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A man of change?

by Peter Speetjens
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.

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After the brinkmanship

by Gareth Smith
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.

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Dilapidation and deficit

by Paul Cochrane
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.

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Resources in conflict

by Nicholas Blanford
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.

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Revolution of the Institutions

by Farea al-Muslimi
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.

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Q & A – Lisa Piguet

by Maya Sioufi
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.

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Testing optimism

by Edwin Lane
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.

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Society

Discovering Armenia’s palate

by Executive Editors
written by Executive Editors

For some it is the smoky strips of blood-red basterma hanging in glass windows in Bourj Hammoud and filling the air with leathery, spicy scents, while others have a weakness for muhammara, rich with walnuts and pepper paste. More still grow misty-eyed at the thought of kafta, drenched in wild cherry sauce and strewn with cashew nuts and fried bread.

Most Beirutis with more than a passing interest in what goes on their plate will be able to name a favorite Armenian dish. But although people of Armenian origin have been in Lebanon for centuries, it’s only in the last few years that they have been drawing attention to themselves as restaurateurs.

The bulk of the Armenian diaspora in Lebanon are descendants of families from Cilicia, a region south of the Anatolian plateau, today in eastern Turkey and northern Syria. During the First World War, the Ottoman Turks pursued a campaign of ethnic cleansing that left some 1.5 million Armenians dead and drove tens of thousands into exile in the Levant; the survivors today in Lebanon are a 150,000-strong community known as much for their commercial industry as for their traumatic history. But if there is one way to pique interest in a people, it’s through food.

Aline Kamakian — co-author of the recent cookbook “Armenian Cuisine” and member of the family behind Mayrig restaurant — says that in her youth, going out to eat Armenian dishes would not have occurred to her. “It was everyday food. Traditionally, it’s always been Armenian mothers who cook.” But as second-generation families loosen up and intermarry, women have more time and independence.

Restaurants with an Armenian twist are therefore thriving on the skills of mothers who have time to spare — the kitchens at Mayrig and Seza are staffed by local women, not chefs — and who fill a need for labor-intensive traditional dishes. Madame Seza, who opened her restaurant a year ago, still idolizes the cuisine of her mother, who “did everything at home, and so well, to perfection.” Now, it is her children who have been re-enthused about the cooking of their forebears through the restaurant. “Before they asked for burgers, now they ask for manteh,” she says.

This flourishing of the cuisine in the public domain is also helping connect Armenians with their homeland and educate outsiders about Armenians and their history. As “Armenian Cuisine” demonstrates, with the recipes come memories, and many dishes — hummus with basterma here, pastries from Latakia there — are expressions of long geographical dislocation.

Rich variety and demand support flourishing restaurants across Beirut. There’s a familial welcome and bistro atmosphere at Onno in Bourj Hammoud, boutique design and ladies in lace headscarves at Seza in Mar Mikhael and seu beureg with a side of jazz at Razz’zz in Hamra. Now two of the more long-standing (and pricey) outfits — Mayrig and Al Mayass — are expanding, taking Cilicia’s heritage global. Kamakian is plotting a central kitchen in Europe that will be able to supply branches in Paris and beyond with food as skillfully produced as it is at Mayrig in Beirut, where “everything is handmade, mum’s doing it.” Al Mayass has had a branch in Kuwait since 2008, and is introducing four more outlets in the UAE and New York next year.

And so the cuisine of Cilicia, which tells the story of a country lost and countries gained through smoky meats and spices, is taking on new commercial and cultural significance. “When you’re eating the food and someone is telling you this is Armenian but the name is in Turkish,” says Kamakian, “the first question is, ‘Why? What happened?’ You’re opening a door for a million people to smell, taste, listen to what is Armenia. You’re moving all the senses through a simple dish.”

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Economics & Policy

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by Executive Editors
written by Executive Editors

Paying the bill

Lebanon’s banks made an uncharacteristically political move last month when they decided to fund Lebanon’s contribution to the controversial Special Tribunal for Lebanon. The move follows a decision by Prime Minister Najib Mikati to fund the tribunal in late November through the Higher Relief Council. The decision to pay Lebanon’s share of approximately $32 million was announced by the Association of Banks in Lebanon (ABL) and will see the country’s top 12 banks, which sit on its board, put up the money. Each bank will pay a share proportionate to their assets, according to the ABL. The ABL justified the move by saying that it would protect depositors’ funds, maintain political stability and help the investment climate in the country. The banks on the ABL’s board are Byblos Bank, BLOM Bank, Bank Audi, BankMed, Fransabank, Banque Libano-Française, Crédit Libanais, Bank of Beirut, SGBL, BBAC, the Lebanese Swiss Bank and Fenicia Bank. Hezbollah criticized the move to fund Lebanon’s portion of the tribunal but said it will not create a political issue out of it. 

Digging deeper deficits

Lebanon’s trade balance (exports minus imports) and balance of payments (or BOP, the measure of money coming in and out of the economy) have hit their greatest deficit levels to date, according to the latest data released by customs and the Banque du Liban (BDL), Lebanon’s central bank. By the end of October the trade deficit had widened to $13.35 billion, up 18.4 percent year-on-year, even while exports increased by 3.3 percent to $3.6 billion during the period. In October alone, the trade deficit was $2.2 billion, 107 percent higher than the same month in 2010. The BOP deficit increased accordingly to $2.13 billion in October, compared to a surplus of $2.8 billion in 2010. October’s BOP deficit, $589.8 million, was up from September’s $301.7 million figure. The two largest factors weighing into the BOP were the BDL’s net foreign asset surplus of $1.8 billion, and the $3.9 billion deficit in the payments of commercial banks and financial institutions.

Minimum wage, maximum anger

Much to the ire of trade unions, Labor Minister Charbel Nahas and his Free Patriotic Movement party, the cabinet voted last month to amend the minimum wage decree that was previously rejected by the Shura Council, Lebanon’s highest court. After a debate that has lasted months, the cabinet decided to increase the minimum wage from LL 500,000 ($331.67) to LL 600,000 ($398.00) and institute various other raises on other brackets. Teachers then held a strike shortly after the decision, which they called “humiliating”. The General Labor Confederation (GLC), the country’s largest labor union, also called for a nation-wide strike on December 27. When the measure came to a vote in cabinet, some of the labor minister’s recommendations were incorporated and the minium wage was raised to LL868,000 ($575.78), which includes LL 236,000 in transportation allowances added to the basic salary. Salaries between LL 1.5 million ($995) and LL 2.5 million ($1,658) will get a further 10 percent raise (above the intial 18 percent) while with anything above LL 2.5 million rises by LL 370,000 ($245). The raise is retroactive on a monthly basis as of December 1, 2011. Prime Minister Najib Mikati stated that the raise may hurt the economy and the GLC was considering calling off the strike as Executive went to print.

Dropping less calls

The typical Lebanese annoyance of having your phone conversation cut short because of the country’s infamously low quality cellular phone services is set to change in the next eight months, according to the telecommunications ministry. Last month the ministry unveiled a plan to invest some $110 million in a project to upgrade and modernize the country’s two cellular networks. The National Quality of Services plan will be implemented by the two privately owned operators Alfa and MTC, and could start showing results in as little as two to three months, according to the ministry. The first phase of the plan was to determine the geographic and technical weakness of the networks and as such the ministry has committed to purchasing 400 new antennas to support areas where reception is weak or non-existent. A further 20 mobile stations will provide backup support in densely populated areas. The ministry will also buy around 120 repeaters to install in areas where people have installed their own equipment to enhance signal strength.

Eating out

Known for their ability to throw a party and have a good time, the Lebanese spend around one-seventh of their income on eating out, according to a new study. A survey released last month compiled by the global credit card company MasterCard showed that the Lebanese spend an average of $105 per month on dining out and that 20 percent of consumers spend between $101 and $200 every month on restaurants. The highest spenders by age bracket were seen to be seniors over 55, while consumers with an annual household income over $30,000 spent around $169 every month eating out. The survey said that more than half of respondents eat out on average five times a month at mid-range family restaurants or cafes and six times per month at fast food restaurants; 32 percent went to food courts while 16 percent went to fine dining establishments in both hotels and standalone restaurants.

Labor makeup

New figures released by Lebanon’s official statistics agency have shed light on the makeup of employment across the nation. According to the Central Administration for Statistics, which used the International Labor Organization’s standards to measure the job market, Lebanon’s employment rate stood at 44.6 percent in 2009, the latest year studied by the agency. Of the total, 77 percent of the labor force is male and 23 percent is female. Around a quarter of workers were shown to hold university degrees, while another quarter had completed intermediate-level education, with 4.2 percent of workers deemed to be illiterate. The survey showed that 36.9 percent of workers are employed in the services sector, 27 percent in trade, 12.1 percent in industry, 8.9 percent in construction, 6.3 percent in agriculture and just 2 percent in financial intermediation and insurance.

Tentative growth prospects

Barclays Capital has forecast Lebanon’s gross domestic product growth at 3.6 percent this year after an estimated 1.8 percent growth in 2011. The firm said that an escalation of sanctions against Syria would pose downside risks for any economic growth and hurt the economy due to close economic ties between the neighboring countries. It also cautioned that the capital inflows enjoyed previously could be a thing of the past if the situation in Syria continues to worsen. The firm added that if the budget is passed as is presented by the finance ministry it would reverse previous fiscal gains due to higher and haphazard spending. It indicated that this increase in spending might not be absorbed by the ministries, which would entail a waste of public funds and inefficient spending. Barclays also cautioned that if the economic situation continues to deteriorate, this year could see political risk spill over onto banks’ balance sheets. It urged the government to support an orderly budgetary process, something that has not occurred since the last budget was passed by parliament six years ago. The government has until the end of this month to pass a yearly budget under the constitution. As Executive went to print the cabinet had yet to pass its version of the budget onto the parliament for debate and ratification.

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Real estate

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by Executive Editors
written by Executive Editors

Changing hands in Cannes

Eight months after Lebanese investor Toufic Aboukhater bought a string of seven InterContinental Hotels in Europe from Morgan Stanley Real Estate Fund, including the Carlton Hotel in Cannes, the same hotel has been sold to Qatari national Ghanim bin Saad al-Saad for $586 million, according to AFP. Starting in August 2012, the hotel will undergo previously planned renovations for a period of 10 months, its first major renovation since being established in 1911. In 2006, Morgan Stanley paid $826 million for the same portfolio. The December AFP report said the Qatari investor was also interested in other hotels belonging to the InterContinental chain, including those in Vienna, Rome and Madrid. In similar news, Saudi Arabian businessman Sheikh Mohamed bin Issa al-Jaber concluded a “100 percent equity” deal on December 14 to buy back the Scotsman Hotel Group, after it fell into the hands of creditors during a lengthy legal showdown with Standard Bank Group. The group accused him of reneging on $150 million worth of loans due but later settled out of court, in a deal that indirectly cost him a total of $1.55 billion, according to Jaber and reported by Arabian Business. Though the deal signed by Jaber’s hospitality firm, JJW Group, to buy the hotel properties out of administration was left undisclosed, Jaber’s December 15 statement said the hospitality firm would see an investment close to $100 million in 2012. The portfolio includes luxury hotels in Leeds, Edinburgh and Paris. Jaber’s MBI group originally bought the Scotsman Hotel Group, the hotel operator, for $98 million in 2006.

Red-hot healthcare

A partnership between Beirut’s Red House Group, a real estate investor, and Rizk Healthcare, has created the newly formed Rizk Red House Healthcare (RRHH) to deliver 10 hospitals in Saudi Arabia, a deal worth $1.35 billion. RRHH will work in partnership with the Saudi Arabian investment firm, Ebram, to complete the projects, which will see nearly 3,000 hospital beds added to the kingdom’s healthcare industry. “Today’s announcement of our partnership with Red House is a great example of how we continue to invest in the healthcare industry and of our commitment to provide healthcare services not only in Lebanon but also on the regional platform,” added Sami Rizk, chief executive officer of RRHH, which will be headquartered in Beirut with an office in Riyadh.

Lights on in Ajman

Originally announced in 2007, Al Zorah Development Company has re-launched its mixed-use tourism development, covering 5.4 million square meters in the northern emirate of Ajman in the United Arab Emirates. Solidere International, registered at the Dubai International Financial Centre, and the government of Ajman are behind the joint venture, with Sheikh Rashid bin Humeid al-Nuaimi as chairman of Al Zorah.  The project’s strategy has been restructured so that 70 percent of the land area will have resorts or tourism-related entities on it, 14 percent will be for residences or mixed-use plots, while offices and retail will take up 7 and 6 percent of land area respectively. The project leaders said the first phase will see delivery of a five-star resort, as well as a luxury hotel, with 160 rooms and 300 rooms, respectively. A luxury golf course and a community of villas and townhouses will round out the first phase, which should be complete by 2014. Speaking at the launch, Al Zorah’s Chief Executive Officer Imad Dana said 1.2 billion dirham ($140 million) worth of contracts have already been issued, but confirmed that management is still deciding on international hotel operators. Infrastructure work has started and completion of the roads and the four marinas is due by 2012. The total project comprises five developments, with nearly 5,000 hotel rooms in total. Regarding financing, Solidere Chairman Nasser Chamaa said the project had enough cash to fund its first phase without resorting to bank finance, but admitted that paid-up capital for the venture had halved to $234 million.

Lebanese buy into London

Ireland’s National Asset Management Agency has reportedly sold a property in London to an unnamed Lebanese developer for a hefty sum. Regarding the plot on the Isle of Dogs, where a 62-storey apartment block was to be built, the Irish Independent newspaper said in a November 30 article that: “It has been bought by a Lebanese developer for around £50 million [$78 million],” without naming the developer. The agreement is part of four deals concerning London properties, which will generate some $117 million for the group. In related news, M1 group, a private investment firm based in Beirut, has made headlines in recent years for some of the largest property deals in the British capital. The group’s real estate arm, based in Monaco, bought Victoria House in Bloomsbury in 2010 for $295 million and Credit Suisse’s headquarters in Canary Wharf in 2009 for $242 million. A December 7 BBC article quoted M1’s Executive Director of Real Estate, Mustapha el-Solh, as saying: “The system in London is very investor-friendly with transparent legal structures… and it has fiscal benefits in terms of tax and capital gains which give it a certain advantage.”

Luxury still sells

Despite the political instability in the region in 2011, Dubai-based developer Damac said a third of its luxury apartments in its Beirut high-rise have sold. “In Lebanon, we mobilized the site in 2010, we launched in June 2010, and so far, although being a very premium project in an area which is still under a lot of political turmoil, our sales are very good,” said General Manager Ziad el-Chaar in a December 5 statement reported by Arabian Business. The 28-story Damac Tower, situated near the Phoenicia Hotel and featuring interior design by Italian fashion house Versace Interiors, is the first residential project in Lebanon for Dubai’s largest luxury homes builder. In Dubai, a number of Damac’s projects have stalled, though the firm has delivered 21 buildings in total. Speaking of those investors who bought off-plan in the Palm Springs residential project on the now-stalled offshore island, Chaar said: “We have offered them a full refund in staged payments [or] a lump sum [70 percent] immediate payment, which is unprecedented in the market.” He added that there are no plans to launch future projects in Dubai in the foreseeable future.

Kuwait teams up with REAL

In a December 11 workshop titled “Mechanism of Real Estate Investments in Lebanon,” Chairman of the Kuwait Real Estate Association Tawfiq al-Jarrah said Kuwaiti investments in the Lebanese real estate sector were growing steadily. The workshop was the first formal cooperation with the Real Estate Association of Lebanon (REAL), headed by Chairman Massaad Fares, since the Kuwaiti team signed a ‘cooperation protocol’ with the former in November to help “remove hurdles facing Kuwaiti businesses” in Lebanon, according to the Kuwait News Agency.  REAL’s agreement means it will help register land plots bought by Kuwaiti businesses with the relevant Lebanese departments. In addition to legal and administrative council, the group will provide names of accredited companies, dealers, engineers, brokers and lawyers in Lebanon. In previous statements to Executive, Fares said the organization aims to promote reputable companies and eliminate or reduce the expanded number of non-professionals who enter the industry.

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