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The Egyptian intifada

by Jonathan Wright
written by Jonathan Wright

 

If one week is a long time in politics, one month can bring a generation’s worth of change. The sudden and unexpected collapse of authoritarian rule in Tunisia has breathed new hope into opponents of Egyptian President Hosni Mubarak, who have struggled for years to muster mass support for their democratic agenda. Now hundreds of thousands of Egyptians have risen up alongside them, challenging the conventional wisdom that autocrats in the Arab world have mastered the dark arts of political survival more successfully than anywhere else around the globe. One way or the other, the Middle East will never be the same again.

Egypt and Tunisia had much in common — high youth unemployment, brutal repression by police, economic growth that never trickled down and stagnant political systems centered around crony-capitalist ruling parties.

The Tunisian opposition that helped drive Ben Ali into exile on January 14 has made great progress toward ensuring that the old guard of the ruling Constitutional Democratic Rally (RCD) party cannot salvage many of the privileges it enjoyed for the past 23 years. In Egypt, as Executive went to press, the battle for the future was still raging, and the latest developments are strong indications that the old guard of the regime will cling to power with some tenacity, possibly at the cost of much more blood of young Egyptians determined to make a clean break with the past.

For the moment, Egyptian President Hosni Mubarak, 82 years old and in power for three decades, has sacrificed his own son’s presidential ambitions and a prime minister, Ahmed Nazif, with an enviable record as an economic manager, in an attempt to fend off a challenge from the streets that by January 30 looked close to triumph. In only four days, overt opposition to Mubarak, once the preserve of a few marginal politicians, Internet activists and the cowed Islamists of the Muslim Brotherhood, has flourished into a mass movement with no clear leadership, little coordination and a simple agenda: to “overthrow the regime.” When tens of thousands of Egyptians flooded across the Nile bridges into central Cairo at sunset on Friday 28, routing one of the world’s largest police forces dedicated to suppressing protests, it looked like Mubarak was on the run. The headquarters of the ruling National Democratic Party was in flames and many jubilant Egyptians were welcoming the arrival of the army as their savior.

But Mubarak, slow and stubborn, but still wily, had more tricks up his sleeve. For the first time in his long reign he appointed a vice president in the person of security adviser and intelligence chief General Omar Suleiman, a man whose public statements have been as rare as Cairo rain. Then he named an old air force associate, former Civilian Aviation Minister Ahmed Shafik, as prime minister, jettisoning technocrat Nazif and his team of liberal economists. Suleiman’s appointment is another nail in the coffin for any plans for his deeply unpopular son Gamal to take over the reins of power.

It was a classic defensive tactic, akin to a circling of the wagons as the enemy advanced. With the army in the streets to reassure ordinary Egyptians who hated and despised the police force, Mubarak was surrounding himself with old military colleagues who would think twice about advising him that it was time to follow Ben Ali into ignominious exile. He has not yet pacified the street, and opposition politicians have dismissed the appointments as too little too late, just like the last-minute concessions with which the Tunisian president tried to save his skin.

For the moment the army is fraternizing on the streets with thousands of protesters telling Mubarak to go. The future of Egypt, and possibly the whole Middle East, now depends on the dynamics of that fragile and shallow alliance between the army and the people. It seems unlikely that the protesters will just give up without violence. When that time comes, will the army stand by the people or by Mubarak?
A successful revolution in Egypt, coupled with that in Tunisia, could be a beacon of light for the Arab world with massive implications for international geopolitics. But an army-backed repression would be a throwback to the dark days of the 1950s, the womb that gave birth to the current autocratic regimes.

JONATHAN WRIGHT is managing editor of Arab Media and Society

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Harb’s divisive idea of ’diversity’

by Sami Halabi
written by Sami Halabi

 

As the wheels slowly fell off yet another ‘national unity’ government last month, Lebanon’s political class apparently had enough time to re-hash some old ideas and present them as legislation. But of all the bad ideas that Lebanese politicians have come up with to preserve the “diversity” of the country, the most recent draft law proposed by Labor Minister Butros Harb is likely the most regressive and divisive.

Harb’s proposal to ban the sale of land between individuals from different religions for a period of 15years is nothing new and stems back as far as the 1860s, when Lebanon’s first“ civil war” erupted. But supposing that the minister has read the constitution, he would know all too well that his proposal contravenes the principles of equality among the Lebanese, the right to private property, a free economy, and the fact that “there is no segregation of the people on the basis of any type of belonging, and no fragmentation, partition, or colonization.”

Then again, government regularly makes a habit of ignoring the constitution, from its obligation to hold timely sessions of parliament to that of passing a national budget, so perhaps we should regard Harb’s proposal as par for the course. At a time when the issue of Christians in the Middle East is particularly loaded, Harb may have used the opportunity to promote himself as the torchbearer of age-old Christian paranoia over being engulfed by the wider Muslim, and in this case Shia, population.

One reason for the draft law stems from allegations that parties such as Hezbollah are behind real estate purchases in “Christian” areas. If that is the problem, however, Harb could have used his legislative ingenuity to propose measures to lift banking secrecy on the accounts of public officials and their relatives and increase the transparency of financial transactions by political parties. That, however, might not go over well with his colleagues in government, who use banking secrecy to circumvent campaign finance laws to help buy their way into office.

A more relevant move for Harb in his capacity as labor minister would be to propose a measure to stamp out sectarian discrimination in the workplace.

Unfortunately, it makes more political sense to stoke sectarian fears and claim to be defending your own than to stick your neck out and actually propose something that takes aim at the institution of Lebanese sectarianism. For starters, if the intention of any law is to protect a particular sect then it is by definition discriminatory and will only serve to increase divisions rather than do away with them. The idea that people from sects that did not traditionally reside in places like Keserwan or Batroun now want to buy property there should not be thought of as particularly grotesque, unless one truly believes that each sect should have its own ghetto and Lebanon is nothing more than a collection of Bantustans.

If Harb truly fears for his community, then he should have used his position as both a member of Parliament and a minister to dismantle the institution of sectarianism by insisting that the cabinet form the constitutionally mandated committee to abolish the practice in society, and that legal structures of a secular state are voted on by parliament. True to form, neither Harb nor any of his colleagues has yet been brave enough to seriously propose either, preferring instead to use such suggestions as a political bargaining tool, happy that they can collect their pay checks and kickbacks based, effectively, on their own sect.

The mantra of co existence between sects cannot just be a pretty phrase that we blindly recite to foreigners before rejecting citizens from “our” areas because they pray on Friday or Sunday. The fact that the country is already staunchly segregated is not something to be proud of, nor a condition to be supported through legislation. 

For all their faults, the Constitution and the Taif Accord lay out the framework that intends to eventually abolish the stain of sectarianism. The Lebanese, including Harb, should not forget that the people and their government are not bound by any other social contract. So the next time a minister or MP would like to propose legislation to protect their community from the “dominance” of other sects, they would do well to start with that in mind and leave the sectarian laws where they belong: as things of the past. 

 

 SAMI HALABI is deputy editor of EXECUTIVE Magazine

 

 

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Reluctant rise of the Resistance

by Nicholas Blanford
written by Nicholas Blanford

Once head of the opposition, Hezbollah may be the predominant force in the Lebanese government by the time you read this column. Such a government will certainly set Lebanon at odds with the international community, especially over the fate of the international tribunal investigating the assassination of former Prime Minister Rafiq Hariri. Paradoxically, while Hezbollah is the strongest political and military force in the country, it has never actively sought to take control of the state — at least not in the conventional sense of being elected into power and forming a government.

That is because Hezbollah’s focus lies elsewhere — specifically in ensuring the retention of its formidable armed wing to confront Israel. Since its founding in the early 1980s, Hezbollah has gradually moved deeper into Lebanon’s political milieu. But each step was taken only when evolving political circumstances threatened the party’s resistance priority. When Hezbollah burst upon the scene, Lebanon was mired in civil war, Israel was occupying the southern half of the country and there was little or no state control. This was the era of suicide bombings against Western targets, kidnappings of foreigners and hijacked airliners. The idealistic Islamic revolutionaries vowed to overturn the Lebanese political system with its sectarian checks and balances, nepotistic feudal leaders and corrupt patronage networks.

But the end of the civil war in 1990 and the dawn of ‘Pax Syriana’ in Lebanon necessitated a change of attitude and conduct, if not ideology and agenda. Hezbollah embraced parliamentary politics, despite its earlier public disavowal of the political system, winning seats in the 1992 election and performing credibly as an opposition to the governments of Rafiq Hariri. It had no desire to join the government, content with its parliamentary toehold where it could generally remain aloof from the sordid bargaining and compromises inherent in Lebanese politics.

Damascus rewarded Hezbollah’s pragmatism through the preservation of its resistance priority. These were Hezbollah’s “golden years,” in which it waged an increasingly successful campaign against the Israeli occupation of South Lebanon and enjoyed broad approval across Lebanese society. Syria’s political umbrella, the Israeli occupation of the Shebaa Farms and continued detention of Lebanese prisoners ensured that Hezbollah did not have to immerse itself deeper into the Lebanese political morass to protect its weapons after Israel’s withdrawal in 2000.

But in 2005, following Hariri’s assassination and Syrian disengagement from Lebanon, Hezbollah found itself hemmed in once more. It allied with one-time rival Amal, reached out to the Christian supporters of Michel Aoun and entered government for the first time, taking a previously unwanted step to better defend its resistance priority. Hezbollah’s weapons became the single most divisive issue in Lebanon, roughly splitting the country in two. Hezbollah even chose to expose its popular standing to significant risks to defend its weapons: the 18-month sit-in in downtown Beirut that began in the fall of 2006 ended with armed clashes against Sunnis and Druze in May 2008.

The emergence of the Hariri tribunal and accusations that Hezbollah had a hand in Hariri’s assassination is the latest iteration in the broad domestic, regional and international campaign to neutralize the organization. The prospect of the tribunal indicting Hezbollah members for killing a Sunni Lebanese leader threatens to severely discredit the Shia group’s image as a champion of anti-Israel resistance in the eyes of Arabs and Muslims, forcing Hezbollah into damage control.

The best it can hope for is to sever all links between the tribunal and Lebanon and besmirch the judicial process as a political ploy of the West and Israel. But the refusal of the previous Prime Minister Saad Hariri to disavow the tribunal investigating his father’s killing compelled Hezbollah to bring down the government, opening up the prospect of a new cabinet filled solely by the present opposition.

“The Resistance is not interested in obtaining seats in the government but rather its main concern is to protect [Lebanon’s] dignity and defend Lebanon against [American] conspiracies,” Hezbollah official Sheikh Nabil Qawq said prior to the parliamentary vote to nominate a new prime minister.

Attaining power in government is usually the ultimate goal of a political party, but in Hezbollah’s case it may prove something of a poisoned chalice from which the organization was reluctantly compelled to drink.

NICHOLAS BLANFORD is the Beirut-based correspondent for

The Christian Science Monitor and The Times of London

 

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Mikati’s STL mire could solve itself

by Paul Salem
written by Paul Salem

Prime minister designate Najib Mikati has been called on before to navigate difficult transitions.  In his first posting as prime minister between April and July of 2005, he presided over the transition from the Syrian-dominated era to the elections of 2005 that brought in a Western-backed anti-Syrian March 14 majority; today he is presiding over a reverse transition back to a pro-Syrian March 8majority.

Before, he presided over the aftermath of former Prime Minister Rafiq Hariri’s assassination; today he is asked to manage the repercussions of its international investigation. Earlier, he stepped in to ease explosive Lebanese-Syrian tensions; now he is being asked to defuse Sunni-Shia hostility. Indeed, the challenges facing Mikati are daunting, but in the few days since his nomination he has renewed hopes that perhaps a stable and peaceful way forward is possible.

The key variable in his success or failure is the stance of Saudi Arabia. Riyadh suffered a blow in May 2008 when Hizbullah defeated its allies in Beirut and it suffered a further blow when Syria and the Lebanese opposition refused to give it and Saad Hariri’s government any concessions in exchange for Hariri breaking with the tribunal. The final blows were the opposition’s bringing down of Hariri’s government and Walid Jumblatt’s change of allegiance to grant March 8 a majority in parliament. This new majority could remain until the next parliamentary elections in 2013, and possibly beyond. 

Saudi Arabia now faces a stark choice: it can acknowledge the new unfavourable status quo and work with Mikati to moderate March 8policies from within the new government; or it can stonewall the new government and exclusively support the new Hariri-led opposition. In all likelihood, it will do a bit of both.

 

Saudi Arabia is aware that the opposition’s insistence that Lebanon distance itself from the tribunal will have to be satisfied sooner rather than later. It might be more convenient to them for Mikati to grant that concession rather than his predecessor, as that will not seriously discredit the tribunal in regional and international opinion and will allow Hariri to keep waving the tribunal’s flag. 

Riyadh could work with Mikati to bolster the Sunni presence in the new government and to provide some counterbalance to Hezbollah and other March 8 forces, while continuing to support Hariri and the March 14 opposition. In that context, the Mikati government might be short-lived; once it distances the Lebanese state from the tribunal, its main function would have been served. After that, it might give way to a return to a national unity government including both March 8 and March 14. 

Once Lebanon officially breaks with the tribunal, Hezbollah itself might be interested in bringing March 14 back into government — and even into the prime minister’s office — because it is aware that a government over which it has too much obvious dominance exposes it to intense risk from Israel and the United States. Syria would also be interested in rebuilding relations with the Sunni community in Lebanon and the region after the issue of the tribunal has caused so much tension. Any new government faces serious social, economic and political challenges, and Mikati is trying to assemble a varied team to deal with them. Throughout the government’s tenure, however, the Hariri-led opposition will probably keep the pressure up, claiming that the government is unrepresentative and unconstitutional. 

Even with Mikati’s best efforts, Sunni-Shia relations will remain tense. In this context, the real risk facing the country is not the formation of the government but the impact of the indictments, if and when they are made public. At that point, the country’s fate might be decided. If the indictments point to high officials in Hezbollah and are backed up with convincing evidence, the country might descend toward serious sectarian strife; alternatively, if the indictments point to low or unconnected operatives and/or appear based on flimsy or circumstantial evidence, the country could put this chapter behind it and rebuild stability and power sharing. 

In either case, Najib Mikati has a very challenging time ahead of him.

 

PAUL SALEM is the director of the Carnegie Middle East Center in Beirut

 

 

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A dictatorship defaults

by Daniel Williams
written by Daniel Williams

 

 

Among the Middle East’s authoritarian leaders, there’s a mantra: economic development takes precedence over civil freedoms and human rights. Things such as free speech, assembly, association and competitive elections — these will only lead to instability, which will damage the people’s principal concern, namely their wallets. Human rights just get in the way.

Tunisia was a poster child for such thinking. Growth stood between 5 and 6 percent in recent years, homeownership stood at 80 percent according to government statistics, and the poverty rate was about 2.5 percent. The latest World Economic Forum Global Competitiveness report ranks Tunisia 31st, far ahead of most of its Arab neighbors. The country presented itself as a successful Western-looking nation, minus the liberties, of course. Those would come later, maybe.

The long rule of Zineel-Abidine Ben Ali supposedly proved that aforementioned mantra that stability comes not from democracy, but from prosperity. Never mind the niggling detail that this domestic tranquility was anchored in repression, the beating of dissidents, torture and fake elections.

Yet it all collapsed with startling speed, with the failure of “trickle-down economics” to produce jobs sparking the unrest. A young college graduate, underemployed as a fruit vendor, set himself on fire and ignited a national revolt. It was not just his economic frustration that led him to this fateful act: He was humiliated by the police, who unceremoniously shut down his business. To say that the riots stemmed only from a disconnect between growth and job creation would underestimate the hunger for freedoms, especially as security forces began to fire on protesters, wounding and killing many.

Ask the crowds still demonstrating in Tunis. They want rights, too. On January 13, Ben Ali tried a last-ditch appeal to calm protesters by pledging to leave office in three years and to lift censorship. Too little, far too late. He left for exile the next day.

After his exit, crowds gathered daily — met with violence from the police, tear gas and beatings — to reject the interim cabinet, which is dominated by leftovers from the previous government. Veteran human rights activist Moncef Marzouki arrived at the Tunis airport from exile in Paris and called the interim government a “masquerade.”Supporters and bystanders called for freedom.

Is there a lesson here for the region’s other Arab leaders? They too follow the same economy-first dogma. Take Egypt, for example. Last November, the finance minister, Youssef Boutros Ghali, wrote in the Washington Post that what “matters most to ordinary Egyptians is their standard of living.” He went on to boast of Egypt’s independent media and Internet freedom in what he called a “healthy political space.” A few days later, Egypt’s parliamentary elections turned farcical as opposition candidates were thrown off ballots, election monitors — even those from participating parties — were barred from polling places and police disrupted campaign rallies. As of this writing, thousands of protestors were still in the streets of Cairo, calling for an end to the regime.

Algeria, statistically booming from natural gas sales to Europe and beyond, has been beset by strikes and self-immolations, while a series of copycat immolations from Morocco and Saudi Arabia are becoming a potent symbol of hopelessness. Wikileaks is credited widely with opening Tunisian eyes to the corruption central to the people’s frustration. A 2008 cable from the US embassy in Tunis detailed the lucrative wheeling and dealing of Ben Ali’s extended “family.” But it’s not as if Tunisians weren’t already aware of corruption. I’ve had taxi tours of Tunis in which embittered drivers pointed out lands and projects controlled by relatives of Ben Ali. In Cairo and Damascus it is much the same: pals of the powers-that-be dominate the development landscape. In these countries, citizens have no conduit for their complaints, much less ways to persuade anyone to crack down. The impunity that allows rampant human rights abuses also shields despots from scrutiny of their business dealings.

Tunisia’s saga shows there is a limit to the growth-without-freedom model. Prosperity statistics don’t erase the degradation of arbitrary rule. Freedoms may not do away with the frustrations of a country’s youth, but they at least would offer a channel for influence. Getting rid of Ben Ali is not enough; full respect for speech, association and participation in political life, as well as economic rights, is what is needed.

DANIEL WILLIAMS is a senior emergencies researcher for Human Rights Watch

 

 

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Society

Beware of small states

by Dean Sharp
written by Dean Sharp

 

 

Lebanon is in crisis mode, again, and as usual it is not only a Lebanese concern. Crisis and foreign intervention go hand in hand in this small, fought-over state. This time around, it is Syria and Saudi Arabia who have added their names to the long list of failed intermediaries. Their foreign interventions, as well as those of Israel, France, the United States and Iran, have regularly ranged from ineffective to catastrophic.

The diplomatic excesses and Machiavellian schemes of foreign states in Lebanon have left a depressing legacy in the country that has been deftly examined by veteran British journalist David Hirst in his latest book ‘Beware of Small States: Lebanon, battleground of the Middle East.’  The book takes its title from  Russian anarchist Mikhail Bakunin, who warned that while smaller states are often the victims of larger ones, they are also a source of danger for regional powers — a fitting warning here in Lebanon, the ‘Achilles’ heel’ of many of the region’s power brokers. 

Hirst gives a fascinating account of how Lebanon has twisted and turned in the regional headwinds. A principal point of discussion is the incongruous relationship between Lebanon and the nascent state of Israel. Initially, the newly arrived merchant Zionists to the Levant were welcomed with open arms in Beirut. “The [Lebanese] government even produced a tourist manual in Hebrew, whose preface proclaimed that, ‘Anyone who wants to lengthen his days, taste paradise and feel the world to come should spend some time in Lebanon.’”

Many would say that the future state of Israel took this tourist manual too literally, with its 1982 invasion and two-decade occupation of South Lebanon. Indeed, as Hirst points out, “from 1973 till this day [Lebanon] has … furnished the only militarily active front in the Arab-Israel struggle,” with the exception of occupied Palestine.  Israel itself is another example of the “small state” phenomena, as is emphasized throughout the book. However, as Hirst shows, its creation was “…a vastly more arbitrary example of late imperial arrogance, geopolitical caprice and perniciously misguided philanthropy than Lebanon’s.” Hirst articulates how the lessons have not been learnt, noting that the needs and fundamental demands of the Palestinian population are ignored in the Israeli project. Misguided philanthropy has also cost the US government countless billions each year in government aid alone. While often a diplomatic and military battleground, Lebanon has also been an ideological front for many of the seminal movements of the past century in the region. Whether it was anti-Ottoman independence, resistance to Israeli occupation, pan-Arabism, sectarianism or Islamism, Hirst asserts that Lebanon has been the unwieldy axis on which the region turns.

 When Arab nationalism began its rise, Lebanon was a key player. It was one of the founders of the Arab League and where, Hirst argues, “Nasserism reached its high-water mark.” Lebanon would also take on with equal fervor the revolutionary spirit of the 1979 Iranian revolution from which sprung the makings of today’s Hezbollah. Though a detailed and well-researched account of Lebanese and regional history, there is one glaring omission: David Hirst himself. A British journalist who has lived in Beirut for the past 50 years, Hirst likely has much to contribute about the familiar aspects of life in Lebanon. In contrast to Robert Fisk, who is often criticized for his improbable propensity to be “at the scene” at every major event that has hit Lebanon, if not the region, Hirst seems nowhere, leaving a sense of detachment from the country itself.

For better or for worse, regional and international powers have not shared this hesitancy to project themselves onto the Lebanese landscape, continually lured into the morass of Bakunin’s small-state curse. 

 

 

 

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Society

There’s no stopping style

by Paul Cochrane
written by Paul Cochrane

 

The United Arab Emirates’ luxury sports-car segment represents 11 percent of the country’s car market, equivalent to some 3,000 units per year, according to Business Monitor International (BMI). Ford estimates it higher, at between 18 to 20 percent.

Whatever the actual figure may be, luxury car sales have certainly defied market logic by not flat-lining in the midst of an economic downturn, but rather holding steady and even growing.

Sales to Emirati citizens and expatriates working in the UAE have also remained consistent, allowing brands to retain sales to established customers and the high-roller expats that managed to ride out the crisis. Porsche registered 11 percent growth in the GCC market from July 2009 to July 2010, recording similar growth in the UAE, with Abu Dhabi and Dubai selling the largest volumes in the Gulf.

“Porsche is in the top three for luxury sales, along with BMW, Mercedes and the more exotic sports-car manufacturers,” said Deesch Papke, managing director of Porsche Middle East and Africa. “Everyone is here: Ferrari, Bentley, McLaren, Lamborghini… and it has been an extremely good environment for premium brands. We are not in isolation, all have had equal success.”

BMW’s UAE sales confirm this, up 29 percent in 2010. “People are still in the market to buy luxury vehicles, which is evident in our positive sales growth this year,” said BMW’s Middle East Managing Director Phil Horton. “From January to November, we sold 6,616 BMW and Mini vehicles in the UAE, which remains our biggest selling market. Some months have been more challenging than others, but overall both our UAE importers have reported strong growth in 2009. As for 2010, the sales of our biggest selling importer, Abu Dhabi Motors, are up 41 percent and AGMC in Dubai, Sharjah and the Northern Emirates have increased their sales by 18 percent.”

Audi has also had a great year, with UAE sales up 18.5 percent in 2010 and equally strong growth throughout the GCC, with sales in Saudi Arabia up 17 percent, 5 percent in Kuwait and 30 percent in Bahrain.

“The mass market is growing faster than the premium, but premium has always had sustainable growth here,” said Jeff Mannering, managing director of Audi Middle East. “There will be a lot of investment in the GCC and the UAE over the next 18 to 24 months to make sure the product is presented in a superbly premium way, and we will spend hundreds of thousands of dollars on training and services. That is how you become number one, not just by selling cars.”

GM estimates that the luxury vehicle market in the Middle East grew 6 percent as of September 2010 on the previous year, and reported 19 percent growth for its luxury brand, Cadillac. Despite this growth, the car sector has still struggled to get overall sales back to pre-crisis highs.

An automotive hub?

News came in June that the Abu Dhabi government had made a “strategic decision” to create an automotive industry in the emirate. The plan is that phase five of the Industrial City of Abu Dhabi in Musaffah will have 11 square kilometers of land allocated for the automotive sector, from assembling vehicles to services and sales. Abu Dhabi has gone car crazy in recent years, with the opening of Ferrari World and a Formula 1 track, which followed Abu Dhabi investors acquiring stakes in Germany’s Daimler and Italy’s Ferrari.

But manufacturers in the UAE market said the idea was overly ambitious, citing several drawbacks, such as local demand to achieve economies of scale and the cost of importing raw materials, set against the already low barriers to entry, with import duty on vehicles just 5 percent.

“It is a very ambitious plan and I think it is highly unlikely,” said Porsche’s Papke. “If you look at car manufacturers, they have plants where the market is.”

The outlook

If BMI’s forecasts for 2010 are achieved — 8.5 percent growth with nearly 353,000 units sold — then the sector will have almost returned to the boon year of 2008, when 355,000 new vehicles were driven off the lot. Attaining such a figure suggests that in 2011, the sector will achieve actual growth; consumer confidence is returning and the International Monetary Fund predicts 3.2 percent economic growth in 2011, up from 2.4 percent in 2010.

Manufacturers are optimistic that the UAE market will be back to sustained growth, albeit not the double-digit runaway expansion of the pre-crisis boom years. Papke thinks the more subdued UAE will be better for business in the long run and that more normal growth in the single digits signals a maturing of the overall market.

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Economics & Policy

Broadband’s Roadblock

by Executive Editors
written by Executive Editors

Being stopped at an army checkpoint is a regular feature of Lebanese life, largely endured without complaint as a necessary condition for maintaining the country’s semblance of security. These checkpoints are normally benign: more often than not the officer in charge will give the vehicle a cursory glance before waving the driver through to go about his or her business.

Lebanese Internet, on the other hand, has been pulled over at the same roadblock for more than a decade, leaving the country and its economic development held up behind, while the vast majority of the rest of the developed and developing world passes by Lebanon in the broadband fast lane.

In the past year there have been financial wheels set in motion to move the country past this Internet impasse, but when, or even whether it will be waved through is far from certain.

Political and vested interests have attempted to thwart development at almost every step, and to circumvent the country’s legislative paralysis the “progress” that has been achieved has often been through blatant violations of the same law enacted to liberalize the telecommunication sector. The telecommunications ministry has effectively admitted to having purposely-opaque policies that call into question the integrity of the entire process, while security concerns and espionage charges have piled up like a fast-action thriller.

In the following report, Executive lets you in on what’s still blocking the road to broadband. 

Stalled in a feedback loop

In January 2010, the Minister of Telecommunications, Charbel Nahas, declared that he would release his policy strategy by November — exactly a year after becoming minister — while his ministry announced that it was beginning the process of upgrading Lebanon’s bandwidth from an estimated two gigabits per second (gbps) to 120 gbps. This included connecting Lebanon to an undersea cable called the India-Middle East-Western Europe 3 (IMEWE3) [see box].

Almost a year later, however, as Executive went to print, neither of these pledges have been fulfilled.

“We tried to assist and be an advisory body to the minister in order to help him to develop and write his policy to submit it to the Council of Ministers,” says Mahassen Ajam, commissioner and member of the board of the Telecommunications Regulatory Authority (TRA), the body theoretically mandated to regulate Lebanon’s telecommunications market. “The year is over and there is still no policy for the sector, which is a dilemma for us.”

It’s a dilemma because, according to Law 431, the TRA is supposed to be regulating the as-yet non-existent Liban Telecom that is meant to be the government-owned entity holding all the state’s telecommunications assets. Setting up Liban Telecom has become such a contentious issue, however, that when Executive queried Minister Nahas about it he replied: “I am part of a large governmental block, so don’t talk to me about when to apply the law.”

Indeed, Mahmoud Haidar, principal advisor to the Minister of Telecommunications, says the tenets the minister is willing to stand by are only that pricing should be lower and that the state monopoly over telecommunications should end. 

“When Liban Telecom is established it has the right to have a five year monopoly by the law and the minister doesn’t like that,” he says.

Haidar adds that: “We are all Lebanese and we shouldn’t be hypocrites about our realities. If Liban Telecom is, as the law says, an established company to be owned by the government, its board of directors appointed by the Council of Ministers, I really see that no Lebanese in his true and genuine sense sees that this will be free from politics. The Council of Ministers getting into the appointment of anything is politics. So to those who promote Liban Telecom as the paradise to come, I would simply ask them how they see this happening.”

Indeed, for Liban Telecom to become a reality, the minister would have to propose it and the cabinet would have to assign the board members; since the minister seems disinterested and the cabinet is unable to even meet regularly (if at all), progress appears stalled. 

“You are right in asking about where we are now because we have not come to the public and said everything,” said Haidar, who stressed that the minister never said he would issue an official policy paper because it has no legal mandate.

Thus with the law unimplemented and a policy unissued, Lebanon’s telecommunications regulator finds itself at a loss as to what it should do. Technically, the TRA is in violation of the same Law 431 that created it, given that the law mandates the TRA be financially independent within two years of its creation, which was in 2007.

The TRA cannot yet be financially independent from the government, says Ajam, as the TRA’s independence is “based on the principle that the sector be liberalized… which means giving licenses and making revenues from the market.”

“We were not able to give licenses — it’s as simple as that,” she said, adding that without a national budget approving investments, the TRA had no choice but to take the funds advanced to it by the cabinet. [The TRA does, however, gain some revenue from the annual interim licenses it is permitted to grant to the country’s service providers and has recently received a World Bank grant.]

No straight talk

Considering that it is the government body responsible for upgrading communications in the country, Lebanon’s Ministry of Telecommunications (MOT) has been exceptionally poor at informing the public how it is going about it.

In April 2010 the ministry announced $92 million would be spent on a range of projects, including a national fiber-optic backbone. Following this announcement Mahmoud Haidar, principal advisor to the Minister of Telecommunications, explained to Executive that this figure may or may not represent what the ministry will in fact spend, given that it avoids releasing its actual budget before issuing tenders, as this would influence bidders’ offering price.

Executive later learned the ministry received a $66.3 million treasury advance to begin building the fiber-optic backbone (a treasury advance is a payment made outside of the national budget with the approval of the cabinet). The ministry’s design proposes two large fiber-optic “rings” that span the width and breadth of the country, with most of the cost of the project going to drilling.

The MOT then announced in September that it had contracted out the first phase of the project, namely laying the fiber and drilling, to a consortium consisting of Alcatel-Lucent and its local partner Consolidated Engineering and Trading (CET), for $40 million. Neither Alcatel-Lucent nor CET were willing to comment for this article. The cost of the current project becomes all the more relevant when it is juxtaposed against alternatives.

As previously reported in Executive, the International Telecommunications Union (ITU) proposed a Internet blueprint for Lebanon in 2002 that would have cost $40 million in total — in other words, equal to what is now being paid for the first phase of implementation alone. Riad Bahsoun, a telecoms expert with the ITU, described the current project design as “obsolete” and overpriced due to excessive drilling and said that the costs associated with drilling will only benefit the companies that drill. “They will do it this way and in 50 years we will cry about why they did it this way,” he said. However, Habib Torbey, head of the Lebanese Telecommunications Association (LTA) and president of GlobalCom Data Services, owner of Internet provider IDM, called the design adequate for Lebanon. 

“When you talk about security and redundancy you cannot always look at cost; it’s not a question of cost,” he said.

Securing the lines

Security has been big news over the last two years, with headlines littered with intrigue and espionage involving Lebanese telecommunications. These included the arrest of workers at Alfa (one of Lebanon’s two mobile operators) and Ogero (the state-owned fixed-line monopoly,) for allegedly carrying out clandestine intelligence operations for Israel, as well as calls by Hezbollah members of Parliament for telecommunications evidence in the United Nations Special Tribunal for Lebanon to be thrown out because of Israeli infiltration of the Lebanese network.  Last month, Hezbollah announced, “As part of its persistent efforts to counter Israeli espionage, the Islamic Resistance has made a new major achievement by foiling an Israeli attempt at infiltrating its telecommunications network.”

“Telecommunications technicians of the Resistance managed to discover a spying device the enemy had planted on its telecom network in the Al Qaysiyya valley, near the southern town of Majdel Selem,” said a statement released by the Hezbollah media relations department. “The enemy [Israel] remotely detonated its device as a result of the discovery.”  With all these security concerns regarding telecommunications, one might think the MOT would attempt to address the security of Lebanon’s network when undertaking a project to upgrade the country’s infrastructure — especially when the minister is from the political bloc allied to Hezbollah. 

However, “There is not even the slightest mention of security issues in the tender book,” says the ITU’s Bahsoun, adding that the current plans do not meet ITU standards.

“No expert can understand what motivated the cutting of this project into two different parts: one called ‘civil works’ and the other ‘active equipment’; there is absolutely no technology rationale behind such sectioning,” says Bahsoun, noting that this sort of segmentation can be used to “fool the budget,” and lead to money being siphoned off of the telecommunications upgrading project to different interested parties.

Haidar, the advisor to the Minister of Telecommunications, claims the opposite and says that the first phase of the project is “absolutely” ITU compliant. “How do they know? These documents are confidential,” he remarked to Executive. “I am surprised that they are commenting on documents that they are not supposed to be aware of.”

Also threatening Lebanon’s communications security is the existence of illegal operators, which came to the fore in August 2009 when an Israeli telecommunications network site was discovered on the Barouk Mountain in the Chouf region of Lebanon selling bandwidth to Lebanese operators.

“The Barouk issue is not a penetration of the Lebanese network. It was an Israeli network in Lebanon, installed by Israelis, managed from Israel with Israeli equipment reaching well inside Lebanon under a disguised commercial cover,” said Habib Torbey, head of the Lebanese Telecommunications Association (LTA) and president of GlobalCom Data Services, owner of Internet provider IDM. “How do they expect us to take seriously the security effort [the government] is doing to secure the GSM [Global System for Mobile communications] networks when such big issues are kept under the rug? It’s just not serious and it calls their credibility into question.”

A source with knowledge of the Barouk proceedings told Executive that a colonel in the Lebanese Army posted at the MOT during the last cabinet’s term in 2009, had spearheaded the discovery of the Barouk station along with 80 to 100 other illegal operators. Haidar confirmed this officer was Colonel Dany Fares.

According to the same source, after the telecommunications equipment, built by the Israeli firm Ceragon, was confiscated by the authorities, a man named Fadi Qassem infiltrated the location where the equipment was being held and was later re-apprehended by military intelligence with the equipment in his possession. The source added that Qassem was let go “immediately” because of political pressure. Several other sources, which also asked to remain anonymous, confirmed to Executive that Qassem was behind the operation, though he was described as “small fry” by one.

In February 2009, in the midst of a political debate over wiretapping during the term of the last cabinet, MP Walid Joumblatt — who exercises far-reaching influence over the Chouf Area — called for Colonel Fares to be removed from his post in the telecoms ministry in an interview with Ad Diyar newspaper. It was later during this government’s term that Defense Minister Michel Murr ordered the colonel to be removed from the telecoms ministry, according to Haidar.

Murr also came under attack last month in the Lebanese press after Wikileaks, a global whistleblower site, released United States diplomatic documents from March 2008 to Al Akbar newspaper stating that Murr advised the US on where any future attack may hit and that he would instruct the army to move in only after any Israeli attack had wiped out the resistance movement. The Ministry of Defense did not respond to a request for clarification and an interview.

In December a Hezbollah tip-off led to two more discoveries of Israeli espionage devices on Mount Sannine and, once again, the Barouk Mountain east of the capital. At present there is a committee tasked with uncovering illegal operators within the telecommunications ministry but Haidar refused to disclose details of how many illegal operators have been apprehended so far.

The road ahead

So while the country has been waiting for years for a way forward, and there does seems to be some momentum building to end the roadblock to move us onto the broadband highway, politics still seems to be leaving our tires flat. 

“We are losing our voices telling [the politicians] to remove the telecom sector from politics because this is an economic and strategic sector for the rest of the country, not a stand alone sector,” says the LTA’s Torbey. “God willing, they will hear us one day.”

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Economics & Policy

For your information

by Executive Editors
written by Executive Editors

More corrupt or just more apparent?

Lebanon is either becoming more corrupt or just appears so, according to the latest survey from the global corruption watchdog Transparency International (TI). The results of TI’s Global Corruption Barometer released last month showed that 82 percent of respondents think levels of corruption across 11 sectors and institutions have increased over the past three years. Over half the Lebanese surveyed (56 percent) believe that the government’s response to this perceived trend is also ineffective, which is more than the global and regional average. In fact, 34 percent of survey respondents stated that they paid a bribe in the past year to facilitate the provisioning of public services. The survey also revealed that the Lebanese think that political parties are the most corrupt entity in the country, followed by public officials and civil servants, MPs, the police, the judiciary and the media.

Gas-inducing deals

Israel has signed a host of agreements with a jointly owned Israeli-Egyptian firm to increase imports of natural gas from Egypt. The move is seen as a major step in the evolving natural gas trade-off between the two states, as Egypt has supplied Israel with a steady flow of natural gas for decades in order to allow the Jewish state to run its power plants and industries. Last month Israel Chemicals, Dead Sea Works, Oil Refineries ltd and OPC Rotem signed agreements to supply 1.4 billion cubic meters of gas over two decades, with an option to more than double that volume to 2.9 billion cubic meters. The counterparty to the agreement was the Israeli-Egyptian firm East Mediterranean Gas (EMG), in which Ampal-American Israel Corporation has a 12.5 percent stake. The gas will be used to fuel three Israeli power plants and is due for delivery sometime in the first half of next year. The move has been described by the Israeli press as a blow to companies exploring and extracting gas off the coast of Haifa, as well as close to the border with Lebanon, which has repeatedly voiced concerns that the drilling could constitute a threat to its sovereignty because of the possibility that reserves may extend into Lebanese waters.

Lebanon’s statistical leprechauns

The dearth of timely and accurate statistics in Lebanon could be on the mend thanks to the European Union and the Northern Ireland Statistics and Research Agency (NISRA). The EU has granted $1.19 million to a joint project with NISRA aiming to bring the Central Administration for Statistics (CAS), Lebanon’ s official body for statistics, up to scratch with international standards. The CAS is theoretically responsible for all national statistics in the country but, as of this writing, national accounts were being compiled by the office of the prime minister; under the program these would be transferred to the CAS. As executive went to print, national accounts had only been published for 2008.

A new way to estimate

A new estimation model to track gross domestic product may remedy Lebanon’s lack of accurate and timely data regarding its economy. The econometric model developed by BLOMinvest Bank claims to provide “a high level of accuracy and precision in estimation” — when it compared its estimations with actual data the margin of error ranged from -0.59 percent to +0.40 percent. As such, BLOMinvest estimated that GDP growth in 2009 stood at 8.6 percent. The variables used in the estimates are: previous year’s GDP, petroleum imports, claims on the private sector, cement production, number of tourist arrivals, government spending, exports, the consumer price index, non-resident spending through credit cards, money supply, construction permits and total imports (excluding petroleum). “The research provided in the paper could be extended further and the margin of error in estimation could be reduced if GDP growth for Lebanon is made available on quarterly basis,” the bank said. “It is of utmost importance for the government to invest more effort in improving its statistical capabilities in order for decision makers in both the public and private sector to be able to make their decisions based on a reliable and updated set of economic information.”

More estimations

The global investment bank Barclays Capital has thrown its hat into the ring of those estimating how much Lebanon’s economy expanded in 2010. The bank calculated that the country grew at a rate of 7.5 percent last year and cautioned against rising uncertainty related to the United Nations Special Investigation for Lebanon (STL). The sectors that drove the growth estimate — namely construction, tourism, trade and financial services — were seen to be solid during the first nine months of the year. On the fiscal side, Lebanon’s decreasing deficit over the course of 2010 in conjunction with a rising primary surplus prompted the bank to estimate that the debt-to-GDP ratio had fallen from 148 percent to 141 by the year’s end. Barclays also put the deficit-to-GDP ratio at 8.5 percent — a figure that it said constituted a structural imbalance, given that it may become even larger if Lebanon passes a national budget and begins to spend accordingly. The bank anticipated that the worst-case scenario would arise if the STL issues its indictment before a political settlement can be reached, leading to the withdrawal of several ministers and the halting of the cabinet and its related institutions. As a result, the bank expects that the Banque du Liban, Lebanon’s central bank, will have to draw on its vast reserves to ward off the devaluation of the Lebanese lira as money is converted into other currencies.  

Be warned ye copyright pirates!

The Ministry of Economy and Trade has stated that in recent months it has used its authority to step up action against violations of Intellectual Property Rights (IPR), which is seen as a prerequisite to joining the World Trade Organization. The ministry said it was increasing surveillance and urging owners of copyrights to refer their complaints to special courts to seek compensation for violations. The current form of IPR legislation dates back to 1999 and is not compliant with the WTO’s treaty on Trade-Related Aspects of Intellectual Property Rights, despite the fact that a parliamentary committee approved Lebanon’s accession to the United Nations World Intellectual Property Organization. Piracy-related losses to copyrighted industries totaled some $29 million in 2009, according to the Office of the United States Trade Representative.

The good and the bad

The Banque du Liban (BDL), Lebanon’s central bank, released both positive and negative news last month about the state of Lebanon’s economy. The BDL’s coincident indicator (CI), an average of eight weighted economic indicators published on a monthly basis, rocketed upwards some 8 percent after remaining stagnant since August. The CI reached 248 points compared to 229 points in September, constituting the largest month-on-month increase of the year. Year-on-year, the indicator has risen by 11.6 percent. On the other hand, the BDL’s quarterly business survey of opinions indicated that commercial sales volumes decreased during the third quarter of 2010.

Debt charts a flat line

Lebanon managed to maintain the level of its gross public debt (GPD) during the first 10 months of 2010 due to both improved borrowing rates and the new borrowing forecast in the budget falling through because it has yet to be enacted. At the end of October, the country’s debt rested at $51.1 billion, which is the same figure as at the start of the year and 2.5 percent higher year-on-year. The level of local debt increased 4.9 percent to hit $30.1 billion while foreign debt fell by a menial 0.7 percent to stay around $21 billion over the covered period. Commercial banks held 59.1 percent of the local public debt during the period while Eurobond holders, foreign private sector loans and special T-bills in foreign currencies accounted for 86.7 percent of the foreign portion of the debt in the first 10 months of 2010. Net public debt, defined as GPD minus the public sector deposits at the Central Bank and commercial banks, increased 2.7 percent to reach $44.9 billion. 

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