Executive Magazine

Marvels, made to measure

by Executive Editors January 6, 2012

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.

January 6, 2012 0 comments

Economics & Policy

Avoiding collateral damage

by Sami Halabi January 5, 2012

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

January 5, 2012 0 comments

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Schooling Lebanon’s police

by Nicholas Blanford January 3, 2012

written by Nicholas Blanford

How many times have you sat in a traffic snarl at a road junction in Beirut while a policeman who should be coordinating a free flow of vehicles leans against a dysfunctional traffic light, puffing on a cigarette and chatting to his girlfriend on his cell phone? Well, with a little luck that scenario could soon be a thing of the past if the Internal Security Forces (ISF) chooses to properly implement a newly introduced code of conduct. The little blue book, which is now required reading for everyone in the ISF, explains the obligations and ethical standards to be followed by all policemen. Written in English and Arabic, it includes subject headings such as professional duty, honesty and integrity, impartiality and discipline.

The code of conduct emanates from the United Kingdom and arose from a strategic overview of the needs of the ISF, conducted in 2008. Since the departure of the Syrian army from Lebanon in 2005, Western nations have taken an interest in providing assistance to the Lebanese security services. But, according to diplomatic sources, too much emphasis was initially placed on providing equipment and training on an ad hoc basis, often without coordination among donor countries. For example, the United Arab Emirates stepped in to build new police stations around the country, but the design was that of a private house or villa rather than a functional and secure base to receive and handle prisoners, interrogate suspects and conduct police work, according to the sources. How are you supposed to question a suspect if you have to take them upstairs to a bedroom office? The ISF should have been in a position of making requests to donor countries for specific assistance, rather than simply accepting whatever was given to them.

“The ISF leadership needs to tell donors what they need for the coming three years, so that the ISF can receive specific training and support for the priorities it has developed,” said a diplomatic source familiar with the code of conduct initiative. After conducting a private poll on public attitudes toward the ISF, the British embassy decided to sponsor a project drawing up a new code of conduct to address issues of accountability, internal discipline and professionalism. The aim is to provide a bedrock, if you will, on which physical equipment and training can be properly utilized. The ISF apparently took some time to absorb the importance of the code of conduct but have now embraced it, with senior figures indicating they intend to ensure it is followed through.

Among the possible future changes we could see in the ISF will be proper identity cards carried by the police and identity numbers worn on uniforms. At present, if someone is mistreated by a policeman, the person cannot register a proper complaint because the policeman’s identity is unknown. The ISF’s uniforms may also be replaced to decrease the military appearance of the current mottled blue-gray camouflage pattern. The M-16 and AK-47 rifles usually carried by the ISF could be swapped for automatic pistols, with the larger weapons held out of sight for emergencies. The number of women police officers is set to increase as well and there is talk of instituting a ‘bobby on the beat’ system, similar to the old British tradition of assigning a policemen to patrol allocated neighborhoods on foot to develop personal relationships and trust with the local community.

Still, changing the way the police force operates requires a cultural shift, not just recommendations in a book. The machinery of Lebanon is lubricated by wasta (or connections), a sadly essential commodity that ensures things get done. But there will be no room for wasta to evade paying parking tickets or other illegal indiscretions if the little blue book is followed to the letter. The police will also have to adopt a proper public complaints system and develop a much sharper internal discipline system. There can be no more appeals to one’s zaim [sectarian leader] to escape disciplinary measures.

It is unquestionably a tall challenge. But the architects of the code of conduct program hope that the recommendations of the little blue book will gradually take hold within the ISF.

NICHOLAS BLANFORD is a Beirut-based correspondent for The Christian Science Monitor and The Times of London and author of “Warriors of God: Inside Hezbollah’s Thirty-Year Struggle Against Israel.”

January 3, 2012 0 comments

Society

Red Alert

by Nadim Mehanna January 3, 2012

written by Nadim Mehanna

Somewhere in a scarlet Ferrari factory in downtown Maranello, Italy, there are some very smug engineers. Every year the luxury sports car brand unveils a raft of gleaming new models, launching technological breakthroughs that demonstrate the continued development of a much-loved marque and opening up yet more purchasing possibilities… And so now to the Ferrari 458 Spider, unveiled in 2011 at the 64th Frankfurt International Motor Show. The mid-rear engine V8 super car is a world first, featuring as it does a cabriolet roof without compromising the performance of a coupé, thanks to a fully retractable aluminum hard top roof and ultra-sophisticated engineering. By pushing the Ferrari frame ever further, the Spider is an invitation to drivers to combine luxurious, carefree lifestyles with some seriously sporty, aggressive driving that soft-top technology cannot support — a disappointment for some who already invested in the straightforward Italia coupé.

Stripping down from coupé to cabriolet in just 14 seconds, the Spider’s roof is 25kg lighter than a traditional soft-top, and is both quieter and more thermally efficient when closed. There has been no compromise on aerodynamics – the roof adds only 45 kg on the coupé and occupies just 99 liters of space, less than a soft-top. Sliding under a dramatic pair of buttresses behind the seats, the roof’s pieces flip 180 degrees and pile on top of each other, leaving plenty of luggage space.

The buttresses also channel air toward the grilles on the engine cover, maximizing the flow to the intakes, the clutch and gearbox oil radiators, as well as protecting driver and passenger if the car rolls over. The roof also brings the driver closer to that famous Ferrari sound, roaring out through 570 horsepower at 9,000 revs per minute (rpm), accelerating up to 320 kilometers an hour (km/h). The rear window can also be fully opened to enjoy the sound in coupé mode, and the same ‘window’ is an adjustable electric wind deflector positioned between the buttresses, ensuring efficient aerodynamics and reducing buffeting, enabling normal conversation even at speeds as high as 200 km/h.

Under the hood, the Spider has everything in common with the earlier 458 Italia model, and delivers the same performance despite the technological challenges presented by the roof. Though no longer displayed under a glass engine cover due to safety reasons, the Spider is powered by Ferrari’s 2011 International Engine of the Year. Developed by F1 engineers, the naturally-aspirated direct-injection 4.5-liter V8 engine sprints from 0 to 100 km/h in 3.4 seconds and from 0 to 200 km/h in 10.8 seconds. Ferrari also modified the throttle mapping and suspension tuning to accommodate the cabriolet form, and it is only traveling over very poor roads (like Lebanon’s, sadly) that the driver can feel a mild tremble in the chassis and some vibrations through the windscreen pillars.

While the Spider is proving Ferrari’s ability to forge ahead, the brand is also giving clients the opportunity to add some old-world style to their luxury. The new ‘Tailor-made’ program harks back to the glamour of choice offered to clients in the 1950s and 60s. Exclusive personal designers can customize models with a wide range of cloth trims, colors, finishes and technical materials within the Classica, Scuderia and Inedita collections, giving Ferrari fanatics worldwide the chance to put their own mark on a brand that’s staying ahead of the game.

NADIM MEHANNA is an automotive engineer and the pioneer of motoring on Middle Eastern television since 1992

January 3, 2012 0 comments

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Getting Syria back to work

by Jihad Yazigi January 3, 2012

written by Jihad Yazigi

The Syrian government’s admission in early December that the actual rate of unemployment in the country was anywhere between 22 percent and 30 percent testifies to the depth of the social crisis the society has gone through in the last three decades. The new estimates, provided by Radwan Habib, the minister of labor and social affairs, are at least twice the previously acknowledged rate of 11 percent. According to Habib, the new findings are the result of a field survey conducted by his administration. The fact that the range is so wide — from 22 to 30 percent— raises questions on the quality of the survey, but there is little doubt that the new figures are a more accurate reflection of the situation in the job market than the previous data based on the number of people registered with job offices. According to most analysts, the Syrian economy needs to be growing by 7 to 8 percent a year for its unemployment level to stabilize. This very high threshold is a consequence of the rise in productivity and in the size of the workforce, which increases on average by 3.5 percent every year. People entering the job market today were born 20 years ago, when the population growth rate stood at above 3 percent. Meanwhile, female participation in business activity is also on the rise and increases the number of people seeking to enter the job market – currently estimated at around 200,000 per year.

Indeed, since the early 1980s Syria’s gross domestic product (GDP) has almost never been sufficient to accommodate its expanding workforce. Put another way, Syria has witnessed almost 30 consecutive years of unemployment growth. The challenge before the government — the current one or any forthcoming one — is therefore huge: How to create the conditions for the economy to grow fast enough to meet the demand for jobs.

One solution to the problem would be to focus not only on the level of growth but on its quality, on how to attract investment in the sectors of activity that are most labor-intensive and potentially generate the most added value, such as agriculture and manufacturing.

This new policy would represent a shift from the priorities of recent years, when Syria’s decision-makers focused on trade liberalization and the development of the services industry. Indeed, finance, tourism, trade and transport, in addition to real estate, have been the main engines of growth in the last few years. Although Syria has much to gain from a strengthening of its services sector, the neglect of farming and industry has cost it dearly in terms of employment, and prevented it from building a strong production base. A lot has already been written on the catastrophic performance of the Syrian agricultural sector, which suffered from several consecutive years of drought starting in 2007 and from poor policy-making decisions, including a steep increase in the price of agricultural inputs when farmers were most in need of help.

The consequence of all this has been to force tens of thousands of farmers from their ancestral lands and to reduce the contribution of the sector from around 25 percent of GDP to 19 percent in less than a decade. Free trade agreements with Turkey and the Arab world, as well as a general reduction in custom tariffs, have also led to an ‘invasion’ of foreign-made products that put countless industrial plants and workshops out of business and consequently thousands of people out of their jobs. The textile sector, one of the most labor-intensive industries, has been particularly hit by the lifting of the ban on garment imports.

The resolution of this predicament is obviously not only an economic or social issue for the government but it is also political. Unsurprisingly, many of the protests taking place across the country since March 2011 are occurring in the areas most hit by poverty and neglect, such as Daraa, located at the center of an agricultural plateau in the south of the country, and the poverty belt around Damascus.

There must be no illusions. A happy end to the current protest movement, including the establishment of a democratic political system, will not mean an end to Syria’s economic woes. Syrians must recognize the tremendous challenges ahead and adopt a new economic development strategy that puts employment at its center.

JIHAD YAZIGI is editor-in-chief of The Syria Report

* This following sentence was changed from the print edition: "Meanwhile, female participation in business activity is also on the rise and increases the number of people seeking to enter the job market – currently estimated at around 200,000 per year." We regret the error.

January 3, 2012 0 comments

Society

Discovering Armenia’s palate

by Ellen Hardy January 3, 2012

written by Ellen Hardy

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 restauranteurs.

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.”

January 3, 2012 0 comments

Comment

A Salafist surprise

by Jonathan Wright January 3, 2012

written by Jonathan Wright

There’s nothing like free and fair elections for finding out what people really think, and the big surprise of the Egyptian elections, the first since the overthrow of President Hosni Mubarak last February, has been the strong level of public support for the Muslim Salafist movement, the conservatives whose overwhelming priority is to emulate the behavior of the Prophet Muhammad and his seventh century companions. Ironically, most of the outsiders who predicted the Salafist gains were Islamophobic Americans and Europeans who based their expectations on visceral disdain for the judgment of Egyptian voters, rather than on any knowledge of the country. Those closer to the electoral battlefield, on the other hand, including Egyptian political scientists and pundits, expected the Salafists to win only about 10 percent of the vote. After the first of three rounds of voting, the Nour Party alone, the most successful of the Salafist groups, had taken more than 24 percent, in second place behind the Muslim Brotherhood but well ahead of any liberal-secular group. The political scientists have some excuses: psephology, the science of elections, is in its infancy in Egypt and the rest of the Middle East, along with the related sciences of opinion polling and market surveying. Besides, in a society where speaking one’s mind in public could be unwise, whatever polling did take place was liable to misrepresent reality.

Journalists and proto-psephologists have come up with a variety of reasons why the Salafists have proven so unexpectedly popular. One of the most promising lines of enquiry is that the Salafist sympathizers have been there all along, at about the weight suggested in the elections, but they took a tactical decision many years ago not to take part in the political process. Researcher Nathan Field notes that in work he did on television viewing in Egypt in 2008, Salafist stations were clearly drawing higher ratings than any others but no channels existed for this preference to find political expression.

With the collapse of the old regime, the Salafists made a sudden and concerted switch into political activist mode, taking advantage of new networks to meet and discuss topics such as Muslim orthopraxy in everyday life. Anecdotal evidence from individual Salafist voters corroborates this theory, though some of them have said they cooperated with and voted for the Muslim Brotherhood, for want of a better alternative, in previous elections. Salafist voters have also emphasized their personal acquaintanceship with the candidates they favor, suggesting a well-established social nexus at the local level. Another explanation is that politics in Egypt, as in many developing countries, has always been skewed toward the urban elite to the disadvantage of the rural poor, many of whom are illiterate and disengaged from central government. Under the Mubarak regime, the rural poor could easily be persuaded, bribed, coerced or intimidated into voting for the ruling party, but in 2011, with the field wide open and no guidance from authorities, they turned to those they knew and trusted. At some polling stations in the countryside, whole neighborhoods appeared to be voting for the Nour Party, but without any overt regimentation by the party’s operatives. The Salafists’ opponents and detractors have attributed the success of the Nour Party to large injections of Saudi cash, both to run its campaigns and to finance hand-outs of basic foodstuffs to the poor — a common electoral practice by many candidates. Newspapers say the ruling military council has collected details of all foreign payments that might have helped political parties or candidates, but until they release them it is hard to assess the impact. Field’s research quotes Jamal Khashoggi, a journalist close to the Saudi government, as saying the Saudis are not in the business of encouraging other Islamist alternatives, so it is hard to see what they would gain from financing the Egyptian Salafists. Wikileaks evidence, on the other hand, suggests that the Saudi government has spread its largesse quite widely among Arab politicians, to keep them on its side.

The sudden switch from political quietism to a new role as the second largest group in parliament has not been a smooth one. Leading members of the Nour Party have sent enough mixed signals in recent weeks to seriously discredit most political movements in ordinary times — especially on alcohol, tourism, the economy and personal freedoms. But the party has struck a chord that no other group has touched, a chord that many did not even know existed.

JONATHAN WRIGHT is managing editor of Arab Media and Society

January 3, 2012 0 comments

Society

Finance for thought

by Paul Cochrane January 3, 2012

written by Paul Cochrane

In the years since the credit crisis erupted in 2007 there has been a steady flurry of economic and financial books published claiming to tackle the root causes of what some have dubbed ‘The New Great Depression’, offer alternatives to the current financial system or provide warnings of the inherent dangers still facing the world economy. With the beginning of a new year that has dark storm clouds still crackling with lightning and thunder over the global economy, Executive has selected four of the most thought-provoking economic books printed in the past year to prime the reader for the challenges ahead.

Debunking Economics

Revised and Expanded Edition: The Naked Emperor Dethroned?

A book by Steve Keen

‘Debunking Economics’ has been a critical and commercial success since it was published in 2001, largely due to Australian economist Steve Keen’s withering critique of the neo-classical economic theories that have dominated policy since the 1970s. His claims are also given more weight by the fact that he predicted the 2008 financial crisis well in advance.

In a newly revised edition, Keen hammers the point home that mainstream economists, as well as central bankers, deserve no credit for the boom years prior to the crash but should shoulder the blame for the crisis and its aftermath. Through a pioneering explanatory statistical model, Keen argues that classical economic thought has little to contribute to what is known as Reality Economics, which is more cause-and-effect than assumption based. He argues that the near hegemonic adoption of a narrow-minded approach to economics in academia, which is then carried into professional life, is at the core of the problem, with those supposed to be implementing a cure still theoretically blinkered, evident in counterproductive solutions such as bailing out the banks and quantitative easing.

Keen’s historical and economic analysis of what went wrong are worth delving into, yet it is his alternatives that will interest the reader mulling options to get us out of the current maelstrom. He proposes radical changes, such as reducing or wiping out private debt through a widespread amnesty and, heretical though it may sound, the temporary nationalization of the American financial system.

It is doubtful whether Keen’s voice will be heard amid the hullabaloo, particularly as the United States enters an election year; as John Maynard Keynes pertinently remarked in 1935: “The difficulty lies, not in the new ideas, but in escaping from the old ones.”

The Quest

Energy, Security and the Remaking of the Modern World

A book by Daniel Yergin

Daniel Yergin is renowned for his Pulitzer Prize-winning ‘The Prize’, which charted the rise of the world’s insatiable thirst for black gold as far as the first Gulf War in 1990. ‘The Quest’ picks up where he left off and ventures into the “Great Game” for energy following the break-up of the Soviet Union, the emergence of national oil companies from emerging markets like India and China and the dirty world of oil politics in the twenty-first century. He tackles the effects of the United States’ invasions of Afghanistan and Iraq on energy security and assesses the twisted reasons for the oil price spike between 2004 and 2008. As in ‘The Prize’, ‘The Quest’ shows why understanding the geopolitics of energy is essential to comprehending the world today, and where we may be going next. He discusses how new technologies and high oil prices are making previously untappable oil reserves accessible, although at significant environmental cost. Such ramped up output in the US, Canada and Brazil — each to some 3 million barrels per day by 2020 — could well change the ‘oil world order,’ particularly the West’s problematic reliance on the Middle East, he argues. And while Yergin is no believer in the ‘peak oil’ theory — arguably a flaw in his analysis — this does not stop him discussing at length the need for alternative energy sources, and how potentially disruptive technologies could be game changers in global politics and security.

Poor Economics

A Radical Rethinking of the Way to Fight Global Poverty

A book by Abhijit Banerjee and Esther Duflo

‘Poor Economics’ focuses not on Wall Street and the problems of the financial markets — the “1 percent” as the Occupy Wall Street protesters have labeled them — but rather the poorest of the world’s poor; not the three billion people that live on less than $2.50 a day but the billion surviving on less than a buck.

The focus is on how the poor respond to aid strategies, based on empirical research in 49 countries carried out over 15 years. What is radical about their work is that Abhijit Banerjee and Esther Duflo draw their findings from actually listening to and understanding the needs and behavior of the poor. Why, for instance, do people buy a TV and go hungry, or prioritize the education of one child over the rest of their offspring?

Moreover, their research is into what has worked in development economics and what has not: micro-finance is not the cure-all it is championed to be and higher rates of literacy and schooling do not necessarily equate to economic development and prosperity. As the inequality gap widens, addressing global poverty is a pressing issue for governments, development agencies and businesses. Banerjee and Duflo tell us where our attention needs to be, and it is no wonder their book won the Financial Times and Goldman Sachs Business Book of the Year Award for “the most compelling insight… into modern business issues.”

Currency Wars

The Making of the Next Global Crisis

A book by James Rickards

We are in the early stages of Currency War III, according to veteran financier James Rickards. The first currency war (CW) was between 1921-1936, and CW II took place from 1967, beginning in the lead up to the end of the gold standard in 1970 and culminating in the 1987 stock market crash.

Rickards argues that the United States has instigated CW III through the Federal Reserve’s quantitative easing policy — printing dollars to boost base money supply to get the economy out of recession. But by doing so, “the Fed has effectively declared currency war on the world” and the result is stagflation — stagnant growth and high inflation — and the world going deeper into financial crisis.

According to estimates, the US dollar comprises 61 percent of identified official foreign currency reserves, while the euro represents 26 percent. What happens to the dollar is of prime importance and the trends are worrying. The dollar’s position has declined from 71 percent in 2000, and stands to fall further as American power is challenged, confidence in the greenback weakens and more countries change their reserve currencies, as Russia and others have threatened to do.

Rickards uses possible scenarios — as played out at a Pentagon-organized financial war game — to highlight what a currency war entails and it is eyebrow-raising reading. The end result could be the dollar joining a crowd of multiple reserve currencies (MRCs), although all major currencies have recently devalued in parallel against gold, and in fact MRCs could exacerbate rather than alleviate the currency war. The other alternative is the International Monetary Fund pushes for greater adoption of its “world money”, Special Drawing Rights. The final possibility is the dollar will be “rejuvenated by gold or descend into chaos with both redemptive and terminal possibilities.”

Rickards suggests a return to the gold standard to retain stability, of money backed by something tangible, not paper or digits on a screen. Yet, however this currency war plays out Rickards warns that it “is the most meaningful struggle in the world today — the one struggle that determines the outcome of all others.”

January 3, 2012 0 comments

Comment

Bahrain’s colonial flashback

by Paul Cochrane January 3, 2012

written by Paul Cochrane

It is perhaps a cliché to say history repeats itself, yet this saying seems to have held true over the past year in the Middle East, particularly in Bahrain. Uprisings have happened before, and been successful or crushed through counter-revolutionary forces. But it is in behind-the-scenes developments that there really is a flashback to the past.

Last month, Bahrain appointed two men — a former Miami police chief and John Yates, the former assistant commissioner of London’s Metropolitan Police — to oversee the reformation of the state’s police force, which was found in an independent inquiry to have committed systematic human rights abuses and used torture to crush the 2011 pro-democracy uprising.

By virtue of their nationalities and their countries’ strategic involvement with Bahrain, both former “top cops” are dubious choices. Yet Yates in particular stands out, as he was forced to resign from the Metropolitan Police in the summer over a newspaper phone-hacking scandal. Moreover, his appointment reeks of the colonial past. Britain set up Bahrain’s security force prior to independence in 1971, and the General Directorate of State Security was run from the mid-1970s until 1998 by former British policeman Ian Henderson.

Amnesty International documented widespread torture under Henderson’s leadership, and he forcefully put down protests in the 1970s and early 1990s, earning him the sobriquet “the butcher of Bahrain”. It is the second such nickname for Henderson, who was a senior policeman in British-occupied Kenya in the 1950s, playing a role in the brutal suppression of uprisings and becoming labeled “the butcher of the Mau Mau”. In 1986 he was awarded the title of ‘Commander of the Most Excellent Order of the British Empire’ for his services.

Although a Jordanian has headed Bahrain’s security force since Henderson retired, the modus operandi has remained the same, as last year’s events document. Furthermore, Henderson, who still lives in Manama, is believed to have provided advice to the authorities during the crackdown.

While Yates may not be cut from the same colonial cloth as Henderson, his mindset is not radically different. “Bahrain’s police have some big challenges ahead, not dissimilar to those the United Kingdom itself faced only a couple of decades ago,” Yates was quoted as saying in The Daily Telegraph newspaper. But what exactly is Yates referring to? When were there “pro-democracy” uprisings in Britain in the past 20 years? Or any protests suppressed by putting tanks and soldiers on the streets? Perhaps he is referring to the Brixton riots in London in 1980 and 1995, which, in any case, were widely attributed to racist policing methods and high unemployment. Yates appears to have fallen for the official Bahraini line that Iran is primarily to blame for inciting the uprising and the demonstrations had nothing to do with political repression or a minority Sunni monarchy ruling a Shia majority country.

The appointment is also curious when one considers the role of the Metropolitan Police in the riots in London and other English cities last August. A joint study by The Guardian newspaper and the London School of Economics into the causes of the riots published in December, identified “distrust and antipathy toward police as a key driving force.”

Such findings do not brook a great amount of confidence in appointing a senior London cop to overhaul Bahrain’s police force. But then, reforming a police force without reforming Bahrain’s political system, by giving the opposition seats in government and addressing the root causes of the uprising, will not change much either. As Saeed Shahabi, a campaigner with the Bahrain Freedom Movement, said of the appointments: “This is not the first time that foreigners have come from the West to upgrade the security services… The government cannot survive without suppressing freedom of expression; only a democracy can tolerate protest.”

The appointments are therefore just a veneer of reform, with Bahrain too strategically important to the West — especially with rising tensions over Iran’s alleged nuclear weapons program and Bahrain’s accommodation of the American Navy’s Fifth Fleet — to allow for substantive democratic change or dissent. By appointing one cop from the former colonial power and another from the current global hegemon, it seems that history really does repeat itself.

PAUL COCHRANE is the Middle East correspondent for International News Services

January 3, 2012 0 comments

Business

Q&A – Karim Makhlouf

by Zak Brophy January 3, 2012

written by Zak Brophy

Gulf Air, Bahrain’s national carrier, was the Arabian peninsula’s original pioneer in aviation, boasting more than six decades of in-the-air experience. However, in recent years it has fallen from profit and the political tumult in Bahrain and across the region has accentuated the nosedive. Executive met with Gulf Air’s Chief Commercial Officer Karim Makhlouf to hear how the airline fell from favor and about its attempts to claw back market share.

Gulf Air has fallen from profit and lost significant market share in recent years. Why?

More and more competition entered the market so customer choice got divided between the airlines, and commercially we were not aggressive or innovative enough in order to introduce quickly to the market the things that the customers need. We have corrected that this year with many new initiatives, with a clear target of winning back the market share to Gulf Air.

What initiatives are being offered to win back your market share?

The new initiatives can be summarized in four areas where we are investing. The first is the Falcon Corporate Plus. Then we re-launched our frequent flyer program, called Falcon Flyer, and we have a new initiative for families called Family First. We are also now investing much more heavily in travel agent incentives.

What customer groups are you targeting with these initiatives?

When looking into the new commercial strategies we defined exactly the different customer segments and they are youth… business and corporate, religious traffic and we defined families as a new and important segment.

Can you expand on the corporate strategy?

It is called Falcon Corporate Plus whereby companies receive special prices and become gold and silver members; there are other features such as complementary upgrade, marketing support, incentive deals and so on. The target is to have 500 deals signed by 2012 and so far we have had 500 deals signed and we have had a good market response from Lebanon. The target here is clear; that we want to increase our market share with the corporate traveler. Companies, especially small and medium ones, can collect [frequent flyer] points with the Falcon Flyer program — that is new.

We have redesigned the Falcon Flyer program with three tiers. Every tier has different advantages besides upgrades, lounge access, baggage access, and obviously the redemption of tickets is the main thing. We are promising that we have the most attractive redemption scheme in the region.

And you said family travelers were a target group?

We really want to position ourselves as the family friendly airline. We are the only airline in the world to offer a sky nanny service and soon we will have this service also in the lounge areas. Also, we are designing kids’ menus and we have kid focused in-flight entertainment systems. We see this as a very attractive target group.

How is Gulf Air developing its routes to take on the regional competition?

We are completely restructuring our network. We aim to avoid the heavy competition of our fast growing neighbors to position ourselves stronger into under-served niche markets. This is why we opened routes to Isfahan in Iran, Addis Ababa, Milan, Geneva, Basra, Kabul, Copenhagen, Nairobi, Rome, Entebbe and we are going to open Juba in March 2012.

E: And how are you developing your regional network?

The target of double daily flights is not just to here in Lebanon but to all regional capitals. This is the difference from Emirates, Qatar Airways or Etihad; we try to make flying a commodity in the region. We think the Gulf and the Middle East will develop like Europe where it is normal for people to commute by flying, so we want to connect the regional capitals on a double daily basis. This is the differentiator, because we are not focusing on long haul to long haul — competing with the European carriers like our neighbors — but we really want to develop here an excellent choice for the people flying throughout the region.

What investments are being made in the fleet to accommodate your new strategy?

We undertook a major investment into the products, so we are refurbishing the whole of the business class compartment with new state of the art seats, which will be ready by the first quarter next year. With Panasonic we have invested in a new-state-of-the art in-flight entertainment system where we are the world’s first airline offering broadband internet, live television and phoning on board.

How about the actual planes in the fleet?

We are in the process of renegotiating our order book. In recent years there were a lot of orders placed with both Boeing and Airbus and we are fine-tuning that. Because we want to develop further the strategy of high frequency regional flying we are going to start flying with narrow bodies, 320s, with an extra tank and a full lie-flat business class to fly to Europe as of next year. We have six extra range A320s coming in next year.

How many jobs have been or are going to be lost as a consequence of the restructuring program?

Staff [numbers] have been reduced by 30 percent in 2010 and we also managed to reduce losses by 30 percent.

Due to political upheavals this year Gulf Air suspended its Beirut routes and is still not flying to Iraq or Iran. How serious an impact has this had on business?

We were hit very hard in March but in the meantime we managed to partly compensate for these losses with new routes, mainly to Europe and Africa. Of course we hope that the flights to Iraq and Iran will be back soon.

I think the Lebanese market is somehow used to the political ups and downs. I think it is also clear that [Gulf Air was not] behind the decisions to suspend flights. I think the customer can very well differentiate between politics and Gulf Air. Obviously we see now the customers are coming back and flying with Gulf Air and that is why we are intending to increase the frequency of our flights for the Lebanese market.

How significant a portion of business is cargo and how does this fit into the overall strategy?

Cargo is integrated into our carriers but we don’t have specific freighters. Cargo business contributes around 25 percent to the revenue of the airline. It is very good ancillary revenue for us which we are developing further. By going toward a narrow body fleet we are focusing on high value cargoes.

With the sector becoming increasingly fractured between traditional carriers and low cost airlines, how is Gulf Air positioning itself?

Low cost doesn’t really work as well in the Arab world as it does in the US or Europe because we don’t have this infrastructure of periphery airports. That is where low cost can benefit from lower costs. So in the Arab world it is very difficult to get those low costs. I think in the Arab world ‘low cost’ is hype, which has more marketing content than real economics behind it. Of course, low cost airlines are competition and we treat them as such, but by offering the right service at the right price, especially in the Arab world, it is easier to maintain the customer loyalty than in, say, Europe, where low cost is spreading very aggressively.

January 3, 2012 0 comments