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Banking & Finance

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by Executive Editors May 28, 2011
written by Executive Editors

ABL adjusts benchmark lending rates

The Association of Banks in Lebanon (ABL) has recommended an adjustment of local and foreign currency benchmark lending rates to its member banks. In a circular dated April 12, ABL urged Lebanese banks to lower the Beirut Reference Rate (BRR) on lending in Lebanese lira (LL) from 7.27 percent to 7.21 percent. At the same time, it recommended raising the BRR on US dollar (USD) lending to 4.79 percent from 4.72 percent. The BRR on USD lending replaced the London Interbank Offered rate (LIBOR) as the national reference rate for lending in foreign currency in 2009, after the ABL had judged the LIBOR to no longer reflect the cost of funding and lending in Lebanon. The new benchmarks were adopted on both USD and LL lending in March and May 2009, respectively. Both BRRs constitute the basis to calculate the Beirut Prime Lending rate. ABL’s latest recommendations are part of efforts by Banque du Liban, Lebanon’s central bank, and the association to stimulate lending in local currency. The proposed adjustments will be effective as of May 2011.

El Zein group acquires controlling stake in MedGulf

Lutfi El Zein (LFZ) Holding, the investment vehicle owned by the insurance sector personality of the same name, has acquired a 51 percent stake in Mediterranean and Gulf Insurance and Reinsurance Group (MedGulf Group) in a transaction valued at $400 million. El Zein, long-time chairman and chief executive officer of MedGulf Group and previous holder of a minor shareholding in the group, purchased the stake from Saudi Oger, the conglomerate owned by the family of Lebanese  caretaker Prime Minister Saad Hariri. The acquisition is the largest leveraged buy-out (LBO) in the Middle East since 2007 and the largest ever insurance LBO in the Middle East and North Africa region. A consortium of 16 banks arranged the deal, which includes a $175 million syndicated loan facility, part of a multi-tranche financing package. Lead arranger on the acquisition was Bank Audi; Deutsche Bank was the book runner. MedGulf Group, which is Lebanon based, is stakeholder in MedGulf Bahrain, which in turn owns 32 percent of MedGulf Saudi, a listed company.

Moody’s raises DP World debt to investment grade

Moody’s ratings agency raised the credit ratings of DP World, a leading global port operator and subsidiary of Dubai World, to investment grade with a stable outlook, citing the company’s rapid recovery in terms of operating performance in 2010 and into 2011. The upgrade to Ba1 from Baa3 includes DP World’s long-term foreign and domestic currency ratings, and the rating on its $1.5 billion Sukuk Islamic bond, due in 2017, with a total of $3.25 billion in debt affected. The positive rating action follows DP World’s late March announcement of 35 percent increase in 2010 net profits to $450 million, buoyed largely by strong volume growth in the second half of the year. According to Moody’s, the ratings are sustained by the company’s diversified global operations, expected growth in container traffic, as well as solid profitability and a strong liquidity profile.

Auction for Syria’s third mobile license postponed 

Syria has suspended plans to auction off the country’s third mobile license due to political tensions and changes in its government. Scheduled for April 17, the license auction could not proceed due to a change in the supervisory committee overseeing the auction after Syrian President Bashar al-Assad replaced his prime minister and cabinet and promised to introduce new electoral and media laws in response to popular revolts. By the time of the auction’s suspension, the number of bidders had already shrunk from five to two companies. In March, the United Arab Emirates’ mobile giant Etisalat pulled out of the bidding, stating disappointment with the stipulated 25 percent revenue share allocation to the Syrian government. Etisalat’s bid was estimated at $122 million. Also citing Syria’s revenue terms, potential bidders France Telecom and Turkcell quickly followed suit and dropped out. By early April, Qatar Telecom Company (Qtel) and Saudi Telecom Company (STC) were the only bidders left. At the time, both companies reconfirmed their bidding commitments. Following postponement of the auction, Qtel said it was still firmly interested in pursuing the license despite the delay.

Plastic payment

on the rise in LebanonFigures released by Banque du Liban (BDL), Lebanon’s central bank, for February 2011 show that payment cards are still gaining favor with Lebanese consumers. According to BDL, the number of payment cards in the country reached 1.69 million in February 2011, up by 7.3 percent from the same time last year. Of all plastic payment methods, credit cards experienced the highest year-on-year increase in February of 15.4 percent, now totaling 395,000, or around 23 percent of all issued cards. Prepaid and charge cards were up 9 percent from the year before, amounting to 10 percent of all payment cards. Debit cards still held 66 percent of the market — with 1.12 million in all — though they recorded just a 4.5 percent increase year-on-year. Point of sale purchases in February jumped 24 percent year-on-year.

Kafalat guarantees fall

Guarantees issued under the Lebanese Kafalat loan guarantee program dropped 23.21 percent year-on-year in first quarter of 2011. However, the average value per guarantee rose to $139,200, up 17.76 percent from an average of $118,200 a year earlier. The face value of guarantees issued in the first quarter of 2011 reached $41.9 million. Allocation of loans by sector saw the industrial sector in the lead with 39.87 percent of total guarantees. Loans to the agricultural sector, comprising 37.21 percent of total guarantees, took the biggest hit as they declined 41.97 percent from a year earlier. In contrast, tourism sector guarantees increased by a yearly 38.10 percent since end-March 2010, accounting for 19.27 percent of total guarantees. Geographic distribution of loans at the end of the first quarter showed that companies in Beirut and Mount Lebanon accounted for 50.5 percent of Kafalat loans. The Kafalat scheme has been noted internationally for its quality, including praise as best performing credit guarantee scheme in the Middle East and North Africa in a March 2011 report by the World Bank.

Lebanon’s life premiums up 15 percent in 2010

Total life insurance premiums in Lebanon increased 14.8 percent to $356.7 million in 2010, according to the annual insurance sector survey by Al Bayan magazine. The report said the 2010 growth was double the 7 percent increase achieved the previous year, adding that life insurance penetration in Lebanon stood at 0.9 percent of gross domestic product for 2010, at an insurance density of $89.2 per capita. Firms reporting higher life premiums vastly outnumbered losers as 27 out of 33 life providers posted gains, led by two firms claiming triple-digit gains. Market share concentration by Lebanon’s top five life insurers dropped by about five percentage points year-on-year to 59 percent in 2010, representing an aggregate value of life premiums of $210.3 million. Metlife ALICO ranked first in life premiums volume with $70.7 million, or 19 percent market share. The other companies in the top five for 2010 were Allianz SNA, Bancassurance, Arope and LIA with life premiums of $40.8 million, $37.5 million, $36.5 million and $24.8 million, respectively. Arabia Insurance reported the biggest growth, an 829 percent leap that propelled it from 15th to 7th place in one year. MedGulf saw the sharpest decline among the country’s top 10 insurers; its life premiums dropped 14.4 percent in 2010.

UAE IPOs rising, but slowly

In signs of life for Gulf Cooperation Council primary markets, three companies in April announced plans to sell shares through Initial Public Offerings (IPOs) in 2011. Between May 1 and May 11, United Arab Emirates’ Eshraq Properties will be offering 55 percent of the company in an IPO worth $220 million, the first IPO on a UAE exchange by a real estate developer since Dubai’s Deyaar in 2007. Funds raised are expected to finance Eshraq’s developments, including the $2 billion Marina Rise on Al Reem Island. After a dry spell of no public offerings in more than two years in the UAE, the Eshraq flotation will be the Abu Dhabi Exchange’s third IPO in 2011, following two insurance-related offerings in February and April. While financial observers judge the return of primary markets positively, international firms have warned recently that political risk could deter investors.  In the two other new IPO announcements, Saudi Integrated Telecommunication Company (ITC) received approval from the country’s Capital Market Authority to offer 35 percent of its shares between May 2 and 8 in a bid to raise $93 million. In Oman, electricity producer SMN Power Holding said it is planning a 35 percent offering on the Muscat Securities Market in 2011; further details on the offering’s size and timing were not available.

May 28, 2011 0 comments
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Iraq emerging

by Riad Al-Khouri May 28, 2011
written by Riad Al-Khouri

Eight years after the American-led invasion of Iraq, the country’s business climate seems to finally be showing some substantive improvements. Granted, the essential quality for the country to re-emerge as a target for investors is physical safety and stability, and on that score the numbers at first sight don’t appear encouraging; the level of violence in Iraq in March more than doubled compared with February. According to statistics from official Iraqi sources, in March, 136 civilians and 111 Iraqi police and soldiers died in attacks across the country; in Baghdad alone, 79 civilians and 31 security personnel were killed: more than twice the previous month’s total. The current level of violence is, however, still far below what Iraq saw during the sectarian warfare peak of 2006-2007; and a suggestion as to why the violence grew recently is that relaxed security forces, over-confident that the situation is calm, are making their searches less vigilant. Hopefully, neither this nonchalance nor the violence will become a trend.

Despite the security slips in Iraq of late, in recent months there have been rising numbers of international organizations and foreign businesses heading for the country’s capital to set up shop. Among the former is the United Nations Development Program for Iraq — previously based in Amman — which is due to begin relocation to Baghdad this month. And the lifting of a travel ban to Iraq on officials of the Paris-based Organization of Economic Co-operation and Development (OECD) is a further indication of a potential ‘Baghdad Spring.’ In the private sector, interest in Iraq on the part of big multinational banks is also growing: at an OECD workshop on Iraqi infrastructure development, held in Jordan in March, the Hong Kong and Shanghai Banking Corporation (HSBC) Group, Citibank and J.P. Morgan showed a keen interest in doing more business in Iraq. HSBC is already in the country through a majority holding in a local bank, and Citi has also been focusing more on Baghdad in the past few months.

Whatever political contortions and security issues may arise in Iraq, more business is certainly coming to the country. For example, the OECD event looked at vast projects to be undertaken, including an Iraqi Ministry of Agriculture plan to set up market complexes for the storage and distribution of farm produce. The recent announcement of an Islamic Development Bank grant for a feasibility study indicates that the project is under serious consideration.

Agriculture in particular could be the country’s new center of business attention (after the always-present focus on oil). Recovery in Iraq generally has not been matched by a revival of agriculture, once a mainstay of the country’s rural economy. Government wholesaling through the country’s creaky public distribution system is now increasingly recognized as problematic and technology, human capital and machinery in the sector lag behind as well. The scope for Iraq’s food production is enormous, and a focus on this kind of business would provide attractive solutions to internal migration, among other key issues plaguing the country.

Though a full recovery is not going to happen automatically or overnight, indications are now positive for the first time in decades — and certainly since the US invasion of Iraq in 2003 — that an improved business climate in the country is beginning to attract interest in non-oil investment, which in turn will help businesses to prosper and reinforce a positive cycle. Physical security is of course crucial, so before rushing to book a flight to Baghdad (where planes no longer land in a “corkscrew” pattern dictated by security concerns) one must remember that this is still no Disney Land. However, the recent economic and political momentum means that the risks of doing business in Iraq are slowly being outweighed by the potentially enormous benefits. Investment climate tipping-points are difficult to spot and to analyze but Baghdad is now heading in the right direction.

Riad al Khouri is dean of the business school at the Lebanese French University in Erbil, Iraq, and a senior economist at the William Davidson Institute in the Ross School of Business of the University of Michigan, Ann Arbor

May 28, 2011 0 comments
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The tale of two Ammans

by Peter Speetjens May 28, 2011
written by Peter Speetjens

Jordan is often said to be divided, both demographically and politically, between so-called “real” Jordanians and those of Palestinian descent. Yet that is hardly the only fault line lurking below the relative peace that has reigned over the Hashemite Kingdom in recent decades.

The capital, Amman, for example, is like an apple split into two unequal halves. West Amman is rich and spacious, dotted with grand villas complete with lavish lawns and pools. Here one finds French supermarket chains, luxury hotels and foreign embassies. Here live the diplomats, aid workers and just about every Jordanian who “made it”. Here when they eat, the choice is between sushi, steak or pizza.

East Amman, on the other hand, is a giant beehive of cheap concrete in desperate need of a lick of paint. Here live most of Amman’s 2.8 million people on a variety of bread and beans. The city’s east and west meet at the Husseini Mosque in downtown which, though not even 100 years old, is one of the oldest buildings in the young capital. The mosque was also the center of recent demonstrations that have attracted a few thousand people — and nearly as many policemen. Yet so far people have not taken the streets en masse.

“I have no time for politics. I have three kids to feed,” said a taxi driver, Ahmad. To do so, he works an average of 10 hours per day, 6 days a week. Every morning, he rents his yellow cab for JD 24 ($33.8) and buys petrol for around $22. On a good day he goes home with nearly $30 in profit, on a bad one with about $10. “You know the difference between Bahrain and Jordan?” he asked. “In Bahrain people have money but no freedom. In Jordan they have freedom but no money.” Still, as if to illustrate the limit of liberty à la Jordanienne, he insisted that his full name not be used.

Based on 2008 figures, the 2010 Jordan Poverty Report determined the national poverty level as below an income of $80 a month for an individual, and below an income of $5,473 annually for an average family of 5.7 members. The average annual family income in 2008 in Jordan was just $8,706. The report concluded that the number of people living in extreme poverty in 2008 increased by 0.3 percentage points to 13.3 percent, despite the fact that gross domestic product that year increased by no less than 7.6 percent, prompting economist Yusuf Mansur to conclude that “economic growth has nothing to do with poverty reduction.”

Purchasing power in the different spheres of spending becomes clear at a market in east Amman, where one Jordanian dinar (equal to $1.4) will buy four pairs of large underwear, six pairs of socks, 10 kiwis or 10 kitchen knives “made in China”; for the same amount in west Amman one can buy half a hamburger in an American fast food joint. The rift between east and west, rich and poor, is perhaps more profound than between “real” Jordanians and “Palestinian” Jordanians, given that these groups live on either side of the city’s socio-economic divide.

However, the divide between haves and have-nots is also linked between capital and country, said Nawaf Tell, head of the Center for Strategic Studies (CSS) at the Jordan University. A recent CSS study concluded that the tribal regions of Ma’an in the south and Mafraq in the north of Jordan are by far the country’s poorest. For people living there, west Amman is like another planet, with even poor east Amman a step up the social ladder. According to Tell, the government’s development policy and constant focus on Amman is only exacerbating the divisions; the provinces have seen hardly any development and the north and south threaten to become a “chain of ghost cities” as the poor continue to migrate to the capital city.

“Amman does not have the resources to absorb such growth,” he said. In this era of regional unrest, one can only wonder how long this increasingly lopsided tale of two Ammans can remain a stable one.

PETER SPEETJENS is a Beirut-based journalist

May 28, 2011 0 comments
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Economics & Policy

Rendez-vous with the rebellion

by Sam Tarling May 26, 2011
written by Sam Tarling

A Free Syrian Army fighter rests in a hill-top hideout near the Syrian city of Idlib [Photo: Executive/Sam Tarling]
The men are short of rocket propelled grenades, a key weapon in the FSA's arsenal [Photo: Executive/Sam Tarling]
FSA soldiers observe heavy fighting on a neighboring hilltop [Photo: Executive/Sam Tarling]
A member of the Free Syrian Army looks on as heavy fighting erupts on a hillside during an attack by his unit in the mountains of Idlib [Photo: Executive/Sam Tarling]
An FSA lieutenant assembles a remote trigger which will detonate the improvised explosive devices seen here [Photo: Executive/Sam Tarling]
An FSA fighter collects his weapons before heading out on an attack [Photo: Executive/Sam Tarling]
High demand and short supply has pushed prices for ammunition and weapons sky-high [Photo: Executive/Sam Tarling]
FSA soldiers go to great lengths to re-supply their base without being spotted by the Syrian Army [Photo: Executive/Sam Tarling]
An FSA fighter surveys his home in the town of Chatouriea [Photo: Executive/Sam Tarling]
An FSA soldier rests at a base near the Turkish border. Turkey, along with America, has recently pledged 'non-lethal' support for the Syrian opposition [Photo: Executive/Sam Tarling]

From the northern Syrian province of Idlib, a moment in the uprising
May 26, 2011 0 comments
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Press persevere in Yemen

by William Dubbs May 3, 2011
written by William Dubbs

Tens of thousands of protestors throughout Yemen continued to demand the fall of President Ali Abdullah Saleh last month. This is a testament to the fact that the president and his ruling clique seem to have decisively failed in their draconian clampdown on the media, a clear bid to “monopolize the message.”

Throughout the last bloody three months, which have seen more than 120 peaceful protestors slaughtered by security forces and their gun-slinging loyalists, journalism has also been a major victim. Dozens of incidents of beating, kidnapping and censoring local and foreign media have run in parallel to the regime’s erratic bloodletting. The youth protest movement has been quick to notice that their cause desperately depends on conveying the behavior of President Saleh in its full horror, and have made obvious common cause with international outlets.

“Al Jazeera,” painted in bright white and broad calligraphic strokes, is emblazoned on the pavement of Yemen’s “Change Square” outside Sanaa University. Meanwhile, the government’s partisans have taken a full account of their detractors in the media, and predictably, they are not content to disagree civilly.

“We caught an Al Jazeera camera crew try to sneak up to ourprotest,” Saleh-supporter Nabeel Majid, said casually. Then, with a proud, deep laugh he proclaimed: “We beat them and sent them running!” A particularly memorable placard at the same gathering consisted of the Israeli flag, with the Star of David beside the Al Jazeera logo, a complement to the president’s assertion that unrest in his country was engineered in “the control room in TelAviv.”

After nearly 33 years of divide-and-rule politics and endemic corruption, Saleh’s power-hold is now in doubt; the regime is utterly incapable of countenancing the truth and will stop at no lengths to keep it away from a people gaining a new consciousness. First, the government deported Al Jazeera journalists, then plain-clothes thugs broke into the station’s downtown Sanaa offices and looted its camera equipment. Baffled by how the network kept managing to spirit correspondents into the country despite an official ban, security forces finally super-glued the door of their officeshut.

But the powers that be in Yemen will need more than super-glue to put their broken government back together again. A massacre on March 18th of more than 50 demonstrators, many of them just young boys, shocked the nation and led to a wave of official resignations from which the President is still reeling. Perhaps not a coincidence, the deportation of six foreign journalists, working for major outlets such as The Wall Street Journal and Time magazine, predated the atrocity by a matter of only a few days.

Poor Yemen, known in happier times as “Arabia Felix,” has never been a media darling.  Even in these heady days, the most revolutionary and hopeful in its millennia-old history of civilization, other current events in the Arab Spring, notably Libya and Syria, are stealing the headlines. And that’s just the way the president likes it. The media is something to be courted and coaxed, not welcomed and let free to do its work. Journalist visas, now non-existent, were granted with gusto by the government when Al Qaeda was the scoop and panicked western audiences promised dividends in military aid and development assistance.

The staff of CBS news documentary “60 Minutes” was even granted exclusive access to the president’s nephew, General Yahya Saleh, to discuss the much-exaggerated threat of terrorism. Now that the Central Security Forces, which Yahya commands, are busy shooting and tear-gassing protestors throughout Yemen, the General has suddenly become camera shy. Meanwhile, the many government news outlets are engaged in a race to the bottom. “Al Yemen” TV describes the perpetrators of March’s massacre as merely annoyed neighbors. “Nabanews” trumpets pictures of young men and veiled women together at protests as “proof” of shameful and impious “mixing” of the sexes.

A small group of international journalists, many of them poorly paid young freelancers, remain to document the struggle for the future of 24-million Yemenis to the outside world. But most promisingly, a whole generation has finally been inspired to unleash their creative potential and, for once, seize the means of defining their own identity. Countless young Yemenis now dedicate themselves to citizen journalism, blogging, and “facebooking” the progress of their movement, confident that the day the government can no longer dictate their lives is near.

William Dubbs is the pseudonym of a journalist based in Sanaa

 

 

May 3, 2011 0 comments
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Economics & Policy

Transparency: lost in revolt

by Sarah Lynch May 3, 2011
written by Sarah Lynch

 More than one million barrels of rebel-controlled crude oilleft the Libyan city of Tobruk on a tanker headed to Asia in early April. Libya’s National Transitional Council (NTC), the Libyan rebel’s interim government, received $129 million for the sale, according to the newly appointed head of Libya’s National Oil Corporation (LNOC), Wahid Bugaighis.

This was the council’s first, and at the time of writing, only sale of oil as the nation’s civil war drags on. The deal reached between the rebel government and Qatar stipulates that Qatar will market rebel-controlled oil abroad; the first shipment was bought by the Swiss company Vitol, one of the world’s largest independent energy traders.

But weeks after the shipment left from the rebel-held city, home to the only functioning export terminal in the oppositions’ hands, only afew knew where, how and when the money was (or will be) spent. The lack of transparency surrounding the $129 million deal leaves room for exactly the sort of corruption endemic within Libyan leader Colonel Muammar Qadhafi’s regime that the rebels seek to overthrow.

Roughly three weeks after the start of the Libyan uprising, the Arabian Gulf Oil Company, or Agoco, owned entirely by Libya’s National Oil Company, announced its support for the rebels. Under the umbrella of the NTC, the company is supplying oil to the interim government so as to carry out its deal with Qatar.

“For me, as of now, there is no transparency,” says Abdeljalil Mayouf, who manages the information department at Agoco. “Normally we have a big financing department, and there are many sections within this finance department that deal with our money, our budget. But as of now, I don’t have any information about this money.”

At an April 10 meeting in the de facto rebel capital of Benghazi, Ali Tarhouni, the opposition government’s finance minister, told Executive that the millions of dollars had not yet been allocated.

“But most of it is going to be for food and medicine and fuel — benzene, diesel, derivatives to fuel the power stations, fuel for automobiles,” he said.

Tarhouni then said a bank account had been set up in Qatar to hold the cash, but when asked about who has access to the account, Tarhouni walked out of the interview, citing that he was too busy to talk. He refused multiple subsequent requests for a follow-up interview and provided no additional reasoning for his refusal to comment.

LNOC’s Bugaighis says the money received in exchange for the oil shipment has already been spent. For weeks previous Qatar had already been shipping gasoline and supplies to rebel-controlled Libya, with the NTC claiming that payments for such items were deferred until a later date. Others suggest, however, that rebel’s $129 million in oil revenue went to cover some of the cost of these shipments. “It was spent in two days,” said Bugaighis. “Take a cargo of gasoline – 25,000 metric tons; that’s $75 million, so the money doesn’t last long.” He did not provide specific details about the allocation, however.

A right to information

Peter Bouckaert of Human Rights Watch (HRW) attributes one of the reasons for the lack of transparency to the council’s fear that Qadhafi will pressure foreign countries and companies not to deal with the transitional government. It’s an assessment reflected by Bugaighis. “We don’t need transparency,” Bugaighis said. “We don’t need to tell Qadhafi what we are doing everyday. And if the world knows or not — it really doesn’t change much.”

But many people argue that transparency is vital; authorities and civilians alike are aware of the potential for corruption. “We are afraid of transparency all the time,” Agoco’s  Mayouf said. “In the third world, there is none.”

 

For more than four decades, hydrocarbon revenues have fallendeep into the pockets of Qadhafi and his inner circle. Many Libyans feelembittered that their country’s natural wealth has not been invested in itspeople, says analyst Shadi Hamid of the Brookings Institute in Doha. He notesthat this gap between the people and the government was one of the factors thatinitially contributed to the uprising.

“Libya’s people have a right to information about a majornational resource,” HRW said in an April 5 report. The organization insiststhat transparency is crucial now, and should not be postponed for the future.

“The vast sums of revenue involved, if misappropriated,could lead to the entrenchment of a new, corrupt elite with the funds availableto put in place a new era of repression,” said Bouckaert. The human rights watchdog urges countries and companies entering into agreements with the temporary government to insist on public transparency, independent auditing and accounting for funds.

Some people in, or close to, the council are not concerned about the lack of transparency, saying that systems to prevent corruption are put in place. “We know the money is going in and out,” Bugaighis said.“Everything is accounted for in terms of invoices. Everything is documented.”  He claimed that no more than 10 people are involved in overseeing the transactions, and that multiple signatures are needed on any transaction made. When Qadhafi is ousted, these documents will be presented to the authorities in Libya and to those in Qatar, he said.

But the NTC vows that when, or if, a temporary government is created the council itself will dissolve. If the current authorities in eastern Libya are not in power following Qadhafi’s ouster, it is unclear how these authorities will be held accountable for any transactions made under their temporary supervision.

Vulnerable to abuse

“It is exactly at this moment of institutional weakness that the danger of ‘capture’ of oil revenues by ruthless elements bent on self-enrichment is greatest,” HRW’s Bouckaert says.

Some argue that “institutional weakness” goes well beyond the lack of transparency. Before NTC members were thrust to the forefront of national and international politics, they were professors, judges, doctors and lawyers. As there has been a lack of participatory state institutions and independent civil society in Libya for more than four decades, some are concerned that the lack of experience among the new governing members could be a threat in the years to come.

Still, amongst Libyans in rebel-liberated areas, there generally seems to be faith in the National Council and its ability to handle transactions responsibly; Bouckaert says the council has committed itself to ensuring that oil sales will be transparent in the future and that the oil revenues would be for the general benefit of Libyans. LNOC’s Bugaighis and Mayouf of Agoco said that, at the time of writing, no oil was being produced in Eastern Libya due to attacks on oil fields by Qadhafi forces. One field, called Messla, was bombarded in attacks on April 4, Mayouf said, and electricity to the nearby field of Sarir was cut off. But according to energy analyst and petroleum engineer Sherif el-Helwa, 20,000 barrels could be extracted daily as a result of natural flow from oil wells.

“I’m optimistic that [the National Council] will be honest, but I don’t know,” said Agoco’s Mayouf. “I have confidence in the young people. They are paying with their lives to liberate Libya. And it wouldn’t be fair if people who are opportunistic take advantage of the situation. This is the future of Libya.”

May 3, 2011 0 comments
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The army and the people

by Jonathan Wright May 3, 2011
written by Jonathan Wright

The shotgun marriage between the Egyptian people and the ruling military council has not been an easy ride. After many decades on the sidelines of traditional politics, the army has had trouble adapting to the demands of an open, modern government. It has acted slowly, mysteriously and at times in ways reminiscent of Mubarak’s brutal police force. Its public discourse has been aloof, cryptic and often illiberal.

Flying in the face of the political realities of the new Egypt it has issued decrees asserting a right to control all information published about the armed forces, and on April 10 a military court jailed a blogger for the first time, on charges of insulting the military establishment and spreading false information. Maikel Nabil Sanad, 25, whose gripe with the military predates the uprising against Mubarak, now faces a three-year prison sentence. Human rights organizations are also unhappy, citing the use of military courts for civilians and the abuse of detainees by military police, including compulsory physical inspections or ‘virginity tests’ for young female protesters.

The people, on the other hand, have behaved like the obedient but demanding bride who discovers that marriage to a powerful man is not always a bed of roses. “The people and the army, hand in hand” was one of the defining slogans of the Egyptian revolution. But many of them knew they were allying themselves with a great unknown whose agenda was opaque. Their only recourse has been to come back to Tahrir Square in central Cairo and bellow their demands loud enough for the army command in the distant suburb of Heliopolis to hear them. For the moment the trick seems to have worked.

Since a mass rally on April 8, the largest since Mubarak lost power and retired to the Red Sea resort of Sharm el-Sheikh, the authorities have taken to heart many of the revolution’s demands. Mubarak was interrogated and will be detained when he is well enough to leave the hospital. His sons, Alaa and Gamal, have joined the group of disgraced ministers holed up in Toura prison awaiting further questioning and possible trial, either for inciting the murder of protesters or for a variety of crimes of financial corruption, such as selling off state land to their friends and cronies at rock-bottom prices. Three other key officials of the Mubarak era — Shoura Council President Safwat el-Sherif, parliamentary speaker Fathi Sorour and presidential chief of staff Zakaria Azmi — have finally joined the detainees in recent weeks. A Cairo court gave the people a bonus prize on April 16 when it dissolved Mubarak’s National Democratic Party — the dominant political force  since the late 1970s — and assigned all the party’s assets to the state.

The army’s performance since Mubarak’s ouster has been a curious mixture — hypersensitivity about criticism and a conservative ‘law and order’ mindset, coupled with belated political pragmatism and constant reassurances that the generals do not want to stay in power any longer than is necessary. When the time comes for presidential elections, the armed forces will not nominate their own candidate or support anyone else for the top post, the military council says. So far the signs are that the generals are sincere and that their greatest desire is to go back to their comfortable and detached lifestyle as honored defenders of a country that has not fought a serious war in 38 years. Some accounts of the army’s sideline in lucrative economic and industrial enterprises have been ludicrously exaggerated, with wild estimates that it controls up to 40 percent of the national economy, for example. But army officers under Mubarak were definitely a privileged elite with access to well-equipped hospitals, sports clubs and subsidized holiday villas on the sea. Retired officers, as in many countries, could look forward to lucrative sinecures in state companies or in private firms that valued their contacts. They also received shiny new weapons regularly, thanks to the $1.3 billion a year in military aid from the United States.

A question mark hangs over the future of that aid when the new Egypt starts to formulate a foreign policy and takes decisions on how to treat Israel and Gaza. If the people can reassure the army on those two points, by the choices they make in parliamentary elections scheduled for September, the army and the people — at least those that didn’t suffer detention and molestation by the military — might be able to arrange an amicable divorce and go their respective ways with fond memories of their eight-month romance.    

Jonathan Wright is managing editor of Arab Media and Society

May 3, 2011 0 comments
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Economics & Policy

Summer still to shine

by Karah Byrns May 3, 2011
written by Karah Byrns

 

In 2010, the travel and tourism sector represented 22 percent of Lebanon’s gross domestic product, according to tourism minister Fadi Abboud, with the country witnessing an increase in tourist arrivals of approximately 17.2 percent on the previous year. While 2011 began with high hopes for tourism, regional unrest and internal turmoil has quickly unraveled that spirit of optimism and confidence. As one Arab regime after another came tumbling down or brutally clung to power, and as the Lebanese government collapsed and pushed the nation yet again into a period of uncertainty, bleak predictions for the tourism sector began to circulate.

In January 2011 the first hit came when STR Global announced that hotel occupancy rates in Beirut had hit 41.6 percent, a 20.9 percent drop on 2010 rates. Drops in tourist arrivals and airport traffic further fueled fears, along with the kidnapping of seven Estonians in an isolated incident in the Bekaa valley and stern travel warnings released by the United States, Bahrain and Saudi Arabia. As unrest continues to boil in Libya, Yemen, Bahrain and now neighboring Syria, the question remains as to what type of summer tourism Lebanon can realistically expect.

Of all the events in the region, it is the unrest in Syria that will affect Lebanon’s tourism industry the most. Many Western tour operators group Lebanon and Syria together as part of a Middle Eastern package; if travel to Syria is impossible then the Lebanese leg of the tour in most cases is also dropped. Western tourists also have a tendency to group countries in the Middle East together conceptually and may not be willing to vacation anywhere in the vicinity of what they perceive to be a ‘hot zone.’

Regionally, land travel to Lebanon through Syria will be cut off, which will lead to a decrease in tourists coming by road, particularly from Jordan and Iran. Last year, Jordanians were the top nationality to visit Lebanon. According to Pierre Achkar, president of the Federation for Tourism and the Hotel Association in Lebanon, most of these tourists were middle-class Jordanians arriving by car. If the security situation in Syria continues to deteriorate during the summer, then the number of Jordanian tourists will inevitably fall off compared to previous years. The number of weekend visitors from Syria will also come to a standstill.

Given the political complexities facing Egypt, the 60,000 Egyptian tourists that came to Lebanon last year may also be deterred. As for the Gulf tourists, Achkar predicts that they will continue to be hesitant, “but the moment we have a government in Lebanon — any government — they will comeback,” he said.

Although the figures released since the beginning of the year have been consistently negative, Director General of the Ministry of Tourism Nada Sardouk said, “Lebanon has seen a small drop compared to other countries in the region.” She also suggested that there is a need to place these numbers into perspective.

In an interview with Executive, Sardouk pointed out that while the number of tourists arriving in Lebanon in the first quarter of 2011(340,700) dropped by 13.36 percent compared to the first quarter of 2010 (393,200), the number arriving this year is still significantly higher than it was during the first quarter of 2009 (297,700), which at the time was considered to be a record year for Lebanese tourism.

The same logic can be applied to Rafiq Hariri International Airport figures, which registered airport passengers (arrivals, departures and transits) of 1.02 million for the first quarter of 2011, 1.07 million for the first quarter of 2010 and just 886,700 for the first quarter of 2009. While there has thus far been a year-on-year decrease of 4.5 percent in airport passengers, 2011 still reflects a significant increase over the last two few years.

While regional circumstances and internal instability have caused a slump, figures could be considerably worse than they have been thus far, given the serious challenges facing the country and the region. There is a definite slowdown in the growth of the tourism sector, but there are also constructive forces that are tempering the hit. One of these appears to be investment in the hospitality sector.

Private sector investors are largely adopting a positive stance; summer 2011 will see the opening of a slew of new restaurants, nightclubs, pubs and even an extreme sports theme park. Some of the biggest names in hospitality will be re-opening with new indoor and outdoor spaces, and an enticing set of trade shows, cultural performances and concerts scheduled.

Massive investments are also underway; the Phoenicia InterContinental Hotel invested $20 million for its 50th anniversary renovations, including re-designing its Eau De Vie and Mosaic restaurants, the Cascade tea lounge and opening the Whisky Mist nightclub; Edde Sands invested a reported $1.5 million in refurbishing its rooftop restaurant, an Italian seafood restaurant in the Byblos port and the first Beirut branch of the eCafe in the historic district of Sursock; Movenpick renovated its rooms and is opening a fusion ‘chill-out’ lounge, and Le Gray’s investments included a new Asian restaurant, conference facilities, additional suites, a new roof terrace lounge and a second bar targeting the young, cosmopolitan crowd.

Beyond the luxury hotel chains in Beirut, food and beverage concept creation and management company Add Mind, which manages trendy nightspots such as White, Rococo and Gem, will also be investing heavily in the summer. The company has scheduled openings for five new venues between May and June, from Batroun to Beirut to Damour. “No one knows what can happen in Lebanon but hopefully we will have a good summer,” said Add Mind Chief Executive Officer Tony Haber. “If nothing happens internally, this could be one of our best summers ever.”

Virgin Megastore Sales Director Abdo Husseiny, who is responsible for ticketing, also expressed high expectations for 2011, which he anticipates will see better sales than 2009. “We are expecting the best summer so far,” he said, citing projections of between $10 million and $12 million in ticket sales revenue. “We are planning even more events this summer than we did in 2009 and 2010,” he added. Who will enjoy the new facilities and events, however, is another question entirely, as convincing Western tourists to venture to the Middle East will be difficult, while Arab tourists will be both wary of regional travel and largely returning home for the full month of August, as Ramadan this year will fall in the middle of the busiest part of the summer.

Lebanese tourists drive the market

In reality, the notion that more than 1.5 million foreign tourists per year have been driving the tourism and hospitality sector in Lebanon is only partially true. Data gathered by the Ministry of Tourism only classifies visitors according to the passport they use to enter the country, which means that many diaspora Lebanese returning as tourists for the summer are not counted in the figures.

“Things aren’t looking good for non-Lebanese tourists this summer, but we can still expect a large number of Lebanese expats,” said Nassib Ghobril, head economist of Byblos Bank. “We should also see decent spending levels from this group, as they are the ones who truly move the tourism sector; they are the biggest group in spending. Maybe hotels will suffer, but that’s it,” he said.

Ghobril’s logic perhaps explains the heavy investments hotels are making to revamp or add venues that can benefit from local and summer expat crowds, and not just on foreign tourists occupying rooms. While many hotels may see a drop, it could well be a smaller one than expected given that 2010 Ministry of Tourism statistics indicate that the top nationality staying in hotels and furnished apartments were Lebanese.

Lebanese nationals accounted for 19.5 percent of the total number of clients for 2010, followed most closely by Saudi nationals, (12.3percent), Jordanians (7.1 percent), Iraqis (6.5 percent) and Syrians (5.5percent).

In the food and beverage sector, Haber confirmed that “70 percent of ourbusiness depends on local Lebanese, and nearly 30 percent depends on Lebanese expats visiting Lebanon.” Husseiny echoed similar expectations regarding entertainment sales, counting on foreign tourists to make up only about 5 percent of total ticket sales, with the vast majority allocated between local Lebanese (70 percent) and expatriates (25 percent).“The Lebanese are used to ups and downs, even the ones who are coming to visit from abroad,” Husseiny said. “They came when things were happening that were far worse than what we are experiencing now; they will come again this year.”

According to Nizar Khoury, head of the commercial department for Middle East Airlines, as of today, overall flights for the summer into Lebanon show no growth, but are equivalent to last year’s figures. For summer bookings, however, flights coming in from the region and the Gulf in particular are less full than they were last year, showing what Khoury referred to as “a substantial decrease,” while summer reservations on European routes have picked up, showing an estimated 5 percent increase from last year.

Given Western wariness toward the region at present, this pickup is likely due to an increase in the number of expatriates visiting Lebanon, not Western tourists. “Lebanon will fare better than other countries in the region in terms of tourism coming from abroad due to our expats,”Ghobril said. “Lebanon has the advantage of having expats who return frequently for a holiday, and Lebanese expats are going to float this season.”

Looking closer to home

While the tourism sector in Lebanon for the last several years has been driven by high-spending tourists, especially those from the Gulf, Lebanese Economic Association Founder and President Jad Chaaban suggested that it is time for a change in direction.

“This model drove growth for the last few years but this type of tourism was hit hard by the financial crisis and now the regional situation,” he said. “This model has proven too risky because it focuses on only one type of tourist, and I think now we can see that it’s time to diversify.”

According to Chaaban, the focus on big spenders from the Gulf led to unsustainable growth centering on investment in Greater Beirut without the creation of a significant number of jobs throughout the country. Leveraging other assets to appeal to different types of tourists is part of a diversification strategy that Chaaban suggests to mitigate risks, beginning with tapping the local population.

“Internal tourism is a huge, growing market,” Chaaban said. Although internal tourism is something that remains off the radar for the Ministry of Tourism, he explained that Lebanese in general enjoy day or weekend trips and would do so more often if more comfortable and affordable facilities were available for overnight stays. “Due to the increased price of housing, not all Lebanese families have a second residence anymore and many want to escape the city for a weekend to relax and enjoy a change in scenery,” he said.

Lebanese still constitute the largest numbers staying in hotels and chalets, and according to Ghobril, “these are not just expats, but Lebanese residing here who decide to go for a local holiday outside of the city.” While there are no figures quantifying the economic effects of local tourism, Ghobril insisted that “local tourism is underestimated for the value it generates for the economy.”

The recently opened five-star boutique hotel Byblos Sur Mercan bear witness to the importance of internal Lebanese tourism. The hotel is expecting high summer occupancy rates this year between 60 and 85 percent, but estimates that 60 percent of its guests this summer will be a mix of local residents and Lebanese expatriates. “Locals come to Byblos as an escape away from the busy capital,” said Sales and Marketing Manager Mona Mounzer. Given the rate at which Byblos is evolving as a relaxing destination for boutique shopping, fine dining and cultural activities, a cosmopolitan local following is sure to emerge.

Developing internal tourism not only makes the country more attractive for its residents, but also creates a form of sustainable growth that promotes rural economic development by bringing more visitors to areas outside of Beirut. A fresh example of this model at work is in Batroun, which is preparing for a booming summer season. Local beach resort Bonita Bay is being fully renovated and upgraded with a new restaurant, primping itself to be a more upscale, trendy resort venue of the north. With a 700-person capacity,it is aiming to lure more visitors to the area. “We are going to be re-branding Bonita Bay with a new logo and mood, and we will be advertising it all over Lebanon,” said Operations Manager Shadi Ayoub.

Not far from the beach resort is another newcomer to Batroun, a spacious restaurant and event venue called Batrouniyat, which was fashioned from a historic home more than 300 years old. The restaurant relies on nearby villages to supply its organic ingredients and traditional Lebanese preserves, and in so doing directly supports many farmers in the caza, or local district.

“No one was supporting the growth of this area, so we decided to do something to help,” said manager Charbel Faour. The venue also occasionally doubles as an exhibition hall for local artists, in addition to being a charming restaurant decorated with traditional furniture, candles and mosaic tile floors. Locals told Executive that it has already reinvigorated the town in the six months since its opening last winter, and Faour confirmed that it brings in approximately 600 people per Sunday for brunch. “Today, 95 percent of our brunch customers come from outside the area of Batroun,” he said. “I even have customers who come from as far as Saida.”

In the south, the Rest House Tyre and Al Fanar Hotel in Tyre enjoy relatively high summer occupancy rates but cater primarily to local tourists, as well as international workers with the United Nations who are stationed near the border. In the Bekaa valley, the West Bekaa Country Club also provides primarily local Lebanese guests with a comfortable place to stay for the night. However, according to Chaaban, there is plenty of room for more hotels. “The Dhiafee program [a United States Agency for International Development project] set up a chain of ecotourism destinations in Lebanon to create an interesting network of places to visit on a circuit… where visitors can stay overnight in quaint cottages and bed and breakfasts,” he said. “This is a growing market with a lot of potential that should not be overlooked.”

Even Casino du Liban thrives on local tourism. Ninety percent of revenues for Casino Du Liban are estimated to come from gambling activities, and the majority of players come from all over Lebanon. Marketing Manager Lara Hafez estimated that locals account for 64 percent of players, 26 percent are regional visitors and the rest from various international destinations.

“I think that the majority of the 2 million tourists we saw last summer were of Lebanese origin,” said Chaaban. “Relying on wealthy expats and Arabs… is a short-sighted way of developing our tourism sector.”

While expats may conceal the drop in tourism this season, continuing to depend on them will not help the tourism sector to move toward its full potential in the future. To develop foreign tourism will require a strategy that caters to different types of visitors from all over the world. By diversifying the sources of tourism, the country will not only shield itself from risk, but also maximize long-term return.

Where have all the Arabs gone?

While Arab tourists accounted for 42 percent of last year’s foreign tourists, 2011 is due to see a drop in this number, with land travel via Syria compromised as overall regional security deteriorates. Joe Yacoub,Country Manager of international VAT refund operator Global Blue told Executive that “tourist expenditures in Lebanon are stagnant,” explaining that there should have been an increase compared to 2010.

“The unrest in some Middle Eastern countries did have a negative impact on the overall tourist spending,” he said, as residents of Arab countries outside of Lebanon represented 52 percent of the total spending in the first quarter of 2011. “The unrest in Syria… affected total in-store sales coming from Syrian tourists, while incidents near the border with Jordan are affecting incoming tourists from Jordan as well,” he said. According to Yacoub, there was an 18 percent decrease in Jordanian spending in the first quarter of2011.

Despite the fact that the greatest amount of tourist dollars spent in Lebanon came from Saudi Arabia (18 percent) and the United Arab Emirates (12 percent) during the first two months of 2011, according to Global Blue calculations, it is not clear how much of this spending is from Lebanese expatriates and how much is from foreign nationals, as calculations are based on the country of residence and not nationality.

“It is worth mentioning that Lebanese expatriates are considered tourists in relation to the VAT refund scheme,” Yacoub said, emphasizing that many refunds typically attributed to Europe, the Americas and Australia are actually for Lebanese expatriates. Regardless of whether the majority of spending from the Gulf is coming from Lebanese expatriates or foreign nationals, and in spite of the regional unrest, relying too heavily on tourists from the Gulf can no longer fully sustain Lebanon’s tourism economy, as travel trends suggest that Gulf travelers are exploring different destinations and traveling less frequently to Lebanon.

“We have taken Arab tourists for granted in Lebanon,” said Ghobril, who underlined that there is now more competition on the market for Arab tourist dollars from Europe, Turkey and East Asia, which recently launched an aggressive marketing campaign targeting Gulf countries. “We should not underestimate the competition outside the region,” he said. “Turkey has already benefited significantly from the situation in the Middle East.”

With more competition vying for wealthy Arab tourists and Ramadan due in the middle of the summer for the next several years, a new strategy for keeping the Lebanese tourism sector going strong is in order.Signs of a strategic shift are already visible in the hospitality sector,where, in anticipation of Ramadan breaking the season in half, hotels have been actively promoting Lebanon as a destination for leisure and business tocountries outside of the region.

“We are trying to replace the Gulf tourists who will not becoming during Ramadan with tourists from Turkey, Russia and Eastern Europe, as they are not as afraid to come to Lebanon as Europeans and Americans,” said Achkar, referring to the strategy of his own two hotels, the Printania and theMonroe Hotel.

Le Gray, on the other hand, is striving to recuperate the losses from Middle Eastern countries with a steady flow of European and American tourists throughout the month of Ramadan. This year, the hotel invested significantly in promoting Lebanon as a destination through international exhibitions and sales trips in the Middle East, Europe and the United States. “We are initiating strategies to highlight new angles to promote Lebanon as a destination, mainly through art and culture,” said Public Relations Manager Rita Saad.

Even Casino du Liban has begun looking further afield for foreign players. Often viewed as an indicator of high-end tourism, the casino is expecting a good season across all of its business units, with gaming rooms expected to work at full capacity, as well as its restaurants, entertainment venues and banqueting facilities. However, according to Hafez, it is looking to diversify beyond the Arab market to make up its share of international players, and is investing in a strategy to target players from neighboring countries like Greece and Cyprus, as well as Turkey and Russia, where recent casino closures have left players looking abroad for more exciting options.

China is also on the list of international target markets.“This market holds huge potential, with a rising interest of Chinese gamblers to come to the Middle East. But we still need a few more years to start witnessing a regular flow of clients from the Far East,” said Hafez.

The Ministry of Tourism has also been very active, participating in international fairs and exhibitions in Russia, Europe and Turkey in addition to the Arab world. In Europe, the Ministry of Tourism is targeting France, the United Kingdom, Germany, Spain and Italy, and has launched a new website for leisure tourism for the French market.

“The Ministry of Tourism is very interested in Europe, but different countries require a different approach,” said Serge Akl, director of the Tourism Office of Lebanon in Paris, France, which is Lebanon’s only tourism office abroad. Country-specific websites are set to follow the French site. “The last step will be the Americas, as these markets will be challenging to reach because there are so many negative images to change,” he said. Back in Beirut, the Ministry of Tourism is also working to develop relations with the Iranian embassy to support more visits from Iranians, who represented 80 percent of non-Arab Asian arrivals in the first quarter of 2011, mainly because of the Persian Noruz holiday. But as 75 percent of these tourists came by road through Syria, further travel plans may well be on hold until the dust of the uprising settles.

More to offer than “beach and booze”

As the market for tourism becomes more competitive worldwide, a well-rounded tourism development strategy for Lebanon will need to rely on promoting the country by focusing on the diversity that differentiate sit from other places around the globe. Marketing Lebanon as a destination for sea, ski and nightlife not only overlooks some of the country’s greatest assets to attract tourists, but also limits the scope of its attractiveness to visitors from the Arab world.

It is unlikely European or American tourists will journey to Lebanon specifically for these things, given that they have other options for sea, ski, and nightlife far closer to home, most likely at cheaper prices. WhileLebanon is a glamorous destination for luxury shopping and services, fine dining, gambling and nightlife, focusing only on these aspects of tourism limits the growth of the sector and the country’s ability to attract more tourists from all around the world. In a country that possesses five ancient UNESCO World Heritage sites and a biodiversity of more than 1,500 species of flowers, plants and trees in just a 10,400 square kilometer space, there is much more to the country than is currently being promoted.

“When looking at the Western market, the target is an educated tourist,” said Akl. “An intellectual person wants to visit Lebanon as a destination of discovery where they can experience something enriching — from history, nature and architecture to a vibrant scene of contemporary art, cinema and design… in addition to our state of the art dining and nightlife,” he said.“It’s about marketing l’art de vivre that Lebanon is famous for, together with its rich heritage and fun-loving, hospitable people.”

When Akl organizes press trips for the French media, he notes that basic sun and sea tourism interests very few. “They become interested when I begin showing them that Lebanon has something more unique and interesting to offer,” he said.

In a special Milan Design Week 2011 edition of Elle Decor Italia, Beirut received a 10-page section featuring the capital not only as a party town but also as a sophisticated cultural destination.

“This type of exposure changes European views aboutLebanon,” Akl said. “Expressing the post-civil war era through things like cinema, music and art shows that Lebanon has something pertinent and intelligent to say to the world, and people want to come and experience that.”

Cultural tourism can also be highly lucrative. From July 13 to 16 this summer, art collectors from all over the world will be congregating in Beirut to experience the city as a cultural destination when they come to visit the first edition of the Menasart Fair, the first international art fair to be completely dedicated to contemporary art from the Middle East, North Africa and Southeast Asia. In the event’s regular newsletter, fair manager Laure d’Hauteville announced on March 24 that “the present stable situation of Lebanon offers a stunning contrast with its surrounding environment.”

Ecotourism could also be an attractive resource for Lebanon, given its abundance of natural treasures — the Qadisha Valley, the Cedar Reserves, the Jeita Grotto, the Balaa sinkhole, and the entire stretch of the Lebanese Mountain Trail (LMT), to name a few.

“Ecotourism is gaining market share,” said Karim el-Jisr, founding member of the LMT, which opened in 2006. “Ecotourism can easily cater to up to 100,000 tourists per year provided that the sector is better organized and there is a commitment to nature conservation,” he said. Last year the LMT welcomed 30,000 visitors and this year it anticipates approximately 50,000 visitors despite regional turmoil, as “ecotourism is more flexible than conventional tourism,” he said.

The LMT also helps to sustain businesses in villages alongthe trail, providing a much-needed injection of economic activity to the ruralareas through which it passes.

“Ecotourism is undervalued in Lebanon,” said Hana Hibri, author of the book “A Million Steps”, which recounts her 30-day journey along the LMT in 2009. “There are many misconceptions about ecotourism. It’s not only for low-budget travelers and it’s not competing with traditional hotel tourism.If anything, it complements it,” she said. If hotels organized packages for travelers to end their hike with a rewarding spa weekend in luxurious five-star surroundings, Hibri felt there would be plenty of hikers that would gladly signup.

Adventure tourism that goes beyond hiking and into extreme sports is also a new niche for Lebanon to explore, given the country’s 300 days of sunshine and temperate climate for most of the year. In 2009 the three-day cross-country Lebanon H.O.G. Tour brought more than 300 Harley Davidson ridersfrom Europe, Australia, the United States, Jordan, Syria, the GCC and beyond, in what became the world’s largest official Harley Davidson tour. A cap on the number of riders the event could accept had to be applied for the following year, due to a lack of sufficient accommodation facilities across Lebanon.“These are people who are brain surgeons, doctors, business owners, architects, engineers, you name it. The profile of a Harley Davidson rider is a five-star client, so we need to take them somewhere where they can all be hosted comfortably,”said Marwan Tarraf, General Manager of Harley Davidson Lebanon.

Turning up the speed a notch, Gilbert Khoury of High On Wheels, the exclusive distributor for Ducati and other elite motor sport brands in Lebanon, is launching an extreme sports theme park near Dbayeh in July. As Lebanon’s first such attraction, the park will offer a vast range of pulse-raising pursuits for an equally broad base of clients. “This park willmost definitely attract tourists from the region and Europe,” said Khoury, who is banking on Lebanon’s temperate year-round climate to attract visitors from more extreme climatic zones who want to enjoy exciting outdoor sports.

Taking care of business

In addition to being a diverse vacation destination, Lebanon also has potential as a destination for corporate travel. Being a gateway to the Middle East, a cultural bridge, and place where diversity of religion, thought and language coexist, Lebanon is a place where people from European and Eastern cultures can feel at ease, and for regional or international companies this accessibility is a great asset.

“MICE [Meetings, Incentives, Conventions, Exhibitions] tourism is very important for the tourism sector and the national economy,” confirmed Sardouk. “MICE provides jobs by creating a chain of value for different sectors, including agriculture, industry, transportation and hospitality,” she said. “The participants in the meetings, exhibitions and trade shows can also discover the country, and we see about 80 percent of them expressing a desire to come back for pure tourism.”

On the 2011 World Economic Forum Travel and Tourism Competitiveness Index (TTCI), Lebanon ranked third out of 139 countries globally for the frequency of business travelers who extend their trips. “High occupancy rates in Beirut are highly correlated to business travel for regional corporate meetings,” said Achkar.

For hotels, MICE also provides another revenue stream that helps to diversify their risk across other activities. The Phoenicia InterContinental has begun to rely more heavily on MICE, as this sector has recently begun to show significant growth. MICE has been the hotel’s strongest growth market for the past two years as a result of heavy collaboration with the Ministry of Tourism and local tour operators.

“We have seen high demand not only from Arab and neighboring Near East countries, but also strong demand from Turkey, Europe and even Latin America,” said Phoenicia Director of Sales and Marketing Daniel Weihrauch. “The second half of 2011 also looks very encouraging, with multinational companies booking regional events and global conferences with us,” he said.

Despite the challenges of 2011, MICE tourism in Lebanon still appears to be going strong. HORECA, a four-day international trade show for the hospitality and food service industry which took place in Beirut this spring was the most successful edition to date. “It’s confusing because this runs contrary to the overall situation in the country and the region,” said Joumana Damous Saleme, managing director of Hospitality Services, the company that organized the show. “We had last minute cancellations from Egypt and Iran, but the rest of our international exhibitors attended,” she said. HORECA attracted more than 25,000 visitors and 350 exhibitors, an increase over last year of 10 percent and 15 percent, respectively. 

International exhibition and conference organizer IFP remains optimistic about its summer trade shows. “I can say we are looking at a potential of 30 percent growth in revenues, maybe more if things in the region settle down soon,” said IFP Chairman Albert Aoun.

The popular trade show for yachts, Beirut Boat 2011, taking place this month, has already attracted more than 120 participants, among them the biggest names in the marine industry, making the show 30 percent larger than 2010. Furthermore, the upcoming real estate show in late May and Early June at BIEL, “Project Lebanon 2011” will be 25 percent larger than last year, withmore exhibitors and exhibition space. In addition to “Energy Lebanon,” a regional electricity trade show that will run from May 31 to June 3, IFP is also adding a new summer show, Outdoor Lebanon 2011, to its busy event schedule from June 22 to 26. The show will promote outdoor sport equipment for all types of activities, such as hunting, hiking, sea sports, ATV-riding and more. “We expect this event to be a success,” said Aoun. “We are expecting growth in this year’s shows.”

Based on 2010 figures, IFP expects summer shows to attract 3,000 to 4,000 international visitors. “We have to keep in mind that business visitors and high income tourists make a good impact on the country’s tourism and hospitality sector,” he added.

Message in a bottleneck

With much of the Middle East in the throes of revolution and Lebanon still trying to form a government, facing the indictments from the Special Tribunal for Lebanon and still recovering from the 2006 July War, tourism represents far more than an economic activity.

“We need to break the perception of Lebanon as a location of terrorism,” said Akl, pointing to the value of tourism as a form of public relations for a small country with what one could call a fairly negative world image. When measuring the tourism economy in Lebanon, the value of an individual tourist goes far beyond the number of dollars spent in the country. When that tourist goes back home and speaks positively about Lebanon, it creates a type of PR that the Lebanese are highly familiar with: word of mouth.

“Lebanon has been using tourism as a major international PR tool for a while now, but the brand image [that was] built was interrupted several times by political instability, which led to economic instability,” said KatiaYasmine, managing director of regional PR agency TRACCS.

Unfortunately, on the 2011 World Economic Forum Travel and Tourism Competiveness Index, although Lebanon ranked third in the region for human, natural and cultural resources, it ranked 113 out of 139 countries globally for how well the country manages marketing and branding.

Before worrying about branding, however, the country has greater issues to deal with. The Ministry of Tourism admitted last year that Lebanon is not prepared in terms of infrastructure — namely water, energy and transportation — to support more than 15 to 20 percent growth in tourism. “In the strategy of [caretaker] Minister Fadi Abboud over the last year the focus has been to look at how we can spread the number of tourists over the year and over the country,” said Sardouk. “More growth could be supported in the country if this happens,” she said. For such alternatives to work, however, better signage, roads, maps and accommodation facilities in other cities outside the capitalare required.

In 2011, the World Economic Forum concluded that “ground transport infrastructure should be further developed, and safety and security issues must be addressed,” in order for Lebanon to truly become more competitive. Even when the country experiences a period of relative stability, however, the media buzz that thrives on political propaganda and negative forecasting does not help to advertise Lebanon as a destination for tourism. Once stability and safety are relatively secure, this has to be proactively communicated.

“The basic starting point is security and stability,” said Ghobril. “People don’t care about politics; they care about safety.”

May 3, 2011 0 comments
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Obedient Al Jazeera

by Paul Cochrane May 3, 2011
written by Paul Cochrane

Since Al Jazeera’s launch in 1996 its slogan has been “the opinion and the other opinion.” Its objective of telling both sides of the story has won over many audiences, while at the same time making the channel more than a few enemies — namely Saudi Arabia, which set up Al Arabiya in response to the Qatar-based network’s regional and global rise.

Banned at one point or another in nearly every Middle Eastern country, Al Jazeera has for the most part lived up to its truth-seeking pledge, but its slogan is now in danger of being undermined by its lop-sided coverage of the Arab revolts. The year began all roses for Al Jazeera, credited with being instrumental to the overthrow of the Tunisian and Egyptian regimes due to its round-the-clock coverage of demonstrations and its ability to give the uprisings widespread visibility. As a result, Al Jazeera has been praised in the Western media and by the White House, which was apparently glued to Al Jazeera English’s (AJE) coverage of Egypt. British newspaper The Daily Telegraph gushed in April: “The ‘Arab Spring’ uprisings of 2011 are being hailed in Washington as the ‘Al Jazeera moment’,” and Australia’s Sydney Morning Herald trumpeted: “Al Jazeera is changing minds and hearts.”

Missing from these glowing accounts, though, was that the uprising in Bahrain was barely covered by Al Jazeera Arabic, with only slightly better coverage on AJE. Given Al Jazeera’s integral role in the  Tunisian and Egyptian revolutions, itsmuted coverage of the Bahraini uprising since it began in mid-February has comeas a slap in the face to the countless demonstrators there. Furthermore, AlJazeera gave the detention and alleged torture of hundreds of Bahraini demonstrators scant coverage compared to similar events in Egypt, while the channel also failed to air potentially damning footage of the demolition of the symbol of the uprising, the Pearl roundabout, and 16 Shia mosques — a silence that could only be called an abdication of Al Jazeera’s self-proclaimed duty to objectively inform regional opinion.

At the heart of the matter is Qatar’s membership in the Gulf Cooperation Council (GCC), established in 1981 as a security pact among the Gulf monarchies in the wake of the 1979 siege of Mecca. Qatar’s position in the GCC pushed Doha to deploy troops to Bahrain when martial law was declared on March 15, but a casualty of this military intervention has been Al Jazeera’s objective news coverage.

With regard to Bahrain, Al Jazeera seems quite clearly to be acting as an extension of the Qatari government’s foreign policy and leaves the channel vulnerable to accusations of “double standards,” politically acceptable uprisings in the name of democracy — in Libya, Egypt, Tunisia and Yemen for instance — are covered and supported; uprisings against the Qatari national interest — such as in Bahrain — are largely dismissed. Ironically, Al Jazeera was banned in Bahrain last year, which the channel suggested may have been because of a report it aired on the country’s poverty, but which Bloomberg suggested was related to Manama’s wanting to increase Qatar’s rent for use of the Hawar islands.

A 2009 United States diplomatic cable, released by Wikileaks, highlights the geo-political role of Al Jazeera, with US ambassador to Qatar, Joseph LeBaron, noting: “Al Jazeera’s ability to influence public opinion throughout the region is a substantial source of leverage for Qatar…Moreover, the network can also be used as a chip to improve relations. For example, Al Jazeera’s more favorable coverage of Saudi Arabia’s royal family has facilitated Qatari-Saudi reconciliation over the past year.”

Al Jazeera’s “objective coverage” should also come under greater scrutiny in regards to Libya given Qatar’s vested interests there, including Doha’s role in the NATO-led air strikes and the inking of an oil distribution agreement with the Libyan rebels the day before the strikes began. Uncritical coverage of Qatari issues has also been a hallmark of the station since its inception. Thus, while Al Jazeera has generally helped raise the baron network news coverage and pushed television reportage to a new level, those who’ve championed the channel as some sort of media Messiah immune to the failings of major Western news outlets should take heed — there is “the opinion and the other opinion”, and then there is the opinion of the Emir of Qatar.

Paul Cochrane is the Middle East correspondent for International News Services

May 3, 2011 0 comments
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Finance

Q&A – Simon Cooper

by Vanessa Khalil May 3, 2011
written by Vanessa Khalil

Simon Cooper is deputy chairman at HSBC Bank Middle East and North Africa (MENA). Herecently sat down with Executive to discuss the effect of the regional unreston business and investment in the MENA region, as well as growth opportunities for the future.

With all the capital outflows, the foreign investments that have been stopped, the people who have been laid off, the expectation that unemployment will rise rather than fall, the lost tourism and the fact that the government is not spending yet, it seems it will take a lot for Egypt to not to fall into a very vicious circle. Banks in general and HSBC are exposed to a lot of risks there. There’s a risk of default from corporate clients and absolutely from individuals for the retail banking division. How are you going to manage this crisis?

I think you’ve got to step back here. First there was the physical crisis that hopefully has passed. We were able to manage that through being part of a regional network so we were able to immediately support what was taking place onshore in Egypt with our infrastructure offshore. We were the first bank to re-open in Egypt.

In terms of the credit risk, we saw a short-term blip in delinquency in February when people on the retail side were not paid because businesses weren’t open to issue payrolls. But we’ve seen that reversing in March.

We as a bank are at the higher end of the economic spectrum in our client base so we have a natural advantage in terms of segmentation of our customer base. When you look at the corporate side, the central bank of Egypt was very disciplined for many years in terms of making sure that foreign currency borrowing was mirrored by foreign currency earnings. So again the impact of foreign exchange has been largely self-hedged by the regulations over many years.

There’s certainly going to be a short term impact on tourism. Hotel occupancy is definitely lower this time this year than it would have been this time last year. I understand that people are starting to book again for October-November, which will be the next peak season for Egypt’s tourism industry. It’s too early to say whether that will be successful or not. It will be a very important barometer to see how many people do come back in.

There’s definitely a bump in the road; exactly how long that bump will last is too early to say. To my mind, it’s probably a year or two to get back on its historic trajectory but I don’t think it will take 10 years, after a sort of downward spiral from where we sit today. We now need the constitutional reform to be moved forward; we need the government to come into place and hopefully it will be a sustainable one.

You were one of the first to be in Iraq along with Standard Chartered, but in the end it wasn’t really operational. What’s your prospect for Iraq and why there?

I can’t take credit or blame; it was done before I was in the region. But talking to Lebanese customers, there’s a huge amount of interest in business opportunities in Iraq. A number of people distribute their products into Iraq – all told me that their only constraint was in getting enough product into the market, whose potential they believe is significant. I think if you look at foreign investment coming into Iraq we’ve done a lot in terms of some of our multinational clients looking to establish or grow their business [there]. It’s not going to suddenly take over the United States as a top-five economy in the world, but in terms of growth potential it’s significant. Physical security remains a high operating cost of having a branch network in Iraq. But the business potential I think is significant. We used to manage the business predominantly from Jordan, and we increasingly put more and more people into Iraq as security becomes much more stable.

Bahrain’s image as a financial hub has been tarnished recently. Is doing business there at the moment such a good idea?

There are clearly a number of companies that ran regional businesses from Bahrain that had to move their operations very quickly elsewhere. So clearly that is a memory that people will retain for some time and it will cause people to think twice when they are looking to really invest. So yes, there has been some damage to its brand. But we’re absolutely staying there. We’ve been through a number of wars in the region and turmoil — we’ve seen it all before. So we’re very much here to stay and to continue to invest more.

How would you assess potential for Syria and Libya?

In Syria we have a representative office. We applied for a branch license last year, which we didn’t get. In terms of Libya, there’s a tremendous opportunity in terms of the economy and to be part of the economic growth. But I don’t know what’s going to happen in terms of the current conflict; that has to resolve itself one way or another before you can form a view as to where the economy is going and how long it’s going to take to get there. But the potential is absolutely huge. In Syria, I’m sure the economics are strong; but from a banking perspective, as an international bank doing business in Syria, given the US sanctions and everything else, it is too difficult. 

Will the‘Arab Spring’ provide new opportunities for the region?

Look at what’s been the reaction for a number of governments. There’s been an increase in infrastructure spending. There’s a renewed or heightened oil price. Both of those things are economic stimulants for much of this region, and that gives tremendous opportunities for employment, gives opportunities for bankers, for project financing. So, yes, I think there will definitely be some benefits coming from it.

Many of the countries’ infrastructure is not at as high levels as you would expect given these countries’ wealth. So as infrastructure investment comes in, it is a real sustainable investment and a real sustainable benefit to the economy. It’s not just the initial sort of cash injection; it’s what it does to enable businesses going forward.

Who benefited from the capital outflows within the MENA region?

There’s definitely a flow of capital around the region. While there’s been an FDI [foreign direct investment] outflow, some of it has come back into some of the other countries. The UAE [United Arab Emirates] has definitely benefited from some of the unrest that’s taken place around the region. It’s become a safe haven for some direct investors.

It’s also become a safe haven for tourists. Tourism numbers in the UAE have risen dramatically in the last few years…because perhaps people are more concerned than they were about holidaying in some of the other destinations they would have otherwise gone to.

May 3, 2011 0 comments
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