Finance

Q&A – Marwan Kheireddine

by Vanessa Khalil
written by Vanessa Khalil

An avid Lebanese contemporary art enthusiast, Marwan Kheireddine, chief executive officer at Al Mawarid Bank, recently sat down with Executive to talk about his personal art collection, his take on the booming Middle Eastern arts scene and ‘passion’ investments.

When did you first start collecting art?

I always had an eye for art. My father collects art [and] I started my own collection some 10 years ago by getting interested in [Mustafa] Farroukh [a pioneer in Lebanese contemporary art]. Someone told me that he was the art teacher at my school, at International College [in Beirut], so I started buying some [of his works] here and there. I moved to buying any and everything that I liked. Then I realized that maybe for the sake of having an ice collection, I should concentrate on something and at some point I concentrated on Lebanese artists [with a theme of] war in Lebanon.

Some say Lebanese art does not get enough support from Lebanese collectors, which leaves it undervalued. Do you agree?

I tend to say that in certain cases and at certain international auctions, some Lebanese art was overpriced, and some was sold for a significant premium. It’s not uncommon now to find Lebanese artists, some of which have passed away, others still alive, that are selling, at auctions, small paintings in size for amounts in excess of $100,000 and $200,000… For those prices you can get a painting that is signed by Picasso. But I do agree that some Lebanese painters have not yet achieved their worth. Aref Rayess for example — who’s one of the massive artists that passed away some while ago —[has] huge collections that are incredibly artistic and still not selling at their full value.

Is Middle Eastern contemporary art being overvalued at auctions?

To establish a market, a one-off sale does not really create a price. So it may very well be circumstantial; it may very well be that someone really liked that piece of Saudi art and decided to pay a lot for it. Saudi art is now hot. People are now looking because the image they have of Saudi Arabia is anything but art. It’s oil, it’s business, it’s the economy, etcetera. So art from there is attracting a lot of interest from regional and international art collectors. I’m looking at it but I have not bought anything.I have not seen anything yet that really caught my attention.

What art would you invest in?

This is the million-dollar question because if it’s only for investment, the objective would obviously be to buy something that will increase in value, and identifying the artists that will survive time is not easy. If we go back to the Lebanese artists, I think that really a handful saw their value increase over the past 100 years. You have Farroukh, Omar Onsi, Habib Srour — who has a limited number of paintings for collectors to view, let alone buy — Paul Guiragossian, Shafik Abboud and that’s out of what? Maybe 1,000 artists that have had their paintings circulated in Lebanon over the past 100 years. 

Auction houses in the region are believed to be overly speculative, focused on short-term profits. How would someone avoid art ‘bubbles’?

Auction houses are by no means experts, in the sense that they are selling something whereby they are guaranteeing its future value. They estimate the art prior to placing it but many times they’ve estimated prices that they were never able to achieve and at other times pieces sold for multiples of their estimates. They guarantee authenticity, condition and delivery.

At the end of the day, the price hike is happening because the bidders tend to be, in our part of the world, somehow emotional. So we had an [Ayman] Baalbaki [“Let a thousands flowers bloom”] sell for something like $200,000 dollars. That, I think, does a disfavor for Baalbaki, because if he sells at this price today, what are his chances of going much higher? You had two bidders that were hyped on that specific painting — especially with the Arab revolutions taking place — and they overbid. In my mind, from a monetary perspective it is not worth that much.

Is it very dangerous having young MENA artists reach record prices so early in their career?

Overbidding on certain pieces does create anomalies in the market. But I don’t think you can do anything about it… and I’m sure that whoever bought this Baalbaki is so proud of it that it’s probably hanging on the main wall in some mansion somewhere in the Emirates or elsewhere. The price is more a reflection of the feelings of the buyer at the time the piece was bought.

What would guarantee the value of the artwork inspired by the Arab uprisings next year?

Nothing will guarantee the value of art at anytime. A lot of [art] buying, especially for upcoming artists, is based on mood and general trends in the market. There’s always this ambiguity, animosity, in the art world because it relies a lot on emotions. It’s not a rational science.

In that sense, passion investments are not any less volatile than other investments, are they?

No, there are certain art lots or pieces that you cannot go wrong with; a Picasso, Monet, Van Gogh, a [Paul] Guiragossian or a [Shafik] Abboud. When you buy these pieces it is a safe haven, a low risk investment for your money. It’s just like the stock market; you can have a low-risk strategy and invest in safe instruments like treasuries and AAA-rated bonds, or you can be aggressive and go all the way into speculative investments.

Art prices are very volatile and getting it right is not easy. But then you can diversify, buy a bit of everything, and if something hits, it hits big. Art is a safe investment, but illiquid. So if you sell it quickly you will lose value. It is a good place to store your money over time, provided you can identify good art.

What would you advise young collectors?

Buy what you love. I definitely went wrong, many times. I have art that is worth nothing. What I like I have no problem with; I don’t care about its value or even monitor it, because typically what I buy I never sell. I take risks in investments. A few years back, I learned that Hitler —before he became the murderer — had some 700 known paintings. Now I have some 35 of his paintings. None of them is really shocking in terms of its beauty, actually most of them are on the ugly side. But it’s Hitler. I bought them here and there from the United Kingdom [and] Austria, so [my collection] must be one of the biggest single collections held by anyone in the world. I’m thinking that maybe I would sell them at some point as a collection. That could prove to be a very good investment or the lousiest one I’ve ever made.

What do you have your eye on right now?

An Ayman Baalbaki. And a very dear friend of mind promised me that he will make sure that I’m getting one. So I’m waiting on that promise.

 

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Society

Technology: the leisure of smart homes

by Rayya Salem
written by Rayya Salem

The Lebanese are known to seek out and import the newest and most advanced products. The technology segment is certainly no exception, especially if the product serves a purpose to entertain, shock or pump up the egos of those who buy them, whether clients are in the hospitality industry or homeowners.

For Beirut-based Triangle Sound & Image and Triangle Entertainment Services, one of the major distributers and installers of audio and lighting systems, the tides are changing as the Middle East and North Africa region builds its hospitality market. “[Our portfolio] used to be 80 percent residential versus 20 percent commercial and staging. Now, it is 45 percent residential versus 55 percent commercial,” says Triangle’s managing director Zahid Elian. As installation and design requests roll in from as far afield as Saudi Arabia, Kazakhstan, Mumbai, Istanbul, Las Vegas or even Paris, current work continues on 11 major commercial projects in the region, most notably the installation of the systems in the upcoming Palais Maillot club (of Parisian fame) in Beirut.

James Bond control

The action going on behind closed residential doors can rival that of the hospitality industry. Nowadays, controlling all electronic systems in a suburban home from the owner’s overseas iPhone is an old trick. And since Lebanon’s Energy Ministry is lagging in energy solutions, remote-controlled systems, promoted as energy-cost savers, are rising in popularity; several Lebanese distributers are now selling these technologies through different global brands.

Zoom Tech Electronics, for example, is the exclusive distributer in Lebanon for the American brand Lite Touch, which controls lighting, security alarms, television, air conditioning and any kind of electricity in your home on a single remote or iPhone, at a starting cost of nearly $6,000.

For entertainment, some private clients relish in confusing their guests with American-made Stealth Acoustics invisible speakers (hidden within the walls) or customized mirrored televisions, which will set you back nearly $5,000 for the 37-inch TV and up to $31,779 for a 65-inch screen. So far, the 15-year-old company has installed roughly 500 of the latter in Lebanese homes.

“Imagination is the limit; the budget is the response to that limit,” says Triangle’s Elian. In Lebanon, it seems the budget doesn’t have the same constraints as it might elsewhere, as another imagination-fulfiller offers.

“Knowing the Lebanese, they like to be the first to have the best products. They are willing to pay for and ask for the most advanced ones,” says Jean Gemayel, managing director for Lebanon and the Gulf for Algeco, a Roumieh-based engineering consultancy that builds aluminum and glazing structures. Though their automated glazing systems can, for example, create an indoor/outdoor pool area surrounded by retractable glass, a newer eye-catcher is picking up in residential popularity. In the last three years, they have installed approximately eight $25,000 steel retractable roof and waterfall systems (see picture) and in May they were commissioned to install a retractable roof with a waterfall over a 2,000 square meter terrace in Le Mall shopping mall in Saida.

Cost of sophistication

As many predicted, the iPod has become a tool and a base around which many other products, systems and services revolve, as demand and know-how grows for digital wireless multimedia streaming, wireless control and the programming of lighting. A major burden on distributers like Triangle is actually finding enough skilled people to install high-end audio and professional light and sound. Add to that the cost of importing foreign systems, and clients should be prepared to pay a premium, as manufacturers must cover the cost of research and development for new innovations, not to mention Lebanon’s import taxes.

Although expensive, such technology offers a long-run investment, including the complete concept and system offered, from the pre-design stage to installation and after-sale services. Just ask the club owners who keep going back to their same supplier when a new product is available.

 

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Finance

Q&A – Rami El Nimer

by Vanessa Khalil
written by Vanessa Khalil

Rami El Nimer is general manager at First National Bank (FNB) and an experienced art collector. He chatted with Executive about how his art collection fed on history and identity, the opportunities and risks associated with banking on art in the Middle East and his plans to build up FNB’s art assets.

When did your passion for art begin?

My passion for art started at a very early stage when I used to visit my ancestors’ house in Nablus, Palestine. As a young man in 1967 I used to visit my family there. There was a small museum that had our family artifacts, arms, armors and documents. Until the age of 16 or 17, I used to collect small artifacts concerned with the Ottoman Empire — like books or coins. And still today I keep them. Then I went to school in Switzerland where I met a lot of art dealers, and there I expanded my knowledge. But it was always Islamic art, particularly Ottoman art, that fascinated me.

Can you talk us through your art collection?

There are three parts. Firstly, since I’m of Palestinian descent, I collected anything to do with Palestine: books, postcards, stones. I have historical documents from 1620 until 1850, and when I couldn’t get them out of Palestine during the Intifada, the family decided to smuggle them for me. The second part is the Ottoman art, which I collected for beauty but also for national heritage. Our descendants lived under Ottoman rule, so it’s fascinating for me. My collection there consists of different areas, from manuscripts to calligraphy to furniture. The third part of my collection reflects my willingness to help contemporary Palestinian artists worldwide, trying to buy their works. My daughter and I are setting the scene for them in Lebanon; hopefully we’ll show that Palestinians are people with identity, with culture, with deep artistic roots; not just a bunch of refugees living in camps, or terrorists. For me this is a duty.

Is there an investment side to your art collecting?

I never approached art as an investment. But with time, apparently, I made a great investment. The [return] percentage was huge because I collected in the right period and the right areas. But I cannot afford today to compete with international collectors worldwide, museums who have unlimited means, especially in the Arab world.

Do you think there is a Middle Eastern contemporary art bubble in the Arab world now?

Previously, the Arab world was away from this movement, due to the political and economic situation for the past years. [Now] there’s a lot of new wealth and of course the younger generations are more interested in contemporary and modern art than, let’s say, Islamic art, which is becoming too rare and too scarce and also very expensive. With the new wealth emerging and no experience, there is a lot of manipulation in the art business. But value is irrelevant because it is a supply/demand issue. Of course some people will abuse this and try to promote artists that won’t necessarily make it in the long run. Now we [are seeing] some extremely exaggerated figures, which will discourage people. But when they are discouraged the market will go down to more normal levels. Then serious art lovers will start buying more because they are not necessarily very rich people.

What is your take on art funds that guarantee safety and greater returns?

I was thinking of doing one myself a few years ago. But then the war in 2006 happened so I decided not to proceed with it. It was too risky. It is much more speculative than you think, because in art you have trends. If you bought in China at the right time, a work of art which cost you $10,000 or $15,000 was worth a million dollars 10 years later. But this is a stroke of luck. If you’re going to buy in an academic, not a speculative manner, it takes a much longer period of time.

In financial stock markets, you analyze the company’s performance at the end of the year; if it goes down 50 percent you can exit. There’s liquidity in it. The art market is not very liquid; you will sit on hundreds of works of art and you might not sell them. What’s a ‘blue chip’ today is not a blue chip tomorrow. If one fund contains $10 million — like the ones in the region — it’s something, but if you’re talking 100 funds each at $50 million, the art has to perform so there will be more manipulation.

What about banks and other institutions building up their art collections?

There are a lot of institutional art collectors in Europe, the United States and China. They have art departments. They’re not looking for short-term properties. This is better than having pure business funds. Bank Audi is one of the banks in Lebanon which were pioneers in collecting art. I started doing it myself [for FNB]. Most of the works are mine; I exhibit and lend them to the bank. I decided to buy every year certain works of Lebanese artists for the bank, but I haven’t set the foundations yet. It takes time and maturity. Now we have different priorities than an art collection as a bank. I don’t want to use the funds of the bank for art; my shareholders will not be very happy.

What’s your advice for new collectors?

I would say ‘be careful’. You have to study your work, not try to color-coordinate your paintings with your walls. Stay away from decorators, go with your instincts, but also educate yourself in art and train your eye. First you have to love the piece, do your research, and then ask yourself whether you can afford the art and whether its price is justified. At the beginning I collected only decorative pieces in Ottoman art which are not pure, in the sense that there’s a lot of influence in them. So now I’m more selective in choosing pieces. You always learn something new.

What do you have your eye on right now?

Ottoman is my passion. I’m trying to buy a 16th century textile, which is very rare. I’m negotiating it in Portugal with my dealer. Ottoman art is much scarcer [than contemporary] and buying it at the right price, at the right moment, is not easy. You have to practically hunt it; it’s a nice feeling.

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Society

Hospitality: Red hot competition

by Emma Cosgrove
written by Emma Cosgrove

Fine dining in Beirut is a statement. It is competitive; affluent diners are always ticking off their lists and regaling tales of their attendance at the newest or trendiest venues. It is also a sport – every new restaurant that opens must have a “one up” on the last, and if you spend anytime with the players you notice an inherent propensity to flambé their competitors’ reputations.

And though the restaurant industry will surely feel the dip in regional tourism, it is generally not a sector in which the Lebanese scrimp, regardless of the economic climate. There is, however, a contemporary challenge that may lead to either the Beirut dining scene’s enrichment or ruin.

“Lately there has been a surge in the restaurant business, which is making the industry very competitive and over-saturated,” said Hussein Hadid, a renowned chef specializing in catering upscale events.

The good here, according to the luminaries of Beirut’s kitchens, is that increased competition could bring up the standard. The bad news is that without diner scrutiny — or a proper health inspector for that matter — it could mean a watering down of Beirut’s culinary talent, where quality loses its crown.

To investigate, Executive spoke with four of Lebanon’s newer upper-crust institutions to find out what diners are paying for when they order a top-dollar meal, and what they deserve.

Surprisingly, no one waxed poetic about the atmosphere, the chef’s mastery or even the service. The answers were all about quality. And according to the chefs, this is the only thing that should matter when pricing a menu.

The meat of the matter

There is disagreement and disbelief when the topic of beef is discussed — meat quality is disputed and “liars” are called out, diplomatically of course. But the truth is that restaurants know what others are serving and what they go through to get it.

Gaucho, for example, the British import that settled down next to the Phoenicia last November, brings all of its hallmark grass-fed beef from a particular farm in the fertile Pampas region of Argentina. It is then wet-aged and cooked on a special grill until it is brought to a table with no steak knife (there is no need). Mark Pass, Gaucho’s general manager heralds this point and talks about the cattle as if they were his own.

“I’m very proud of it,” said Pass. “If you talk about pricing and product, our cattle is as close as you’re going to get to organic without it being certified. There’s no feedlot. They’re completely grass-fed and they have on average one square kilometer per cow.”

Beef is at the top of the price list for several other Beirut chefs as well.

Burgundy, well known to be Beirut’s most expensive restaurant, makes no great arguments to convince its customer that the prices are warranted (some of the organic ingredients on the menu are not marked as such). But according to sous-chef Youssef Akiki, it’s all there. The fish is from Scotland, some of it wild, the beef is Australian Wagyu, including the MB9+ “Blackmore” variety for a mere $120 per serving.

Even the lower ends of the Wagyu spectrum can cost around $80 per kilogram wholesale; this should be noted by patrons dinning elsewhere that if the price on the menu seems too good to be true, it probably is.

Battle of the greens

Even with all of the meaty competition, the vegetables of Beirut are also causing a stir. With the trend of ‘locavore’ — eating local produce — settling in for the summer, those who fill their plates with produce from abroad are falling out of favour. Mar Mikhael eatery Chez Sophie has been accused of importing much of its menu from France as opposed to using Lebanese produce. But Sophie Tabet, the chef and namesake of the place, says that this is not the case, especially in the summer.

“With the summer you can eat the products (from) here but in the winter we don’t have anything in Lebanon, nothing,” said Tabet. She also added that the complexity of her ever-changing menu makes using all local produce impossible.

 

Burgundy uses a mix of local and imported organic produce, but Akiki said that though the quality and source of produce is important to chef Brody White, “The guests care in the end about taste.”

Kelly Jackson, executive chef at Le Gray, is delighted with local agriculture at the current seasonal moment and says that it is the one element that will make or break a menu.

“For me the key is the produce,” he said. “You can be the best chef in the world but if you don’t have the produce you’re not going to make anything great.”

Verifiable

Chez Sophie’s Tabet is miffed when it comes to “fine dining” in Beirut.

“Most of the restaurants don’t have the quality to back up their prices. And people enjoy going to them. That’s what is weird. They enjoy it,” said Tabet.

Hadid, slightly more diplomatically, said, “We have loads of restaurants but few that we can be proud of. There is still lots of room for improvement. We need to raise the standards, and it can only be done if more of the young generation are exposed to the restaurant and hotel industry in the West, learning from the very best chefs in the world.”

Hadid, as well as Tabet, both emphasized the diner’s palate and eye for quality as the only thing that will weed out the eateries with undeserved prices.

So, the bottom line is that when prices reach up into the stratosphere, the quality of the components should be there even before the skill of the chef is considered. It is hard to be sure that this is the case, but without a restaurant association or dependable inspection into false claims, the consumer is the only referee in this game.

 

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Real Estate

Boardwalk Empire

by Rayya Salem
written by Rayya Salem

“The world over, everyone is talking about Beirut today, especially in creativity and entertainment,” boasted Samer Bsatt at the June 9 launching of Zaitunay Bay. Beirut Waterfront Development (BWD) held the launching of this residential and retail mega-project — inviting their 22 restaurant and retail tenants, the contractors, investors, shareholders and members of the media — to announce the “first and only [commercial] boardwalk in Lebanon” according to Bsatt, the group’s general manager.

The 20,000-square-meter waterfront project along Beirut’s hotel district coastline aims to cater both to Beirut’s tourists and ‘fun in the sun’ seekers and strategically position the bay as the meeting point for yacht-coasters who sail the Mediterranean during the summer months, perhaps as new members of the upcoming exclusive yacht club.

Farouk Kamal, chairman at BWD, a joint venture that began in 2004 between Solidere and the London-based Stow Development, said that throughout Lebanon’s political upheavals and project delays, the budget has grown to $200 million, which reflects in part the constant upgrades made over the years. Overlooking the construction site from a nearby hotel restaurant, he offered Executive his take on the movers and shakers who are revamping the bay, as well as who stands to reap the rewards.

The first of two phases will see the promenade (starting near St. George Yacht Club to just in front of Marina Towers) and its 17 local and international restaurants open to the public by September of this year, where the space will also host concerts and exhibitions to attract maximum foot traffic.

The main contractors are Mouawad-Edde, on the restaurant side, with MAN Enterprise and Hourieh Enterprise also working on phase two, while project manager Interior Design, Engineering and Architecture (IDEA) oversees work on the site.

The second and final phase will see the yacht club and 53 ‘club residences’ delivered in the spring of 2012. “We have a list of 120 who will be founding members of the yacht club, but not confirmed memberships, ”Kamal said. “We need a harmonious mix, including expatriates living in Europe.”

The club will feature a ‘seven-star’ level of service for the 53 units, part of the reason for the significant price, which can easily be described as the most exorbitant Beirut has ever seen. For the smallest size unit, at 85 square meters, the asking price runs at around $2 million, which translates into $23,500 per square meter, but it can only be bought after one becomes a member of the yacht club.

“For a family of three or four, [membership will be roughly] $50,000 initially and then $4,000 to $5,000 annually,” Kamal said. Of course, since the residences are expected to be used for just a few months a year by their owners, one of the included services available is to rent out the clubhouses throughout the year. All in all, the owners of the project stressed the Lebanese character of the journey to create what they hope will become the region’s glitziest boardwalk. “The [man power] on this project is mainly Lebanese, except for the [architectural] concept, which was done by New York’s Steven Holl [the executive architect supervising the design is Lebanon’s Nabil Gholam]. All are Lebanese who have succeeded in their own fields. Lebanese can deliver beautiful things when they work together,” said Kamal, who originally approached Solidere with his vision for creating an entertainment and lifestyle venue on the boardwalk that would reincarnate Beirut’s dolce vita lifestyle of the 1960s.

Just enough cooks

“We had 150 applications from [commercial] tenants, mostly from Lebanon, and we had to pick carefully so that the mix would create a range— not all high-end — and so as not to create too much competition,” said Kamal. MyWaterfront, the big brother of Beirut sushi joint, Mybar, will occupy the largest space among the 17 restaurants, and will feature an outdoor terrace overlooking the bay. A possible competitor, Hakkasan, a world-famous Chinese restaurant with its main outlet in London, was denied a request for a 900-square-meter outlet at BWD due to size limitations.

Mybar Manager Haytham Nasr didn’t hesitate to sign the nine-year rent contract with BWD. “Once I saw the actual development, it was a no-brainer… It’s prime real estate,” he said. “[And] we are looking at events at the waterfront to make sure there is a lot of foot traffic, especially in dead periods of the year.”

Mybar’s crowd funding concept is structured a little higher the second time around, with buying options at $10,000, $20,000 and $50,000,with the payback period guaranteeing money back within two years, and doubling it after four. “[The funding cycle] was nothing short of remarkable,” said Nasr. “A lot of people have trust in this development. We launched our website a month and a half ago and it took us less than five weeks to raise $1.5 million, all from Lebanese investors.”

Lebanese furniture designer Nada Debs, one of the five non-food and beverage outlets, signed for the lease on the June 9 launch day. Her store, which will sell home items and gifts, will be situated amid the 17 restaurants. The designer seems to be betting that a destination within the hotel district, with the added traffic from sea visitors will pay off, even if she is paying more in rent there than at her Saifi village boutique.

Not so crazy

“When [Stow Development] did Marina Towers [a development overlooking Zaitunay Bay], people thought we were crazy, but it pulled all these projects after us,” said Stow’s Kamal.

Though the yacht club’s sales are dependent upon high-net-worth clients, it is projected the expansiveness of the entire real estate development, once complete, will benefit all levels of the tourism industry.

With the global flare of the many expatriate yacht club members, and the mix of international food and beverage brands such as the Indian restaurant Moti Mahal, the Italian tastes of Signor Sassi and America’s glamour steakhouse Cro Magnon, among others, the new waterfront will surely add spice to Beirut’s reputation for sophisticated cuisine, nightlife, and marine activities. Perhaps the ‘la dolce vita’ is soon to return after all.

 

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Society

Hospitality: Where everything is possible

by Zak Brophy
written by Zak Brophy

 

The job of a concierge in a five-star hotel is a portal into the stratospheric world of the super rich, a front-row view of how the ultra well-heeled live. Sometimes it is amusing, sometimes shocking and sometimes downright weird.

When paying top buck for service, guests can, and often do, expect everything on a platter. “I cannot say no to any request. Everything is possible, as long as it is legal,” said Reda Chaiban, senior head concierge at the Habtoor Metropolitan.

Chaiban exudes a genuine passion for his job. Having spent his working life striving to be at the top of his game, he sees himself as someone who can organize just about anything. “A concierge’s contacts are his toolbox. He needs to know everyone in town so he can fix any request,” he explained. 

Organizing a spot at the top table in town or a day out on a mega yacht is routine business for Chaiban, but sometimes he really has to go the extra mile to keep the guests happy. On five separate occasions a returning female guest has had him fly over from France one of the most desired hairdressers in the world. “Like I said, nothing is impossible,” he joked. But what about requests from guests with more illicit designs in mind for their stay in Beirut?

Walking on the wild side

 Chaiban was adamant that none of the staff at the five star hotels would get involved with organizing drugs or prostitutes for visitors.  However, the lines of distinction can become a little blurred.   A concierge from another five-star hotel told Executive, on condition of anonymity, that “there is normally someone in the hotel that knows someone outside who can arrange these things, but it is true we don’t fix it ourselves.” It’s a simple case of passing on a phone number.

The same concierge spoke about a party of men who booked the penthouse at a cost of more than $20,000 per night to throw private parties. “Every night they would bring between 30 to 40 prostitutes, and even if they didn’t sleep with them they would pay them several hundred dollars just for coming,” he said. “People pay up to $5,000 a night for a prostitute; some will pay more for a virgin,” he added.

Official policy is to inform the police if staff members are aware of illegal activity going on in the hotel. But the anonymous concierge smirked at this suggestion. “Even if we suspect illegal things are going on in people’s rooms, we don’t get involved. Quite simply it’s none of our business,” he said.

There is a prince from Saudi Arabia who is infamous amongst Beirut’s hotel staff for his outlandish requests, which have earned him the soubriquet “The Golden Boy”. A receptionist, again speaking anonymously, explained how the prince always books the same penthouse at one of Beirut’s most prestigious hotels. “He has all the windows blacked out, the whole floor carpeted in sheep’s fur and he will only wash in Perrier water or laban,” he said.

Tips are what makes the often-demanding job worth it and are an integral part of the hotel staff’s income. “If I told you how much I earn you would cry,” lamented a senior concierge at a high-end boutique hotel. “But in a good month in high season I can take $12,000 in tips,” he added with a wry smile. Tips don’t always come as notes greasing palms either. “The tips can come as gifts such as perfume, an iPad or an iPhone. Sometimes the guests come to see you as a friend so they want to give you a gift,” said Roxanne, a concierge at the Four Seasons.

 

 

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Society

Homes: A full house of assets

by Rayya Salem
written by Rayya Salem

 

With a few Lebanese names solidified on the regional stage of furniture design, Lebanon is becoming more aware of furniture as an art form and investment. Executive spoke with some of the country’s biggest players in the field to discover where Lebanese designers are in the maturing world of Arab furniture design.

Art that you sit on

American University of Beirut graduate and London-based designer, Zaha Hadid, made a series of 24 chairs for international architecture and design firm Sawaya & Moroni, the prices for which start at $150,000. This price tag may come as a shock, but Gregory Gatserelia, founder of Beirut-based Gatserelia Design, urges customers to look at the pieces as assets.

“It’s not money paid, it’s money invested,” he says. “So I tell my clients that art is money well invested if you have a good consultant.” Gatserelia just opened SMO Gallery in Beirut to showcase his favorite collections, which include a couch and table of his own design.

Gatserelia says that the creative Lebanese crowd is becoming more and more interested in attending art galleries and shows and they are more aware of certain “collector pieces” or newly available pieces at galleries and showrooms. He works on behalf of clients to acquire those items. Gatserelia’s main business remains interior and architecture design, mostly of Middle East and North African residential and commercial projects, and he is now commissioned to work on the architecture and interiors of the 200 villas in the upcoming Nikki Resorts in Croatia.

“We just commissioned Ross Lovegrove to design a set of suspension lights and a dining room table that is molded into one unique piece, to be installed in a client’s Sursock residence. It’s molded in fiber-carbon through a technology we can’t master here in Lebanon,” he says.

The exclusivity of the piece (only two were made alongside the original) will allow the owner to ask “three or four times” the piece’s original cost, if and when he sells it. 

Despite investment considerations, Gatserelia is careful to keep ‘passion’ as a main ingredient in the art collection process, even though anything that’s properly marketed can be made into an investment item.

“If I see that [someone] is not interested [in the quality of the art], [I will] never get rid of a piece to a person who doesn’t appreciate it, just because [they] have the money.”

A particular soft spot shows for his favorite pieces: “I have pieces [a set of stools] designed by Bernard Khoury that I consider more valuable than all my pieces combined.”

 

It’s all about the name

With few competitors in the field of Lebanese furniture design, Nada Debs, chief executive officer of design company East & East, has carved out a profitable niche for herself after originally starting out as an interior designer.

Debs’s uniquely Middle Eastern outlook makes her pieces instantly recognizable — a plus that has helped her build her brand since she returned to Lebanon from London. Debs is most known for the “arabesque modern Arabic style” throughout her hand-made furniture lines.

Her company’s name represents the combination of Far Eastern sensibility and Middle Eastern details. The popular mix allows for shipments all over the world, with 40 percent of her products sold abroad, mostly in the Gulf.

“Our customers from the West see our pieces as exotic and authentic, whereas our Middle Eastern customers like the craftsmanship element and handmade detail, which reflect our culture and emotional belonging to the region. Even in the [Gulf Cooperation Council], people who originally liked the whole contemporary Italian look now prefer more subtle furniture and warm colors,” said Debs.

Her limited edition series, ‘Middle East Bling Bling’, included pieces, such as an arabesque chair and a chrome pebble table, infused with mother of pearl. Price-tags for tables in this line begin at $60,000.

Though she admits that many people think her work is overpriced, rising costs of labor and materials leave her with little room to maneuver.

“In the Arab world, labor isn’t cheap like in China. Import taxes make the price 30 percent more, as pieces are made with imported wood, brass and chrome,” she says.

But customers still save on local brands when compared to importing European-made products, which are more expensive, even if they are machine-made. But that won’t be the case for long, it seems. “Definitely, people are more interested in local craftsmanship, not commercial pieces,” says Debs. The proof is in the numbers, as revenues for Debs have grown about 10 times since she started a decade ago, she says.

But it is the corporate deals and special orders that keep her name rapidly circulating in a region that has a sweet tooth for known, often foreign, brands.

As an example of her growing regional prominence, 700 small pieces, such as vases and candleholders, were shipped off to a Middle Eastern royal family last year, and similar bulk orders are popular among Middle Eastern companies who distribute the items among employees as end-of-year gifts.

Recently the Museum of Modern Art in Qatar purchased a “concrete carpet,” which will be exhibited as an art installation and will be part of their permanent collection.

Entrepreneurship organization Endeavor Lebanon, whose London International Selection panel of six judges chose Nada Debs (and another Lebanese business) out of companies from 8 countries, sees potential in Debs and plans to make her company a globally recognizable brand.

 

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Society

Q&A – Fady Chams

by Rayya Salem
written by Rayya Salem

After starting out on the Cannes interior design circuit, Prospect Design International’s Managing Director, Fady Chams set up the second branch of the boutique design firm in Dubai in 2005. The firm’s work has been ogled by the eyes of the jet set, with a portfolio that includes the VIP Room in Saint Tropez, to world-famous Movida and Maddox in London, to the iconic art deco Sass Café in Monaco. Closer to home, Prospect left their mark on Beirut’s La Plage beach and Palais nightclub. Though the firm has worked on high-end projects from Casa Blanca to Kazakhstan, the Middle East’s highly hospitable climate remains the focus for their well-secured niche within the interior furnishings market.

How did you become a high-profile interior design company so quickly, designing interiors of exclusive high-end clubs and restaurants in Monaco, London, France, and the like?

My brother Sami, after having worked with Ralph Lauren Interiors and many other brands in the south of France, set up Prospect Design in Cannes in 1996. Several friends asked him to design restaurant interiors, which became very successful, and we became specialists in that domain of hospitality design. We were thinking to open Prospect Design in Beirut but security and investment-related factors didn’t allow us to do that.

Do you position yourself as designers in the luxury segment?

Not necessarily. We do high-end and we can provide a mid-end French classical Provence house, which is rich in natural materials, [such as] French antique wood, without having necessarily the highest technology and the expensive marble and so on.

Wasn’t Palais the biggest budget project in hospitality at the time?

No, not at all. To tell you, it was approximately half a million dollars, which is acceptable when you consider they already had the services, electrical, mechanical, air conditioning and so on. There is big competition in Beirut, especially for [design in] hospitality. Now, we have a lot of private clients for residences… and hope to design a boutique hotel but that is all related to the political and security situation.

When you compare the market for luxury hospitality design in Beirut with the regional market, do you see major differences?

In Beirut there are no limits compared to the rest of the Middle East. You can open a restaurant and club wherever you want and you are allowed to sell alcohol and open from very early until very late. In Dubai, [if you are a restaurant that sells alcohol] you have to be in a hotel, which affects our design.

What makes it so demanding to work on a luxury restaurant?

You cannot just design a very nice restaurant [based purely on aesthetics]. When it comes to operations you have a lot of problems with the lighting, the seating or the circulation around the tables. Also, going for a contemporary style or a classical style will definitely last much longer than something futuristic with a lot of LED lighting and changing colors.

Did the economic downturn impact your business?

Yes and no. Back in 2008, some clients started to freeze their spending. But we do not have a lot of overhead… Before the crisis in Dubai, we were approached by maybe 20 people a week; 90 percent of them were…wasting our time. Now, if we get approached by four clients, three of them are very serious and have the funds.

What was the most expensive project you ever worked on?

There were some private residences… that included an indoor swimming pool, a nightclub, a basement tennis court, you name it. In hospitality, it is a business with projections and a feasibility study and goals to meet. They don’t care if I put a gold-plated part in the ceiling or something that looks like a gold-plated part. But the private client would want gold-plated.

How did your strategy develop to combine luxury items with mid-range items in your designs of hospitality spaces?

It comes naturally since in most projects no one has an open budget; we are therefore quite skilled in mixing-and-matching a very expensive sofa with a less expensive table and a chandelier that is not a Swarovski one…to create a unique design. If you want a wall covering, I can find you five similar coverings at very different prices.

 

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Economics & Policy

Redialing discord?

by Sami Halabi
written by Sami Halabi

To describe Lebanon’s telecommunications sector as politicized would be an understatement on par with saying the summer of 2006 was eventful, or that Hezbollah and Israel enjoy a good game of tag from time to time. Since its heyday atop the pyramid of Arab telecommunication industries in the early to mid-1990s, the sector has become little more than a wounded lamb at the mercy of the packs of hyenas roaming Lebanon’s political plains. Today the sector has the dubious distinction of having the slowest average Internet speed in the world and the highest prices for those same services in the Middle East.

“We are lacking so many basic things and the entire root cause of our despair is the governance of the sector,” said Riad Bahsoun, telecom expert at the International Telecommunications Union (ITU) –– the arm of the United Nations that deals with information communications technology. “It’s the domination of politics over performance. It’s the subjection of intelligence to force and collective interests to individual will. This is called tyranny and despotic governance.”

This high-handedness was on full display in May, when the lack of reform and the hyper-politicized decision-making in the sector culminated in an embarrassing encounter between Charbel Nahas, then the telecom minister allied with the March 8 coalition, and hundreds of members of the security forces, who prevented the minister’s team from entering one of the ministry’s buildings in the Adlieh district to dismantle a non-commercial cellular network that had been operating in parallel to the country’s two commercial operators.

Submarine cables coming to and from Lebanon

The confrontation apparently came about when Abdulmenaim Youssef, who is allied with the opposition March 14 coalition and heads Lebanon’s incumbent fixed-line public operator OGERO, requested that the head of the Internal Security Forces (ISF), Ashraf Rifi, who is also allied with the opposition, guard OGERO’s property from the ministry’s prying eyes.

OGERO was created in 1972 and controls the country’s fixed-line services as well as its current Internet infrastructure. It acts under the “supervision of the telecom ministry”. However, it is also financially and administratively independent, in accordance with the law that created it, and answers to the directorate general of operations and maintenance at the ministry, which has also been headed by Youssef since 2007.

Immediately after the Adlieh incident, the political mudslinging began. The convoluted arrangement over who had authority to see, dismantle, own and operate the network descended into quarrelsome disputes over the constitutionality of the move, the civilian rule of the security forces, wiretapping, illegal phone lines and so on, until the issue finally faded into the background. Lebanon emerged from the fracas minus one favorably regarded and technocratic interior minister (Ziad Baroud, who resigned following the incident) and no further along the path to reform.

Legal arguments aside, the cellular phone network Nahas was attempting to confiscate from OGERO was given to the Lebanese government as a gift in 2007 by the Chinese government, through the multinational telecommunications company Huawei. At the time, Lebanon was preparing to liberalize the telecommunications market and introduce Liban Telecom, a legally mandated government-owned body with a corporate framework that would eventually replace OGERO and take on most of its assets. The gift provided the Chinese with an opportunity to enter the market as it was opening up and to prove that its companies were capable of running a high quality network. At the time, the technicalities of the donation were negotiated by OGERO under Youssef’s purview was director general of the company.

According to ITU’s Bahsoun, when questions were raised about whether the network should be monitored by the Telecom Regulatory Authority(TRA), Youssef said that it would be used solely for testing purposes and hence, as a non-commercial network, it would be overseen by himself and not the TRA. Youssef did not respond to repeated requests for comment.

The gift, however, did not arrive until 2009, when the current Energy Minister Gebran Bassil was heading up the telecommunications ministry and plans to set up Liban Telecom had effectively been scrapped due to political wrangling. By this time a row had erupted regarding a new wiretapping law that would take authority over such issues away from the Information Branch of the ISF and split it between the ministries of justice, telecommunications and the interior. In 2007, after the network had been pledged, the interior minster put in a request to the Council of Ministers, Lebanon’s cabinet, to allow the Information Branch to use the network for intelligence purposes. The permission was denied.

“In my opinion this was rejected in turn by the Information Branch,” said Bahsoun, though he stressed that he could not confirm such information. “The Information Branch probably decided to [use it] anyway without formal legal coverage,” he added.

Whether or not the network was used for intelligence purposes will likely be an ongoing source of bickering among Lebanon’s politicians, but the capabilities for such an operation were certainly there. The network was widely reported to have a capacity of 50,000 lines that could have been employed outside the two existing cellular networks. Speaking to the Lebanese Broadcasting Corporation last month, opposition Future Movement Member of Parliament Ghazi Youssef said the network contains a total of only 15operational lines.

 

“They say that the OGERO equipment is made up of 62 base stations [part of the cell phone network which handles communications between phones and the network] in addition to the core; the intelligence system that manages all of this is there,” said Imad Tarabay, secretary general of the Lebanese Telecom Association (LTA), which represents Lebanon’s private-sector data and Internet providers.

According to Bahsoun, a staunch opponent of Minister Nahas, this equipment was consolidated at some point at building in Adliyeh and this allowed for a more powerful network which he suspects played a part in uncovering some of the Israeli spy networks in the country over the past several years.

“If this network is operating 15 lines, why does it need 400 people to protect it?” he asked rhetorically, referring to the reported number of security forces present at the building when Minister Nahas tried to enter. “The truth is that the Information Branch could not accept in any way the minister of telecommunications or a team apart from theirs to inspect the equipment.”

3G connection

What ultimately emerged from the fiasco is that even if the minister was attempting to lift the lid on any alleged wrongdoing, he was also trying to speed up the implementation of the contentious 3G mobile Internet projects that he launched last January after the cabinet had collapsed, in conjunction with mobile operators Alfa and mtc.

As Executive reported in March, there have been numerous unanswered questions over the legality of the 3G project, due to the fact that it was launched while a caretaker government was in place, and neither the legally required licenses nor frequencies from the TRA and the cabinet have been granted to the companies that will conduct it. Moreover, the prospect of a faster, better service being provided by the public sector, without private sector access to the market, has fueled a campaign against the plan, spearheaded by Tarabay, chief executive of the private sector company Cedar comand distributor of the Mobi wireless Internet service. Tarabay co-owns the company with the son of opposition MP and former Telecommunications Minister Marwan Hamade, and contends that Nahas is attempting to nationalize the telecommunications sector.

He says he has prepared legal files against the telecommunications ministry and is prepared to submit them to the Shura council, Lebanon’s highest court. This comes after an unsuccessful attempt at arbitration through the TRA that, perhaps predictably, did not take action against the ministry it depends on for financing; the TRA spent several months this year without the money to pay its employees.  The TRA also did not respond to repeated requests for an interview.

Most of the controversy surrounding the legality of 3G stems from two contentious issues. The first is telecom Law 431, which states that licenses and frequencies must come from the cabinet and the TRA respectively. Second is unfair competition as a result of exorbitant tax discrepancies between public and private service providers, which would likely come about if the project moves forward.

With regards to Law 431, former Telecommunications Minister Nahas’s response has always been the law is not applicable, ostensibly because it has not yet been implemented in its entirety. His position got a boost last month when he announced that he had seen a Shura council decision stating that the law had been “suspended” because of Article 51, which states that “all applicable[previous] legal or regulatory provisions remain effective until the enforcement” of the law itself. Translation: the law and all the institutions created under its jurisdiction, such as the TRA and Liban Telecom, would also be technically suspended. As Executive went to print the ruling had not yet been made public.

“Law 431 is applicable and being implemented,” insisted Imad Hoballah, acting chairman of the TRA, at a press conference intended to respond to the minister’s statements last month. Hoballah went on to describe the licenses and frequencies that the TRA had given out over its four-year term, though he admitted that these had been handed out before the Shura council decision. Previously, the Shura council has ruled against the ministry and in favor of the TRA but there is speculation this ruling could be particularly pernicious for the TRA.

“We respect the decisions of the Shura council and we will follow them,” Hoballah said, insisting that the decision does not negate the entire law. Asked what the TRA would do if the telecommunications ministry issued 3G frequencies that the regulatory agency is legally mandated to allocate, he declined to comment, saying only that if the telecommunications ministry decides to go ahead without allowing the private sector to participate, “no one can stand in its way.”

“Fundamentally, the TRA has eight months left,” contended Antoine Boustani, an advisor to Minister Nahas, speaking to Executive last month. Boustani’s position, like that of Nahas, is that because the law that created the TRA is not fully implemented, “it’s already obsolete”.

“We don’t decide to implement the law; the Council of Ministers decides. We are moving forward on the basis of the authority of the ministry. When they say they want to implement the law [in full] we are ready,” he said, denying that the ministry officially seeks to shut down the TRA.

“I’m not stopping until I get my rights,” Tarabay snapped back defiantly, adding that he will file court cases against the ministry but is waiting to see the Shura council decision to “fine tune” his lawsuit in line with the status of Law 431. 

But according to Boustani, Tarabay will soon have little to complain about. Last month he told Executive that the ministry plans on leveling the playing field between the private sector and public sector by decreasing the taxes on the former by “50 to 55 percent.” Asked whether the private sector will be allowed to enter the market, he said “byiswa” — an Arabic word suggesting that something on this front could happen and would be a positive — though he couldn’t confirm or deny it. “We will ask for it [in thecabinet]; we don’t have a problem,” he said, adding that such a request “isliberalization, not privatization.” 

He also said that a long-awaited policy statement that waspromised by the minister one year after he took office would soon be issued.The issue has become a major talking point for opponents of Nahas, includingthe TRA, who say that he has no policy and works according to his own whims.Nahas’s response has always been that the ministry’s policy is a matter of“practice not paper.”

Of course, Boustani is not an advisor to the newly appointedTelecommunications Minister Nicholas Sehnaoui, but the latter is widely seen asNahas’s protégé and has already stated that he will follow the same course asthe previous minister. If he adopts Nahas’s purported policy — which Boustaniconfirms is “almost done” — and makes it public, it would mean that the sectorwill have a general set of rules mandated by the ministry under Law 431 for thefirst time since former Minister Gebran Bassil was in office from 2008-09. Thiswould be significant, as it would provide an indication of the minister’sintentions vis-à-vis the many contentious issues in the sector.

Money to make

Bickering aside, the ministry has been pressing on with the3G project, as have both Alfa and mtc. The attempted takeover of the telecomequipment by Charbel Nahas in May can be seen as part of this aggressive pushby the ministry to make the 3G project a fact on the ground as quickly aspossible, before legal issues potentially complicate such plans.

According to Bahsoun and Tarabay, the equipment at Adlieh can technically be upgraded and used as part of the 3G rollout currently being undertaken by Huawei and mtc. Huawei won the contract to build the new network for Mobile Interim Company 2, the state-owned cellular telecom company managed by mtc. The Chinese company’s winning bid was valued at $25.6 million (not including a $2.7 million control center that will be built by Nokia), $10.6 million less than their counterpart Ericsson, who won the 3G contract at Mobile Interim Company 1, the state-owned cellular telecom company managed by Alfa. Both Bahsoun and Tarabay estimate the value of the third network’s equipment, once upgraded, to be around $10 million, (thus making up the difference between the two bids).

Both Alfa and mtc stand to benefit greatly from the 3G project, on top of the revenues they already garner from the talkative Lebanese who pay 58 percent in taxes on all telephone services. Zain’s mtc, for instance, has increased their net earnings from $22.1 million in 2008 to $46.1million under their current management contracts. In January, under the caretaker government, Minister Nahas renewed their contracts for a year.

“We extended 12 months when the minister thought that if these two companies are going to go into the 3G project they need security. They said they need more than two to three months to do such things,” said Boustani.

India-Middle East-Western Europe III

So with the two companies locked in a yearly contract, the Shura council ostensibly on the ministry’s side with respect to Law 431, the TRA hobbled and toothless and Tarabay’s cases needing some time to come to fruition, there seems to be little stopping the 3G project from materializing sometime around the end of the summer. Except for one hitch.

In 2007 Lebanon entered an international consortium to construct a submarine fiber-optic cable from Europe to India —

called the India-Middle East-Western Europe 3 (IMEWE3). Lebanon has already invested some $53 million into the construction of the underwater sea cable to carry traffic and unclog the international bottleneck Lebanon has long suffered.

“Capacity has to be met at all levels,” said Ghassan Hasbani, chief executive of the International Operations group of Saudi Telecom Company (STC), which is part of the consortium and is using the cable. “If you have a high speed local connection network and clogged capacity on your international gateway, then access to international content becomes very slow. These have to come together and the more connectivity there is in the country the better the prospects of lower pricing, of routing for traffic, and the better accessibility you have to the rest of the Internet globally.”

According to a source from the consortium, who asked for anonymity because he was not authorized to speak to the press, the contract between Lebanon and the consortium was signed by “OGERO Telecom”, which is not the official name of OGERO. At the time, the creation of Liban Telecom seemed imminent due to political consensus under the Saniora government and then Telecommunications Minister Marwan Hamade. Director General Youssef and the minister were ensconced on the same side of the political fence, enabling them to lay the groundwork for their political camp’s control of the sector. By December of last year the cable was ready to go and all other member countries of the consortium had started to use it. But by then the political stars of the telecommunications ministry were anything but aligned.

Engineers at Alfa have already confirmed that the 3G project will need IMEWE3 to function. Currently Lebanon’s international connection is through the Cadmos cable connecting the country to Cyprus, through which Boustani admitted a bottleneck would occur if there was a large amount of traffic as would be the case if 3G were introduced. The Cadmos cable also leaves Lebanon at the mercy of Cyprus for international bandwidth.  This is ominous as trouble has been brewing between the two countries over a maritime economic zone agreement between Cyprus and Israel.

Official data is not available, but most estimates are that Lebanon is currently using 2.5 gigabits (Gb) of legal bandwidth. However, Boustani says that the Cadmos cable has 40 Gb available for use after its recent upgrade. IMEWE3 has an initial 30 Gb and can be updated to 1.4 terabits. Thus, according to Hoballah, Lebanon is currently blocking 97 percent of its international bandwidth.

In order to activate the IMEWE3 cable it is necessary to log onto the consortium’s system with a secret code, which according to a consortium source is something only Youssef has the details of.  Again Youssef did not respond to repeated requests for comment.

“We paid a total of some $53 million and we are not using[it] because one person [Youssef] says ‘I don’t want to’ and the collective interest becomes subject to one person,” said the ITU’s Bahsoun.

According to Boustani, the ministry sent a commencement order to OGERO to oversee the project and has since asked for the ownership of the IMEWE3 to be transferred back to the ministry; this is what Youssef has refused to do. “There were some people who were supporting him politically. It used to be former Prime Minister Fouad Saniora but I don’t think today that Saniora will cover him. We hope that this government will lift this political cover so we can work,” he said.

What will also need to occur is the negotiation of an agreement with a European operator to purchase capacity in order to transfer information from Marseille, France (where the cable ends), so that traffic to and from the rest of the world via Europe can come into the cable. The going price for such traffic is about $2 per megabit per second (Mbps) per month, which means that 10Gb of capacity would cost some $20,000 per month. Given that the cellular network alone generates some $3 million each day in Lebanon, this is a relatively trifling sum.

If Lebanon wants full redundancy, in case the European side is cut, they can also negotiate the same contract in India, at the cable’s other pole. Such negotiations take about a month to complete but again this would need to go through Youssef’s office at the ministry as long as he maintains control of the post of director general. Nonetheless, Boustani says the ministry is in direct contact with France Telecom discussing such an agreement.  

Since it was Youssef who negotiated and carried out theIMEWE3 project with the consortium, when the telecommunications minister contacted its management committee to try and wrest control of the cable, the consortium became predictably confused. In the end they decided to take a “hands off” approach, according to the source. Of course the fog of Lebanese laws, their seemingly inconsistent application, and the autonomy of public institutions, especially OGERO, has not helped.

“Youssef sent a letter to the consortium telling them not to hand [it] over to the minister, and he does not have the right to do so,” said Boustani.  He would not comment on whether the ministry would take legal action as a result.

Even if the consortium is convinced to transfer control, the procedure stipulates that when OGERO hands control of the cable over to the ministry it initially does so through the Directorate of Operations and Maintenance, whose head stamps the handover and transfers the asset to the minister’s office. As Youssef himself holds that post, there seems to be scant chance of that happening.

According to Boustani, at the meeting of Arab telecommunications ministers held in Beirut last month the ministry received important political backing that he thinks will see the IMEWE3 handover soon, although this could not be independently verified.  This would not solve Lebanon’s Internet woes outright, however. “Even if IMEWE3 is activated, what use will it have if the ministry of telecommunications sells the international E1 line [2 Mbps] to [private sector] service providers for $3,000, while costs on them is less than $30?” asked Tarabay.

“The Internet cost to the consumer will remain high,” he said, unless the price of E1 falls and Internet Service Providers (ISPs) have access to the bandwidth. Lowering prices requires a decree to be issued by the cabinet because the sector is still not liberalized as per Law 431. Bandwidth will then need to be handed out by the ministry under the directorate general of operations and maintenance — again Youssef’s office.

But while Youssef may be a major roadblock to better Internet, other projects will also need to be completed to see the sector reach an acceptable global standard. According to Jean Gebran, projects director at Consolidated Engineering and Trading Company (CET), the Court of Accounts, the government’s public sector auditor, gave final approval in May to a project to construct the telecommunications ministry’s $40 million fiber-optic backbone throughout the country. CET and Alcatel will carry out the project, which has already begun in the South and the Bekaa valley. It is expected to take 16 to 24 months to complete, according to Gebran.

Furthermore, the ‘last mile’ connection from the fiber to homes will also need to be completed. But in the short-term, even without these projects, 3G service can technically run and allow speeds in the range of 21Mbps, compared to the current average of 0.1, even if this may kill private sector participation in the sector.

Time for action

With a new cabinet and a new minster that are both technically on the same side, there is some renewed hope amongst those in the sector that the coming period will be less fraught with conflict. A government of a single color may be more willing to see off some of the old opposition guard (starting with Youssef), but who they choose as a replacement is entirely another matter, and what the market will look like after any reshuffle of institutions, laws and people may just end up resulting in the same stagnation that has plagued the industry for over 15 years.

“It is very difficult if you ride a donkey to reach a high summit, even if you choose the direction,” said Bahsoun, referring to Lebanon’s telecom policy decision makers. “It’s impossible to reach it if you let the donkey choose the way. However, if you carry the donkey you will die. We are still carrying donkeys and paying for their food.”

But today one side of the political divide can no longer blame the other for obstructing policy implementation. “You don’t have two sides anymore so you don’t have anyone to delay,” said Boustani. Thus, there are no more excuses.

 

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Society

Is that a no. 9?

by Paul Cochrane
written by Paul Cochrane

Demand for cigars is so strong that the sector is inundated with counterfeits. An estimated two thirds of cigars smoked in Lebanon are “fake”, with a Honduran, Dominican or Nicaraguan stogie attempting to pass itself off as the crème de la crème of smokes, the Cuban cigar.  It is not easy to notice the difference until one sparks up, as the counterfeiters are pros, switching the paper ring around the cigar for a Cuban brand and using real or counterfeit boxes.

The situation has become such a concern to the legitimate sector that leading distributor, La Casa del Habano, owned by Phoenicia Trading, spent $50,000 this year on a billboard and media awareness campaign to inform consumers about fake cigars, particularly the Cohiba brand.

“The Cohiba Behike is the most expensive and the most popular right now,” said Wael Zeidan, executive manager at Phoenicia Trading. “We classify consumers of fakes into two segments — one, a consumer that knows it is a fake Cuban but smokes it to show off and doesn’t care. The second is a beginner that is easily bluffed, so we focus on him.”

To ensure that fake Cubans are not being put in boxes as the container empties — a classic scam to bump the price of a $2 cigar up to, say, $30 — Phoenicia has undercover employees that go in to check for fakes at its 300 wholesale customers. They are also opening a new outlet to better distribute Cubans from its current five stores.

While Honduras and the Dominican Republic do produce high quality cigars, primarily for the American market due to the trade embargo with Cuba since 1962, such brands are more expensive in Lebanon than Cuban cigars. Hence the fake Cubans are lower quality and normally machine made. One to watch out for is the Cohiba Siglo no.9, as real Cohibas only go up to size six. “It’s so big, it’s crazy,” said Zeidan.

Cohiba is the number one brand around the world, and in Lebanon this is no exception. Top sellers are the Robusto size (50-54 ring gauge), which is ideal for a half hour to one-hour smoke. Cigarillos — the small, lean cigar just a centimeter longer than a cigarette — are also becoming more popular, with Phoenicia Trading bringing out its own brand, Phoenicio.

“Demand for cigarillos is starting to grow, and women are increasingly smoking cigarillos,” said Zeidan. As cigars have a somewhat “old man” reputation, every month Phoenicia holds a breakfast cigar event for women in Ashrafieh, and has introduced cigarettes into Casa del Habano “to get youngsters into the shop and to find out about cigars,” said Zeidan. Pushing sales further are the cigar lounges at some of the capital’s leading hotels. At Le Gray, cigar nights are coupled with tastings of single malt whiskeys. And awareness of cigars is rising, said Paul Atallah, wine and bar manager at Le Gray.

“Some 80 percent of people know what they’re smoking. The rest, it’s just to show off that they are cigar smokers while swallowing the smoke,” he said. “But the culture has changed, and we’re seeing more people go for [brands] Partagas and Hoyo instead of Cohiba; this shows a change in awareness.” Most of the hotel’s cigar aficionados are guests from out of town but it is increasingly attracting non-guests to come to enjoy a cigar, sip an Armagnac and relax.

The economic downturn in the country has affected sales but the 400 percent rise in people smoking cigars since 1980 has provided a loyal customer base. “People get used to smoking cigars, and they continue to buy them,” said Zeidan. Indeed, big spenders are still out there. On a recent Saturday at La Casa del Habano in downtown, a customer bought a whopping five boxes of Cohibas as well as several packs of cigarillos.

 

 

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