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Feature

Game over

by Sam Tarling September 18, 2011
written by Sam Tarling

In the days following the libyan rebels’ push into tripoli, stubborn resistance by loyalist fighters continued in various areas of the capital. With the final battles raging and the fall of the city imminent, Executive was at the front lines documenting the fierce firefights, the surrender of soldiers and the casualties of war

1) After rebels routed loyalist forces during a day of skirmishes in the neighborhood of Abu Salim, one resident celebrates by ripping up a picturenof the fallen Libyan dictator Muammar al-Qadhafi with his teeth

2) A rebel patrol hunts for loyalist forces on the streets of Abu Salim, a staunchly pro-Qadhafi area that saw heavy house-to-house fighting after rebels took the city

3) A rebel soldier aims and fires through an opening in a wall at a loyalist gunman who, from a position in a residential building overlooking the Qadhafi compound of Bab Al Aziziya, had the rebels pinned

4) Rebel soldiers argue over the fate of a captured Qadhafi loyalist

5&6) A Qadhafi fighter pleads with his rebel captors before being struck in the head with a rifle butt 

7) A terrified resident is reassured by rebels who, after a vicious assault, had just captured four loyalist troops from her building 

8) A loyalist soldier has his hands tied behind his back after surrendering to rebel forces. With the discovery of what appeared to be executed loyalist prisoners, the rebel leadership urged fighters not to abuse detainees. However, with little coordination between the various rebel groups, the fate of their captives was far from assured. Executive saw one captive being shot in the leg and others being beaten, though most of those seen captured by rebel forces appeared to be treated humanely

9) A loyalist soldier is interrogated by rebel troops minutes after he and several of his comrades surrendered amid heavy fighting in Abu Salim

10) Rebels take cover from sniper fire inside a guard post at the Qadhafi compound of Bab Al Aziziya 

11) Opposition soldiers fire at loyalist gunmen in a residential area of the Abu Salim neighborhood in Tripoli 

12) Some rebel divisions have taken to wearing uniforms and have developed formal structures of command, though for the most part remain loosely organized and use an informal assortment of arms and apparel 

13) The body of a soldier lies dead in a corner after heavy fighting in Abu Salim

14) A rebel fighter escorts an Abu Salim resident from his home. Given the urban nature of the warfare and that fighters were often informally dressed, distinguishing civilians from soldiers was often difficult

15) A family flees after rebel troops surrounded their building in Abu Salim. As loyalist gunmen took up positions in residential housing blocks, civilians found themselves in the middle of heavy exchanges of fire from rifles, anti-aircraft weapons and rocket propelled grenades

16) Rebels dash toward the outer wall of the Bab Al Aziziya compound, keeping low to avoid Qadhafi gunmen who had been firing at them

17) Leaving no stone unturned, rebels search a giant stuffed bear found in the Bab Al Aziziya compound

18) Rebel soldiers patrol the streets of Abu Salim near sunset after a day of heavy house-to-house fighting 

19) Children collect bullet shell casings in what was formely called Green Square in Tripoli, now renamed Martyrs’ Square. The square saw little actual fighting but much celebratory gunfire 

20) As fighting ceased and quiet descended with the night, a resident walked through Tripoli’s old city, El Madina El Kadima

September 18, 2011 0 comments
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Feature

Oil’s return from turmoil

by Executive Editors September 18, 2011
written by Executive Editors

As Libyan rebel fighters began routing government forces and advancing on the capital city of Tripoli in August, international oil and gas companies with interests in Libya (including five European and five North American hydrocarbon multinationals) began aggressively vying for the resumption or possible expansion of their roles in the country.

Italian oil firm, Eni, Libya’s most significant partner in hydrocarbons, said it expects a sub-Mediterranean gas pipeline between Libya and Italy to resume operations by mid-October. The company signed a memorandum with the National Transitional Council (NTC) — the rebels’ de facto government based in the eastern city of Benghazi — by which “Eni and NTC are committed to creating the conditions for a rapid and complete recovery of Eni’s activities in Libya and to doing all that is necessary to restart operations on the Greenstream pipeline, bringing gas from the Libyan coast to Italy”, the Italian company said in an August 29 press statement. The full restoration of oil output and exports, however, will be enormously complicated. Three factors will determine the speed of recovery of Libyan oil and gas production.

First, damages to the existing facilities will need to be examined and capacities restored. According to statements from NTC and Libyan oil officials at the end of August, direct conflict damages from the past six months to facilities have been limited and repairs have already begun. However, the restoration of facilities also includes dealing with the impacts of the shutdown process and inactivity of oil fields and pipelines.  

Second, oil sector workers will have to return to their jobs, which will require a rapprochement between the National Oil Company (NOC) and the NTC, as well as the return of foreign companies and their staff, which is heavily contingent upon an improvement in the security situation. The third and most crucial precondition for resumption of Libya’s oil economy, therefore, is a return to stability and internal security in the country. Reliable security structures have to be in place before the restoration of hydrocarbon facilities and the redeployment of the workforce can be meaningfully expected.

The nitty-gritty of Libyan oil

The oil and gas industry accounts for about 25 percent of Libyan gross domestic product, 80 percent of government revenues, and approximately 95 percent of export earnings. The 2011 BP Statistical Review of World Energy ranks the country as having the 11th largest oil reserves in the world, at 46.4 billion barrels, though it had been ranked at 19th in terms of production, at 1.6 million barrels per day, before the revolution. The equivalent figures for Libya’s natural gas reserves put it at 15th largest in the world at 1.5 trillion cubic meters, with its annual production at 32nd globally, with 15.9 billion cubic meters per year (cum/yr).

The sector is dominated by the NOC, which exploits and exports the country’s hydrocarbon reserves — both onshore and offshore — via a number of wholly-owned subsidiaries and international oil companies licensed by special agreements. The company owns the country’s refining and oil and gas-processing facilities, which include refineries at Mersa El Brega, Zawiya, Ras Lanuf, Tobruk and Sarir; the Ras Lanuf petrochemical complex and gas-processing plant is the country’s largest, also producing ammonia, urea, methanol, ethylene and low and high-density polyethylene.

Before the revolution, the NOC refined close to 380,000 barrels per day of the country’s crude oil in its refineries, with approximately 60 percent of the refined product output being exported. Libya’s oil and gas is sent to Europe, the country’s biggest export market, both by sea and a 540-kilometer, 11-billion cum/yr capacity subsea pipeline, dubbed ‘Greenstream’, across the  the Mediterranean to Gela in Sicily.

Within the country, Libya has a network of more than 8,700 km of onshore oil, gas and product pipelines.  Following the current unrest, most of the country’s oil and gas production and refinery capacity has been shut down. While refineries can be relatively easily restarted, damage notwithstanding, the crude oil pipeline network will have problems in starting up due to the waxy nature of the high-quality and relatively ‘light’ crude oil the Libyan oilfields produce. Once flow has halted for any appreciable time, the wax separates out and gradually blocks the pipeline. This material, similar to candle-wax, then becomes difficult to remove in order to restart the system, and it is foreseen that a considerable investment in technology and effort will be required to bring the system back to full operating capacity.

Looking ahead

UK-based energy and mining consultants Wood Mackenzie said in an August 25 statement that it expects resumption of full oil production capacities in Libya to require 36 months from “from whenever the current crisis reaches a resolution.” According to the analysts, the recovery of oil production capacities is likely to take longer for the mature Sirte basin in eastern Libya but will be faster in the newer Murzuk and Pelagian Shelf basins of western Libya.

For the longer term, “Libya has the potential to produce up to 3 million barrels per day of oil and become a major gas exporter through partnering with the international industry,” Wood Mackenzie noted, with the caveat that this future remains “on hold until military operations are concluded.”

September 18, 2011 0 comments
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Feature

The fall of Tripoli

by Executive Editors September 18, 2011
written by Executive Editors

Tuesday, August 23 

Abdallah slides his finger across the map of Tripoli. “They’re still fighting here, in Abu Salim. And in Bab Al Aziziya, of course: that’s Qadhafi’s stronghold. And over there, around the airport. Oh, and I was just talking to a friend in Sidi Khalifa yesterday; she said there was heavy shooting in her neighborhood.”

It has been three days since rebels entered Tripoli but intense fighting persists in the capital, while outside of it Qadhafi soldiers continue to stalk Western Libya. At the Tunisian border, nearly every car is heading out of the war-torn country. Apart from a Red Cross truck and a few dozen journalists busy filming each other, only a few Libyans are heading the other way. One of these is Abdallah, who says that, after having been involved in the Egyptian revolution, he would not miss this one for the world: “It’s my country now. I want to be there when Tripoli falls.”

In Nalut, the first city on the road from Tunisia, the shelling ended more than a month ago but schools and businesses are still closed. The few open shops have half-empty shelves and petrol is in short supply — a liter now costs $2.50, whereas before the war it was cheaper than water. Like the capital, this city is still living the war and so are its people.

“There must be war,” affirms Khamis Birgig, a 35-year-old rebel who garnishes every other sentence with a “boom-boom!” and skillfully maneuvers the gearshift with what remains of his right arm. “Just a few more days and we’ll be rid of Qadhafi,” he says, as the car heads towards the capital.

Khamis clearly took some psychological hits when he lost his right arm, eye and part of his knee to a Qadhafi rocket early in the uprising, though he does not seem overly fazed about his physical disabilities: he can still shoot with his good arm and is confident that when the new government arrives his sacrifices will be rewarded. “They will respect human rights and take care of me. But first we have to catch Qadhafi, so that we can put him in front of the international court, where he has to tell the world what he has done.”

Khamis, like most of the rebels, speaks about freedom and democracy when asked why he rose up. But when pressed, out come the complaints about a lack of work, income and opportunities. “Under Qadhafi there was nothing,” he says. “Just poverty.”

With the sun setting over the Libyan desert, Khamis is asked how long the ride will be. “I have no idea,” he replies cheerfully to Executive. “It depends on whether or not we run into Qadhafi soldiers.” He looks to the side with his one eye, points to the Kalashnikov on the seat and smiles hopefully. “Boom-boom!”

Wednesday, August 24

The capital of a disintegrating state is a strange place to be. Since the rebels entered Tripoli a few days ago, the city has been alternating between sounds of celebration and the booms of Qadhafi soldiers’ last-ditch efforts to stave off their own impending demise. Car horns honk incessantly while bored rebels light up the night sky with tracer fire. The streets are strewn with the burnt-out wreckage of cars and dumpsters, improvised roadblocks set up by the new authorities, most of whom are younger than 20.

Some residents have a hard time getting used to the new status quo. In one incident in the neighborhood of Dahra, young fighters pounce on a taxi driver after he takes exception, with a swing, to their demands to open the trunk. As the struggling man is dragged away from his car, one rebel lands a punch squarely on his face before elderly residents intervene and the driver is allowed to leave. “Idiot. Should have opened the boot when I told him to,” the boxing rebel shrugs, before turning his attention to the next car.

Incidents like this one are rife within the city, but thus far the local councils secretly put in place to take over the day-to-day running of the city after Qadhafi’s departure have done well: looting has been kept to a minimum and, apart from the occasional resident happily jogging through Qadhafi’s former stronghold with a painting under his arm, very little plundering has been reported. No stores ransacked of flatscreen televisions, no looting of abandoned homes. But their control is slipping.

“No government, so no water,” says a smiling teenager to a foreign journalist scavenging the city for food and drink. A few days after the rebels all but took over the city, it has begun to break down. A lack of milk, vegetables and petrol may be manageable for the moment, but with drinking water increasingly scarce and tap water and electricity on the cusp of running out, one cannot help but wonder how long until the residents of Tripoli start pining for the good old days.

Thursday, August 25

“Watch out, sniper!” yells a rebel, before a deafening firefight explodes in the streets of Abu Salim. Through the black smoke tears a truck with thundering anti-aircraft guns on the back. From the besieged building, snipers open fire on the rebels. A wooden garden door is shredded on impact. Two rebels drop while their comrades in full sprint empty their Kalashnikovs at the flashes from the building down the road. The sharp smell of cordite and burning asbestos drifts over the streets. While the rest of the city has been enjoying relative calm, rebel fighters have been trying to clear this working-class neighborhood of the remaining Qadhafi loyalists for several days now. When a rumor that Qadhafi may be hiding in one of the buildings starts to buzz, Abu Salim turns into a full-fledged war zone.

After the dust settles, three bloodied corpses lie on the streets: two rebels, one loyalist. No Qadhafi. The deposed dictator’s location is still a mystery, and the search continues.

“When we finally get Qadhafi, the resistance will die out by itself,” says 25-year-old Abdallah Masoud, still shaking from narrowly escaping a sniper’s volley. “But as long as he’s free, the fighting will continue.”

In a few days, Abu Salim will be cleared of Qadhafi loyalists, while the fighting will go on in other neighborhoods. Some parts of Libya, notably the cities Sirte and Sabha, are still under Qadhafi control.

But a return of the dictator is now out of the question. It is “game over” for him, says Majid Fituri, a 47-year-old rebel leader from Misrata, while wandering around the rubble of Qadhafi’s former stronghold of Bab Al Aziziya.

He looks back at the ruins behind the famous statue of the clenched fist crushing an American fighter jet. Qadhafi left intact the concrete skeleton of the building, destroyed by American bombs in 1986, to serve as a reminder of the West’s wickedness. 

“Look at that,” Fituri says. “That used to be a museum in the form of a ruined building: a propaganda tool for Qadhafi.” He turns around and smiles. “Now, it’s just another ruined building.”

September 18, 2011 0 comments
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Editorial

The fortunes of upheaval

by Yasser Akkaoui September 18, 2011
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.

September 18, 2011 0 comments
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Finance

Searching for security

by Zak Brophy September 3, 2011
written by Zak Brophy

The cataclysmic crash in global financial markets in 2008 was a smack in the face with a wet fish for both bankers and investors alike. A new reality emerged in its wake: gone were the days of carefree flurries into magnificently low-risk and high-return financial products fueled by seemingly boundless levels of borrowing. After a high-octane binge of hedonism and excess the hangover kicked in.

Many investors, left reeling from their losses, woke up to the sober realization that, in the words of Al Ahli Investment Group Managing Director Nael Raad, “nothing is safe”. Daniel Diemers, principal at Booz &Company, explained: “Clients shifted their assets towards simple, transparent, liquidity-oriented products with lower margins. Structured products in particular fell from favor, and clients largely retreated from risky and complex asset classes.” 

From Spring 2009 to late 2010, confidence returned to the markets and many investors were once again upping their risk threshold to try and recoup their losses. But the bonanza was short lived. Profound structural defects in the United States and Europe have been hounding their economies and fear has reentered the market.

Safety first

Many of the private bankers who spoke with Executive for this special report said the turmoil in the markets has instigated a shift in mentality amongst clients. “People only learn from their mistakes,” said Khaled Zeidan, general manager of securities and structured products at Med Securities Investment, “and people have been burnt a lot here.”

According to AM Financials Managing Director Mohammed al-Hamidi, “In general, the environment is very conservative. Not a lot of people are taking risks and that’s why we see that yields on bonds in the US are going down, the stock market is very volatile… [Clients] are not trusting anybody”. It is a classic case of once bitten, twice shy.

Whilst there are still gamblers and seasoned traders seeking the quick buck to be made in the storm, most clients have shifted their expectations. Preservation of capital has usurped quick-fire trading as the order of the day. Head of Private Banking at BlomInvest Bank Georges Abboud said: “We are educating the bankers and the clients to move from a trading mentality to a more diversified, long term strategy.”

Abboud claims, however, that investing in equities can still be considered a responsible option if played right. “If there is a high yield, say 8 percent, low debt, and you have reliable revenues over the coming five years, then buy! There is a risk it could go down with the market but I am comfortable with the risk.”

Private bankers consider a core aspect of their work to educate and inform the clients. But Jean Riachi, chief executive officer of FFA Private Bank, has found that convincing the Lebanese client to ignore the short-term vicissitudes of the market is not always an easy task. “We would like to convince people to forget about the volatility in the short term. But people are very difficult to convince, they have to look almost daily, in any case monthly, at their net worth, and they will panic anytime you have a fall in this valuation,” he said.

Paranoia’s parade

The rotten roots of today’s market instability are sunk in the very shores that have long been the bedrock of the global economic system.The 2008 banking crisis, the Eurozone sovereign debt crises and the US credit rating downgrade have upended many previously held assumptions about what is a‘safe investment’.

According to Al Ahli’s Raad, “what’s risky nowadays are definitely the international banks in the US and Europe and sovereign bonds in Europe.” 

BlomInvest’s Abboud considers the western banking system a toxic miasma as well. “I have been telling the team since 2008 not to invest in any Western European or American banks. When the rates are low they don’t make money, and there is all the junk around in terms of assets, and they are having to make provisions on all the problems that have happened with the governments. We cannot know what the banks hold in terms of assets so you have to get away,”he said.

The sovereign debt traumas continue to hector the Eurozone, and what’s beyond the horizon is far from certain. The very real prospect of a Greek default would pose a significant threat to the solvency of the banks in Europe’s core nations of France and Germany (who hold substantial amounts of Greece’s outstanding debts). And that’s before we dare to look at Europe’s other tottering members Ireland, Spain, Portugal and Italy. A recent indication of the markets’ unease with the Eurozone is the almost 130 billion euros [$187.75 billion] banks are parking overnight in the European Central Bank’s deposit facility rather than lending to other banks.

FFA’s Riachi explained that the Euro-crisis presents a new and hostile territory for economists and bankers due to the fact that such an array of national economies are tied into a single currency. There is no real precedent to base their analysis on. “I don’t know what kind of solutions they will find but it’s really a very deep crisis and it needs to be solved as soon as possible. Germany needs to show leadership on this issue; otherwise they have to renounce the Eurozone,” he said.

Across the Atlantic, the US is also proving an insufferable headache for private bankers as they strive to offer sage advice to their clients. Opinions on whether it is going to relapse into a double dip recession remain divided but few disagree with HSBC Private Bank Managing Director Rudy Sayegh’s assessment that “everyone [American and European governments and consumers is up to the hilt in debt, so their capacity to spend is limited and thus what will come is slow growth, if not recession, but in a best case scenario slow growth for several years.” 

Despite the recent debacle over America’s debt, some private bankers still view it as a safe investment. “They downgraded the debt and at the same time the bond yield went down. You should have expected the contrary. So people still believe it is a safe haven,” said Abboud.

For Jean Riachi, the political fiasco of the debt ceiling debates, replete with playground histrionics and stern-browed brinkmanship, was as damaging as the underlying economic ills. “In the US, I think it was more of a leadership issue, and it was clearly stated by Standard & Poor’s when they did the downgrade that they know there is no doubt about the ability of the US to repay its debt,” he said.  

In any case American markets remain in a somewhat battered and disheveled state. When US companies released their mid-year reports at the end of July, they had much lower guidance for future earnings, a warning sign for equity markets. According to Sayegh, “People are selling equities on the concept that if you don’t have growth now the market should not be valued at this level but at less in terms of private equity.” 

Counting the fundamentals

Despite the woes in western markets, several bankers warned against overstating the case. When asked if investors should disassociate from European and American markets, MedSecurities Investment’s Zeidan sought todownplay reasons for alarm. “Let’s not be ridiculous. Despite all the problems and issues we have today in the US and Europe, these are mature markets. There are sound laws and there is protection for the investor.”

Nada Safa, regional manager for Audi Saradar Private Bank added: “You have to choose growth stocks. Look at the US and all the blue chips and growth stocks. It is true that they went down but we know that at the end of the day they will go up.”

While there may still be promise in western markets, it is clear there has been a shift in perceptions and investors are increasingly looking elsewhere. “Is it the time to invest in emerging markets? It’s been the time for 10 years,” said Georges Abboud. 

The Institute of International Finance (IIF) is projecting increases in overall net private capital flows to emerging markets this year to more than $1 trillion, after a 54 percent rise to $990 billion in 2010. IIF Managing Director Charles Dallara said, “The high level of capital flows to emerging markets reflects the rising weight of these economies [globally] and their very strong performance relative to mature economies in recent years.”

Nonetheless, Raad warned that investment in emerging economies still poses potential risks, and only informed and specifically targeted investments should be made. “You need to be much more selective. It’s not regional anymore. Which sector, which companies, which currency, you have to be selective. It’s not a broad idea like it used to be.”

Although private bankers are increasingly searching out those fruitful opportunities in emerging markets, it is still the US that sets the tune for the world to dance to. It is just unfortunate that the record is stuck on a Waltz and not a Polka.

Audi Saradar Private Bank’s Safa, speaking about Brazil, Russia, India and China, said: “they are all linked to the US, and you know if the US sneezes the whole world gets the flu. I think they are solid but still no one allocates more than 10 percent to 15 percent to emerging markets.”

Abboud agreed the US was still a dominant force in the global economy but argued the shift east was ineluctable. “The US market is still a big driver for the rest of the world, and it will remain that way because of its consumption. In time, though, it will de-correlate, and I am a firm believer that you have to move your money away to Asian economies, and to move away from the US dollar,” he said. 

With over 60 percent dollarization of Lebanon’s banking assets, investors are increasingly mindful of minimizing their exposure to a potentially precipitous decline in the value of the dollar. Reto Bartel, senior representative at UBS AG in Beirut, said, “We expect major currencies to remain relatively unattractive in the quarters ahead. When diversifying their US dollar and Euro exposure, investors might think of the Scandinavian currencies, the Canadian dollar and several Asian currencies.”

Looking ahead

The disorienting upheavals of the past couple of years have been a wakeup call to many investors, and private bankers now talk of customers being both better informed and more demanding. “They want to know everything,” said Abboud.

What is more, private bankers in Lebanon say their clients now have somewhat more realistic expectations with regards to protecting their capital and expanding their wealth. While the Lebanese predisposition to take risks has not been completely snuffed out, a more conservative approach to asset management now prevails.

The problem is that there are no longer any true safe havens. In the words of Zeidan, “there is no longer one black swan; there are 100…so we should not take anything for granted.”

September 3, 2011 0 comments
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Finance

Executive Insight – Rebuilding relations

by Dory Hage September 3, 2011
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.

September 3, 2011 0 comments
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Economics & Policy

Rebalancing the equation

by Thomas Schellen September 3, 2011
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.”

September 3, 2011 0 comments
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Egypt’s great divide

by Daniel Williams September 3, 2011
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
 

September 3, 2011 0 comments
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The fortunes of upheaval

by Yasser Akkaoui September 3, 2011
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.

September 3, 2011 0 comments
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Trailing the truth in Syria

by Moe Ali Nayel September 3, 2011
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

 

September 3, 2011 0 comments
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Since its first edition emerged on the newsstands in 1999, Executive Magazine has been dedicated to providing its readers with the most up-to-date local and regional business news. Executive is a monthly business magazine that offers readers in-depth analyses on the Lebanese world of commerce, covering all the major sectors – from banking, finance, and insurance to technology, tourism, hospitality, media, and retail.

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