Executive Magazine

Healthy returns in an ailing society

by Rayya Salem February 3, 2012

written by Rayya Salem

Despite billions of petrodollars spent on healthcare in Saudi Arabia, the kingdom’s targets for healthcare service have not been met in recent years. With the government’s push to include more private investment in the field, and Saudi Arabia’s burgeoning demand for medical services in a country that has high rates of diabetes and other ‘lifestyle’ diseases, the kingdom may have the potential to offer the highest returns in the Gulf Cooperation Council to those who can build and operate cost-effective hospitals and medical networks. Thus, models are now emerging in this market — traditionally seen as almost impenetrable — that many are suggesting will offer substantial returns for investors without skimping on quality healthcare.

“Any successful [private healthcare] project which is looking to expand across the GCC should consider a joint venture approach with an experienced partner on the ground,” wrote Mohammed al-Qahtany, chief executive officer, Al Aman Investment of Kuwait, in a 2009 report by Ithmar Capital titled ‘Meeting the GCC Healthcare Challenge 2050’. “This ensures both local support and at the same time enables the project to benefit from the accumulated experience of the organization as a whole. Joint ventures have a successful track record, and this is the way to move forward.” It seems some major investors took notice.

The doctor strikes a deal

Dr. Sultan Bahabri founded and served as CEO of the 894-bed King Faisal Specialist Hospital in Riyadh; now as chairman of the Riyadh-based Ebram Investments, he has formed a joint venture with the new Beirut-based Rizk Red House Healthcare (RRHH) to develop a chain of 10 specialty hospitals throughout different cities in Saudi Arabia over the next eight to 10 years. The $1.35 billion project was announced in December 2011 after Red House chairman Mazen Beaini, and Bahabri, decided on a strategic vision that would require exceptional medical operating experience. Beaini then looked to Sami Rizk, the former general manager of Ashrafieh’s Rizk Hospital, as the man for the job, and RRHH was formed as a partnership. It is not hard to see why the trio has come together.

The Saudi government has long planned to transition healthcare from the public to private sector. However, it has been slow to do so and continues to buoy the majority of the industry, as most estimates put government expenditure at more than two-thirds of total healthcare spending. As part of a plan to increase the profile of healthcare in the country, the government announced that an extra-budgetary spending of $18 billion will be allocated to healthcare and social services under a five year plan, begun last May. As part of the initiative, 120 healthcare centers and hospitals will be built and four expanded.

To reach the target of 3.5 hospital beds per 1000 people by 2014, the kingdom will need to add more than 41,600 beds to its total of 55,000, as of last year. But so far the private sector has been hesitant to make bold moves, as the nature of the capital-intensive industry requires many years before significant returns are seen.

Bahabri points out that returns for healthcare providers are around 6 to 8 percent worldwide, “but in our region it is about 10 to 12 percent.” In the last three years, he says, some private groups have seen returns of 22 to 25 percent, mainly because governments started to buy those services, a trend that will likely continue. Globally, revenue streams are differentiated according to each medical specialty. For example, diagnostic centers tend to provide exceptionally high returns compared to other domains. “Some specialties make [profit] after three years of operation; [for] some it takes eight years to make money back,” says Rizk.

Saudi Arabia’s health ministry still owns and operates more than 60 percent of hospital beds in the kingdom, but even so, a recent report by management consultants Booz & Co noted that: “many private companies are either majority owned by the government or have government officials on their board in the GCC — private investors will be wary of going head-to-head with such companies.”

Another reason private sector investment has not surged is because regulation is nascent, with the government announcing in 2010 that it would set up an authority to track private facilities.

Lifting the lid

In March of 2011, King Abdullah issued a number of royal decrees to encourage foreign private investment in healthcare, in which the cap on loans to private hospitals rose from SR50 million ($13.3 million) to SR200 million ($53.3 million).

In fact, though both Ebram and Red House had been doing their own independent research on the Saudi healthcare market, it was not until King Abdullah’s initiatives were announced that the two got in touch. “As a Lebanese company headquartered in Beirut, we were motivated because of the foreign investment incentive,” said Beaini. “Now we have access to government authorities and groups like [Saudi] social security which has billions to invest.”

Mandatory healthcare insurance, which has been an obligation for the private sector since 2009, “will ultimately apply to all Saudi national employees as well,” according to a report on the Saudi healthcare industry by the National Commercial Bank, one of the country’s largest lenders. As of today, an estimated 20 to 30 percent of Saudis have voluntary health insurance according to Bahabri.

As such, the joint venture plans to construct hospitals in cities like Riyadh, Jeddah, Khobar and other areas outside major population centers. “Al Kharj, close to Riyadh, doesn’t even have one [civilian] hospital. All these areas already have infrastructure so we don’t need to build,” says Beaini, who insists that people should not have to come to Riyadh and Jeddah for quality care. Already, real estate consultants Colliers International have completed a feasibility study for the first hospital in Riyadh in November 2011 and will decide with Ebram what the specialty will be in each area where hospitals are planned.

Getting the money

The joint venture between Ebram and RRHH has adopted a fund-like procedure modeled on private equity but with the option to use other structures to raise 70 percent of the $1.35 billion cost not covered by government loans. Thirty percent of the $1.35 billion cost will be covered by soft loans that can be paid back with interest over 20 years, with a plan to go public down the line.

Till now, the joint venture has raised the seed capital, which covers 55 percent of required equity, and will officially launch a road show in the second quarter of this year to raise the rest of the money, mostly from international healthcare funds and operators. “We prefer institutional investors since we have worked with them before in our other projects,” says Bahabri, adding that they may approach investment banks as well. Funds will start to be deployed by the first half of this year.

So far, international healthcare operators have shown eagerness to invest, and cover the remaining equity in exchange for long-term (20 to 30 year) contracts as facility operators. “We have European, Canadian, Indian, all the big players in the healthcare sector,” says Beaini. “We have [even] been approached by Spanish contractors trying to get into partnership. If they have a proven track record in healthcare, this could be an added value for us.”

Since most Saudis who seek care abroad end up in Germany, Britain, Thailand and India, it would make sense that potential operators will be found there, according to Booz & Co. Treatment in oncology, neurology, orthopedics and cardiology centers are most sought by Saudi patients abroad, the firm adds.

Costs and returns

The time is ripe for such a healthcare venture in the KSA market, according to Bahabri, given the supply shortfall and the interest that will be drawn from the financial sector due to the innate financial setup. He says, “In KSA, we have a very healthy market for Initial Public Offerings (IPOs). We have [around] 20 health insurance companies listed and only one listed healthcare company on stock exchange [Al Mouwasat Medical Services], which is the opposite of the global reality,” where listed healthcare providers outnumber insurance companies. The planned IPO could pave the way for a more mature healthcare market. “The authorities are… encouraging us and other healthcare companies to go public because it’s low-risk and it suits pension funds and other funds that would like long-term sustainable income,” says Bahabri. The potential already exists due to rising rates of diseases like diabetes and the onset of an ageing population, as well as the penetration of supportive industries like health insurance.

While $300 million has been marked for land acquisition (locations of the first hospital will be chosen in the coming few months), about $1 billion will be spent on design and construction (each hospital may have up to four surrounding speciality centers); equipment will most likely be leased.

Since medical equipment and technology must be imported, traditionally it has been a tricky piece of the pie for new private players who seek to provide healthcare in the GCC. But Bahabri says he has a plan to bypass those expenses: “We are going to change the rules of the game in a very conservative industry. If we are not going to be innovative, we will not be in it. You don’t have to own your CT-scan anymore. You don’t even have to lease it. You can share revenue with the provider and that would improve your margins.”

By comparison, each 300-bed hospital will cost around SR500 million ($133.3 million) as compared to the $70 million cost of the 300-bed Jeddah East Hospital under construction, a project of the Saudi Ministry of Health. “In the United States $450,000 to $500,000 is the standard cost per bed when developing a hospital, including construction, equipment and land,” says Rizk. “We are spending $450,000 per bed [including construction, equipment and land] but we are financing it differently.”

Operations strategies

Unlike other development schemes, when building hospitals it is crucial that the operator and contractor are in sync from the design phase so as to coordinate patient flow based on what kind of specialty the hospital will serve, according to Rizk.

Ebram Medical, which is legally designed as a public company, will have a board and audit committee, and will operate the hospitals but will form strategic alliances with international operators, hinting that Asian models from Thailand, Malaysia and India are preferred over Western operators due to cost-efficiency. “The challenge is not to build, it is how to operate… the investment part is easy, it is the operations and services that are hard,” says Bahabri.

Using a more sophisticated version of a cost-effective model already in place in the region, the group plans to bring in American doctors for 15 days every 3 months and schedule operations during the strategic interval. But costs will have to be kept close to the standards of the kingdom. “Today, open heart surgery in KSA is around 40,000 Saudi Riyals ($10,600) as opposed to $40,000 in [the] US,” cited Bahabri.

In 2010, KSA was already exhibiting higher prices in private hospitals as both the inpatient and outpatient visits are estimated to have increased by 5 percent and 8 percent that year, respectively, according to the National Commercial Bank’s report on Saudi Health Care published in July 2011.

Issues and concerns

“Our strategy is ‘what not to do,’” says Bahabri. Certainly, it is not to imitate models of medical pinnacles like the Mayo Clinic in Minnesota, but instead to focus on delivery of a specific area of medicine and only provide post-hospital care in later phases after secondary care is established. Hospitals would be run like a network with “specific disease-based centers” surrounding them, according to Bahabri, which will collaborate with other research centers.

“For each disease you need a hospital, which has been the trend in last 10 years, and each facility will have a different strategy,” he says.

In addition to high expectations from demanding healthcare recipients and the cost of importing medical equipment, Saudi Arabia faces a shortage of local talent in terms of medical staff and will need to attract foreigners to fill the gap.

Though more than 100 nationalities work as physicians in KSA, Saudi doctors are preferred, according to Bahabri, who also points out that Philipino nurses are on their radar, as they have a well-established and respected history in the kingdom. To integrate the pool of medical experts, the hospitals will have their own training programs. In parallel, the government is trying to increase the number of Saudi physicians. In December 2010, Saudi Arabia‘s Education Minister announced plans to build medical colleges and hospitals at all 24 government universities in the country.

There is competition from other well-established players that have expanded in recent years, like Magrabi Hospitals and Centers, and Saudi German Hospitals Group, though no new major players have emerged in last 10 years and Bahabri says the joint venture’s focus on disease-based centers will differentiate its market.

Gulfward bound

RRHH — a Lebanese company based in Beirut — aspires to distribute their know-how in management, operations, design and construction, with a focus on the GCC across the Middle East and North Africa.

Though there were 68 hospitals in the United Arab Emirates in January 2011, bed demand will more than double to about 165,000 and treatment demand will rise by 240 percent by 2015, according to a January 2011 report by the Italian Trade Commission. Healthcare costs in the Emirates could multiply by a factor of five to $60 billion. So far, however, billions of healthcare dollars are being spent outside the country, a major loss of revenue. The most recent figures from the Abu Dhabi Chamber of Commerce notes that UAE residents spent $2 billion on treatment abroad in 2009, though the government has a stated policy of encouraging private investment in order to supply its domestic medical needs.

Centers for diabetes are particularly in short supply, with the International Diabetes Foundation noting that the GCC spends $5.5 billion a year on prevention and treatment of diabetes, accounting for 14 percent of its total health expenditure.

Lebanese companies may reap great benefits due to their long history of accredited medical institutions relative to the GCC, says Rizk: “The GCC respects Lebanese know-how in healthcare, we are renowned for it.”

Citing the potential of healthcare tourism in Jordan and Tunisia, Rizk stresses that the strategy must be patient-centered in the new healthcare era, where the type of design prioritizes cost-efficiency. As for markets in short supply of modern medical services, RRHH aims to expand beyond the conservative model of sticking to construction, design, and equipment placement, with plans to develop a strong network of services, management, healthcare tourism, maintenance, facilities management, biomedical engineering and talent management.

“Our quality is because of the culture and this is what we will export,” says Rizk.

February 3, 2012 0 comments

Real Estate

Big is getting bigger

by Rayya Salem February 3, 2012

written by Rayya Salem

Increased competition in the retail sector has ushered in a new era, whereby malls have become the major players, as exhibited by the increased demand for space and rising rental prices. But there is little doubt that upcoming malls will irrevocably change the rules of the game in terms of operations, services, rents and fees. The price of doing business is definitely on the up.

“The cost of construction [has] reached peak levels, leading shop rents to the highest point ever and newcomers [malls] are modifying their prices,” said Michel Abchee, chief executive officer and chairman of ADMIC, the builder of City Mall in Dora and parent company of retailers BHV and Monoprix.

Already, Beirut is home to the third most expensive retail rents among 13 cities in the Middle East, according to a September 2011 survey by property consultants Cushman & Wakefield. Beirut’s retail stood out as the only city in the region where retail rents in general increased, while the report zoned in on ABC Ashrafieh’s retail rents, which increased by 33.3 percent over the year ending June 2011. But it was a report released in the second quarter of 2011 by Ramco Real Estate Advisors (RREA) that exposed the trend of steady rises in mall rents, while pointing out that surrounding retail areas outside of the mall had stabilized.

Considering the added pressure of new supply and the impact of a seemingly impending wage hike, local retailers will have to play it smart if they are to compete with large retail groups and international stores.

In with the new

Despite several established retail areas, some believe that supply is still limited. According to RREA, 95 percent of retail space in Hamra, Verdun, Ashrafieh and Gemmayze was occupied, as of July 2011. New mall operators will likely look to fill much-needed supply in areas outside the capital. Hazmieh will be home to Lebanon’s largest mall as Dubai-based mall developer, Majid Al Futtaim Properties, will deliver 60,000 square meters (sqm) of Gross Leasable Area (GLA) when the Beirut City Center opens this year, which will include more than 200 shops.

Acres Development, a subsidiary of the retail group Azadea, will deliver its third installation of the Le Mall brand with a new mall in Dbayeh, which they intend to open in August. Although the Dbayeh building offers 25,000 sqm of GLA, more than double that of the existing Sin El Fil location, it is already sold out of retail space “even for a stand,” according to a representative at Acres. The mall is aiming for high foot traffic by the inclusion of attractions such as an eight-screen movie complex, along with two floors of food and beverage outlets. It has also been successful in luring new entrants to the Lebanese market. Several European and American brands have taken up the largest swaths of retail space; international apparel giants Decathalon and The Gap have both booked sizable space at 3,000 sqm and 900 sqm respectively.

Go big or go home

Although tourism fell 23.6 percent last year compared to record numbers in 2010, according to the tourism ministry, tax-free purchases by tourists actually grew by 10 percent for the year, according to Global Blue, the reimbursement firm, although that was lower than the 21 percent growth recorded in 2010. However, if tourism numbers continue to fall and the retail market is flooded with more malls, it will likely force retailers to improve their services, and offer better prices. More than ever, increasing competition will push out low performers to make room for newer or international brands. “At renewal time, some [tenants] are asked to leave because there’s a waiting list… and malls want to improve their tenant mix,” said Abchee.

According to the owners and managers of the Verdun 730 and 732 retail buildings, Aliamad Group, ground floor retail space always has a waiting list of around 10 companies with rents starting at around $700 per square meter. While each mall caters to a different category of shopper in various geographical areas, whether retail rents will stabilize across the board as new supply enters the market is something that only time can tell. But according to Abchee one thing is certain: “Those who are not client-oriented will fade out and lose their market share.”

February 3, 2012 0 comments

Society

Foam and fortune

by Ellen Hardy February 3, 2012

written by Ellen Hardy

If you fancy an evening of Lebanese food, implores Karim Haïdar, do not book a table at his newly opened restaurant, Zabad.

“Please,” he says, “go to Karam [Al Bahr, a close neighbor at the Zaitunay Bay restaurant complex], because if you come here you’ll be disappointed.” Given Zabad’s tagline “Lebanese Cuisine by Karim Haïdar”, this might seem counterintuitive. But it is a serious attempt to prepare his audience for what many will see as an unorthodox dining experience.

A traditional Lebanese table invariably calls for blizzards of mezze, steaming mountains of main dishes, pagodas of fresh fruit and platters of sweetmeats — even if half of it gets thrown away. But at Zabad, you will consume a finely-orchestrated procession of seven small savoury dishes and two sweet, from a set tasting menu that changes every few days and name-checks a raft of well-known Lebanese ingredients — tahini, moghrabiyyé, kafta — while presenting them in unheard of forms and flavors.

Food as art

A dollop of chickpea “espuma”, a scoop of moghrabiyyé with cheese foam, a single square-cut chip with a slick of basil coulis — this is Haïdar’s interpretation of Lebanese cuisine in the modernist tradition. Sometimes known (and maligned) as “molecular gastronomy”, this precise, experimental and technical style of cookery has been obsessing the greatest chefs around the world for the past decade, and has influenced a whole generation of restaurateurs.

Names like Ferran Adrià, Thomas Keller, Heston Blumenthal and Grant Achatz have dominated the scene, with Adrià’s three Michelin starred restaurant elBulli, situated on the northern coast of Spain, and its mythical 35-course dinners making it to the number one spot of Restaurant Magazine’s annual “Best Restaurant” rankings a record five times. But despite the two million requests it received for tables every year, elBulli closed in summer 2011 due to massive financial loss, and is due to reopen in 2014 as a culinary research and education center.

Modernist kitchens have often been compared to laboratories — they rely on sophisticated cooking methods, intricate equipment and a lot of highly-trained manpower to achieve dishes that bear little relation to anyone’s idea of a square meal. Adrià and his ilk’s repertoire of foamed, frozen, deconstructed and reconstituted ingredients have become bywords for a scientific complexity that has nevertheless become popularized to the extent that Adrià created Texturas, his line of products for home kitchens.

Alginate for spherification (“the controlled gelification of a liquid which, submerged in a bath, forms spheres”), lyophilized (freeze dried) fruits and anti-humidity tablets are all on the menu — at a cost. A “mini-spherification kit” will set you back around £85 ($130) from Harvey Nichols in London, and if you want to purchase a cookbook, ‘Modernist Cuisine’, created by former Microsoft chief technology officer Nathan Myhrvold with a team of 20 staff over five years, it comes in at six volumes, 2,400 pages, 1,500 recipes and a $625 list price. This is fine dining taking itself extremely seriously.

Shy tongues for modernism

Beirut is still in the early stages of acquaintance with modernist wizardry, but there are a number of the famous sous-vide machines (long, slow cooking in a plastic vacuum) in operation in kitchens around the capital, and some restaurateurs are taking the idea further. Badeeh Abla is the founder of beirutrestaurants.com, creative director of Nobrand agency and a self-confessed “gourmet and gourmand” who has created a private kitchen in his Gemmayzeh mansion dedicated to hosting top international chefs and “putting Beirut on the culinary map.”

In September last year, he hosted a team of chefs from elBulli for three nights, investing $85,000 in equipping his kitchen with everything from obscure herbs to a $4,000 Pacojet machine, which purees frozen ingredients. The event, at $350 a head, was booked out, but Abla barely broke even. He says wryly “I really understand why elBulli [did] not make money… It’s a lab, it’s a show.”

One of Nobrand’s former clients, chef Dory Masri, has ample reason to agree with Abla’s assessment. After rising through the ranks in London to work with celebrity chefs like Gordon Ramsay and Angela Hartnett, he returned to Lebanon in 2011 to invest $400,000 with two friends in opening La Manche on Pasteur Street, offering exclusively modernist dishes.

With a menu listing sea bass with pink grapefruit foam, carbonated mashed potato, deconstructed peanut butter sandwiches and liquid nitrogen frozen kiwi lollipops, Masri’s influences and ambitions were clear. The project lasted eight months.

“The only interest I had was from chefs, to be honest, and restaurant owners,” says Masri, who regrets his assessment of the market and location (being located in Downtown, he suspects, would have helped). Importing pigeon breasts and bringing in alginate and other substances by DHL courier pushed the price of a single dish up to as much as $65, earning La Manche a reputation as unfeasibly expensive. He was also frustrated by the reception of his ideas by his audience, characterized by suspicion of the unknown.

“Lebanon is a very hard market to deal with. You go for a soft poached egg and people tell you: ‘It’s nayyeh [uncooked], you can’t serve that…’” says Masri.

His passion for the modernist approach suffered an early casualty in regards to marketing with the PR company Grey, who “didn’t have a clue about it. Their presentation was like another McDonald’s.”

As an unknown chef in Beirut and with no knowledge of the market, he now says ruefully that his advice to other chefs contemplating a similar move would be to “be very careful. Market it big time.” Given the chance again, he would “start with what the market needs, establish my name and then do it [with] a menu of 60-70 percent molecular and 30 percent other stuff.”

Is there a genuine market for modernist cuisine in Beirut? “Yeah, like 12 people,” says Abla. At his elBulli event, “I’m sure 40 percent of those people didn’t know what they were eating.” And he is cautious about the potential for growth, pointing to the high cost and small portions associated with this approach. “[Beirut] will never be ready for such a cuisine,” he says. “It [modernist cooking] came late to Beirut.”

If a chef is really passionate about his art, perhaps he should look to Burgundy restaurant, whose more traditional à la carte menu and focus on a quality wine list give their Canadian chef freedom to experiment with acidulated cucumbers and foie gras with curry. Restaurants that do not succeed will lose in the region of $50,000 a month in running costs, Abla estimates. Even popular restaurants rely on franchising to grow their business. For modernist restaurants in Beirut, he says “it is a risk and I don’t know how they can pull it [off].”

Culinary for love

Haïdar will be hoping he can prove the naysayers wrong. A Lebanese restaurateur based in Paris since 1985, with successful operations Point Bulles, L’Enclume des Bulles and La Branche d’Olivier to his name, he opened Zabad at Zaitunay Bay in late December, his first venture in his home town. “I don’t want to change Lebanese cuisine,” he insists, citing the variety found within French cookery. “I want to add to it… it’s for people who are interested in this new dining experience.” Moghrabiyyé, for example, “in Lebanon is made only one way… with cinnamon and caraway, with chickpeas and with red onions. We are serving it with saffron as a spice, totally changed, and a foam of cheese.” Instead of Arak in a glass, you’ll find it in a palate-cleansing granita between the savoury and sweet courses.

Haïdar has invested, he estimates, 50 percent more in his kitchen than he would otherwise have done to acquire the requisite Pacojet, siphons for injecting liquid fillings, a sous-vide machine and a thermoplongeur for achieving exact temperatures. But although he’s “very scared” about the prospect of failure, he says he makes significant savings on wastage and labor. And he is prepared to listen to his customers. He has already had “good” and “horrible” feedback, but “of course I’m not coming to make the restaurant that they love to eat in, because Lebanon is full of that,” says Haïdar. “I’m not coming just to make money and fill my restaurant and make whatever people want. So I’m making what I want them to eat, but I want to listen to them, to understand what they really feel about it.”

February 3, 2012 0 comments

Comment

A man of change?

by Peter Speetjens February 3, 2012

written by Peter Speetjens

King Abdullah of Jordan continues to rule in all shapes and sizes. The country is filled with images of Abdullah as a pilot, student, family man and Bedouin. In Amman, there is even one poster of him cheering in a football jersey next to the smiling face of Ronaldo. The message is clear. King Abdullah is like a father to all his subjects. He also remains a trusted friend of the West that continues to portray him as a man of change. Surprisingly, Abdullah’s talk of reform since his ascendency to the throne in 1999 has actually manifested very little.

Politically, the constitutional reforms suggested last summer were disappointingly meager, as they hardly limit the king’s powers and still await parliamentary approval this spring. The same is true for the new election law — no one expects a fundamental change. Abdullah’s support base in the sparsely populated tribal and rural areas is likely to continue to dominate over the densely populated and predominantly Palestinian urban areas. Economically, Jordan under Abdullah’s reign has increasingly adopted a free market ideology. Yet, while the country has shown a healthy gross domestic product growth rate in recent years, most observers agree that the increase in wealth has not been evenly distributed, while corruption has been gradually on the rise. On the 2011 Corruption Perceptions Index issued by Transparency International, Jordan ranked 56th out of a total 183 countries. In 2004, the kingdom ranked 37th.

As Jordan’s reputation was fading, something needed to be done. Consequently, the Anti-Corruption Law (ACL) was passed in 2006, which shortly after gave birth to the Anti-Corruption Commission (ACC). Admittedly, the ACC has since uncovered a series of major scandals: in 2010 four suspects were sentenced to three years behind bars for paying $18 million in bribes with the aim to obtain a multi-billion dollar contract to expand the country’s one and only oil refinery. They included an ex-minister, a former adviser to the prime minister and a billionaire with, reportedly, good contacts at the royal court.

The ACC is currently investigating the wrongdoings in a major affordable homes building scheme that allegedly involves a former Minister of Housing. Mawared, a property development firm with close ties to the military, is also under investigation.

Still, it remains to be seen if Jordan is serious about fighting corruption, especially since King Abdullah last year replaced Prime Minister Sami Rifai with Maroun Bakhit. It was a decision that raised quite some eyebrows, as Bakhit in a previous stint at the helm supervised the most tainted elections in Jordan’s history in addition to the “Casinogate” scandal.

In 2007, former Tourism Minister Osama Dabbas signed a contract with an Iraqi investor to build a casino on the Dead Sea coast. Within a week however, the Bakhit government changed its mind, even though the investor in that case was contractually entitled to damages worth some $2 billion. The case was eventually settled out of court.

As soon as his second coming was a reality, Bakhit referred Casinogate to the ACC. He had little choice, as he had vowed “to open all corruption files with transparency and with no exceptions” and “there will be no immunity for an official, no closed files and no protection for the corrupt.” In reality, the former general set out to do the exact opposite. Based on recommendations by the ACC, Jordan's parliament managed to obtain the required two-third majority to prosecute Dabbas, but not Bakhit. The latter went on to amend the ACL by adding Article 23, which penalizes an accusation of corruption “on false grounds” with a fine of up to $86,000, which seems to have but one goal: to stop the media from meddling in potentially embarrassing affairs and keep the decision to investigate corruption cases firmly in the hands of the establishment. Shortly after, Bakhit was replaced by Awn Shawkat al-Khasawneh, King Abdullah’s 9th premier in 12 years. Looking back at those 12 years, one cannot but conclude that very little of the promised reform has actually materialized.

There is one exception: the streets of Amman are increasingly adorned with the images of Abdullah’s son Hussein — there is little Hussein serious in a suit, little Hussein smiling in a shirt and little Hussein complete with Bedouin scarf watering an olive tree. Thanks to this most salient successful policy change of his father, one can only imagine the day young Hussein himself ascends to the throne, heralded by the horns of reform and bearing the mantle of a better tomorrow that looks surprisingly similar to yesterday.

February 3, 2012 0 comments

Comment

After the brinkmanship

by Gareth Smith February 3, 2012

written by Gareth Smith

The failure of Iran and the United States to negotiate risks all out conflict. Western advocates of sanctions against Tehran argue they will pressure the Iranian people to lean on their government to abandon its nuclear program. “Intelligence sources” are claiming that covert operations can do the same.

Many Iranians question this belief. Farideh Farhi of the University of Hawaii noted that the latest murder of an Iranian nuclear scientist, Mostafa Ahmadi-Roshan, was followed by the plastering of his picture throughout the Iranian media “with his adorable young son, both sweetly gazing at the camera.” She continued: “The picture went viral and, with it, a rather explicit message: America, Britain, and Israel… have killed a father and orphaned a son. It must have been pure fortuity for Tehran that, on the same day, a video of American marines urinating on dead Afghan bodies also took the internet by storm.” The notion that sanctions and covert operations will turn Iran’s leaders rests on some analysis of their psychology and political thinking. But is it right?

Iranian politics is factional. When I lived in Tehran from 2003 to 2007, there was a leadership group of around six to eight people, reflecting the balance of factions within the political class that weighed up important decisions. Within the group, Ayatollah Ali Khamenei was pre-eminent as the rahbar (‘leader’) but he was no simple autocrat.

When he succeeded Ayatollah Ruhollah Khomeini in 1989, he lacked his predecessor’s religious pre-eminence and stature as leader of the 1979 revolution. Partly as a consequence, Khamenei rarely led from the front, preferring to wait for consensus or balance to emerge within the leadership.

True, Khamenei often sided with Iran’s conservatives. In the 1997 presidential poll, he barely hid his support for Ali Akbar Nateq-Nouri and when reformist Mohammad Khatami won, Khamenei allowed conservatives to undermine him, especially through the judiciary. But in 2005, he instructed the Guardian Council, a constitutional watchdog, to reinstate two reformists in the presidential election. And in March 2006, he publicly backed talks with the US regarding Iraq, despite strong objections from fundamentalists aired in the media, including by Hussein Shariatmadari, editor of Kayhan newspaper, who wrote two stinging editorials describing talks with the US as a “trap”. Mahmoud Ahmadinejad’s election in 2005 capped a rightward shift in Iranian politics and the new president, endorsed by a landslide, elevated the nuclear program from a state policy to a popular campaign. Slowly, the balance in the leadership had moved in favor of a more assertive — or, as Washington would see it, defiant — foreign policy, and Ayatollah Khamenei moved with it.

When the reformists took to the streets after Ahmadinejad’s disputed re-election in 2009, it was clear that Washington’s political class was wary of the “engagement” promised by Barack Obama when elected the year before.

And like Khamenei, Obama has shown little inclination to lead from the front. Whilst it is true that by recently postponing joint military maneuvers scheduled for April he signaled to Israel not to take for granted US support for a military attack, he has seized on tighter sanctions as a ‘cost free’ alternative to force, as a way to buy time and assuage domestic and international critics. Khamenei knows sanctions are cutting deeper as they have focused on Iran’s central bank and oil imports. Tehran enjoys some leeway due to high oil prices, but this could diminish as China, South Korea and India scale back purchases, or perhaps, in the case of Beijing, use the situation to drive down prices.

Diplomacy barely exists. The P5+1, the permanent members of the United Nations Security Council plus Germany, is an unwieldy negotiator led by Catherine Ashton, whose main diplomatic experience appears to have been negotiating the Lisbon treaty through the British upper chamber, the House of Lords. On the Iranian side, Saaed Jalili, secretary of the Supreme National Security Council, lacks the worldliness of predecessors like Hassan Rouhani or Ali Larijani.

If Obama and Khamenei really wanted to talk, they could dispatch serious and trusted people to meet, ideally in secret, in Norway or a South Sea island. But that is where domestic calculations come into play. For all their bluster, neither Obama nor Khamenei are ready for the risks. The outcome is a dangerous drift. And looming US presidential elections this year and parliamentary elections in Iran next year will give plenty of room for advocates of confrontation to make the running.

February 3, 2012 0 comments

Comment

Dilapidation and deficit

by Paul Cochrane February 3, 2012

written by Paul Cochrane

My fiancé and I recently decided that we’d had enough — the grinding traffic gridlocks, the high-and-rising rent, the ever present noise of construction and the near complete lack of public green space in Beirut were daily agitations we could no longer bear. Our move — to a house with a large garden and mountain views 10 kilometers above Jbeil — was possible, we reasoned, given that we are both able to work remotely, via the Internet.

That was the theory anyway. In reality the infrastructure in our area provided for no functioning Internet network, and so we had to purchase an illegal, snail-speed connection. The other shock was regarding electricity, with power cuts vastly more pervasive than in Beirut, meaning we had to shell out for a UPS system for uninterrupted power — a viable solution but with obvious annoyances. All this made us tangibly aware that while the current government has spoken a great deal about reform — and indeed some progress has been made in the telecommunications sector — Lebanon still has a long way to go. Phone costs here are still among the highest in the world, and while Internet connectivity and pricing has improved — albeit not nearly as much as was promised by the telecommunications minister in October — for much of the country Internet speeds have gone from a snail’s pace to the velocity of a snail after a few energy drinks. Cheap telecommunications and fast Internet are economic essentials in this so-called ‘global village’ we live; when dealings with the rest of the world are fast and efficient, business is invariably stimulated. Jobs are already being created in call centers and related services that tap Lebanon’s skilled and multi-lingual labor force. Better telecommunications would also relieve some of the strain on Beirut as, in principle, more people would be able to work from home or at businesses outside the capital. As it stands, my own move to the countryside will have to be part-time — today’s journalists require high-speed Internet, and for that I will be forced to keep my office in the city and become another commuter clogging Beirut’s traffic arteries.

Successive governments have pledged to promote more equitable development throughout Lebanon, which would require investment in public infrastructure such as telecommunications, electricity, roads and so forth. This investment has not materialized, with the consequence for the northern regions being unemployment by far the highest in the nation, while constituting 46 percent of the poor in the country according to the United Nations. The lack of viable growth areas outside the capital has also concentrated the country’s economic expansion in and around the capital, with 400,000-odd vehicles entering the capital everyday according to air quality researchers, gardens being paved over for car parks, and open spaces disappearing under new tower blocks, among other stressors that have reached such a pitch in recent years that the city is becoming unlivable. Aside from killing productivity and fraying nerves, the increased traffic is also destroying people’s health: recent studies have shown that Beirutis are at high risk of almost constantly inhaling hazardous particulates, mostly from cars. Further statistics highlight the rampant urbanization: some 80 percent of Lebanese live in urban areas and there are an estimated 18,000 people per square kilometer in some areas of Beirut such as Nabaa and Dahyeh— an urban density higher than that of Shanghai or Beijing.

It is apparent that our policy makers are quickly losing the luxury of inaction on public service reforms — the infrastructure that is meant to prop up the country is teetering under dilapidation and deficit, placing pressure on Beirut that has become unsustainable.

Despite the inconveniences my fiancé and I have faced since leaving the city, the move could not have been more timely. The five-story building that collapsed in Beirut’s Fassouh district last month, killing 27 people, was the building my fiancé had lived in until just two weeks prior to the tragedy. If we had not moved when we had… well, I would rather not contemplate that possibility. Preliminary investigations indicate the building’s decrepit structure gave way after sustained heavy rains — a grim reminder of how, when neglected, eroding foundations eventually crumble.

February 3, 2012 0 comments

Comment

Resources in conflict

by Nicholas Blanford February 3, 2012

written by Nicholas Blanford

The discovery of vast oil and gas reserves under the eastern Mediterranean seabed presents a new set of security problems in one of the most volatile corners of the world. Among them is the issue of divided Cyprus: the Turkish Republic of Cyprus has already warned its Greek competitor not to begin drilling for oil and gas before the unity of the island is resolved. But it is the potential dispute between Lebanon and Israel that has drawn most international attention — and apprehension.

Israel has moved much more quickly than Lebanon in tapping its potential oil and gas wealth, parceling up some 9,600 square kilometers off its northern coastline in a series of licensed exploration blocks. However, the problem lies in the differences between the proposed boundary lines marking the extent of the Exclusive Economic Zones (EEZs) — the area a state can claim for resource purposes — of Lebanon and Israel. Israel’s proposed line begins 17 kilometers north of the point proposed by Lebanon. In effect, this has left a disputed zone of approximately 854 square kilometers.

Resolving the dispute has reached an impasse for now. The United Nations, which regularly mediates disagreements between rival EEZ claims, is the best choice for mediating a solution. But Israel insists that any negotiations should be expanded to cover the Lebanon-Israel land border as well, clearly a non-starter for Beirut.

The lack of a negotiated solution has left both sides mulling the security implications. A little over a year ago, Israel drew up a maritime security plan costing between $40 million and $70 million to defend its oil and gas interests. Last month, the Israeli navy announced that its flotilla of missile boats will be responsible for protecting oil and gas rigs.

Of particular concern to Israel is the weaponry now available to Hezbollah and Syria which could inflict significant damage to offshore oil and gas infrastructure.

Hezbollah’s military component includes an amphibious warfare unit with cadres trained in underwater demolitions and seaborne insertions. It could be equated to, if you like, the United States Navy SEALs.

Details about the unit are vague. It is equipped with Zodiac inflatable boats and probably has access to some of the specialized vessels produced by Iran. They include torpedo-armed submersible or semi-submersible boats and swimmer dispersal vehicles, which are underwater torpedo-shaped vessels that transport frogmen to a target.

Israeli’s major worry, though, comes from the anti-ship missiles in the arsenals of Hezbollah and Syria, like the Noor cruise missile used on the third day of the 2006 war which disabled the INS Hanit, one of the Israeli navy’s top warships. The Noor is an Iranian reverse-engineered version of the Chinese C-802 missile. Until then, no one had imagined that Hezbollah had acquired anti-ship missiles.

Since the 2006 war, Hezbollah is believed to have received larger quantities of Noor missiles as well as more advanced systems. One of them, possibly, is the Raad, an improved Iranian version of the Chinese HY-2 Silkworm. The Raad can carry a 320 kilogram shaped-charge warhead for a distance of more than 350 kilometers. That means Hezbollah could fire a Raad from Ouzai at the southern end of Beirut and strike Israeli naval vessels as far south as off the coast of Gaza. Israel’s oil and gas rigs lie beyond Israel’s territorial waters but within its “economic waters”. That places them within range of the smaller Noor, let alone the Raad.

The latest potential addition is the Russian P-800 Yakhont supersonic anti-ship cruise missile. In November, Russia delivered two Bastion coastal missile systems to Syria, with a total of 72 Yakhont missiles. The range and warhead size are similar to the Raad, but the Yakhont is three times as fast and has a superior guidance system. Its speed — twice the speed of sound — and sea-skimming approach make it very difficult to defeat. Syria showed off its new missiles in a series of military exercises in December.

Economic interests will probably ensure that both Lebanon and Israel will move to exploit oil and gas resources in the uncontested stretches of their respective EEZs, avoiding the disputed zone and aggressive moves for now. But if and when a fresh war breaks out between Israel and Hezbollah, the waters of the eastern Mediterranean will constitute a significant new theater of conflict.

February 3, 2012 0 comments

Comment

Revolution of the Institutions

by Farea al-Muslimi February 3, 2012

written by Farea al-Muslimi

If you find yourself at the head of a public, or even a private institution in Yemen today, you are most likely having a hard time sleeping, owing to the fact that the nightmare of being kicked out the door by your own employees may be what you wake up to the next morning. As the media spotlight has moved on, Yemenis have been revolting against their officials all around the country in what is being tipped as Thawrat Al Muasasat, or the “Revolution of the Institutions”, better known as the revolution’s second phase. Public servants and private employees of all stripes and colors are rising up against their bosses, demanding they be replaced with “clean ones”.

Those taking part include military staff in the army and air force, staff at the national air carrier, employees of oil companies, factories, hospitals, universities, unions, radio stations and even middle school students fulfilling the High School dream of ousting their most loathed teachers. Perhaps fittingly, among the institutions experiencing these new rounds of protest is the Central Organization for Control and Auditing, the largest governmental authority in the country intended to fight corruption. The techniques being used include preventing the targeted boss from entering the building, forcing their resignation or pressuring those above them to issue them a pink slip.

Notable in these new uprisings is the fact that those carrying them out were largely silent before the dismissal of Yemen’s lord of corruption: former President Ali Abdullah Saleh. These movements are organic, unorganized and not driven by any political party. Indeed, deals devised by foreign interests — such as that which the Gulf Cooperation Council concocted to let Saleh off the legal hook — can do nothing to contain these movements or push them in a specific direction, as they did with the first revolution. This time the Yemeni people have shown that their revolution is much more than just a euphoric expression that dissipates once the dictator is no more.

Little, if anything, would have changed in Yemen if people just replaced a figurehead since the nizam, or system, would have continued to feed its “small-dictators” through the patronage systems and ensured that only those supporting the regime enjoyed ‘public’ services. Yemenis, who have lived with the malediction of Saleh’s business and family ties, know this all too well.

But as with anything in the country these days, there are voices of dissent. Even though these movements aim to purge the country’s institutions of the very people who maintained the networks of patronage and corruption, some still condemn them because they are contrary to the rule of law, disregarding due legal process, and thus contributing to chaos. One might question, however, the success of these skeptical intellectuals in steering the country away from the course it plotted for the past 33 years, compared to the protest movement which is only entering its second year.

The more pressing question perhaps is whether people would revolt against their leaders even if those very leaders were from the opposition? The answer is most likely ‘yes’. This new uprising that is spreading in the country against officials will most likely reach any public official in a position of power unless their priorities are centered on three major elements: employees, employees and employees.

The Revolution of the Institutions leads one to the logical deduction that, even though it may not make global headlines, the struggle in Yemen will be long, deep and institutional. Yemenis are all too aware that fear will take them nowhere, nor will the corrupted legal apparatus that acted as a cover for the former regime. This phase of the revolution is only the start of an effort to devise creative means of expressing dissent. By the time Yemenis come up with the next phase, they will have already altered their country’s concept of change.

February 3, 2012 0 comments

Society

Q & A – Lisa Piguet

by Maya Sioufi February 3, 2012

written by Maya Sioufi

The economic crisis has hit, among other things, the pockets of potential Masters of Business Administration (MBA) candidates, many of whom are choosing to postpone their studies or seek alternatives to an MBA program that entails taking a minimum of one year’s leave — a luxury in these testing times. To discuss the challenges business schools are facing, Executive sat with Lisa Piguet, head of MBA Admissions at IMD, a worldwide leading business school based in Switzerland.

What are the top three concerns of MBA business schools?

One concern is the decline in applications. Looking at GMAT (Graduate Management Admission Test) data, the participants for the age group 18 to 24 years old is growing and the test participants of the older age group is declining. In Europe, MBA admissions at European business schools require previous work experience so the average age of the classes are older and they are seeing a slight decline in applications. The economic situation is definitely a concern and impacts the drop in applications. Another concern is the return on investment. It is expensive to do an MBA and I think people are looking more at that now as a big issue. When they spend $120,000 on an MBA program, they want to know that it will pay off in five years. The third concern is no one knows where the market is going. Everyone is sitting on the fence.

So as it becomes more difficult to fill seats, is competition increasing among business schools?

Business schools in Europe have increased their class sizes a lot in the past five years because their MBA program is a money making machine. The competition has stiffened because of the declining market conditions and the class sizes increasing so compromises are being made in some places. When I see certain schools accepting people that normally would be declined in the past, I am really shocked. They are doing that to increase their revenues. At IMD, we have not increased our class size since 1995. We kept it at 90 because we felt we cannot mass-produce leaders. The MBA program at IMD is a brand and not a moneymaking machine for us and we rely on executive education for our revenues.

Are MBA graduates still able to find jobs in a weakening global economy? What changes have you noticed in terms of job placements?

I know a lot of people are afraid now. The United States is really suffering in terms of career placement, with some universities only seeing 50 percent placement. At IMD, as we only take 90 MBAs and we are very selective, our program is niche so our placements results are always really high, even in an economic crisis. What I’ve seen in the 10 years I have been at IMD is a change in how companies recruit. They used to look for “talent positions” in which graduates would be hired into a two year rotational program covering marketing, finance, accounting etc. Now recruiters are moving away from that and looking for actual positions.

E What have you witnessed in terms of number of applications since the economic crisis?

We witnessed a record number of applications in 2009, shortly after the crisis began, but it’s been down since. Most schools worldwide are down on applications right now because people are really concerned and they are staying put. It’s really bad in the US. I have witnessed, though, that the quality of applicants has also changed. It’s as if the candidates who were not so serious about applying went away. At the European Business Shools Meeting, which took place in June in Copenhagen, all the top European business schools were witnessing the same trend.

Who is paying for the MBA program? Have you seen any change since the economic crisis? What financing facilities does IMD offer?

The only slight change I have seen is that candidates are more likely to have a ‘Plan B’. The company will not pay for the MBA but the candidate negotiates a deal whereby he can go back if he needs to. I’m always surprised to see a lot of times the MBA [students] come with cash in hand. IMD has a loan program, which lends up to 65,000 Swiss francs ($71,000) — roughly half the tuition fees with living expenses — for the candidates that qualify. No co-signer is needed for the loan and it has to be paid back in four years. We recommend that potential candidates look for scholarships in their respective countries, as it is much better to get a scholarship than a loan.

What do you teach at IMD when there is a lack of visibility?

The economic crisis had several causes but one of the things I think caused the crisis is people being naïve and managers not being able to react. We are actually changing the program for 2012 and the new program is essentially looking at how you train a manager to react properly in a crisis situation. We are now adding a cyclical learning process whereby candidates do something, put it into practice, reflect on it and then go back and do it again. It is an active learning cycle. At IMD, leadership runs through the entire program; it’s our unique selling proposition. We provide candidates with team coaches and they are given tasks such as going to the Alps in January when it’s freezing and they are filmed completing their tasks and then they debrief with their group.

Where do IMD graduates end up?

78 percent of our 2010 graduates ended up working in industry, with the remaining 16 percent in consulting and 6 percent in financial services. This gives IMD a huge advantage during the financial crisis. Most programs in Europe are heavily weighted to the consulting and financial industries.

What do you have to offer for older business professionals?

The executive MBA is an option and we also offer in-company programs and open programs which could last one to two weeks. The biggest open program takes place at the end of June, with 500 top executives from around the world coming for one week. We offer different streams such as leadership and strategy and it costs 15,000 Swiss francs ($16,330) for the week.

How many candidates are from the Middle East (ME)? And how do they fund their studies?

Only 8 percent of the candidates are from Africa and the Middle East, with the vast majority from Lebanon, but it is a percentage we want to grow. We’d also love to have more women from the ME on the program. ME candidates have predominantly completed their undergraduate degrees in local universities — for Lebanon, it is the American University of Beirut — and often follow it with a master’s degree from a non-local university. For Saudi Arabia and Kuwait, most graduates complete their undergraduate degrees in the US. As for funding, Middle East candidates normally pay for themselves.

Do you aim on increasing your intake of students from the Middle East?

Yes, it is one of our huge focuses as it is a growing region. The biggest issue we have is GMAT scores. Some countries have scores of 300. I still don’t understand the score; so many are educated in the United Kingdom and the US. For example, in Kuwait and Qatar, they receive great education in the US but they have GMAT scores of 350. We can’t take these people. In Saudi Arabia, it is getting better. An MBA is something quite new for them. There are not enough test preparations centers, but awareness is rising and we are trying to build that up in the Middle East and Africa.

Would you consider doing a partnership in the Middle East similar to what London Business School and New York University have done in the UAE?

No, we are not considering such a partnership as IMD is just an 11-month program and we already do so many international projects. There are roughly 16 multinationals that pay us 75,000 Swiss francs ($81,636) for our MBA candidates to consult for them. Nespresso, for example, comes every year. The project lasts eight weeks, during which time candidates could be based anywhere in the world.

Graduate profiles

Tamer Nassar is an IMD graduate from Egypt. He was raised in California and completed his undergraduate degree in political sciences in German at the University of Santa Barbara in California. After graduating, he joined Setcore, his family business in Cairo, operating in textile and oilfield services. After working there for ten years, he felt he needed to be exposed to new ideas. IMD was the only option he considered, as he couldn't leave the family business for more than a year, he wanted to be with candidates to be similar in age (early 30s), and he was interested in IMD’s strong focus on leadership. After obtaining his MBA, he returned to his family business in Egypt where the personal development enjoyed throughout his studies allowed him to improve his management of the company.

Zina Saniora, daughter of Lebanon’s former Prime Minister, is an IMD graduate from Lebanon. She was raised in Lebanon and completed her bachelor of business administration (BBA) degree at the American University of Beirut (AUB). She then worked in corporate banking at Bank Audi in Lebanon for four years before moving to Washington DC to work for the International Finance Cooperation in their financial markets department for another four years. Zina wanted to go back to school and decided to pursue an MBA as it was the most versatile degree and it would not limit her options in the future. She decided on IMD as the average age is higher, the intake is much smaller and it provides candidates with a one-on-one career coach. For Zina, the MBA program was really a personal development program as it taught her how to deal with very conflicting group situations and she says she now knows herself better. After graduation, she completed a nine-month project at the World Economic Forum covering corporate governance for family-owned businesses in Middle East. She then joined a private equity firm in Geneva, which specializes in microfinance companies, where she still works today.

Mohamad Ansari is an IMD graduate from Lebanon. Like Zina, he completed his BBA at the AUB. He then worked in the technology industry in the GCC with Dequota, Reuters and finally Hewlett Packard before deciding to go for an MBA, something he had always wanted to do. For Mohamad, it was just a question of when and where. As he was looking for a program in Europe for its proximity and a short-term program of one year, he applied to both INSEAD and IMD. He settled on IMD for its down-to-earth environment, its rigorous selection process, its higher average age and its smaller intake. Mohamad considers the IMD MBA program one of the key milestones of his life as he says it provided him with a new way of thinking. He says that social responsibility, entrepreneurship and thinking outside of the box became innate to him after IMD. After graduation, he worked at Booz & Co, a consulting firm in the Middle East for four years before going back to his family’s publishing and printing business.

February 3, 2012 0 comments

Comment

Testing optimism

by Edwin Lane February 3, 2012

written by Edwin Lane

When I met Libya’s interim Prime Minister Abdurrahim al-Keib late last year in the plush Tripoli offices once occupied by Muammar Qadhafi’s loyal ministers, he was in an optimistic mood. After spending most of the last four decades in exile, the 61-year-old electrical engineering professor was back in Tripoli, and charged with readying his country for its democratic rebirth.

He was eager for elections to happen as soon as possible. After 42 years of Qadhafi dictatorship, he said, “Libya will respond well to good governance.” But whether he will get the chance to test that claim is doubtful to say the least. The challenge facing Keib and his cabinet of technocrats and former rebel commanders is enormous, and it is difficult to see how Libya can meet its self-imposed timetable for democratic transition. On top of that, there are now serious questions being asked of the authority and credibility of the government itself and the National Transitional Council (NTC) that appointed it. The plans for democratic transition looked ambitious from the outset. Unlike its neighbors Tunisia and Egypt, Libya has no experience of national elections — not even the sham variety used by Hosni Mubarak and Zine el-Abidine Ben Ali to give at least the veneer of legitimacy to their regimes.

According to a timetable set out by the NTC, the first national vote, to elect a constitution-writing body, must happen before the end of June. That leaves just a few months in which Libya’s democratic institutions — non-existent under Qadhafi rule — must be built completely from scratch. New election laws need to be written, election officials trained and decisions on constituencies and voting structures made.

After decades in a political vacuum, Libyans themselves also need time to adjust. There is little sign of political parties being formed and little awareness that elections are even planned. Meanwhile the government has its hands full with other concerns. There is growing criticism of the NTC on several fronts, from its lack of transparency to its inability to provide even basic services. In January, protests in Benghazi at the NTC’s perceived shortcomings even saw the resignation of deputy chairman Abdel-Hafidh Ghoga.

Libya’s problems are numerous. Its recovery from eight months of bloody civil war will require national reconciliation. With assets still frozen and oil production below the pre-war levels, the economy is struggling. There is no functioning judiciary, meaning that thousands of Qadhafi fighters still languish in unofficial prisons dotted around the country, raising concerns of human rights abuses. But the greatest concern of all is security. In January the former Qadhafi stronghold of Bani Walid slipped out of the government’s control when local fighters attacked and expelled NTC-aligned militias. With no functioning army or police force, security is in the hands of dozens of regional militias who have carved up parts of the country and even the capital Tripoli. The country is divided along regional lines, and rival militias frequently clash over control of borders or airports. Keib says national voting can go ahead unless the security situation becomes “very dangerous”; in today’s Libya that likely means elections will take place even if the militias have not laid down their weapons or accepted the authority of the central government. That sounds dangerous in itself. It is uncertain whether militias will attempt to use their power to influence the voting or the constitution writing, and as Khalifa Shakreen, a professor of political science at Tripoli University put it: “We can’t write a constitution with a gun to our heads.”

The authorities are reluctant to delay the democratic transition, with good reasons: First, any delay will leave them open to accusations that they are trying to make a grab for power, as has happened in Egypt. Second, any extended period without a legitimate elected government could create a power vacuum that rival militia leaders may be only too happy to fill.

Those risks are real. But the alternative is to run elections before the country is ready. If that fails it could be a disaster for democracy in Libya before it has even begun. For now, Keib’s strategy is to muddle through, hold the elections on time and hope for the best. That may test his optimism to its limits.

February 3, 2012 0 comments