Executive Magazine

Executive Insight – Master Capital Group

by Henri Chaoul January 3, 2012

written by Henri Chaoul

Europe needs to move from demure to decisive. It is hard for any bystander to rationalize the tepid and timid moves proposed by either the European leaders or the European Central Bank (ECB) regarding their sovereign debt crisis.

While the Americans’ prefered solution to the financial crisis is quantitative easing — flushing the markets with fresh liquidity and injecting capital into the financial institutions — the Europeans want to follow a fundamentally different path: Treating the root cause of the problem rather than its immediate after-effects. The European approach is similar to treating a patient dying from acute asthma with a long-term steroid treatment rather than prescribing a couple of puffs from an inhaler that will keep him alive long enough to see the long-term. Their approach — even if executed and implemented in its utmost detail — will lead to a collapse of financial markets, not only infecting Europe but also having spillover effects throughout the global system.

Peripheral European countries have unacceptably high levels of debt compared to gross domestic product, with that of Greece at more than 160 percent and Italy nearing 120 percent. The weakest links — Greece, Italy and Spain — together have accumulated more than $3.5 trillion in debt. Greece is effectively bankrupt and illiquid, while Italy and Spain are on life support. In its most recent effort to raise debt, and despite historically high yields, the German government was not able to place a third of its issuance last month — a historical first and a testimony to the fact that investors consider all such debt toxic — while, despite frantic calls by the French and the German tandem, the last European Union Summit to tackle the crisis came up horribly short.

Against this very negative landscape, there is still a way out. European leadership needs to act swiftly and decidedly to reignite the confidence of financial markets and address the root causes of the problem.

In the short-term, both the ECB and national governments in Europe need to ensure that liquidity is available in the markets. First and foremost, Italy and Spain need to be “ring-fenced” to stop contagion and enable them to remain solvent and get necessary help to finance their debts at affordable yields. The ECB has a major role to play here by standing as the lender of last resort and effectively guaranteeing all such debts. Second, a serious recapitalization program of the banks is required, similar to the US Troubled Asset Relief Program in 2008. Finally, Europe needs to help Greece through an orderly default of its debt. None of those points can be left to individual nations to decide upon; instead a coordinated and common approach is required.

In the longer-term, Europe needs to deal with the root causes of its paralysis. At the heart of it is the fact that individual nations are clasping to sovereign rights at the expense of the stability and longevity of the Eurozone.

Europe needs to strengthen the monetary union by changing the mandate of the ECB. It cannot act as an independent monetary authority as long as it does not have the financial wherewithal and weapons to deal with the financial crisis without going back to all its member nations. Its mandate has so far been to ensure price stability and nothing else, a purpose deeply rooted in the history of hyperinflation that hit Europe at the end of World War One. But the mandate now needs to reflect the reality of today’s financial markets: Adding an economic growth objective to its line of fire and becoming the lender of last resort thus allow it to instigate programs of quantitative easing without resorting prior authorization from France, Germany and the parliaments of all remaining nations. Second, the European monetary union is facing a serious fiscal dis-union. As long as different Eurozone nations have structurally different fiscal needs and objectives, monetary union will be cracking at the seams. Authority and decision-making will have to move away from Paris, Berlin and Rome towards Frankfurt and Brussels.

The stakes are too high to let the Europeans test whether their long-term approach would work. Decisive actions are needed. They were due yesterday.

HENRI CHAOUL is the general manager of Master Capital Group in Lebanon

January 3, 2012 0 comments

Finance

Executive Insight -Nada Safa

by Nada Safa January 3, 2012

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

January 3, 2012 0 comments

Finance

Lebanese capital markets

by Maya Sioufi January 3, 2012

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.

January 3, 2012 0 comments

The Buzz

Attack of the killer chickens

by Fernande van Tets January 3, 2012

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.”

January 3, 2012 0 comments

Real Estate

Q&A – Chafic and Jemmy Saab

by Rayya Salem January 3, 2012

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.

January 3, 2012 0 comments

Comment

Why the government is paralyzed

by Sami Halabi January 3, 2012

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.

January 3, 2012 0 comments

Society

Marvels, made to measure

by Ellen Hardy January 3, 2012

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.

January 3, 2012 0 comments

Economics & Policy

Q&A – Fadi Abboud

by Executive Staff January 1, 2012

written by Executive Staff

As minister of tourism, Fadi Abboud has seen Lebanon through the heyday of visitor arrivals in 2010 to the more barren roads of 2011, as well as the change in government from last year to this. At the helm of one of the most underfunded ministries in the government while overseeing an industry accounting for nearly a quarter of the country’s gross domestic product, Abboud pulled no punches when laying out the challenges for tourism in Lebanon as he sat down for an exclusive one-on-one with Executive.

E Following a fantastic 2010, how bad was 2011 for tourism?
We broke all records in 2010. Some 2.2 million tourists visited Lebanon, with total tourist spending up to an estimated $8 billion. In 2011, I think we will be down by some 300,000 tourists, most of whom come by road. Because of what happened in Syria, we lost roughly some 100,000 Jordanians, 100,000 Iranians and 100,000 Gulf Arabs. However, total spending in 2011 seems up, though I should add that buying residential property is included in tourism spending. What may also play a role is the fact that we are a dollar-based economy, and the euro went down.

E What has been done or what could have been done to counter the negative consequences of the Syrian crisis?
In all honesty, we should have taken some measures much earlier, but we did not do anything to compensate what we lost by road. For example, we could have had planes to Jordan for $50 a flight. Most Iranians only come for 24 to 48 hours, as part of a trip to Syria, and they do not spend much. But I think we could work harder in attracting the some 1.5 million Iranians who visit Turkey. In other words, we should attract more Iranians flying to Lebanon. Generally speaking, we are not taking advantage of what is happening around us. We should grasp the opportunity to, for example, build a civil airport in the Bekaa Valley, or use the existing airport to create a regional hub for so-called low-cost carriers. I just came back from the World Travel Market in London, where I had a word with Monarch, which is one of the smallest low-cost carriers in the world. Still, with 34 jets and a turnover of some $1.3 billion, it is twice the size of MEA (Middle East Airlines). On average, they offer a return ticket from London to Cyprus for some $450. Compare that to flights to Lebanon. Also, open the travel section of the Sunday Times and you can fly anywhere in the world on a package deal. But not to Lebanon. As long as we have a monopoly in Lebanon, or a duopoly between MEA and BMI (British Midland International), which is technically bankrupt, prices will not come down.

E External factors aside, what do you think is the main internal problem facing the Lebanese tourism industry?
I’d say a lack of professionalism. Lebanon is like a mezze. You eat a bit of everything but you never get full. For example, we have a casino, but we are not a gambling destination. Our casino is more like a hospital to treat the locals. We have ski slopes, but are not a skiing destination. Do you know any skiing destination in the world that does not have snow cannons? With all due respect, these days we can no longer rely on God alone. Another problem is that the owners of the separate ski stations do not want to cooperate. Yet to create a true ski destination we need lifts from Faqra all the way to the Cedars and snow cannons. Then, and only then, can we become a ski destination.
Likewise, we are not a Mediterranean destination. We need a coastal resort, where you have all the facilities in one place not to get bored for a few weeks. We are not a serious religious destination, even though we have all the sites in the world and no less than four saints. We are not even a serious destination in terms of nightlife. I’ll be frank, a lot of people come here for prostitution, yet the Emirates have much more to offer. In terms of diving we have the Victoria, the only ship in the world in a vertical position, and underwater archeology at Tyre, yet we are not a diving destination. Even when it comes to hiking, we do not take things seriously. There are a lot of jacks-of-all-trades anywhere in the world, yet people want professionalism. We do not take anything seriously. And that is what I’m trying to change. In Arabic we have a saying ‘you do not drink from a well and throw a stone.’ I am embarrassed to say what we throw in this well. It is not just stones. It is rubbish. Tourism represents 22 percent of our GDP. We should invest in it. You cannot create an industry if you do not promote it.

E Talking about promotion, what happened to the LL5,000 ($3.33) airport tax you suggested in 2010?
It did not happen. It was refused as usual. It was meant to be an extra LL5,000 departure tax, which would have enabled us to promote Lebanon. But the whole 2010 budget was refused, including the extra tax. It was not even debated properly. The Ministry of Finance always emphasizes the unity of the budget, but, personally, I don’t see what a LL5,000 promotion tax has to do with the budget of, say, the CDR (Council for Development and Reconstruction).

E What is the budget of the ministry?
It’s ridiculous. It’s less than $20 million, which includes all wages. It is by far not enough to promote the country. But suppose they give me $30 million, even then I cannot spend them. If I tell the World Travel Market I want to participate and ask if I can pay six months later, they will ask me politely to f*** off. For a stand at a fair you pay up front, regardless of what is the official way of doing things in Lebanon.

E Will attracting more Western tourists be difficult considering travel warnings issued by many Western embassies?
Usually, we are not in the market of mass tourism. We cannot compete really. That does not mean we only want jet setters staying in 5-star hotels in Solidere. I love them, don’t get me wrong, but we cannot only rely on them. Fortunately, most educated people in the West know that these travel warnings are political. For example, why did England not issue a travel ban when earlier this year two young Britons were massacred in [Florida]? Is Beirut more dangerous than Bogota? I feel safer in Beirut with an expensive watch than in London, Paris or any city in the United States. Now, I don’t think these bans and warnings are working, but is it making our life any easier? No, not at all.

E In a few words, how would you describe 2011?
2011 was not as good as 2010, yet it could have been much worse. Overall, certainly seeing what is happening in countries around us, I’m happy.

E What to expect for 2012?
Of course, security is very important, but all things being equal, 2012 could be a good year. But, unfortunately, we are experts in losing opportunities. We have an excellent opportunity to build our position. We are currently one of the safest countries in the region. We should grasp this opportunity.

E What are the main challenges?
Well, regional politics of course. Look, if I were responsible for Israeli security I would have only one thing on my mind: a Shiite-Sunni war. Israel is usually very good at studying our weak points, and that is one of our weak points. Today, with the rise of Sunni fundamentalism everywhere, it is very feasible to instigate such a conflict. And the US would be happy with that, as they need a market to sell their weapons. If this scenario becomes reality, all hell will break loose. Closer to home, we really need to redefine tourism in Lebanon. We really need to become a serious destination for the hiker, the religious tourist, the diver, etc. We really need world-class facilities. In addition, I strongly believe that monopolies, and the sisters and brothers of monopolies, are still controlling the Lebanese economy. This has to stop. I don’t believe that Lebanon should have just one casino, one airport and one port. We have to free the travel market, especially when it comes to flights. If you talk to tourism professionals in Jordan and Egypt, they will tell you that they could only break their records once they broke the travel monopoly. If we don’t free the market, we will never substantially expand.

January 1, 2012 0 comments

Tourism

Fadi Abboud

by Executive Editors December 25, 2011

written by Executive Editors

A s minister of tourism, Fadi Abboud has seen Lebanon through the heyday of visitor arrivals in 2010 to the more barren roads of 2011, as well as the change in government from last year to this. At the helm of one of the most underfunded ministries in the government while overseeing an industry accounting for nearly a quarter of the country’s gross domestic product, Abboud pulled no punches when laying out the challenges for tourism in Lebanon as he sat down for an exclusive one-on-one with Executive.

Following a fantastic 2010, how bad was 2011 for tourism?

We broke all records in 2010. Some 2.2 million tourists visited Lebanon, with total tourist spending up to an estimated $8 billion. In 2011, I think we will be down by some 300,000 tourists, most of whom come by road. Because of what happened in Syria, we lost roughly some 100,000 Jordanians, 100,000 Iranians and 100,000 Gulf Arabs. However, total spending in 2011 seems up, though I should add that buying residential property is included in tourism spending. What may also play a role is the fact that we are a dollar-based economy, and the euro went down.

What has been done or what could have been done to counter the negative consequences of the Syrian crisis?

In all honesty, we should have taken some measures much earlier, but we did not do anything to compensate what we lost by road. For example, we could have had planes to Jordan for $50 a flight. Most Iranians only come for 24 to 48 hours, as part of a trip to Syria, and they do not spend much. But I think we could work harder in attracting the some 1.5 million Iranians who visit Turkey. In other words, we should attract more Iranians flying to Lebanon. Generally speaking, we are not taking advantage of what is happening around us. We should grasp the opportunity to, for example, build a civil airport in the Bekaa Valley, or use the existing airport to create a regional hub for so-called low-cost carriers. I just came back from the World Travel Market in London, where I had a word with Monarch, which is one of the smallest low-cost carriers in the world. Still, with 34 jets and a turnover of some $1.3 billion, it is twice the size of MEA (Middle East Airlines). On average, they offer a return ticket from London to Cyprus for some $450. Compare that to flights to Lebanon. Also, open the travel section of the Sunday Times and you can fly anywhere in the world on a package deal. But not to Lebanon. As long as we have a monopoly in Lebanon, or a duopoly between MEA and BMI (British Midland International), which is technically bankrupt, prices will not come down.

External factors aside, what do you think is the main internal problem facing the Lebanese tourism industry?

I’d say a lack of professionalism. Lebanon is like a mezze. You eat a bit of everything but you never get full. For example, we have a casino, but we are not a gambling destination. Our casino is more like a hospital to treat the locals. We have ski slopes, but are not a skiing destination. Do you know any skiing destination in the world that does not have snow cannons? With all due respect, these days we can no longer rely on God alone. Another problem is that the owners of the separate ski stations do not want to cooperate. Yet to create a true ski destination we need lifts from Faqra all the way to the Cedars and snow cannons. Then, and only then, can we become a ski destination.

Likewise, we are not a Mediterranean destination. We need a coastal resort, where you have all the facilities in one place not to get bored for a few weeks. We are not a serious religious destination, even though we have all the sites in the world and no less than four saints. We are not even a serious destination in terms of nightlife. I’ll be frank, a lot of people come here for prostitution, yet the Emirates have much more to offer. In terms of diving we have the Victoria, the only ship in the world in a vertical position, and underwater archeology at Tyre, yet we are not a diving destination. Even when it comes to hiking, we do not take things seriously. There are a lot of jacks-of-all-trades anywhere in the world, yet people want professionalism. We do not take anything seriously. And that is what I’m trying to change. In Arabic we have a saying ‘you do not drink from a well and throw a stone.’ I am embarrassed to say what we throw in this well. It is not just stones. It is rubbish. Tourism represents 22 percent of our GDP. We should invest in it. You cannot create an industry if you do not promote it.

Talking about promotion, what happened to the LL5,000 ($3.33) airport tax you suggested in 2010?

It did not happen. It was refused as usual. It was meant to be an extra LL5,000 departure tax, which would have enabled us to promote Lebanon. But the whole 2010 budget was refused, including the extra tax. It was not even debated properly. The Ministry of Finance always emphasizes the unity of the budget, but, personally, I don’t see what a LL5,000 promotion tax has to do with the budget of, say, the CDR (Council for Development and Reconstruction).

What is the budget of the ministry?

It’s ridiculous. It’s less than $20 million, which includes all wages. It is by far not enough to promote the country. But suppose they give me $30 million, even then I cannot spend them. If I tell the World Travel Market I want to participate and ask if I can pay six months later, they will ask me politely to f*** off. For a stand at a fair you pay up front, regardless of what is the official way of doing things in Lebanon.

Will attracting more Western tourists be difficult considering travel warnings issued by many Western embassies?

Usually, we are not in the market of mass tourism. We cannot compete really. That does not mean we only want jet setters staying in 5-star hotels in Solidere. I love them, don’t get me wrong, but we cannot only rely on them. Fortunately, most educated people in the West know that these travel warnings are political. For example, why did England not issue a travel ban when earlier this year two young Britons were massacred in [Florida]? Is Beirut more dangerous than Bogota? I feel safer in Beirut with an expensive watch than in London, Paris or any city in the United States. Now, I don’t think these bans and warnings are working, but is it making our life any easier? No, not at all.

In a few words, how would you describe 2011?

2011 was not as good as 2010, yet it could have been much worse. Overall, certainly seeing what is happening in countries around us, I’m happy.

What to expect for 2012?

Of course, security is very important, but all things being equal, 2012 could be a good year. But, unfortunately, we are experts in losing opportunities. We have an excellent opportunity to build our position. We are currently one of the safest countries in the region. We should grasp this opportunity.

What are the main challenges?

Well, regional politics of course. Look, if I were responsible for Israeli security I would have only one thing on my mind: a Shiite-Sunni war. Israel is usually very good at studying our weak points, and that is one of our weak points. Today, with the rise of Sunni fundamentalism everywhere, it is very feasible to instigate such a conflict. And the US would be happy with that, as they need a market to sell their weapons. If this scenario becomes reality, all hell will break loose. Closer to home, we really need to redefine tourism in Lebanon. We really need to become a serious destination for the hiker, the religious tourist, the diver, etc. We really need world-class facilities. In addition, I strongly believe that monopolies, and the sisters and brothers of monopolies, are still controlling the Lebanese economy. This has to stop. I don’t believe that Lebanon should have just one casino, one airport and one port. We have to free the travel market, especially when it comes to flights. If you talk to tourism professionals in Jordan and Egypt, they will tell you that they could only break their records once they broke the travel monopoly. If we don’t free the market, we will never substantially expand.

December 25, 2011 0 comments

Real estate

Business talk

by Executive Editors December 25, 2011

written by Executive Editors

“Beirut is reaching its normal prices, but it’s still undervalued compared to Jordan, Syria and all the countries around us, although not as undervalued as the Metn [area]. The most undervalued area for me is the Mechref area [south of Beirut]; it’s nicer than Rabieh and Faqra, and I think it’s on the way up.”

Capstone Investment Group: Ziad Maalouf, CEO

“We have only seen a slowdown in sales but it has not affected prices of land, which remain high. Expectations of landowners keep increasing despite new realities in the market today. If I were to buy land today in Ashrafieh, I would have to sell at a starting price above $6,000 per square meter, which should not be the case… The owners have to readjust their expectations to market realities. Since 2005, land prices have increased exponentially per year, so they assume that this will continue. But that was when Lebanon was underpriced in the region; it’s not true anymore. Growth of land prices and apartment prices should be around 5 percent per year, if there is any at all.”

Seven Invest Developers: Fawaz Sawaf, Director

“The biggest problem in Ashrafieh is parking. The government is trying to improve roads in Ashrafieh, but it wasn’t originally made for this many cars, if all the buildings come up in the area.”

FFA Real Estate: Mireille Korab Abi Nasr, Head of Sales and Marketing

“While prices have generally risen for the past several years, in 2011 we have noticed a standstill in the market in some areas which has caused some developers to resort to giving discounts to sell their apartments. This is all due to the mismatch between the market needs and the supply. This has been the case especially with large-scale apartments. The market will always correct itself, and this is very healthy in order to regain the balance between supply and demand.”

Ramco Real Estate Services: Karim Makaram, Director

“A couple of years ago, a project would have sold half by the time excavation was complete… The absorption rate would have been 80 percent by the time it was delivered; now it is about 60 percent. But if you’re selling the right size in the right area, there is still demand.”

Benchmark Real Estate: Zina Dajani, Managing Director

“Last year you could get a 5 percent or 10 percent discount at best, if you are a serious buyer, except at the launching of new projects where discounts were more substantial. This year, buyers are expecting around 20 percent and 25 percent discounts and are making counter offers to developers before they accept a deal. Given that the sales momentum has slowed down, these numbers may have been achievable in some projects.”

Prime Consult: Massaad Fares, General Manager

“Clients tend to be more selective; they know what they are looking for… the ones interested in city living tend to require mostly smaller sizes but very sophisticated buildings. Being environmentally friendly is very important [and] tall buildings are becoming more and more interesting as views of the city can be guaranteed, and as you know this is not always available. Environmentally friendly projects and gated communities will be more and more in demand.”

December 25, 2011 0 comments