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“We are the 99 percent”

by Peter Speetjens November 3, 2011
written by Peter Speetjens

Occupy Wall Street and the Egyptian uprising have more in common than it may seem, and surely much more than Washington wished for. Egypt seems a la mode in New York. For example, the protests were partly inspired by Adbusters magazine, which in July encouraged its readers to flood Manhattan with the battle cry: “Are you ready for a Tahrir moment?”

When American protesters, blocked by police from reaching Wall Street, decided to settle at nearby Zuccotti Park, little did they know it had only been renamed after a local property developer in 2006. Until then it had been known as Liberty (Tahrir) Plaza. These were not the first American signs of emulation of revolutionary Egypt. When the state of Wisconsin last February attempted to cut the salaries and benefits of government staff, tens of thousands of workers took to the streets under the slogan: “Fight like an Egyptian”.

Most Western observers, however, prefer to stress the differences between Occupy Wall Street and the Egyptian and other Arab uprisings. The former, they argue, aims for economic reform, while the latter called for political change. Hence, they speak of an  ‘Arab Spring,’ a reference to the 1968 Prague Spring when Czech citizens attempted to shake off the Soviet dictatorship. Implicitly, the term assumes that both Czechs and Arabs aspire for a Western notion of democratic freedom.

That is only partly true. Sure, most people prefer voting over dictatorships, yet the Arab uprisings, especially those in Egypt and Tunisia, were as much about economic justice as fair representation. Let us not forget that the so-called  ‘Arab Spring’ started over economic injustices: Following the confiscation of his vegetable cart, Tunisian street seller Mohamed Bouazizi set himself on fire at the main square shouting: “How do you expect me to make a living?”

At Tahrir Square, demonstrators not only called for the downfall of Mubarak, but also of people like Ahmed Ezz. Politically, Ezz was not particularly powerful, yet he controlled two-thirds of the steel market and was seen as one of the faces of Egypt’s corrupt and elitist economy. Interestingly, the ‘Arab Spring’ started in Tunisia and Egypt, both formerly state-led economies that — more than most countries in the region — bought into the West’s free market mantra over the last decade. State-owned assets and companies were privatized —generally ending up in the hands of the well-connected few — and then streamlined, resulting in massive layoffs. And while economists routinely pointed at gross domestic product growth as a token of success, the disparity between rich and poor accelerated year after year. Just as the Arab uprisings were not solely about political change, so the current manifestations in New York and elsewhere are not exclusively about economic reform. Yes, the Occupy Wall Street slogan, “We are the 99 percent”, refers to the pyramid-like structure of the American economy, as 1 percent of Americans earn 24 percent of national income and own 40 percent of national wealth.

Yet by referring to the majority, protesters also evoke the founding principle of democratic rule. “We are the 99 percent, and that is why we need a voice,” is the full slogan. The reality is fewer and fewer Americans feel represented by the two traditional parties, which both seem caught in a web of corporate interests and lobbying dollars; the situation is only slightly better in Europe. 

This sense of a political sell-out culminated in the 2008 financial crisis and the subsequent bailout. While several banks were soon awarding major bonuses again, unemployment rose and people everywhere were confronted with austerity programs. In the minds of many it is all rather blunt and simple; politicians bail out the banks, and the people end up paying.

It would be a severe miscalculation if President Barack Obama were to define Occupy Wall Street as merely a call to rein in the malpractices of the financial system. As one protester in New York put it, “we tried voting for change, today we shout for change.” And tomorrow, if need be, they may well fight for it.

 

PETER SPEETJENS is a Beirut-based journalist

November 3, 2011 0 comments
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Society

Book Review – In the Lion’s Den

by Executive Staff November 3, 2011
written by Executive Staff

Andrew Tabler’s account of his time in Syria between 2001 and 2008 is refreshing — relative to the reams of Orientalist trite other Western authors have published about the Middle East and North Africa — in that he actually spent years in the region getting to know the place, first studying Arabic and working as a journalist in Cairo and later traversing the MENA for the Oxford Business Group writing country investment reports, before eventually basing himself in Damascus.  Thus his offering, “In the Lion’s Den”, is neither ‘parachute journalism’ nor the story of a doe-eyed apple-pie eater struggling to make sense of an alien Arab fantasyland — the two most common categories of expat writing on the region. Rather, Tabler — a former contributor to Executive — is candid and observant in relating the challenges of trying to comprehend the vast complexities of a country like Syria.

The author has been accused of being naïve, in asserting that after Bashar al-Assad’s succession to the presidency in 2000 the country would move from autocracy to democracy, but what Tabler says interested him more was getting an “unexpected front-row seat to a fight”, pitting the young reformist Assad against the entrenched status quo of the old guard. He later admits some of his shortcomings in framing the situation as such; while there were superficial changes, it was clear after the first few years of the new Assad’s leadership that regime survival would always be the paramount concern.

Tabler was in a unique position to assess the touted reforms in Syria after a private meeting with Assad’s wife, Asma, and then working for one of her government-organized non-governmental organizations (GONGOs), the Fund for Integrated Rural Development of Syria. This led him to start up, under the auspices of Asma Assad, the country’s first English-language magazine, Syria Today.  Tabler’s account of his meeting with the “first lady” is intriguing, as are the relations between Asma and her go-betweens at the GONGOs. Equally fascinating is Tabler’s account of being the only non-Arab and the first American to accompany a Syrian president on a state trip, to Beijing in 2004.

A criticism of “Lion’s Den” is it goes into no great depth about such encounters, or the running of Syria Today. Tabler also reveals little about his life in Damascus and travels around the country. A possible explanation for this may be that the book was intended both as a memoir and a dovetail into future career aspirations — Tabler’s current employer is the neoconservative Washington Institute for Near Eastern Policy think tank.

Much of the book consequently concerns Syria’s relations with Lebanon, Iraq and Israel, and America’s resultant foreign policy with Damascus. This ranges from Western hopes of engaging Assad to bring Syria ‘in from the cold’ — primarily through solving the Arab-Israeli conflict — to problematic relations after the Bush administration labeled Syria part of the ‘Axis of Evil’ and Damascus’ apparent reluctance to prevent fighters crossing its border into Iraq following the 2003 United States invasion. Relations soured further following the assassination of former Lebanese Prime Minister Rafiq Hariri in 2005, leading the US to withdraw its ambassador to Syria and Damascus entering into a strategic alliance with Tehran. The account of the ongoing tussle between Damascus and Washington is succinct and bipartisan, providing a useful primer on bilateral relations.

Tabler chose to write the book after he was not allowed back into Syria in 2008, due to his increasingly vocal criticism of the regime. Published in September, Tabler could not have asked for a more opportune moment for the release, given the international media attention on the Syrian uprising, and he has capitalized on this in the epilogue in arguing how Assad and the regime should be handled by Washington. While Tabler may have been taken in by Assad’s veneer of reform a decade ago, “In the Lion’s Den” resounds as an impeachment of the Syrian leadership and a call for even tighter international sanctions to bring the regime to account.

November 3, 2011 0 comments
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Comment

Welcome to the waking nightmare

by Farea al-Muslimi November 3, 2011
written by Farea al-Muslimi

“Yemen is on the verge of a true, deep humanitarian disaster,” were the words late last month of Geert Cappelaere, representative of the United Nations Children’s Fund (UNICEF) in the country. Even in this country with a history struggling through strife and conflict, the current situation is accelerating into a catastrophe without precedent.

A third of Yemenis go to bed hungry — roughly 7.5 million people — while half of all children under five-years-old suffer from chronic malnutrition and half the population lives in deep poverty. The World Food Program (WFP) warned that it needs $56 million for its operations this year in Yemen — equal to around one third of American military assistance to the Yemeni government in 2010.

While millions of Yemenis are unable to sleep for hunger still more are kept awake by the increasingly bitter civil war. Heavy explosions and bombings continue in Sanaa and other major Yemeni cities as pro and anti-regime forces continue to battle for control. 

In the capital electricity is off for more than 23 hours per day, meaning those lucky enough to still have jobs are often unable to work; produce and perishables rot in grocery stores and the idle refrigerators in people’s homes. Sanaa becomes a ghost town once night falls, with regime forces opening fire on civil protesters with alarming regularity. A recent and unnerving trend has also emerged in the targeting of protesters: security forces have begun kidnapping young people — including the injured — from protests and holding them in hidden prisons, according to the National Organization for Defending Rights & Freedoms.

Outside of Sanaa the WFP has reported that more than half a million Yemenis have been displaced since the beginning of the uprising in January. In the Abyan Governorate in Southern Yemen alone, where many of the fiercest clashes between military forces and Islamic extremists have taken place, more than 100,000 people have fled their homes; most have taken refuge in some 50 school buildings in the neighboring governorate of Aden. Already by the beginning of the summer more than 2,400 people had been killed and more than 20,000 injured, according to a July report by Abaad Studies and Research Center, a Yemeni non-governmental organization and think tank.

All aspects of the humanitarian disaster and escalating violence are being exacerbated by the absence of any semblance of a functioning government and the grinding political deadlock. The continued refusal of President Ali Abdullah Saleh to step down after 33 years in power makes it hard to imagine how the situation can improve in the coming weeks.

Yet the world continues to look the other way. On October 21, The UN Security Council passed Resolution 2014 urging President Saleh to sign the Gulf Cooperation Council initiative calling for a transition of power as soon as possible. The vote, which was discussed for a little under two minutes, is a clear sign of how little import the international community is giving Yemen and its people — something the world will regret if, and more likely when, Yemen explodes into full blown conflict. The UN resolution gave Saleh another 30 days before the Security Council would meet again to discuss the situation. What the bureaucrats failed to grasp was that in 30 days there might be no Yemen left to discuss. 

Instead of becoming a new Tunisia or Egypt where — with international support — legitimate protests gave way to democratic elections, Yemen is increasingly likely to become the new Somalia, going the way of failed states. The continued support of much of the international community, including crucially Saudi Arabia, for President Saleh will only drive the country further down the road to ruin. The unbelievable will of the Yemeni people to persevere through the crises they have confronted this year is a rare and beautiful thing. However, if the world continues to ignore Yemen and refuses to step in to halt its complete dissolution, no one should be surprised by the waking nightmare that will ensue.

 

FAREA AL-MUSLIMI is a Yemeni activist and writer for Almasdar

November 3, 2011 0 comments
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Economics & Policy

For your information

by Executive Editors October 24, 2011
written by Executive Editors

Low growth, higher debt

The prospects of a second-half economic rebound appear dimmer than ever as Lebanon rounds out the third quarter, with predictions for gross domestic product (GDP) growth in 2011 from several economic institutions looking grim. According to the Economist Intelligence Unit (EIU), the country’s economy will expand by just 1.3 percent, representing a drastic drop in anticipated growth, from 4.6 percent in April. The EIU maintained its 3.6 percent GDP growth outlook for 2012. The agency cited several reasons for the revision, including the usual political instability in the country and elsewhere in the region. The report stated that while it believed reforms would occur due to relative accord within the cabinet, they would be slow to take effect as corruption, patronage and an over-bloated public sector prevent further economic growth. Barclays Capital also predicted economic growth in 2011 to come in at just 1.8 percent because of spillover effects from the Syrian uprising and a weakening services sector. Barclays said that the deficit this year should stay at around 7.6 percent of GDP, but a 15 percent expected increase in expenditures next year will have a harrowing effect on debt dynamics as the predicted deficit widens to 8.5 percent. The International Monetary Fund  (IMF) also weighed in with a projected growth figure of 1.5 percent, granting Lebanon the honor of the 16th slowest growth rate in the world. The IMF said that in the region Lebanon would come ahead of just Egypt and Tunisia in growth rates. Standard Chartered Bank also revised its previous 3 percent growth forecast downward to 1.5 percent.

Lebanon a little less risky

Lebanon has marginally improved its risk profile, if only in comparison to the rest of the Middle East. According to Euromoney magazine, Lebanon ranked 82nd out of 184 countries in terms of its risk profile and 11th out of 20 in the region. The rank is a 10-spot improvement on the June 2011 global rankings and represents the biggest leap in the region. The rankings were based on six weighted indicators: political risks (30 percent), economic performance (30 percent), access to bank finance and capital markets (10 percent), debt indicators (10 percent), credit ratings (10 percent) and a structural assessment (10 percent). Political risk declined by 1.3 percent since June, while Lebanon’s access to bank finance and capital markets rating increased by a whopping 288.7 percent.

Sharpening the stats

In an attempt to partially rectify the endemic lack of credible and timely data, the Central Administration for Statistics (CAS), Lebanon’s public bureau of statistics, is launching a new project that will form the basis of economic projections for some time to come. Last month the CAS announced that it will launch the National Household Budget Survey for 2011, the first such poll since 2004. The survey will cover a sampling of 4,000 households in cooperation with the World Bank and will quantify several elements related to the social, economic and demographic development in the country. The results will help assess poverty levels and provide a basis for updating the weights on different products used in the compilation of the consumer price index, the main indicator of inflation. Moreover, the survey will give a more accurate and timely reading on labor and unemployment levels.

Subsidy deal staves off strike

A nationwide strike by public transport sector workers was called off last month after a late-night deal to implement a subsidy for the drivers, which was agreed to during the previous cabinet’s term but never implemented. The subsidy will be doled out once a month and will cover the equivalent of 12.5 jerry cans (1 jerry can = 20 liters) of gas to around 40,000 licensed taxi drivers, as well as to an undisclosed number of truck drivers. The subsidy will provide taxi drivers with a total of LL470,000 ($311.77) per month, and truck drivers will receive LL350,000 ($232.17) over the next three months. The move comes after a reduction on the gasoline excise duty by LL5000 ($3.30) in February to a total of LL4,530 [$3.02] per jerry can.

EEZ finally rubber stamped

After a long wait, the Lebanese government is one step closer to future offshore oil and gas exploration. Last month the cabinet signed off on the borders of Lebanon’s exclusive economic zone in the Mediterranean Sea, which was ratified by Parliament in August. The declared border puts the country at odds with Israel after the latter declared a different border demarcation earlier this year. The cabinet decision follows an agreement between Tel Aviv and Nicosia that adopted “Point 1” as the ending point for Israel’s proposed border with Lebanon, which starts in Ras Naqoura and ends 133 kilometers off the coast at an angle of 291 degrees. Lebanon also signed an agreement with Cyprus adopting “Point 1” but never ratified it in Parliament. The new law proposes an end point around 17 kilometers southwest of “Point 1”, which corresponds to Israel’s existing northernmost contract blocs — areas where oil and gas companies can come to explore and extract hydrocarbon resources. The difference of opinion has resulted in a disputed area of some 854 square kilometers and has fueled fears of potential conflict.

Improving irrigation

The ongoing issues over a lack of irrigation in Lebanon’s rural areas will be addressed after an agreement between the ministries of agriculture, energy and water, the United Nations Food and Agriculture Organization and the Italian government was inked last month. The agreement will see $370 million provided by the Italian government go towards the rehabilitation of outdated water networks. The project seeks to deliver water to about 15,000 hectares (150 square kilometers) over the next five years. Irrigation accounts for around 60 percent of Lebanon’s water demand.

EDL hemorrhages ever more

Transfers from the treasury to Electricité du Liban during the first half of the year came in at $684 million, a 22 percent increase on the first half of 2010, according to the finance ministry. The increase in transfers, said the ministry, is due to higher prices for fuel and increased payments to the Egyptian Natural Gas Holding Company (EGAS) for natural gas delivered via pipeline. Payments to Lebanon’s two fuel providers, the Kuwait Petroleum Corporation (KPC) and Algerian energy conglomerate Sonatrach, totaled $620 million, constituting 90.6 percent of payments, while $36.4 million, or 5.3 percent of payment, went to EGAS, with debt servicing accounting for the rest. According to the Finance Ministry, average oil prices increased for the first half of 2011 by 14 percent, along with a 10 percent increase in the quantity of imports.

Striking for a higher lowest pay

As a general strike planned for October 12, called for by the General Labor Confederation (GLC), Lebanon’s largest union, looms on the horizon, a report released by the consulting and actuarial firm Muhanna and Co outlined the effects of increasing the minimum wage to the GLC’s proposed LL1,250,000 [$829.18] per month from its current level of LL500,000 [$333.3]. The report outlined the potential consequences the increase could have on different sectors of the economy and found that the increase would raise labor costs the most in agriculture, with a projected 99 percent increase, though operating expenditure in the sector would rise just 15 percent. Other sectors would also be hit by rising labor and operating costs, such as banking and insurance (24 percent and 12 percent, respectively), construction (72 percent and 15 percent), education and health (72 percent and 36 percent), energy and water (32 percent and 2 percent), industry (67 percent and 11 percent), market services (49 percent and 29 percent), trade (64 percent and 26 percent) and transport and communication (44 percent and 9 percent). The report proposed that the minimum wage should be raised to 150 percent of the poverty line, or LL750,000 ($497.51) per month. The labor ministry has formed a committee to study the effects of a minimum wage increase while, as Executive went to print, negotiations with the GLC to avert the strike were ongoing. 

October 24, 2011 0 comments
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Real estate

For your information

by Executive Editors October 24, 2011
written by Executive Editors

In District//S, size does matter

The developer behind the 22-building residential and retail community District//S in Beirut’s Saifi area has launched a new initiative to satisfy those looking for pied-à-terres in the city in September. The launch, at Lebanon’s DREAM exhibition in the Beirut International Exhibition and Leisure Center, unveiled the plan for 20 one and two-bedroom studios. The studio apartments will be fully furnished and serviced (cleaning, laundry, concierge service, gym access), with the local interior design firm Nabil Dada and Associates offering four schemes. All of the studios, ranging from 65 to 160 square meters, will be offered within one five-story building of District//S, according to Estates co-founder Anthony el-Khoury.  Namir Cortas, chief executive officer of Saifi Modern, owner of District//S and co-founder of Estates, told Executive that there could be more than 20 studios if there is more demand in the future. The price differential of the studios is about $1,500 more per square meter than the $7,000 per sqm starting price of other apartments in the development. “The price differential is our estimated cost for furnishing them and equipping them,” said Cortas. Studio construction is expected to be complete within four years, in line with the rest of the project.

DREAM goes green

London-based green-building consultancy firm, G, has partnered with 45 buildings in Lebanon to lead them to Leadership in Energy and Environmental Design (LEED) certification. Nader Nakib, chief executive officer of G, told Executive at the DREAM exhibition in Beirut that for the first time investing in green technology in Lebanon is worth it for developers. “The cost of going green for a first level certification is around 2 percent extra of the construction cost,” he said, adding “but the central bank subsidy allows for up to 45 percent of the construction cost at almost zero percent interest fee.” G is the LEED consultant for a number of developments in Lebanon, including Audi Plaza, Beirut Terraces, Beirut Waterfront, Beirut Harbor, Saifi 178, Verdun Hights, the ESCWA Building and most recently Saifi Gardens. In the District//S residential community, G will ensure rainwater collection techniques, the use of recycled material where possible and the use of environmentally friendly gases for ventilation and air conditioning systems. 

Real Estate branches out

Jouzour Loubnan, an environmental non-governmental organization working towards the restoration of Lebanese woodland, is partnering with both private developers and government municipalities to continue planting trees in Lebanon on government land.  Raoul Nehme, president of the organization, told Executive at the DREAM exhibition that, in addition to 38,000 trees already planted since 2007, the group hopes its partnership with developers like Estates and HAR Properties will mean an additional 35,000 trees planted this year alone. The programs with real estate developers, launched two months ago, mean that “for every meter squared built and sold, one meter squared of new forest area will be planted,” Nehme said. The 2011 budget for the group is $400,000 based on an average cost of $10 per tree planted. Phillippe Tabet, chief executive officer of HAR Properties, the developer behind the AYA building in Mar Mikhael and UPark building in Ashrafieh, said at the exhibition that HAR’s contract with Jouzour does not directly help sales but is still part of the group’s “dedication” to green building.

Rejuvenating Iraq’s housing stock

Iraq has the biggest shortage of affordable housing in the Middle East and North Africa (MENA) region after Egypt, with about a million homes needed to bridge the gap, according to a September Jones Lang LaSalle report for the MENA region entitled “Why Affordable Housing Matters”. The National Investment Commission in Iraq is to construct 1 million affordable houses, and up to 430,000 of them are expected to be completed by the end of the first quarter of 2012, according to the report.  In related news, Faleh al-Ammiri, under secretary of the Iraqi Ministry of Housing and Construction, told Gulf News in a September 16 interview that the National Housing Plan currently includes 30 projects where units are to be sold to nationals at cost price or below. He added that financing for real estate is still in its infancy: “We look forward to a time when the private banking system takes part in financing investment projects and the limited housing projects with the cooperation of the state’s ministries,” he said.

Jordan’s unpaid builders

Local contractors are owed $282 million by developers and public sector institutions, President of the Jordan Construction Contractors’ Association Ahmad Tarawneh claimed in September. Tarawneh told The Jordan Times that the gap would force contractors to lay off staff if payment is not received in the short term. He highlighted major Turkish developer GAMA, which is carrying out the Disi Water Conveyance Project, but claimed that other projects like Andalucia and Abdali Urban Regeneration Project also failed to pay local firms. “For the past two years, developers have been promising to pay their financial obligations to contractors, but nothing happened,” he said. In a September 12 statement to Construction Week Online, Yahya Kisbi, Jordanian minister of public works and housing, disputed the figures claiming the government only owes local contractors $70.6 million, with the Ministry of Planning and Internal Cooperations owing $29.6 million. In related news, an official at the Central Bank of Jordan told The Jordan Times in a September 13 article that the loans extended to the property sector reached 2.2 billion Jordanian dinars ($3.09 billion) by the end of July, or 12 percent of the overall deposits at local banks. Commenting on the figures, President of the Housing Investors Society Zuhair Omari said that the availability of this cash at the banks, coupled with the improved lending policies in the local banking sector, should galvanize the property market in the final quarter.

Riding the wave in Oman

Consolidated Contractors Company Oman, a subsidiary of CCC group, headquartered in Athens, has won the contracting tender to build the Omagine mixed-use development of residences, educational buildings, hotels and theme park along Muscat’s waterfront near Seeb Al Hail in Oman. The total cost of the project is $2.59 billion, which will see the US-based Omagine Inc. developers create an integrated touristic and residential area on more than 1 million square meters that will complement the upcoming The Wave touristic marina and retail center in the capital. A total of 2000 homes will be built around a marina, which will have an array of hotels and resorts ranging from three-star to five-star. The centerpiece of the development includes a cultural theme park that will feature exhibition buildings and an open-air amphitheatre. According to the Oman Daily Observer in a September 17 article, Omagine’s equity holding in the project is 60 percent, while newly formalized shareholders include the Office of Royal Court Affairs (25 percent), Consolidated Contractors Company SA (10 percent) and Consolidated Contractors Co Oman LLC (5 percent). CCC boasts a 120,000-strong workforce in the region and is already commissioned to several other projects in Oman.

October 24, 2011 0 comments
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Banking & Finance

Lebanese capital markets

by Executive Editors October 24, 2011
written by Executive Editors

BLOM Stock Index (BSI)

Weighted effective yield of Eurobonds

Equity update

Persistent political unrest in the region and volatility in the international markets continued to have a negative impact on the Beirut Stock Exchange (BSE). The BLOM Stock Index (BSI), Lebanon’s equity gauge, followed a downward path between August 16 and September 16, 2011, to hit a 27-month low of 1,244 points. The BSI was down 4.7 percent on the previous month, extending its year-to-date retreat to 15.7 percent. The BSE witnessed a daily average volume per month of 182,811 shares, worth $1.71 million, during the four-week period of August 16 to September 16, as compared to 153,424 shares, valued at $1.74 million, over the preceding four-week period.

When compared to regional equity markets, the BSI underperformed the S&P Pan Arab Composite LargeMidCap Index and the Morgan Stanley Emerging Markets Index. The former inched up 0.3 percent to 107.3 points and the latter slipped 2.6 percent to 963.7 points as investors remained wary. 

During the period, banking stocks dominated on the BSE, accounting for 64 percent of the total value traded. BLOM Bank’s stocks witnessed a mixed performance, with its Global Depository Receipts (GDR) falling 4.4 percent to settle at $8.17 while BLOM listed stock advanced 2 percent to $8.19. Audi Bank’s GDR and listed stocks fell, with the former declining 5.2 percent to $6.82 and the latter falling 9.9 percent to $6.2, hitting their lowest level since the 10 to 1 split became effective in May 2010. Byblos Bank’s common stock retreated as well, inching down 0.6 percent to $1.65, whereas Bank BEMO stocks slipped by 6.2 percent to an all-time low of $2.57. Bank of Beirut’s  common stock reached a peak of $20 on September 9 before ending at $19.26 on September 16, still 1.4 percent higher than its close on August 12. With regard to preferred stocks, Byblos preferred 2008 and 2009 lost 0.5 percent each to align at $100, while Bank of Beirut preferred D and E declined by 1.6 percent each to stand at $26. BLOM preferred 2011 rose 1.1 percent to close at $10.11.

Real estate leader Solidere saw its market dominance decline. Solidere A and B stocks tumbled an average of 9 percent to a 28-month low of $15.15 and $15.30, respectively.

In the industrial sector, cement manufacturer Holcim’s stock reached its highest level since October 2008, peaking at $17.88 on September 8 before settling at $16.70, 1.3 percent higher than its close the month before. Ciment Blanc Class B hit its highest level since March 1998, touching $3.25, before declining to $3.07, though still up 3.4 percent from August 12, whereas Ciment Blanc Class N rallied 11 percent to $1.72.

Rasamny Younis Motor Company stocks fell 7.4 percent to a one-year low of $2.50. 

Eurobond bulletin

The Lebanese Eurobond market has been volatile over the month. The market witnessed some selloffs on long-term maturities, especially on the 2021 issue between the middle and end of August before it rebounded, boosted by higher demand from local investors on the long end of the curve. Thus, the BLOM Bond Index rose 0.3 percent to reach 111.24 points. Consequently, the portfolio weighted yield fell by 14 basis points (bps) to 4.8 percent, while the spread against the United States benchmark yield widened 7 bps to 404 bps. Lebanon’s five-year credit default swaps (CDS) — which vary positively with the country’s default risk — reached 395-425 bps compared to 361-391 bps on August 12. Comparatively, in regional markets, Dubai and Saudi Arabia CDS were quoted at 415-430 bps and 111-113 bps, respectively.

October 24, 2011 0 comments
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Banking & Finance

Financial quotes of the month

by Executive Editors October 24, 2011
written by Executive Editors
Josef Ackermann, CEO of Deutsche Bank

“We should resign ourselves to the fact that the ‘new normality’ is characterized by volatility and uncertainty”

Mohammad Safadi, Finance Minister of Lebanon

“Looking forward it’s gloomy and at best, the economies will not perform. Far Eastern economies and third-world economies like Lebanon will keep on growing, but not as fast”

Sheikh Mohammed Bin Rashid al-Maktoum, ruler of Dubai

“Dubai is well”

Georges Soros, billionaire investorV

“The German public still thinks that it has a choice about whether to support the euro or to abandon it. That is a mistake”

Mohammad Jleilati, Syrian Minister of Finance, on the GDP growth of Syria

“Now, it will be around one percent, because of the events… maybe between one to two percent”

Angela Merkel, German chancellor

“We’re facing a challenge which one can call historic. If the euro fails, then Europe will fail”

Mohamad al-Jasser, Saudi Arabia’s central bank governor on the future of the common GCC currency

“The economic situation in our countries is excellent and nothing is delaying the currency”

Riad Salameh, Lebanon’s central bank governor

“Lebanon is immune to what is happening in Syria or worldwide because of the model we have, which is a highly liquid, prudent approach to credit and low leverage”

Jacek Rostowski, Poland’s finance minister

“The risk of all sorts of authoritarian political movements, and therefore even war, in the long horizon, rises”

October 24, 2011 0 comments
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Banking & Finance

MENA stocks tips

by Executive Editors October 24, 2011
written by Executive Editors

With the European sovereign debt crisis taking center stage last month, the United States economy still in tatters and uprisings continuing in parts of the Middle East, uncertainty prevailed in the markets. Surrounded by such volatility, what is a Middle Eastern investor to do?

For an expert opinion on how to navigate the markets, Executive spoke to Ammar Bakheet, head of asset management at Audi Bank, and Khaled Zeidan, general manager at MedSecurities, a BankMed subsidiary.

The scoop

Bakheet remains very conservative in his approach, as he believes that the market turbulence will persist at least until the end of the year. However, he sees significant opportunities in the current environment and recommends buying high quality, fixed-income instruments rated triple B or better, and big blue chip companies with high dividend yields. Zeidan also favors fixed-income and equities; he believes equities are very cheap and advises to buy defensive names — such as telecommunications and utilities — as they have been beaten down badly along with the growth sectors like technology. Both Bakheet and Zeidan say they would avoid gold. Bakheet believes buying gold now is a gamble, and Zeidan prefers investing in productive assets.

Both Bakheet and Zeidan are optimistic about the investment opportunities they see in the Middle East and North Africa. According to Zeidan, the interesting thing about the region is that it offers solid names with high dividend yields. Saudi Telecom Company (STC), as an example, is one of the largest telecom companies in the region and in emerging markets generally, and has had a consistent dividend yield of 7.5 percent on a currency that is pegged to the US dollar. Zeidan pointed out that this is better than buying a corporate or government bond as the yield is more attractive. His favorite regional countries to invest in are Saudi Arabia and Turkey, as both countries have solid growth, relative political stability and a young population. According to Bakheet, with oil prices still holding high, the region is raking in revenue and many infrastructure projects are being announced. His favorite MENA countries to invest in are Saudi Arabia, the United Arab Emirates and Qatar.

As for long-term stock recommendations, Bakheet suggests buying Mobily, the second mobile telecommunications company in Saudi Arabia. He would also buy Maaden, the largest mining company in Saudi Arabia. Zeidan on the other hand would buy leading Turkish banks due to the fact that their stock prices have been severely beaten down, yet they have great balance sheets and no exposure to Europe. He would also buy into the telecommunications sector in Saudi Arabia, such as Mobily and STC.

October 24, 2011 0 comments
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Banking & Finance

For your information

by Executive Editors October 24, 2011
written by Executive Editors

Gold boosts BDL assets

Total assets at Banque du Liban (BDL), Lebanon’s central bank, rose 6.2 percent in August to reach $72.75 billion, mainly due to an increase in the international price of gold. The value of BDL’s gold reserves increased by 12.5 percent to $16.75 billion, accounting for 44 percent of the rise in total assets. Lebanon plans to keep its gold reserves at around $17 billion as it tries to protect its economy from domestic unrest in neighboring countries, according to BDL Governor Riad Salameh. The central bank’s foreign assets (excluding gold) rose by 5.6 percent in August to $32.14 billion due to an increase in confidence in the Lebanese currency. On the liabilities side, private sector deposits increased 3.7 percent to $48.6 billion, while public sector deposits went up around 7 percent to $6.08 billion.

HSBC axes Lebanon branches and jobs 

HSBC is closing three branches in Lebanon, consolidating its network by half, not including its headquarters. The move is part of an ongoing global effort of the HSBC Group to “improve efficiency”. The bank plans to cut 30,000 jobs by 2013, which amounts to approximately 10 percent of HSBC’s total workforce. As well as the job cuts, HSBC is closing its retail banking operations in Russia and Poland and selling three insurance businesses as part of pre-announced plans to save $2.5 billion to $3.5 billion by 2013. HSBC recently sold 195 retail branches in the United States, primarily in New York, to First Niagara Bank for approximately $1 billion.

Lebanon moves up the global competitiveness ranks

Lebanon is ranked 89th in The World Economic Forum’s global competitiveness report for 2011-2012, up three places year-on-year. Qatar is the most competitive country in the Middle East and ranked number 14 overall, up three places from a year ago, followed by Saudi Arabia (17), which enters the top 20 for the first time and gained four places on the year before. The United Arab Emirates (27) fell two slots. The most competitive country in the world is Switzerland, followed by Singapore, which overtook Sweden for second position. Northern and Western European countries dominate the top 10.

Iran’s banking scam reaches Ahmadinejad

Several Iranian banks have been targeted in one of the biggest frauds in the Islamic republic’s history, losing nearly $2.6 billion over more than two years. The financial scandal involved the forging of documents to secure credit from various financial institutions, including Bank Saderat, one of the largest in the Middle East. The proceeds were then used to purchase state-owned enterprises, such as the Khuzestan Steel Company, as the government implemented its controversial privatization scheme, which began in 2004. Iran’s Minister of Economic Affairs and Finance Shamseddin Hosseini said on September 18 that the chief suspect of the banking scam had been detained but gave no further information. Kayhan, a conservative newspaper under the direct supervision of the Office of the Supreme Leader, identified the suspect as billionaire mogul Amir-Mansour Aria and alleged complicity on the part of President Mahmoud Ahmadinejad’s top ally, chief of staff Esfandiar Rahim Mashaei. Ahmadinejad denies Mashaei’s link to the scandal.

Growth forecast in Syria hit by ongoing unrest

The International Monetary Fund (IMF) cut its growth forecast for some countries in the Middle East and North Africa due to the continuing social unrest in the region and the volatility in the oil price. According to the report, “the outlook is subject to large downside risks”. Lebanon is expected to grow 1.5 percent in 2011 and 3.5 percent in 2012. For oil-exporting economies, the IMF expects a 5 percent growth in 2011 and 4 percent growth in 2012. Qatar will continue to lead the way, followed by Iraq (which has the highest growth forecast in 2012) and Saudi Arabia. For oil importers in the MENA, the forecast is grim, as the IMF expects average growth of 1.5 percent in 2011 and 2.5 percent in 2012. Syria has the worst growth forecast in the MENA region, as it is expected to contract by 2 percent this year (down from an April forecast of 3 percent growth) due to the more than six month uprising and European sanctions.

Qatar investing in Greek banks

EFG Eurobank and Alpha Bank, the second and third largest banks in Greece, respectively, are to merge with the help of Qatar. The merger will take place via an all-share swap with a 1.25 billion euro [$1.68 billion] rights issue, followed by a 500 million euro [$672.7 million] convertible bond to be covered by Qatar. Alpha will offer Eurobank investors five new shares for each seven they hold. The expected deal will result in the formation of the biggest bank in southeast Europe. Qatar, which already owns 4.5 percent of Alpha, will become the largest shareholder with a 17 percent stake in the combined bank. Banks are not the only assets in Greece that Qatar seems interested in. According to the Greek Reporter, the ruler of Qatar, Sheikh Hamad bin Khalifa al-Thani, is interested in acquiring two islands, including Scorpios, which was originally bought by Greek billionaire Aristotle Onassis and whose granddaughter is now looking to sell the land. But according to Theodoros Varikos, mayor of the region, the elder Onassis specified in his will that the island could not be sold. 

US targets Israeli banks

In its effort to pursue offshore tax evaders, the United States is now targeting Israel, as three of its largest banks are suspected of helping American clients evade taxes through their Swiss outposts. The banks targeted by the US Justice Department’s criminal tax division are Bank Hapoalim, Bank Leumi le-Israel B.M. and Mizrahi-Tefahot. The inspection of the three Swiss branches of the Israeli banks comes during a wide-ranging campaign by the Justice Department to force nearly a dozen Swiss banks now under scrutiny to pay collectively billions of dollars in fines and to admit to criminal wrongdoing.

October 24, 2011 0 comments
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Special Feature

KNOW YOUR FOOD

by Executive Editors October 24, 2011
written by Executive Editors

At the table

the consumer is master of the feast

A transparent food system is hard to find. Even in the world’s most developed economies, giant food companies keep their tactics and techniques under wraps under the pretense of keeping their intellectual property safe and their production lines untainted.

But food is a fundamental ingredient of our lives and our health, following only air and water in its importance, and consumers have a right to know how the food they buy is produced. Every country needs to ensure the transparency of its food system, though governmental monitoring need not be the only force at work. Consumers have the opportunity every day to vote with their fork, as food writer and activist Michael Pollan says.

Creatures of habit

The Lebanese Broadcasting Corporation’s Marcel Ghanem, in addressing the issue of food safety on the Kalam El Nas program this past July, generated strong backlash from the Lebanese public, but these reactions have been largely misguided. When food is shown to contain unsafe levels of bacteria, when people are getting sick, and even dying, from eating out, and when we know that some farmers are using wastewater for irrigation, what is the proper reaction? Though fear may be the knee-jerk response, outrage and action are much more likely to produce productive results.

Some would suggest that we hound our government officials to fix these problems for us. Indeed, government action seems to be what Ghanem’s program was calling for most prominently. But as we know too well, endeavors like this can take years and have already fallen through the cracks between successive governments on several occasions. What consumers can do right now is perhaps a more necessary discussion.

When faced with a food safety or food quality scare, one need not throw their hands up in the air and say, “Nothing is safe, so I will go on eating as I always have”. Instead one can ask: “What can we do?”

It is a good question and it has a simple answer. Be the regulator. Consumers are creatures of habit. We shop in rituals, often sticking to the same brands of canned goods, chicken, candy, etcetera. So why not investigate these habits?

Packaged and prepared foods have become a godsend in a time of two working parents. But in their quest for market share and the bottom line, food manufacturers have turned to chemicals to keep shelf lives longer and tastes more intense. The ingredients on the label can have a serious effect on our health, not to mention those that are not disclosed [see story page 62].

Lebanon’s poultry industry is one of the country’s success stories, producing enough chicken to satisfy private consumption and exporting frozen product around the region as well. But what is the difference between the big three poultry producers? Just because the price is capped does not mean that all Lebanon’s chicken is created equal [see story page 66].

Market power

Then there is organic agriculture, which is growing worldwide, including here in Lebanon. Though a tiny sector at present, organic agriculture is growing fast and brands and distributors are multiplying by the day. But as usual, the devil is in the details [see story page 74].

For this report Executive played consumer. We looked at some sectors of Lebanon’s food industry and investigated the fundamentals. Naturally, we were not always well received, but a door held closed often says as much as a door opened. And if consumers were able to take control over the food they consume, shifting the tide of a free market food system toward quality and health might come faster than waiting for regulation — and could outlast any government.

ADDED EXTRAS

Small amounts can have large effects

For discerning food shoppers, the label is king. Whether figure or frugality is paramount, food labels are the place to start when becoming a conscious consumer. But the ubiquity of the E-number (the international classification system for food additives) coded ingredients, and long, technical terms outside of the traditional food lexicon, can lead consumers into a false comfort with the familiar where the additives in packaged foods are concerned.

Nancy Hobeika, a licensed nutritionist and clinical dietician who works in tandem with a clinical psychologist on some of her cases, sees frequently in her practice the link between additives in food and behavioral disorders in children.

“Nutrition plays a 20 to 40 percent part in ADHD [Attention Deficit Hyperactivity Disorder]; this has been proven by scientific research,” says Hobeika. Though scientists remain unclear as to whether behavioral disorders such as ADHD and its little brother, Attention Deficit Disorder, can be caused by food additives (particularly artificial coloring), the link between additives and the exacerbation of existing behavioral conditions has been known since 1980.

Some European governments have either banned or called for a gradual ban on some of the most potent artificial colors such as ‘Tartrazine,’ ‘Sunset Yellow’ and ‘Allura Red’, and the United States Federal Drug Administration requires warnings to be printed on packages containing these colors, as they can not only affect behavior but are also highly allergenic.

And beyond this, there are tales of sweets containing the illegal and highly carcinogenic colorant ‘Sudan Red’ creeping into the Lebanese market every few years.

Colors are just the beginning. Though government action has not kept up with research in most jurisdictions around the world, some flavor enhancers have been found to cause heart complications and central nervous system-related problems such as strokes, Alzheimer’s and Parkinson’s; artificial sweeteners have been found to be carcinogenic, and certain preservatives can cause long-term respiratory problems, DNA mutations and cancer — just to name a few.

Subtracting the additives

Some private actors are beginning to recognize the potential effects of additives. Sesobel, a small, non-profit school in Keserwan for handicapped and mentally challenged children, also has a small factory in Jezzine where it produces  batches of natural products without additives.

“We work for people who are handicapped. We should make the food more healthy so we decided to make food without additives,” says Sesobel Plant Manager Paul Kattar.

The staff at Sesobel adopted the policy of clean products for sale and clean food for its children due to the growing but not yet widely recognized belief that additives in food can encourage behavioral disorders in children. The preserves sold by Sesobel in their own stores are free of preservatives, artificial colors and any other additives and are made from fruits grown by the organization’s farm. The farm is not certified organic due to the cost and length of the certification process, but Dr. Joseph Haddad, director of research at Sesobel and president of the Lebanese Pediatric Association, says the produce is tested for chemical residues before use. This means that in his opinion Sesobel’s products are as healthy as they can be.

“It is well known that some of the additives may provoke chemical reactions in the food and can lead to toxicity. To avoid this cascade of toxicity it is better that you develop healthy food. That was our aim,” says Haddad.

For additives, as with almost any substance, the poison is in the dose and herein lies the rub. The Lebanese Standards Institution LIBNOR has standards dictating the appropriate usage of many additives, capping their presence in food products at levels deemed to be safe. However, as diplomatically explained by Lena Dargham, director general of LIBNOR, the relevant authorities do not coordinate well to make sure that standards are being followed and that food is safe.

Standards set by LIBNOR exist for the usage or non-usage of many additives, but many, if not most, of these are not mandatory because a standard published by LIBNOR has no enforcement mechanism without a ministerial decree making it obligatory.

Clear definitions for words like ‘natural,’ ‘lite,’ ‘low fat’ and ‘healthy’, along with many other health claims, do exist but are also not mandatory, and are therefore not enforceable by any of the authorities responsible for food safety. 

As Executive went to print, LIBNOR had published 550 food-related standards, most of which are not compulsory. But even when standards are made mandatory, Rita Abou Obeid, managing partner of Specifico & Co, a regional food safety consultancy, is sure that no Ministry of Economy and Trade staffers are pulling items off the shelves to check how faithfully they are labeled or whether they adhere to LIBNOR standards.

Dargham said that manufacturers are starting to clean up their acts because of the potential for export to countries with stricter regulations. And in an attempt to give their standards more efficacy, LIBNOR is now offering a mark or seal to be printed on packaging to signify that a product is compliant with their standards — even those that are not mandatory. So far no food products have been granted the seal since the organization is still working out the kinks in the auditing process, but this has the potential to be a positive step in terms of consumer education and choice.

A new food safety law is in the works which will most likely leave the issue of food additives and labeling in the hands of the newly formed food safety authority [see page 82]. It should be noted, however, that what is of equal, if not greater importance to the rules and regulations the law will enact is the funding and resources necessary to enforce accurate labeling and the exclusion of forbidden substances.

So what to do?

Beyond learning to make condiments, candies and soups at home so as to avoid buying pre-made ones in the store, there are few options to avoid additives altogether, though there are some that are more dangerous than others (see chart) depending on the individual concerned and the additive concentration, which in Lebanon can scarcely be confirmed.

Furthermore, the Ministry of Economy and Trade has set up a consumer protection hotline where consumers can report products they believe should be investigated. If colors seem too bright, if children have an allergic reaction to their food or if headaches occur after eating a specific food, a call to the hotline may just get to the bottom of it.

But Obeid is not holding her breath: “We are not used to having our rights in this part of the world… In other places [these] things are taken for granted.”

“It is well known that some of the additives may provoke chemical reactions in the food and can lead to toxicity”

Paltry room to move

…for birds and producers alike

Lebanon’s poultry industry is the only sector within the food system in which production is sufficient to satisfy domestic demand. It produces 135,000 tons of meat per year, according to the Food and Agriculture Organization’s 2007 statistics (the most recent available). You would think, then, that the government would want to keep a close eye on it, as Lebanese chicken is exported in increasing quantities all over the region and is a staple food at home as well. But alas, experts say that practices in the poultry industry remain as unchecked as in any other. So Executive sought to find out if the quality of Lebanese chicken matches the price.

“It’s not like you have a margin; there is no margin for error. You have to follow the competition”

Out with the old

It is the big three poultry brands, Hawa, Shuman and Tanmia, that have raised Lebanon’s poultry production to such a high volume, with the big three alone producing more than 27 million birds per year, according to their own reports. But the quality of chicken meat and the nutrition it provides is directly related to the feed the animal consumes, the space in which it lives and even the conditions in which it is slaughtered. Best practices in this regard are currently being debated around the world as modern methods champion consistency, while more traditional methods offer a more natural process.

All three main chicken producers have been gradually modernizing and expanding over the past decade. Though they started out using traditional methods of farming, they all now primarily use closed-system farming operations. This means that the chickens live in a closed house with forced ventilation and specially designed lighting to keep the chickens calm. The closed system is meant to insulate the animals from all pathogens in the ground and air outside so that the chickens are as protected as possible from disease and contamination. The birds never leave the houses and are generally packed around 15 birds to a square meter.

“When you have a closed system the bio-security is 100 percent better,” said Ralph Freiha, vice president of Youssef Freiha and Sons, parent company of the Lebanese Poultry Company (LPC), which owns Shuman.

In most cases, contract farmers are also required to outfit their farms with closed-system technology. In the case of Shuman, few traditional farms remain.

All three companies also have their own, automated slaughterhouses and have either obtained or are in the process of obtaining the International Organization for Standardization 22000 certification for food safety standards — a comfort in a country plagued by horrifying slaughterhouse images.

Though all three companies claim that the closed-system factory farm is the safest way to grow chickens, there is an expanding view in the world of animal husbandry that the welfare of the animal is directly related to the taste and the quality of the meat. The closed system, at least in the eyes of concerned consumers in Western markets, is falling out of favor.

A 2002 report by the Department of Animal Sciences at Colorado State University in the United States stated that everyday stresses of confined living, and especially the acute stresses preceding slaughter, can have an ill effect on the quality of the meat. Acute stress causes the chicken to secrete stress hormones, which alters the taste of the meat, and chronic stress can cause depletion of muscle glycogen, decreasing the size of the meat and darkening its color.

When owned by the Shuman family, Shuman Farms was known for having an open-system, more traditional way of operating, but, said Freiha, “The competition is really very fierce in the market. And you work on cents; it’s not like you have a margin — there is no margin for error. You have to follow the competition.”

Consumer poultry, meaning the chickens sold in grocery stores and bought by private consumers, has a price ceiling implemented by the Ministry of Agriculture, as it is seen as an essential food product along with bread and certain oils. This means that poultry producers cannot raise their prices and must produce at a cost below approximately $3.45 per kilogram if they want to turn a profit. Freiha says that the ceiling is so low that he does not even turn a profit from the chickens he sells in supermarkets.

The Shuman family controlled operations for the brand until 2003, but by 2008 LPC, a subsidiary of Freiha Holding, had completely taken over operations for the brand and owned 30 percent of the name.

Two of the three big companies herald their good practices right on the package, saying they do not use antibiotics in poultry raising. Administering antibiotics to sick animals meant for human consumption is common practice all over the world. As long as proper protocols are observed, the end product will not contain any residues of the medication and the farmer will not lose an animal to disease.

The improper use of antibiotics, however, is a serious concern. When antibiotic residues are ingested, it is essentially like taking a small dose of unnecessary medication. Over-prescription of antibiotics and unintended extraneous doses can cause the very bacteria the antibiotics are meant to fight to mutate and become antibiotic resistant. This is of particular concern in Lebanon as both Zeina Kassaify, professor in the American University of Beirut (AUB) department of nutrition and food sciences and Dr. Rana Sharara, practicing pediatrician and assistant professor of pediatrics at AUB, said that Lebanon has a drastically overmedicated population.

Both Tanmia and Hawa told Executive that they do not use any antibiotics whatsoever because their closed-system facilities keep pathogens from reaching the birds.

“We don’t give antibiotics to the chickens. We give vitamins,” said Ziad Aoun, marketing manager for Hawa Chicken. “In Lebanon there are too many open system farms, but our farms are closed system. And this system will decrease the relation with the outside because viruses are in the air… This is why we don’t have the diseases that chickens get when they are in open system farms.”

Executive took supermarket samples from Hawa, Tanmia and Shuman to the Industrial Research Institute’s  (IRI) certification lab in Hadath in order to be sure. IRI tested for a chemical commonly found in antibiotics and found no traces in any of the samples from any of the companies. Though desirable, these results are not necessarily definitive. While it was professionally administered, the testing did not investigate every possible antibiotic used in poultry and experts consulted by Executive expressed strong skepticism at the possibility of any large-scale poultry producer operating without any antibiotic use.

“It is a general practice on poultry farms of Lebanon to use antimicrobial agents whenever mortality starts rising and gross lesions appear on the internal organs, such as the liver, heart, kidney, air sacs, etcetera…” said Elie Barbour, professor of veterinary microbiology at AUB. “However, the respect of withdrawal periods — making sure the antibiotics have time to get out of the chicken’s system before slaughter — is important and very serious.”

Ralph Freiha of Shuman said that despite his closed system he does sometimes require antibiotics in his operation. The feed for his chickens contains a small amount of antibiotics, which is stopped 10 days before slaughter. Further, sick birds are quarantined and administered antibiotics, whose use must be stopped seven days before slaughter.

Barbour said that this is the point where the Ministry of Agriculture needs to show its teeth.

“The only way for the ministry to make sure is to sample marketed carcasses randomly from each farm, and to analyze it for antimicrobial residues and give significant fines for those that badly manage drug administration,” he said.

“Making sure the antibiotics have time to get out of the chicken’s system before slaughter is important and very serious”

Crying Fowl

Unfortunately, a lack of proper monitoring of Lebanon’s poultry purveyors is not the most worrying aspect of eating white meat in Lebanon. Capped consumer prices do not mean that Lebanon’s restaurants and caterers are not going to try to increase their margins by decreasing costs. And the way in which they do this when it comes to poultry can be downright scary.  That is, by allegedly buying illegally imported meat.

“When you get chicken parts coming to Lebanon in a taxi and the heat is maybe 30 degrees and it is cleaned — dipped in water and chlorine — and sold as fresh, then you get people going to hospitals,” said Freiha, who estimates that domestic supply makes up just 65 percent of the poultry on the market.

Illegal imports come into Lebanon without proper storage, proper cooling, proper handling and without any verifiable expiration date — all of which invite spoiling and contamination. Wadih Nasrallah, general manager of Tanmia, believes that illegal imports have gotten so out of hand that they are driving down the market share of local suppliers.

“With no serious measures by the government to stop the illegal imports, the percentage of the chicken meat produced will dwindle down to below 50 percent of the consumption level,” said Nasrallah.

Legal imports do exist from Brazil, where the poultry industry is heavily subsidized. The LPC, owners of the Shuman brand, import Brazilian chickens to sell to hotels and caterers, but do not sell them branded under the Shuman name unless they are grown in a Shuman farm.

It is this kind of transparency that consumers deserve when buying food, but too often it is not what they get. In fact, even the claim above regarding where a chicken was raised is incredibly difficult to verify. The only things to do then are to ask questions, use best judgment and do not buy chicken out of the back of a taxi.

“Illegal imports come into Lebanon without proper storage, proper cooling, proper handling and without any verifiable expiration date”

The next big thing

All the rage in the metropolises of the west are phrases like “organic,” “free-range,” “cage-free,” and “pastured.” Such words have also been turning up on egg cartons in Lebanon’s supermarkets with growing frequency. But do these words have any place in Lebanon’s poultry industry? Opinions regarding the feasibility of these niche types of farming on a large scale seem to differ between practitioners and academics.

Free range is a phrase that must be given meaning by an enforcing agency or it falls into the category of nebulous claims such as “low fat” and “diet.” In the United States, free range only indicates that animals have had access to an outside environment. But on Lebanon’s limited land, converting to free range practices and maintaining current production levels would be impossible.

“Free range in Lebanon is not feasible. You don’t have enough land to have free range. Imagine 20,000 birds roaming around. And free range costs you about double. And since you have limitation on the price of chicken in Lebanon…” said Freiha rhetorically.

The organic trend is picking up speed in Lebanon, but organic in the world of animal husbandry is a tough nut to crack. So far the only certified organic animal operation is Biomass’s organic eggs and dairy production, which debuted in June.

Doing their best to give chickens a better life and customers an alternative to factory-farmed chicken is the B. Balady project in Jezzine. Started by the World Rehabilitation Fund with funding from the United States Agency for International Development to give opportunities to land mine survivors in Jezzine, B. Balady sells eggs in supermarkets all over Lebanon and whole and partial chickens in their own outlet in Jezzine and the Healthy Basket store in Beirut.

The chickens live in naturally ventilated and lit houses with access to small outdoor areas in various farms in Jezzine.

AUB’s Barbour, an advisor on the project, sees it as a benefit to Lebanon, not just at the consumer level but also on a larger scale.

“This project is within the international strategies of food safety and food security, since the Middle East imports 50 percent of [its] needed foods, and climate change might reduce our local and the international production of foods, thus affecting our security,” he said. “We have to be prepared, creating new niches for production under climate change.

Planet Organic

Seeking perfection in an imperfect field

The price of organic produce is about to go through the roof. Recent media focus on food safety and the ever-present Lebanese desire to move with international trends translates into a boon for the organic food industry; but it is still in its infancy in Lebanon, having only been around since 2002, and only really selling since 2009. And, like children, young industries take wobbly, faltering steps to reach maturity, after which they may not bear much resemblance to their former selves. Still, it is important for the consumer to understand the way in which the industry currently works, and what it really means to be organic in Lebanon, if we are to make prudent consumer decisions in the current climate of fear over food safety.

The process & the product

The word “organic” refers to the process more than to the product. In most cases, a conventionally grown apple and an organically grown apple look exactly the same. In fact, organic fruit and vegetables may even have more flaws or individualities than their conventional counterparts because invasive and synthetically based measures are not taken to ensure uniformity.

Organic does win when shelf life is the matter at hand. “The thing is, with organic vegetables, once you pick it, its shelf life is longer because it has no chemicals to hold it. With chemicals [it] is shorter because once you pick it, you take all the chemicals from it and it’s going to start deteriorating,” said Hadi el-Solh, an organic farmer who sells his produce in Saida.

Essentially, organic farming means being free of all synthetic materials, including hormones and synthetic pesticides, herbicides and fertilizers. Organic farms must also use clean water for irrigation — an especially salient issue in Lebanon.

This type of farming leads to produce that is free of chemical residues and is as toxin-free as possible. In a world where conventional farming has become more chemistry than horticulture, keeping to this standard takes more defense than offense. Boundaries must be set and buffer zones created to keep neighboring conventional farms from contaminating organic ones.

This fact poses geographic challenges in Lebanon, where some locales are virtually impossible to protect against contamination. “We have some operators who want to go into organic certification in the Bekaa but we cannot accept them because we know that the irrigation water is not very clean, so we don’t certify farmers in the Bekaa. Also [the land] is very open and you cannot do any buffer zones,” said Khalil Haddad, general manager of LibanCert, the only Lebanese organic certification body.

The biggest organic player in Lebanon currently is Biomass, a brand that is becoming more ubiquitous by the day. The fast-emerging organic producer and distributor began on the Massoud family farm in Batroun in 2007. Today, the company sells more than 200 products in supermarkets all around the country from certified farms across Lebanon. Biomass also recently expanded into organic dairy production and is growing fast, though, according to commercial director Mario Massoud, they have yet to break even.

And though Biomass may be one of the most prominent players in the organic field, its proclivity for perfection is a frustration to some growers. Agriculturalists report that Biomass requires their product be uniform in size, so that even if four tomatoes in a box may have come from different farms they must all look exactly the same; this type of strict selection then creates a consumer perception and expectation.

“The problem is that what you find on the market is the elite product. The consumer is willing to pay more but they want the best product. And when you want to give them this… you are obliged to eliminate or destroy the rest, and you have a lot of waste,” said Roula Fares, Middle East representative for FiBL, a Swedish research institute for organic agriculture.

To rectify this issue, which helps to keep prices high and environmental benefits low, the market mentality — on both the producer and consumer end — will have to change.

Why go organic?

The benefits of buying organic are two-fold. Synthetic herbicides and pesticides are both chemicals meant to kill organisms. They are therefore toxic to the body, and even if they do not cause direct symptoms they have a taxing effect on the immune system, leaving vulnerable populations like children and the elderly at risk whilst also exacerbating existing conditions such as autoimmune diseases and allergies.

Though a tougher sell, the environmental impact — or lack thereof — of organic farming is perhaps a more important reason to buy organic whenever possible. Firstly, there is the problem of runoff; the effects of conventional agriculture are felt throughout the country as pollutants do not stay put where they are first applied. When it rains, chemicals flow into groundwater and are then swept into the country’s streams, rivers and sometimes into the sea, not to mention into the public water supply. Secondly, there is the health of the soil itself. Lebanon is a small country with land that is regionally prized. Conventional agriculture does not require crop rotation, as synthetic means can be used to prop up the soil and kill any bad bacteria or organisms that have taken root.

“In organic farming, crop rotation is necessary. The soil talks and it will tell you what it needs. But a conventional farmer who just grows tomatoes and tomatoes and tomatoes — he doesn’t care because he is using chemicals,” said Solh, who sells his wares under his own label and is also a supplier for Biomass.

But topsoil does not last forever, and it is widely believed that conventional agriculture, partnered with erosion and the geological stresses of civilization, mean that topsoil all over the world is degenerating faster than it can replete itself.

Certified organic

An organic product is as good as its certification, and in Lebanon this is where it gets tricky.

There are two certification bodies in Lebanon with the aim of giving the word ‘organic’ a standardized meaning. LibanCert and Instituto Mediterraneo di Certificazione (IMC) are both accredited by foreign bodies (as Lebanon lacks an agency that oversees the certifiers) and follow the standards for organic cultivation of the European Union.

“Once standards are adopted by the [Ministry of Agriculture] and become law, the local certification body will be very important,” said LibanCert’s Haddad. 

As happens in any industry, the virtue of the certifiers is questioned by market players, who accuse them of complacency in their monitoring. More than once-yearly visits to farms, including surprise visits, should be a large part of a certifier’s work, and the farmers Executive consulted for this story all acknowledged the potential for noncompliance, but also affirmed the commitment of farmers and certifiers to the validity of the industry.

“Can someone cheat? Yes, but I believe that anyone really involved in the organic industry would never do that because they have everything to lose,” said Biomass’s Massoud.

The competitiveness of the organic market in Lebanon and the small amount of consumers with the funds and the inclination to pay for organic products means that mud throwing is perhaps more prevalent than noncompliance.

Rami Chemaly, a professor in the agriculture department at the American University of Beirut, said that the certifiers are doing their best but that the nature of certification does come with a certain leap of faith.

“Certification is voluntary. It means that the farmer requests certification to make sure that they are doing things properly and not as a way of granting a certificate of good health,” he said. “All farmers can cheat; you are not sitting on top of the farmers… But essentially the company relies on [their] good will.”

And though most of the industry players consulted for this report expressed faith in Lebanon’s certifiers, Nancy Hobeika, a licensed nutritionist, clinical dietician and owner of an organic meal delivery service and diet center, holds that the only way to know for sure is to have a relationship with your farmer or grow yourself. 

“I tell my clients to go fetch organic labels that come from the United States or from Europe. I recommend them to grow their own inside their houses. It is not that difficult to grow some green leafy vegetables. Everybody in Lebanon has houses and land outside of Beirut,” she said.

The price of production

Contrary to logic, organic farming is not inherently more expensive. Yes, any materials such as minerals and fertilizers must be certified organic and imported, as none are produced in Lebanon, but by banishing the many chemicals conventional farmers use to produce bigger fruits and larger yields out of tired soil, overhead costs are actually cut. But here in Lebanon costly obstacles do remain.

When soil is not ‘on steroids’, the output is naturally much smaller and less dependable. As Solh, the farmer, explained, when a conventional farmer plants 1,000 tomato plants, he knows that he will get 10 tons of tomatoes when it is time to harvest. When an organic farmer plants 1,000 tomato plants he will only get four to six tons.

Furthermore, organic farmers are more susceptible to the forces of nature, such as droughts and extreme heat, as they cannot use chemical measures to combat these problems.

And for a farmer looking to make the leap, going organic is a big financial commitment. The conversion process takes two to three years. While a farmer is waiting for his soil to regenerate and cleanse itself of chemicals, he may grow and sell his produce, but not under the label of organic, meaning he is operating organically but must adhere to conventional market prices.

Furthermore, organic certification does not come cheap. Solh, for one, is certified by LibanCert and pays $180 per hectare. With 17 hectares, that is a yearly expenditure of $3,060 before the costs of labor and all the necessary materials for farming enter the picture.

And though the other substances required to keep the farm going are fewer than they are with conventional methods, the small population of organic farmers and the lack of centralization makes for small orders and high prices.

“It is such a small industry that you don’t have big suppliers importing for the whole country. It is each operator trying to import for himself,” said Massoud.

Another major driver of cost is transportation, as most of the market for organic products is still in Beirut. Solh sells his product in Saida, and Biomass is expanding its distribution both north and south, but for independent farmers transportation exerts an upward pressure on prices.

Packaging also takes a toll. Organic vegetables are often bagged or boxed and wrapped in plastic, with the reason for this two-fold. Packaging lessens the probability of tampering or contamination from conventional vegetables and supermarket owners who might decide to put conventional tomatoes in the organic boxes, while it also offers a crucial opportunity for branding in a market where prestige is premium.

Furthermore, as very few restaurants in Lebanon serve organic produce, organic farmers depend on everyday consumers who follow the unique Lebanese seasonal patterns of behavior that greatly affect sales.

“It’s well known now that in organic sales, the season starts in September and ends in May. June, July and August are dead months because schools are done, people are up in the mountains… they go to the beach, they go to restaurants, and restaurants don’t buy organic because they want the cheapest [goods],” said Solh.

Prices could be slightly lowered if there was more cooperation among players but the effort to form an official organization halted years ago, and recent attempts have borne no fruit.

Looking ahead

Organic agriculture is not going to solve any of Lebanon’s food security problems any time soon, as right now it represents only a small niche in the overall market. But it is growing fast, and if Western trends are any lesson it is not something to write off.

Too many cooks…

Who’s carrying the can over Lebanon’s food policy?

Stated with as much trepidation as is needed vis-à-vis any remark regarding an undertaking dependent on the Lebanese government, it is reasonable to assume that there will be a food safety law on the books shortly. And where food safety is concerned, Lebanon has nowhere to go but up.

Currently, the duties performed in other countries by a central body, such as the United States Food and Drug Administration, are being done by a plethora of different ministries with several layers of authority that overlap and collide in a manner that perhaps only Lebanese legislation could have conjured up.

Even industry players and government employees will say that the duties of ensuring food safety are so sporadically spread throughout the ministries of health, agriculture, interior, industry and economy and trade that coordination is next to impossible.   Furthermore, the funds and skilled manpower needed to support activities such as testing products for labeling accuracy are next to nil. The food safety law, which is currently undergoing a revision by several ministers — who have already had at least one extraordinary cross-ministerial meeting as Executive goes to print — creates just such an authority.

“In Lebanon in particular [an independent authority] is really important because, the way that it is now, the responsibilities are fragmented among all of the ministers,” said Zeina Kassaify, professor of nutrition and food sciences at the American University of Beirut and president of the Lebanese Association for Food Safety.

The Lebanese Food Safety Authority will theoretically be able to function unhindered by the territorial posturing of the ministries and the glacial pace of cabinet decisions.

Unified authority

The authority will have jurisdiction over the farming, production, makeup, packaging and storage of all food items produced or distributed in Lebanon where and whenever their safety is of concern. The authority will also have control over labeling requirements and investigations into the accuracy of labeling, and will also be in charge of inspecting the supply chains of operators and ensuring that proper records are kept.

The food safety authority will also have the opportunity to make regulations regarding genetically modified food — a controversial issue in Europe and the United States and a legislatively nebulous one in Lebanon.

Advising the authority will be a council of experts from public and private sector organizations such as the Lebanese Standards Institution, the Federation of Lebanese Chambers of Commerce and the Consumer Protection Association.

The authority will be governed by a managing board made up of experts from a variety of existing government offices, which points to perhaps the most radical and the most important structural element of the food safety authority: it belongs to no ministry. The authority falls under the tutelage of the Council of Ministers and receives an allocation in the government’s budget just like any ministry, although it is not subject to oversight by the Civil Service Board or the Central Inspection Board as per the initial draft law.  

Though this arrangement may be a good thing where autonomy is concerned, the authority is also at the mercy of the Council of Ministers’ leisurely decision-making schedule, as any measure must be ratified by decree from the Council of Ministers.

The designers of this law have, however, kept emergencies in mind and given the authority the power to take immediate decisions regarding item recalls and import restrictions during times of crisis. These decisions need only be alerted to the Council of Ministers.

Kassaify describes the authority in these cases as a facilitator, linking the ministries under one authority, assigning response work and coordinating information from each ministry.

“An outbreak is not just people getting sick. You have to go follow the source, you have to see who is responsible, you have to go and close down places, you have to follow it in the courts and you have to prevent things from happening again,” she said.

An unknown quantity

If the scheme sounds like it will shake things up within some ministries, it will. And there has been a marked amount of pushback from related ministers who believe that they are losing power and influence by forfeiting some of their responsibilities. As Executive went to print, these very ministers were making changes, and only when the law is resubmitted to the Council of Ministers and then moves on to Parliament will we know if its spirit has remained intact.

Kassaify, who was not consulted in the drafting of the law, was a supporter of the original scheme, but is wary about the most recent round of changes and said she could not throw her support behind the new version until she has seen it.

Guidelines and regulations for individual sectors and distribution points will be decided by the authority’s many departments if the original scheme survives, and though the formation of the authority will be a good sign, these will show how serious the government is about making Lebanon a safer place to eat.

“An outbreak is not just people getting sick. You have to go follow the source, you have to see who is responsible, you have to go and close down places

October 24, 2011 0 comments
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Since its first edition emerged on the newsstands in 1999, Executive Magazine has been dedicated to providing its readers with the most up-to-date local and regional business news. Executive is a monthly business magazine that offers readers in-depth analyses on the Lebanese world of commerce, covering all the major sectors – from banking, finance, and insurance to technology, tourism, hospitality, media, and retail.

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