Finance

Executive Insight – Rebuilding relations

by Dory Hage
written by Dory Hage

Following unprecedented financial turmoil, investment scandals and the decline in world wealth, private banks and wealth managers are facing enormous challenges. Profits are declining, regulatory requirements are growing, compliance measures are multiplying, costs are increasing, privacy and secrecy are losing ground and trust between high net worth clients and their wealth managers is seriously damaged. Within this changing landscape, private banks try to redefine their role and most importantly to rebuild clients trust.

An open approach

During the last crisis, investors suffered from losses resulting from a massive price decline. A major part of these losses derived from risks investors weren’t aware of, triggering a significant transparency issue. This breach of trust by some managers has had a profound impact on investor confidence. Taking into consideration these facts, high net worth clients have raised the bar and are now demanding more from their wealth managers in terms of product offerings, transparency and due diligence. They look much more for transparent product offerings, product suitability, robust due diligence and a proactive risk/reward analysis of their wealth and holdings. Private clients also want more information about how their holdings are being transacted, processed and managed.

In order to meet these requirements, wealth managers need to rethink their model, improve their skill-sets and adapt their tools.

In some cases high net worth clients feel that their private bank is steering them toward in-house products to make money for the overall firm. Private Banks have to review their approach by adjusting product offerings to reduce these fears. Adopting an open architecture versus an exclusively in-house approach, by including third party products, would reduce client distrust.

The skills of the wealth manager are crucial to exercise this business. Many wealth managers focus on sales and marketing; they have arange of products and they spend their time convincing clients to buy them. A wealth manager is not a salesperson; he has to develop a comprehensive understanding of the client, his needs, his profile and his appetite for risk. Once this is done, he can suggest to each client the investments adapted to his profile. A wealth manager has to understand the product he is selling and to present to the client the advantages of this product as well as the related risks. In this case, the investor will be able to take his investment decisions comfortably.

Meeting clients’ sophisticated demands requires private banks to invest in advanced technology to survive. Online client service platforms should become a priority over the next few years. They provide innovative, high-quality online client interfaces that could increase client loyalty and, importantly, free their relationship managers to focus on higher-value client interactions.

Recently, a row over the debt ceiling in the US raised concerns over the fiscal imbalances of the US and the worrying debt to GDP level. Consequently, the US saw its credit rating decreased by S&P from AAA to AA+ with a negative outlook. In Europe, the sovereign debt crisis is weighing on the economic recovery through squeezed liquidity and tighter credit. Consequently, stock markets tumbled globally amid concerns of weak economic growth prospects. Within this lack of visibility, investors are overweighting what they consider “safe havens”. They are mainly buying gold and tangible assets such as real estate.

Limited choice

Three years ago, inspired by an unstable international environment with interest rates nearing zero percent, Lebanese investors were assured by the resilience of the Lebanese banking system and attracted by high interest rates. On the fixed income side, they are mainly allocating to deposits and Lebanese government Eurobonds. Meanwhile, real estate in Lebanon was undervalued relative to the region; as a hedge, investors rushed into real estate investments. Today, interest rates have decreased significantly compared to three years ago and the real estate market is slowing. Consequently, Lebanese investors are looking to diversify their exposure, but the choice is still limited especially with the current uncertainty global markets are witnessing.

The current behavior of investors locally and globally could be explained by the temporary lack of confidence. This concentration could outperform but that should not be considered certain. Investors should take into consideration the suitability of investments to the financial environment and remember that diversification is still the fundamental rule.

DORY HAGE is head of advisory at Libano-Française Finance (LFF), a subsidiary of Banque Libano-Française.

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Economics & Policy

Rebalancing the equation

by Thomas Schellen
written by Thomas Schellen

Events following the September 11, 2001 terrorist attacks in New York and Washington on the global stage involved wars and fundamental challenges to the established political and economic frameworks. While the ability to draw direct correlations between a past event and present challenges dissipates over time, now, a decade after the event, 9/11 must be acknowledged as a turning point in contemporary history for the immense changes it precipitated in the United States, the Arab world and the global order.  

Did 9/11 succeeded in sparking a conflict between Muslim and Western civilizations? From an American vantage point the clash of civilizations is not a given, according James Zogby, the president of the Arab American Institute and senior analyst at Zogby International, the pollster firm founded by his brother John. “The majority opinion in America [on Arabs] is not as bad as people think it to be. Our polling indicates that,” he told Executive.  

According to Zogby, public opinion in the United States trends toward a balanced view on Arab issues. “Elderly, white, born-again Christians are very pro-Israel, and decidedly so, but African American, Asian and Hispanic — who after all are about a third of the population — as well as young and educated people are more pro-balance and pro-peace,” he said.

What issue is most important for the US to address in order to improve ties with the Arab World?

Issue most important for US to address

Questions were asked in spring 2011, Source: Arab Attitudes 2011 survey by Zogby International for Arab American Institute Foundation

Ahmed Younis, senior analyst with Gallup, also notes that the polling organization’s surveys have found that the Western perception that religiously observant Muslims nurse anti-American sentiments runs counter to the actual trend: “What we find in the data for Muslims globally is that the more religious you are and the more regularly you attend the mosque, the more likely you are to say that you are ready for engagement with the West and to say that the conflict with the West is not inevitable.”

“What 9/11 did do in the minds of people in the West and in Muslim-majority societies was to have them enter the process of exploring if the conflict [between Muslim and Western worlds] is inevitable or if there is readiness for the two groups to engage,” he added.

Repondents with positive view of the US (%)

Respondents with positive view of US

Source: Arab American Institute Foundation/Zogby International

The increased American interest in understanding Muslim and Arab cultures has been tangible since 9/11, confirmed Lara Alameh, executive director of the Safadi Foundation USA, a civil society organization that aims to further economic development and job creation in Lebanon and other Arab countries. “I think some prejudices have increased [post 9/11] but at the same time there has been a huge interest,” she said, illustrating from her personal experience that, when graduating in 2001 from a university in Washington, DC, she was “one of about two people with a major in Middle Eastern studies. If you look at the graduating classes of Middle Eastern studies at the same university now, you have hundreds [of graduates].” Alameh added that she is being increasingly approached by young Americans who want to travel to Lebanon for employment or internship opportunities.

Where things went wrong

In parallel to the growth of interest, prejudice and discrimination against Arab-Americans — who account for about 1 percent of the US population — is a growing concern within the national culture. According to Younis, a recent Gallup poll found that a majority of American Muslims said that they experience discrimination and prejudice regularly. “They have a perception that the average American discriminates against Muslims,” he said, but noted black and Asian Muslims generally do not experience more prejudice than other non-Muslim members of the same race.

Whether the taste of a McDonalds meal has helped or hindered US-Arab relations remains a subject of debate

Evidence of Americans’ split perceptions of Arabs and Muslims is as far reaching as ever. From initiatives to ban “Islamic law” on state levels to anti-Arab rants in the media and blogosphere, the tensions are clear and the divisions evident. One telling case was when the embassy of the United Arab Emirates in Washington last month donated funding for computers to the children of the town of Joplin, Missouri, which had been devastated by a May 22 tornado. In response to the announcement, online ‘opinionators’ in the southern town immediately questioned whether the community had sold out to that “country that brought us the 9/11 hijackers”, and produced other slander —which was then quickly rebuked by other members of the community.      

According to Zogby, the views of Arab issues in the US are indeed strained by a partisan split but the researcher attributed this less to the original terror attacks and more to the response of the American leadership of the time: “The Bush administration fed this nascent conflict and gave it life and made it real. The war in Iraq and the way Afghanistan was handled and the neglect and reckless approach to the Israeli Palestinian situation dug very deep holes between America and the Arab world.”

More recently, the strain on American–Arab relations within the US seems largely due to Republican politicians and their supporters fueling attacks against a Democratic president through fomenting fear of, and anger toward, Muslims — indeed the extent of their success was evident in the political fire-storm that was ignited by the popularized assertion that President Barack Obama is actually a Muslim in Christian guise.

Economic Realities

It is an open debate as to what degree economic relations can be the foundations for peace, though it has often been documented how economic interests have historically been the motives for war. This notwithstanding, the strengthening of mutually beneficial business ties between Arab countries and the US has a great potential for changing both realities and perceptions.

Of all Arab countries, only Saudi Arabia is a major actor —regularly one of America’s top 10 or 15 trade partners in the monthly US import statistics — when it comes to Arab economic dealings with the United States. Saudi export performance to the US, however, is hugely distorted by the dominant role of petroleum, as is the case for Kuwait, the second GCC member state with a large trade surplus vis-à-vis the US in 2010. Of combined deliveries to the US worth almost $37 billion in 2010 from Saudi Arabia and Kuwait, non-oil exports accounted for less than 3 percent of total value.

Moreover, it is only oil that the US is buying from the Arab world in significant quantities. A country like Qatar, whose international trade revenue is based on liquefied natural gas production, currently does not even reach an annual export volume of $1 billion to the US.American exports

The impact of purpose-designed incentives has also been noticeable, though on a small scale. The prime example here is Jordan, whose exports to the US ballooned at the start of the century as result of Jordanian-Israelico-production in exportable goods in special economic zones, instituted as a reward for Jordan’s peace treaty with Israel. 

But while the billion-dollar annual shipments of goods from Jordan to the United States has not maintained growth momentum through the second half of the last decade, the Israeli-American trade story is a demonstration of an economically successful interaction for a country in the Eastern Mediterranean. Since 1994, the US trade balance with Israel has been skewed in Israel’s favor each and every year.

According to the office of the US Trade Representative, Israel has established a solid role as supplier of several categories of machinery to the US ($3.7 billion in 2010), pharmaceutical products ($5.2billion) and of diamonds and precious stones ($7.9 billion). Perhaps also telling is the difficulty in finding a Palestinian export to the US of note.

Imports to the US from Israel from January 2010 through June 2011 amounted to six times the value of goods imported in the same period from Israel’s direct Arab neighbor states, namely Egypt, Jordan, Syria and Lebanon. While this ratio, from an Arab perspective, represents something of an improvement when compared with the period of 1996 to 2000 — when annual Israeli exports to America were roughly 12 times the size of the same four Arab countries — it was almost unchanged when compared with the skew in favor of Israel between 2000 and 2005.

Even without discussing the selective offering of American military hardware, the imbalance of positive and mutually profitable business ties between the US and Arab countries and the US and Israel, is as deeply engrained as it is massive.   

While politics and culture play a role in the absence of real trade development between Arab countries and America, it would be futile, faulty and self-defeating for advocates of Arab trade expansion to attribute the miserable performance only to factors of identity and affinity. As Gallup’s Ahmed Younis pointed out, the Arab problem is much more direct and practical. “In order to trade, you must have the capacity to create something that the market on the other side of the divide is interested in consuming. The primary challenge [is] in creating a trade balance that brings about equality and respect in Muslim-Western relations — the primary obstacle is that most Muslim majority societies are not producing anything that they can trade,” he said.

Younis added that the middle-income Arab countries are crucial for developing genuine trade. In his recommendation, “there must be the entrance of multi-national companies and the ability of governments in the region and around the world to help catalyze the development of small-to-medium-size enterprises that serve as supply chains for these multinational corporations.”

A slowly expanding pattern in the promulgation of local bases in Arab countries for such economic relations with the multinationals of the world has been created by entrepreneurship initiatives. Fostered by a variety of civil society entities, government programs and capitalist ventures, entrepreneurship drives are a part of the post-9/11 decade in the Arab world that have, to a large part, been motivated by the ideology of modern business empowerment rather than by political considerations. However, according to the Safadi Foundation’s Alameh, policy makers in Washington still rely on “old thinking” about the Middle East. “The main interests — oil, Israeli security and containing Iraq/Iran have not changed in the post-9/11 context. What has changed is the rhetoric, the language used with the people, but actual strategies I don’t think have changed much,” she said.

The 10th anniversary of 9/11, then, will pass as inequitable trade relations remain between countries such as Lebanon and the US. According to Tarek Sadi, the Lebanon managing director of Endeavor, a global entrepreneurship organization headquartered in the US, for entrepreneurs in the Middle East “selling to America is an important part of their plans.” Viable growth of trade, however, should be seen as a policy for the next 10 years.

Experts contend that the Arab governments and elites of today are still ill equipped for managing and driving entrepreneurship programs and rely on foreign expertise even where funding of programs can be achieved with ease from local sources in the region. However, with research showing that the desire to start one’s own business is up to 10 times higher among young Arabs of today than among the same age group in Western societies, policies and initiatives in favor of entrepreneurship would go a long way towards treating economic disenfranchisement.

Still a way to go

According to the findings of a Gallup poll of Muslims in the Arab world, being exposed to cultural disrespect is one of three main grievances they hold against the West. The perception of being disrespected, when analyzed more closely, is tied to absence of “fairness and equity of engagement”. Muslims, says Younis, ask: “Why is it that the freedom that you consider inalienable to you, your government is not making available to me and my country?’ In order to reverse that perception of disrespect, to reverse the perception of inequity, America and western countries need to play a role in bringing about those things that Muslims see globally as good in America and good for their own societies, and those things that they want for their own societies.”

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Egypt’s great divide

by Daniel Williams
written by Daniel Williams

In this Nile River town in Upper Egypt, a pious and politically active Islamist group is handing out pamphlets that warn of what it claims are the dangers of a secular state.

“Gay marriage! Alcohol! Nude beaches!” the fliers fearfully predict.

The pamphlets represent an extreme end of post-Mubarak Egypt’s intense debate over the country’s political future. On one side stand some Islamists who contend that, as Egypt is a majority Muslim country, basic citizen rights and duties are enshrined in the tenets of Islam. Any other path, they assert, takes Egypt to perdition.

On the other side are Egyptians who assert that the key guarantor of all citizen rights is the “civil state," whose rules trump religious doctrines. Religious minorities — chiefly Coptic Christians — also favor a civil state, while agreeing with Muslims who want their own religious authorities to deal with personal status issues like marriage and divorce.

In response to months of campaigning by liberal politicians, on August 10, Deputy Prime Minister Ali al-Selmy endorsed a proposal to decrees upra-constitutional principles that would guide the creation of a new constitution, to be written after November parliamentary elections. Selmy’s outline included what he called the foundation of a “civil democratic state.”

Islamists, including the Muslim Brotherhood, the oldest and largest Islamic political organization, say this would short-circuit a democratic process in which a new elected parliament would establish the procedure for drafting the constitution. Islamists also say such guidelines would open the way to a political order hostile to religion, and they are threatening street protests.

These debates and mutual suspicions are not new, but after the ouster of President Hosni Mubarak, activists initially shunted aside such differences. For instance, none of the major non-Islamist parties advocate cancelling Article 2 of the old constitution, which declares the principles of Islam as the main source of the country’s legislation.

The debate assumed a striking manifestation when Salafists — a term referring to pious Muslims who contend that believers must strictly follow the example of early Muslims — entered Tahrir Square, the Cairo epicenter of Egypt’s democratic uprising, and called for an Islamic state. “The people demand the laws of Allah,’’ they chanted, a sharp revision of the earlier, unified Tahrir call, “The people demand the end of the regime.”

A key peril in the divide is the chance that one side or the other will feel betrayed by Egypt’s new democratic order. Under Mubarak, many Islamists were imprisoned without charge and tortured for their political activity. Both before and since his downfall the Muslim Brotherhood has campaigned against torture and arbitrary arrest. Islamists understandably want their new-found freedom of political participation to be permanent and distrust liberal politicians, some of whom tolerated Mubarak’s exclusion of Islamists.

Liberal Egyptians worry that statements by various Islamists that Christians and women should not be president of Egypt foreshadow an Iranian-style political and cultural repression in the name of religion. They want individual liberty guarantees, including freedom of expression, and minority and women’s equality. According to an account published on August 28 in the Masry Al Youm newspaper, the proposed pre-constitutional text includes the phrase: “Discrimination on basis of gender, race, language, religion,wealth or social status is prohibited.”

Such a guarantee would be an excellent way for Egypt to start meeting international standards on equality it has signed up to. Human rights are not the monopoly of secularists or Islamists. The protections against torture and arbitrary detention that Islamists campaign for are also fundamental.

Islamist and non-Islamist thought each constitute traditional elements of Egypt’s political soul and similar divisions are at play in Tunisia and undoubtedly will arise in Libya. Failure to reach accommodation brings another risk; already some liberals are appealing to military authorities to bridge political divides, prolonging rule by the opaque and authoritarian Supreme Council of the Armed Forces.

The dangers of this approach include continuing military trials of demonstrators and other critics, and arbitrary banning of strikes and demonstrations. Neither Islamists nor their opponents should want that kind of future. Rather, Egypt’s future requires structures and institutions that will guarantee basic rights — including freedom from torture and arbitrary detention, the right of all to practice their religion, and freedom from discrimination, including by gender or religion — regardless of who is inpower.

DANIEL WILLIAMS is a senior researcher at Human Rights Watch
 

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The fortunes of upheaval

by Yasser Akkaoui
written by Yasser Akkaoui

The Libyan rebel forces’ rout of government troops from Tripoli last month heralded a pivotal moment in history, with the toppling of Muammar al-Qadhafi’s regime marking the third North African autocrat to fall to popular uprisings this year. Even while the security situation remains perilous, world powers and multinational companies are climbing over each other for a chance to reap their slice of the spoils of war: Libya’s fabulous resource wealth of oil and gas.

The Libyan revolution and its impact on global energy prices have been among the factors playing into the economic turmoil of late, where the sovereign debt crises in the United States and Eurozone have raised fears of a double-dip recession, sending markets into a flailing panic and rendering them near untradeable at times. In this environment, protecting one’s wealth becomes an anxious business. Executive has sought out the brightest minds in the business, locally, regionally and globally, for their take on how to navigate the storm.

Much of the world’s attention this month will also be focused on the 10-year anniversary of the September 11, 2001 terrorist attacks in New York and Washington. How much does this event, and the reactions it was used to justify, still impact the world we live in today? And is the so-called ‘clash of civilizations’ as clear-cut as its proponents would have us believe?

Despite all the turmoil, however, one must not forget to always look for opportunity. Perhaps that is a thought to ponder as one cruises what just recently became a long, open highway from the Gaza border to the doorstep of Algeria.

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Trailing the truth in Syria

by Moe Ali Nayel
written by Moe Ali Nayel

Sitting in my West Beirut office at the end of July, pondering the Syrian revolution and the conflicting reports from state media and activists on the ground, I decided I ought to visit.

For three days I travelled around Damascus, visiting the suburbs reported to be places of protest — they were hard to miss given the army deployment in these areas — but I saw little of what I expected. Where there were protests, such as in Qaboun, they ended within 10 minutes and were male-only marches; women were asked to leave for their own safety. Seeing the situation in Damascus made it clear how the regime is dealing with protests through a choking military siege. Was it like this all over Syria?

The Homs bus station of my youth had been bustling with vehicles and travelers but when I arrived last month it was a ghost town. As I jumped off the bus I heard gunshots in the distance. Later that night my nostalgia of Homs as a place where sects co-existed peacefully vanished when my Christian waiter told me he was worried about the “conspiracy” — touted by Syrian state media — that the militant Islamists sought to foment “chaos”.

“We Christians are afraid,” he said. “We saw how Al Qaeda groups killed Christians in Iraq after the American invasion. We are a minority here, and if this regime falls we are in danger.”

The Alawite neighborhoods in Homs were guarded by tanks and mukhabarat (secret service) and there were few people in the streets — not so different from the rest of the city save the posters declaring “We love you Assad”. Here nearly everyone swore to me that the revolution was a conspiracy, an American and Saudi plot to separate Syria from the axis of resistance, distance it from Palestine and force it sign a peace treaty with Israel. The international media’s inflated reporting of the protests has compounded this sentiment, causing Syrians on the ground to lose respect for their accountability and playing directly into the regime’s claims of an international conspiracy against it.

Now, it was time to see the places of protests, from where the echoing gunshots were fired.

The Khaldeyh neighborhood after Friday prayers saw wave after wave of men arrive to form a sea of protest, a mass movement that brought with it a sense of unity and security. The safety I felt in Khaldeyh encouraged me to travel to Bab-Amr, Bab-Dreb, Bab-sbe’a and Hola, near Hama, where I saw people, mostly poor, protesting courageously for their freedom. No one had guns; I did see signs of people trying to protect their neighborhoods with sticks and stones, but this seems the least one can expect from those attacked and threatened by battalions of state security.

Worryingly, I also saw people drifting unknowingly towards extremism. Lacking strong opposition figures, many found guidance in the words of Sheikh Adnan al-Ar’our, a Syrian religious leader broadcast by satellite from exile in Saudi Arabia. His fiery rhetoric incites Sunnis to take back their country, and graffiti in protest epicenters testifies to his revered status. As much an indication of the religious coloring of the movement, Ar’our’s influence speaks to disillusionment within the largely secular opposition. Repeatedly I was told the opposition were “doing a great job meeting and planning, but they don’t represent us”. “We are here on the streets striking, protesting and facing Assad’s bullets with our bare chests,” people would say, while the opposition “hangs out in hotels”. These sentiments resonated on August 20 when a transitional council was formed in Turkey by outside Syrian opposition figures. On social media networks Syrian activists have questioned who these people are and who chose them.

The danger now lies in this revolution being hijacked by those who do not have the people’s interests at heart, those in “hotel rooms” far from the streets, those who are empowered by foreign countries that want to shape the revolution and sectarian divisions to serve their own ends. As an Arab youth myself I stand by the protestors: this is our time. The older Arab generation had their chance and they left us with dictators, oligarchs, widespread unemployment, illiteracy and poverty; but the old ways die hard. Selmeyeh (peacefully) is how the Syrian revolution started and selmeyeh is the way it must remain to bring about true change, rather than the old tyranny under a new name.

MOE ALI NAYEL is a Beirut-based freelance journalist

 

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Only one state left

by Ahmed Moor
written by Ahmed Moor

Decades of fruitless, frustrating and ultimately self-defeating negotiations have yielded nothing meaningful for the Palestinians. For the Israelis, however, 20 years of the Oslo process have been immensely productive. During that period, the number of Israelis colonizing East Jerusalem and the West Bank swelled by several hundred thousand; today, there are more than half a million settlers in the Occupied Palestinian Territories.

But the putative Palestinian leadership — with Mahmoud Abbasat its head — has signaled that it recognizes the actual nature of the Oslofarce. September will see the Palestinians issue Oslo’s final dirge when a vote on Palestinian statehood is put to the United Nations. While helpful, the move will not impact the likeliest outcome of the conflict: The emergence of a single, non-Zionist, multinational state within Palestine/Israel. Mahmoud Abbas, the President of the Palestinian Authority, will be submitting an application for full membership in the United Nations in September. He will request that the West Bank, Gaza and East Jerusalem be henceforth recognized as Palestine, a state among equals. The move is expected to receive overwhelming support in the General Assembly, but it will require backing from the permanent members of the Security Council in order to be presented for a vote in the Assembly. The United States’ representative to the UN, however, will undoubtedly veto the measure, thereby ensuring that a Palestinian state is not recognized.

The American and Israeli leaders insist that by actively obstructing the Palestinian bid for statehood, they enhance the prospects for peace. According to them, a negotiated settlement is the only way to ensure that a strong and secure peace emerges in Palestine/Israel. In reality, Palestinian statehood would complicate Israeli efforts to continue colonizing Jerusalem and the West Bank; invading a fellow UN member state carries more international penalties than colonizing occupied territories. Over 40 years of colonization has ensured that no Palestinian state could come into existence in the occupied territories. More than 100 settlements and an equally large number of outposts (early-stage settlements) have rendered the West Bank non-contiguous for Palestinians. Moreover, a vast network of settler-only roads has worked to further geographically fragment the West Bank. Jerusalem too has been segregated from its Palestinian hinterlands by a ring of settlements.

Israel’s dependence on Palestinian water further increasesthe likelihood that a separate Palestinian state will not materialize. The mountain and coastal aquifers — which sit beneath the West Bank and Gaza, respectively — are important sources of freshwater for the Jewish state. In a region where the scarcity of potable water is a permanent feature of the conflict landscape, the Israelis cannot be expected to relinquish control of this vital Palestinian resource. Yet, the fact that the US and Israel have effectively aborted any Palestinian state does not mean that the UN vote is meaningless. Indeed, the vote will enable the Palestinians to highlight Israeli intransigence, thereby promoting its increased isolation and bolstering the global Boycott, Divestment and Sanctions (BDS) movement — which aims to defeat Israeli apartheid by adopting South African anti-apartheid strategies.

In this way, the UN vote on Palestinian statehood will promote the most likely outcome of the conflict; the emergence of a binational, single state with equal voting rights for all citizens, following the trajectory set by South Africa for contemporary colonial conflicts in a decolonizing world. 

While it may sound like a novel solution to a hitherto intractable conflict, the one-state solution was in fact a central goal of the Palestinian national movement for decades after the establishment of the state of Israel. The transition to the two-state process was only completed by Palestinian leaders in the past 20 years or so. Indeed, many activists, leaders and academics insist that the empirical reality of Palestine/Israel is already that of a single state — a deeply segregated state with apartheid and institutionalized racism, but a single state nonetheless. The vote on Palestinian statehood at the United Nations will not result in a state due to American and Israeli obstructionism. But it will aid the Palestinian quest for freedom by helping to further isolate Israel and its patron, the US. By empowering the BDS movement, the UN vote will further enhance the prospects for the establishment of a single, non-racist state in Palestine/Israel. At this stage, that is the only viable solution.

AHMED MOOR is a Master in Public Policy candidate at Harvard University’s Kennedy School of Government

 

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Little evidence at the end of the line

by Nicholas Blanford
written by Nicholas Blanford

If Daniel Bellemare, the prosecutor for the Special Tribunal for Lebanon, is planning to base his case against the four Hezbollah members indicted for the assassination of Rafik Hariri solely on the telecommunications evidence contained within the indictment, the actual trials, should they occur, could be over in a very short time. As it is, the indictment acknowledged that the case against the accused is built “in large part on circumstantial evidence”. Indeed, at a certain level it must be tempting for Sayyed Hassan Nasrallah, Hezbollah’s secretary-general, to dispatch the four accused to the Netherlands with a good team of lawyers in the belief that they can beat the rap. After six years of investigations, we could be forgiven for expecting more than telecom analysis to support an indictment that has polarized Lebanese society more deeply than at any other time since the end of the civil war and still threatens further political turmoil. As it stands, the centerpieces of the indictment are five covert and overt mobile networks related to the assassination the prosecution says it discerned and color-coded from the millions of phone calls made each day in Lebanon.

It was widely expected that telecom analysis would play apart in the prosecution’s case; as long ago as October 2005 the cell phone networks used by the perpetrators of the assassination were made public in the first report of the United Nations commission charged with investigating the crime.

Regardless of whether Bellemare has more evidence to hand out or not, there are a couple of questions to ask regarding the contents of the indictment. First of all, the indictment acknowledges that the perpetrators were aware that at any given time their locations could be traced by the process of co-location — using mobile phone signals to triangulate the position of an individual. That, the indictment claims, is why the assassination team’s “red” network of color-coded phones was activated in Tripoli a month before the murder, an area where few Shiites live and home to Sunni Islamists on whom the accused planned to pin the blame for Hariri’s murder.

Yet, if the perpetrators were aware of this technological tracking system, why did they then continue to carry other color-coded phones along with their regular phones while going about their daily business? It was the proximity of their regular phones to the color-coded ones that apparently led to the identification of the alleged perpetrators. During the wave of assassinations of prominent anti-Syrian figures following Hariri’s death, people under potential threat routinely removed batteries and SIM cards from their cell phones before leaving home so that they could not be traced. Hezbollah’s signals intelligence and electronic warfare capabilities are highly advanced and its technicians thoroughly trained. It is inconceivable that the organization would have been unaware that a cell phone can still be tracked even when not in use.

The second, and more pressing, question is why Hezbollah would want Hariri dead in the first place. Certainly, Hezbollah and Hariri were poles apart politically, each having different visions of a future Lebanon. Hariri was a pragmatist, was well accustomed to the necessity for compromise and was not on a moral crusade to oust Syria from Lebanon or disarm Hezbollah. Hariri was willing to accept an armed Hezbollah and respect Syria’s interests in Lebanon so long as he was given free rein to run daily Lebanese affairs as prime minister.

In the months before his death, Hariri and Nasrallah struck up a close and secret friendship — one which even Hariri’s advisors still maintain was genuine — and they met at least once a week in secret. They had much in common, both being devout Muslims, originating from south Lebanon, sharing a strong sense of humor, and even both having lost their eldest sons.

Nasrallah must have not only realized that Hariri was not a threat to Hezbollah and Syria, but he could in fact be exploited as an asset. After all, Hariri’s friendship with Jacques Chirac, the then French president, helped keep Hezbollah’s name off the European Union list of terrorist organizations compiled in January 2005.

More importantly, Hezbollah did not possess the leeway to independently undertake an assassination of such strategic import. If there was Hezbollah involvement in the Hariri assassination, the orders came from elsewhere. That begs the question that if it has taken six years for the tribunal to accuse four men, two of whom supposedly played a minor, ancillary role, how much longer will it take for the tribunal to identify those whodecided that Hariri must go?

Nicholas Blanford is the Beirut-based correspondent for The Christian Science Monitor and The Times of London

 

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Society

Western media flaws only highlight our own

by Youmna el Asma, Zeina Loutfi & Ramsay G. Najjar
written by Youmna el Asma, Zeina Loutfi & Ramsay G. Najjar

The attacks perpetrated by Anders Behring Breivik in Norway on July 22 had the unintended effect of unveiling bias and prejudice in the Western media, and sparked worldwide debates about the role and responsibility of the press. The incident also raises important questions about the lessons that we can extract in our bid to harness our regional media’s power as an agent of positive change and a reflection of the aspirations and values of the people.

In the hours immediately following the massacre, the false assumptions and speculation as to the perpetrator revealed a significant lack of rigor and objectivity by some major news outlets. When the truth was out — that the massacres were not carried out by Islamic terrorists but in fact by an anti-Islamic Norwegian one — Middle Eastern journalists were quick to pour scorn on the mistakes made by the foreign media, seizing the opportunity to point out all the faults in coverage. It would seem that they forgot for a moment that our own media industry still has a long way to go before being able to brag about values like objectivity and truthfulness.

Lazy assumptions

Some of the most influential broadcasters undoubtedly were too quick to jump to conclusions, favoring the Islamist and Al Qaeda route without any reliable facts. Looking back at the earliest hours after the attacks, most media directly assumed the terrorist attacks were linked to Islamic organizations and attempted to rationalize every new piece of information by integrating it into the Islamist hypothesis. For instance, an American commentator accounted for the fact that the killer was a “blonde Norwegian male” by deducing that Islamic terrorist organizations had probably moved to “a new level” by recruiting natives. Moreover, the foreign media’s choice of experts commenting on the event provided the grounds for erroneous interpretation; most specialized in researching Al Qaeda, Salafis and other Islamist extremists, thus automatically directing the media analysis towards the Islamist theory without any shred of evidence.

In fact, the Norway attacks could have been a chance for the international media to rectify the strong prejudice against Islam and Arabs that it has played a role in fostering since the 9/11 attacks in New York and Washington DC. Instead, it reinforced a false perception that continues to influence local and international politics around the world. In their reluctance to use the word “terrorist” once the man’s identity was discovered, the media helped perpetuate the idea that terrorism and Islam are often mutually inclusive, and to some extent interchangeable. The word terrorism, or its derivatives, was ubiquitously absent in the majority of the mainstream media’s coverage the day following the attacks, whereas some broadcasters used it only to reassure the audience that “it seems like this is not linked to any international terrorist organizations” and is “not Islamic-terror related”.

In addition, the media’s propensity for sensationalism, and its desire to fill airtime, was prevalent in the headlines used to cover the attacks. The headline that ran in the British tabloid The Sun — ‘Al Qaeda’ Massacre: Norway’s 9/11 — clearly has absolutely no relation to the reality but was immediately chosen as a convenient sound bite that would resonate with audiences, and a captivating branded product that could easily be “sold”.

Moreover, instead of focusing on the human aspect — the  young victims and their stories — the media chose to focus on the perpetrator and his ideology, inadvertently shifting the debate to the topic of immigration and integration, and thus somehow rationalize his horrendous act. The end result, while yet to fully unfold, seems to indicate that Breivik succeeded in what he set out to do,which was to sound the alarm bells over an issue that Europe has been grappling with for generations.

Our own failings

Returning to the media in the MENA region, which were given the rare opportunity to look down on their Western counterparts, the Norway attacks provide an opportunity to assess our own limitations. It is important to remember that our media is still far from performing its role effectively or living up to people’s expectations in terms of objectivity, editorial integrity and ‘fair and balanced’ reporting. The truth remains that, whereas many of the faults the foreign media committed in their coverage were caused by the race for the headline and the urge to fill the 24/7 airtime, the ones committed by our own media are mostly driven by the specific agendas of the media outlets ’financial backers.

One of the many examples is in the coverage of certain campaigns and elections in the region for which media entities are often quick, and more than willing, to announce winners even before official (if not credible) results are in. They often disseminate unfounded information, use sensationalism in their reporting through violent language and fear mongering, and reveal a clear lack of objectivity whether in the amount of airtime given to specific political parties or candidates, or in the partiality of the reporting of certain facts. Moreover, whenever there are security breaches or incidents, some of the media in the region are always ready to point fingers at specific parties, simply because it suits the agenda or interests of the government, politician, or “deep pocket” behind the media outlet.

And most recently the coverage of the Arab Spring has revealed the extent of the partiality in regional media outlets. Whether in the choice to cover, or to not cover, certain demonstrations and political events, or by taking sides between the opposition and the regime, media institutions have clearly failed to play their role as providers of unbiased information.The myth trumpeted by some media channels in the region that they abide by the highest industry standards when it comes to objectively showing both sides of the story, free from propaganda or self-serving interests has to a large degree been shattered in 2011.

For the media to truly reflect the high level of professionalism and integrity of many of its journalists, it should re-examine its practices and instate self-regulatory boundaries that prevent information from becoming a tool for public opinion manipulation. The media has a moral obligation to shun sensationalism that puts a shade on the human and social aspects of events and often directs the debate towards unconstructive dimensions. And it has a duty to avoid speculation and discriminatory discourse that further reinforces prejudices, as a step towards becoming a uniting, rather than a dividing, force.

Accepting responsibility

It is a fact that the media is no longer simply a medium to relay the news. It has a responsibility to use its reach and influence to educate and break down barriers enacted out of prejudice. Remaining faithful to these imperatives would most certainly set the media in the region on the right track; only then would it be in a position to criticize the western media for its shortcomings.

The western media’s coverage of the Norway attacks should serve as a lesson to MENA outlets on the power they have in shaping opinions and debates, and on their responsibility to not turn such power into propaganda. Then again, many would argue that putting the onus on the media, knowing the political climate and the industry’s dependence on advertising revenues and/or political and financial backing, is asking too much. Knowing this, what it all boils down to is that most regional media should free themselves from the shackles of political and financial servitude. Only with such freedom comes the ability to be objective and free of prejudice. Following the incredible societal achievements of the past months, one can only hope that the time has come for the media in the region to show some courage by looking closer into how they operate and re-examining their own system of values.

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Finance

Executive Insight – Value over quality

by Natacha Tannous
written by Natacha Tannous

Fear and panic drove the markets through most of August causing more than $4 trillion in wealth destruction, while policymakers responded with “soft patches” and short-term solutions to what are structural and fundamental sovereign-debt problems on either side of the Atlantic.

During the week of August 8 the S&P500 — best single gauge of the United States equities market — went on a roller coaster ride, closing consecutively at -6.7 percent, +4.7 percent, -4.4 percent, +4.6percent, and +0.5 percent. While choppy and erratic, both American and European equity markets began a four-week downward near the end of July, with the heightened risk of a recession prompting investors to dump risky assets and seek safety in the Swissie (CHF), gold and in long-dated US Treasuries, in other words, there has been a general flight-to-quality.

Thus, the concern today is how to trade equity and foreign exchange markets, and hedge against potential event risks until the politicians and central bankers provide durable solutions to exit their debt conundrums and correct economic imbalances.

Approaches to equity and FX

Nouriel Roubini, also known as “Dr. Doom” for having predicted the 2008 financial crisis, recently told me that he assigned a “50 percent probability to a double-dip scenario… Or possibly more.”

For investors sharing this “doom and gloom” view, outright put options on US or European indices would make sense, if not shorting the indices directly. Since implied volatility hasn’t reached the 2008 and real crisis levels, protection is still cheap and below fair price if you calculate that the worst is yet to come. The put protection provides an attractive way to limit the downside, or potential losses, to the put premium if you happen to be wrong. If such structure is not affordable, an investor could play the correlation card — given that in times of global meltdown correlation tend stowards one, meaning the markets move in sync — and buy a best-of-put on a global basket where the index that will fall the least will still drop considerably in broad-based sell-offs.

Turmoil in the S&P

Turmoil in the S&P 500

Source: Standard & Poor’s

In the world of foreign exchange, investing in quality assets would protect from event risks, with possibilities including buying a barrier option for a targeted move in the USD-CHF rate, or play the Norwegian NOK if investors fear interventions from the Swiss National Bank (SNB) to control the appreciation of the Swissie.

The second group of investors — the bears — assign a lower probability of dramatic worsening of the sovereign crisis, but still believes that uncertainty will dominate markets. Even the fixed income markets in the Eurozone are pricing in a deeper debt crisis with Italian and Spanish 10-year yields flirting between 6 and 6.5 percent — that is until the European Central Bank decided to resume bond purchases — and more alarming, the Greek 2-year yield hitting 46.6 percent on August 25.

“Markets won’t give the benefit of the doubt [to theEurozone] until the results of policies to correct imbalances in public and private sector balance sheets as well as current accounts, and the new policy infrastructure, are visible,” highlights Mark Wall, managing director and co-head of European Economics at Deutsche Bank. “It is a ‘muddle through’ and as such markets don’t like it.” With this bearish view, buying (bear) put spreads on indices, for example, is a better alternative to outright puts —given the cheaper structure — as investors are willing to limit the upside, or potential gain, below the first strike.

A third and quite diverse group — the bulls — argues that the market has allegedly discounted the turmoil in the US or potential selective default in the Eurozone, with policymakers close to providing solutions; the more extreme ones even believe that ‘everything is a buy at current levels’. These investors are betting on this rally starting soon — and on a more inflationary world — and would rather buy call options on indices, for example, staking their money on the upside. Once again, this group covers a large spectrum and is quite hybrid, as being bullish does not necessarily entail being bullish on all markets.

If an investor bets on a faster resolution to economic imbalances in the US on the basis that the US has better fiscal tools at its disposal to solve the debt crisis, one could combine longs in the S&P 500 with shorts in E-STOXX50. This view can also be played through the FX market, and particularly the euro-dollar.

“As the ECB begins to aggressively accumulate Eurozone bonds— out of necessity — and overall risk appetite grows disappointed with any stimulus from the Fed, the euro-dollar is likely to make its way towards the $1.40 figure,” explains Ashraf Laidi, chief executive officer of Intermarket Strategy Ltd and author of Currency Trading & Intermarket Analysis. “The most important support remains $1.37, a break of which would flood the gates towards further downside.”

Last but not least, a growing group — the ‘risk off’ investors — would rather sit-and-wait. These investors do not wish to actively trade in these markets given the excessive uncertainty and irrationality; they prefer to dump investments across a spectrum of assets and sit on their cash, with the idea that “being flat is the new high.”

Taking a view

Looking at the divergence in trends between the end of July and what seems like a start of rally in equities and correction in quality assets during the last week of August heading into ‘Jackson Hole’ — the annual US Federal Reserve (Fed) symposium — it would seem that the irrationality of markets was more due to panic, a lack of liquidity (with many investors on holiday), day trading and market positioning, rather than to sensible trends. Either way, it seems that markets are largely untradeable, at least until we get more clarity from policymakers.

And yet, the investor has to do something, but what? Is ‘off risk’ the only logical option? The reality is, liquidity has been poor this summer and volatility high, so the investor can make the same amount of money with less notional than in a low volatility environment.

Thus in order to work out how much to put in, the real questions should be: What opportunity does the investor seek and how much does he want to make? Does the investor want a ‘high risk/high reward’ portfolio —investing in the banking sector like Warren Buffett’s recent $5 billion bet on Bank of America — or a portfolio with lower volatility, such as one with investments in the utilities sector?

Whether a sector, single-stock or asset class approach, investors must take a view, but one in search of what has been oversold and depressed, or conversely overbought and overvalued,  rather than rushing into safe haven currencies, gold or US Treasuries. In short, it is more sensible to bet on assets trading under or above ‘fair value’ rather than invest blindly in ‘safety’ — value over quality.

NATACHA TANNOUS is EXECUTIVE’s financial correspondent

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Real Estate

Q&A – Fadi Antonios

by Rayya Salem
written by Rayya Salem

Fadi Antonios presides over a network of industrial enterprises in the United Arab Emirates and has growing interests in Lebanese real estate. Through his development company, Antonios Projects, he is the sole owner and developer behind what will be Lebanon’s tallest tower, the 50-story Sama Beirut, currently under construction in Ashrafieh, where it will offer luxury retail space, offices and residences. Executive recently got the scoop on the project and on Antonios’ future plans for his home city.

Since the construction contract alone is well over $100 million for Sama Beirut, is it not risky to self-finance the entire project?

My father used to say, ‘In real estate, never take a partner; it’s like [having a] wife, you don’t take a partner.” [laughs] If you can realize your project without banking facilities it is better and less risky… Now we have a bridge loan [a guarantee from the bank in case of a financial shortfall]… but we don’t have any problems with financing. I always work by myself [without partners].

Besides that, I am working on a much bigger project. It will be a gated community, which will have close to 60 buildings in a prime location in Beirut and will have all internal facilities, security at the gates and a club for the families.

I am also starting an office building in Beirut, near Université Saint Joseph, where there is a need for “clever offices”. I bought the plot, which is close to 2,000 square meters, and we are now working on the drawings and architecture. Again, it is all being financed by myself.

To date, what is your total investment in Lebanon?

Quite a lot. I think investing in Lebanon in real estate is still the safest and most interesting place. Especially that we are Lebanese and we know the mentality, the people. It is much easier to navigate the construction field [in Lebanon] than anywhere else in the world.

The construction contract awarded to MAN Enterprise was more than $100 million whenannounced in June. Was this the original budget?  

Yes, but the construction budget has increased more than 50percent.

We didn’t expand floors but it is due to the improvements,choice of material, high technology and the devaluation of the US dollar.

How does Sama Beirut use solar water heating techniques?

We tried to use solar energy to produce basic electrical needs. Unfortunately the photovoltaic technology is still very expensive and it did not pay to invest in it. For the hot water, that is a much simpler technology and it’s enough to provide hot water for 24 hours without burning fuel… Fuel for boilers and maintenance of systems is getting more expensive. With solar, it’s a free system and maintenance is cheap.

In the UAE,developers have traditionally applied a mix of British and US fire safety standards, but the rules are currently being standardized, as some new residential buildings reach over 100 stories. What about in Sama Beirut?

Here we can use the service floors [every 10 floors] and we also have fire-proof elevators in addition to fire safety plans and installations. We are applying fire safety [techniques] that are a mix of the French and American systems.

Lebanese engineers are really the best, I would say. I enjoy working with these engineers and architects. I always use Gregory Gatzerelia for all my private residences… For Sama Beirut, we considered international contractors before choosing MAN Enterprise. [The deciding factor] was not price, it was experience in mastering Lebanese construction, rules and regulations — its name and its realizations are the best buildings in Beirut.

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