Executive Magazine assesses the state of Lebanon’s industrial sector five years after it was devastated by Israeli bombardments in the 2006 war
“Freedom ain’t free” is a commonly used idiom in the United States. Somewhat jingoistic and trite it may be — certainly when used to justify a militaristic US foreign policy — there is still much truth to the expression.
The uprisings in the Arab world this year have certainly not come gratis. Many have paid the ultimate price — death — and the economic losses have been staggering. In post-revolutionary countries, economics has become a major focal point and it was arguably lop-sided economic development as much as political repression that sparked the uprisings in the first place, from Tunisia to Egypt and Bahrain, to Yemen and Syria. One of the economic factors that contributed to the uprisings and is a cause of much inequality throughout the developing world is capital flight, and while governments may have, to varying degrees, limited ability to stop legitimate investors from pulling up stakes,an area of enforcement where regional authorities have been lax is in stymieing the illicit flow of capital out of their countries. Between 2000 and 2008, according to Global Financial Integrity (GFI) research published this year, illegal capital outflows from the Middle East and North Africa (MENA) grew 24.3 percent, far ahead of any other region on earth.
Illicit capital flight refers to funds derived from corruption, money laundering, commercial tax avoidance and trade mispricing, where deals are made for transactions to end up in offshore havens to avoid being taxed. As a result, cash that could have stayed in the country of origin ends up elsewhere, leaving less capital to finance development. From 1970 to 2008, some $70.5 billion flowed out of Egypt, $25 billion out of Morocco and $25.7 billion out of Algeria. In Egypt, GFI estimates an average of $2.54 billion flowed out of the country each year through illicit trade mis-pricing alone. Tack on corruption and crime, and the figure is a whopping $6.36 billion a year that was not available to the Egyptian financial system and economy. Notably, as Egypt’s gross domestic product spiked and the economy grew in the late 2000s, illicit outflows increased by leaps and bounds, meaning real economic growth was essentially two steps forward, one step back. In 2006, illicit outflows reached $13 billion, $13.6 billion in 2007, and as the global financial crisis hit in 2008, $7.4 billion. Ousted President Hosni Mubarak and his family siphoned off billions from the Egyptian economy, but Egyptian financial elites also helped to hobble the country’s development through illicit outflows.
Addressing illicit capital flight is a concern for which revolutionaries should fight if the people are to improve their economic future. The problem right now, however, is that with the instability in the MENA, legitimate investors are also pulling their capital out of the region at worrying rates. Jordanian Finance Minister Mohammad Abu Hammour recently said at a meeting of the Union of Arab Bankers that capital flight in the Arab world is estimated at some $500 million a week. Unless such outflows are curbed, the capital needed to invest in post-revolutionary countries will be wanting.
Desperate for cash, these countries will either have to be beholden to donors, or to the conditionalities imposed by global financial institutions such as the World Bank and International Monetary Fund to stay afloat. In Egypt, with the government’s hard currency reserves reportedly plunging from $36 billion in February to $25 billion in May, some analysts warned that the country could be as bankrupt as Greece by the end of the year.
How to tackle this is tricky. Capital is transferred at the click of a button. Some $1 trillion in illicit inflows enters the Western financial system every year — with an estimated 20 percent to the US — and billions go to offshore havens. Tough withdrawal measures by post-revolution countries may help, but this is both heavy-handed and against the principles offree trade. With an estimated 65 percent of illicit outflows in the form of commercial tax avoidance, ensuring greater transparency by companies and elites in paying tax is a more feasible solution.
In tallying the expense of what it has taken for the MENA region to reach this turning point in history, what must not be overlooked is that those who have a responsibility to help cover the costs should be made to do just that. After all, democracy must be paid for.
PAUL COCHRANE is the Middle East correspondent for International News Services
Saudi Arabia overtook Israel as Washington’s largest purchaser of arms in 2009 and their demand shows little sign of abating. Riyadh-Tehran relations are at their worst since the Saudis were funding Saddam Hussein’s legions to mow down Iranian infantry in the 1980s.
The more recent escalation in tensions can be traced back to the election of Mahmoud Ahmadinejad in 2005, which tilted Tehran away from the pragmatic foreign policy of presidents Akbar Hashemi Rafsanjani and Mohammad Khatami. President Ahmadinejad’s notion of an assertive Iran, and his trenchant criticism of Israel and the United States, struck an unsettling chord around much of the Islamic world and his invocations of the 12th Imam projected an evangelical Shia’ism which the Saudis detested.
But even if Iran’s supreme leader, Ayatollah Ali Khamenei, continues in his efforts to restrict the president it is unlikely there will be any kind of rapprochement with Riyadh any time soon. The leader’s disquiet with Ahmadinejad derives more from his management of government and choice of advisors than from his role in foreign policy.
Saudi-Iranian tensions were further strained by the 2003 US-led invasion of Iraq, which replaced a Sunni-led regime with one whose leaders are Shia and allies of Tehran. Iraq’s drift into communal strife further enflamed Saudi’s sectarian sensibilities.
For years, pragmatic heads prevailed. Following the 2005 assassination of Rafik Hariri and even Hezbollah’s military assertion of power over Beirut in 2008, mediation efforts led by Qatar and Turkey were met with a shared sense in Riyadh and Tehran that escalating violence in Lebanon was in neither’s interests.
But a stalemate in international talks over Iran’s nuclear program fueled Saudi belligerence. By April 2008, according to US diplomatic cables released by Wikileaks, the Saudi ambassador in Washington relayed a plea from King Abdullah that America “cut off the head of the snake”, and last summer The Times newspaper in London reported the Saudis had practiced standing down their air defenses in a test-run for giving Israeli war planes a clear path to Iran’s nuclear facilities. And then came the Arab Spring, whose fires of revolt reached Bahrain, prompting Saudi intervention in February to defend a Sunni monarchy from a Shia majority.
In Syria at least the Saudis see favorable currents in the maelstrom of reform. Change in Damascus could upset relations with Tehran, severing its main logistical link to Hezbollah. Suddenly, there is the prospect of a Sunni-led Syria to counterbalance the Shia dominion in Baghdad.
Prince Turki al-Faisal, the former Saudi intelligence chief and ambassador, revealed in June a clear, if deniable, outline of the ruling family’s thinking when he said Iran was “very vulnerable in the oil sector”, while “more could be done to squeeze the current government”, as a reduction in oil revenues would cripple Tehran’s finances. He also spoke of Saudi Arabia developing nuclear weapons should Iran do so.
To Saudi chagrin, Iraq has sided with Iran at the Organization of Petroleum Exporting Countries, resisting Riyadh’s efforts to agree to higher quotas to lower prices. Riyadh has also reportedly discussed with Washington increasing its crude supplies to China as a way to lure Beijing into reducing its investment in Iran’s energy sector. It is a high risk strategy and may enflame the situation with no tangible benefit.
Despite increased sanctions the International Monetary Fund reported economic growth in Iran at 3.5 percent in 2009/10 (up from an earlier estimate of 0.1 percent). Further, according to the British Petroleum “Statistical Review of World Energy”, Iran increased production of oil and natural gas in 2010 by 0.9 percent and 5.6 percent, respectively, despite sanctions targeting investment in Iranian energy.
Iran remains resilient and has seen some improvements in its relations with Pakistan and Afghanistan, where US influence is waning. In June Iran’s military commanders declared themselves pleased with the tests of new, medium-range missiles — and the growing Saudi weapons arsenal will no doub tincite Tehran to further reenforce its armament program.
Gareth Smyth has reported from around the Middle East for almost two decades and was formerly the Financial Times correspondent in Tehran
One of the inherent ironies of a proper democracy is that a parliamentary majority can vote to temper or even topple the tenets upon which a country’s democratic qualities are founded. In that sense, no one can disagree that Israel is a true democracy.
On July 11, the Knesset passed a Boycott Law, which penalizes any Israeli citizen who dares call for or endorse an economic, cultural or academic boycott of the country as a whole or “areas under its control.” Approved by a 47-to-38 vote, the law allows companies and institutions targeted by such a call or endorsement to seek damages. It furthermore stipulates that an individual or company calling for a boycott will no longer be eligible to bid in government tenders. It remains to be seen if the law will stand when applied in court, as it has been protested as a violation of Israel’s constitutional right of free speech. It seems the law will face such a legal test sooner rather than later, as Aryeh Eldad of the National Union party has already filed a complaint against Dror Morag and other members of the left-leaning Meretz party, after they called for the labeling of products made in Israeli settlements.
The law has come under intense scrutiny in Israel and abroad, including in the United States. The New York Times slammed the law as “not befitting a democracy.” Even the Anti-Defamation League, one of the pillars of the Israeli Lobby, which has always proudly opposed any calls for a boycott of Israel, defined the law as “an unnecessary impingement of Israelis’ basic democratic right to freedom of speech.”
Ironically, the US itself in 1977 passed legislation in response to the Arab Boycott of Israel, which prohibits American taxpayers from taking action in support of an unsanctioned foreign boycott against a friendly state. When in recent years a potential boycott of Israel was discussed at American university campuses, pro-Israel elements keenly reminded people of the existence of the little known “Office of Anti-boycott Compliance” within the Department of Commerce.
Meanwhile, Israel’s ruling coalition of right-wing nationalist and religious parties happily ignored the wave of criticism and perceived the passing of the law as a green light to revive an older and equally controversial initiative: The launch of a parliamentary inquiry into the foreign funding of Israeli human rights organizations. Pushed by Foreign Minister Avigdor Lieberman and Likud Member of Parliament (MP) Danny Danon, it aims to tackle Israeli organizations that, according to them, work against the interests of the country.
Initiatives such as these illustrate not only Israel’s increasing schism with its own democratic principles, but also a shift away from the prospect of a negotiated peace with the Palestinians and Arab states. On the right there is the growing number of Jewish fundamentalists who, with a metaphorical Torah in one hand and an Uzi in the other, claim that the West Bank is an integral part of Israel, as God once upon a very long time ago gave Judea and Samaria to the Jews. On the left there are the secular, liberal segments of Israeli society, willing to comply with international law and cede the occupied territories in exchange for a peace deal, but they have largely been cowed into obscurity over the last decade or so as the right and far right have seized the initiative, dominated Israeli politics and set the social agenda, and this momentum shows no signs of slowing.
In an interview with Robert Fisk, the late Yeshayahu Leibowitz (1903-1994), one of Israel’s greatest 20th century thinkers, sketched a doom scenario for the country if the occupation of the West Bank were allowed to continue. “Two consequences are unavoidable,” he said. “Internally, the state of Israel will become a full-fledged fascist state with concentration camps not only for Arabs but even for Jews like me. Externally, we will have a war till the finish against the Arabs, with the sympathy of the entire world on the Arab side. This catastrophe can be avoided only by partition.” At that time, his words were hardly taken seriously. Yet today, seeing the actions of the religious right and extremist hotheads such as Lieberman, one must wonder if we are not peering over the precipice of a very slippery slope.
PETER SPEETJENS is a Beirut-based journalist
Eager to turn the page on money laundering scandals and rumors that hounded the industry at the beginning of 2011, Lebanese banks have gone on a summer retail advertising binge. From the refurbished and repackaged classic loans to the downright quirky new ones, Lebanon’s summer banking products are certainly putting on display the country’s on-credit conspicuous consumption.
Loan innovation
In 2004, Byblos Bank made the first move away from classic retail loans [housing, car and personal loans] when it introduced both wedding and travel loans. “The big wedding trend took off in 2000, and people started spending more on event planners, large venues, caterers and such. They were in need of huge budgets,” says Georgina Eid Dinar, head of group consumer loans at Byblos Bank. The bank’s $15,000 wedding loan ceiling far from covers lavish ceremonies, but Dinar says accompanying benefits, such as zero percent file and insurance fees outside the monthly installments, a three-month grace period and a slightly discounted interest rate — around 1 percent less than the regular personal loan — add value to an otherwise common personal loan.
Ronald Zirka, head of marketing and retail divisions at Banque Libano-Francaise (BLF), says the bank’s wedding package is the newest addition to an extensive retail product line, part of BLF’s somewhat recent strategy to divest from corporate banking and go into more consumer lending. “In 2009, we decided we wanted to dig into retail because we wanted to diversify the risk. We wanted equilibrium between corporate, small-to-medium enterprises and consumer loans,” he says. BLF’s wedding package offers a preferential interest rate of 9.99 percent on the wedding loan, compared to 13 percent for the usual personal loan, with the installments spread over a range of 18 to 24 months. Zirka says the package offers instant cash collateral to the bank. “We usually advise the customer to place the wedding list against the loan. That way no money will be spent nor lost. And if they do that they can go up to five years [for the reimbursement period], because we will have secured our guarantee.”
For Dinar, plush honeymoons that followed big weddings called for having a travel loan on the side. “At the time [2004], trip organizers and travel agencies started arranging for cruises and small trips. We went through the travel agencies and came up with packages for the [travel loan],” she says. There are currently seven banks that offer a travel loan in Lebanon, most of which allow for some sort of grace period and generally restrict the repayment time frame to a year. The rationale behind these terms and conditions, according to BLF’s Zirka, is that customers who take out a travel loan will usually want to settle it over a period of nine to twelvemonths, but need some breathing time first.
“It will be two to three weeks of vacation, and when they come back they will have spent a considerable sum of money. All in all, that is around a month and a half of no productivity. So we gave them a two-month grace period,” he says. Interest rates on these loans, however, are either generally the same as those on classic personal loans or cleverly embedded in extra charges. “The travel loan is at a zero percent interest rate and it is a true zero percent,” says Byblos’ Dinar, adding that customers are only charged a file fee, which adds up to 5 percent of the total loan amount.
With the exception of a one-year repayment period, Bank of Beirut’s “Safar” [travel] loan is no different from the bank’s personal loan, ranging between $500 and $15,000, and offering around a 7 percent interest rate on the total amount.
Outside impetus
Mira Raham, head of sales and marketing units at Credit Bank, says the push for travel loans was initiated some 15 years ago by travel agencies and cruise organizers to facilitate deals with their own customers. “The travel agency cannot install to the customer because after all, it’s not a bank,” she says.
BLF’s Zirka agrees that targeted retail products have helped bring suppliers and banks closer together to service both sides’ clients, which particularly benefited home appliance and electronics retailers. It was back in1999 that Bank Audi launched the first ever personal computer (PC) loan in Lebanon. Soon after, others followed. “We implemented our consumer/PC loans about three years ago. We have the lion’s share in this market,” says George Aouad, head of the retail banking division at Bank of Beirut. While the bank’s consumer/PC loan doesn’t diverge a great deal from their personal loan in settlement terms, Aouad says the interest rate on such a loan can fluctuate depending on the risk associated with certain appliance and high-tech retailers and distributors. “When I have the personal guarantee of the retailer the rate could be lower. That’s why we apply sometimes between 5.5 and 6 percent[interest rate]. But it’s usually 7 percent,” he says.
Credit Bank’s Raham says that it is the bank’s own clients that have paved the way for loans such as those for furniture and home appliances. “Many of our clients own galleries, furniture and home appliance stores. So we capitalize on that and try to cross-sell the banks’ products with those of our client-suppliers,” she says. BLF is slated to add an appliance loan to its current retail portfolio, but had previously introduced an iPad loan for a limited time in the summer of 2010, and plans to repeat this for theiPad2 soon. “We went into the iPad loan because it was a partnership with L’Orient Le Jour. The customer got a two-year print and iPad application subscription to L’Orient Le Jour along with the tablet itself,” says Zirka.
Home sweet home
But while travel, wedding and appliance loans could well be considered marketing ploys and gadgetized versions of the personal loan, it is summer housing loans, particularly those that target Lebanese expatriates, that largely prop up the season’s lending activity. “Housing loans are most demanded in summer because the expats come to Lebanon during that time, apply [for loans] and do their paperwork,” says Dinar, adding that Byblos Bank’s expat housing loan offers vary from the regular housing loan in services and conditions rather than in payment terms. “There is no difference in amounts, or down payments. The focus is the service [of availability] because some banks do not lend to non-residents,” she says.
But Zirka says that expatriates bring in higher incomes as well as more risk, both of which should be taken into account when lending to this particular segment. BLF’s expat housing loan requires a minimum 25 percent down payment of the house’s total value, compared to 15 percent asked of residents. “Expats make and spend much more money [than residents], especially during summer time. Every time they come to Lebanon they spend most of the money they put aside,” he says. “That’s why we finance a little bit less in terms of percentage out of the loan amount requested. The down payment is a bit greater than the one requested of residents,” says Aouad.
What’s in a name?
When asked about the need for banking products that can be easily replaced by the classic personal loan, Byblos’ Dinar says it is the way these targeted loans are packaged as on-the-shelf products that attracts a bigger customer base. “At the end, whether the interest is 12 or 7 percent, customers are only interested in how much they have to pay at the end of each month,” she says. But Zirka says that loans such as those for home appliances and electronics are necessary to facilitate consumers’ on-the-spot big purchases. “It saves the hassle for a customer who, let’s say, wants to purchase from Khoury Home. It makes the purchase a one-stage transaction instead of two,” he explains.
But some banks have taken niche marketing to extremes, introducing products that are borderline gimmicks. Both Bank of Beirut and the Arab Countries (BBAC) and Credit Bank offer a jewelry loan, with Credit Bank’s “Bijou” loan imposing a 20 to 62-years-old age bracket for beneficiaries who can borrow up to $10,000, and settle the amount over a maximum of two years. “It’s mainly young ladies or men who would like to offer [jewelry to] their wives; usually the young generation,” says Credit Bank’s Raham, who admits that the “Bijou” loan falls under the bank’s marketing, rather than product strategy.
“[Summer loans] all fall under the umbrella of a personal loan. You can make up an infinite list of products, but it goes to the same place [on the balance sheet]. It’s good marketing though, to address certain segments for a specific purpose,” says Bank of Beirut’s Aouad. But Zirka is cautious about bombarding clients with too many products. “First National Bank has a plastic surgery loan and a fertility loan. It’s a normal consumer loan but repackaged. It’s not wrong what they’re doing. We want to offer targeted products but still respect the banking image,” he says.
On managing credit risk that comes with tailoring loans on which people can easily default — Banque du Liban’s Centrale des Risques, the entity that assesses loan applicants’ eligibility, only requires such a process for personal loans above $5,000 — Zirka says that some of the targeted products offer relief for the banks. “What we are concerned about normally when we give out a personal loan is: Is the customer using the money for gambling? As an example. But someone who is getting married has priorities,” he says in reference to BLF’s wedding package.
For Aouad, adding some preventive conditions and terms to these products is key. Bank of Beirut’s taxi car loan, which Aouad says is a best seller during summer time, finances either taxi cars’ red license plates, which can cost $18,000 to $20,000, or the new and used cars themselves.
“Taxi cars are most prone to accidents so we included total loss insurance. The interest rate was also put in a logical way [around 5percent on new cars and 6.5 percent on used ones, compared to 3.9 percent and 4percent for the regular car loan], because we know that the car will depreciate very quickly,” explains Aouad.
Still, banks find comfort in setting low ceilings for these targeted loans. “We could adopt a no-limit policy with loans, but this is not good neither for them [the customers] nor us,” says Byblos’ Dinar. Aouad says customers could drown in debt if they take on more than what they can handle. “But it’s only risky if the bank’s lending policy is loose,” says Credit Bank’s Raham.
The rift between Turkey’s Justice and Development Party (AKP) and the Turkish military reached a critical breaking point with the resignation of the military’s top command staff. The resignations of four of the country’s five top generals is perhaps the most poignant protest in Turkey’s history, with those stepping down including the chief of staff and the leading commanders of the Army, Navy and Air Force.
For years, journalists and analysts have been concerned that the rising power of the AKP was a sign of increasing Islamic bent within a staunchly secular NATO ally. Throughout the history of the Turkish Republic, the military has been widely regarded as the defender of both secular and democratic civilian leadership, and in its history the military has unseated governments that pushed the bounds of their electoral mandates — whether secular or Islamist.
However, since a coup in 1980 established a military regime and rewrote the Turkish constitution, popular resentment against the military/secular establishment has intensified, with a significant portion of the more religious Muslim population feeling disenfranchised. The terms ‘secular’ and ‘democracy’ have often been espoused as synonymous in Turkey, leaving little room for Islamist currents in the political process.
This looked set to change in 1996, when the leader of Turkey’s Welfare Party (RP), Necmettin Erbakan, was elected prime minister. However, this Islamist foray into the upper echelons of Turkish politics was short lived, when less than a year later Erbakan stepped down at the behest of the military establishment.
Since coming to power in 2002 the AKP has wielded its strong electoral mandate to address this historical inability of the Muslim majority to gain, and maintain, representation at a national level; in no small part by steadily weakening the power of the military and its independence from civilian leadership.
Armed with loose terrorism legislation that enables the imprisonment of accused parties for 10 years without trial, and aided by the popular memories of military oppression the AKP has managed to steadily curtail the power of the military establishment.
Indeed, it is the pervasive public perception of the military’s involvement in extrajudicial torture and killing — whether against leftists, the militant Kurdistan Workers’ Party (PKK), or the Turkish far right— that has overrode a rational investigation of charges against military personnel. The so-called ‘Ergenekon Case’ has attempted to pin many of the county’s best-known scandals and terrorist activities on a clandestine kemalist ultra-nationalist group, with purported links to the military. Spanning the past decade the Ergenekon case has provided the legal basis for the imprisonment of nearly 200 military personnel — none of whom have yet been convicted (though they remain either in jail or under house arrest).
While the military must take responsibility for past transgressions, the Ergenekon Case is widely regarded as a farce. As Gareth Jenkins, of the Central Asia-Caucus Studies Institute’s Silk Road Studies Program, said in 2009: “The fear is that [the case] represents a major step not— as its proponents maintain — towards the consolidation of pluralistic democracy in Turkey, but towards an authoritarian one-party state.”
On Friday, July 29, the highest-ranking members of the chain of command attempted to make a final stand against this effort.
A meeting that morning between Chief of Staff Isik Kosaner, Prime Minister Recep Tayyip Erdogan and President Abdullah Gul preceded the indictments by a Turkish court of 22 military generals and officers. In response to the charges the chief of staff and the commanding officers of every arm of the military, except the Jandarma (the gendarmerie), announced their retirement.
In the scramble following the resignations, the PM promoted General Necdet Ozel from Jandarma general commander to the position of land forces commander, just hours before appointing him chief of staff. This enabled Ozel to co-chair the meeting the following Monday of the Supreme Military Council (YAS). Over the course of the four-day meeting, it was expected that YAS would decide on the promotions of Turkey’s next commanding officer class, with the PM having the final say in the highest appointments.
For the first time in Turkish history, a civilian and Islamist government has the opportunity to change the military’s essential role in the country — first established by Kemal Ataturk with the modern Turkish state nearly a century ago.
Further resignations are yet expected.
SEAN COX is an Istanbul-based researcher and political analyst
Tahrir Square of late has come to resemble an Egyptian version of the famed Speakers’ Corner in London’s Hyde Park; the difference being, perhaps, that it is ringed with barricades of barbed wire and those gathered here are actually somewhat relevant to their country’s future. Ever-multiplying platforms are scattered around a central encampment where speakers take to the podiums to espouse their political ideas and demands. But, unlike the days of the revolution when the masses gathered at Tahrir with one booming voice to chant the clear and simple demand for the regime to fall, the political demands and aspirations of protesters today range from Islamism to socialism and beyond, and when one stops and attempts to listen, the voices of the pontificates seem to blend into an earnest white noise, with nary two among them expounding a complementary vision for a direction forward.
Egypt’s “second revolution”, as the protesters are calling it, has stemmed from the frustrations with the way the country’s interim military leaders — the group of generals known as the Supreme Council of the Armed Forces (SCAF) — are running the country. There is a feeling that the revolution is not in fact over and that to bring additional changes they must continue the struggle.
After protesters reoccupied the square on July 8, SCAF quickly began to offer partial concessions in an attempt at appeasement; the cabinet was reshuffled, more than 600 police officers were fired for offenses committed during the revolution six months ago, and while the protesters were not asking for it, elections were delayed, ostensibly to give political parties more time to better organize. Cynics would say that such overtures are aimed at creating additional discord between the protesters, and if such is the case, SCAF would be employing tactics similar to those of the Mubarak regime, just much more refined, subtle and perhaps successful. Whether intended or not, by going halfway on some issues — such as firing police officers as a response to the initial, basic protesters’ demand of bringing policemen to justice for crimes during the revolution — SCAF has placated some and further agitated the debate over what should be demanded from them. The delay in parliamentary elections will let more parties crowd into Tahrir Square and give even more time for the already disunited platforms of the protesters to drift farther apart.
The latest episode of disunity came with the debate among protesters over whether or not to march on SCAF. While at the start of their reoccupation of the square protesters first feared that the military might once again try to forcibly clear them, this was not to pass; instead, SCAF let the protesters come to them. And on July 23, Egypt’s national day, several thousand of them did, marching to the Ministry of Defense only to find themselves confronted by the army, which watched them battle for hours with angry local residents and SCAF supporters wielding stones, sticks and other weapons.
As the clashes — some of the worst violence Cairo has seen since the revolution — kicked into high gear, few spoke of it on the streets downtown. Shops remained open, families ate dinner, traffic was as bad as ever, oblivious to the chaos just miles away.
This is perhaps not surprising. The disunity of Tahrir Square has driven away many who, despite being present in the square during the 18-day-long uprising that toppled Hosni Mubarak and still strongly against SCAF, no longer readily see the value in showing up to the square, let alone marching to directly confront SCAF. During the daytime heat, the square is quiet. At night, the numbers swell, but it is difficult to tell who is there for a protest movement and who is there for the food vendors and carnival atmosphere.
Many Cairenes are just plain sick of conflict and yearn for stability rather than more days of broken curbstones and Molotov cocktails. Although they may also oppose the way SCAF is running the show, for them to rejoin the protesters in Tahrir and strengthen the movement, those in the square will first have to agree on what they are fighting for.
JOSH WOOD is a contributor for The International Herald Tribune
and Esquire Magazine
In the past, other Arab countries have looked to Lebanon as a model of democracy and free expression in a region submerged in autocracy and monarchism. But the Arab Spring has put us Lebanese in awe of the feats we thought our brethren were incapable of achieving, and has highlighted the systemic flaws within what we once believed to be the most representative system of government in the Arab world.
As much of the region’s citizenry fight to determine their political future, the matter of debate in the wake of the Special Tribunal for Lebanon’s (STL) indictment of four Hezbollah members is whether justice or stability is preferable in Lebanon. But instead of referring back to our own political reference books, we should be looking to those who are currently rewriting their history.
The latest round of protests in Egypt in July have come more than half a year since the pharaonic figure of Hosni Mubarak was ousted — plenty of time for any military council to hand power over to a civilian body that is already in place. The notion of genuine justice has become the mantra of the protestors, who want to see those who ordered and carried out killings during the uprising held to account. They are not concerned with the tired excuses that have helped to stunt the evolution of a truly representative Arab society and preserve a “stability” laced with corruption and inequality, and neither should the Lebanese.
The difference between the Egyptians and the Lebanese, however, is not only that the justice they seek follows a true overhaul of their political system, but also that they seek it on their own terms, not on those of foreign institutions. Egypt, and to a greater extent Tunisia — which has largely fallen out of the international media’s attention — have realized that revolution is a constant struggle and that they can rely only on themselves to direct its course. They understand that they must shatter the bedrock on which the previous system sat so comfortably, one institution at a time, before they can achieve what they initiated back in January.
Here in Lebanon, on the other hand, such a self-reliant fervor is not evident. Many seem to think that it is the international community that will deliver justice in Lebanon. But anyone who has taken even the most cursory look at our history and our current affairs knows that Lebanon is the playing field where conflicts and assassinations are carried out, as opposed to being resolved, in the game of nations.
A bona fide contribution to the country from the international community would have been to make good on one of the STL’s first promises: to focus on reforming the judiciary so that it could try its own cases. Perhaps if that had been a priority, six and a half years after the assassination of former Prime Minister Rafiq Hariri, Lebanon could have managed its own affairs rather than being swept up in the geopolitical wave of the tribunal.
As for those who propound stability over justice, the predication itself constitutes an insult to our collective intelligence and a means by which to point fingers and inflame sectarian conflict. By suggesting that stability will be harmed by the indictments because they pit Shia Hezbollah against the Sunni Future Movement automatically infers that the indictment amounts to a conviction in the minds of the latter, which it most certainly does not; many Sunnis are not about to swallow whole the STL pill given its grievous legal mishaps over the years. Trying to frame it as such only serves to add fuel to the fire of extremists, whose purpose is served by viewing every action or accusation by a sectarian party such as Hezbollah as representative of an entire sect, which again, it most certainly is not.
Thus the polemic that has emerged between justice and stability is just another testament to how susceptible we are to the pitfalls of sectarian rhetoric and the goading of international powers. We continually miss the point in the truth and stability equation: the two are inseparable. But if we allow our politicians to formulate their tired old narratives at a time when even the nations closest to us will not listen to the same old jazz, then perhaps we should expect to get exactly what we deserve: neither justice nor stability.
SAMI HALABI is deputy editor
at EXECUTIVE
Toufic Dalal had spent 20 years building his firm into one of the largest steel manufacturers in the region, specializing in pre-engineered buildings and pre-fabricated houses. He had become a rare success story in Lebanon’s heavy industry sector.
Then on 23 July, 2006, Israeli fighter jets left his factory a smoldering wreck of ash and twisted metal.
When Dalal heard his steel works factory in the Bekaa had been bombed he rushed straight to the site. Where he had stood the day before in a 22,000 square meter (sqm) factory full of heavy industrial equipment he found nothing but ruin.
While most people would have been enraged, panic stricken or crushed, Dalal said without a hint of false modesty, “It bothered me some.”
“On the ground in the factory we had eight holes, 30 meters in diameter by 15 meters deep,” he said, calmly recounting the first scenes he saw. “So imagine what was left: Nothing. All of the machinery was destroyed.”
The value of the damage came to a total of around $25million.
At the bombed-out site, groups of employees had also gathered, many in tears. Unlike Dalal, they believed their livelihoods were ruined with the factory.
Surveying the damage, Dalal said he was struck by a simple wisdom that determined his next steps: “You know in this life it doesn’t matter if you have $20 or $100, or $20 million or $100 million. You come to a point where you are just playing with numbers.”
Emboldened by this philosophy, it was clear to him that he had to rebuild. “I said to myself I want to start a new factory now as if I didn’t have anything before. It is much easier to build it now than when I did it 20 years ago. I have the money; I don’t have debt; I know the business; I have the experience, and I have a market.”
And build he did.
The next day he was on a United States Navy ferry to Cyprus from where he flew direct to Chicago. He immediately bought the machinery he needed to get back in operation and flew it to Lebanon. And so it was that within three days of being bombed that Dalal was rebuilding the foundations of his new factory.
Free from any debt burdens, he was able to make an initial investment in the range of $3 million dollars from his own savings. Once he was back up and running, the orders began to flood in, providing the finance for the full redevelopment of the factory; within three months he was back at pre-war production capacity.
Fruits of war
Ironically, Dalal’s biggest client would emerge from the political settlement to the very same war that had leveled his facility. When a ceasefire was finally reached under the auspices of United Nations Resolution1701, the UN Interim Force in Lebanon’s (UNIFIL) troops in the south mushroomed from some 2,000 peacekeepers to nearly 13,000. “We ended up selling to UNIFIL in the south so many prefabs and so many buildings. We were earning between $3million and $5 million per year, and that actually compensated most of our losses,” he said.
In no small part due to Dalal’s ingenuity, boldness and creativity, the bombing actually boosted the Dalal Steel business. The rapid turnaround from demolition to production won a lot of customer loyalty and trust, not to mention prestige.
“People liked to work with us, perhaps to help us out, or perhaps they felt more secure working with us, because even though our factory was bombed we were still there so they knew we could guarantee our work whatever happens,” he said, before adding with a wry smile, “It was like marketing for us. People know who Dalal is now.”
The plan was never just to return the company to where it had been before. With business thriving and a blank canvas to work with, Dalal built a far superior factory to take Dalal Steel Industries forward.
It was expanded from 22,000 sqm to 32,000 sqm and it will soon be expanded to 50,000 sqm. Furthermore, the machinery has been upgraded and is now fully computerized with a much more efficient production system.
The economic crisis in America has graced Dalal with a golden opportunity to recapitalize his factory at discount rates. With many fabricator firms in the US going bankrupt, Dalal Steel is snapping up at auction virtually brand new top-of-the-line equipment “for peanuts”. Reflecting on life and work, he said, “It makes you feel happy that at least you have work while other people are closing down.”
Five years on and Dalal is boasting a substantially more successful business than the one that was leveled to the ground in the war. He said his assets are at least twice what they were in 2006, and his turnover is perhaps 10 times what it was before the war. What is more, he continues to be a significant employer in the Bekaa region, with his workforce having expanded from around 220 to approximately 350. Dalal said his team was “essential” to the resuscitation of the business in 2006.
The past five years have also made Dalal a rejuvenated captain at the helm of his new and improved vessel. “When I rebuilt my factory it gave me so much power, and I’m much more dedicated to the work and I… love it so much more than before,” he said.
In the drive to expand the company he has been developing new production lines while tapping into new markets and developing existing ones. On home turf he continues to win large contracts.
“Lebanon has been good until now,” said Dalal, before rolling off a list of contracts his company recently won, including an 84,000sqm shopping center in the Bekaa, 44,000 sqm of steel construction in a shopping center in Beirut and 600 prefab houses for the Lebanese army.
The US army used to be their principal client, but the scaling back of its presence in the Middle East means there is now less business coming from that corner of the world. Nonetheless, Iraq remains an important country for the company, with three large projects in Erbil currently underway. Dalal also anticipates good business developing in southern Iraq as investment in the oil industry picks up pace. It is with an eye on this market that he will be courting new clients at a trade fair in Basra in two months time.
African prospects
However, the real growth area for Dalal Steel Industries lies to the south.
“Our replacement market is Africa now. We sell a lot of goods to Nigeria, to Angola, to Kinshasa,” said Dalal. The continent now comprises around half of the company’s business and they are months away frombuilding a new factory in Nigeria.
With sights set on these expanding horizons, Dalal’s children have joined him to play central roles in the firm. Three of his children have followed in their father’s footsteps and are now engineers, with his daughter running the engineering department in the office, one son running the big projects and operations in Africa, while another son is in his second year of studies in the US. Another daughter is a business graduate and takes care of the firm’s accounts. But he is quick to clarify, “You know I still get involved in everything.”
With the steel business going from strength to strength, the Dalal family are diversifying into the real estate game. After all, “It’s easy,” said Dalal. They have been buying land since 2004 and intend to start building a 24-story tower in Hamra in three months. The real estate projects are within a different company but one that is still very much a family affair.
Looking back to 1987, a young Toufic Dalal decided to leave his job of four years with Proctor and Gamble because “an employee’s life was not the one for me.” He risked his lot to buy a machine and go solo before he even had a workshop or any land to use it in.
Twenty years later, this audacious spirit served him well; after rebuilding his pulverized factory, in 2011 his entrepreneurial thirst remains unquenched.
“In 10 years I suspect we shall be twice as big,” he concluded confidently.
Liban Lait had established itself as a leading competitor in the Lebanese dairy industry by the time bombs began to rain down in 2006. Considering it had only been formed in 1997, and built its own factory in 1999, the company was brimming with confidence.
But on July 17, 2006, two Israeli missiles demolished their processing plant in the Bekaa valley, throwing Liban Lait’s very existence into doubt. Five years later, the business has finally returned to capacity, and it is intent on fighting its way back onto the winners’ podium.
Production Manager Houssam Zein-Eddine has been working at the Bekaa plant since day one. “I saw our dream underground. For all of us here, Liban Lait was like our baby. We had grown little by little and, once we were stable in the market and we had developed everything, it was bombed,” he said.
Along with many of the other staff, Houssam did not believe they would be able to rebuild the plant. Fatima Ghosn Dirany, head of human resources, said: “We were convinced that we would no longer be working for Liban Lait.” According to her, ex-general manager Michel Waked –— who passed away in August 2009 — helped the staff believe there was a future for the company. “He was a very strong man with a strong personality. A special one,” she said.
While touring the factory with staff four days after it was bombed he told them he intended to rebuild. “At first, we said ‘how can he be serious?’ It was a hard idea for us all to accept,” Dirany said. “He wanted to get started while the war was still going.”
Waked, and the rest of the board, did follow through on their decision to rebuild, but it eventually took them seven months to get back to a reduced level of production.
Zein-Eddine said all hands were on deck during this difficult period; “Managers, operators, everyone was working like a [laborer].We sorted through all the debris and got rid of everything that was completely destroyed and fixed what we could and when necessary imported from outside.”
The shareholders made an initial investment in the range of $1 million to $2 million to get the plant to a level where it could produce fresh milk, Laban and Labneh, though at less than half its previous capacity. A plethora of product ranges, including flavored yoghurts, cheeses and deserts had to be dropped altogether.
Ultra Heat Treated (UHT) milk was a core product that could no longer be produced in the eviscerated factory. To maintain a presence in this market, Liban Lait imported its UHT from its franchise partner company in France, Candia. “It was important to keep a market share here but it was difficult to compete with high transport costs and high customs duties compared to imports from Arab countries,” said General Manager Youssef Massoud.
Time to rebuild
From early 2007 to January 2011, Liban Lait was operating on this reduced framework to keep a foothold in the market while working in parallel to build its new factory. “This allowed [us] to completely review the financial and technical aspects to make sure the job was done right. We did not stop completely and wait. That would have been a complete disaster,” said Massoud.
Around $25 million was invested to rebuild the whole factory, furnishing it with new and improved production lines. Having invested around $20 million in the original factory more than seven years earlier, there was initial uncertainty as to whether or not there would be the funds available to recapitalize the business. However, having proved that it could not return to production after the bombardment, nor could it service its existing debts, Liban Lait was eligible for a subsidized loan arrangement from Banque du Liban (BDL), Lebanon’s central bank, created specifically through a circular in 2007to assist businesses directly affected by the war.
Under the agreement, the BDL effectively provided 60 percent of the replacement costs through the company’s commercial bank, which Liban Lait was exempt from having to repay. The way this worked was the bank was given soft loans from the BDL, which it then invested in treasury bonds, on which the interest accrued would cover their costs.
In a roundabout way it amounted to free money for Liban Lait. The remaining 40 percent was covered by their own sources, half by increased capital input from the shareholders and half from standard bank loans.
The new plant manager, Abed Khoder, has overseen the transition to the new production lines, which has been underway since January2011. “We have improved productivity and quality with the new technologies… I can say operation costs will be around 40 percent less than what they were before.”
On the filling side, the plant has roughly the same capacity as it did before the war but as Khoder explained, the processing capacity has been considerably increased.
“Now our processing capacity is five times our production capacity. It is much easier to increase production capacity so this gives us room for expansion,” he said.
Liban Lait boasts of being the only large dairy processing plant in Lebanon that has its own milk source on tap. “Top quality milk as the first step is the most important thing and I am very confident in this,” said Massoud. On site next to the processing plant, the company has around 1,000 milking cows who tirelessly rotate on and off the milking machines three times a day, seven days a week. The farm, which was not struck in 2006, provides the plant with 25,000 liters of milk every day.
Back in form
With the move to the new facilities, Liban Lait is finally re-entering the market for a whole range of dairy products, some of which it was producing before 2006 while others are completely new to the company. Earlier in the year a new milk range was launched including UHT and flavored milks and the first batches of new flavored yoghurts were leaving the factory as Executive went to press. Test runs on feta cheese have also been sampled and a new desert range will be launched in the coming months.
For each product there has been an extensive research and development process, which Khoder said costs on average around $200,000. “We do tests, retests and retest it again to be satisfied before we accept its launch into the market,” he added.
After four years, Liban Lait is now back in a position where it can compete in scale and range with the other major Lebanese dairy firms. “Many competitors have taken our place in the market. It is now our strategy to kick them out and get our place back again,” said Khoder.
But Massoud conceded that clawing back their market share, which he estimates to have declined by around 50 percent, will not be an easy task. Earlier in the year they ran a large advertising campaign for the new milk range and he said they will be “aggressively” marketing all the new products. But sparkling new facility aside, damage from the war continues to exact a toll. “It will be difficult to recapture the market share. This is the challenge. Of course nothing is a given.”