Economics & Policy

Rebalancing the equation

by Thomas Schellen
written by Thomas Schellen

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

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

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

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

Issue most important for US to address

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

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

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

Repondents with positive view of the US (%)

Respondents with positive view of US

Source: Arab American Institute Foundation/Zogby International

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

Where things went wrong

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

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

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

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

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

Economic Realities

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

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

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

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

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

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

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

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

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

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

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

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

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

Still a way to go

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

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Egypt’s great divide

by Daniel Williams
written by Daniel Williams

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

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

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

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

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

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

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

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

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

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

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

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

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

DANIEL WILLIAMS is a senior researcher at Human Rights Watch
 

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The fortunes of upheaval

by Yasser Akkaoui
written by Yasser Akkaoui

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

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

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

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

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Trailing the truth in Syria

by Moe Ali Nayel
written by Moe Ali Nayel

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

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

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

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

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

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

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

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

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

MOE ALI NAYEL is a Beirut-based freelance journalist

 

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Only one state left

by Ahmed Moor
written by Ahmed Moor

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

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

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

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

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

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

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

 

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Economics & Policy

A town on the frontlines

by Sam Tarling
written by Sam Tarling
Members of the Free Syrian Army take positions near the town of al-Qusayr in Homs province, Syria, in anticipation of an attack by regime forces that won't come [Executive/Sam Tarling]
Members of the Free Syrian Army's Ah Al Rassi (freedom for the river Assi) brigade take part in an attack on regime forces in the village of Nizareer, near the Lebanese border in Homs province, Syria, on Saturday, May 12th. The FSA said the attack was a response to a regime incursion into the village during which they killed villagers and imprisoned others [Executive/Sam Tarling]
This fighter survived his injuries after comrades patched his wounds before sending him back to safety [Executive/Sam Tarling]
A fighter is treated for his wounds after being shot in the torso and the leg while attempting to fire a rocket propelled grenade at government troops [Executive/Sam Tarling]
Member of the Free Syrian Army prepare to attack regime forces in the village of Nizareer, near the Lebanese border in Homs province [Executive/Sam Tarling]
Dead civilians are loaded onto the back of a truck outside a hospital in al-Qusayr, Homs province, after heavy fighting broke out in the town after the Syrian Army entered the town [Executive/Sam Tarling]
FSA fighters take a moment of solitude in the town's martyrs' cemetery, where some 200 people are buried [Executive/Sam Tarling]
Members of the Free Syrian Army's Mughaweer (commandos) Ah Al Rassi (freedom for the river Assi) brigades celebrate after an attack on regime forces in the village of Nizareer, near the Lebanese border. The FSA said the attack was in response to a regime incursion into the village during which they killed villagers and imprisoned others [Executive/Sam Tarling]
FSA brigades return home after attacking regime forces that had raided a village near the Lebanese border [Executive/Sam Tarling]
With the town's mosques unusable due to shell damage, Friday prayers are held in the street under the watchful eye of FSA guards [Executive/Sam Tarling]
United Nations monitors talk to community leaders in an effort to broker a cease fire. While there is an uneasy peace of sorts in al-Qusayr, it's frequently shattered by sniper attacks and shellfire. The efficacy of the UN mission in Syria is yet to be measured but its presence seems to have been welcomed by people in al-Qusayr [Executive/Sam Tarling]
A fighter from the Free Syrian Army's 'commandos brigade' receives treatment for a previous shrapnel wound at a field hospital in al-Qusayr [Executive/Sam Tarling]
Although al-Qusayr is effectively blockaded by the government, the FSA controls the bountiful arable land to the south of the town. Here an FSA fighter cooks beans over an impromptu barbecue [Executive/Sam Tarling]
Members of the Free Syrian Army 'commandos brigade' take positions near the town in anticipation of an attack by regime forces [Executive/Sam Tarling]
A moment of relief as the Syrian Red Crescent delivers two truck-loads of much needed food. [Executive/Sam Tarling]
A family packs up and leaves for the safety of Lebanon. Some 80 percent of the town's 50,000 residents have now left [Executive/Sam Tarling]
Heavy shelling has almost completely destroyed some parts of this small, rural town [Executive/Sam Tarling]
Members of the Free Syrian Army 'commandos brigade' take part in a training exercise [Executive/Sam Tarling]
FSA fighters take part in a training exercise in the countryside outside al-Qusayr [Executive/Sam Tarling]
Petrol for sale in bottles such as these are a common sight; there's no working gas station so the town is fueled by a stream of smugglers. Prices are exorbitant [Executive/Sam Tarling]
A woman makes bread by hand on a traditional 'saj' oven because oven-baked break is in short supply in al-Qusayr [Executive/Sam Tarling]
Every day, residents of al-Qusayr celebrate their freedom and protest openly against the regime [Executive/Sam Tarling]
Surgeons use basic equipment to save the life of a man who was shot by a sniper positioned at the town's hospital [Executive/Sam Tarling]
A boy brandishes the sole of a shoe at a picture of Syrian President Bashar al-Assad which is draped inside a dumpster in which other demonstrators have been throwing rubbish [Executive/Sam Tarling]
A barber is seen cutting hair through the broken window of his salon on Monday, May 7th, as a parliamentary election took place elsewhere in the country [Executive/Sam Tarling]
Due to trigger-happy government snipers, streets with checkpoints such as this are deserted [Executive/Sam Tarling]

Al-Qusayr pays a heavy toll for a taste of freedom – photos by Sam Tarling for Executive

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Consumer Society

Preparing for the transcendent web

by Karim Sabbagh, Olaf ackerDanny Karam & Jad Rahbani
written by Karim Sabbagh, Olaf ackerDanny Karam & Jad Rahbani

Imagine a world in which a movie search on your phone turns up only the kind of movies you like, and only those playing in your neighborhood; your behavior and interactions on social networks automatically produce lists of recommendations, potential friends, even job offers; searching and browsing the web becomes vastly more interesting and efficient, with results and link suggestions tailored specifically to your interests, and your “virtual representative,” a kind of online personal assistant, keeps working to find you the best information even when you are offline.

This is the world of web 3.0, or what we call the ‘transcendent web’, and it will bring profound changes to people and businesses alike. The benefits it will provide users include the creation of a much more personalized web experience and the automation of many of the services already in use. Businesses too, will benefit from vastly greater amounts of information about consumers and thus the opportunity to market and sell to them much more directly. They will also be able to take advantage of the greater operational efficiencies brought about by technologies that will keep people, processes and products much more tightly connected. The transcendent web will play a critical role in the digitization of industries as wide-ranging as telecommunications, financial services and healthcare.

The transcendent web is still on the horizon, but it is critical that companies understand what is coming, and how it will affect their businesses, if they hope to take full advantage of what it will offer.

Web 3.0 will build on the kinds of applications and services that have proved so popular in the past few years. Recommendation engines will produce much more complete and targeted information, based on a greater knowledge of the habits and preferences of users.

Search engines will become much more precise, taking context and wording into account in generating their results. And services will arise that enable users to create avatars to perform all these functions for them, automatically, depending on highly specific preferences.

These kinds of services will depend on new web technologies that are significantly more intelligent than current standards.

The Social Web: Social networking will continue to be a mainstay of the transcendent web. Indeed, much of the activity on web 3.0 will take place within the context of social media, as the connections among like-minded people become strengthened, reenforced and multiplied.

The Semantic Web: The semantic web will understand on a considerably deeper level the meaning of the search terms people use, and the context in which they are used. This in turn will enable far better results when searching and generating recommendations on the web.

The Internet of Things: More and more things are being made Internet-enabled — houses, cars, appliances, even clothing — allowing them not just to be located through technologies like radio frequency identification but to communicate richer amounts of information about themselves; all of this becomes not just possible but also visible to web users.

Artificial intelligence: Ultimately, the transcendent web will depend on a high level of artificial intelligence underlying many web processes. Using inputs from different sources, including browsing history, user-specified preferences and contextual information such as location, these systems will profile users to better understand both the content and the context of their requests.

The Impact of the Transcendent Web

As web 3.0 comes into being, its effect on both users and businesses will be profound. It will change how people work and play, and how companies use information to market and sell their products, and operate their businesses.

The huge increase in user data, behavior and preferences offers marketeers a great opportunity to attract more consumers to their websites, target their efforts to particular consumers, gather more information about those consumers and use that information more efficiently.

To do so, they must prepare to take advantage of the coming ‘semantic web’, optimizing their websites by embedding them with search engine–friendly, structured, semantic data to increase traffic. When Best Buy embedded semantics into the descriptions of its online products in 2009, describing not just the product, but also accessories, delivery and payment options, and warranty conditions, its site traffic increased by 30 percent.

Advertising too, will be transformed, as businesses come to understand and take advantage of behavioral advertising, in which the kinds of ads placed on websites will depend on highly specific information about who is visiting the site. The result will be a large boost in online sales, as companies learn how to target those consumers most likely to purchase their products.

The impact of the transcendent web will also allow companies to reexamine their entire organizational structures, business and governance processes, supply chains and product innovation efforts. What’s more, they will be able to further automate many processes, promote better communication among employees and enable far more efficient manufacturing, supply chain and inventory management practices, as parts, machines and finished products are linked together in the growing ‘internet of things’.

Enhanced customer feedback will allow companies to boost innovation and continuously improve product quality.

“The impact of the transcendent web will allow companies to reexamine their entire organizational structures, business and governance processes, supply chains and product innovation efforts”

Getting Ready for the Transcendent Web

Many critical elements of the transcendent web have yet to be put in place. We expect, however, that the effort to implement them will accelerate through the coming decade.

The evolution of the transcendent web will take time, but companies should not take that as an excuse to wait and see what it will look like once it is finished. Organizations need to begin now to build the capabilities that will be key to reaping those benefits.

Open up to the Internet world: Ensure that every critical business system is open and ready to interface in a secure way with external systems over Internet protocols.

Move to real time: Convert business systems from today’s often asynchronous data management operating models to real-time analytics and processing.

Structure your data: Move to structure all of your company’s data so that it can be used in different ways both internally and externally by your business partners. This will require the automation of tagging to provide for how data is managed and searched in context.

Develop your people: Create a plan to ensure that your company has the skills needed to take advantage of today’s needs and tomorrow’s opportunities. Keep in mind that the skills required will extend beyond the technology department to encompass the entire organization.

Involve your customers: If you have not done so already, start now to move your customers from a passive, “lean-back” approach to a more active, “lean-forward” attitude. Stimulate an active online dialogue about your products and services, then capture the information produced and use it to further refine your products and services, and to enhance your marketing activities.

Each stage of the journey will bring benefits, and the companies that begin planning now will reap those incremental benefits and be that much better prepared when all the pieces are in place.

KARIM SABBAGH is senior partner and the global leader for the Communications, Media and Technology Practice at Booz & Company; OLAF ACKER is a partner, DANNY KARAM a senior associate and JAD RAHBANI an associate with Booz & Company

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Consumer Society

Eric Vergnes

by Executive Editors
written by Executive Editors

In an effort to move from a pure traditional watch brand to a full-on lifestyle brand, the 151-year-old Swiss manufacturer, TAG Heuer, is taking some bold risks. As the world’s fourth largest luxury watch brand and number one worldwide in chronograph pieces, it is also launching its second generation of luxury phones, called “Link”, the first luxury smart phone developed on an android platform. Its expansion plan in the Middle East is no less ambitious. In July the firm opened its 10th boutique in the Middle East, in the Beirut Souks, with the Atamian family as their exclusive agent. Beirut will be one of the first markets in the region to be exposed to the new “1887”, which is an update of the iconic Carrera watch, with a twist. Though originally launched in 1964, the firm is now a chronograph manufacturer, so movements are made for the first time via the firm’s 100 percent in-house department, instead of sourcing from Swiss suppliers of chronograph movements like Zenith and ETA. Executive got in on the details during a cozy bar room chat with General Manager of LVMH Watch & Jewelry, Middle East, Eric Vergnes. [TAG Heuer is one of the 60 brands under LVMH]

  • How much does it cost to produce the movement yourself?

It’s a huge investment… We are still at 25 percent of what we are aiming to produce in the future. But the difference in price would be only around 10 percent.

  • You don’t feel that the people would rather choose the Zenith or the ETA movement?

The Zenith is very limited in terms of supplies, quantities. We have a Zenith modified movement “Caliber 36”, it’s on the very high-end, around $12,000, compared to $4,000 for the other ones.

  • On a point-of-sale level, how are you going to adapt your boutiques to allow these new models to be represented?

Our targeted customer is the feminine one; we have this very strong image of being a masculine brand, but today, in the region, more than 50 percent of our sales, in value, are done with ladies.

  • Where does the strategy of diversifying away from watches come from?

We don’t have diversification in the main families of the watches, which are the Carrera, Monaco 1969 and Grand Carrera. Seven years ago we launched the eyewear, and now, for every two watches we sell one pair of eyewear, and 100,000 units of eyewear are sold every year. We are one of the very few luxury brands making mobile phones. Of course we are very small compared to Vertu. For every 10 Vertu mobile phones sold, we sell one [Link].

  • In the last four to five years the performance of luxury phone manufacturers was not very good. How would you justify the Link [priced at $6,750]?

There was a survey that [said] that the market of luxury phones will eventually be as big as the market of luxury watches. Nokia has had difficulties, but Vertu is extremely successful in China, the Middle East and Russia. Our main competitors are stuck with their in-house software, but Link has a late generation of androids and the catalog of android applications. 

  • How much does the Middle East represent out of your total sales?

Approximately 5 percent, but we have huge potential for growth in the Middle East. We’re not very big in Saudi yet… Iran and the United Arab Emirates look very promising. We will not double the sales but we can certainly grow by 30, 40, 50 percent.

  • How did TAG Heuer manage the relationship with the retail agents around the world after the financial crisis?

All partners in the region (in mid 2008) had all of a sudden nearly two years of stock. We didn’t push the selling, instead we did as much advertising as possible and by the end of 2009 they were back to one year of inventory. No partner has dumped product.

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Economics & Policy

For your information

by Executive Editors
written by Executive Editors

Paying more for the same

Prices of consumer goods in Lebanon continue to rise, with last month’s consumer price index, the major indicator of inflation, showing that the trend of increasing prices since 2000 continues unabated. Even though real estate and communication prices remained steady, the first half of this year witnessed a 6 percent increase in inflation compared to June 2010 levels, according to the Central Administration of Statistics, though many economists fear that actual inflation may be much higher. The rise in prices was mostly attributed to an increase in the price of clothing and footwear (+21.1 percent), electricity, water, gas and other fuels (+13.1 percent), as well as more moderate rises in the price of education, restaurants and hotels. According to the International Monetary Fund the index hit 127.62 in 2009 and is expected to exceed the 150 mark in 2015. Most analysts agree that Lebanon imports around 70 percent of its inflation.

Keeping the country watered

Minister of Energy and Water Gibran Bassil inaugurated last month the Lebanese Center for Water Conservation and Management and announced a strategy aimed at conserving water in the country. According to the minister, unless new measures are taken soon Lebanon will face a water deficit by the year 2020. The project was put together to “promote sustainable water management through both technical and policy-level support”, according to the United Nations Development Program (UNDP) website. It will be conducted with the support of Italy and Spain, through their embassies in Lebanon. According to the UNDP, the strategy has three components: technical capacity building on sustainable water management, the promotion of public awareness on the issue and an assessment and collection of data on groundwater.

Trade deficit hits five-year high

According to Ministry of Finance figures, the period from January to May 2011 registered the highest trade deficit in five years in terms of value. Lebanon’s trade deficit was about $5.95 billion, or 10 percent higher than the trade deficit recorded the same period last year ($5.4 billion). In fact, the economy witnessed a 7 percent increase in imports, which reached $7.66 billion, while exports decreased by 1 percent to $1.71 billion. The main reason was the rise in oil prices. However, an increase in prices of Lebanon’s most important imports was also a key reason (such as a 49 percent rise in the value of unwrought and semi-manufactured gold, precious stones and metals, and a 19 percent rise in pharmaceutical products). Imports from major trading partners Italy and France increased, according to a Byblos Bank report last month, while key export destinations like Switzerland, the United Arab Emirates and Syria fell 17 percent. Lebanon’s main exports include jewelry (33 percent of total exports), base metal (15 percent), machinery and mechanical appliances (13 percent), prepared foodstuff (9 percent) and chemical products (8 percent).   

Debt roll over, and over, and…

The government’s strategy of rolling over short-term debt for longer maturity periods looks to continue as reports emerged in July that the finance ministry was seeking to issue Eurobonds this month. The issuance will be the first under the new government and is an indicator of the level of confidence in Lebanese paper. The ministry is looking to make a $950 million issuance that reportedly consists of a $750 million principal and $200 million in interest. According to various reports Citigroup and BLOM Bank will handle the book running for the issuance. The last issuance of Eurobonds occurred in May when $1 billion were issued in two tranches, the first at a rate of 6 percent with a maturity of eight years and a value of $650 million, and a second at a rate of 6.1 percent with an 11-year maturity and a value of $350 million. This month’s issuance will be part of the remaining $2.1 billion in Eurobonds that will mature this year. The public debt maintained its level of $52.7 billion at the end of May, unchanged since the beginning of the year.

Internet penetration on the rise in MENA

According to the International Telecommunications Union (ITU) the United Nations agency for information and communication technology, the rate of Internet penetration in Lebanon rose from 24.7 percent in 2009 to 31 percent in 2010. The figures ranked Lebanon 10th in the Middle East and North Africa in this category, and 100th among 233 countries worldwide — surpassing Egypt and Syria with 26.7 percent and 20.7 percent penetration, respectively. However, Lebanon still has a long way to go to catch up with the leaders in the region. The country is still far behind the United Arab Emirates and Qatar, with 78 percent and 69 percent penetration, respectively. As for fixed-line communications, Lebanon is ranked highest in the Middle East and North Africa region with a 21 percent rate of subscription for fixed lines, compared to a 9.19 percent average in the region; worldwide Lebanon ranks 97th.

Fewer tourists, spending more

An unstable political situation in Lebanon and the region has resulted in a 20 percent decline in tourist arrivals to the country during the first six months of the year, compared to the same period last year — from 964,067 down to 774,214. However, tourist spending grew by 6 percent in the first half of this year, according to duty free agency Global Blue. Arab tourists accounted for 31.9 percent of total arrivals and 54 percent of tourist spending in Lebanon. Among them, tourists from Saudi Arabia took the lead, at 20 percent, followed by the United Arab Emirates (11 percent), Kuwait (9 percent), Syria (8 percent) and Egypt (6 percent). Some analysts say the rise in tourist spending comes on the back of the financial crisis of recent years.

Another growth downgrade for Lebanon

The Institute of International Finance (IIF) has followed other institutional surveys and reduced Lebanon’s real gross domestic product (GDP) growth expectation for 2011 from 4 percent to a range of 1.1 to 3.0 percent. The global bank HSBC made a similar move a few weeks prior, cutting Lebanon’s growth forecast from 3.2 percent to 2.7 percent. Indeed, so far most economic proxy indicators have witnessed a decline, with observers saying that growth will depend on the development of the political situation in Lebanon and the region. In that vein, the IIF has predicted two separate scenarios. The first, with a 70 percent probability of occurrence, assumes that the situation in Lebanon and Syria will remain unchanged, in which case any recovery would be insignificant and GDP growth would not exceed 1.3 percent. With a stable political situation, in other words the return of political calm in Syria and a resolution to strife over the Special Tribunal for Lebanon, the organization would expect 5.1 percent growth in the second half of 2011.

Minimum wage still lagging

As prices rise, wages should follow suit. That was the sentiment last month of Lebanon’s largest labor union, the General Labor Confederation (GLC), when asking that the minimum wage be raised once again. The GLC demanded that the Lebanese government increase the minimum wage in the country by 150 percent, from $333 to $833. However, according to the Association of Lebanese Industrialists and the Federation of Chambers of Commerce, Industry and Agriculture, before being able to do so the government needs to create incentives for companies to increase their level of productivity. Otherwise such a move could lead to the bankruptcy and/or closure of many factories and private companies due to increased wage costs.

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