Real Estate

Q&A – Salvatore Saker

by Rayya Salem
written by Rayya Salem

Green Precast, a global precast-concrete manufacturer and contractor, offers a unique on-site automated construction procedure that builds by pouring concrete into pre-designed housing molds to make customized, one-piece frames that can be stacked. This process reduces human error and cuts construction time by over 50 percent and cost by between 5 and 30 per cent when  compared to conventional methods. The firm was founded in Australia 65 years ago and operates globally, with Lebanon being its most recent market entry. Executive spoke to Salvatore Saker, the company’s chief executive officer, about concrete and the Middle East’s construction industry.

E   Why is Green Precast investing in Lebanon now, and how much is the initial investment?

Lebanon became a strategic market for us after venturing into the Middle East [United Arab Emirates] about a year ago. We found [the Lebanese] extremely receptive to new construction methods. It helps because we spend less time explaining and more time on implementation. We have found a niche market that hardly anyone else is catering for.  When we first came to Lebanon, we didn’t realize the market size; we were working on investing between $5 million to $10 million and watching it grow organically. However, now our level of entry is going to be around a $20 million investment. We will be [building] thousands of residential units. Almost 80 percent of our [construction] products will be sold here.

E   What is the size of your upcoming project portfolio in Lebanon?

In the last two months, we have accumulated over 10 projects totaling over 2 million square meters of construction. More than 70 percent [of our portfolio] will be on the outskirts of Beirut; this is where the real demand is. At the moment, we expect 70 percent of construction to be catering to the residential market, 25 percent commercial — hotels, hospitals, universities, schools — and 5 percent industrial. In the last few years, we have been looking toward development so now we are looking to acquire our own land and develop upon it. We are looking at 31 sites in Lebanon. We have secured the land, are in the process of design, and will be delivering in six to eight months.

E    What makes your system different?

We benefit from value engineering. It creates a building that is almost four times more sustainable and superior in speed and quality than conventional precast methods. For example, we delivered a mock up 500square meter built up area dwelling within 24 hours, whereby it took other [conventional precast systems] two weeks to deliver.

We achieve this speed by minimizing the labor traditionally used for construction and combining our technology with heavy equipment. The module that comes out of the mold is manufactured using a pre-prepared steel cage of reinforcement and has all  [electrical and plumbing] conduits positioned and cast in. The procedure allows for four walls and a roof to be made in one pour with no joints between the parts.

E   So you rely on advanced technology rather than labor?

We use a lot less labor in our system, so o one Green Precast labor unit is equal to 10 workers in other firms because we don’t require a lot of labor to actually manufacture the product through our molding technology system.

E   Are there certain projects that this kind of system favors?

Our system is designed to cater for large-scale projects. The smallest project is 50,000 square meters of built up area, up to 10 million square meters per annum per market. That requires a lot of mobilization, manpower and preparation. We eliminate the margin of human error by providing [specialized molding] equipment.

E   What kind of cost savings are we talking about?

On average, on anything from 5,000 square meters upwards, if design and value engineering is done properly, you should come up with 5 to 10percent cost savings on the building. You can have access to the building within six months instead of it taking two to three years to complete. So for a commercial building, it means you have started earning money two years ahead of a conventional program, plus you have saved at least 15 percent on your holding cost.

Your construction method provides thermal insulation – is that relevant in the Middle East?

Thermal insulation is becoming a must. It applies for cold and hot weather. The cost to apply the thermal insulation, in our system, is absorbed into the construction cost, while you still save 5 to 10 percent on construction cost. On a 100,000 square meter [project], your savings can vary10 to 30 percent on the whole building, compared to conventional methods. We have proven studies that say, if you have external thermal insulation and combine it with an outer coating of [ultraviolet and infrared] reflector paint, you can save on 50 to 70 percent of air conditioner usage in Gulf countries. In Lebanon, you would hardly ever have to use AC if this was applied.

E   Is green construction a growing trend in the Middle East?

Dubai and Abu Dhabi have LEED and Estidama certification [incentives]. [In Lebanon] it should be mandatory in order to obtain a construction permit. Why do we have Lebanese groups and consultants implementing green technology outside Lebanon but not in their home country? However, today they are starting to zone different areas of Lebanon. We are already saying you can’t cut trees or pollute in certain areas. This is much tougher than requesting certification of LEED.

E   Do you predict labor and material costs will rise in the near future?

When demand eases, prices should drop, but labor costs haven’t dropped at all and in some areas [in the region] have increased. We do try to outsource most of our labor to third parties. We expect construction materials to always increase in price, but I don’t predict a rise in 2011.Hotspots like Saudi Arabia, Pakistan and India may drive up the cost of steel for neighboring countries. It was $1,700 per ton earlier this year and now it’s back to $2,700 per ton.

E   What is the main concern for those working in Lebanon’s construction industry?

When it comes to the quality of construction and materials, it’s up to every developer but there aren’t high standards on all levels. Also, the [poor] infrastructure in Lebanon is far more challenging than in other countries in the region. No other country in the Middle East has the mountains, snow, sea and the natural resources. It’s important that the right construction methods are used to preserve this natural wealth.

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Finance

Executive insight – Gazprom

by Executive Contributor
written by Executive Contributor

It is now an accepted fact that global warming is one of the most pressing threats facing the world today. The unusual weather patterns that result not only cause natural disasters and health hazards, they also impact production, productivity and efficiency. The industries affected by weather volatility are countless, from agriculture and construction to transport, energy, travel, leisure, retail and events.

The Intergovernmental Panel of Experts on Climate Change(IPCC) is well aware of the problem and of its consequences. Indeed, taking into account various demographic, technological and geopolitical hypotheses, the IPCC states in its recent report that the average increase in temperature on earth will be between 1.5° C and 4° C by 2100; a situation which is undoubtedly alarming.

In a world of increasing weather extremes, the question no longer is whether climate change is actually happening, but rather how can businesses protect themselves from it.

Weather derivatives were, as a result, created for the purpose of reducing the volatility of turnovers created by weather risk. The first weather derivatives deal was introduced in August 1996 in the context of a purchase of electric power from Aquila by Con Edison that was dependent on the August weather situation. Following that small introduction in the market, weather derivatives started to be traded in 1997 on the over-the-counter market and on the Chicago Mercantile Exchange (CME).

Weather derivatives are financial instruments that enable the management of risk associated with adverse weather conditions. There are different types of products: options, futures, swaps and more.

The products are based on a range of weather conditions in more than 47 cities in the United States, Europe, Canada, Australia and Asia, with hurricane products geared to nine US regions. Weather derivatives don’t take into account the damages but enable companies or individuals to hedge themselves according to their own predictions.

In fact, just like all the other options, weather derivatives are a sort of bet that you make on the upcoming weather according to your own expectations, based on the underlying temperature, cloudiness or the rainfall data. They are therefore potentially subject to individual speculation.

How does this product work? Let’s concentrate on the most commonly used product, the weather option. The trickiness in these products lies in their underlying asset, which is absolutely random and not scientifically predictable and very risky because of the controversy surrounding the climate change/global warming debate. This underlying asset has another issue as well: it is non-tradable, and thus inapplicable to the Black Scholes valuation model used for the other options. Therefore, weather options are valued either through the Burn analysis, which is based on historical data, or Monte Carlo-based statistical computer simulations.

Weather derivatives also enable protection against production cost increases. For example, a factory that uses some water in its process of production can protect itself against un favorable rainfall levels.

To trade weather options the following parameters must be determined:

• The contract type (call or put)

• The contract period

• The underlying index

• An official weather station from which the data is obtained

• The strike level

• The tick size

• The maximum payout (if there is any)

It is very similar to an insurance product. There are two types of weather options indices: “cooling degree day” (CDD) and “heating degree day” (HDD).

The number of CDDs on a single day is the difference of the daily average temperature from 65 degrees Fahrenheit. CDDs and HDDs are never negative. If the daily average temperature is less than 65° F, then the difference between the daily average temperature and 65° F is the number of HDDs. Over the course of a month, one might accumulate both CDDs and HDDs. The CME contracts therefore are based on the total number of HDDs or CDDs in the month.

Weather derivatives, now a multi-billion dollar industry, were originally created and traded in the US. Despite their use globally, these products have still not caught on in the Middle East and North Africa (MENA)region and no major contract has been launched in the area.

Catching on

Nevertheless, since weather derivatives are increasingly attracting energy companies, it has been said that the Organization of Petroleum Exporting Countries (OPEC) countries are starting to consider them in order to manage the increase in global demand resulting from the world’s changing weather conditions.

But the fact remains that energy companies are not the only ones concerned by weather shocks. The food sector is perhaps the most affected, through the impacts on agricultural production and decreasing supply coupled with increasing demand. It will therefore be important for African nations to consider weather derivatives to manage their food crises. In 2008, the World Bank launched a $1.2 billion financing facility to help developing countries in the region to overcome food shortages. This facility was meant to grant support mainly to Djibouti, Haiti, Liberia, Togo, Yemen, Malawi and Tajikistan by investing in multiple risk management tools.

In 2009, Malawi chose to use these funds to access the international weather derivatives market with the World Bank acting as an intermediary. In this context, Malawi was protecting its cereals production from projected harsh weather conditions. The new weather derivatives product created in June 2009 for Malawi was structured as an option based on a rain fall index. If rainfall drops under a certain level, a payout occurs; if rain fall doesn’t go beyond that certain level there is no payout. The amount was set to a maximum of $4.385 million as a start in order to test the market.

As African countries and the international weather derivatives market start becoming more familiar with each other, the World Bank is expecting more individual transactions of that type to occur in the region within the framework of global risk management strategies.

Eventually, the MENA region will have to embrace weather risk management tools in order to offset their weather correlated risks, particularly in the energy and food sectors.

Neyla Merheb is an associate in investment banking at Gazprombank-Invest

 

 

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Finance

Executive insight – DIFC

by Fabio Scacciavillani
written by Fabio Scacciavillani

As we enter 2011, the mature economies of the world seem headed toward the doldrums once more. Hopes of a quick rebound are fading, especially in the United States, while in Europe the fiscal crisis in peripheral countries is threatening to spread to the core. Only Germany has performed well, thanks to the external stimulus received from emerging markets imports of its goods, while Japan remains mired in political indecisiveness after two decades of gradual decline, hastened by the global financial crisis.

Looking forward, we see the European Union’s policy rudder firmly set on fiscal consolidation and the design of the Stability Pact 2.0, sustained by a European Fund. A major political focus will be the design of a permanent framework for dealing with sovereign crises, which will be undergoing an “on the road” test with Ireland’s collapse and contagion to Portugal and Spain. So it is unlikely that much stimulus for global growth will come from the Old Continent.

But the main uncertainty hangs over the US economy. Since taking office, President Barack Obama’s administration has essentially followed the strategy conceived by his predecessor and has skirted policy actions that would tackle the fundamental causes of the crisis: lagging productivity, crumbling infrastructure, poor education, declining innovation and financial imprudence. The indecisiveness and the stalemate with Congress on fiscal and structural policies, compounded by the setbacks in Afghanistan, have generated a malaise that is deterring investments.

Following the midterm elections, in which the Republicans took the House of Representatives, the confrontation on economic policy is likely to escalate, starting with the extension of the tax cuts enacted by former President Bush. With major policy decisions and regulatory reforms on standby, the task of reviving the economy has been taken up by the US Federal Reserve. As interest rates are already near zero, the strategy conceived for the next few months hinges on a second round of ‘quantitative easing’ or, as the media dubs it, QE2.

The Fed will inject money by purchasing long-term government bonds, in the hope that the financial institutions will lend the money to corporates and savers will spend on goods and services.

Printing money to pay for government liabilities is hardly an original move. It was a widespread habit in Latin America when the continent was experiencing double, and occasionally triple, digit inflation in the 1970sand 1980s. In more recent history, from March 2001, it was adopted by the Bank of Japan to counter deflation and stagnation, with scant success. During the acute phase of the financial crisis, as interest rates moved close to zero, QE became popular in many of the advanced economies including the US, the Euro zone and United Kingdom. As a lifeline to banks it has worked, but as a stimulus it had, at best, a limited effect.

The US embarked on the second round of QE in November. The Federal Reserve’s meeting on November 3 outlined that, “economic conditions…are likely to warrant exceptionally low levels for the federal funds rate for an extended period” and “the committee intends to purchase a further $600billion of longer-term treasury securities by the end of the second quarter of2011, a pace of about $75 billion per month.”

The statement indicated that the Fed is keeping the door open for additional purchases if necessary, noting that the Federal Open Market Committee (FOMC) will “adjust the program as needed to best foster maximum employment and price stability.”

The Fed touted this measure even before the formal announcement, so long-term interest rates and the dollar exchange rate had plunged in reaction. Then the Irish crisis provoked a flight to the safety of US Treasury bills, thereby reversing the currency movements.

It is rather worrisome that for the next six months, while the Obama administration deals with the new Congress, monetary policy will be the only ingredient in the policy kitchen. The case for QE rests on the hopes that monetary policy and ultra low interest rates will induce corporations to invest.

But doubts abound. Professor of economics at New York University’s Stern School of Business and chairman of Roubini Global Economics, Nouriel Roubini, for example, pointed out that banks already have close to US$1trillion in excess reserves, yet they refuse to lend while earning only 25basis points. More liquidity will not help. He argues that there is a “continued credit crunch on the supply side, exacerbated by the comatose state of the securitization system.”

Furthermore, the private sector is still de-leveraging while corporations are holding hundreds of billions of dollars in cash and up to $2trillion according to some estimates. It is very unlikely that they will be induced to invest by even lower interest rates. In essence, it is the uncertainty over the future direction of policy, the fiscal measures to stabilize the public debt and the persisting troubles in real estate that holdback market forces.

The counterargument, espoused by the Nobel Laureate economist Paul Krugman, holds that higher inflation will induce companies that are sitting on cash to invest, while the real burden of the public debt will shrink. However, inflation is essentially a tax on money holders and those whose salaries are fixed; plus it represents transfer of wealth from creditors to debtors. It is highly uncertain where such a gamble could end, and in fact, historically, inflationary policies have been hard to reverse.

Global fallout

In today’s interlinked world, the impact of QE will not be limited to the US economy: it will also cause excessive liquidity in emerging markets, including the Middle East and North Africa (MENA) region. Freely floating currencies have already appreciated in response to capital inflows from investors seeking higher returns. Warnings of a bubble in emerging market assets were rife even before the announcement of QE2. Now the red lights are flashing in front of many senior policy makers.

South Korea’s finance ministry announced that it would consider limits to capital flows, while Brazil and Thailand already raised taxes on foreign investment in government bonds. Thailand’s Finance Minister Korn Chatikavanij acknowledged “discussions with central banks of neighboring countries, which are ready to impose measures together, if needed, to curb possible speculative money flowing into the region.”

QE2 will have an even greater impact on those economies that have a fixed peg to the dollar and allow free capital movements, such as the Gulf Cooperation Council (GCC) countries or Lebanon. In fact, the central banks would not be in a position to tighten monetary policy to cool down the economy while the dollar depreciation will spur imported inflation, especially if the weak dollar translates into higher food commodities prices.

Furthermore, speculative investments induced by cheap money expose the receiving country to a sudden outflow if global risk aversion rises. So, for the Middle East and the GCC, two kinds of scenarios could occur in2011. One is a more benign one, where anemic growth in mature economies will be offset by the push from emerging Asia and public investments. In such a case the real growth rate in the GCC would not be too far from the average growth rate in countries from the Organization for Economic Cooperation and Development (OECD) and emerging Asia, (i.e. 3 to 4 percent).

The less benign scenario will be dominated by currency instability, bouts of risk aversion and international credit market frictions. It is hard to predict which one will prevail because the second scenario would be ignited by a traumatic event, such as a sovereign default, which depends crucially on political developments rather than purely economic ones. In essence, the usual cloud of uncertainty is unusually thick because the precarious historical phase we are experiencing has no precedent that can provide guidance.

There are no easy prescriptions for these testing times, but economies that are developing an internal capacity to grow through major infrastructure upgrades and expansion of capacity are better placed to withstand shocks. In other words, medium-term policy efforts should be concentrated on decoupling from the performance of the mature economies.

In this context we should welcome the successful bid to host the FIFA World Cup in Qatar, which will offer a major boost to economic activity in the entire Middle East.

FABIO SCACCIAVILLANI is director of microeconomics and statistics, and AATHIRA PRASAD is an economist at the Dubai International Financial Center Authority

 

 

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Finance

Q&A – Christos Papadopoulos

by Emma Cosgrove
written by Emma Cosgrove

Christos Papadopoulos has been six months on the job as regional chief executive officer for the Middle East and North Africa at Standard Chartered. He recently sat down with Executive to discuss what we can expect from both Lebanese and regional banks in the new year.

E  What will be the drivers of regional asset growth in 2011?

The picture in the region is going to be somewhat diverse. There are some markets where on the wholesale banking side, especially in those markets where there are significant infrastructure investment plans, the wholesale banking assets will significantly grow. And then there are other markets where, just by virtue of large populations and ongoing healthy [gross domestic product] growth, we are going to have consumer assets growing —markets like Egypt — but it is not going to be uniform.

E  Why is wholesale banking part of your Lebanon strategy for 2011?

Standard Chartered is extremely good at connecting trade corridors and FDI [foreign direct investment] flows, so we have a significant role that we can play in Lebanon in providing those kinds of solutions, especially for those corporates that have regional or even [outside]businesses. And that means that we are bringing to the market something that the local banks cannot provide, or at least cannot provide to the extent that we can. What we are very successful at doing is bringing Asian investors and Asian money into this part of the world. So what we’ve done in the Gulf is we have had as much as up to 40 percent of new money coming out of Asia.

Historically Europe used to be a significant supplier of finance to this part of the world, but now Europe is going through its challenges so in many respects when it comes to refinancing, they are not looking to participate, they are looking to get their money back. The extent to which Asia steps in and fills that gap means that you have a successful fundraising effort. Increasingly the Middle East is looking into Asia — whether it is to raise funding or to engage and do business.

When you look at the big trade corridors, whether it’s companies importing from China, whether it’s Korean contractors coming and doing business here, or whether it’s Chinese contractors coming in and working in the region, there is a significant engagement.

You have FDI flows going from the region to Asia, for example when the Qatar Investment Authority bought a significant stake in Agricultural Bank of China, so the world has changed in terms of the shift of economic growth and the emergence of Asia — a shift from West to East. And to a certain extent there has been a shift from North to South — whether it’s moving to the Brazils of this world or moving into Africa because of their commodities story. So you’re building corridors between Asia, Africa, the Middle East and Latin America.

E  What are your expectations for mergers and acquisition (M&A) activities in the region?

We have seen some big deals. We have seen very recently the deal with Zain and Etisalat, which was a significant transaction. Here in Lebanon you have the deals with Bank Audi and EFG-Hermes, so I think good deals that are available will be happening. I don’t think you will see a frenzy of activity, but there will be opportunistic deals as people seek to take advantage of those economies that increasingly provide more attractive returns.

If you want to be in a market that is otherwise unavailable to you, Libya for example, you might consider an M&A type entry into the financial sector. In the nonfinancial sectors, you will increasingly see[activity in] the telecoms sector.

 

 

 

 

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Vanquish visas and they will come

by Paul Cochrane
written by Paul Cochrane

Over the past decade the Middle East has shaken off its ‘danger zone’ reputation of being a place where only the foolhardy or “conflicted tourists” would plan a holiday. Since 2000, the number of tourists visiting the region (excluding Turkey and Israel) has more than doubled, from 24.9 million to more than 53 million. And while 2009 saw a 5 percent slump in international tourist arrivals, the region was only behind Northeast Asia globally in the rise in tourists in 2010, up 16.1 percent, according to the United Nations World Tourism Organization.

Perceived heightened stability, investment, infrastructure development and marketing campaigns have all contributed to tourism in places other than long-term favorites Egypt, Turkey and the Holy Land.

The rise has partly been fuelled by wary Westerners warming to the Middle East as an attractive vacation destination, after being swayed by the flurry of advertising campaigns and travel articles extolling old Damascus’s charms, Dubai’s palatial hotels and Beirut’s infamous ‘phoenix rising from the ashes’ reputation. However, inter-regional tourism has been a key driver for the sector and has corresponded with the emergence of low cost air carriers and the aggressive expansion of Middle Eastern airlines in general.

The rise in tourism has also dove-tailed with a resurgent middle class with the desire and funds to take a trip within the region but not quite enough cash to splurge on a family holiday to Europe or America. Syria has become a regional poster child in this regard, with its tourism sector exploding since the economy was opened up at the beginning of this century; visitor numbers have surged from two million in 2004 to nearly six million in2010. What is notable is that the majority of tourists are from the Gulf, with2.9 million Arabs visiting in 2010, compared to 1.35 million tourists from other, primarily European, countries.

It has been the increased openness of countries that has really encouraged the inter-regional tourism boom, with Damascus scrapping visas for Iranians and Turks and Turkey abolishing visas in 2010 for Syrians and Lebanese. Once the regulations changed, there was a 117 percent rise in Iranian visitors to Syria, while the Turkish-Syrian agreement encouraged482,000 Syrian holidaymakers to stream into Turkey, an 113 percent increase, and an 170 percent rise in Turks heading to their southern neighbor. This sensible bi-lateral move resulted in the largest jump worldwide in visitors between two countries in 2010.

Meanwhile, Ankara’s decision led to 73 percent more Lebanese visiting Turkey than in 2009, and easier visas and marketing campaigns led to74 percent more tourists from the United Arab Emirates, a 60 percent rise from Iran and a 47 percent increase from Saudi Arabia. While Arab and Iranian tourist numbers surged, Ankara’s strained relations with Tel Aviv resulted in a41 percent drop in Israeli tourists, to 80,000 visitors.

That’s not much of a surprise though, as politics and outbreaks of violence frequently cause the region’s tourism figures to yo-yo from one year to the next. But with all the development and infrastructure investment underway — from airport expansion in the Levant and the colossal aviation hubs in the UAE and Qatar, to the new resorts and hotels being built —the region is on track to becoming a top global travel and tourism destination. Indeed, according to the World Travel and Tourism Council, the Middle East’s tourist and travel economy is forecast to rise 149 percent by 2020 from the current $173 billion to $430 billion.

What should be addressed is the scale and feasibility of tourism projects. Mass tourism — as compared to more sustainable tourism that is not primarily seasonal — can have negative social and environmental ramifications. Now is the time for the public and private sectors to plan ahead.

The easing of border and visa restrictions should also expand further to bolster regional travel for Middle Eastern citizens and foreigners; as Turkey and Syria have clearly demonstrated, scrapping visas makes visitor figures jump. In Syria’s case, the country received $2 billion more in tourism revenues in 2010 than the year before.

 

PAUL COCHRANE is the Middle East correspondent for International News Services

 

 

 

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Erdogan lumps the leaks

by Peter Grimsditch
written by Peter Grimsditch

 

Turkey’s fiery, if thin-skinned, Prime Minister Recep Tayyip Erdogan has a love-hate relationship with the press. He loves the organizations that show appreciation of his policies and seems to hate those that don’t. Heis prone to threaten the offending publications with lawsuits, while urging their boycott by advertisers and readers alike.

Little surprise then that Erdogan should bristle at many of the stories emanating from the Wikileaks disclosure of diplomatic cables over the past few weeks. The notoriously hard-working premier wanted to sue a former United States ambassador to Turkey, Eric Edelman, for claiming, according to some of the press reports, that he had secret bank accounts in Switzerland.

If any such accounts could be found, he proclaimed to the media, he would donate the total deposits to the main political opposition, the Republican People’s Party (CHP). In addition to Edelman, he also wanted to sue the US State Department for uttering such a calumny. The excitable Turkish press debated for days the practicalities of putting such a threat into practice, seeking opinions from senior members of the legal establishment.

While the threat of legal action made for lurid headlines, it somewhat misses the point. The content of the cable was not that he had Swiss bank accounts but that the ambassador had been told by two sources that they existed. The cable did not include an opinion about the likely truth of the claims. It was also a confidential document — essentially a private conversation — between the envoy and his bosses in Washington. Edelman also described Erdogan as having “unbridled ambition stemming from the belief God had anointed him to lead Turkey” and an “overweening desire to stay in power.”The latter comment, of course, is less an insightful piece of news for the home base than a glimpse of the blindingly obvious regarding any political leader.

In any case, a more likely target for lawsuits than the State Department would have been either Julian Assange, the founder of Wikileaks, or the myriad media outlets that published the cables.  In a political environment as beset with gossip, rumour and mendacity as Turkey’s, the prime minister’s tetchiness understandable, even if the tendency to use some of his boundless energies in pursuing the authors of published criticism is perhaps as wasteful as it is unrewarding.

More significant than the tittle-tattle tales of tabloid headlines is the general picture that the US diplomatic service, overall, rejects the notion that the ruling Justice and Development Party (AKP) is hell-bent on turning Turkey into an Islamic state similar to Iran or Sudan, or even that it is unreasonably turning its back on the West and switching its allegiance eastwards.  What the cables do suggest is that Turkey has been redefining its place in the world ever since it realised that its importance as the eastern flank of NATO diminished after the collapse of the Soviet Union.

Especially since 2002, when the AKP came to power, the country’s security policy has been integrated with its economic transition and growth. Turkey’s strength is better illustrated by the size of its economy than the number of soldiers in its army. The cables may be tiresome and embarrassing but are not even news for the most part.

If Erdogan wants an example of real toughness in the face of adversity, maybe his aides could show him one leaked cable that doesn’t even mention him or the AKP. In January of last year, a 75-year-old American, Hossein Ghanbarzadeh Vahedi, walked into the consular section of the US Embassy in Ankara after a dramatic escape from Iran, where he had been held for seven months. Vahedi, according to the cable, had travelled to the country to visit the grave of his parents when, for reasons he never discovered, the authorities confiscated his passport. Vahedi rejected the offer of handing over $150,000for its return and opted instead to pay people to smuggle him out of Iran. After three days of furtive flight, including a nightmare 14 hours on horseback over a freezing mountainous trail, Vahedi reached Turkish soil where he took a bus for Ankara. That’s real fortitude in the face of adversity.

 

Peter Grimsditch is Executive’s Istanbul correspondent

 

 

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An outpost obstinate & obsolete

by Adam Pletts
written by Adam Pletts

 

Command Outpost (COP) Spera is located 800 meters from the border with Pakistan in Afghanistan’s Khost province. The platoon section that occupies the COP can only come and go by helicopter and they have no vehicles based here. As the lieutenant in charge explains, “all we got here is our legs and as you can see everything is higher than us.”

One of the peaks that occupies the high ground around the COP is code named “New York” and another, “the Taliban Hotel”, but the coalition’s enemy here is not actually the Taliban but rather the Haqqani network who, although allied with the Taliban, retain their own identity and considerable influence in the Khost border region and beyond, emanating from their power base at Miran Shah on the Pakistan side. Set up in 2003 and originally used as a Special Forces base, the COP was handed over to regular United States army units in 2005 with the intention of controlling insurgent infiltration from Pakistan to Afghanistan. Within my first five minutes on the base the lieutenant has compared the well-established infiltration routes that the insurgents use on a seasonal basis to the Ho Chi Minh trail, an apt analogy given that cutting supply lines of insurgent support now in Pakistan has proved little more successful than it did decades ago in Vietnam.

In fairness, the border traverses a vast and barren mountain range; since Spera is the only COP for miles along the frontier it is hardly surprising that the insurgents have simply changed their routes.

As one officer put it, “They just walk around the COP.”Another confided that “[COP Spera] is kind of a stupid base to have; the enemy attack it simply because it’s there but it doesn’t really serve a purpose.”

With this in mind, requests have been made at the brigade level to have the COP closed down but the US military sees it as a delicate subject, given how such a move could play into the propaganda war: the US would say it was a strategic withdrawal while the Haqqani network and the broader Taliban would claim to have forced the Americans out. This is perhaps why the Commander of US Forces in Afghanistan, General David Petraeus, will have to sign off on shutting Spera down.

You might have thought that the difficulty of controlling borders had been understood following the experience of insurgent infiltrations from Syria to Iraq, not to mention the problems that the US has on its own border with Mexico, or for that matter Europe has with human trafficking from the East and Africa. But the situation here is particularly complex.

The coalition would like to see Pakistan do more to secure the border but Pakistan is a volatile ally with mixed motivations. It has long been accused of attempting to destabilize Afghanistan, thereby mitigating the risk of being sandwiched between two potentially aggressive neighbors, while at the same time maintaining what they think of as “strategic depth” in Afghanistan in the worst case scenario of an Indian land invasion.

Whatever the decision on the closure, those who might be saddest to see it go are, strangely, the very soldiers who are based there and endure regular attacks and mortar shelling roughly twice per week. While I was there, the call “incoming” woke me from a brief afternoon nap as the mortar rounds were detected by radar, giving a few precious seconds to grab body armor and take cover. I’m not suggesting that anybody likes being fired at but the soldiers I spoke to all said they enjoyed their deployment. A public affairs officer put it this way: “At Spera they’re actually doing the job they signed up to do, not stuck in a TOC (Tactical Operations Centre) staring at a computer screen.”

It must be said that the atmosphere at Spera is one of close camaraderie. One Lieutenant said, “Here the guy to your left or right is your security — your survival depends on him.” It’s also true that the closer you are to the war, the more some of the rules break down. As one of the younger enlisted soldiers told me, “When I leave here I gotta go back to that bullshit saluting.”

 

ADAM PLETTS is a freelance journalist currently embedded with coalition
forces in Afghanistan.

 

 

 

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Finance

Femme finance

by Emma Cosgrove
written by Emma Cosgrove

When female banking executives discuss their path to the top, the word lucky is almost always mentioned. They were lucky that their experience was without gender discrimination or sexual harassment. They were lucky to have respectful mentors and to get to their positions without any apparent sexism in the way.
 

“I certainly had a fortunate experience in that throughout my career I never felt discriminated against or put down just because of my gender,” said Bana Akkad Azhari, Lebanon country manager for The Bank of New York Mellon, speaking on the sidelines of the New Arab Woman Forum (NAWF) in Beirut on December 2. The ubiquitous gratitude at reaching heights in careers they are fully qualified for begs a discussion of why women working in the financial world feel that a career without gender-related bumps is a luxury, not an expectation.

The numbers

Of the six of Lebanon’s alpha banks surveyed by Executive, women made up an average of 45.5 percent of the workforce. Banque Libano-Francaise had the highest representation of women with 49.66 percent, while Byblos Bank had the lowest of the banks surveyed with 41.1 percent.  Lebanon’s workforce is 24.8 percent female according to 2010 figures from the World Economic Forum’s (WEF) Gender Gap Index, compared to 25.4 percent in Morocco and 46 percent in the United States. The World Bank puts the female percentage of Lebanon’s workforce slightly higher, at 27 percent.

Despite the difference in the estimations, both statistics indicate that Lebanon as a country is behind in terms of gender equity in the work place, though the banking sector, it would seem, is well ahead of the national trend. 

A curious juxtaposition to the gender gap within the workforce is the gender dynamics of Lebanon’s universities. According to the WEF report, there are 1.19 times more women with tertiary education than men. Furthermore, 56 percent of students taking American University of Beirut’s Master of Business Administration program are female.

And that’s not the only oddity: when you scratch below the surface of the seemingly enlightened banking sector, it’s clear that women are largely crowded at the bottom and middle rungs of the ladder. In fact, the only female general manager of a conventional bank is Pik Yee Foong, of Standard Chartered, which isn’t a homegrown Lebanese institution. Furthermore, only two of the six banks surveyed by Executive have women on their boards.

Roles to play

The great debate surrounding the inequalities between men and women in the workplace is whether women choose to slow down their careers and delay promotion by taking maternity leave, or whether they are professionally punished for being biologically responsible for procreation. “Women are very educated in Lebanon but there is this Levantine mentality where they are very excited to be active and work after university, but upon their marriage there is a tendency to go back home to engage in a new challenge, which is building a family. It’s quite paradoxical with the level of education,” said Freddie Baz, chief financial officer at Bank Audi. 

The legally mandated maternity leave in Lebanon is just seven weeks with 100 percent pay. This is significantly less than the 12 weeks given to Moroccan women and half of the minimum leave granted to American women.

Although there is little conclusive evidence as to the effect of maternity leave on the composition of workforces overall, there is conclusive evidence that taking maternity leave lowers a woman’s pay over her career, as concluded by a 2004 Ohio State University study. This also indicates that choosing to take maternity leave makes promotion less likely. But in Lebanon, there are two forces at work. Some women may choose to leave the workforce when they start families, but many are also drawn out of the country by better-paid opportunities elsewhere.

This is a man’s world

Regional players indicate that the boys club dominating the upper echelons of banking is not so much a consequence of cultural mores as the result of a testosterone-prone industry.

“The United States is considered the most open and most diverse society that we have; at least we try to promote it as such. But in the banking environment it still tends to be a very white, male, pinstripe suit, white collar type of environment,” said Nadine Chakkar, head of global financial institutions for The Bank of New York Mellon, also speaking at the NAWF conference. Chakkar has worked her entire career in the US, but is of Lebanese origin.

 

The case in Lebanon is similar, but with the added issue of the common habit of passing family businesses from father to son — which is largely no longer the case in the West.  However, familial patronage aside, financial workplaces worldwide tend to display the same behavioral patterns. “Guys tend to help each other a lot more. When they move up they move everybody up with them,” said Chakkar. “With women, for some reason, we are wired differently. Instead of pulling everybody else with us we feel that we have to move up and push everybody else down. I think women just need to realize that somebody else’s success doesn’t hurt them.”

From the boardroom to the teller
A Lebanese mother became the first woman in the country to open a bank account for her children on December 17, 2009, when she opened accounts for each of her two sons at the Bank of Beirut and the Arab Countries (BBAC). “I’ve been trying to open a bank account for my two sons for 10 years now, but I was continuously told that only my husband could sign the papers,” said Barbara Batlouni, the Lebanese-American director of the non-governmental organization Amideast, to the Associated Press. Batlouni’s victory came after the Association of Banks in Lebanon changed rules that discriminated against women after receiving pressure from the Institute of Progressive Women and other like-minded groups. This move was a positive step, but Lebanon is still far from financial equality: a Heritage Foundation/Wall Street Journal Financial Freedom index shows that financial freedom has actually decreased in Lebanon in the past two years.
The World Bank reports that Lebanon is one of 42 countries in the world that does not afford men and women equal access to institutions in both the public and private sector. Married men and women do not enjoy equal financial rights. Women may work the same hours as men but are prohibited from certain industries and must retire four years earlier than men, at age 60. Finally, Lebanon is one of just four countries to grant tax breaks to men with unemployed wives, but not women with unemployed husbands.

Thus some hindrances may come from women themselves. However, Chakkar also said that reaching senior levels at financial institutions is a particular challenge for women due to the different ways that the two genders are perceived. “When I display a little bit of passion, I’m acting as a ‘bitch’ or being extremely aggressive, whereas a guy is just being competitive,” she said.  However, Roula Habis, general manager at Middle East Capital Group, says that she uses the assumptions about women to her advantage as a private wealth manager.  “Men usually know that women are more loyal and they are more focused,” she said. “You rarely hear about fraud and corruption among women — it’s more men. It’s easier for me to earn clients’ confidence because I am a woman.”

Future

Chakkar said that she is feeling a change in the wind.

“I think the industry’s changing, and not because the guys at the top had a revelation. I think it’s changing because society is changing. I think they are realizing that good talent has no color, no gender. I think they are also succumbing to the pressure of the environment out there,” she said. “Today corporations are being put on the spot. You get asked ‘how many women do you have on your board? How many women do you have in senior management?’”

 

 

 

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Qatar

by Peter Speetjens
written by Peter Speetjens

Following the suspension of two FIFA executive committeemembers for accepting bribes, the world’s governing football organization onDecember 2 announced that Russia and Qatar will host the World Cup (WC) in 2018and 2022 respectively.

While Russia — with England — was a favorite from the start,Qatar came as a total surprise. Especially in the West, commentators ask: whyorganize such a major tournament in such a tiny country that is blessed withsummer temperatures soaring up to 50 degrees, has no football tradition tospeak of, and which most people are unable to locate on a world map?

While this is a legitimate question, it seems thetraditional football power-houses may have underestimated the strength of theQatar bid, as well as FIFA President Sepp Blatter’s wish for the WC to betterreflect the game’s global appeal. In the past, the organization of the world’sbiggest sporting event more or less routinely changed hands between Europe andSouth America. Yet ever since Blatter came to FIFA power in 1998, Asia hostedits first WC in 2004, the first WC in Africa followed in 2010, while the 2022version will be hailed as the first-ever in an Arab and Muslim country.

The (controversial) Blatter believes that football has thepower to bring people together and enhance mutual understanding, peace andprosperity. Critics, however, claim that Blatter’s global interests mainly aimto enhance his own chance of a political FIFA-afterlife. Western footballnations may also have overlooked the influence of Mohamed bin Hammam, theQatari Head of the Asian Football Federation and current “number three” in theFIFA hierarchy, who is a strong candidate to succeed Blatter.

Still, even in the troubled FIFA ranks that would not beenough for Qatar to beat the bids of its main competitors, Australia and theUS, both countries absolutely nuts about sports and blessed with superbfacilities. As Qatar possesses none of the above, it seems to have outsmartedits bigger rivals by emphasizing being small.

Qatar promises to organize the most compact tournament ever.It will build or expand a total of 12 stadiums located within, at most, anhour’s drive, which will allow football fans to attend more than one game perday. Try doing that between New York and LA, or Sydney and Perth. In addition,once the 2022 world champion has been crowned, the stadiums’ upper tiers willbe removed and donated to countries that lack proper sport facilities. Theoffer is a novelty on ‘Planet Football’, one that was no doubt welcomed byFIFA’s poorer Asian and African representatives.

Qatar’s main weak point is, of course, the weather, as theWC traditionally takes place in summer. Previously, the FIFA technicalcommittee had considered the weather a potential health risk, not just forplayers and fans, but also for “officials and the FIFA family,” and requiredthat precautions should be taken.

To overcome this “slight” inconvenience, Qatar introducedanother novelty: to equip its stadiums with a solar-powered outdoorair-conditioning system that is able to keep the stadiums’ temperature at aconstant and comfortable 20-something degrees. Oh, and beer-drinking fans neednot worry. Qatari officials have promised that alcohol will be allowed inhotels and special outdoor “fan zones,” and they too will be connected to the“green” cooling system.

While most Qataris are no doubt proud and thrilled to hostthe 2022 football bonanza, some may question if building 12 stadiums andorganizing a WC is the best way of investing the country’s wealth. The stadiumsalone have a price tag of some $4 billion. South Africa in 2010 spent less thanhalf that amount, yet failed to record a profit as only two thirds of theprojected 450,000 visitors attended the games.

To the Qatari authorities however, money is not an issue.They think big and have more important things on their minds. Following the2022 WC, which has billions of viewers the world over, few people will still beunable to pinpoint Qatar on a world map. And there are other sport events tocome, such as the Asian Games, the Asian Cup in 2011, and, ultimately, theOlympics. Expect Qatar to be bidding for the ultimate dream in 2024 or 2028.

 

PETER SPEETJENS is a Beirut-based journalist

 

 

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Conflict nigh as waters dry

by Nicholas Blanford
written by Nicholas Blanford

 

The storms that wracked Lebanon in mid-December were among the most severe in several years. While they helped douse the epidemic of late season brush fires and allowed nervous ski resort owners to open the pistes for the first time, the welcome rainfall could not disguise the fact that Lebanon and the region in general is experiencing a worsening drought.

While the concept of “water wars” in the Middle East has been articulated for many years, the looming crisis over the lack of water is certain to lead to greater competition for resources, fuelling not only inter-state tensions but domestic upheavals between the haves and have-nots.

Before the first rains fell in earnest in December, Lebanon’s meteorological office had registered just 51.2 milli meters (2.01inches) of rain since September. That compares to 214.8 milli meters (8.45inches) for the same period in 2009.

Years of war and government mismanagement have wasted Lebanon’s most prized natural resource, the envy of much of the region, particularly Israel to the south which has coveted Lebanese waters since the notion of a Jewish state in Palestine was first suggested more than a century ago. An Arab League project in the early 1960s to divert the Hasbani River from flowing into Israel indirectly led to the 1967 Arab-Israel war, in which Israel seized the Golan Heights from Syria and the West Bank from Jordan.

Since then, Israel has exploited both territories for their water reserves. The Mountain Aquifer in the West Bank, which produces some 600million cubic meters of water per annum, is supposed to be a shared resource for Israelis and Palestinians.  But Israel exploits about 80 percent of the aquifer for its own needs. Israelis on average consume three times as much water as Palestinians. The Coastal Aquifer in Gaza once kept the Jewish settlements watered and provided some 18 percent of Israel’s water supply. But years of over-pumping emptied the aquifer ,allowing salt water to seep in, so that by the time Israel abandoned its settlements in Gaza in 2005 there was little water left for the Palestinians to exploit.

The sensitivities between Lebanese and Israelis over water resurfaced nearly 10 years ago when several minor pumping projects in the Hasbani river to provide water for certain villages and to irrigate some farmers’ fields prompted the Israeli government to threaten war against Lebanon. A four-year drought in north eastern Syria has left an estimated 2million to 3 million people living in what the United Nations terms “extreme poverty.” Thousands of inhabitants of the Jazeera region in Syria’s north east have migrated toward Damascus, living in ad hoc settlements in the hope of finding work. With once productive arable land turning into desert, Syria has gone from a net exporter of wheat to a net importer.

Lebanon boasts some 40 major rivers and 2,000 springs, but the UN estimates that half of the annual flow of 1,150 million cubic meters is lost to the sea or neighboring countries. A World Bank study concluded that Lebanon could be experiencing chronic water shortages by 2020 due to over-consumption, over-pumping, pollution and poor management. Much of Lebanon’s water is used for agricultural irrigation, particularly in the relatively arid Bekaa. But the lack of sustainable irrigation techniques places a burden on local water resources with ever more wells drilled and a consequent lowering of the water table. A 1999 plan to harness water resources called for investments of $1.5 billion to construct dams and reservoirs. The plan was supposed to be completed this year, but it has hardly got off the ground due to the failure of successive governments to allocate funds for the project.

If action is not taken soon, water shortages could provoke social unrest, especially given the expanding divide in Lebanon between the wealthy and poor. In recent months, residents of the Bekaa and the north, the two poorest regions in the country, have had to purchase water from tankers because the state supply ran out. In 1992, the collapse of the Lebanese lira sparked riots in the streets of Beirut, which ended up toppling the then-government of Prime Minister Omar Karami. Those protests were dubbed the “bread riots.” The next could be over water.

 

Nicholas Blanford is the Beirut-based correspondent for The Christian Science
Monitor and The Times of London

 

 

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