Executive Magazine

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

Comment

Inching toward equality

by Nadya Khalife February 3, 2012

written by Nadya Khalife

Sheikh Khalifa bin Zayed al-Nahyan, president of the United Arab Emirates, made an important move in November for the rights of women in the region. He proposed changing the law that long discriminated against Emirati women married to foreigners by denying them the right to pass on their citizenship to their children. “Children of female citizens married to foreigners should be treated as citizens,” he said.

The president’s proposal signals an important policy shift in a region that has long discriminated blatantly against women. The policy in many countries in the region — Lebanon, Jordan, Syria, Qatar, Oman, Kuwait and Saudi Arabia — flows from fears over race, ethnicity and demographics. Children of Emirati women married to foreign or stateless men remain noncitizens — even if they are born in the UAE and never leave. As in most Arab countries, the UAE’s citizenship laws specify that it is the father’s nationality that determines the child’s, not the mother’s or both parents’.

The proposed reform in the UAE would make the children concerned eligible for citizenship only when they reach the age of 18. But they would be able to get the better education and health care benefits available for Emirati children earlier. And when they are older and granted citizenship they would be able to enroll in a university and apply for government posts, options now denied to them.

One key issue would be whether the children of Emirati women married to Bidun — the estimated 20,000 to 100,000 people considered stateless who have been historically neglected in the UAE — would qualify. Media reports have said that this measure will probably include their children but the government’s position is not yet clear. On December 14, the UAE set up a committee to compile a list of eligible children who would benefit from this new measure.

The issue of the Bidun children is critical because only about 12 percent of UAE residents are Emirati nationals, with foreign residents and stateless Bidun making up the rest. The number of Emirati women marrying foreigners also rose 15 percent from 2009 to 2010, from 643 to 737, according to the UAE’s National Bureau of Statistics.

The lack of citizenship has had a direct impact on children of Emirati women because under the current law, these children do not get the generous state benefits available to citizens under 18, and they often have access only to second-rate education and health care. The UAE offers free primary education to Emirati children. In some emirates, non-citizen children can enroll in public schools at no cost only if they score 90 percent on their entrance exams. Those with resources can attend private schools, but many children of Emirati women, particularly those married to Bidun men, cannot afford the tuition. The net result is that there are children of Emirati women who simply do not attend school.

Families whose children are not citizens also must pay for routine health care for their children, even basic care such as immunizations, while health care is free for Emirati children with citizenship. Bidun children, because of their stateless status, cannot travel outside the country, which further limits their families’ options.

While the number of children who will benefit from the UAE’s change remains to be seen, Sheikh Nahyan’s pronouncement was a step in the right direction, and he has painted an optimistic picture for Emirati women married to foreign husbands and their children. The hope now is that other Arab countries that discriminate against women and their children this way will follow his lead.

Every day in our region, women pay the price for discriminatory laws, but the UAE has made the moral choice, and in the long run the UAE will benefit because its children will be healthier and better educated. The progressive leadership it is showing in the region for the rights of women and children will also be recognized around the world. If the UAE, a country deeply worried about its demographics, can make this decision, it is high time that other Arab states follow suit.

February 3, 2012 0 comments

Comment

The tipping point

by Jihad Yazigi February 3, 2012

written by Jihad Yazigi

After months resisting the pressure, the Syrian pound dived in January against the United States dollar and other international currencies, forcing the central bank to announce that it would begin a managed float of its currency in a dramatic departure from a five-decade-old policy of strictly regulating foreign exchange transactions.

While the American dollar traded at around 60 pounds in black market dealings at the end of December, it quickly rose to 63 pounds in the first days of the year before crossing the 70 pound mark by mid-January. Since the beginning of the popular uprising in March 2011, Syrian analysts have been predicting the collapse of the national currency. However, contrary to the most pessimistic projections, the pound managed to stand its ground for months, falling to only 51 pounds per dollar in August, five months after the beginning of the protests — a decline of roughly 8 percent relative to its pre-crisis level of 47 pounds.

The relative strength of the currency for this extended period of time was a consequence of a number of factors including an aggressive strategy by the central bank, which by August had reportedly spent some $2 billion, or 10 percent of its foreign reserves, to defend its currency. Other factors were sensible policy choices by the bank, including a rise in interest rates and restrictions on the sale of foreign exchange by money traders, as well as a decline in imports resulting from a strong contraction in investment and spending, which partly helped offset the decline in export earnings. Still, the last weeks of 2011 saw a rapid increase in the rate of decline. The combined impact of the general downturn in business, poor economic policy and international sanctions had taken its toll on the currency. Another key factor was likely the beginning of the application of the European Union embargo on oil exports in November. Indeed, oil revenues made up in 2010 some 20 percent of Syria’s total foreign currency earnings and a much larger share of the government’s export revenues.

One other factor, however, also explains the rapid deterioration witnessed at the beginning of this year. In an interview on Syrian TV early January, Minister of Economy Nidal al-Shaar said that the government’s priority was to “preserve the country’s foreign reserves and not to defend the currency.” These few words alone may have triggered the rush to the greenback.

By declining to go too far in the defense of the currency, Shaar was echoing the advice of many economic analysts: if the international value of the pound must be defended, it must not be done at any cost — i.e. at the expense of the foreign currency assets.

Indeed, Syria’s foreign reserves, painfully accumulated during the country’s short oil boom of the 1990s, will be almost impossible to recover once they are spent, given that Syrian oil fields have been largely depleted, while by selling its foreign assets now the government would be mortgaging the country’s future.

Also, in spite of the serious consequences it will have on the purchasing power of the population, already largely dented by decades of poor growth, the devaluation of the pound can provide new opportunities for Syrian exporters and make local manufacturers better able to compete with imports. Finally, the fall in the value of the currency is a natural consequence of the political stalemate and of the economic crisis faced by the country, and in a certain sense more accurately reflects the real status of the economy.

By deciding to partially float the currency, the central bank may ease the supply of foreign currencies in the market and help reduce pressure on the pound. However, there is little doubt the fall in the value of their currency will have a serious psychological impact on Syrians. Indeed, the majority of them still remember the dark days of the 1980s when a serious economic and foreign currency crisis led, in less than two years, to a precipitous decline in the value of the pound from 3 pounds to 50 pounds per dollar.

The period marked the beginning of the end for Syria’s middle class. Twenty-five years later, the Syrian population is helplessly taking a second hit and wondering how difficult the years ahead will be.

February 3, 2012 0 comments

Society

Lebanon Adrift – A book by Samir Khalaf

by Ellen Hardy February 3, 2012

written by Ellen Hardy

Something strange often happens to first year medical students, confronted by textbooks listing reams of sinister symptoms: they all come down with galloping hypochondria, seeing brain tumors in every headache and consumption in every cough. Something similar might happen to a Beiruti reading “Lebanon Adrift” — though instead of physical ailments, readers will look up from the pages and see, in every poster, traffic jam or flutter of false eyelashes, a society in torment. “Lebanon Adrift” is a wide-ranging diagnosis of Lebanon’s contemporary pathology as a culture of unrestrained excess, narcissism and escapism, indicative of political, moral and social alienation.

Author Samir Khalaf is a distinguished sociologist and professor at the American University of Beirut. “Lebanon Adrift” is a book full of “personal indignation and outrage” — the sum of a lifetime of observation of a land he loves, in which he attempts to theorize those grating features of Lebanon’s social landscape that will be familiar to anyone with more than a passing acquaintance with the country, from pervasive littering and smoking to the gaudy wedding season with its antisocial firework displays. Via a whistle-stop tour of Lebanese history and politics, peppered with social thought from the Frankfurt School to Zygmunt Bauman, Khalaf explores theories of modern consumerism turned to mindless commodification of kitsch and prestige items in the pursuit of social status.

Lebanon’s post-war society, Khalaf suggests, rejects the usual trappings of restraint and sobriety typical for countries recovering from long periods of civil conflict. Rather, the Lebanese, with their history of mercantilism and aptitude for playfulness, have responded to political inaction, social and geographical stratification, unresolved tensions and an uncertain future by unreservedly embracing the numbing attractions of conspicuous consumption. With everything from ‘super nightclubs’ to the latest Porsches, they are replacing creative industry and functional social cohesion with a Durkheimian “social state in which society’s norms can no longer impose effective control over people’s impulses,” resulting in a damaged landscape of environmental degradation, corruption and incivility.

By designating a range of social features as part of Lebanon’s movement from a battleground to a “playground”, where the dark sides of the nation’s Janus-faced liberty, playfulness, enterprise and conviviality are taking over, Khalaf is offering a constructive way of thinking about social malaise. Through consumption, he suggests man gained freedom, “but not the positive sense [of] freedom to mobilize this liberation in creative and purposive forms of participation in the public sphere.”

But like those medical students, the temptation to see everything around one as the manifestation of an illness can obscure other realities. Khalaf proposes the use of “ideal types” to pin down “essential elements” of a social reality as a constructive “tool for analysis”. Yet in his scattergun and often rambling tour of the tribulations of contemporary Lebanon, his “average Lebanese” is invariably hugely wealthy, indolent, monstrously superficial and male. That such people exist is indisputable, but to give them the status of standard-bearer for the modern Lebanese identity is dangerous. There is little attempt to differentiate his central analysis by class, age, gender, religion or geography, and at times his personal outrage reaches the point of parody, decrying Lebanon’s “houses of ill-repute, casinos, gambling parlors, nightclubs, discos, bars, escort bureaus and other abodes of wickedness… Such aberrant features blemish the country’s national character.” Further, by identifying a general and unattractive tendency of the Lebanese for excessiveness and locating so many evils within it, Khalaf neglects a rigorous taking to task of the politicians and lawmakers who are allowing so many damaging transgressions free rein.

There is much to admire in “Lebanon Adrift”, which also sees possibilities for redemption, making an assessment of non-governmental organizations, architects and political movements that give hope for an active and engaged civil society. Khalaf sees within consumerism possibilities of creativity and resistance. With luck, the debate over Lebanon as a “playground” will act as a spur to action and an encouragement to the “avant-garde and counter-culture” who are sidelined by Khalaf’s “average Lebanese”.

February 3, 2012 0 comments

Comment

The ugly side of man

by Sami Halabi February 3, 2012

written by Sami Halabi

Misogyny is the vulgar indulgence of ignorant men, and it is a shame upon this nation that the men who head our government so openly display this flaccid form of intellect. They began to give it expression early in their term, by forming a cabinet devoid of women, and continued through their denial of nationality rights to the children of Lebanese women and their spouses, then ignored a parliamentary initiative to enact laws targeting men who beat their wives and, more recently, a refusal to criminalize marital rape — these are just some of the more obvious affronts.

With such exemplary leaders, it is no wonder why the slighting of women is so pervasive in our society, reaching even inside their bodies to reproductive choices.

Even though abortion is widely available in Lebanon, it remains technically illegal and therefore unregulated and often unsafe. While forms of emergency contraception, in particular what is commonly known as the ‘morning after pill’, are not officially barred, pharmacies across the country were not stocking it on their shelves through December and January.

Emergency contraception in the form of a pill does not induce an abortion; it is a preventative measure that releases hormones to prevent fertilization during the time it takes sperm to reach the egg, usually between 24 and 72 hours after intercourse. Only one brand of emergency contraception, called Norlevo, has legal access to the Lebanese market, but for reasons unbeknownst supplies of the drug were “cut off” according to the more than 20 pharmacies that were contacted last month.

Calls to the local distributor, Union Pharmaceutique d’Orient, enquiring as to why, were met with denials that there was even a shortage and officials for the company refused to comment further. The manufacturer in France, HRA Pharma, also declined to comment. The head of the Syndicate of Pharmacists in Lebanon said he was unaware of the issue when asked, but promised to follow up on the matter — all further calls to his phone were left unreturned.

The underlying issue here is that there are no consequences for private companies who take away a woman’s right to choose and even put their lives at risk. The worst thing that usually happens with the morning after pill is a horrible mood swing, but little or no pain. But the alternative to proper emergency contraception for, say a 16-year-old girl who has been raped, is resorting to drugs such as Misoprostol, intended for use in the prevention of ulcers, but also having the ‘side effect’ of technically inducing miscarriage.

So instead of a relatively painless hormonal procedure to prevent pregnancy, women are forced to endure an excruciating process whereby eggs are expelled after contractions in a pool of blood and then, “you just pray,” according to one pharmacist, that fertilization has not taken place. There is no guarantee with Misoprostol that an embryo is expelled, as it is possible that a life threatening ectopic pregnancy might occur, where the embryo implants outside the uterus. Other complications of Misoprostol can include potentially fatal toxic shock syndrome.

This shortage of Norlevo on the market is directly related to Lebanon’s economic aberration of exclusive agents, which disallows any other company from importing the same brand of medicine. So, in the interests of companies’ product monopolies that keep retail prices high, and the structure of our economy dependent on a few rich and powerful men, women are suffering.

Reproductive rights, and the recognition that women are entitled to the same opportunities and protections as men in a society, are not trivial policy matters — they are issues of human rights that leaders with any claim to morality need to address.

Misogyny in Lebanon is as societal as it is systemic, rooted in a lack of education with regards to the issues and perpetuated by regressive laws and lawmakers. For the sake of treating half the population — including our sisters, wives, mothers and daughters — with a minimum of respect, we cannot allow our leaders to sit so comfortably with their inhumanity.

February 3, 2012 0 comments

Finance

MENA stock tips

by Maya Sioufi February 3, 2012

written by Maya Sioufi

Envisioning the start of 2012, investors across the Middle East probably could not have conceived of a more nightmarish scenario if they tried. The European debt crisis, Arab revolutions and election year posturing in the United States are just some of the many monsters ready to jump from the closet and under the bed as they lay awake at night. For advice on how to keep your cash safe from these creatures of havoc, Executive spoke with Tareck Farah, chief executive of MENA Invest, and Amin el-Kholy, head of asset management at Arqaam Capital.

Tareck Farah

Bullish or bearish? “Cash is king,” says Farah as he explains his bearish stance towards the financial markets. He prefers to hold cash, especially in the first six months of 2012. Within developed markets, he prefers to be exposed to the United States where there is at least some confirmation of growth relative to Europe, which faces a “deleveraging process that might take longer than we imagine.” He believes that investor confidence could still go lower as the European crisis deepens. In emerging markets, Farah believes there will be a squeeze in liquidity in the first half of the year but expects this to ease towards the end of the second quarter, and would start picking stocks in these markets then.

Favorite asset classes? While Farah stresses that he would keep a high level of cash in these uncertain times, he likes the corporate credit of solid US and European companies and would stay away from sovereigns and financials. On the equity side, he recommends the US healthcare sector for its defensiveness and likes Medtronic, United Health Corporation, Johnson & Johnson, Élan Corporation and Boeing in the heavy industry sector. He also recommends the US telecommunications sector on the back of the social network boom this year, with major initial public offerings expected, such as the much-hyped Facebook offering. In this space, he highlights Constant Contact, a provider of social media tools.

Thoughts on the MENA region? Farah is not particularly hot on any MENA market, with the only one he would consider investing in – if it falls to lower levels – being Saudi Arabia for its solid growth potential, high global oil prices, significant government spending in 2012 and population growth. His favorite sectors are cement and petrochemical.

Thoughts on Lebanon? Farah would not invest in Lebanon’s financial markets. He is concerned about the exposure of the Lebanese banking sector to Arab countries facing turmoil. On Solidere, he believes it is not expensive at $14 and if it falls further, it becomes a no brainer. As for Lebanon’s debt, he finds it expensive relative to global market conditions and it does not reflect the Lebanese reality. Farah believes rates should be higher given that Lebanon is “not a producing country, has a single B credit rating and 100 percent of its [territorial] frontiers have issues.”

Top pick globally? He stresses on cash as he says, “The intelligent investor would be the one who can better manage his cash.”

Amin el-Kholy

Bullish or bearish? Kholy is neither overly bullish nor bearish. He is selective in these uncertain markets, as he believes that we are now facing a binary scenario. He stresses that in these markets it is essential to be selective and able to react quickly as we get more clarity on the possible scenarios. Kholy is not too concerned about the Arab political situation as “the risk is already out there.” He is more worried about what the new normal will look like once the European debt crisis and the global uncertainties are resolved, and how it will impact the commodity space, emerging markets and the MENA region. He also highlights the geopolitical risk in Iran as a key issue to be resolved before he can be more bullish on the MENA markets.

Favorite asset class? Kholy believes that both fixed income and equities present attractive opportunities. He is particularly interested in solid names in the MENA region, which offer high dividend yields. He likes the Gulf Cooperation Council region, as it enjoys a favorable economic environment.

Thoughts on MENA markets? Kholy would be bullish but selective in trying to find interesting opportunities. The only factor that could impact his stance in the region is geopolitical risk stemming from the Iranian situation. His favorite countries to invest in would be Saudi Arabia and for a slightly contrarian pick, he would recommend the United Arab Emirates. In Saudi Arabia, he would invest in the retail and banking sectors. In the UAE, he would also look into investing in the banking sector.

Top global picks? Kholy likes gold or US dollars, but which depends on the scenario that pans out over the course of the year. In a more favorable scenario in which inflation picks up, he expects gold to be popular again. In a less favorable scenario, he would invest in the US dollar, especially via high-yielding GCC fixed income.

February 3, 2012 0 comments

Economics & Policy

A rush to power

by Joe Dyke February 3, 2012

written by Joe Dyke

If the many announcements coming out of the energy ministry last month translate into reality then the country’s electricity sector is on the verge of major change. In a few short days the government announced the start date for the increasing of the country’s energy capacity, the winners of a number of crucial contracts and even plans to control the price of illegal generators.

But if anybody has learned to be wary of the difference between presentations and performance it is the Lebanese. There are significant obstacles in the path of Energy Minister Gebran Bassil, among them political infighting, lawsuits and even allegations of corruption looming over the ministry’s head.

At present, Lebanon’s consumption of power far outstrips supply. Including generation and imports the country has around 1,500 megawatts (MW) of electricity available, but demand reaches as high as 2,500 MW at peak times, leading to blackouts of over 6 hours a day in some parts of the country. Late last year the government came close to collapse over the $1.2 billion electricity plan, which aims to add 700MW to the country’s grid, with Free Patriotic Movement (FPM) leader Michel Aoun threatening to pull his ministers from the cabinet if Bassil’s plan was not accepted.

This cabinet collapse was averted and in January a government circular announced that the projects — including the redevelopment of Jiyye and Zouk power plants, a new gas pipeline and floating electricity-producing barges — are due to begin in March. Yet the infighting continues, with allegations that the finance ministry is preventing the transfer of the $1.2 billion. Cesar Abu Khalil, advisor to the Minister of Energy and Water, admitted that there have been “unnecessary” delays and confirmed that they are still waiting for the funding to be released.

“Technically no, I cannot confirm they [the funds] have been transferred but they have been allowed for by a law. It can be delayed but it cannot be stopped,” he said. “Sometimes it gets delayed in some administration but inevitably we will get our $1.2 billion.”

Unperturbed, the ministry plans to begin the tenders on the 700MW project in March and has begun announcing the winners of other contracts. One project that has been given the go-ahead despite a cacophony of criticism is the distribution service providers (DSPs). Under the scheme Lebanon is to be divided up into three sections, with one private consortium in each area allocated electricity distribution, maintenance and collection operations for a four-year period, with each contract worth more than $100 million. Last month the contracts were awarded, with Butec due to administer the north, Arabian Construction Company (ACC) dealing with Beirut and Debbas in the south.

Potential conflicts of interest are, however, apparent. Butec’s founder and majority stakeholder, Nizar Younes, ran for the Aoun/Franjieh alliance in the 2005 election in Batroun, alongside the energy minister. Meanwhile the ACC is run by the Qatari Prime Minister Hamad bin Jassim bin Mohammed al-Thani, whose country is known to have close relations with the FPM. Furthermore, while all of the companies are well respected, none have experience as energy distribution units in Lebanon.

One of the losing bidders in the north was E-Aley, a company that has been distributing energy in the country for more than 80 years. Following the decision to overlook them in favor of Butec, deputy general manager Albert Khoury confirmed that they have begun legal proceedings against the ruling. Khoury did not wish to discuss the bidding process for fear of jeopardizing the legal proceedings, but said: “electricity is more about politics in this country than about kilowatts and hertz; this is my conviction and this is how it is being played today.”

Mohammed Qabbani, head of parliament’s Public Works, Transport, Energy and Water Committee, says he believes the project is not permitted by Lebanese law, which grants powers exclusively to Électricité du Liban (EDL). “It is a completely illegal project. I will be asking the President of the Republic and the Prime Minister to stop [the minister] from continuing his illegal preparations for these service providers,” he said.

However Khalil denies all accusations of wrongdoing or political favoritism, welcoming legal challenges from those who believe there have been nefarious dealings. “There have been many allegations in the media and we don’t respond to these allegations. We waited for justice to issue its verdict and the verdict of justice is our response to all these allegations,” he said. Given the backlog of cases in Lebanon’s courts, justice may be a long time coming.

Punishing success?

E-Aley is not the first company to take the government to court over their plans. Last month the ministry won a case brought by Électricité de Zahle (EDZ) over plans to reduce concessions for independent providers of electricity.

Under the current scheme EDZ, and other firms that have exclusive concession agreements, receives electricity cheaper than cost price. The ministry claims Zahle is provided electricity at LL50 per kilowatt (KW), with others mostly around LL75, while average prices are around LL127. A ruling from the council of ministers in January upheld the decision that the cheapest price going forward will be LL95 per KW, a price Zahle owner Assaad Nakad claims will squeeze him out of business.

“It will be impossible for us to continue our services, and this will lead to the total liquidation of EDZ,” he said. He added that EDZ had been providing a similar service to the distribution service providers for decades. “I really do not understand why they want to destroy such a successful example while they do not know yet the outcome of the DSP project.”

But Khalil points out that these concessions add to the deficit of EDL, which ranges anywhere from $1.2 billion to $2 billion a year depending on oil prices, and are therefore paid for by the Lebanese people. “These concessions are some kind of feudalism, out of the Middle Ages. They try to portray themselves as a success story for Zahle and others,” he said. “If you got a kindergarten kid and put him in these conditions — where he has a fixed cost and a fixed selling price and exclusivity on people with 150 percent in profit — he will be a success story.”

Generating a regulator or regulating generators?

While announcing sweeping changes in almost every part of the industry, the government has remained tight-lipped about one issue; the creation of an independent regulator. Lebanon has been due a financially and politically independent body to organize and control the development of the sector since it was promised as part of Law 462 in 2002.

Roudi Baroudi, Lebanon secretary at the World Energy Council, believes a regulator is the most important step toward increasing confidence in the energy sector. “The regulatory authority would make the market very transparent and honest; it would create competitiveness and a modern platform for private investors to have more of a stake in the industry,” he said. “And finally somebody would be liable for failures; the consumer will be able to pursue companies for mistakes.”

Yet successive energy ministers have proved unwilling to relinquish absolute power in their fiefdoms and the current one appears little different. Khalil claims the minister is open to the idea of a regulator but is waiting on the outcome of an amendment to Law 462, something a cabinet committee formed during the electricity crisis last September promised to create within three months — yet it has still not come to fruition.

“Whenever there will be a need for this body we will work on creating it,” said Khalil, though many in the private sector would claim the need has been clear for more than a decade.

Perhaps the most bizarre of the ministry’s many announcements in January was the ‘directive’ on the price of private generators. Under Lebanese law only EDL is allowed to distribute electricity, but the power cuts that plague the country have led many to rely on illegal private companies, or ‘neighbourhood generators’ as they are more commonly known, to provide them with energy when the lights go out.

The government has long turned a blind eye to such practices but has become concerned by the growth in companies exploiting their monopolies and overcharging customers. So a recent circular announced that the minister was introducing a ‘maximum price’ that generators are allowed to charge at LL400 ($0.26) per hour per five amperes, seemingly ignoring the fact that the industry is outside the law.

Khalil explains that whilst the whole issue is outside the rule of the law they do have tools at their disposal to make the generator owners comply. “Last week two generator companies were shut down by the municipalities; for those who will not abide by this tariff the municipalities, along with EDL, can ask them to remove their cables from EDL installations.”

What Khalil is admitting, in effect, is that the government has begun to regulate an illegal industry. Whilst it may be commendable to face up to the elephant in the room there are serious concerns that without a regulator to ensure best practices, this process is open to abuse. The relationships shared between local officials have the potential to become more important than the service they provide.

“He [Bassil] is indirectly legalizing generators in the villages and streets. Why do it this way?” asked Qabbani. “Create a regulatory body and this body would have the right to give licenses for the production and generation of electricity. What can you deduce when somebody wants to monopolize illegal authority? What could it mean except corruption?”

The bottom line

When all this squabbling is over and done with, the average Lebanese customer cares about two things: whether they have electricity and how much it costs. The minister’s plan of 2010 aims to “gradually increase the (EDL) tariff” as the additional 700MW is introduced onto the grid over the coming years, thus reducing consumers’ reliance on expensive illegal generators. Yet the government has admitted that demand continues to grow by between 100 to 200 MW year-on-year. Therefore the 700MW, spread over three or four years, could only match the increase in consumption, meaning any increase in price will burden the Lebanese consumer without offering a tangible return.

Qabbani questions whether the plans will be able to counteract the growing gap between supply and demand. “They might be able to stabilize the inclination downward but I don’t think they can have any appreciable increase.”

The flurry of announcements suggests that at least something is happening. After years of deadlock, with electricity reform constantly overlooked, any news may be good news. Yet Riad Chedid, professor of electrical engineering at the American University of Beirut, believes for all its announcements the government is facing an uphill battle. “One should not underestimate the difficulties of trying to fix the electricity sector. It is multi-character: technical, political, human resources, financial. This is what the ministry has been doing so far, but you are dealing with 40 or 50 years of neglect.”

February 3, 2012 0 comments