Economics & Policy

Executive Insight – Stronger but not immune

by Fabio Scacciavillani
written by Fabio Scacciavillani

After months of burying their heads in the sand, markets and policy makers are waking up to the reality of a double dip in many mature economies. The logic of the recovery was quite simple: the massive bank bailouts, the fiscal stimulus and the monetary injections were supposed to provide temporary support to avoid depression while the deeper underlying causes of the crisis were addressed and resolved.

The reality has been utterly disappointing. As soon as a timid recovery materialized in mid-2009, world leaders, financers and central bankers patted each other on the back, hailing the “green shoots of growth” in a self-congratulatory ritual. Hence difficult but unavoidable decisions were postponed day after day while the stock market was inflated by the liquidity injected by the United States Federal Reserve and, to a lesser extent, the European Central Bank.

Once the ‘quantitative easing’ programs expired, stock markets lost steam, and by the second quarter of 2011 all major economies were close to stagnation.

Faced with evidence of declining economic activity, most media and analysts started to drum up the “soft patch” rhetoric, suggesting the slowdown was a mere pause in the global recovery. Yet by the summer, with the intensification of the fiscal crisis in Spain and Italy, the smoke and mirrors were wiped away, revealing a chronic lack of leadership and policy direction, laid bare by the squabbles over the debt ceiling in the US. Investors were forced to realize there was no long-term plan to tackle the crisis.

Belatedly, the reality of an impending double-dip recession has sunk in, although the extent and the duration are still being debated. But it will not be a matter of a few months given that there is no catalyst for growth in sight. Nor are current policies going to rectify the situation in the short-term. It is unlikely that the structural reforms that are key to boosting long-term growth prospects — including revamping fiscal systems, European Union governance, financial regulations and welfare programs —  will be enacted before the end of the year. In the meantime risks of a large sovereign default or other disruptions loom.

Buoyed by barrels

So far the Gulf Cooperation Council (GCC) has emerged relatively unscathed from the global economic crisis, not withstanding the effects of the Arab uprisings this year. But how long can this last? The resilience results from healthy growth in the emerging markets — above all in China —  which has maintained high oil prices and international trade. If the recession deepens, we could experience a situation similar to that in early 2009 when the oil price plunged below $50 a barrel.  

GCC states remain obviously reliant on oil revenues, which account for close to 78 percent of total exports. Saudi Arabia in particular has embarked on a program of increased social spending to defuse political tensions. Standard Chartered estimates that Saudi Arabia will incur budget deficits if the oil price falls below $106 per barrel.

Break-even oil prices have increased in the rest of the GCC, although they are still below current market prices. The UAE and Kuwait need oil prices at $80 per barrel to balance their budgets, while Qatar based its $6.1 billion surplus budget projections for 2011 on an oil price assumption of $55 per barrel. Oman’s 2011 budget was drafted with a slightly higher figure, at $58, and while higher spending has been incurred the high average oil prices of $106 so far in 2011 gives them a fairly comfortable cushion. 

Even the International Monetary Fund in its latest World Economic Outlook, issued in late September, underscores that growth in the MENA oil exporters will be almost 5 percent in 2011, gliding to almost 4 percent in 2012. The IMF mentions downside risks from political unrest and a deeper fall in commodity prices (in the baseline scenario oil prices are expected to fall by only 3 percent on average in 2012), but overall the picture is rather positive, especially if compared to mature economies.

If the global picture were to deteriorate, there are two elements to keep in mind. The lessons from 2009 have been internalized: commitment to public spending kept the economies going then and will again act as an anchor of stability in 2011/12.

Actually, governments would be wise to reiterate their commitment to expenditure on infrastructure now, without waiting for the situation to worsen. This will reinforce confidence, thereby sustaining credit, private investment, consumption and the job market.

Lessons learnt

There is an even more important factor compared to 2009: financial markets have improved markedly. High-grade credit from the GCC has been buoyant, with Abu Dhabi and Qatar outperforming most sovereign benchmarks from emerging markets. International portfolio managers have developed a more insightful knowledge of the region, whereas in 2008 there was hardly any significant fixed income market.

During 2011 regional bonds withstood the bouts of global volatility, in contrast to 2009 after the Nakheel default. Traders for example recall that Qatar sold $7 billion in bonds in November 2009, subscribed mainly by investors in the United States and the United Kingdom, and as a result of the turmoil ensuing the Dubai World debt moratorium, some portfolio managers sold them on the belief that the Emirate was part of the UAE.

The notable progress made in the past two years in creating a fixed income market and some central banking facilities has paid off: liquidity is improving dramatically, with several benchmark issues now gettingt he attention of large funds with the analytical resources to assess the economic situation professionally and not hysterically. Crucially, GCC paper finds better acceptance in the repurchase (repo) market with low haircuts. This is of the utmost importance because in crises heightened risk aversion affects dramatically those securities that do not provide liquidity and that cannot be used as collateral in repo operations.

The Lehman bankruptcy was essentially a run on the international repo market and hit the GCC banking system because short-term financing became difficult. If such an extreme event were to take place again the lines of defense are stronger. Additionally, commercial banks have painstakingly cleaned their balance sheet of non-performing loans, while name lending after the Algosaibi-Saad affair is being replaced, albeit sluggishly, by careful assessment of balance sheets and business plans.

Not everything is rosy: corporate governance remains patchy, macroeconomic statistics in some areas are far below emerging market standards (in the UAE especially) and stock markets remain extremely fragmented and illiquid. Sovereign bonds from the region are not included in emerging market indices; hence the GCC bonds are an off-index choice for most international funds. This means they are the first to be dumped by investors whose portfolios track broader indices.

In conclusion, thanks to solid fundamentals and an improved financial landscape, the GCC can reasonably withstand another mild recession lasting two or even three quarters, but the ripple effects of a deeper downturn or a traumatic sovereign default would be felt on Gulf shores. Accumulated wealth is a strong bulwark, not total protection.

 

 

 

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Society

The end is nigh for the age of rage

by Jeff Neumann
written by Jeff Neumann

Lebanon has among the slowest broadband Internet speeds in the world. This has been well documented, and as Executive went to press the country was ranked 169 out of 170 by broadband monitor Ookala — putting Lebanon ahead of only Iran, while trailing directly behind Mali, Bolivia and Sudan. And not only are Lebanese Internet connections painfully slow, they are also prohibitively expensive.

The grand rollout of the upgraded broadband digital subscriber lines (DSL) in Lebanon is set to take effect on October 1, according to comments made by Telecommunications Minister Nicolas Sehnaoui to reporters in late September. With the assumption that the plan will be realized and broadband speeds will move beyond a crawl Executive found out what the increase in bandwidth could mean for businesses here.

The hold up

Because of the extortionate cost of a decent Internet connection in Lebanon today — by all accounts the most expensive broadband in the Middle East — running a web-based business can be extremely frustrating and logistically problematic. And one does not have to look far to find the source of such frustration. Tom Shepherd, an analyst for telecommunications market research firm TeleGeography says, “On the subject of affordable access to newly increased bandwidth, the overriding factors are local infrastructure and local commercial agreements, often dictated by political decisions, [which is] particularly true in Lebanon.”

Lebanon has had the proper fiber-optic network to handle upgraded Internet speeds in place for years, but government bickering has kept the additional bandwidth unavailable. This inaction has caused “puzzlement” among members of the telecommunications industry and the government, Shepherd says. Most current broadband subscribers would likely use a somewhat less innocuous adjective to describe their feelings about the holdup.

Lebanon is connected to the India-Middle East-Western Europe (IMEWE) submarine cable that runs from mainland Europe to Cyprus, and on to Tripoli. The IMEWE cable has designated levels of bandwidth assigned to each country it is connected to, as Shepherd explains: “Of IMEWE’s overall design capacity of 3.84 Tbps [terabytes per second], 120 Gbps [gigabits per second] is allocated to Lebanon.” And Lebanon is connected to more than just the IMEWE cable.

“Increased bandwidth is also coming via other cables — potentially a larger capacity increase than the IMEWE launch,” Shepherd says, with upgrades planned for the Cadmos submarine cable that also links Lebanon and Cyprus, in addition to upgrades on the Berytar cable running between Syria and Lebanon. Clearly, and unsurprisingly, the main culprit in the failure to bring Lebanon’s connectivity up to date is not infrastructure, but rather government wrangling and bureaucracy.

Average consumers aside, perhaps the biggest beneficiary oft he upgrade will be web developers, who today find themselves constantly behind on the latest technology, trends and software. Put simply, their business is wholly dependent on connectivity. Nagib AbdelNour, head of business development at Koein, a Lebanon-based web and software development company, says that for his developers it is difficult to even download new software that is essential to keep the company current in a highly competitive market, putting the company at a distinct disadvantage to regional rivals.

One such technology currently unavailable in Lebanon is cloud computing, or the sharing of information and software over an online network. “[We’re] left out of new products, like applications. You can’t use them here,” AbdelNour says. “Cloud computing is the future of computing. It could take four years for  Lebanon to get into serious cloud computing. That’s a long time in this business. Everyone is moving to cloud computing, and for this you need a good and cheap connection.”

On a consumer level, cloud computing is used to store and share photos, music and other media through services offered by Apple, Amazon and many others. But being years behind on this technology ensures that local developers cannot stay as competitive. AbdelNour says that while the initial upgrade will be “good for today,” he warns that it is far behind other countries in the region, and as others progress Lebanon will “not be ready for tomorrow.”

Another missed opportunity for Lebanon is the global information technology (IT) outsourcing market. “All of the big corporations are outsourcing to Egypt and Dubai,” AbdelNour says. He notes that many Lebanese can speak at least three languages and that the country should, under normal circumstances, be well positioned to attract large-scale IT outsourcing contracts from some of the tech world’s biggest players. But without a fully functional, modern fiber-optics network, “you will never see them in Lebanon.”

While the revolution in Egypt has stifled economic growth and investment, the country remains a perennial favorite atop the National Outsourcing Association’s ‘Offshore Destination of the Year’, and is shortlisted for this year’s award in November. Last year alone Egypt generated over $1 billion in IT outsourcing revenues from overseas contracts, and revenue predictions for the coming years are even greater.

But even as frustrations with bureaucracy and inaction have reached fever pitch, the positive aspects of better bandwidth are countless. As businesses and consumers spend more time online, advertising rates will increase, too. According to a recent study by Omnicom Media Group, online advertising in the Levant and GCC this year should take up some 9 percent of a roughly $2 billion regional advertising market. Lebanon’s share of that can only grow with time as the means and technology catch up.

Mobile broadband is set to take off as well. TeleGeography’s Shepherd points to the vast experience that the management behind Alfa and MTCTouch — Orascom Telecom and Zain Group, respectively — have with mobile broadband networks around the world as reason to be hopeful that up-to-date technology could be quickly and efficiently implemented. “Mobile broadband —using the new upgraded Internet capacity — will of course also be very important as a means of Internet access, as in many countries around the world where cellular has often overtaken fixed access as the primary method of getting online,” he says.

Security concerns

With increased bandwidth will also come the need for better online security. According to Ziad Badaoui, product manager for security systems at BMB Group, a Beirut-based IT consulting firm that partners with Cisco, McAfee and other global online security companies, “Across the years, security threats have evolved from traditional computer viruses, which were commonly detected by legacy antivirus applications, to sophisticated, blended threats with one major target: steal as much data as possible.” Large-scale data  theft is a terrifying thought for any business owner.

According to BMB Group’s Product Manager for Security, KarimAbillama, as “businesses are moving into ‘always on’ reliable connections, allowing them to host E-services, web-based and mail services in their data centers,” the multitude of security threats will only grow. “Although this [always on] approach allows organizations such as banks, telcos [telecommunications operators] and universities to offer reliable services such as e-banking, e-portals, e-learning, outlook web access and CRM [customer relationship management], security risks from both the public accessibility of those services and the variety of threat vectors targeted at them make enterprises realize that security is a big concern.”

Abillama points to a variety of constantly evolving threats, such as denial of service (DoS) attacks and distributed denial of service (DDoS) attacks, whereby a website is overwhelmed with a flood of data that can bring a company’s online operations to a halt. These attacks are also used to steal vital information from businesses.

Consultants at BMB Group also tackle the problem of inefficient and, in turn, costly Internet usage in the workplace.

“Solutions include enterprise class cache engines that will enhance the Internet browsing experience, lower the Internet overhead fees and offer better and faster response,” Badaoui says. “These caching solutions are usually bundled with traffic shaping solutions that help IT administrators prioritize bandwidth per service or user. Packet shaping tools ensure the availability of Internet bandwidth whenever needed, as well as fairly distributing the available bandwidth among users.”

Global markets

At an e-commerce event during Beirut’s Social Media Week in September, Louise Doumet, the co-founder of Lebanese online fashion retailer Lebelik.com, told attendees that she was surprised to notice people from all over the world were suddenly buying from her. As she put it, marketing online through Facebook and other social media brought in “clients [we] never even thought of,” through friends and acquaintances sharing links and pictures, commenting on purchases and passing it on through their personal networks.

At most, one third of the audience at the e-commerce event said they had purchased something online in Lebanon. Better and cheaper connectivity will increase this, opening up countless opportunities for businesses. Running a web-based retail business keeps overhead costs far lower than, say, a traditional storefront with high rents and costly maintenance.

The unlimited potential for small and medium-sized enterprises to thrive in a modern online environment could also spur a new generation of entrepreneurs. “Today’s social, economic and political pressures have driven the corporate environment in a continuous quest for cost reductions. Businesses must increase their responsiveness to change and continue to minimize operating costs,” says Sandra Salame, senior consultant at BMB Group. “New paradigms, such as software as a service and cloud computing are emerging; in the near future, many organizations will, for example, save cost by renting e-mail, backup and security.”

And the future benefits to citizens are endless; “Applying those trends to industries like healthcare, we would see the emergence of tele-health, doctors and medical staff collaborating together, reaching remote locations, smart connected medical devices that would relay information in real time,” Salame says.

Jawad Abbassi, founder and general manager of Arab Advisors, an Amman-based media consultancy firm, calls high speed Internet in Lebanon “essential, like water.” He says that Lebanon “cannot have a vibrant e-commerce or online banking sector without reliable broadband,” and wryly adds, “We’re really just stating the obvious.”

Hurdles to come

In the near term for Lebanon, “average fixed broadband speeds will double or triple,” says TeleGeography’s Shepherd, adding that “Ogero has also piloted direct fiber access [fiber-to-the-home] for end-users in Beirut, which is expected to eventually offer speeds of at least 25 Mbps [megabits per second] and hopefully higher.”

It remains to be seen just how quickly that will come into effect. “The speeds in different areas of the country also depend on how complete Ogero’s fiber-optic transmission network is. Ogero began the roll-ou tof a nationwide next generation [Internet protocol] backbone in 2010 to support the spread of high-speed services,” he adds.

In the long term, the significant increase in bandwidth will bring with it new consumer demands — such as the ability to stream high quality videos, share large media files and open up many new opportunities. It will eventually make Lebanon a far more attractive destination for multinational corporations.

TeleGeography’s research shows that the cost of an Internet connection in Lebanon on average has not changed between 2008 and 2011 “for low and high usage customers,” Shepherd says.

The telecommunications ministry’s new table of rates indicates an 80 percent drop in cost, and there is a cap on how much Internet service providers can charge consumers. With faster broadband Internet, companies can conduct video teleconferences with clients or other branches overseas. Online banking will become quicker and more prevalent. The list of knock-on effects for businesses here is infinite.

While there are many reasons to be hopeful, do not count on your Internet connection becoming lightning fast overnight, either. Shepherd says, “In South Africa too, recent new international cable launches have taken a longer time than predicted to filter down to the end-user in terms of cheaper and faster broadband, largely due to complexities in the competitive domestic wholesale bandwidth provider market.”

The many variables and complexities at play here should keep things interesting, to say the least.

 

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Society

Your life on the line

by James Reddick
written by James Reddick

The concept of identity theft has long been a theme of the science fiction world. Jack Finney’s 1954 classic novel, Invasion of the Body Snatchers (later adapted into film no less than four times), is driven by uncertainty over who is a clone ­— duplicated by an amorphous extra-terrestrial race — and who remains human.

While the consequences are certainly more mundane, and the means more temporal, online identity theft is presenting a similar real-world scenario that has the potential to affect anybody with Internet access.

Take, for example, the case of Fafi Merhi, who has now had parts of her profile “cloned” on Facebook twice. In both instances, Merhi says,the perpetrator created an account under a different name from hers while using all of her pictures. She or he then attempted to add her friends, and then afterwards their friends, on a few occasions (that she was told about) sending messages to contacts with ambiguous come-ons such as “Let’s get to know each other”.

As far as she knows, the culprit had no financial motivation, and was most likely a “friend” or “friend of a friend”, since they would have had to have access to her photographs and list of contacts. When a tech-savvy friend gained access to the impostor’s affiliated email address, Merhi disconcertingly discovered that it was [email protected].

“I don’t know what satisfaction they could get out of this. Honestly, I felt sorry for this person,” she says. Sympathy aside, the consequences of cloning can be dire, especially since reporting security breaches on Facebook is a notoriously slow process. Merhi’s first clone account was up for six months before it was taken down, despite repeated complaints submitted through Facebook’s online security form.

“Consider if Fafi was working in a government position,”says Michael Chaftari, CEO of newly launched Beirut-based social media monitoring company Fetch. “Someone could seriously damage her reputation.”

‘Social engineering’

While online risks are typically associated with malicious software, predators more and more target users’ anticipated behavior. This, says Chaftari, is known as “social engineering”, a cynical approach to information gathering that manipulates a user’s proclivity to trust. This can come in elaborate forms, from pop-up windows that pretend to be a trusted site asking for a user name and password, to rummaging through garbage bins in search of clues about passwords, social security details and other sensitive information.

In the case of Facebook, fake accounts are the most common channels for social engineering. If a beautiful, scantily clad woman with no mutual friends invites you on Facebook, it is best to resist the temptation. Same goes for shirtless men, or any stranger for that matter.

With faster speeds in Lebanon an eventual reality, the nature of Internet usage is bound to change. Online shopping, for example, will no doubt increase, as companies are finally able to adapt to the 21st century. But as the usefulness of the Internet in Lebanon increases, the need for vigilance will rise accordingly as sensitive information will be more frequently submitted online.

“Your online presence is no longer limited to communication,” Chaftari says. “People are using the Internet for more serious things.” While Facebook remains a largely light-hearted social platform, it can be the gateway for predators to access more sensitive information.

With this in mind, Executive enlisted the help of Victor Sawma, chief technology officer and partner at NetDesignPlus and a lecturer at Notre Dame University in Lebanon, to dissect the risks of Facebook to the everyday user and to explain what he or she can do to protect themselves.

What are the potential security risks of using Facebook?

Connecting people is the goal and soul that drives this giant social network. But with each of Facebook’s innovative new methods to communicate — such as the ‘Places’ application, which is essentially an opt-in online tracking device — come new risks to users’ security. That in mind, Facebook is constantly trying to create a balance between the two; these efforts have increased lately with the release of Google+, which was advertised as an antidote to Facebook’s security “minuses”, a key feature for users to make the migration to a new platform. Facebook’s response was a rash of  security upgrades, such as more finely tuned privacy controls and increased default security settings.

From a security perspective, Facebook is prone to the following issues:

Identity integrity: This is directly related to when somebody else tries to pretend to be you or even to be your business and abuse your social relations. This is very common lately on Facebook, especially at the personal level. But it is also possible in some cases to see this taking place at the business level by somebody creating a business page for a competitor through a fake account for the sole purpose of harming the image of that business.

Personal/business privacy: This is related to information being leaked to other parties, whether directly or indirectly. It is not necessary for Facebook users to write about something for other people to know about it. The existence of a relationship, along with photos and status updates, are more than enough, in the majority of the cases, to allow other people to learn about information that you did not intend to tell them about.

Trust-relay issues: Facebook users are expected to trust applications  — additional programs that exist within the structure of Facebook —  by giving them access to personal, and sometimes sensitive, information. The majority of users do not realize how harmful this can be. For example, why would an application need access to publish on your wall if, at the same time, it claims that it will not tell anybody anything without your previous consent? The majority of users do not question why a certain application is requesting permission to certain information. They trust that application simply because it comes from Facebook.

What can users do to protect themselves?

The only protection that Facebook users can have is awareness. They have to learn what permissions are about, how the social network (called the social graph) of Facebook works, and so on. But is not an easy task, even for security experts. We end up, in many cases, uncovering potential risks that can rise from certain permissions or activities. As a start, Facebook users must consider giving permissions at the minimum level needed. They must also remember that giving an application permission once means that this application will gain access to the information that it needs (name, email, gender, friends list, etc.) and will still have that information even if that permission was denied later on. The majority of applications, if not all, save the information that it needs once permission is granted.

Is there any defense against cloning?

Any person (real or virtual) who knows or has access to your information can attempt to clone your profile. Who can access sufficient information to do so convincingly depends on your own privacy settings. Recent updates to Facebook’s privacy functions now mean that users have more control than ever over who can access their content; almost every facet of a Facebook user’s online presence can be designated as visible to either just their friends, friends of friends or be left completely unrestricted, visible to (and thus able to be ‘cloned’ by) anyone. Facebook also allows users to narrow this down further by creating specific lists of friends who are able to access their ‘wall’, profile updates and photographs. Users are also now able to embargo ‘tags’ in friends’ photos and restrict who can see any tags that they do choose to accept.

Where does Facebook go from here?

Facebook is currently undergoing dramatic changes at the security level, in general, and privacy and access control level in particular. A re-engineered news feed now allows users to better control what is being written about them by friends, family and other parties. Users are also now being asked about certain sensitive posts before Facebook posts them within their News Feed. Sawma believes this process will continue in the few coming months as Google+ pushes more and more into the social network market share.

 

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Comment

Increasingly called to arms

by Nicholas Blanford
written by Nicholas Blanford

The challenge facing Syria’s opposition protestors seems greater today than at any other time during the six months of demonstrations against the regime of Syrian President Bashar al-Assad.

Despite more than 2,600 people dead, according to United Nations figures, the imposition of sanctions against the Syrian leadership and an international outcry, an undaunted Assad has redoubled his efforts to crush the uprising by brute force.

This durability is causing dismay among opposition protestors who, for all their bravery in facing tanks and snipers on a near daily basis, have yet to gain the necessary momentum to topple the regime. Increasingly, there is talk in opposition circles of the inevitability of resorting to weapons to confront the regime. Reports are mounting of attacks against Syrian security forces and of arms being smuggled into Syria. The prices of black market weapons in Lebanon continue to climb, as they have done since mid-March when the uprising began in Syria. Although some of the demand is domestic, most of it is driven by the crisis in Syria. At this stage, it appears that the arms buying is being conducted on an individual basis, with Lebanese intermediaries purchasing illegal weapons, and legal shotguns, and selling them to Syrian contacts. The bulk of the opposition says it isdesperate to keep the demonstrations peaceful. Yet they admit that there could come a breaking point when protestors will no longer endure being gunned down in the streets each day and will choose instead to shoot back.

“The regime is going to do more killing, so the only way we can win is to have neutral observers, and lots of them, in Syria to monitor what’s happening,” said Ahmad, an activist from the port city of Banias who escaped to Lebanon last month. “We don’t want to go for the option of an armed struggle against the regime. But if the international community does not step in, we are afraid that it will lead to civil war.”

Resorting to weapons not only risks plunging Syria into civil war, it would also play neatly into the hands of the Assad regime. The Syrian leadership has consistently said it is fighting “armed terrorist gangs”, a claim that presently few believe. But such accusations would be harder to refute if the opposition takes up arms. Furthermore, the Syrian army — the elite units at least — and the intelligence services still back Assad, which means the regime is well positioned to confront an armed struggle.

The Syrian opposition, which remains critically divided with no single unifying figurehead nor effective, overarching organizational body that can speak for the opposition at large, cannot expect anytime soon an international intervention in Syria, similar to the NATO-led campaign to oust Colonel Muammar al-Qadhafi.

Syria, after all, is not Libya. Unlike the isolated North African country and its eccentric ruler (who was scorned by his fellow Arab leaders), Syria lies in the heart of the Middle East and wields influence — of a potentially malevolent nature — throughout the region. Syria’s Arab neighbors, and Israel, are wary of the Assad regime exporting mayhem and instability in the admittedly unlikely event that the international community chooses to intervene militarily in support of the opposition.

Instead of an overt military intervention, it is perhaps likely that interested parties — the United States, Iran, Saudi Arabia and Turkey  — will intercede to play a more active role in shaping the future of the country. Iran will probably continue to support the Assad regime for the time being, even as it sends outfeelers to some elements in the opposition to explore the possibility of whether any post-Assad administration in Damascus will continue to abide by the three-decade Iran-Syria alliance. Among the signs to watch out for are defections by senior Alawite military officers, some of whom may prove susceptible to under-the-table offers of cash and immunity from prosecution if they were to abandon the Assad regime and side with the opposition.

Another indicator would be the emergence of more organized transfers of weapons and communications equipment to the opposition, suggesting that the revolution has found financial sponsorship. Social media tools such as Facebook and Twitter may help promote a revolution and win international sympathy, but they are not enough to defeat a regime that shows no hesitation in using brute force to ensure its own survival.

NICHOLAS BLANFORD is the Beirut-based correspondent for The Christian Science Monitor and The Times of London. His book “Warriors of God: Inside Hezbollah’s Three-Decade Struggle Against Israel” will be published by Random House this month

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Society

Book Review: The Road to Fatima Gate

by Paul Cochrane
written by Paul Cochrane

A Book by Michael Totten

There has been a flurry of books published over the past few years by Westerners, primarily Americans, describing in depth their brief encounters with Lebanon and the Middle East. Their insights are telling not so much for the informative content, but rather how this budding vein of adventure writers perceives the region and its people.

Often misplaced in bookstores under ‘political journalism’, these titles — including Ted Dekker and Carl Medearis’ “Tea with Hezbollah”, Jared Cohen’s “Children of Jihad” and Lee Smith’s “The Strong Horse”  — ought to be stacked closer to the ‘adventure/fantasy’ section.  And relegated to the bin of banality they would be, did they not also wield such a dangerous degree of influence over the shaping of United States foreign policy. 

It is in this light which one must regard Michael Totten’s “The Road to Fatima Gate”, released earlier this year by Encounter Books, a publisher self-described as being a press for the “serious conservative”. Fitting, then, that the book is written from what could be called a ‘Western extremist’ perspective.

“The Road to Fatima Gate” traverses Lebanon’s politically tumultuous time between 2005 and 2008, from former Prime Minister Rafiq Hariri’s assassination and the Syrian army’s subsequent withdrawal, through the July 2006 war and the civil conflict of May 2008. Totten is in Lebanon only part-time during this period, but he does not let this pollute the aura of comprehensiveness he lends his accounts. Nor does the author let the selectiveness of his associations temper the license he allows himself to make sweeping generalizations regarding the Lebanese mindset — Totten has minimal meaningful interaction with ‘people on the street’, instead openly preferring the company of expatriates and barfly drinking buddies, with his most authoritative source on the country being Charles Chuman, an American-Lebanese from Chicago who came to Lebanon in 2003 and whom the author describes as knowing “the country better than almost anyone I ever met.”

Totten recounts the 2006 war in Lebanon from Northern Israel and being abroad when rival political factions faced off in block-to-block combat in May 2008, Totten retells the experience largely through the eyes and ears of Chuman, complete with dialogue and inner thoughts. (Perhaps tellingly, Chuman, Smith and Totten all spoke at the annual Institute for Policy and Strategy conference in Herzilya, Israel, shortly after the 2006 war.)

Totten’s myopic narrative is most blatant regarding Beirut’s southern suburbs and South Lebanon, despite the crux of the narrative being about Hezbollah. Totten describes these areas as throttled by totalitarianism, where Hezbollah violently suppresses self-expression. Totten does let Lebanese voices set some of the record straight, but only in chapters outside those in which he portrays “Hezbollahland”.

In his account, Lebanese police have never set foot in “Hezbollahland”, from which they are “forbidden” — news, no doubt, to the veteran law enforcement officers in Haret Hreik and Bint Jbeil. Similarly, Totten suggests Iran is the sole financer of post-war reconstruction in South Lebanon, completely ignoring the hundreds of millions of dollars pumped in from Qatar, Kuwait and other nations, including the US.

Leveraging his thorough understanding of Lebanon, Totten then graces us with his incisive insight into the region as a whole: “Arab countries have a certain feel. They’re masculine, languid, worn around the edges and slightly shady.”

This book does a good job of listing the many important events of the years it covers in Lebanon but it is rigidly selective in the sources it taps and the questions it asks. Further, it lacks historical insight and glosses over inconveniences such as ‘facts’ that would run counter to the agenda Totten is pushing. But then again, what adventurer would want to dilute his drinking stories with reality?

 

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Consumer Society

Ian Gorsuch

by Executive Editors
written by Executive Editors

It the Beirut launch of McLaren Automotive’s long awaited high performance car, the MP4-12C, Executive spoke with Ian Gorsuch, McLaren’s regional director for the Middle East and Africa.

A totally bespoke car, the 12C has a lightweight carbon fiber chassis structure and a 3.8-liter, V8 twin-turbo engine producing around 600 brake horse power (bhp), able to reach 0-100 kilometers per hour (km/hr) in just 3.3 seconds.

  • The MP4-12C has been a long time coming, with production of the iconic McLaren F1 ending in 1998 and the world’s best selling luxury supercar, the Mercedes-Benz SLR McLaren, in 2009. Why did it take so long?

We had a long gestation period. Over the last three years there’s been a lot of speculation about what we were doing, especially as we had no new car on the road. And because it is our first car (in such volume), there has been a lot of discussion. Perhaps we revealed too much information too early, and we should have been more circumspect in releasing information as it created such a seemingly long waiting time. But although it seems like a long time to launch, it is on time.

  • How much did McLaren invest in developing the MP4-12C?

More than $1.3 billion has been invested in the project since 2005. Around 30,000 hours were spent in simulation development, and 100,000 kilometers of prototype testing was carried out, from the Arctic to the Middle East. We could have done testing in Death Valley in the United States, where the temperatures are the highest on earth, but we thought it better to do the testing in the humidity and dust of the Gulf.

  • Will there be other MP4-12C models?

We will also be launching the MP4-12C GT3 racecar. It is not like the Porsche GT3, which can be driven on the roads; it is purely a racecar. There has been a lot of interest from race teams, and we will initially start in Europe.

  • A new trend appears to be for supercar manufacturers to downsize and improve carbon emissions. Is this the case for the MP4-12C?

The car has the lowest carbon emissions in its segment, better per horsepower than a Toyota Prius. We built in performance criteria, not just 0-100 kilometers, but also ergonomics and CO2 [carbon dioxide] levels. We are a technology-led company.

  • How else does the car differ from others in the same segment?

The problem for many people is that they have to choose a luxury vehicle for a certain job. [They need] good suspension to make driving in traffic comfortable, or a performance car for high speed, which needs rigidity and good engagement with the road. Rarely can you enjoy the two together. With the MP4-12C’s unique suspension you can feel everything on the road, high speed on bends and you are able to cruise around in town, much like the comfort of a BMW M-Series. It can be driven every day, not just for a burn out on the weekend.

  • The F1 famously had a gold covered engine. Does the MP4-12C?

No, we didn’t need it for the MP4, perhaps due to the engine size. It was only on the F1, and for heat insulation on the engine bay.

  • How many MP4s are to be produced?

About 1,000 a year. There are already around 20 on the roads in Britain. Once we get up to full production and offer different models, it will be 4,500 worldwide.

  • How many do you expect to sell in the Middle East?

We will sell around 100, so 10 percent of global sales. The order bank is more than that, but the constraint is the production capacity. The biggest market is the United States.

  • What’s the price tag?

In Dubai, AED900,000 to AED 1,000,000 [$245,000 to $272,271].

  • Are customers old clients?

There are only 106 F1s in the world at the moment, so if we sold to F1 customers it would not be a viable business. We don’t advertise, so the key is through the media and our reputation.

  • Could the financial crisis affect sales?

At our level there are a limited number of cars so we are reasonably secure. And this is indicative worldwide. Before the crisis, if someone was worth $100 million, they are now worth, say, $70 million. This has not affected their lifestyle but it has affected their purchasing psyche. It’s not value for money, but people don’t just want a badge, they want intrinsic qualities behind the badge. This is an advantage we have.

  • Can you tell us about the main investors in McLaren Automotive?

Peter Lim, a Singapore investor, has joined us along with our chairman Ron Dennis. Other investors are the TAG Group, headed by [Saudi businessman] Mansour Ojjeh, and Mumtalakat Holding Co., the Bahraini sovereign wealth fund (with 50 percent). So we now have European, Middle Eastern and Asian investors, bringing new money, equity and experience to the board. We are perhaps the best funded car company in the world.

  • What is your regional presence in the Middle East?

We have six new showrooms; a 400 square meter showroom in Dubai, which is to open in November, and in Abu Dhabi, Jeddah, Doha, Bahrain and Kuwait. And we have eight service points, including Beirut, as a lot of Gulf nationals bring their cars to Lebanon in the summer and need the confidence that their car can be looked after.

Asia is the next step, with Osaka, Singapore and Hong Kong. We will be opening 35 new showrooms in 19 countries. It has been very exciting but [there has been] a lot of pressure, as no luxury brand has done in such a short time span a global launch with showrooms for just one car. We have had to train technicians at our facility in Woking, England, create unique dealer ordering portals and sign dealership contracts.

  • Is McLaren facing problems with the gray market?

The gray market is a problem for every luxury manufacturer, and it is costing the second buyer a lot of money. I heard of one car sold on Ebay, worth $280,000, that was offered online for $411,000. It was sold to a trader for $445,000.

  • When it was launched in 1993, the McLaren F1 was the world’s fastest production road car with a top speed of 386 kilometers per hour. British actor Rowan Atkinson, known for his role as Mr. Bean, crashed his F1 in early August in England. Have you any news?

Atkinson is fine and his car is being repaired. The press undervalued the car at $3.2 million. It is actually worth $5.76 million as there are only a few in existence worldwide.

“People don’t just want a badge, they want intrinsic qualities behind the badge. This is an advantage we have”

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Economics & Policy

For your information

by Executive Editors
written by Executive Editors

Huff, and puff, and blow ,your smoke out

Non-smokers will be breathing a breath of fresh air after a new anti-smoking law was passed by Lebanon’s parliament last month. The law, which has been in the pipeline since 2004, was slow to come to fruition but was spurred on recently by both civil society and the press. It prohibits smoking in certain indoor and outdoor locations including bars, restaurants, schools, hospitals, public and private offices and on public transportation. It also bans any form of tobacco advertising, including promotion and sponsorship. In addition, the law increases the size of the required health warnings on cigarette packages to 40 percent of the surface area of a pack. Hotels were granted some leeway by being permitted to allow smoking in 20 percent of their rooms. Penalties to be introduced range from a fine of $663 to $1,990 for establishments that are caught allowing smoking indoors, as well as a fine of $66.3 for individuals caught smoking in public spaces. Implementation is to take place gradually over the next year, allowing establishments and businesses to recalibrate their activities accordingly.  “A long road ahead to achieve effective implementation awaits us,” said a statement released last month by the health ministry’s National Tobacco Control Program unit. “The previous partial law passed in 1996 was very weakly implemented; it is necessary to prevent the tobacco industry and its allies from once again standing in the way of effective implementation.”

Enough energy to bring ,down a cabinet

Cracks in the cabinet began to emerge last month when a bill proposed by MP and Free Patriotic Movement leader Michel Aoun to borrow $1.18 billion to fund electricity projects from 2011 to 2014 was not passed from the cabinet to parliament. Aoun threatened to pull his ministers out of the cabinet if the bill was not passed, and as Executive went to print a deal had not yet been hammered out. The project proposes to produce 700 megawatts of electricity at a cost of $850.4 million using combined cycle gas turbines, as well as $247 million on transportation of power, $38.5 million on distribution and $40 million for consulting. According to the energy minister, the additional 700 megawatts could decrease average power rationing around the country by up to seven hours per day. If the power was only partially distributed to curb rationing by an average of 4 hours and repairs on the rest of the aging infrastructure were completed, estimated savings of $460 million per year for the treasury could be achieved and individual households could save $730 million to $1.3 billion on expenditures for private generator companies, said Energy Minister Gebran Bassil.

Assuming a deficit fall

The finance ministry seemed to shift the goal posts in the latest release of public finances last month, which stated that the total fiscal deficit had fallen 4.8 percent in the first half of the year. According to their figures, the 2011 deficit through June came in at $908.7 million. Government expenditure was put at $5.63 billion, a rise of 7.3 percent on the same period in 2010, while revenues were believed to have risen to $4.77 billion, a 9.8 percent rise. The smaller deficit figure, however, factors in revenues estimated by the telecom ministry totaling $704 million over the first six months of 2011, even though this sum has not yet been transferred to the treasury. The government’s largest expenditure item, debt servicing, shrank slightly during the first six months of this year to $1.9 billion, a fall of 0.5 percent year-on-year, constituting 33.8 percent of total expenditures. Interest payments on domestic debt made up $1.2 billion of that total in the first half of this year, with the primary surplus — the government’s income statement without debt servicing — at $1.13 billion, fractionally different than in 2010.

Welcome news on the web

The price of legal Internet in Lebanon looks set to fall after the adoption of a ministerial decree last month by the cabinet. The decree, which was proposed by the telecom ministry, details a new breakdown of prices and bandwidth caps for different categories of Internet speeds. The changes will take effect one month from the projected publication in the official gazette on August 29. The price list was not yet made public but was leaked to the pro-opposition Al Mustaqbal newspaper and confirmed as accurate by several telecom experts. The changes will see the slowest available residential Internet package rise in capacity — from 128 kilobits per second (kbps) with a bandwidth cap of 2 gigabits (GB) per month to 1 megabit (mbps) per second with a cap of 4 GB — while falling in price, from $23.21 to $15.90. The highest available residential package will rise from 2.3 mbps with an 8 GB cap to 8 mbps with a 30 GB cap, while decreasing in price from $199.00 to $114.09. The telecom ministry also announced that the 3G mobile Internet service will have a test-run on some 4,000 clients by mid-September, with the service available to the general public by the end of the year.

Business feeling blue

The feeling amongst the top hirers in the country is that business has been stagnant in 2011 but may well emerge from the doldrums come next year, according to a new survey conducted by the job site Bayt.com. Bayt’s latest Consumer Confidence Index (CCI) stated that 45 percent of Lebanese respondents believe that business has been stagnant this year while only 13 percent think things are going well, with the remaining 36 percent offering a neutral response. Nonetheless, 34 percent of respondents think that next year things will improve, while around half that percentage believes things are heading south in a year’s time. The June CCI index itself decreased year-on-year by 19.7 percent to 98.3 points. Asked whether salaries make up for the increasing cost of living in Lebanon, 71 percent said that they did not.

Buttressing the maritime border

The issue of the location of Lebanon’s maritime border has finally been resolved, at least as far as the Lebanese government is concerned. Last month, Lebanon’s parliament passed a law demarcating the country’s maritime border with Cyprus and “Occupied Palestine” for the first time. The law sets out Lebanon’s Exclusive Economic Zone from which it can extract what many expect to be hydrocarbon resources present under the seabed. The move comes after Israel submitted its own proposal regarding maritime borders, in which it drew its boundary according to a previous agreement between Tel Aviv and Nicosia that adopted “Point 1” as the boundary 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 “Point 23” as the ending point, which is around 17 kilometers southwest of Point 1 and corresponds to Israel’s existing northernmost contract blocs, areas where oil and gas companies can come to explore and extract hydrocarbon resources. The differences have resulted in a disputed area of some 854 square kilometers and have fueled fears of potential conflict over the area. Israel has already found large deposits of gas in its northern fields and is in the process of extracting them, while Lebanon has not yet had its first bidding round or set out contract blocs. The agreements signed with Nicosia by both Israel and Lebanon (which never ratified the agreement in Parliament) each allow for an adjustment of Point 1. Last month, the foreign ministry requested to the United Nations Secretary General that the UN step in as arbitrator to resolve the issue.

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Real estate

For your information

by Executive Editors
written by Executive Editors

Solidere’s ups and downs

Solidere, Lebanon’s largest firm by market capitalization, will be distributing $147 million in dividends to shareholders, as approved at the Ordinary General Assembly held by the real estate company on August 1. Of this, $61 million will be paid out in cash, while the majority, $86 million, will be distributed as shares. This comes after a 19 percent drop in sales through the first half of 2011, with share prices hitting a two-year low of $15.85 in the last week of August. At the same time, Citi Investment Research & Analysis, a division of Citigroup Global Markets, valued Solidere’s target price per share at $31 in August, though it said the company’s shares were “high risk”.  They also warned that they may not be able to reach the target price, due to concerns that those planning to build on plots already purchased from Solidere may have trouble securing financing and making payments, given the economic slowdown and tightening of credit in the region. The company currently owns a land bank of 1.9 million square meters, valued at about $7.5 billion based on current market prices.  In an August 18 press release, Solidere unveiled their plans for Zeitouneh Square, a public garden behind the Starco building in Beirut Central District, with the company’s master plan stipulating the allocation of 50 percent of the total land area to public spaces and gardens. It plans to complete four other public squares in the near future as part of this overall plan.

Increased construction of the humble abode

While the number of construction permits increased 21.8 percent year-on-year in the first half of 2011, to 9,728, according to figures from the Order of Engineers in Beirut and Tripoli, the actual construction area authorized by permits increased by just 5 percent to 8.77 million square meters (sqm). These numbers indicate that developers are increasingly interested in smaller plots, possibly to deliver buildings with small-sized apartments (less than 250 sqm) to accommodate demand, according to a recent report by real estate advisory RAMCO. Supply indicators in Lebanon have been low through the first half of 2011. Unlike during the first half of 2010 and 2009, when cement deliveries increased 9.2 and 19.8 percent, respectively, deliveries rose just 2.9 percent in the first half of this year, in parallel with the slow progression of construction activity. Tons of cement delivered reached 2,662,000, according to figures from Banque Du Liban, Lebanon’s central bank, and in June cement deliveries increased 18.3 percent year-on-year, putting an end to a downward trend seen earlier in 2011.

Rising up amid an uprising

In an August 2 company statement, Dubai-based mall developer Majid Al Futtaim (MAF) Properties said it had started foundation work the week before on its $1 billion mixed-use project in Syria, its first in the country, which will cover 1.5 million square meters in the Yaafour district west of Damascus. The news is surprising given the uprising against President Bashar al-Assad, which has engulfed Syria and hobbled its economy since March. The first phase of the Khams Shamat project, slated for completion by 2014, will include hotels, residences, offices and commercial space. Peter Walichnowski, chief executive officer of MAF, said that the foundation work is “in preparation for the buildings’ development and the completion of works related to roads, electricity, water, sanitation and public services.” MAF has three other major projects underway in Lebanon, Egypt and the UAE.

Israel’s cynical use of housing crisis

Israel’s Ministry of Interior gave final approval on August 11 to the construction of 1,600 new units in the East Jerusalem settlement of Ramat Shlomo in the occupied West Bank, with an impending approval of 2,700 additional units. Israeli officials claimed the move came in response to protests over soaring real estate prices in Jerusalem, a claim that anti-settlement group Peace Now called a “cynical use” of the housing crisis, according to The New York Times. The settlements were initially proposed in March 2010 during a visit by US Vice President Joe Biden, an apparently deliberate affront to the Obama administration’s calls for a permanent cessation to settlement building. On August 4, 900 new homes were approved in Har Homa, a settlement just north of Bethlehem, also in the West Bank.  European Union foreign policy chief Catherine Ashton condemned the settlement approvals, telling Agence France-Presse, “The European Union has repeatedly urged the government of Israel to immediately end all settlement activities in the West Bank, including in East Jerusalem. All settlement activities are illegal under international law.” The area is a point of contention between the Palestinian Authority, which views East Jerusalem as the capital of any future Palestinian state, and the Israeli government, which has insisted on a unified Jerusalem as its capital in the event of a two-state solution. It was originally annexed from Jordan after the 1967 war.

Getting real on land prices     

The last quarter was the worst in the past five years for the real estate industry in Lebanon, according to property advisory firm RAMCO’s second-quarter report, citing limited land sales and especially slow sales in the luxury segment of the residential market, where the price per square meter (sqm) is $5,000 or above. The report called the continually rising price of land “worrying”, and said that realistic selling prices would not justify the cost of the plots to land buyers, thus concluding that landowners will eventually re-align their expectations with market realities and lower their prices. Demand mostly exists for smaller apartments, under 250 sqm, at prices ranging between $500,000 and $800,000 each; two projects with a built-up area of nearly 10,000 sqm each “were almost entirely sold out in a very short period of time” because they offered small-sized apartments at a fair market price. In the commercial sector, the report said that Grade A, purpose-built offices are undersupplied in Beirut and are mostly concentrated in the Beirut Central District (BCD). Estimated Rental Values (ERV) in BCD are $325 to $375 per sqm per year in the Park Avenue area, and $275 to $325 per sqm per year in the Beirut Souks area. Other business areas like Tabaris offer some high-end office buildings with ERV between $250 and $275 per sqm per year. It also noted that Verdun and Clemenceau have ERVs of $250 to $275 and $225 to $250 per sqm per year, respectively.

Bringing life to the Dead Sea

On July 28, the Jordanian government, along with the Jordanian Development Zones Company (JDZ), announced a 25-year development plan to create a touristic and commercial area within 12 zones along the northern coast of the Dead Sea. The chief executive officer of JDZ, Taha Zboun, said that the project was openly looking for both local and foreign investors (small and medium sized) to undertake development on the 59 plots up for sale, while also claiming it would create jobs for thousands of locals. Though the vision for the corniche boulevard is to create a string of hotels, malls and restaurants within the touristic zone, the project will also focus on boosting infrastructure, including an investment of $250.5 million in a desalination station. American development firm, Sasaki Associates, has been appointed to lead the consortium for master planning purposes.

$4.08 billion backlog for UAE construction giant

The UAE’s biggest construction company by market value, Arabtec, has posted a 67 percent drop in first-half net profits — hitting just less than $27 million — following a 74 percent drop in second-quarter profit as multiple project delays took their toll on the balance sheet, reported the company in a statement on August 7. Chet Riley, an analyst at Dubai’s Nomura Bank, told Gulf News in an August 8 article that payment transfers from profits also took a toll; “around 35 per cent of Arabtec’s actual profit in the second quarter was actually paid out to minority interests… We are finding revenues are slightly lower across the board due to delays in starting up new projects.” Its current backlog of projects stands at $4.08 billion, of which a third comprises a 5,000-home project to be built in a joint venture with the Saudi Bin Laden Group in Saudi Arabia. On August 17, the builder announced it had won a $76.2 million construction contract from Nakheel to build 523 homes in Dubai’s Jumeirah Village Circle, to be completed by the end of 2012.

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Banking & Finance

Regional equity markets

by Executive Editors
written by Executive Editors

Beirut SE  

Current year high: 886.37       Current year low: 882.02

>  Review period:  Closed August 26 at 886.37 points     Period Change: -3%

Investors found little time for Beirut stocks in a tumultuous month for international equity markets and amid escalating events in Syria. Trade volumes were unusually low even by Ramadan standards and proved as uninspiring as this summer’s tourist numbers. The affirmation of Lebanon’s credit rating by Moody’s with a stable outlook meant little to Solidere investors who were bitten by a 19 percent decline in property sales in the first half of 2011. Shares of the real estate developer plummeted 6.8 percent to a 2-year low of $15.85, while banks came in slightly ahead of the market.

Amman SE  

Current year high: 2,477.99                Current year low: 2,03.71

>  Review period:  Closed August 25 at 2,028.1 points     Period Change: -2.6%

Amman stocks watched from the sidelines as neighboring equity markets spiraled downwards in August. Although the index retreated during the first week, it has since been on strong footing, backed by renewed political stability as the government pushes forward its promised reforms. A troubling increase in the budget deficit during the first six months was partly mitigated by a new agreement with Iraq to increase oil imports. Meanwhile, Royal Jordanian reported heavy losses in the first half due to regional turmoil, sending the stock down 19.5 percent through August 25.

Abu Dhabi Exchange  

Current year high: 2,833.09                Current year low: 2,491.65

>  Review period:  Closed August 25 at 2,590.49 points     Period Change: -1.1%

The rebound of ADX stocks stumbled on the downgrade by S&P of the US credit rating in early August. The emirate’s banks had reported strong second-quarter earnings when energy and real estate stocks were struck by rising fears of a new global recession. Dana Gas and Aldar fell 11.3 percent and 4.8 percent, respectively, during our review period while National Bank of Abu Dhabi was slightly better off at -0.5 percent. Abu Dhabi plans to face fresh global economic uncertainty with new blood after a shake-up of leading company managers, including at Aldar.

Dubai FM  

Current year high: 1,781.92                Current year low: 1,352.24

>  Review period:  Closed August 25 at 1,465.01 points     Period Change: -3.5%

The region’s international hub was synching more with global equity malaise than listening to positive domestic indicators. Skepticism spread to major stocks, dragging Emaar Properties down 3.5 percent despite the group reporting a 20% increase in hospitality revenues in the second quarter. Similarly, Emirates NBD slipped 7 percent during our review period, although Fitch removed the ratings of the bank from negative watch, citing Dubai government support. Thin trading also showed how equities took second stage to gold trading, in addition to the typical Ramadan calm.

Kuwait SE  

Current year high: 7,129.30                Current year low: 5,764.30

>  Review period:  Closed August 25 at 5,785.6 points     Period Change: -4.1%

Kuwait’s exchange continued to nose dive in August, hitting a dangerous seven-year low in the benchmark index. Kuwait closed August trading almost 63 percent below the KSE’s June 2008 historic high tide mark. Latest corporate results were just as discouraging, with Agility reporting a 57 percent decline in net income in the second quarter with less government business, sending the stock down 10.2 percent during our review period.

Saudi Arabia SE  

Current year high: 6,788.42                Current year low: 5,323.27

>  Review period:  Closed August 24 at 5,979.3 points     Period Change: -6.5%

Domestic market sentiment took a direct hit from rising fears of a global recession. Stocks tumbled following the downgrade of US debt, which represents a major chunk of the kingdom’s portfolio. Petrochemical stocks slid 11% during the month as the Tadawul’s powerful stock SABIC dropped 10.5% among Ramadan trading volumes. A recent report by Global Finance Magazine said that Saudi Arabia hosts five of the 10 safest banks in the Middle East.

Muscat SM  

Current year high: 7,027.32                Current year low: 5,426.56

>  Review period:  Closed August 25 at 5,584.67 points     Period Change: -3.8%

Muscat securities investors were flooded by a flurry of corporate and regulatory announcements during a supposedly quiet month, with the Capital Market Authority introducing margin trading to boost the exchange’s activity. But the Renaissance Services conglomerate announced a disappointing 71 percent drop in first-half profits and revealed fraudulent activities at its Topaz unit, pushing the stock into a 24.3 percent fall during our review period. Other investors struck gold in Omantel’s 7.1 percent gain following the announcement of strong revenues in the second quarter.

Bahrain Bourse  

Current year high: 1,475.10                Current year low: 1,259.80

>  Review period:  Closed August 25 at 1,260.95 points     Period Change: -2.4%

Ever declining Bahraini stocks were dominated by negative sentiment echoing Europe and the US. A steady market decline since late February’s civil unrest has cost stocks nearly 12 percent so far in 2011 and the trend appears unwavering. The country heads for elections in September to replace resigned opposition politicians, adding another layer of uncertainty to already murky global and domestic waters. Banking stocks faced rising investor uncertainty, falling 3.15 percent during the month through August 25, with Ahli United Bank leading the decline by 4.2 percent.

Qatar SE  

Current year high: 9,242.63                Current year low: 7,195.88

>  Review period:  Closed August 25 at 8,171.48 points     Period Change: -2.8%

Industries Qatar, the country’s second largest stock, called back investors from their Ramadan escape, after adjusting its profit goals upwards for 2011 and putting on hold a steel expansion project. Traders rushed to book their profits, especially amid mounting global economic concerns, driving the stock down 12.2 percent through August 25. Outside the petrochemicals arena, sectors continued to show some strength, with banks adding 0.5% during the period, led by Qatar Islamic Bank, which rose 1.5% after its credit rating was affirmed by Fitch.

Tunis SE  

Current year high: 5,681.39                Current year low: 4,058.53

>  Review period:  Closed August 25 at 4,476.94 points     Period Change: +1.3%

While global investors were getting burnt in international equity markets, Tunisian investors have put on a nice summer tan. The Tunindex led Middle East exchanges under coverage for the third consecutive month, signaling a steady return of domestic and foreign investors to a reinvigorated market. The country introduced a new press code and launched a successful electoral role registration process, sending positive shockwaves to the country’s tourism industry. Several stocks registered strong gains, including market heavyweight, Poulina Group, which rose 4.7 percent through August 25.

Casablanca SE  

Current year high: 13,397.47              Current year low: 10,784.67

>  Review period:  Closed August 25 at 11,277.3 points     Period Change: +0.7%

Casablanca stocks were on the offensive in August as the country took delivery of the first batch of F-16 jets from the US. The market index performed near the top of MENA exchanges, buoyed by banking stocks which rose 1.6 percent during our review period. Despite minor dismay over several electoral law items, the announcement of parliamentary elections in November rejuvenated investor sentiment. Positive news

also included tourist numbers, rising 6 percent during the first half of the year.

Egypt SE  

Current year high: 7,210.00                Current year low: 4,478.00

>  Review period:  Closed August 25 at 4,676.05 points     Period Change: -7.1%

Fresh financial support from Saudi Arabia and the World Bank to post-Mubarak Egypt took the backseat to rising tensions between the country and Israel following a military incident in the Sinai desert. Stocks had originally tumbled along with global equities, but the rebound in the second half of the month was limited by fears of escalation on the northeastern border. Losses at market heavyweight Telecom Egypt were limited to 3.9 percent despite reporting an 11 percent drop in net profits in the second quarter.

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