Consumer Society

Marvels, made to measure

by Executive Editors
written by Executive Editors

Expensive tastes are exclusive ones — why spend thousands on an identikit interior when your home can be one-of-a-kind? But beyond the diamond-encrusted couches and Arabic-embroidered rugs hand-woven to order by Nepalese craftsmen, the trend for tailor-made interiors opens up exciting possibilities in design and enterprise. Executive takes a tour of some of Beirut’s creative companies in the business of fulfilling dreams clients didn’t even know they had.

“I don’t like the word creativity,” says architect and designer Karim Bekdache, sounding at odds with the sun-filled furniture showroom behind him, crammed with mesmerizing concoctions in wood, glass and steel. “I think [design] should answer a real need, and then it can be completely wild and you can call it creative, or it can be completely invisible — but for me, creating something completely invisible or completely wild is the same.” Trained in France and working mostly in Lebanon and Europe, Bekdache does not worry about imposing a particular architectural signature on a project. Being at the top of your game as an architect or designer isn’t just about the ‘wow’ factor. As luxury consumers globally are cutting back on flash statements in favor of projects with personal meaning, Bekdache seeks a sort of synthesis where clients, if the process goes well, feel that they are the ones who defined the work.

Bekdache gives the example of a project in Gemmayze whose owner was making the move from the mountains to Beirut. Based on this background, Bekdache commissioned the famous French botanist Patrick Blanc to create a vertical interior ‘green wall’ inside the property, a self-sustaining structure made entirely of plants and mosses. “It’s about installing something in the house that gives meaning,” he explains. Then, “there’s an inside relation between the client and the house.” Horrified by the spectacle of so many design catalogues of endless, stultifying choices, Bekdache has learned to bypass the books and magazines predicting the latest trend. “This is the meaning of modern for me,” he concludes. “Not to imitate, but to keep on going, further than you did the last time.”

Let there be light

When it comes to local companies who can realize unconventional visions, Bekdache has high praise for lighting design and manufacture firm .PSLAB. He describes their approach as “very very courageous and daring. It’s incredible… they throw away all the catalogues of all the possible spotlights in the world, and then you come to them and say ‘I need a light for this space,’ and sometimes they really get beyond this stuff and start telling you how the architecture should be.” .PSLAB, unlike any other lighting company in the region, design and manufacture all their products in-house, giving them total control of their exclusive ‘haute couture’ approach. For them, the specifics of a given space define the lighting, rather than the lighting imposing a mood on the space. Their contemporary, industrial chic products are crafted by teams of in-house artisans and never re-used on the same market; an approach that has won them devotees as far apart as Parisian design darling India Mahdavi and Beiruti architectural rock star Bernard Khoury.

.PSLAB compare themselves to a five-star hotel, where the customer’s needs define their experiences and where each experience can be completely different. This synthesis of forward-thinking design, controlled production and sophisticated client relations is a complete service that puts .PSLAB ahead, not just of other lighting companies, but also of many other ‘bespoke’ design services. 

High-class problems

High-end, high budget projects will often involve an unusual attention to structure and detailing. Architects like Bekdache might lower a ceiling or find a way around an awkward hallway, which ultimately will increase the value of a property that has been sculpted into its best possible form. But there are some challenges that need the expertise of master designers and craftsmen — a niche demand that Karim Chaya and his partner Raed Abillama stumbled upon in 1997 when they began the projects that led to their company Acid, specializing in architectural detailing. Chaya, who jokes that the team are “detail nerds,” explains: “We started becoming known as the ‘mission impossible’ company — whenever there was something difficult, strange, unresolved, out of a dream, they would come to us, a company that will take the headache out of [it].” From staircases, to lifts, to made-to-order wall cladding (such as in the new Downtown café, Grid, that glows pink and gold from sets of copper mesh screens imported from Turkey), Acid have built their reputation on “quality and sensibility above all,” an uncompromising stance that brooks no opposition over the amount of time it takes to do a thing properly — principles that have landed them commercial projects like Lanvin and Joseph boutiques worldwide.

The artisanal skills that Acid often relies on originate in the “back alleys in Bourj Hammoud,” of which Chaya says “the most valuable thing that I have acquired since we started is that network. Good people we can work with and who have the same ideas.” Far from throwing out the skills of generations of craftsmen, Acid is one of the companies keeping them in business, playing an intermediary role between the metal smiths, carpenters and leather workers and the off-the-wall requirements of high-end clients.

“What I got from my father as a heritage… we changed completely. Instead of accumulating more stock from all over the world, we did the contrary”

The business of bespoke

A more classical approach to customized interiors offers clients the opportunity to have total control of the design of luxury items — a methodology that is revolutionizing some local businesses. Opened a year ago in Ashrafieh, the United Kingdom’s Rug Company has developed a bespoke service that complements its already elite range of rug designs created by the likes of Vivienne Westwood and Alexander McQueen. Existing designs can be adapted in myriad ways, while the customer controls the colors and the silk content of the weaves, which range from around $500 to $3500 per square meter. But the premium service sees clients designing their own patterns, such as their name in Arabic calligraphy, which are then tried and tested on screen before being sent to Nepal, where teams of expert weavers take up to a year to produce the finished product.

Serge Nalbandian of Nalbandian Textiles offers similar services, having personalized rugs for Elie Saab and had his Tibetan weavers produce a pop art Superman number. He has also redesigned his family business around customization, with the company abandoning its history of trading antique Persian carpets and preferring to give clients what they want — pieces for the home that are about immediate pleasure, without re-saleable value.

“What I got from my father as a heritage… we changed completely,” he says. “Instead of accumulating more stock from all over the world, we did the contrary. What the customer needs, we can provide him with.” The new year will see a giant state-of-the-art screen installed at Nalbandian for the sole purpose of giving clients a multimedia customization experience. “There is no longer a way of investing in your decoration as an heirloom,” says Nalbandian. “It fits in your house, you live with it for the time that you’re enjoying it and this is it.”

Extreme dreams

Enjoying the moment can take many forms. “I’ll be the executor of your dreams,” smiles Vick Vanlian — and he should know, being responsible for creations including a diamond-strewn sofa. Like Serge Nalbandian, he developed his family business, Galerie Vanlian, in response to customer demand for the high-end customized items that now make up 50 percent of his business. This led to Envy, his three-floor Downtown boutique — a mind-boggling collection where there isn’t one object that doesn’t glitter or gleam or clamor for attention. Vanlian is aware of his celebrity cachet as a successful and distinctive young designer; a further gloss on custom projects, which always bear his characteristic signature.

As such, Vanlian excels at realizing flamboyant visions, from a ‘famous singer’ who requested a room designed around 150 pictures of herself, to a Saudi prince’s pleasure chamber. Working through an intermediary, Vanlian received instructions for it. “[The client] called it the massage room, but it was the sex room… it had a round bed in the middle with four stages on each corner, with dancing poles and big screens and in the middle a big cage that could come up and down… nicely put together for a porn movie, basically.” There will always be mileage — and a lot of fun — in being known for making any dream come true.

“It’s not easy because when you have custom-made designs you have to create all the time”

Made in Lebanon

None of these dreams come cheap, of course. Maria Halios started her own furniture gallery in Mar Mikhael last year, producing limited edition and bespoke pieces, after demand for customization necessitated her own working space. She points to a pair of hoop-like metal sculptures with finely textured surfaces. “Imagine that I have to do them a centimeter smaller,” she says. “Molds are required. Each mold costs a fortune and because you cannot have the same dimensions in another house, you basically throw the mold in the garbage. So you invest in a mold that is supposed to produce a hundred pieces, just for one piece — the cost is huge.” The cost of a dining table can jump from $5,000 to $15,000 if you want to be sure no one else has it.

Yet these are the prices you have to pay to keep ahead of the neighbors — a popular pastime in a high society as small as Lebanon’s. But Lebanon is also an exciting hub of creative talent with a distinct price advantage over Europe. Halios, like most of the companies mentioned here, works with clients overseas who are happy to undercut designers offering similar services in more developed markets.

Yet aside from the business of pursuing the most exclusive clients around, a genuine commitment to originality at all costs is at the heart of these projects. Halios fingers an origami-like paper maquette, the first stage in creating an intricate table of angular interlocking pieces. “I never imagined the beauty that could come from a mock-up like this,” she says. “It’s not easy because when you have custom-made designs you have to create all the time. It’s not like you create two collections a year and then you forget about it.”

Far from a cynical exploitation of the fantasies of the super-rich, these companies are challenging themselves, and the industry as a whole, to keep evolving the practice of made to measure design.

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Economics & Policy

Avoiding collateral damage

by Sami Halabi
written by Sami Halabi

A friend in need is a friend indeed, or so the saying goes, but when sticking up for your confidante means you find yourself in a heap of trouble, companionship can be more of a liability than an asset. The accord between Lebanon and Syria, as with any old couple, has seen its ups and downs, yet no matter how precarious the politics ever were, the economic bond between the two has kept the Levantine neighbors’ fates intertwined, especially when it comes to banking. 

“It has always been the case because there was no private banking sector in Syria and they are still at an early phase in terms of techniques,” said Elie Yachoui, dean of the School of Business Administration and Economics at Lebanon’s Notre Dame University. “The Syrians have always done their transactions in Lebanon and gone back to Syria. It’s nothing new.” 

What is new, however, are the widening sanctions being imposed on Syria by those near and far, as its economy and foreign currency reserves continue to buckle under international pressure. The United States, the European Union and Turkey have all recently imposed new sanctions on the Syrian government, its central bank and prominent members of the business community [see table]. The Arab League initially mirrored the moves in November after an initiative to impose similar sanctions, including asset freezes and travel bans, was leaked to the press. In theory, these sanctions were seen to be the most effective against the regime as most trade with Syria goes to its neighbors: close to 60 percent of its exports are to Arab countries. But the league’s sanctions were more or less declared dead on delivery. 

“They said they were going to freeze the Syrian government accounts but they allowed the Syrian government to pull 75 percent of the accounts before the decision was made,” said Yachoui. “They say they want to sanction the Syrian central bank but then allow Syrian expatriates to send foreign currencies back to Syria. So from one side you sanction and from another you nourish.” 

Ibrahim Saif, specialist on the political economy of the Middle East at the Carnegie Middle East Center think tank, agrees that the sanctions will have limited effect, “For the simple reason that those countries that seem to be very adamant about imposing the sanctions are not the countries that can effectively do it.”

As Executive went to press the Arab League was wavering and the list of sanctions was removed from the league’s website in December. Arab League Secretary General Nabil al-Arabi even released a statement last month denying that a ban on air travel would be implemented, given that discussions were ongoing between the league and the Syrian regime. 

“Many countries will not be applying [Arab League sanctions] and even [regarding] the countries that want to apply them, we don’t really know if they have the know-how and logistics to implement those measures,” said Jihad Yazigi, editor-in-chief of The Syria Report. “So in this sense they are not extremely meaningful.”

The ones that bite

The sanctions that are proving consequential are those coming from the West that pressure Syrian access to foreign currency, such as a ban on Syrian oil exports to Europe. Already the Syrian pound has lost some 25 percent of its value since March and an emergency reserve fund used by the Syrian central bank to prop up the currency is dwindling. With gross domestic product estimates for 2011 forecast (depending on who you ask) to fall by some 20 percent and the Syrian fiscal deficit continuing to climb on the back of an increase in subsidies and civil servant pay, the situation has produced an economic exodus according to Yazigi. “Everyone’s plan now is not to do anything. For everyone, business is dead here, they are just managing. Those who can are leaving,” he said. 

As the economic migration takes place, Lebanon is finding itself under increasing international pressure to abide by Western sanctions. A visit by US Treasury Assistant Secretary for Terrorism Financing Daniel Glaser in November set off a renewed wave of fears in the banking sector, especially after “concern” over the dealings of Lebanese Canadian Bank (LCB) threw the sector into crisis mode earlier in the year. 

While the case of LCB and Syrian sanctions are not directly related, the fear that further action could be taken by the US over assistance to the Syrian regime is ever-present, even though “US sanctions do not directly obligate Lebanese financial institutions,” according to a US Treasury department official who spoke to Executive. 

“Lebanese financial institutions may be choosing to perform their own enhanced due diligence on transactions associated with Syria due to the heightened risk associated with that jurisdiction,” the official said. 

True or not, reports of sanctioned individuals attempting to use Lebanon as an outlet abound, and a battle  has kicked off between those seeking to dodge the sanctions and financial institutions looking to protect themselves, the sector and by extension, the country’s economy.

“Now we are afraid of another LCB issue,” said Paul Morcos, founder of the Justicia law firm that provides legal consulting for the banking sector. “They need a new scapegoat so that the new procedures they are asking for can be implemented. Since our banks have accounts with correspondent banks in the US, they should be afraid.”

Avoiding lists

Sanctions are based on what those in the business of complying with them call ‘the lists’. The most infamous of all is the US’s Office of Foreign Assets Control (OFAC) list. Companies placed on this list, or those who have dealings with persons on them, are effectively banned from dealing in US dollars and any banks that carry out transactions for such a person could potentially be sanctioned themselves. Banks have relationships with other intermediary American banks to deal in US dollars, which would act as the initial trigger for any US-imposed sanctioning of transactions. “The banks have to do their due diligence and not have accounts with people who are on the lists, because they have relations with US banks,” said the manager of a compliance unit at one of Lebanon’s major banks, speaking on condition of anonymity. 

Of course, anyone on a list would likely not be naïve enough to think they could waltz into a Lebanese bank and open an account. But using an intermediary, or setting up a Lebanese company that then would work with the Syrian government, could be ways around this, given that, in theory at least, “the sanctions are on Syria and not Syrians,” according to the compliance manager. 

“Banks don’t hold any accounts for people listed on the OFAC lists or other lists,” said Morcos. But those who deal with or front for sanctioned individuals is another issue: “We don’t know if we have [sanctioned accounts] or not,” Morcos added. 

Camille Barkho, manager of Amerab Business Solutions, a firm that provides products to help financial institutions protect themselves against US money laundering and terrorist financing regulations, confirmed that some banks are simply saying “no” to Syrian traders. “But it’s institution by institution and it also depends on the sect the bank belongs to. For one sect it’s okay and for another it’s not.” 

He stressed that in principle the OFAC list targets money laundering, terrorist financing and other financial crimes and not sanctions, which come under a wider US legal principle called a country ruling. Even so, banks still use the lists as the basis for compliance. 

Lebanon’s legal texts do not actually cover sanctions per se, given that banking secrecy can only be lifted on accounts under Law 318, which, like the OFAC list, covers financial crime and not sanctions. Under that law, the Special Investigations Committee at Lebanon’s central bank can remove secrecy and look into the account after the banks raise the alert. Even then, very few of these cases actually make it to court. “You have rare cases in the courts, very rare cases. Most of them are not tried for specific reasons, like the case does not apply under Law 318,” said Morcos. Indeed, according to the compliance manager, “The central bank has nothing to do with this — it is up to each individual bank to do its due diligence.” 

Given the uncertainty, many banks are taking measures that go beyond the text of the law by refusing to bank with those on the OFAC list as well as their relatives, close friends, business associates and so on, according to Morcos. And, according to Yazigi, many Syrians can no longer open up accounts in Lebanon and find it very difficult to conduct financial transactions even if they do not have ties with the regime. “I would not open a [Syrian national’s] account. I would advise other banks not to give themselves a headache and just not take the account,” he said. 

In theory, holding the accounts of sanctioned individuals should not pose a problem for the banks, as long as they do not move money through them, especially in US dollars. And of course there are ways around that as well. “If I am a Syrian and I’m sanctioned and I have money, I can easily get four people to set up a company and trade with China and do it all with cash,” said Barkho. “When you trade with lots of cash the banks start asking, but all you have to do is convince them that you are generating daily sales. The main point is that it is not money laundering because it’s not covered by Law 318.” 

Last month Executive called 12 Lebanese banks, both large and small, asking how they were dealing with accounts held by Syrian nationals. None of the banks responded.

Many ways to still move money

Those seeking to dodge the sanctions are likely to employ the same methods that money launderers do, given that these techniques have proven useful in the past. In essence, what those seeking to skirt sanctions will do is find ways to generate cash and obfuscate the origin of funds and to whom transfers are going. It’s up to the banks to monitor and report suspicious transactions.  

What launderers generally do is generate the illusion of as many cash sales as possible to justify their cash deposits. Supermarkets are a good way to do this, given the number of retail operations that take place in a single day. “What you can do is go to the supermarket and stand at the cash register and count the cash. But who is going to do that?” Barkho asked rhetorically. The only legal entity theoretically authorized to do so is the financial general prosecutor’s office, but the fact that the government currently has $11 billion unaccounted for on its books does little to inspire confidence that it will be able to keep pace with the launderers.  

Another tool used by launderers are pre-paid cards offered by banks where one can deposit cash on a card and then use it to withdraw money internationally, with some banks offering ‘buy-one-get-one-free’ packages. “Pre-paid cards are not customers, you don’t know them,” said Barkho. “Basically the banks are creating a tool for money laundering.” 

Executive, posing as a potential customer, enquired at one of Lebanon’s top banks about the buy-one-get-one-free offer and was told that it was indeed available. The bank said the second cardholder did not have to come to the bank or sign any paperwork and could give the card to someone else whenever they wanted. The card itself carried a daily limit of $5,000 and could be used internationally, said the sales rep. 

Covert conversions 

Since the LCB scandal, which allegedly involved a fair amount of currency conversion, the exchange sector has come under increased scrutiny from the central bank. 

Given that the Syrian pound has lost around 25 percent of its value since the uprising began, there is considerable pressure on Syrians to change their money into another currency or place it in a fixed asset. So far the Central Bank of Syria has taken several measures to limit this conversion, including closing dozens of exchange houses in Damascus, increasing the interest rates on deposits in Syria from 7 to 9 percent, reducing the amount foreign currency banks and Syrian exchange houses can give out to local residents from $10,000 to $5,000, as well as further limits on how much foreign currency can be taken abroad, especially in Arab countries. 

“It’s about the time when the foreign currency issue they are having and their injections into the market will not be adequate to protect the Syrian pound,” said the Carnegie’s Saif. “Already there is a black market for the Syrian lira. The more you witness of this the less likely you will see the resistance of the Syrian economy.” According to Yazigi, the Syrian pound was trading at roughly 60 pounds to the US dollar on the black market in mid-December. The official rate at the start of the uprising was around 47 pounds to the dollar. 

Lebanese exchange houses are regulated by Law 347, enacted in 2001, which declares that if they issue checks for more than $10,000 they must notify their affiliate bank, give the identity of the beneficiary and the purpose for issuing the check. Otherwise they legally have free reign and this simultaneously places pressure on and creates opportunities for, the Lebanese exchange market. Even so, most people believe that this avenue has been closing in recent months. 

“No one should think that millions of dollars a day are being exchanged at the exchange companies but there is nothing stopping someone with small amounts to exchange,” said Yachoui. “Today the borders are open. If someone brings in banknotes, especially dollars, in a suitcase and this comes into the market, there is no way to find out where it came from.”

Indeed what many Syrians are looking to do is change their money into fixed assets that hold value. “You either keep your money and pray that it is not going to deteriorate further, or if you have more money you buy real estate or invest in something,” said Yazigi. With the banking sector effectively closed off, and discounts on real estate purchases aplenty at a time when the market is cooling, this has become an increasingly viable option to place money.  

“If you are known to be a real estate promoter and I bring you $700,000 in cash and buy an apartment from you, you go and put it in the bank, they ask you where it came from, you tell them you made a sale, the bank is not going to ask more than this,” said Yachoui. “He’s not going to ask you who your customer is when you have hundreds of them.” 

Indeed, the compliance officer agreed: “Every bank is responsible for their accounts but we don’t have a crystal ball to see other accounts. It’s not your business to ask the nationality or the source of money of the other [third] party. The client is responsible. We flag it if there is much more cash than a real estate transaction would normally be.” 

Trouble down the road

As the Syrian currency and economy continue to take a beating and the uprising takes on new dimensions, Lebanese financial institutions seem to have chosen which side of the divide they stand on. In mid-December the Association of Banks in Lebanon announced that its members would fund the government’s contribution to the Special Tribunal for Lebanon, something that Syria’s main ally and the accused party in the investigation, Hezbollah, has stated should not have happened. 

“At every moment, every instant and every second they [Americans] can do what they want with us. If there is a decision to do something to us, they do it. But right now there is no decision,” said Yachoui. “No matter what precautions the banks take, don’t think for one second that all the records are clean. They can always find a million reasons to take action, but for now there is no decision to do so. The target is not Lebanon, it’s Syria.” 

 

Reporting contributed by Youssef Zbib

 
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Finance

Executive Insight -Nada Safa

by Nada Safa
written by Nada Safa

In times of deep uncertainty, we are often overwhelmed with information and use mental shortcuts to arrive at snap decisions and judgements. Sometimes, such assumptions work, but this approach can also lead to biases, errors and confusion, especially when it comes to investment decisions.

A year of indecision

Under ordinary circumstances, the world has time to catch its breath between major news events. The sheer speed at which history happened during 2011, though, created deep market uncertainty, from Japan’s earthquake cum tsunami to a tragic nuclear disaster, from war in Libya to escalating political turmoil across the Middle East and North Africa, from limited concern over weaker Eurozone members to widespread fears of single currency break-up.

Not since the Second World War have investors had to navigate such a barrage of events. Many fell into a trap that rendered their rational capacities useless, with financial markets driven instead by fear, short-termism, stop-losses and political instability. By the third quarter, many had resorted to cash, waiting for a meaningful United States recovery, for eurozone “leadership”, for signs of Middle Eastern entente. We might as well have been “Waiting for Godot”.

The year started relatively well, as markets continued to benefit from the 2010 year-end rally. Investors were looking forward to strong growth in the US and continued buoyancy from the emerging markets. By spring, though, reality was breaking through. America’s recovery was paltry and Western Europe’s largely unforeseen sovereign debt crisis was coming into view. Rapid Asian growth was also stoking inflation.

The response to all three problems was fiscal constraint, which stoked fears of recession in the Western world and culminated in a rather vicious August sell-off, with global markets giving up their year-to-date gains in a single, wicked week. By the end of 2011, investor sentiment had yet to recover with global markets still locked in a deep malaise. As a new year dawns, opinion is divided between adherents of “risk-on” and “risk-off”, with neither side completely convinced, but the more cautious definitely holding sway.

A Japanese tragedy

In December 2010, Goldman Sachs placed Japanese equities in their list of “favorite” 2011 investments with a 12,000 target for the Nikkei, based on a strong macro backdrop. As the world’s third-largest economy was struck by an earthquake and tsunami in March, killing thousands, Asian markets dropped severely and continued their descent amidst ever-worsening news, not least the Fukushima nuclear disaster. Alongside the ghastly human impact, the shutdown of car plants and oil refineries imposed vast economic costs, as global supply chains seized. The Japanese government suggests the bill could ultimately reach an astonishing $320 billion.

Black gold

Despite a sluggish global economy, world oil demand reached 89.3 million barrels per day in 2011, according to the International Energy Agency. That’s an all-time high, up from 84.1 million in 2009 and 76.4 million in 2000. This growth was driven by spiraling Asian consumption. China consumed almost 15 percent more oil in 2011 than in 2010. As the emerging markets continue to grow, and their massive populations adopt more energy-intensive lifestyles, the IEA foresees global crude use of 93.4 million barrels a day by 2015.

In 2011, the price per barrel of Brent crude reached $110, up from an average of $79 in 2010. This was driven by relentless Asian demand and from MENA-based supply concerns fuelled by the Arab uprisings. Libya is still pumping nowhere near the 1.7 million barrels it supplied daily to world markets in 2010.

US deficit

The tortuous negotiations between Congress and the White House over raising the US debt ceiling made the markets take notice of America’s $14 trillion of public debt. The Federal Reserve made the unprecedented announcement that base interest rates would be nailed to the floor until 2013. As the end of 2011 came into view, global markets finally accepted that the US could be in for a much longer period of weaker growth than previously expected. 

With a budget deficit standing at 10 percent of gross domestic product, America’s fiscal situation is dire. The Congressional “super committee” seems unable to fulfill its remit of finding $1.2 trillion of spending cuts and new revenues by January 2013. As Uncle Sam’s debt continues to spiral, heading for $18 trillion by 2016, even the seemingly impossible spending cuts may not be enough. For now, as the euro suffers, the dollar looks strong. But America’s fiscal woes will inevitably come back to hurt the markets. 

The Eurozone debacle

Throughout much of 2011, the European Central Bank (ECB) took a relatively aggressive interest rate stance, as Germany’s inflation aversion prevailed and higher borrowing costs exacerbated the creeping austerity across the Eurozone. While Greece took center-stage, the other PIIGS (Portugal, Italy, Ireland, Greece and Spain) also began to squeal due to their high-debt burdens and spiralling sovereign bond yields. Several member states are effectively insolvent, which suggest default and debt rescheduling is inevitable, something policymakers seem determined not to accept.

As 2011 comes to an end, the PIIGS government yields are reaching new euro-era highs. A previously unthinkable default is threatening the ECB due to the refusal of member states to sufficiently raise the bailout to stop the contagion. The infection of Europe’s “core” (France, Austria, the Netherlands and even Germany) is now a fact, and could spell systemic disaster for the Eurozone.

Golden horizons

Gold maintained a broadly upward trend and crossed the $1,900 level before reversing course. The strength of the gold price has been supported by soaring gold coin sales, America’s debt ceiling debacle and Eurozone worries, together with almost unprecedented gold stockpiling by central banks. The trend has been marked by bumps stemming from margin calls, liquidity constraints, hedge fund liquidation, profit taking and investors’ capitulation.

Popular pennies

Angst about US and European economies led the Swiss franc and the yen to benefit from “safe haven” flows. Strong currencies often are not welcome though. Switzerland’s central bank pegged the Swiss franc at 1.20 to the euro to boost its local economy. The Bank of Japan remains undecided with regards to the yen, leaving it at relatively strong levels.

Persistent pains

As 2011 comes to an end, Europe is in the midst of many changes. Mario Dragi, an Italian banker, replaced Jean Claude Trichet as ECB governor. In Greece, former ECB Vice President Lucas Papademos replaced Georges Papandreou as prime minister; in Italy, having failed to charm parliament due to fiscal problems and a long history of sex scandals, Silvio Berlusconi resigned as prime minister, leaving Mario Monti, an economist, to shoulder Italy’s burden. During the “make or break” Brussels summit in December, Europe’s leaders threw the kitchen sink at the Eurozone conundrum, unveiling a new European Stability Mechanism and promising fiscal union. Yet again, the bond markets remained unimpressed, with many still pricing-in a ‘Eurozone break-up’.

With presidential elections in the US and France in 2012, challenges remain to be tackled whether with new blood or new reforms, but investor sentiment looks set to remain unchanged, with rattled nerves playing havoc with both investor psychology and asset prices.

 

NADA SAFA is a private banker

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Finance

Lebanese capital markets

by Maya Sioufi
written by Maya Sioufi

The payment of Lebanon’s $32.6 million share of the annual funding for the Special Tribunal for Lebanon boosted activity on the Beirut Stock Exchange (BSE) in the latter part of November. The BLOM Stock Index (BSI) climbed by more than 4% during the period to 1,224 points, before retreating to 1,189 points by the end of the fourth week (December 12-16). Hence, the BSI advanced 1.2% from its previous close on November 18, with total losses in 2011 at 19.39%. The daily average volume per month rose more than seven-fold to 513,173 shares, up from 69,186 shares in the preceding four-week period, due largely to 6.8 million shares in Byblos’s common stock being traded on 16  December.

On the regional front, the BSI managed to outperform both the MSCI Emerging Market Index and the S&P Pan Arab Composite LargeMid Cap index. The former fell between November 18 and December 16 by 6.5% to 897 points, reflecting fears over the European debt crisis and signs of economic slowdown in China and South Korea. The S&P index followed suit, retreating 1% to 106 points.

Most banking stocks ended the four week-period in the red, affected by Moody’s Investors Service Outlook‘s downgrade for local banks to ‘negative’ from ‘stable.’ In fact, BLOM’s global depositary receipts lost 2.5% and BEMO common stock retreated by 4.9% to $7.70 and $2.35 respectively. Bank of Beirut stocks followed suit as its common stock declined by 1.3% to $19.20, while its preferred Class D lost 0.4% to $26. Bank Audi stocks also drew back, with its GDR losing 2.3% to $6.29. Its listed stock fell 2.2% to $5.85 and its preferred Class D decreased by 0.5% to $10.30. Byblos common stock was the sole gainer among banking stocks, rising 3% to settle at $1.65.

Solidere stocks A and B, which accounted for around 42% of total value traded, rallied during the first three weeks to hit $16, their highest level since mid-August 2011, before closing at $14.5 each on December 16 with a monthly increase of 6% and 7.5%, respectively.

Within the manufacturing sector, Holcim stock grew 1.5% to $16.15, whereas Ciment Blancs Nominal Class witnessed a single trade of 2,496 shares, lifting its price by 40% to $2.41, its highest level since inception. 

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The Buzz

Attack of the killer chickens

by Fernande van Tets
written by Fernande van Tets

Genetically engineered chickens have become killing machines, invading Dubai, Egypt, Lebanon and the rest of the Arab world. You can only stop them by shooting them and destroying their eggs. Luckily this dystopian nightmare is not coming to a street near you, but is the storyline behind Birdy Nam Nam, an Arabic mobile game which was downloaded more than 250,000 times within a week of its release in September, and ranked number one in the Arab world on the iTunes store.

This is just one example of Lebanese talent tapping into the profitable computer gaming market, which, with a projected annual global growth rate of 12 percent, makes it the largest growth sector of the media industry. Digital games can be played online (on PCs or game consoles) or on mobile devices such as smartphones and tablets. In revenue terms, such games earn $56 billion annually; at least three times as much as the global music industry, which saw revenue decline by 8.4 percent to $15.9 billion last year. In the United States gaming makes $22 billion, which is more than the music ($10.4 billion) and film industry ($9.5 billion) combined.

Despite many obstacles, in terms of knowledge as well as infrastructure, gaming in the Arab world shows huge potential. Demand for local products far outstrips supply; less than 1 percent of content is in Arabic, while over 60 percent of Arab users prefer content in their first language on the Internet, according to the Dubai Press Club’s Arab Media Outlook 2010. “If you do anything in Arabic now, it will work,” says Lebnan Nader, one of Birdy Nam Nam’s creators.

Gaming in the Arab world started in the 1990s, when international fighting games such as Counterstrike and Starcraft drew large crowds at cafes, where people would play on a Local Area Network (LAN) connection.

With the advent of the Internet, games moved online, but the social function of the café remained and the popularity of massive multiplayer online (MMO) games such as World of Warcraft grew. In 2005 Travian Games, a German company, entered the market with an Arabized version of its MMO game Travian. United Arab Emirates-based GamePower7 was the first regional company to try and tap into the market in 2007 by Arabizing the game Rappelz, while Jordanian Quirkat developed the region’s first original MMO game in 2008, with ‘Arabian Lords’ allowing players to be merchants in the time of the rise of Islam.

With mobile and Internet penetration exploding across the Middle East, local entrepreneurs are searching for ways to tap into the opportunity, with the videogame market in the Middle East and Africa set to grow to $3.2 billion by 2016, according to the research company Ovum. 

The largest markets are Saudi Arabia, Egypt and the UAE, while companies have been springing up across the region, especially in Jordan where the government has stimulated the sector’s growth through the Jordanian Gaming Task Force.

According to its chairman, Nour Khrais, online and mobile gaming revenues in the Arab world reached about $450 million in 2010, while the overall value of the gaming market in the Arab world, including investments and advertising, exceeds $1 billion. Jordanian companies develop 70 percent of the Arab world’s mobile and online games. In Lebanon, where there are just a handful of companies known to be producing games, with less than 20 released so far, the market is still immature.

Birdie makes a bang

Birdy Nam Nam (BNN), the Lebanon-based company that published the namesake game, credits its success to the use of the Arabic language, emulating international games that have entered the market through ‘Arabizing’ their blockbusters. Wixel Studios, Lebanon’s first gaming company that opened in 2007, scored its greatest success with its first game Douma, a fighting game based on Lebanese politics.

The game has been played online over 2 million times. The three-man company has released 13 titles, including games about a manouche bakery and the Egyptian elections. Falafel Games, a company started in 2010 by three Arab gaming veterans, uses Islam as the theme for their multiplayer online game ‘Knights of Glory’, which is set during the Islamic conquests of 632 to 636. All claim competition is virtually non-existent, with only a handful of regional competitors operating in their field.

Recognizing the opportunities, venture capital funds are starting to show an interest. “Gaming is a segment within technology which requires customization and local product development… The demand is there,” says Walid Mansour of Middle East Venture Partners (MEVP). The fund decided to invest in Falafel Games a few months ago, and is eager to enter the multiplayer online market, projected to be worth $400 million regionally by 2015 — a tenfold increase in five years.

Regional consumers tend to be big spenders; the average revenue per paid user in Saudi Arabia is $50, twice the global average. Most games developed in emerging markets rely on a free-to-play model that sells advertising and, in particular, virtual goods or one-time premium upgrades through micro-transactions. Within Knights of Glory, for example, extra defenses or more sophisticated weaponry can be purchased with virtual gold, which costs real money.

Although the lack of credit card owners in the region poses an obstacle, platforms such as OneCard, Cashu and Gate2Play are overcoming this issue by offering alternative ways of payment. In the West, a subscription model is popular, however this model is struggling in the Middle East as pirated versions of a game are readily available, though often lacking features.

Birdy Nam Nam, for example, was initially released for free, but sales on iTunes alone have garnered $20,000 in revenue, while its creators see the potential as much higher as they continue to monetize their product.

Mobile is the future

Console games still tend to come from big international manufacturers such as Sony and Nintendo, but browser and mobile gaming have opened up the market. The mobile platform shows the most potential regionally, especially with the advent of third generation (3G) Internet.

Of Arabic-speaking mobile Internet users, 85 percent have downloaded apps, with 27 percent downloading more than one per week, according to research published by Spot On Public Relations in January 2011. Of those apps, almost 20 percent are games, with women playing more than men, illustrating how gaming’s target audience has shifted over the past decade with the diversification of games on offer. Social Girl, which allows you to “go on the hottest dates and shop for the trendiest clothes”, is currently one of the most popular apps in Saudi Arabia. With women largely confined to their homes and veiled when in public, it is not hard to imagine why. Furthermore, many mobile games such as ‘Arabic Crossword’ appeal to both sexes.

BNN is looking to keep growing within mobile gaming. In addition to the benefits of a pre-existing end-user market and relatively easy payment methods through SMS, Nader sees two other factors playing a role. First, as the margin on voice calls drops, mobile operators are fighting for customers by offering extra services and unique content such as games. Second, corporate use of games for advertising — for example BMW offering potential customers a virtual test drive in their newest model car — will pick up. “With mobile marketing you can measure your impact; you know how many people are playing,” Nader says. Wixel Studios has already tapped into the advertising market through so-called ‘advergames’ for Kit Kat and Almaza. The latter was a football game that formed the centerpiece of the beer maker’s marketing strategy during the World Cup. Wixel aims to switch from browser-based games to the mobile platform next year.

Representatives for both Wixel and BNN said they aim to expand beyond the Middle East market over the next year, as less than 5 percent of all Internet users are Arabs. They wish to do this by offering unique content to a global audience. But, so far, the key to regional success is producing content that is recognizable to an Arab audience, in terms of landmarks, language or culture. Furthermore, people are immensely proud of locally developed games. “We got many emails saying how proud people were that BNN was created by Lebanese. Some were kind of disappointed to see that there was a French guy on the team,” smiles Jean-Christophe Hoelt, the French developer who wrote the code for BNN.

A lack of human resources?

The need for a French developer highlights one of the main obstacles to creating games in Lebanon; a lack of human resources. “I know that it is hard for people to find somebody, because they want me,” says Hoelt. There are plenty of graphic designers, but not many with sufficient experience to create a complex game. “High tech 3D animation or virtualisation, virtual realities, we cannot do this,” says Elie Boujaoude of Berytech Fund, the other Lebanese venture capital fund with a game company in its portfolio. “But if you stay below that [technological barrier] you can do very well.”

The lack of skilled employees to create a gaming industry is not just a Lebanese concern; the sentiment was echoed in a regional setting at the fourth Dubai World Game Expo conference last month. Falafel Games is based out of Hong Kong due to the availability of coders and artists with an extremely varied set of skills. “I tried Egypt, Jordan, Syria, I just couldn’t find the talent,” explains Vince Ghossoub, Falafel’s Lebanese founder. 

Some companies, such as BNN and Wixel, do believe in setting up shop in Lebanon. “Part of our message is to be here. We want to create a success story for Lebanon to convince youngsters that they have the potential to do it here,” says Ziad Feghali of Wixel Studios. Both companies and investors highlight the diversity and creativity of Lebanon’s workforce, which allows it to create games that will resonate with both Western and Middle Eastern audiences.

Feghali hopes to transcend the lack of technical knowledge through in-house training; all three of Wixel’s founders have teaching experience. Birdy Nam Nam also feels that guidance can overcome lack of technical knowledge and is in the process of hiring several Lebanese developers. Ubisoft, one of the world’s largest game developers, just opened offices in the UAE, citing an abundance of raw talent. Notre Dame University in Beirut now runs a game design course, though it is a far cry from a full-fledged degree.

It is the only course in Lebanon since Digipen closed its institute and offices at Holy Spirit University of Kaslik following the 2006 war. All three of Wixel’s founders are graduates. Since then, most of Lebanon’s few game developers learn their skills independently through online tutorials and experimentation.

Stimulating local talent is especially important as developing a game is a continuous process, lasting well beyond the launch date. “Outsourcing everything is not a solution… because you need to respond to customer feedback,” explains MEVP’s Mansour.

“A good game can be played for years,” says Tarek Chehab, formerly on the Lebanese team for the game Counter-Strike. But building such a game, and a corresponding industry, takes time and requires mature investors. “We have the talent, have what it takes, all we need is investment,” says Nader. Such investment would be used to fund the development of  new games as well as their marketing. Companies are wary of sharing specifics, but Nader estimates that a team of six people could work for a year and half with a $300,000 to $400,000 investment, with return on investment  in a maximum of two years.

Normally, for MEVP to enter a deal, the fund expects a 30 percent yearly return on any investment (which vary between $200,000 to $1.5 million), while Berytech aspires to obtain a four to five times value multiplication over five to six years on its investments of up to $1 million.

“Venture capital firms are looking at the MENA region,” says Nader. “In the near future, this region will be a really good place.”

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Real Estate

Q&A – Chafic and Jemmy Saab

by Rayya Salem
written by Rayya Salem

During the lead-up to the market peak in Ashrafieh over the last two years, both established and new developers seized the opportunity to build in-demand residences in one of Beirut’s most lucrative markets. For Jamil Saab & Co, one of the oldest real estate investors and builders in Ashrafieh, the culmination of their efforts over the last 50 years has led to their most ambitious and high-tech project, the two towers that form 20|30, named after their respective floor levels. Executive sat down with two partners in the firm, siblings Chafic and Jemmy Saab. 

What differentiates 20|30 from the other upcoming high-rises in Ashrafieh such as Sama Beirut and Skygate?

JS: The first advantage is the location. A lot of clients come to see us just because it’s in a residential area in the Golden Triangle. All the apartments, both 400 and 600 square meter (sqm) sizes, have four bedrooms, so it’s important for [clients that are mostly] families. And then the concept, the Italian architecture and the facilities are important; each building has a small oasis with an outdoor pool, indoor gym, wine cellar and security surveillance… In 20|30, it’s purely residential, with no retail or offices. 

How is the extra investment in high tech facilities justified, both for you and for the buyers?

JS: For us it’s not, it’s just an extra cost for an added value. We have the photovoltaic panels that let the building generate its own power for electricity, the co-generation for free hot water and a lot more whether in the wall insulation or the aluminum thermal breaker or else. These technologies will reduce the carbon footprint and will economize the electrical consumption, decreasing the maintenance charge for the end user.

Was there ever a plan in the development of 20|30 to provide smaller apartments, as demand for this type of unit has increased in the last year?

JS: Never. Smaller units need more condense architecture and more people living in the same area. We preferred to have exclusive big apartments.

CS: In 20|30 we didn’t follow the market, we focused on luxury, green building and innovation. 

On the other hand we are targeting the market in another smaller project that we have, where the average price-tag is $600,000: a budget anyone is aiming at whether it’s in Ashrafieh, Rabieh, Hazmieh or anywhere else. 

What is the mix of buyers so far? What proportion are locals, expatriates or foreigners?

JS: It’s 100 percent Lebanese, most of them have good business in Lebanon and the minority are expatriates.

How do you find the usage of home loans in your projects and in the market in general?

JS: I would say about 60 percent [of buyers] at Le Patio, our last project, took advantage of a home loan. They were able to take a loan for 80 percent of the value, after buying the apartment. The loan was never an incentive to buy an apartment. It facilitates but doesn’t affect sales.

E:  In general, how do you think sales will be affected now that it has stopped?

JS: It won’t affect sales, but it will affect the terms of payment. Before, they could pay a 30 to 40 percent down payment, but now it might be harder for buyers [without this loan]. We should be more flexible now. 

CS: We deal with BLOM and Credit Libanais to provide home loans. 

It is the first time the group has worked with the Italian architect Marcello lo Mauro, though it is not his first time working in Lebanon… 

JS: Right. For Le Patio, we worked with AAA, a local architectural firm, but for 20|30 we wanted to go abroad for a change. It’s also the first time we’ve worked with  landscape architect Vladimir Djurovic. We have 3,500 sqm of landscaping in the common areas of both buildings. [Djurovic has worked on several downtown projects and public spaces in Beirut and abroad]. In another ongoing project, Urban Residences, which has smaller 200 sqm apartments, [Lebanese Designer] Dori Hitti has collaborated on the façade design. Units in that 12-floor building have sold up until the 8th floor.

How do you keep the building homogenous in terms of the mix of buyers? 

JS: It is especially the buyers who bring other buyers… by word of mouth. It’s important because if people don’t like the mix, they might not buy.

As land plots have dried up in Ashrafieh, what’s the biggest issue for developers in terms of acquiring the plots?

CS: The major issue is time and price. We are not negotiating vacant land anymore but properties with several owners and tenants.

For 20|30 there were four plots put together… we purchased this land in 2008. Another developer had already bought three plots and cleaned them, which we bought from him. The other land had a property with 14 tenants on it.  It was a risk for us… it was tricky.

[I think] landowners may decrease their asking prices in the future because they are over-asking now. The ones that face difficulty selling now might not sell their plots before 2015 and for the same asking price as 2010 because of the over-asking.

How did the ambitious investment in the project’s sustainability affect the cost of construction? 

CS: It will cost $1,000 per sqm more than the cost of our previous projects because of all the added initiatives. 

Many developers complain that too many ‘unprofessionals’ entered the market. What has been the effect?

CS: There are too many unprofessionals in the market. They thought they would make 100 percent profit, like they did in 2007 and 2008 when the land price doubled and tripled. In four or five years, most of these groups will disappear and the real professionals will stay in business. But our price is never affected by what is happening because it’s a family business with no partners, so we are flexible with the prices and deals to keep our cash flow appropriate for construction. 

There seems to be a consensus that prices in Beirut reached a plateau this year after reaching their peak. What will happen next?

CS: Prices will not go up, there [will be] stagnation for a few years, and that’s better for the market. There is no sense of prices increasing when people can’t afford it. $5,000 [per sq/m] is the price in the middle of the Golden Triangle for a building with top facilities. But in an average building where there is no pool and no visitor parking, the first floor should be $4,000 per sqm, not $5,000 per sqm. 

Some people say that high towers shed the architectural flavor of Ashrafieh. What is your response?

JS: The trend now is towers. It’s dense vertically but it gives a lot of green space and open areas on the ground level. On the other hand we build these towers green and provide the best energy-efficient technology to make them highly sustainable. 

Is the term “Green” overused among Lebanese developers?

CS: A lot of people [developers] call the building “green” even though they only use solar energy to heat water. 

What future projects are on your radar?

JS: We are working on a property in Batroun waterfront where we may build a resort with villas for sale or rent.

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Comment

Why the government is paralyzed

by Sami Halabi
written by Sami Halabi

How many Lebanese members of Parliament does it take to make a mockery of the people they supposedly represent? At most 128 (the number in parliament), but it usually takes only two: one to propose and the other to oppose. When that happens, the country’s carpenters’ ears perk up, knowing that they will soon be called to build larger drawers in which to stuff heaps of new parliamentary committee minutes. 

As I write this piece there are about 340 laws waiting to be discussed and passed by the various parliamentary committees and subcommittees, only to reach the desk of one man who will decide upon the country’s legislative fate: Parliament Speaker Nabih Berri. This year Berri will celebrate 20 years as the headmaster of the playground that is the house of Parliament. Regardless of what one thinks about his politics, his all-too-familiar snapping voice from atop the pedestal in Parliament seems to be the only thing the children below fear. 

While MPs are busy calling each other ‘dogs’ or comparing their compatriot’s respectability to that of their shoe, they still salivate over 10 seconds of Berri’s time to advance their particular piece of draft legislation and move it up his infamous list of priorities.  With such a backlog, one would think Parliament meets quite often in order to get through its to-do list. But since committee meetings are held in secret, it is little wonder that all contentious issues are sent to them to be ‘studied’. 

A walk past the empty and locked offices of Parliament shows how much our honorable MPs are slaving over the laws being thrown their way. Again to the carpenters’ delight, many of the 340-odd pieces of legislation are different drafts of the same law, proposed by a different MP or member of cabinet. The fact that the executive branch of government is even permitted to mingle in the affairs of the legislature is already an overt aberration of the constitution — which no one feels the urgency to apply anyhow. 

The constitutional deadline for passing a budget into law will expire at the end of last month, exactly when the ministers involved will take their annual vacation. MPs too will take some time off, which are the only date in their calendar that seems set, given that Parliament still does not have a yearly work-plan. Even if the budget proposal is approved by cabinet and reaches the newly renovated Parliament building, do not assume its halls will be bustling with activity. More often than not committee meetings, not to mention sittings of Parliament, fail to meet quorum. 

One of the few things Parliament did actually reach last month was its Internet quota, temporarily crashing the government’s online access. That may seem surprising, given that of 400-odd staff in Parliament it seems not one has the ability to digitize the content that their own institution produces — instead that is the task of a private company paid with public money. 

By the time anything gets done in Parliament it is almost always too little, too late; not that it matters anyway. There is little point in passing laws, given that ministers choose when to apply them, and when to issue their notorious ‘implementation decrees’. This executive cop-out makes certain a non-elected cabinet, controlled by the country’s sectarian overlords, maintains real control. What it also means is that MPs can focus on their private businesses until they are asked to rubber stamp an agreed-upon text in Parliament. On the way out the door, they can also collect their salaries — something they, and their children, will do for the rest of their lives. 

In such a state of affairs, it is little wonder that the institution that is meant to represent our democracy has become nothing less than a dysfunctional dictatorship. And now that the issue of the Special Tribunal for Lebanon’s funding is over, the parliamentary electoral law is likely to be tossed around in the media by politicians as their next ‘crisis’. But for the people who live in this country, where real incomes are falling and basic public services are lacking, the real crisis is that whatever the next electoral law or the next votes cast, the result will likely be the same: a body whose sole function is to give a vote of confidence to a non-elected cabinet. 

SAMI HALABI is EXECUTIVE’s Economics & Policy editor

* This article was changed to reflect the fact that the budget deadline passed last month.

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Society

Marvels, made to measure

by Ellen Hardy
written by Ellen Hardy

Expensive tastes are exclusive ones — why spend thousands on an identikit interior when your home can be one-of-a-kind? But beyond the diamond-encrusted couches and Arabic-embroidered rugs hand-woven to order by Nepalese craftsmen, the trend for tailor-made interiors opens up exciting possibilities in design and enterprise. Executive takes a tour of some of Beirut’s creative companies in the business of fulfilling dreams clients didn’t even know they had.

“I don’t like the word creativity,” says architect and designer Karim Bekdache, sounding at odds with the sun-filled furniture showroom behind him, crammed with mesmerizing concoctions in wood, glass and steel. “I think [design] should answer a real need, and then it can be completely wild and you can call it creative, or it can be completely invisible — but for me, creating something completely invisible or completely wild is the same.” Trained in France and working mostly in Lebanon and Europe, Bekdache does not worry about imposing a particular architectural signature on a project. Being at the top of your game as an architect or designer isn’t just about the ‘wow’ factor. As luxury consumers globally are cutting back on flash statements in favor of projects with personal meaning, Bekdache seeks a sort of synthesis where clients, if the process goes well, feel that they are the ones who defined the work. 

Bekdache gives the example of a project in Gemmayze whose owner was making the move from the mountains to Beirut. Based on this background, Bekdache commissioned the famous French botanist Patrick Blanc to create a vertical interior ‘green wall’ inside the property, a self-sustaining structure made entirely of plants and mosses. “It’s about installing something in the house that gives meaning,” he explains. Then, “there’s an inside relation between the client and the house.” Horrified by the spectacle of so many design catalogues of endless, stultifying choices, Bekdache has learned to bypass the books and magazines predicting the latest trend. “This is the meaning of modern for me,” he concludes. “Not to imitate, but to keep on going, further than you did the last time.”

Let there be light

When it comes to local companies who can realize unconventional visions, Bekdache has high praise for lighting design and manufacture firm .PSLAB. He describes their approach as “very very courageous and daring. It’s incredible… they throw away all the catalogues of all the possible spotlights in the world, and then you come to them and say ‘I need a light for this space,’ and sometimes they really get beyond this stuff and start telling you how the architecture should be.” .PSLAB, unlike any other lighting company in the region, design and manufacture all their products in-house, giving them total control of their exclusive ‘haute couture’ approach. For them, the specifics of a given space define the lighting, rather than the lighting imposing a mood on the space. Their contemporary, industrial chic products are crafted by teams of in-house artisans and never re-used on the same market; an approach that has won them devotees as far apart as Parisian design darling India Mahdavi and Beiruti architectural rock star Bernard Khoury.

.PSLAB compare themselves to a five-star hotel, where the customer’s needs define their experiences and where each experience can be completely different. This synthesis of forward-thinking design, controlled production and sophisticated client relations is a complete service that puts .PSLAB ahead, not just of other lighting companies, but also of many other ‘bespoke’ design services.  

High-class problems

High-end, high budget projects will often involve an unusual attention to structure and detailing. Architects like Bekdache might lower a ceiling or find a way around an awkward hallway, which ultimately will increase the value of a property that has been sculpted into its best possible form. But there are some challenges that need the expertise of master designers and craftsmen — a niche demand that Karim Chaya and his partner Raed Abillama stumbled upon in 1997 when they began the projects that led to their company Acid, specializing in architectural detailing. Chaya, who jokes that the team are “detail nerds,” explains: “We started becoming known as the ‘mission impossible’ company — whenever there was something difficult, strange, unresolved, out of a dream, they would come to us, a company that will take the headache out of [it].” From staircases, to lifts, to made-to-order wall cladding (such as in the new Downtown café, Grid, that glows pink and gold from sets of copper mesh screens imported from Turkey), Acid have built their reputation on “quality and sensibility above all,” an uncompromising stance that brooks no opposition over the amount of time it takes to do a thing properly — principles that have landed them commercial projects like Lanvin and Joseph boutiques worldwide.

The artisanal skills that Acid often relies on originate in the “back alleys in Bourj Hammoud,” of which Chaya says “the most valuable thing that I have acquired since we started is that network. Good people we can work with and who have the same ideas.” Far from throwing out the skills of generations of craftsmen, Acid is one of the companies keeping them in business, playing an intermediary role between the metal smiths, carpenters and leather workers and the off-the-wall requirements of high-end clients. 

The business of bespoke

A more classical approach to customized interiors offers clients the opportunity to have total control of the design of luxury items — a methodology that is revolutionizing some local businesses. Opened a year ago in Ashrafieh, the United Kingdom’s Rug Company has developed a bespoke service that complements its already elite range of rug designs created by the likes of Vivienne Westwood and Alexander McQueen. Existing designs can be adapted in myriad ways, while the customer controls the colors and the silk content of the weaves, which range from around $500 to $3500 per square meter. But the premium service sees clients designing their own patterns, such as their name in Arabic calligraphy, which are then tried and tested on screen before being sent to Nepal, where teams of expert weavers take up to a year to produce the finished product.

Serge Nalbandian of Nalbandian Textiles offers similar services, having personalized rugs for Elie Saab and had his Tibetan weavers produce a pop art Superman number. He has also redesigned his family business around customization, with the company abandoning its history of trading antique Persian carpets and preferring to give clients what they want — pieces for the home that are about immediate pleasure, without re-saleable value.

“What I got from my father as a heritage… we changed completely,” he says. “Instead of accumulating more stock from all over the world, we did the contrary. What the customer needs, we can provide him with.” The new year will see a giant state-of-the-art screen installed at Nalbandian for the sole purpose of giving clients a multimedia customization experience. “There is no longer a way of investing in your decoration as an heirloom,” says Nalbandian. “It fits in your house, you live with it for the time that you’re enjoying it and this is it.”

Extreme dreams 

Enjoying the moment can take many forms. “I’ll be the executor of your dreams,” smiles Vick Vanlian — and he should know, being responsible for creations including a diamond-strewn sofa. Like Serge Nalbandian, he developed his family business, Galerie Vanlian, in response to customer demand for the high-end customized items that now make up 50 percent of his business. This led to Envy, his three-floor Downtown boutique — a mind-boggling collection where there isn’t one object that doesn’t glitter or gleam or clamor for attention. Vanlian is aware of his celebrity cachet as a successful and distinctive young designer; a further gloss on custom projects, which always bear his characteristic signature.

As such, Vanlian excels at realizing flamboyant visions, from a ‘famous singer’ who requested a room designed around 150 pictures of herself, to a Saudi prince’s pleasure chamber. Working through an intermediary, Vanlian received instructions for it. “[The client] called it the massage room, but it was the sex room… it had a round bed in the middle with four stages on each corner, with dancing poles and big screens and in the middle a big cage that could come up and down… nicely put together for a porn movie, basically.” There will always be mileage — and a lot of fun — in being known for making any dream come true.

Made in Lebanon

None of these dreams come cheap, of course. Maria Halios started her own furniture gallery in Mar Mikhael last year, producing limited edition and bespoke pieces, after demand for customization necessitated her own working space. She points to a pair of hoop-like metal sculptures with finely textured surfaces. “Imagine that I have to do them a centimeter smaller,” she says. “Molds are required. Each mold costs a fortune and because you cannot have the same dimensions in another house, you basically throw the mold in the garbage. So you invest in a mold that is supposed to produce a hundred pieces, just for one piece — the cost is huge.” The cost of a dining table can jump from $5,000 to $15,000 if you want to be sure no one else has it. 

Yet these are the prices you have to pay to keep ahead of the neighbors — a popular pastime in a high society as small as Lebanon’s. But Lebanon is also an exciting hub of creative talent with a distinct price advantage over Europe. Halios, like most of the companies mentioned here, works with clients overseas who are happy to undercut designers offering similar services in more developed markets.

Yet aside from the business of pursuing the most exclusive clients around, a genuine commitment to originality at all costs is at the heart of these projects. Halios fingers an origami-like paper maquette, the first stage in creating an intricate table of angular interlocking pieces. “I never imagined the beauty that could come from a mock-up like this,” she says. “It’s not easy because when you have custom-made designs you have to create all the time. It’s not like you create two collections a year and then you forget about it.” 

Far from a cynical exploitation of the fantasies of the super-rich, these companies are challenging themselves, and the industry as a whole, to keep evolving the practice of made to measure design.

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Economics & Policy

The downside of uprising

by Youssef Zbib
written by Youssef Zbib

When you walk into Al Haidari sweet shop in Khaldeh, 20 kilometers south of Beirut, employees will greet you with a smile and free baklawa, but the forced cheer belies a grimmer reality.

“We have 70 employees in our branch in Syria, but we had to make up for the huge losses we’ve suffered; this is why we opened this branch [in September 2011],” said Wassim Haidar Ahmad, owner of the shop, who declined to disclose figures about his losses. 

For 13 years Ahmad’s first sweet shop, in a small shopping center that included a pharmacy and supermarket only a few meters away from the Syrian checkpoint at Jdeidet Yabous–Masnaa, acted as the final stop for Lebanese travelers on their way back from Damascus. Since the start of the uprising in Syria last year, however, businesses like Ahmad’s that rely on the flow of passengers between Syria and Lebanon have suffered, with those in favor of the regime and those against both hit equally hard. 

Lebanese General Security failed to provide official data, but other business owners confirmed Ahmad’s claims of a sharp drop in the number of passengers and vehicles crossing the Syrian border.

“Business has been a disaster,” said Ghassan, owner of Sunrise supermarket and currency exchange office in Chtaura. Travelers usually make a stop in this town in the Bekaa to exchange money and fill out forms before driving the last half hour to Masnaa.

“Look at the square; on a day like today [Saturday] it should have been packed. Shop owners and families used to visit Damascus every weekend to get their supplies,” added Ghassan. “But since the start of the events in Syria people have been scared to go there, and prices of [Syrian-made] commodities are not that cheap anymore.”

Exchange of commodities between the two neighboring countries has suffered, but varied depending  on the border crossing according to data for the first three quarters of 2011 disclosed by the Lebanese customs directorate. The value of imports coming in through Masnaa on the international road between Damascus and Beirut decreased only 4 percent year-on-year, but the amount going through Qaa, which links the Bekaa to the turbulent Syrian city of Homs, has dropped by 44 percent. Other border crossings have seen minimal change: imports through the northern access point of Abboudieh decreased in value by 1 percent in comparison to figures from 2010, while the northern border point of Arida actually saw a 2 percent increase in imports year-on-year. Lebanese customs, which totaled LL2,207 billion [$1.47 billion] during the first three quarters of 2010, dropped to LL1,707 billion [$1.14 billion] year-on-year for the first three quarters of 2011, marking a loss of 22.4 percent. 

During the same period exports to Syria also fell, as their total value dropped 10 percent year-on-year. While the value of exports through Masnaa increased 2 percent, exports through Abboudieh, Arida and Kaa decreased 6 percent, 35 percent and 23 percent, respectively, according to Lebanese customs data.

Taxi blues 

Merchants and industrialists have not been the only ones to suffer from the crisis. A visit to Charles Helou taxi and bus station in Beirut, the main point of departure to Syria, helps explain why business has been slow near the border.  Customerless taxi drivers aimlessly pacing the sidewalk or playing cards have become a common sight. Mohammad Suleiman drives a fifteen-passenger minibus to Homs. When asked about his business, he said without hesitation: “You can see for yourself — zero.” 

“Lebanese passengers have been reluctant to travel to Syria since [Prime Minister Rafiq] Hariri’s assassination [in February 2005],” added Suleiman, in reference to the political tension that followed accusations of Syrian involvement in the killing. “But since the start of the events in Syria, I have barely had any Lebanese passengers at all.”

Guiragos Hagopian of Zeitouni Tour, which operates a shuttle service between Beirut and Aleppo, agreed that road travel to Syria has been hit because of the lack of Lebanese passengers. Three drivers who operate taxis between Beirut and Damascus, who spoke on condition of anonymity, gave similar testimonies. They all concurred that their weekly trips to the Syrian capital have dropped by more than half since the start of the turmoil. One of them admitted that business during June, July and August, usually the peak season, was “dead”. 

“Whereas [before] I was able to arrange trips for my brothers and cousins, who are also taxi drivers, now I can barely find any for myself,” he added.  

An employee at a small taxi company in Beirut, who also wished to remain anonymous, gave a more positive account; he mentioned that the number of trips to Damascus and Jordan that his company organizes has not changed. Trips to Jordan travel through the province of Daraa, the first area to witness anti-regime protests in Syria. He admitted, however, that trips to Homs, the city in northern Syria that continues to witness intense demonstrations and military clashes, have dropped from six to two per day since October 2011.  But the change in the number of passengers has not affected the cost of travel since last year, according to several drivers who said that rising fuel costs prohibit them from bringing prices down. The fee-per-passenger in a sedan taxi from Beirut to Damascus still ranges between LL22,000 [$14.67] and LL25,000 [$16.67]. Similarly, a bus ticket from Beirut to Aleppo still averages LL20,000 [$13.33], according to Hagopian from Zeitouni Tour.

What road ahead

As Executive went to print, the situation in Syria had shown little sign of improvement, with satellite channels continuing to report daily killings in Homs, the countryside surrounding Damascus and elsewhere.  Until the situation on the ground is resolved, the taxi drivers, the shops and small businesses along their routes between Lebanon and Syria and the industrialists that depend on the flow of commerce between the two countries are unlikely to see their fortunes improve. The Lebanese press also reported that cargo shipments coming from Turkey have been delayed at the Turkish-Syrian border, causing them to take up to 10 days to reach Lebanon, compared to only three to four before the crisis started. This has forced some Lebanese traders to import Turkish-made commodities by air rather than overland, spiking transportation costs from $3.50 to $7.50 per kilogram. Ziad Bikdash, vice-president of the Association of Lebanese Industrialists, expressed his fear over what will happen to Lebanese exports if the crisis in Syria persists. 

“The roads [to Syria] are still clear, but many shipments through Syria have been delayed and we’re scared that merchants in Arab countries would eventually stop importing Lebanese goods,” he said. He added that bypassing Syria through maritime transport might raise shipping fees from something between one and a half to three times the original cost. 

“We’re trying to set up new markets in Europe, but we need the Ministry of Foreign Affairs to step in and appoint competent commercial attachés in each of our embassies there,” said Bikdash, though given the state of Lebanese bureaucracy, he doubts it will be able to come up with a cure to the loss of Syrian access any time soon.

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Society

Executive Insight – S2C

by Ramsay G. Najjar, Zeina Loutfi & Rany Kassab
written by Ramsay G. Najjar, Zeina Loutfi & Rany Kassab

Flying insults, throwing water, swinging chairs — spectacles more befitting a wrestling match or an episode of Jerry Springer than a political talk show.

While arguably no longer a novelty, the scene that unfolded live in front of thousands of viewers on a Lebanese television channel is symptomatic of the level of discourse (or lack of it) between politicians, not only in Lebanon but across the region as well. Indeed, a similar fistfight erupted on Jordanian television in the same week over opposing views regarding the situation in Syria.

In developed countries around the world, such behavior would almost certainly have ended their careers or relegated them to secondary roles. The fact that the two feuding Lebanese politicians were lauded (or at least not condemned) by many of their peers and a significant segment of the population shows how far the country is from reaching political maturity. It is time to redefine the attitude and conduct expected from elected officials and reassess the relationship between elected officials and their constituents.

Undoubtedly, scuffles breaking out in Parliament or between politicians are not limited to our part of the world. However, they do reflect the lack of substance and content in the discourse of our leaders, who try to overcome or compensate for shortcomings by appealing to the primal instincts, emotions and insecurities of their audience, playing on religious, ethnic or socio-cultural sensitivities, erupting in fits of anger as a means of projecting strength and establishing presence. 

The fact that politicians who remain poised and rational in communicating with their public are often perceived or portrayed as weak or unfitting for leadership is yet another testament to our skewed understanding of the role of a political figurehead, and the entrenched culture of revering the mighty but not necessarily the righteous. 

Furthermore, the often patronizing approach and tone of voice used by politicians in the region in communicating with the public is indicative of how broken our system is. There is a need for a complete overhaul in mentalities if we are to become a state where power is truly in the hands of the people.

Examples abound of the disequilibrium in the relationship between citizens and elected officials, becoming similar to that of employer/employee or even master/slave. While this comparison might seem particularly harsh, it remains true when considering that politicians seldom feel the need for transparency, making decisions and taking stands on matters without reverting back to their constituents or sharing relevant information with them, while expecting them to follow blindly.

Prior to the year-end holidays, members of the Lebanese government publicly stated that they were offering citizens a “gift” in the form of an increase in the minimum wage. Though intended as a humorous analogy, this choice of words reflects the condescending attitude of politicians vis-à-vis their electorate, whereby they depict what is arguably an earned right as an act of charity or a favor for which they expect appreciation and applause.

Accepting the norm

Yet the root of the problem lies elsewhere. It is the lack of understanding of the concepts of accountability and citizenship that encourage and perpetuate such a prevailing culture, in which politicians sometimes act God-like and expect unwavering loyalty and support, often offering nothing in return except a false sense of security or the occasional monetary or material reward.

But the state in which we find ourselves cannot only be attributed to the mindset or behavior of politicians, as we citizens are equally at fault, content with the status quo and refusing to actively work to change the equation, whether out of despair or because of personal interests.

Breaking what has become the norm requires establishing a new social contract that clearly defines the rights and responsibilities of citizens and the role and duties of elected officials. 

While a long overdue process, achieving this requires a concerted effort on educational and communication levels as a pre-requisite to raising public awareness of what citizenship entails. This, in turn, will begin to change mentalities and eventually lead to change on the ground.

Such a collegial and collective exercise will only bear fruit and allow us to celebrate our democracy, in practice and not in theory, once we admit that the system is broken and needs fundamental surgery, rather than a cosmetic makeover. 

Today, politicians are debating Lebanon’s parliamentary election law, with different parties proposing varying systems — ranging from proportional representation on one end of the spectrum to majority rule on the other. Though of key importance, the law will still amount to a band-aid rather than a vaccine unless mentalities change and voters realize the importance of the election process and the difference between casting a vote and electing a representative. 

The difference is similar to a one-night encounter and a committed marriage; in the former both parties go their own separate ways after the deed is done, whereas in the latter both are accountable to one another as long as the marriage lasts.

To this effect, as part of communicating to the public the new election law, the government and civil society organizations have a duty to educate voters on the meaning and importance of carrying out their civic duty of electing their representatives in a responsible manner. It must be explained that democracy can be a potent remedy against the practice of bribery and buying votes.

It remains that if we are to ensure that the Arab uprisings do not turn into recurring or perpetual unrest, politicians in the region have to realize that they can no longer afford to talk down to their constituents, while the latter also need to play their part in keeping their elected officials in check, holding them accountable for their promises and sanctioning them whenever they stray from their roles and responsibilities.

 

March 14 Saad Hariri, Lebanon’s former Prime Minister

 

 

The killer is Bashar Hafez El Assad

Fares Souaid, March 14 General-Secretariat Coordinator

 

 

Antoine Haddad, Democratic Renewal Movement

 

Samy Gemayel, Phalange Party

 

March 8 Michel Sleiman, Lebanese president:

 

I am with you… I am with you… I am with you… I am with dignity I am with sovereignty

Ibrahim Kanaan, Member of parliament and Secretary general of Michel Aoun’s Change and Reform Bloc:

 

Part of the contradictory and successive stances taken yesterday and today against the army remind of the book by Gérard de Cortanze, “L’Eloge du mensonge” (The praise of lies)

Nicolas Sehnaoui, Minister of Telecommunications

 

Najib Mikati, Prime Minister

 

And the rest… Rima Maktabi, Lebanese TV presenter

 

Nemr Abou Nassar, Lebanese comedian

 

Nadim Koteich, talk show host

 

Listen to the “Najib” (also meaning wise in Arabic)… The only sentence that occurs to me today… Shut up Najib…

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