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Economics & PolicyUAE's Best Places to Work

Employers par Excellence

by Thomas Schellen February 3, 2012
written by Thomas Schellen

Everyone deserves a good job. Thus, a challenge is afoot in corporate Arabia and it mandates companies to improve from within: to become a great workplace. For the second time ever, ten companies in the United Arab Emirates are being recognized as the Top Companies to Work For in the UAE. 

The list of these exemplary workplaces has been researched and produced by the UAE arm of the global research and training firm the Great Place to Work Institute (GPTWI) in partnership with Executive.  The ten companies that emerged on top passed the scrutiny of a thorough employee satisfaction survey, called a Trust Index in GPTWI terminology, and a culture audit, or assessment of their corporate behavior. The trust index score, which is based on employee responses to a confidential survey, accounts for two thirds in the ranking of a company.   The 2012 list is led by big business names: FedEx Express followed by Microsoft Gulf, the hospitality group Marriott International in third.  Three homegrown companies also made the list, furniture retailer Total Home Experience (THE) One (5th), online employment market Bayt.com (8th), and the human resources firm Dulsco (9th).

As an annual benchmarking study, the GPTW list is only in its secondary function a ranking exercise and celebration of the best companies in achieving workplace excellence. The list’s primary function is to induce a process of continuous improvement in the value that workplaces provide to their employees and teams, to their owners and shareholders, and ultimately to their communities and societies on national and regional levels. 

“We want every company in the UAE and the GCC [Gulf Cooperation Council] to be a great place to work. Whether we will be able to achieve that in 20 years or 25 years or 100 years, I don’t know. But we are very aggressively going at it,” said Farrukh Kidwai, the chief executive officer of the GPTWI in the UAE. According to Kidwai, the institute has surveyed over 6000 companies and more than three million employees globally and lays claim to being “the world’s largest databank of information when it comes to great places to work.” 

This portfolio of information and insights was originally the work of an American journalist and has grown over the past 27 years to cover 45 countries today. The selection of companies for participation in the GPTWI survey and audit process is based on an approach akin to that of a ratings agency, whereby companies have to agree and actively register to be part of the process. This methodology may not necessarily be representative of the whole landscape of eligible employers, but the track record of the GPTW rankings in the US indicates that firms which enroll in the process early on after GPTWI’s entry into a market have a distinct edge in developing their workplace quality and enhancing their employee satisfaction, thus improving their human capital base with substantial benefits to profitability and bottom lines.  In the UAE the process is still in its infancy; the skew toward Dubai-based ventures suggests that awareness has yet to spread more toward Abu Dhabi and the other emirates. 

Besides recognizing the top 10 places to work in the UAE, the GPTWI published its first specialized list featuring three top companies to work for women and Emiratis just after Executive had completed interviews. The research into best companies for women and Emiratis is to be developed into full lists by GPTWI UAE. The organization is also working on geographic expansion of its presence and coverage to Saudi Arabia, Qatar, and other GCC countries. 

The top companies for women to work in the UAE are General Electric Middle East and North Africa, THE One, and Omnicom Media Group. GE and PepsiCo are the two companies highlighted for their appeal to Emiratis. 

Very notably in the 2012 results, employees have given their organizations substantially improved marks when compared with the average scores which the top ten companies reached in the trust index surveys a year earlier.

Congratulations are in order.

February 3, 2012 0 comments
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Economics & PolicyUAE's Best Places to Work

EMC Corporation – Best workplace in the Cloud

by Thomas Schellen February 3, 2012
written by Thomas Schellen

Being cryptic and brief was quite common when naming startup companies in the United States 30 or 40 years ago. When two American engineers created a venture for production of computer memory boards in 1979, they combined their initials and a third letter into EMC Corporation, garnished it with a visual reference to Einstein’s relativity formula and grew it into a specialist information technology (IT) company under a cloak of mild obscurity, known best among true nerds and corporate IT managers.   

Today, the company boasts $20 billion in consolidated revenue with double-digit growth in 2011 driven by demand for its data storage, information management and security and cloud computing products. It has 48,500 employees worldwide and spent 11 percent of last year’s consolidated revenue on research and development, according to results announced last month.    

In 1999, EMC set up its first office in the Middle East in the United Arab Emirates with a tiny team and has grown to about 550 employees in 17 offices around the region, plus 250 to 300 engineers based in Cairo, says Wael el-Nadi, the EMC technology solutions director for Turkey, Emerging Africa and the Middle East. 

Aspects that impressed the Great Place to Work Institute in the EMC culture audit were the company’s initiatives and readiness to exceed legal requirements in developing a caring culture, granting time off for paternity and marriage as well as compassionate leave and extended holiday leaves. 

As Nadi describes it to Executive, the spirit motivating EMC’s care of its employees is one of mutuality. The firm is responsive to people’s requests for time off whenever that is needed and goes beyond the mandates of the UAE labor law in providing extra vacation during the Eid periods and in special situations, because “on the other side of the coin we expect our employees to work harder than the standard.”

The reason why EMC’s Dubai-based organization participated in the 2012 GPTW list process was a sense of obligation to staff.  “We believe we owe this to the employees, because we are a great place to work and we believe it is good to share the success,” Nadi explains. 

Success is perhaps the biggest driver in making the UAE and regional teams proud of what they do and binding them to the company — according to Nadi, the operation is the highest-growth EMC office in percentage terms worldwide. “This by itself makes the office attractive because people join a successful team.”

He cites EMC’s very low employee turnover as indicative of pride and loyalty: “It is part of the ego of a normal individual to be proud of it if you work for a good company.” In corporation-wide internal employee feedback, the regional organization usually gets strong marks on vision and leadership, he adds. “Management is accessible and easy to approach and one can raise any concern and so on; thus we score very high when it comes to leadership and vision. When it comes to rewards, here in this region we know that we are not the highest but also not the lowest.”

In pursuit of its human capital growth plans, EMC has recently set up an undergraduate curriculum with universities in the UAE which the company expects will unleash much potential for local recruitment. This program ties in with an “associate program” that grooms graduates with degrees in disciplines such as computer engineering and business administration for management roles. Leadership training for high-potential employees in a joint program with EMC’s European division is another part of the formula. 

EMC engages in a variety of corporate citizenship activities and has implemented corporate social responsibility programs in Pakistan, Egypt, and the UAE. 

Nadi tells Executive of strong territorial expansion that has been managed from the regional office in Dubai and he is highly confident that the organization based here will increasingly contribute to global results. At present, the regional organization keeps some 4,000 people, including employees and their dependents, in bread and roses. He says, “We consider this our big family and this is a big responsibility. That is why we always say that we have to maintain our success.”

February 3, 2012 0 comments
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Economics & PolicyUAE's Best Places to Work

Dulsco – It started on the docks

by Thomas Schellen February 3, 2012
written by Thomas Schellen

Dulsco, the Dubai-based provider of human resources and waste management services, is the largest and oldest local company in the Top Companies to Work for in the United Arab Emirates, and it has succeeded not only to make the Great Places To Work (GPTW) list for the second year running but also improved its standing in the list from 2011. 

Acting behind the scenes as a quasi-invisible human resources back office to a wide range of enterprises, the company provides manpower support to industries that are essential for the UAE’s economic performance, such as transport and logistics and also in sectors that are core to the international attractiveness of the Emirates, such as event organizers and hospitality operators. Its staff profiles range from drivers and machinery operators to clerical workers and recruitment consultants. In the area of waste management, the company provides general and specialized cleaning, collection and related services as well as low-tech and high-tech equipment. 

As a privately held company, it does not publish results and the primary testimonies to its business acumen are its record of 77 years of continuous operations and its staff size of more than 5,300, approximately two thirds of which are part of the Human Resources division. The company has a joint-venture operation for manpower and waste management services in Qatar and dispatches roving staff to safety-tested locations and sites on specific projects and vessels beyond the borders of the Gulf Cooperation Council. Homegrown and without the human capital development processes and resources that a multinational firm or foreign corporate parents can deliver to their UAE units, Dulsco invested itself in the GPTW process from its internal resources.

At the core of any business is the human being. Due to the nature of the company’s activity with many physically demanding work roles and occupations, caring for its employees means for Dulsco to care for the safety and wellbeing of a mainly expatriate, male workforce.  

Incentive to care

“If you don’t invest in your employee, the employee will not care about his work. When, however, you plan a career for him and take care of safety and provide him with help and all that comes with it, you are transparent to him. When everything is clear in this way, he will be motivated to work for such a company,” Dulsco Chairman Abdul Aziz Mohammad Khan Abdulla tells Executive. 

As he conveys the Dulsco story, it becomes evident that the tradition of caring goes back to the company’s formation with stevedoring services. It was years before port facilities were created, and so ships would load and unload at an anchorage. It was also a long time until insurance companies would start offering their services. From those early days on, the company made it a policy that a worker who was injured or unable to work will get paid until he is healthy and able to work again.  

“So when the ports were built and insurance was introduced, we were way ahead of the other companies in providing safety and benefits as part of the corporate work policies,” Abdul Aziz says. 

People before profits

The practice was applied throughout the company’s growth. During the war in Iraq, there were inquiries to send crews to work at an oil loading terminal outside of the war zone with the promise of substantial premiums added to the normal wages, but Dulsco insisted firstly on the security of its employees and did not outsource the workforce. According to Abdul Aziz, “It is not just about money. It is safety first; this is what we believe in and we value human life more than money.” 

In its appraisal, the GPTWI 2012 Culture Audit commends Dulsco for its commitment to communications and active listening to employees. The report highlights the company’s facilities for two-way and down-up communication between employees and management, which include an open-door and ‘open office’ model, plus suggestion boxes in every location and department. 

Other Dulsco assets in being a great place to work for its employees include quality housing, sports facilities and a clinic as well as soft assets like celebratory and entertainment events that are tailored to the hearts of the employee base. “Don’t forget that these people are deprived of being with their families for two years and so you need to create the ‘home-style’ atmosphere, have functions and entertainment,” Abdul Aziz explains and sums the Dulsco culture up in saying, “We run this business as a family business.”

February 3, 2012 0 comments
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Economics & PolicyUAE's Best Places to Work

Bayt.com – From the website to the workplace

by Thomas Schellen February 3, 2012
written by Thomas Schellen

Rooted with one leg in technology and with one leg in services, Bayt.com stands with a well-established reputation as a leading authority in the region on all questions related to jobs. The company’s core activity is the provision of an internet-based marketplace connecting global job seekers and Middle East-based employers. The company has also leveraged its wealth in interaction with job seekers into an auxiliary career services business and into research activities.

Revenue generation at Bayt.com is based on fees that employers pay for posting job offers. But as the company does not collect fees for employment agreements emanating from usage of their site, Bayt.com cannot provide information on the number of contracts reached on the marketplace each year. However, the number of registered users is reported to be above 7 million and growing and the number of organizations that post employment offers is cited as 40,000.

There is money in the employment marketplace for Bayt.com and the firm has reached profitability within a relatively short time from its creation in 1998, according to chief executive Rabea Ataya. Yet it nurtures an approach to profits that differs from most companies. 

Every year Bayt.com sets a profitability target which is kept at a ‘low-level’; any profit exceeding the targeted margin will be reinvested into the team, Ataya tells Executive. “The company is willing to trade off profitability to achieve gains in how recognized, respected, and admired it is. We are far more focused on touching people’s lives than we are on profitability,” he says.

The organization’s employee-centric culture is cited by the Great Place to Work Institute (GPTWI) as an outstanding feature in the culture audit evaluation for the 2012 Best Companies to work for in the UAE list. As an example, GPTWI mentions daily training sessions prepared by team members and shared across the company’s locations. 

Based on the trust-index survey responses of Bayt.com employees and GPTWI’s culture audit, Bayt.com retained the same position in the 2012 and 2011 best companies lists. For Ataya, the repeated success in the GPTW process is “one of those feathers in our cap that we value with the greatest amount of pride,” he beams. 

Every person joining the Bayt.com team is tuned in to the company’s vision, which Ataya says is “about trying to build a Middle Eastern institution that is globally recognized and respected; and the way we hope to build that is by empowering people to lead better lives.”

The participation in the first GPTW process helped the company in understanding areas in which Bayt.com could further develop its strengths in 2011 and remedy weaknesses that it was not previously aware of. 

Gaps between responses by managers and junior employees to some trust index questions showed that while managers were well aware of the organization’s values and focus on maximizing Bayt.com’s role in improving people’s lives while maintaining profitability, employees were not made equally aware of these values and approaches. As one of the results of the GPTW participation, Bayt.com management increased efforts to enhance internal communications and explain these approaches more deeply.  

In other aspects of its employee focus, Bayt.com supports wellness-orientated lifestyles among its team members through initiatives such as providing baskets of fresh fruit in all pantries. Other sponsored activities throughout the year include team sports and lunch sessions in which the company invites speakers to address “topics that relate to improving people’s general lifestyle and quality of living,” Ataya says.

Ataya considers very steep hierarchical structures to be a hinderance to forming creative environments. Based on the realization of how important his sense of freedom while at work is for his own wellbeing, he made it a priority to give people in the organization the chance to replicate the same experience in their own working lives, saying: “The single most important thing that I can impart on the organization is letting people have that freedom.”

Alignment with the culture is a high priority in selecting employees and Ataya is confident that most Bayt.com workers are “seeking to live toward realizing our values. In all relationships with clients and employees and job seekers, we try to leave a positive impact on their lives.”

February 3, 2012 0 comments
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Society

A size of the times

by Michael Karam February 3, 2012
written by Michael Karam

There was a time when a young man was given a watch on his 21st birthday, something half decent and Swiss, and that was, basically, that. He would remove the Timex or Seiko that got him through school, put on his grown-up watch and enter the real world. 

Our man would wear it on all occasions, and if it were not waterproof, he would simply take it off before swimming. It would have been around 34-36mm in diameter. His next watch might be a gift on his 50th birthday, when his wife would have bought him something out of the top drawer – a Patek Philippe Calatrava in white gold, perhaps. 

That was then. Now all bets are off and watches have become very big business. They no longer just tell the time; they can also telegraph who we like to think we are. Just pick up any copy of the International Herald Tribune and you will see just how much ad space is devoted to luxury (and not-so-luxury) timepieces. Indeed, so powerful is the luxury watch advertising dollar that the global broadsheets run annual, or in some cases biannual, supplements charting the latest industry trends. 

The latest figures available, in 2010, show the Swiss watch industry exported 26.1 million finished watches with a value of SF15.1 billion ($15.9 billion), a growth of 20.4 percent and 22.7 percent in exports and revenues, respectively, compared to 2009. Figures for the first half of 2011 should exceed those for the same period in 2010. 

In the meantime, man has become less stuffy, and watches are one of the few accessories that allow him to express himself. When he heads to the beach, today’s chap might consult his collection and choose a watch designed not only to function at depths that would crush a human skull but also deliver just the right dose of bling needed to cavort around the pool bar.  

We no longer feel silly wearing watches designed for fighter pilots, members of the Special Forces or astronauts. Indeed Jaeger LeCoultre, that most sober of Swiss watchmakers, has produced a special edition Master Compressor for both the United States Navy Seals and Chelsea football club, while Omega has been hugely successful in associating its long-serving Seamaster to the James Bond franchise. The message is clear, simple and unambiguous: even if you are an insurance claims adjuster, you can wear a sense of adventure on your wrist. And in this revolution, size suddenly matters. 

What was considered more than acceptable 20 years ago would now be considered weedy. Panerai, the Italian, Swiss-made brand, led the way in the oversized watch segment in the late 1990s. Rolex, who for so long set a 40mm limit on its classic sports watches, have bowed to popular demand with the classic Explorer and Explorer II, which were stubbornly set at 36mm and 40mm, respectively, for decades. In the last two years they have morphed to 39mm and 42mm.  Omega’s Planet Ocean measures in at 45.5mm, while Graham has an SAS watch abandoning all sobriety, which, if you include the lever, has a staggering 60mm diameter. 

Even Jaeger LeCoultre’s Reverso, arguably one of the most famous watches in the world and one designed to be understated, comes in a ‘jumbo’ version, the Grande Reverso 976 (I am reliably assured by salesmen in Beirut that the classic man’s model is now being sold as a ladies’ watch, as is the 34mm Rolex Air King).

Tastes, however, are changing. Like the oak revolution in wine, the size novelty is waning and discerning consumers are eyeing watches that speak more to them than the public. In these uncertain economic times, a bit of taste can do no harm.

February 3, 2012 0 comments
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Economics & Policy

A lost cause?

by Youssef Zbib February 3, 2012
written by Youssef Zbib

The talk of labor nationalization in the Gulf Cooperation Council — ‘Saudization’, ‘Emiratization’, ‘Qatarization’, etcetera — has dominated national policies and development plans for the past 20 years. Qatar’s national vision for 2030, for example, explicitly mentions “increased and diversified participation of Qataris in the workforce” as a goal for human development. 

Qataris have not taken to the streets to demand more jobs, but the protests that have shaken Bahrain and sporadically erupted in the Eastern Province of Saudi Arabia were, at least partially, an expression of economic grievances, specifically high rates of unemployment among the youth of both countries. 

To stave off the rumblings of potential uprisings, oil-rich regimes of the GCC have a two-pronged approach: defuse popular resentment by injecting enormous sums of money in the form of benefits and salary increases for the public sector,  while brutally cracking down on dissent. In February 2011, Saudi King Abdullah bin Abdul Aziz ordered $37 billion as cash handouts and benefits, followed by a royal decree to double the monthly salary for all of the kingdom’s public sector employees for the month of March of the same year. More recently, an immense sum of $184 billion was also planned for expenditure in the 2012 budget plan. 

The Kuwaiti government has embarked on a similar spending extravaganza by committing to give every family free food rations until the end of March 2013 in addition to a sum of $3,500, even though Kuwait has not witnessed near the same scale of public outcry as in Bahrain or even Saudi Arabia.  

While it is too early to judge the efficiency of the planned public expenditure in creating jobs in Saudi Arabia, economists have long warned that the ‘munificence’ of GCC rulers will keep their populations reliant on state subsidies and an inflated public sector, making them less likely to seek ‘real’ jobs in the private sector —  an outcome which contradicts the stated aims of labor nationalization policies.

A closer look at these policies reveals that they face many obstacles, and even a certain amount of reluctance on the part of some GCC governments to pursue them.

 

Doomed by oil 

The windfall created by the oil boom, which lasted from 1973 until the early 1980s, resulted in the creation of a large number of jobs that attracted foreigners who were more skilled than nationals, or simply willing to work for less. A study titled “Local Workers in the GCC countries, assets or liabilities?” published in 2000 estimated that 25 percent of the 20 million migrant workers in the world in the 1980s were located in Gulf countries, while more recently expatriates make up at least 50 percent of the total workforce in the six GCC states, according to the latest national labor statistics (see table). 

This has proven detrimental to the local labor force: as low-cost foreign labor continues to skew the salary scale, it has become more difficult for nationals to find a job in the private sector that meets their expectations, according to Zafiris Tzannatos, senior advisor for the Arab States at the International Labour Organization (ILO) [see story page 54]. 

The public sector, by contrast, is largely staffed by locals, but inflated salaries and flexible working hours have done nothing to change the work culture of Gulf Arabs or prepare them to compete in the private sector job market.  

“People in Kuwait still prefer a job in the public sector because they get paid more, work for shorter hours and can’t get fired,” said Yassine al-Farsi of the Kuwait Trade Union Federation, speaking on the margins of a workshop recently organized by the ILO in Beirut. 

According to a study published by the Brookings Doha Center (BDC) in December 2011, employment in the public sector makes up 83 percent and 85 percent of the total employment of Qatari and Emirati nationals, respectively. The predominance of youth in the public sector is another indication that it continues to be the favorite destination for young job seekers. According to the same study, 60 percent of Emiratis between the ages of 25 and 34 are employed in the public administration and defense sectors, while the same proportion rises to 68 percent for those between the ages of 20 and 24.

The situation is similar in Kuwait, according to a 2010 survey published in 2011 by Silatech, a para-governmental Qatari foundation that aims to promote employment. The report shows 83 percent of the surveyed Kuwaitis preferred working for the government as opposed to the private sector.

Young people’s unwillingness or inability to compete in the private sector contributes to high unemployment rates among young people in the Gulf, according to Tzannatos, who suggested that the public sector cannot absorb such large numbers of new job seekers. Young job seekers may have lukewarm feelings towards the private sector, and the feeling seems mutual among their would-be employers. The problem is also partly due to the fact that the private sector, sensitive to demands of productivity and competitiveness, cannot afford the same incentives as its public counterpart, according to the BDC 2011 report. 

 

More than a lack of skills  

A highly competitive private sector needs employees with high-level skills that job seeking nationals might not necessarily have, as reported in several employer surveys.    

To accommodate, official nationalization schemes have sought to overhaul educational infrastructure in order to equip job seekers with suitable qualifications for the job market. 

The presence of Western-style education is significant in Qatar and the UAE; both countries host local branches of leading Western institutions of higher education, otherwise known as ‘satellite universities’. Abu Dhabi is home to satellite campuses of the Sorbonne, New York Film Academy and New York University, while Qatar’s Education City and Dubai’s Knowledge Village hold prominent institutions such as branches of Texas A&M and Georgetown University. 

But this endeavor is still flawed, according to the BDC 2011 report, as the majority of graduates plunge into the job market without having a clear understanding of the available job opportunities or the skills they need to acquire. The study advised governments and educational institutions in Qatar and the UAE to “increase young people’s employability, build their soft skills and effectively advise them of their employment rights,” going as far as recommending the introduction of “mandatory” internship programs at the high school and university levels. 

But in certain instances, the limits of nationalization processes might be more a matter of lack of commitment on the part of certain governments than a failure to devise the most suitable practices, as not all GCC governments seem to be pursuing nationalization policies with the same enthusiasm. 

Saudi Arabia seemed to have stepped up its drive to limit the domination of expatriates in the labor market with the introduction of the ‘Nitaqat Plan’ in 2011, whereby firms that fail to ‘Saudize’ their workforce face restrictions on hiring expatriates.

Other governments, however, have adopted approaches that are much more favorable to the private sector. Both Bahrain and Oman have taken the road towards removing obstacles to private investment, both foreign and local, in the hopes that job creation will follow, according to Marc Valeri, a lecturer on the political economy of the Middle East at the University of Exeter. 

 

A long way to go

“All the GCC governments — except Qatar, and probably also the UAE — face, in one way or another, the same dilemma: the private sector, especially the leading business families, is a key ally of the regimes, and they need their support; the problem is that the [labor] nationalization policies are contradictory to the interests of these business actors,” Valeri adds. Bahrain’s economic vision for the year 2030, as formulated by the kingdom’s Economic Development Board in 2005, makes no mention of limiting the influx of expatriate laborers. Instead, it promises to increase employment among Bahrainis by shifting to “an economy driven by a thriving private sector — where productive enterprises, engaged in high-value-added activities, offer attractive career opportunities to suitably skilled Bahrainis.” 

The fact that expatriates make up 74 percent of Bahrian’s workforce and 54 percent of the total population according to the official census of 2010 —  in addition to the unreported number of naturalized foreigners who work in the ranks of the security and military forces — throws into question the premise that economic diversification is taking place to the benefit of Bahrainis.

The governments of Bahrain and the rest of the GCC still have a long way to go to reform the labor market, while preserving the balance between a productive private sector and their people’s welfare. This raises a legitimate question about the extent to which the benefit of the people figures on the official agenda of labor nationalization.  

“The fact that most cabinet members are involved directly or indirectly in business explains… why the jobs’ nationalization policies cannot be maintained as such in the long term,” says Valeri. “These decision-making people had to avoid questions being asked about the nation’s general interests they are supposed to promote like the Bahrainization or Omanization policies, and the particular interests they have defended as businessmen.” 

February 3, 2012 0 comments
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Society

Fostering homegrown flare

by Ellen Hardy February 3, 2012
written by Ellen Hardy

To the untutored eye, the minimalist Starch boutique looks much like any other high fashion store. Its rails are stocked with avant-garde designs from up-and-coming names – accessories by Dina Khalifé, urban fashion from Mira Hayek and designs by Marc Dibeh, previously known for his ‘Love the Bird’ lamp that subtly incorporates a detachable sex toy. But there is a key difference between Starch and the innumerable gleaming multi-brand boutiques mushrooming all over downtown Beirut. Uniquely, Starch stocks exclusively Lebanese designers; what’s more, it is a non-profit foundation dedicated to their advancement. 

Once a year since 2008, Starch has scouted four to six young Lebanese designers and given them a crash course in creating and marketing their collections, which are then sold exclusively at the Starch boutique. Members also participate in international exchanges, such as the recent seminar organized by Starch at the American University of Beirut, ‘London Meets Beirut’, with representatives of the international design magazine Wallpaper*, the London College of Fashion and the global designers platform Not Just a Label. Starch, like an increasing number of artistic foundations, was devised to help Lebanese talent leapfrog over the handicaps of setting up shop in Beirut.

Tala Hajjar co-founded Starch with fashion designer Rabih Kayrouz when they became tired of seeing design graduates struggle to realize their ambitions. Hajjar, who was Kayrouz’s public relations and marketing manager for three years, explains that in fashion college, “You learn how to cut patterns, to design, everything related to the technical side of designing, but never really the business aspect.” This is a global problem, but in Lebanon specifically, “You don’t learn art and design from a young age… so you’re already starting off a few steps behind many other designers worldwide,” she says. The tastes of the local market, too, have a stultifying effect on bright young fashion minds. “You drive down the highway and every billboard left and right is just another bling dress… you make much more money [doing made-to-measure] and your eye has got so used to [it] you will lose your identity and your creativity,” says Hajjar. Finally, financial and visa restrictions on travel mean that Lebanese designers’ influences and experiences are limited and they can be seen as provincial. Even those designers who stick to their guns suffer inequalities in production and delivery, which make multi-brand stores unwilling to take local pieces.

Thus, Starch aims to provide some much-needed business and creative support and an international forum for exchange and networking – an education that has helped launch such success stories as Krikor Jabotian and Lara Khoury. It is a trend reflected in long-established foundations like Ashkal Alwan, the Lebanese Association for Plastic Arts, and brand new ones like The Creative Space, which offers haute couture training to young people from diverse backgrounds. 

The financial potential of homegrown fashion and design is significant, in a time of global crisis for luxury industries, and with sustained foreign interest in Lebanese designers. Whereas people might once have asked, “Why am I paying $300 for a young designer’s top,” says Hajjar, now “people are actually spending this money… everyone’s after that exclusive piece that has a romantic story behind it.” 

For now, it is nonprofits rather than businesses or the government that are investing in Lebanon’s talent pool. Starch’s boutique space is a donation from Solidere, but Hajjar is a solo full-time volunteer and the foundation is not yet officially registered. As of this year, Starch designers will have to invest a percentage of the profit made on their collections back into the foundation. 

Hajjar is now focused on funding to grow her team and find a permanent location, saying: “Now I can go up to anyone with my grant proposal and say this is what we’ve done in the last four years, as opposed to this is what we aspire to do.”

February 3, 2012 0 comments
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Economics & Policy

Q & A – Zafiris Tzannatos

by Youssef Zbib February 3, 2012
written by Youssef Zbib

The nationalization of the private sector is at the center of the Gulf Cooperation Council governments’ employment policies. Executive asked Zafiris Tzannatos, advisor for the Arab states at the International Labour Organization (ILO), to discuss this endeavor.

E  Is the private sector in the GCC creating enough jobs?

Employment in the private sector in the GCC countries has been expanding much faster than the increase in the national labor force for many decades. In the mid 1970s there were 50 percent more national workers than migrant workers (1.7 million versus 1.1 million). Now there are no more than 6 million national workers compared to nearly 14 million migrant workers. This means that the number of migrant workers – mostly in the private sector – increased by 14 times in the last 35 years. 

E  Is the problem in the GCC one specifically of  youth unemployment?

The problem in the GCC is not confined to youth unemployment though it registers as such because older workers are gradually absorbed into the public sector. 

E  What are the socioeconomic risks of having a population that is reliant on foreign labor?

The proven outcome by now, has to do with the lack of diversification, as the economy is locked into a low productivity/low wage equilibrium. 

On the social side, given their expectation to get a job in the public sector, nationals under-invest in their education. Also, opportunities for women to work depend more crucially on education than for men. In some GCC countries, for every male university student there are three females. 

E  Is it important to tie the nationalization of the labor force with economic diversification?

Nationalization of labor is very important both for economic diversification and… changing the course of the economy from a rentier state to one based on legitimate profit seeking. For example, it may not be an exaggeration to say that if GCC countries had capital intensive techniques and knowledge-based economies, productivity and wages would increase, thus making jobs in the private sector more appealing to nationals.

E  How successful have investments in education been? 

Why should nationals spend time and effort to learn English or get accustomed to work in complex environments when jobs in the public sector are guaranteed as a right deriving from citizenry rather than from merit and hard work? The problem here lies more on the demand for education by nationals than on the supply of education – schools and universities. In this case offering a high quality education may resemble offering a luxurious meal to someone who already had his dinner.

February 3, 2012 0 comments
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Business

From Jal El Dib to Disney World?

by Ellen Hardy February 3, 2012
written by Ellen Hardy

Growing up in Jal El Dib during the civil war, Mayella Zard remembers, “everybody was crying, but I was thinking I was going to become a princess… all my focus was on my costumes and makeup.” Her enterprising parents organized theater shows to occupy and entertain neighborhood children during difficult times, to great success. Even when the war ended, the shows remained a fixture of the local community. When Zard graduated from university with a degree in business auditing and finance, she saw the potential of her childhood pleasures. With just one other staff member, she set out to professionalize the productions and expand their audiences in order to turn a profit. Eleven years later, OM2 has 35 full time staff on its payroll and an international network of freelancers who contribute to the productions, seen by tens of thousands of children in Lebanon and an increasing number across the region.

OM2 produces one or two plays every year, always on a social or educational theme: 2012’s is the environment. Productions are shown at the company’s own theater in Antelias, the Odeon, and also tour the country, visiting schools in more than 40 municipalities. OM2 has also expanded into creating tailor-made productions for corporate clients, and for voluntary associations like the Red Cross. Of the 25 or so theater companies in operation in Lebanon, estimates Zard, OM2 is one of the few producing original productions in Arabic. Her mother, Giselle, writes all the scripts, often in consultation with child psychiatrists. OM2’s large network of craftsmen and creatives is also important in putting together the scenography and costumes possible on each budget.

Building a functioning network of state and private clients took years of hard graft. When OM2 started out, Zard had neither data on her market nor a map of schools in Lebanon, so she did the rounds herself. It might have felt like she was visiting “a thousand schools a year”, but she managed to build relationships with schools and municipalities so that they would commit to the production every year. She also encouraged the wider public, sometimes through a proxy who would sell tickets for a commission. Over the years, OM2 has come to the attention of the government — one of the first productions was held in the presidential palace — and of banks and other large businesses.

International dreams

Zard estimates that OM2 entertains around 100,000 children in Lebanon each year, at 10,000 lira ($6.63) per ticket: a conservative turnover estimate of $663,000, not taking into account adult audiences, supplementary projects and productions overseas; for example, OM2 has put on productions in the Jerash festival in Jordan for the past six years. In recent years OM2 has started branching out into books related to the productions, and will soon be launching an animated TV character, Maryam, who represents OM2’s values in the live theater productions, in books and online. Recent talks have raised the possibility of franchising the company — schools in Qatar are looking to reproduce the experience for their children — making the wartime hobby for a family in Jal El Dib into a region-wide player in the big business of children’s entertainment. 

Zard still retains much of her original enthusiasm for the magic of the theater that made such an impression on her as a child. Asked what she sees ahead for her business, she focuses instantly on the quality and technology of the productions. 

“Disney World is a thing I think about,” she says. “All we need is funds, and not just thousands, millions sometimes.” And not just funds, but as many staff as the business can support. “My mum used to ask me, ‘what do you want for a gift on your birthday?’,” smiles Zard. “I used to say, one extra employee!”

February 3, 2012 0 comments
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Finance

Culling the small fish

by Joe Dyke February 3, 2012
written by Joe Dyke

As you walk into Hissam Exchange in Hamra the first thing you see is the frame on the wall. Encased behind the glass is a certificate declaring that the business is permitted to trade currencies by the Lebanese government. The family company has been operating in Beirut for nearly a decade, but the room is still barely big enough for four people — working on such a small scale there is little excess.

Yet Hissam’s family business may soon be squeezed out of existence. Under new plans to be introduced by Banque du Liban (BDL), Lebanon’s central bank, even the smallest money changers (classified as Category B) will have to hold at least LL500 million ($330,000) in capital to operate, up from the current LL100 million ($66,000). Larger ones deemed Category A will have to hold LL750 million ($500,000) in capital to continue to operate, up from LL250 million ($166,000). Hissam’s brother Sakar admits that the new rules will almost certainly force them to close down. “If I had $330,000 I would not be here. I would be living up in the mountains with my family,” he jokes.

They will not be the only ones. Mahmoud Halawi, head of the Lebanese Money Changers Association (LMCA), estimates that the new regulations might put up to three quarters of their members out of business. “Out of 400 [licensed] money changers, we estimate that up to 300 could close because of feasibility — there is not enough work in Lebanon for this,” he tells Executive.

Halawi claims that the hike is aimed at forcing out smaller companies, but believes it would hurt the industry as a whole. “Even the remaining changers will not benefit because the big exchangers cannot spread out as much as small ones, so in the end we will not be covering the whole market.”

A conspicuous cull

Hissam Exchange and other legitimate businesses may be the victims of a slew of bad press brought on by a minority of exchanges taking part in money laundering activities that eventually caught the eye of international regulators and tarnished the banking sector’s image. 

The continued concern over the lack of regulation on the influx of currency from Syria was exacerbated in December when the United States Department of the Treasury highlighted the role of money changers in its allegations against the Lebanese Canadian Bank (LCB). The US federal government has now filed a suit in Manhattan Federal Court which seeks $480 million in damages from the now sold out LCB and two Beirut money changing businesses, the Hassan Ayash Exchange Co. and Ellissa Holding.

Paul Morcos, founder of the law firm, Justicia Beirut Consult, and an advisor who works closely with the BDL, is in favor of the overall plans but believes the raising of the capital limit has more to do with improving foreign relations than cracking down on fraud. 

“We are facing demands from the international community to enhance the system. Lately many exchange industries have been mentioned in American reports and that’s why the banking authorities are taking these measures; in order to show they are controlling the exchange,” he says. “The capital increase will massively restrict the establishment of exchange and negatively affect exchange business.”

Halawi has been pleading with the BDL to reconsider their plans, urging them to introduce the rules over a period of time, rather than as an instant hike. “After we discovered what the Bank was planning we sought a meeting with them and after several requests they agreed and we explained the reasons for rejecting this law,” he says. “We are asking them to decrease the capital limit and extend the time period so that the exchangers can take the plans into account and have 10 years to fulfill the requirements.” 

He believes the government’s plans will cause Lebanon’s already large illegal money changing market to grow as exchangers seek to protect their livelihoods. “In Lebanon we estimate that there are more than 2,000 unlicensed traders and they are only going to increase [if the bill is passed].” The BDL did not respond to repeated requests for comment.

Not blind to the problem

There are however legitimate concerns about the industry that are also being addressed. A larger exchange dealer also in Hamra, who did not wish to be named, claimed he was glad the regulations were to be introduced as it could help rebuild the confidence of the international community. “We will survive the raise because we are well run. What really affects us is the situation in Syria and the attitude of foreigners to Lebanon. We have stopped accepting Syrian and Iranian currency already but we need more foreigners coming here and changing money.”

The move is the most recent step in the long process of attempting to rein in money laundering in Lebanon, which began with Law 318 regarding commercial banks in 2001. That law defined what constitutes money laundering in the country and established the Special Investigative Commission (SIC) within the BDL to investigate it. 

In the years since, the exchange industry has grown hugely, with larger changers now offering a diverse range of services including FX Trading and share buying, increasing the pressure to impose further regulations. In addition to a rise in capital, the new rules will force money changers to have at least one compliance officer and invest in anti-fraud software. More significantly still, they will be legally obliged to report suspicious transactions. 

Camille Barkho, manager of Amerab Business Solutions — a firm that provides advice to banks and other financial institutions about how to avoid money laundering — believes the idea that money changers are innocent victims in money laundering is ridiculous: “They know… Once they know [about fraud] they might make suggestions to the customer: ‘I cannot do that, but if you want I have a friend with certain commissions who can do it’.”

He adds that there are real concerns about the lack of control over the industry, but admits minimum captial requirements have little to do with the issue. “Let me give you an example: you can go to an exchange dealer, deposit cash in unlimited amounts, then ask for a transfer for a cheque to another country or another bank without you being identified. This is a very clean tool for money launderers.”

Yet regulating the industry will likely be a difficult business, with all the exchange dealers Executive spoke to expressing concern over the lack of information provided by the government. Halawi confirmed that the LMCA is in consultation with the BDL about establishing joint training to help firms understand the new laws and implement the changes.

Some of the industry appears to have started preparing, and Barkho has noticed an increased concern among Lebanese money changers. He claims that until two months ago Amerab had never received any work from the industry, but now money exchangers have been approaching them two to three times per week as companies struggle to comprehend the new regulations. 

First pennies on the dollar

The international pressure to act is so great that these changes may prove to be the first of many. There has also been chatter in the financial world that the government is planning to table an amendment to strengthen Law 318 later this year, with increased powers for the SIC and tougher penalties for offenders among the possible proposals. Under the current laws the SIC is only allowed to point out where institutions are failing to comply with the legislation but can do little to punish them for doing so. 

Morcos says he believes plans may be afoot to take the regulations beyond money exchangers and into other sectors. “There was a plan to control professional bodies in this regard but there are certain handicaps in trying to control non-financial bodies,” he says. “You have to be delicate not to put any handicaps on their operations, especially in terms of professional secrecy.”

Yet, as ever, there is a big difference between writing laws and implementing them. While the government appears keen to improve the laws on money laundering, whether it has the will or means to effectively enforce them remains in question. 

“We have driving laws but still when you go out and drive in Lebanon it is crazy,” Barkho says. “The Lebanese can have very well written policies on anti-money laundering but if they are not implemented, they are nothing.”

February 3, 2012 0 comments
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Since its first edition emerged on the newsstands in 1999, Executive Magazine has been dedicated to providing its readers with the most up-to-date local and regional business news. Executive is a monthly business magazine that offers readers in-depth analyses on the Lebanese world of commerce, covering all the major sectors – from banking, finance, and insurance to technology, tourism, hospitality, media, and retail.

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