the world’s highest — would being the operative word, as the $300 million project was never even started.

Another failure concerns the $1 billion Saraya Aqaba resort. Construction started in 2006, yet has been stalled since 2008. Saraya Holdings, largely owned by former Lebanese Prime Minister Saad Hariri, also planned to build a $700 million Dead Sea resort. Announced with much fanfare at the 2007 World Economic Forum, construction never started. The same is true for the company’s regional projects. Small wonder therefore that the Saraya Holdings headquarter, which Hariri planned to build at his brother Bahaa’s Abdali Project, has been stalled as well [see box].

Abdali stays Afloat

“The Abdali Project was not spared the effects of the global financial crisis like so many other large, mixed use developments,” said Salim Majzoub, deputy CEO of Abdali Investment and Development. “Since the start of the crisis, not a single investor has pulled out; however, construction work on some of the projects was halted for a period of time. Currently, some 15 percent of the developments in ‘phase one’ are on hold.”

With an estimated cost of $3 billion, the first phase of the Abdali Project foresees, among other elements, the construction of 12 mixed-use buildings and a shopping boulevard and mall, which are the heart of the 1.7 million sqm regeneration development in central Amman. The project is a joint venture between Jordan’s Mawared and Horizon, a Lebanese property developing firm established in 2002 by Bahaa Hariri. Both Mawared and Bahaa Hariri own 44 percent; the remainder is in the hands of Kuwait Projects Co.

If a tree falls in the forest…

As a forest of construction cranes continue to operate at Abdali, the project seems to have survived the onslaught that followed the 2008 crisis. “Approximately 75 percent of the mid-rise developments within the project will be ready for opening in 2012,” said Mazjoub. “They mainly consist of ‘Grade-A’ commercial and luxury residential space. The Abdali Boulevard has been over 80 percent completed and construction has started on the Abdali Mall, which is due to become operational by the end of 2013.”

Since 2008, the project has received several loans from Arab Bank, BLOM Bank and Bank Audi, with work underway on a number of banks’ offices, as well as offices for Saudi Arabia’s Rajihi Cement and Lebanon’s MedGulf. Also, five towers are being built, among which are the Rotana Hotel Tower (“the highest in the Kingdom”) and a DAMAC residential tower. The Emirati developer reportedly faced some financial woes, yet found new partners to complete the 34-story building, though abandoned the initial idea of building a total of 7 luxury towers in the Jordanian capital.

The Abdali Project is arguably the most prestigious in the country. Modeled to a large extent on Solidere’s downtown Beirut project, it aims to become the new (commercial) heart of Amman. Its failure would be an absolute disaster for Jordan’s international standing. It remains to be seen however, if the project will finally be executed as planned on the drawing board.

A planned university and medical city, reportedly, have already been cancelled. In the project’s $2 billion second phase are another nine high-rise towers and 25 mid-rise buildings. Seeing the fate of the twin coffins of the Royal Gate — and the many, many other plans to build Jordan’s biggest this and tallest that — perhaps a slightly humbler version is not entirely out of place.

Saraya dream turns sour

The Lebanese daily Al Akhbar reported on February 13 that King Abdullah of Saudi Arabia had saved Saad Hariri from bankruptcy by offering him a $2 billion interest-free loan. The latter firmly dismissed the report as Hezbollah propaganda. True or not, rumors over Hariri’s financial health have been persistent and if his real estate endeavors are anything to go by, then a major Saudi bailout would not come as a surprise.

Saad Hariri is the chairman and majority shareholder of Saraya Holdings, a Dubai-registered firm that aims to develop “luxurious mixed-use tourist destinations”. Its first and flagship project was announced in May 2005 at the World Economic Forum: Saraya Aqaba, a $1.2 billion mixed-use resort built around a man-made lagoon. In partnership with, among others, Arab Bank, the project had an initial capitalization of $242 million. It raised a further $120 million by issuing shares.

Other project announcements followed in quick succession. In September 2005, Saraya Holdings, Arab Bank and the Emirate of Ras Al Khaimeh signed an agreement to launch the $500 million Saraya Islands. In February 2006, Saraya and Arab Bank launched a $250 million real estate investment fund. In June 2006, Saraya signed a deal with Oman to create a first-class beach resort south of Muscat. In 2007, it announced a deal to create a $700 million Dead Sea resort and a luxury resort on Russia’s Black Sea coast. Then came the ‘Big Bang’ of 2008, and suddenly things turned very silent indeed at Saraya Holdings. Work at Saraya Aqaba, by the construction arm of Hariri-owned Saudi Oger, had started in January 2006 but was stalled in 2008. Executive requests to Saraya Aqaba for further information on the matter were declined.

Last year, a former Saraya employee told Jordan’s Jo Magazine that Saraya Aqaba’s business model was based on one-third equity, one-third loans and one-third pre-sales. A model quickly undermined, he said, as the project’s estimated cost ballooned from $700 million to $1.2 billion. “The company grew incredibly quickly,” said a prominent Jordanian contractor and former employee of Saraya Aqaba, who wished to remain anonymous due to fears public comments could jeopardize his business. “It seemed they were trying to inflate the brand name in order to go public. Then the crash happened and we had to scale back dramatically. The marketing department in Amman alone went from thirty-five employees to just four or five. We thought it would get better, but the CEO, Ali Kolaghassi, eventually admitted that it wasn’t looking good — and that’s when many of us lost our jobs.”

While most Saraya projects are “on hold”, there is a chance that Saraya Aqaba will still rise from its coma. In October 2011, the company announced a new cash injection of $240 million by an unnamed Abu Dhabi investor, which follows a previous $350 million injection by Saraya Holdings’ Aqaba partners Arab Bank, the Aqaba Development Corporation and Jordan’s Social Security Corporation.

By February 2012, with work at Aqaba still yet to be resumed, the company issued a rare press release promising to begin discussions with clients who had bought homes in Saraya Aqaba. “We do appreciate the patience of our customers and look forward to addressing their needs within the coming weeks,” wrote Saraya Aqaba’s general manager, Saud Soror. Whether that means Saraya’s dream world of villas, townhouses and a lagoon will indeed manifest, one can only wait and see.

March 3, 2012 0 comments

Society

Snap, crackle and pop-ups

by Ellen Hardy March 3, 2012

written by Ellen Hardy

Life is tough for Lebanese designers. Despite unreliable spending and tourist numbers in a contracting economy, retail rents per square meter per year range from $400-$2,000 in malls, and are totally unregulated elsewhere. Multi-brand stores are reluctant to support local names, and even established retailers rely on holiday seasons to boost slack sales. This makes setting up shop a daunting prospect for small local businesses that need to boost their brand presence and client bases while running on minimal staff and overheads.

Some brands are therefore operating ‘limited edition’ or seasonal stores, which are as blink-and-you’ll-miss-them as Lebanese profit margins themselves. They are inspired by the trend in America and Europe for ‘pop-up shops’, which in some cities have become ubiquitous in their popularity. Opening sometimes for days or even hours, these stores offer unique products and experiences, from Hermès pitching its scarves and swimwear to summer crowds in the Hamptons, to ‘Alcoholic Architecture’ by Bombas & Parr, which filled a venue in London with vaporized gin and tonic. Brands love the marketing buzz and sales hike — qualities that are exceptionably valuable to Lebanese designers struggling for a foothold.

Temporal retail

“It’s not that sales increase twofold during the holiday period like Christmas and August, it’s that they increase seven to eight times,” says Nayla Assaf, whose casual contemporary clothing line En Ville has been selling wholesale to multi-brand stores in Beirut and Amman from a studio in Ain El Mreisseh since early 2010. She convinced Solidere to let her and six other brands take over a line of empty shops in the Souks for six weeks over Christmas and the New Year.

“At this point in time it did not make sense for me to open a permanent shop,” says Assaf. “So I wanted to tap into that holiday buzz and holiday crowd… by choosing a really prime location with lots of tourists.” Unlike other locations that were overpriced and whose owners were reluctant to draft temporary contracts, Solidere listened to Assaf’s case that “we’re entrepreneurs, we’re Lebanese, those shops are empty… but equally we’re going to bring people. We have our own mailing lists, we have our own contacts.”

For a “symbolic” rent, these retailers could test the location and market, meet new clients and boost sales. Compared to her sales for the same period the previous year, Assaf scored an increase of around 150 percent, offset by incidental expenses like staff, décor, packaging and the DJs and catering that were an essential part of the “buzz”. Two of the pop-ups — jewellery designers Joanna Laura Constantine and Smartiz handbags and accessories — decided to extend their contracts on the site across Valentine’s Day and Mother’s Day. Joanna Laura Constantine, 90 percent of whose customers are in the United States, says that “the potential of the market in the Middle East had low expectations for me until I opened the pop-up store,” which exceeded her predictions “20 times over”.

Elsewhere, Rouba Mortada’s paper products and homeware brand Choux à la Crème sells in a few local outlets, in Monocle stores worldwide and at Liberty in London, but she is not ready to commit to a Beirut boutique of her own. Instead, she opened her fourth-floor Clemenceau design studio to the public for two weeks in December, selling her standard and Christmas collections with special packaging and snacks on offer. A couple of posters and a Facebook group advertised “for two weeks only” and “limited edition pretty things”, generating 22 percent of her annual turnover. Simply, Mortada says, “it makes more sense and more money for me to sell on my own,” and the use-by date on a retail space can intensify this advantage. “It’s a whole experience,” says luxury brand consultant Marie-Noelle Azar from the agency Whyte Mulberry. “You’re selling them the product that they might not necessarily need but… because they know that in a week you won’t have it, they need to buy it now.” Mortada sees this potential as unexplored by established Lebanese brands: “One of the frustrations about Beirut is that it tends to run in the same circles… so I wouldn’t be surprised by any of the creatives doing a pop-up shop here.”

Seductive synergies

For Nour Sabbagh and Nur Kaoukji, their ‘Beirut Loves’ pop-up experience is an end in itself rather than a test run or a boost to an existing brand, opening for 15 days a year and focusing on products from a different country each time, starting in 2011 with ‘Beirut Loves Jaipur’.

“We both knew that we wanted something ephemeral, something that was a store and an event mixed into one,” says Kaoukji. “We imagine the store to be a kind of suitcase, something exciting we bring back from our travels.” They, too, scored a deal on a Downtown location. “People were initially surprised that we were only going to be present for 15 days, but that factor pulled them back. We received a lot of client’s details who were keen to be notified about our next pop-up.” For them, consumers are in a mood to be seduced by such projects. “One can sense their longing for this personal connection and we believe that this is going to affect businesses in the long run, the trend of the ‘one off’ or the handmade is growing stronger.”

Azar sees the pop-up trend in Beirut as an underdeveloped tool that, done properly, can bring together the best in online media, marketing and creative sales. “In terms of maturity… it’s still who you know that’s going to come and who you know that’s going to buy, it’s not commercial,” she says. “When pop-up stores started in Europe and the US they started in the main street where they know that they have traffic and they know that if they get the right product to this traffic they’re going to sell — you don’t have that here.” In an environment that lacks syndication, low-cost retail space or a healthy market for carefully crafted, locally branded goods, entrepreneurial artisans have always relied on exhibitions and exhibits to spread the word about their work; pop-up stores work on the same principle but with significantly more business benefits.

And when the store itself is the must-have limited-edition accessory, the possibilities are endless. Sara Darwiche at Chouchic.com, an invitation-only online boutique for the Middle East that deals in luxury labels, describes her marketing strategy as “a continuous virtual pop up store for a variety of high-end brands and trend setting styles [and] themes with a twist”.

Daily sales at noon are driven by membership and email alerts that cause “a daily flood of transactional traffic,” she says, for a “business model based on scarcity, selection and urgency,” where “hundreds of thousands of shoppers compete online for the limited inventory… we expect the majority of the ‘hot’ items to be sold within the first 10 minutes, with the bulk of sales occurring within the first 90 minutes.”

Attempting this sort of daily rush in the physical world, Hania Yaffawi from local multi-brand store Depeche Mode opened concept store 6:05 Downtown in January. Rather than spending money on traditional marketing, the store relies on the media and buzz generated by a daily cocktail hour with a DJ and weekly events with artists and musicians. If every day offers a unique or unusual experience, the theory goes, the clientele will be more diverse.

Big players in the industry are also waking up to the benefits of limited-edition, unusual events to hook customers. Retail rents at ABC Dbayeh might run at an estimated $1,000-$1,200 per square meter per year, but 205 square meters have been dedicated rent-free to temporary stalls for Lebanese designers for three months of 2012. The designers promote their wares in a new forum, and ABC benefits from corporate social responsibility brownie points, plus a percentage of the sales and publicity. As Azar says, it is a “win-win situation.”

March 3, 2012 0 comments

Society

Colored by uprising

by Executive Contributor March 3, 2012

written by Executive Contributor

As headlines are dominated by the Syrian political crisis, new exhibitions in Damascus have drawn to a halt. But the city’s art gallery doors are still open.

The conflict seems unlikely to deter the Syrian contemporary art boom that has lit up the market over the last five years. In 2007, a major work by Safwan Dahoul, a leading and much coveted Syrian painter, sold for $10,000. Today it reaches $150,000. The post-9/11 appetite for Arab culture may have played its part; as titles on Islam and the Middle East flew off the virtual shelves of amazon.com, art from the Middle East also experienced unprecedented international attention.

Compared to artists from Lebanon, Morocco and Egypt, who were already relatively exposed to global galleries and collectors, Syria revealed itself to be an oil well of untapped talent, paint being the asset. Artwork prices soared, contemporary art galleries mushroomed and reports such as “Syrian Art Sizzles” (Time Magazine, Sept 2008) and “Damascus Evolves Into a Hub of Mideast Art” (New York Times, Nov 2010) saluted the awakening.

“The talent hiding over the last five or six years was the surprise factor, the shock factor, that made them globally interesting,” says Khaled Samawi, the owner of Ayyam Gallery, a blockbuster art enterprise with a roster of some of the most highly-valued Arab artists — the majority from Syria — and a triad of exhibition spaces in Damascus, Beirut and Dubai. “When we first opened in 2006 to 2007, in Damascus, it was absolute golden years. I’d say once a week a private jet would land from the Gulf or somewhere, who had come to Damascus just to visit Ayyam.” Samawi, a former hedge fund manager, has spearheaded the rise of Syrian contemporary art, with a smaller cluster of galleries, such as Damascus’ Tajalliyat Art Gallery, and auction houses Christie’s and Sotheby’s following suit. Most of Ayyam’s artists, such as Asaad Arabi and Oussama Diab, have seen their paintings rocket in value five to 10-fold, thanks to Ayyam’s polished and well-publicized exhibitions, record-breaking auctions and young artist competitions. By providing their artists financial stability and access to an international hit list of collectors, the market has grown so much that Edge Capital, a venture capital and private equity holding company, is now choosing to invest in Ayyam’s expansion. New galleries in London and New York will open in the next two to three years, a major triumph for Middle Eastern art. Samawi sees it as a “vote of confidence”, both for the artists and collectors, giving “the scoop” to Executive before the official press announcement.

Fearless expression

The investment strikes at the right time. The political uncertainty embroiling Syria is inspiring a new drive in contemporary art: angry, poignant and provocative. “They’re painting the best art they’ve ever produced. It’s painful, humanitarian art,” Samawi describes it.

“For years people have been living under fear, and now the fear is gone. Now artists can express themselves. There are no more taboos. They can talk about the president, the power, the party,” says Ammar Abd Rabbo, a Paris-based Syrian photojournalist who exhibited “Coming Soon”, a series of portraits of pregnant women, in Beirut last February. He believes there is a new, powerful generation of young Syrian artists in the making, “born from the crisis and revolution.”

Some art has already left Damascus’ citadel. “In Army We Trust”, a radical set of paintings by Thaier Helal, sold positively at Ayyam’s Dubai gallery earlier this year, despite its provocative title. Established artists Mohannad Orabi, Mouteea Murad, Kais Saman and Omran Younes have abandoned their solitary ateliers and transformed the empty Damascus gallery — which stopped hosting new exhibitions four months ago — into a remarkable shared workspace. The ferocious art being produced, both in quantity and subject matter, is broadcasted on a live feed from Ayyam’s website. “It’s probably the busiest the gallery has ever been,” says Samawi, who has offered the space as a cultural refuge to citizens surrounded by violence.

“We started the workshop to see this situation in a different way. There is a huge power inside us, and we have to make these ideas and feelings visual,” says young Damascus-born painter Mohannad Orabi, whose work is becoming “more realistic, more emotional.” The eerie, blackened eyes of his human figures are unmistakable, but Orabi now paints them “open.” “Now,” he says, “you can see the detail inside and the sparkle. This sparkle is a kind of hope.”

March 3, 2012 0 comments

Society

Banquet on the bay

by Ellen Hardy March 3, 2012

written by Ellen Hardy

Even by the standards of a city where you can dine at the tables of multi-Michelin-starred chefs one night (Yazhou, S.T.A.Y.) and be seen eating out at global trendsetters the next (Momo at the Souks, Gaucho), Zaitunay Bay is piquing interest. Pitching as it does a complex of 17 new restaurants, five retail outlets and a public promenade into the heart of the commercial district at a cost of $160 million, the brainchild of Beirut Waterfront Development (BWD) is a bold attempt to recreate the area’s pre-war sense of glamour and community. But what is it like for the local businesses whose hopes are riding on the project’s success?

Two concepts, Cro Magnon Steakhouse & Bar and St Elmo’s Seaside Brasserie, are the work of one set of five Lebanese investors, and for them, the location sealed the deal. Though rental prices in Hamra and Ashrafieh may have been anywhere from 10 to 20 per cent cheaper, “We wouldn’t have come on board if it wasn’t Zaitunay Bay,” says one of the investors, Mazen Fakhoury. Employing some 100 people between the two restaurants, Cro Magnon is a high-end, glamorous steak house, and St Elmo’s a more casual brasserie with a slew of theme nights. Putting together the $4.5 million initial investment required a special chemistry between the five shareholders, who came together through casual meetings and are mostly newcomers to the hospitality industry. Operations manager Joey Ghazal is the most experienced restaurateur of the group, with over 14 years in the restaurant industry in Montreal and London. He is joined by engineering and financial investment services CEO Houssam Batal, nightclub public relations and communications veteran Ramzi Traboulsi, oil and gas expert Mazen Fakhoury and finance professional Rami Batal.

Ghazal and Traboulsi first met with the BWD in February 2010, when they proposed a casual seaside brasserie. Learning that the landlord was also insisting on having a steakhouse in the project, they ended up signing the leases for two restaurants in December. “There are a lot of back office and operational expenses that you incur,” explains Ghazal, “and it’s obviously better to take those on over two profit centers.” On this day February, as the five settled into their distressed leather armchairs at Cro Magnon to sample their own menu of prime steaks and seafood, single malts and cigars, more than a desire to make a quick, high return on their investments ties them together. “You have to feel that there’s a measure of trust, a foundation of business understanding,” says Ghazal. All the investors contribute their business wherewithal; Rami Batal, for example, already has accounting and finance infrastructure in place for his other companies, so can manage the back office, while Traboulsi contributes PR expertise. “They’re their own number one clients,” winks Traboulsi. Established businessmen with a taste for the finer things in life, they came on board for the chance to bring a type of restaurant to Lebanon that they’ve admired abroad. “We are people who travel a lot and… appreciate the best class restaurants in the world,” says Houssam Batal. As such, he explains, they are long-term investors, not out to make a quick buck. They “hope to be able to pay back our investment in three years… you expect to double your money at least within the first five years maybe.”

Working with Zaitunay Bay ensured that there would be no competing concepts on the site; the most intense negotiations were over the specific concept briefs. After that, says Ghazal, apart from external design issues, the BWD was surprisingly hands-off — though citing problems with ventilation and delivery access, he notes wryly that the complex overall “could have been designed by someone who has some knowledge of the restaurant industry. It wasn’t.” Other niggles of opening a restaurant in Beirut — such as a lack of qualified staff and the terrible truism that political uncertainty hangs over everything — are a standard part of the deal. Just two months into operation, it is too early for Zaitunay Bay to release meaningful footfall and revenue figures, but Ghazal will say that “the landlord assured us they were going to do everything in their power to ensure a certain amount of footfall per week or per day, and the project has kept its promise.”

Like most restaurant businesses, the shareholders are open to including other investors and franchising the concepts to other territories in the future. As Zaitunay Bay looks ahead to spring, its many partners will be hoping to see their investments flourish. “It’s a high risk, high reward country,” concludes Houssam Batal, and one that is unlikely to lose its appetite.

March 3, 2012 0 comments

Society

A crown for the wrist

by Michael Karam March 3, 2012

written by Michael Karam

Ask anyone on the street what he or she thinks the world’s most luxurious watch brand is, and they will probably say Rolex. They’d be wrong. But perception is everything, and the timepiece that is regarded as the sign that you have made it — a person to be reckoned with, a person imbued with a hint of rugged glamour — is indeed a Rolex. There are more accurate watches, more expensive brands and more prestigious brands, but Rolex has captured our imagination like no other.

Don’t get me wrong. There is no sleight of hand here. They are not, in luxury watch terms at least, overpriced (unlike some brands I could name). They are supremely well made and they will last forever. I should know; I have a steel Rolex Oyster Perpetual Datejust made in 1963. It still keeps immaculate time and has been serviced a maximum of four times in its life. It also looks almost identical to the current model — the only difference is an extra 2mm in the diameter, a sapphire glass and a quick date changer. So in a global luxury watch market that has gone bonkers in the last 20 years, Rolex has both pedigree and consistency.

The company was founded in London in 1905 by Hans Wilsdorf and Alfred Davis and moved to Switzerland in 1919 after the First World War. By 2003, Rolex was earning revenues of $3 billion annually, according to Stern Business, with BusinessWeek ranking it the 71st most valuable brand in the world in 2007. Like Patek Philippe, arguably the most prestigious watch brand in the world — and unlike other luxury brands such as Vacheron Constantine and Jaeger Le Coultre, both of whom are owned by the Richemont Group — Rolex is still a private company, a factor that arguably adds to its aura of distinction.

So what is it about Rolex’s enduring appeal? Luxury aside (Rolex caters to all tastes, even producing some eccentric designs for those who like a bit of diamond-encrusted bling), I would wager it is the fact that no other watch has as much history, glamour, sex appeal and adventure, allied to reliability and looks, wrapped up in one brand.

Take the Rolex Submariner, the iconic diving watch that was worn by Sean Connery’s Bond on a fabric NATO strap — to lady-killing effect — or the Explorer, the equally famous black-faced chronometer. You aren’t just buying a watch, you are buying into the very fabric of 20th century achievement. Omega is the only watch brand that comes close to matching this heritage (its Speedmaster was famously worn on the moon) but Rolex, with its functional designs and almost onomatopoeic name, has captured more of the public’s imagination, allying itself with sports stars, musicians and scientific pioneers the world over. Not surprisingly, Rolexes are among the few brands with a strong resale value, especially for the iconic Daytona Cosmograph with its famous Zenith “El Primero” movement, and the other professional models.

But at the end of the day, it’s all about owning the item that you love. And as my wife found out, Rolex watches are very desirable. She does not share my obsession with watches, but over the years has faithfully tramped round showrooms or stood patiently as I peered in shop windows like an excited schoolboy. For her a watch is a watch. It tells the time. Who cares if it’s manual, automatic or quartz, or if it’s a 36mm or a 45mm? But on New Year’s Eve, while I tried on a new Explorer II (now 42mm and with an orange 24 hour hand, if you must know) in the Rolex showroom in Beirut, she pointed to an Air King in brushed steel with subtle blue numeral batons on an off-white face. “I like that a LOT,” she said. It was the first time she had ever really expressed a genuine interest in a watch. What could I do?

March 3, 2012 0 comments

Society

Tender teachings

by Ali Kazma March 3, 2012

written by Ali Kazma

At any given moment in a randomly selected Lebanese café, one will likely spot an eight-year-old girl amusing herself with the newest iPad or other high-tech device. It is difficult to imagine that said young girl realizes that what she holds in her hands is worth more than what thousands of Lebanese families make each month. These children are being raised to see expensive things — and money itself — as playthings, and what many are not learning as they grow into adults is that financial success requires them to see money as a tool, not a toy.

In Beirut and other metropolitan areas, conspicuous consumption seems to be the order of the day. It is becoming all too easy to forget that almost 30 percent of the country lives in poverty, according to the United Nations. With all of this country’s outward displays of wealth, what’s slightly less apparent is how much of our nation’s youth is clueless about the true value of money, and the risks this financial illiteracy poses to the country at large.

While Lebanon was lucky enough to be relatively insulated from recent global economic crises, all over the country one can see the effect that poor money management is having on the nation as a whole. We live in a culture of waste at every level in our society — from the government sector to the corporate realm, and we often see examples of poor financial decision-making at work within individual homes. Consumer debt levels are climbing, while our public debt is estimated at a jaw dropping $54.3 billion, roughly 133 percent of GDP, among the highest ratios in the world. Lebanon exports relatively little aside from much needed human capital, but our taste for extravagant things still sees us importing products and luxury items at considerable levels. The Lebanese economy is increasingly dependent on remittances from those living abroad, but given the recent economic crises around the globe, this dependency will only make us more susceptible to market fluctuations elsewhere. All together, if this continues unchanged, it is a recipe for national disaster.

Nipping the bud

We must combat these dangerous practices that place our entire economy at risk, and it is imperative we start the fight early. If we ever hope to witness the success borne from a financially responsible citizenry, we ought to begin by teaching Lebanese youth to respect and understand the value of a lira, by teaching them how any economy works: You work hard for financial rewards, and then you must make important decisions regarding how to best and most efficiently use those resources.

Understanding how money is earned, and learning through vivid and detailed first-hand experience how to make informed and conscientious financial decisions, will give our children the best tools to succeed in the modern world. Some parents already do this by involving their little ones in the purchases they make everyday. Parents need to let their children see and understand that money is not something to be toyed around with. Giving children strict allowances and spending limits, as well as explaining our own financial decisions, will help train youth to cope with the kind of financial choices they will be forced to make later on.

Outside the home, Lebanese parents and policy makers should begin to encourage activities for our children that will help us instill these important financial values early on. Fortunately for parents, teachers, and children alike, there are facilities popping up all over the globe that are developed with just this goal in mind, and one is set to open in Beirut in the summer of 2012. These facilities employ a concept called “edutainment,” and are rich, highly interactive mini-cities with functioning kid-sized economies that encourage children to learn the value of money by role-playing through numerous careers, earning “cash,” and offering choices on how to invest that money throughout the facility, with not all choices being equal.

Though money might not be a toy, if we aim to take a playful approach in transmitting these important economic practices, learning how to be financially responsible can still be great fun. If we do not, the opportunity to address our current state of financial illiteracy will skip another generation.

March 3, 2012 0 comments