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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The tale of two Ammans

by Peter Speetjens
written by Peter Speetjens

 

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

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

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

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

Based on 2008 figures, the 2010 Jordan Poverty Reportdetermined the national poverty level as below an income of $80 a month for anindividual, and below an income of $5,473 annually for an average family of 5.7members. The average annual family income in 2008 in Jordan was just $8,706.The report concluded that the number of people living in extreme poverty in2008 increased by 0.3 percentage points to 13.3 percent, despite the fact thatgross domestic product that year increased by no less than 7.6 percent,prompting economist Yusuf Mansur to conclude that “economic growth has nothingto do with poverty reduction.”

Purchasing power in the different spheres of spendingbecomes clear at a market in east Amman, where one Jordanian dinar (equal to$1.4) will buy four pairs of large underwear, six pairs of socks, 10 kiwis or10 kitchen knives “made in China”; for the same amount in west Amman one canbuy half a hamburger in an American fast food joint. The rift between east andwest, rich and poor, is perhaps more profound than between “real” Jordaniansand “Palestinian” Jordanians, given that these groups live on either side ofthe city’s socio-economic divide.

However, the divide between haves and have-nots is alsolinked between capital and country, said Nawaf Tell, head of the Center forStrategic Studies (CSS) at the Jordan University. A recent CSS study concludedthat the tribal regions of Ma’an in the south and Mafraq in the north of Jordanare by far the country’s poorest. For people living there, west Amman is likeanother planet, with even poor east Amman a step up the social ladder.According to Tell, the government’s development policy and constant focus onAmman is only exacerbating the divisions; the provinces have seen hardly anydevelopment and the north and south threaten to become a “chain of ghostcities” as the poor continue to migrate to the capital city.

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

PETER SPEETJENS is a Beirut-based journalist

 

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The Buzz

Year in Review – Middle East

by Executive Staff
written by Executive Staff

Dec28: The American oil company Noble Energy signed a letter of intent to provideIsrael with natural gas from the Tamar field, discovered in January 2009 and located some 90 kilometers offshore ofthe country’s northern coast. The field, which may run into Lebaneseterritorial water, can potentially produce up to $750 million worth of naturalgas annually, according to Noble.

Jan4: The world’s tallest building, theBurj Khalifa, officially opened in Dubai with a spectacular display of 10,000 fireworks, light beams, music andsound effects. Formerly known as the Burj Dubai, the 828 meter-high buildingwas renamed after the ruler of neighboring Abu Dhabi, who bailed outdebt-ridden Dubai at the end of 2009.

Jan9: In 2009, Abu Dhabi’s economymade a significant turnaround withjust 0.8 percent inflation, down from 14.8 percent in 2008, according to theStatistics Center of Abu Dhabi, the official body concerned with the collectionof statistical data in the emirate. A fall in commodity prices and the effectsof the global financial crisis were the primary reasons for the improvement,the center said.

Jan10: Sheikh Issa, the brother ofthe United Arab Emirates president, was acquitted on charges of torture, a year after a video obtained by the American TV networkABC showed Issa graphically torturing an Afghan grain dealer. According toIssa’s lawyer, “The court accepted our defense that the Sheikh was under theinfluence of drugs that left him unaware of his actions.”

Jan12: According to the US-based FreedomHouse Index, the Arab world is the most repressive region globally and several countries that had shown improvements inrecent years had regressed. Jordan, Bahrain and Yemen were downgraded from“partly free” to “not free” and 88 percent of Arab populations were deemed tolack basic rights. January 2010

Jan19: Mahmoud al-Mabhouh, an exiledHamas military commander who had been living in Syria for the past 20 years,was assassinated — by strangulationand electric shock — in a hotel room in Dubai. Israel refused to comment onallegations that it was behind the killing, and the UAE said the perpetratorshad already fled the country.

Jan20: According to the globalconsultancy firm Control Risks Crude, oil prices were expected to remainstable in 2010 after two years ofmarket fluctuations brought on by the global economic downturn, with barrelprices hovering around the $80 mark. “We called the price at $70 for 2009,which people said was crazy at the time, but which turned out to be pretty muchon tap,” said Jonathan Wood, global issues analyst at Control Risks.

Jan20: David Jackson, the CEO ofDubai Holding’s investment arm, Istithmar World, resigned and was replaced by the company’s chief investmentofficer, Andy Watson, as the government-owned conglomerate struggled torestructure an estimated $22 billion in debt.

Jan25: Standard & Poor’swithdrew its credit rating for the government-owned Dubai Holding CommercialOperations Group citing“insufficient information” and claiming that the group was “likely to bematerially weaker” than previously thought.

Jan25: Iran’s Central Bank governor,Mahmoud Bahmani, said Iran’s banking system had $48 billion innon-performing loans and was on the brink of a crisis. Meanwhile, Iranian President Mahmoud Ahmadinejad announcedthat three zeros would be knocked off the Iranian currency, but did not statewhen the measure — intended to help recover the rial’s depreciated value —would take place.

Jan25: Shortly after taking off fromBeirut in stormy weather, Ethiopian Airways Flight 409 crashed into theMediterranean, killing all 90 persons on board, including 51 Lebanese nationals, 31 Ethiopians andthe French ambassador’s wife. Media speculation abounded about the cause of theaccident — ranging from lightning and pilot error to sabotage and a bomb onboard.

Jan31: The Washington Post reported that the Obama administration wasquietly speeding up arms sales and upgrading defenses for oil terminals and keyinfrastructure in Saudi Arabia andother Persian Gulf allies, to thwart attacks by Iran. The initiatives wouldtriple the size of America’s forces in Saudi Arabia.

Feb1: Following the cessation of atwo-month long military campaign against Yemeni rebels along the border inwhich at least 133 Saudi troops were killed, Saudi Arabia’s deputy defenseminister, Khalid bin Sultan, said some 69 percent of Saudi soldiers areoverweight and that this posed a threat to “combat efficiency.” Bin Sultan himself underwent gastric bypass surgeryin the US to lose weight, the UPI newswire claimed.

Feb3: Ahead of scheduled Marchelections, an Iraqi appeals court overturned a ban on hundreds of candidatesfor suspected ties to the former Baath party. “The appeal court will look at their file after the election,” and ifthey find them to have links to Saddam’s outlawed Baath party, “they will beeliminated,” Hamdia al-Husseini, an electoral commission official, told Iraqistate TV.

Feb4: Loaded House, a traditionalEmirati restaurant in Dubai, introduced its newest entrée — a quarter-poundcamel burger, which comes loadedwith cheese and burger sauce and a side of fries, priced at $5.45. Therestaurant’s assistant manager claimed that the burger was fat andcholesterol-free, but declined to comment on how the outlet tenderized the toughmeat.

Feb7: Saudi Arabia’s Prince Turkial-Faisal smiled warmly and shook hands with Israeli Deputy Foreign MinisterDanny Ayalon at a securityconference in Munich, following a diplomatic spat about seating arrangementsfor a panel. Ayalon began his talk to the panel by saying that “arepresentative of a country with a lot of oil” had pressured the organizers toseparate the panel because he “did not want to sit with us.”

Feb8: The world’s tallest building, theBurj Khalifa in Dubai, was unexpectedly shut down  only a month after opening. Witnesses cited electrical problems with the towers’elevators and visitors told the media they were stranded on the skyscraper’sobservation deck for around 45 minutes as the lift faltered.February 2010

Feb15: Dubai’s police departmentpublished passport photos and CCTV footage of 11 alleged Mossad agents at the hotel where Hamas operative Mahmoudal-Mabhouh was assassinated in late January. The passports — six British, twoIrish, one French and one German — corresponded to the real names ofIsraeli-European dual citizens, some of whom contacted the press claiming thattheir identities had been stolen.

Feb15: A year after she was denied anentry visa for a tournament in Dubai, Emirati authorities permitted Israeliplayer Shahar Peer to play in the Dubai Tennis Championships, though she was restricted from speaking to thepress and could only travel from the hotel to the tournament site. Peer endedup beating Belgium’s Yanina Wickmayer, the world’s number 15.

Feb18: According to the STR GlobalConstruction Pipeline Report, Dubai reported the largest number of hotelrooms currently in the active pipeline and construction phase in the region, with 30,222 rooms and 15,563 rooms, respectively,followed by Abu Dhabi. Region-wide, a total of 456 hotels with 123,764 roomsare in the active pipeline, the report said.

Feb23: According to the KhaleejTimes, the UAE central banklifted restrictions on the percentage of profit at which bonus shares may bedistributed, overturning a 60percent restriction put into place just one week before. The paper reportedthat the cap was put into place in order to retain liquidity in the banks. Itwas removed when bankers suggested that allowing bonus shares to be distributedat an unlimited percentage of profits would expand the banks’ capital base.

Feb24: Saudi Prince and billionaireal Walid bin Talal, agreed to sell a 9.09 percent stake of his Rotana Media for$70 million to Rupert Murdoch’s News Corp, with an option to take this up to 18.18 percent. The move marked NewsCorp’s most significant investment in the Middle East.

March3: Nissan said it would recall50,000 vehicles across the Middle East due to faulty fuel gauges and brakepedals, as part of a worldwiderecall of some 50,000 automobiles. The recall affects several of the Japaneseautomaker’s pick up truck, sports utility vehicle and minivan models, rangingfrom 2005 to 2010. Nissan said no accidents had been reported and blamed aparts supplier for the defect.

March18: As global demand for oilincreased, the head of Libya’s delegation to the Organization of PetroleumExporting Countries (OPEC) said that the cartel’s ability to raise productionwas being stymied by Russia’s increased output, since the December inauguration of its EastSiberia-Pacific Ocean pipeline. OPEC would, however, not change output targetsin the hope that rising demand later in the year would absorb excessproduction.

March22: According to the FinancialTimes, the UAE was awaiting ananswer from the US in response to its request for new American-made JointStrike Fighter planes. The US said it would first have to review arms salesto the Gulf, in light of its policy of maintaining Israel’s “qualitativemilitary edge” in the region.

March22: Undersecretary of Abu Dhabi’sdepartment of economic development Mohammed Omar Abdullah told a pressconference that Abu Dhabi would not permit 100 percent foreign ownership ofcompanies outside existing free zones. However, the revised Companies Law, which is under review by the government,will relax foreign ownership rules, Abdullah said.

March22: In a notice sent to all foodestablishments, the Dubai municipality ordered restaurants to stop servingdishes with alcoholic content or risk a fine of $5,440, Abu Dhabi-based The National reported. Restaurant owners criticized the decision,which is based on a 2003 law. The Dubai Municipality retracted the ban one daylater, saying it was a misunderstanding.March 2010

March23: Dubai International Airport saw cargo volume rise by 26.7 percent to 171,707tons in February, and the number of passengers increase from last year by 22.6percent to 3.64 million. The announcement marked the ninth consecutive month ofdouble-digit passenger growth at Dubai airport. By comparison, 2009 saw anannual passenger increase of only 9.2 percent, up from a 4.6 percent rise in2008.

March24: Former director of the DubaiInternational Financial Center (DFIC) Omar bin Suleiman, who was removed fromoffice last November, was reportedly being detained and questioned by state security for alleged financial crimesamounting to some $13.6 million, according to the daily Gulf News. Suleiman hadnot yet been charged, and DIFC and public prosecution officials refused tocomment.

March24: United Kingdom ForeignMinister David Miliband announced his country would expel an unnamed Israelidiplomat, after investigations byBritain’s Serious Organized Crime Agency revealed “compelling reasons” tobelieve Israel was behind 12 forged British passports used in the Januaryassassination of a Hamas operative in Dubai.

March25: Investigators formallycharged and slapped a travel ban on Mansour bin Rajab, a Bahraini minister who stands accused of laundering money reportedlytotaling more than $30 million, according to the daily Gulf News. The move cametwo days after Bahrain’s king issued a formal decree dismissing bin Rajab.

March25: According to the local daily TheNational, the UAE was consideringnew legislation which would fine traffic violators based on their salaries. Head of public health and safety at the DubaiHealth Authority Ali al-Marzouqi told the paper: “If someone is earning 50,000dirhams or 60,000 dirhams a month, a few thousand dirhams worth of fines isnothing so it would not be fair to increase the amounts for everyone.”

April1: As oil prices reached their highest levels since October 2008 at $84 perbarrel, energy ministers concluded a two-day meeting of the InternationalEnergy Forum in Cancun, publishing a joint statement calling for greatertransparency to curb energy market volatility and strengthenedconsumer-producer dialogue.

April2: According to the Sisters’ ArabForum for Human Rights, a 13-year old Yemeni girl, Elham Assi, reportedlydied of injuries to her genitals four days after her marriage to a 23-year oldman. Authorities detained herhusband.

April8: Dubai police announced theyhad arrested Steven Moos, who posed as renowned plastic surgeon Dr. StevenHooping to lure patients into thebasement of his Dubai villa and performed surgical procedures on his kitchentable. Moos apparently used rudimentary tools and disposed of fat removed byliposuction in a cooking pot.

April11-15:  Several major opposition parties boycotted the firstmulti-party presidential, legislative and local elections held in Sudan in more than two decades, citing the logisticaldifficulties of holding fair elections in the war-torn south and Darfur. The USCarter Center and European Union observers concluded that the elections did notmeet international standards, while Russia concluded that the elections werefair by “African standards.”April 2010

April15: In the greatest disruption to air travel since 9/11, a massive cloud ofvolcanic ash from an erupted Icelandic volcano led much of Europe to shut downits airspace for four days. Canceled flights left thousands stranded across theMiddle East, with the Dubai-based Emirates Airlines estimating that 100,000passengers had been affected, amounting to $65 million in losses for thecarrier. The UAE responded by issuing 96-hour visas to passengers stranded atEmirati airports.

April18-21: According to eventorganizers, some 255 exhibitors from 36 countries and 800 company chiefexecutive officers participated in the Abu Dhabi Cityscape 2010, as well as regional and international visitors andinvestors. During the event, the Abu Dhabi-based developer Sorouh Real Estatesigned a $1 billion agreement with the Urban Planning Council to develop theWatani and Shamkha residential areas.

April19: Pan-Arab recruiter GulfTalentreported that Saudi Arabia and Qatar saw a rise in employment in the lastquarter of 2009 on the back ofgovernment spending and increased oil revenues, which helped to drive economicgrowth. Saudi Arabia’s employment rate rose 2.4 percent in the fourth quarterof 2009 with Qatar witnessing a 2.2 percent rise, according to the recruiter,while the UAE, Bahrain and Kuwait all suffered job losses.

April19: Spending on informationtechnology in the Middle East and North Africa (MENA) region was set to grow at12 percent in 2010, four times theglobal average of 3 percent growth, with total spending reaching $1.48 trillionthis year, according to a study conducted by telecom research firm IDC. Thestudy’s findings followed the announcement that Emirates IntegratedTelecommunications Company (Du) was planning to raise $273 million by sellingadditional stock to shareholders to fund accelerated growth, networkcapabilities and mobile infrastructure.

April23: Amnesty International accusedUAE authorities of torturing 17 Indians sentenced to death in the killing of a Pakistani man. According to thehuman rights organization, the suspects were beaten, given electro shocks,deprived of sleep and forced into stress positions.

April27: Kenya’s foreign minister arrivedin Dubai to defuse tensions after four members of the Emirati ruling family,who were vacationing at a resort in Mombasa over Easter, were questioned asalleged terror suspects byimmigration officials and subsequently deported. The UAE responded bytightening visa requirements on Kenyan nationals, only permitting universitygraduates to enter the country.

May11: The number of humantrafficking cases prosecuted in the UAE doubled last year, with 43 cases goingto court, compared to only 20 in 2008and 11 in 2007, The National reported, citing a report by the governmental National Committee to CombatHuman Trafficking.

May13: The German Ex Oriente Luxcompany unveiled a vending machine at Abu Dhabi’s Emirates Palace Hotel thatdispenses one, five and 10 gram gold bars, in addition to a one ounce bar. The fluctuating price of gold will bereflected in the bars’ pricing, with one-gram bars currently vending for$47.70. The machine includes security features and anti-money-launderingsoftware.

May18: The Israeli daily Haaretz reported that Israel rejected two Qatariproposals to renew diplomatic ties and allow Israel to re-open an office in Doha, in exchange for letting thekingdom carry out reconstruction projects in Gaza and import necessary constructionmaterials. Ties between the two were suspended following Israel’s December 2008pummeling of the Gaza Strip.

May19: Without explanation, Bahrainsuspended Qatari TV network Al Jazeera from broadcasting locally and barred a TV crew from entering the kingdom,accusing the station of breaching “professional media norms and flouting thelaws regulating the press and publishing.”The US-based Committee to Protect Journalists noted that it came a day afterthe station broadcast a report on poverty in Bahrain.May 2010

May24: The Dubai-based Spot On PublicRelations reported that, at 15 million users, the number of social mediasubscribers in MENA surpassed the combined circulation of newspapers in theregion, with the UAE, Egypt, SaudiArabia, Morocco and Tunisia accounting for 70 percent of Facebook users in theregion.

May24: Australia expelled an Israelidiplomat after a police investigation revealed that Israel was behind theforging of four Australian passports used in the January murder of Hamas operative Mahmoud al-Mabhouh in Dubai. “Thedecision to ask Israel to remove from Australia one of its officers at theIsraeli embassy in Canberra is not something which fills the Australiangovernment with any joy,” Foreign Minister Stephen Smith said.

May26: Baghdad’s municipality saidit had shortlisted eight foreign firms to construct a $3 billion metro systemthrough Iraq’s capital. Thecompanies — from Britain, Germany, Finland, Italy and the US — will presenttheir bids to the project’s consultants, French engineering group Systra. Themetro’s first line will span 21 kilometers with 21 stations, while the secondline will run a stretch of 18 kilometers and have 20 stations.

May31: Saudi Arabia announced plansto establish an independent firm to manage the kingdom’s eight ports and gradually privatize them, reactivating a processthat has been frozen since 1997 when a royal decree first permitted privatefirms to operate berths and equipment. The move aimed to raise the kingdom’scontainer handling capacity to 15 million 20-foot equivalent units by 2020.

May31: A total of nine civilians — eightTurks and one Turkish-American — were killed and dozens were injured afterIsraeli commando troops attacked and seized a Gaza-bound flotilla of humanitarian ships loaded with 10,000 tons of aidin international waters.

May31: In a press release thatcoincided with “World Day for Anti-Smoking,” the Director General of the GulfCooperation Council Executive Council for Health Ministers, Dr. Tawfeeq Khojah,said that the GCC states were working on a unified anti-tobacco strategy, in line with international criteria. The strategywould be set for 10 years, cost $3 million and would include national campaignsin each of the GCC states.

June7: A planned $3 billion,40-kilometer long causeway linking Qatar to Bahrain was put on hold for the second time. Inside sources told Reutersthat skyrocketing costs and political tensions were to blame for the delay inconstruction, which was scheduled to begin in the first quarter of 2010 and becompleted by 2015.

June8: Stunning its competitors at anair show in Berlin, Dubai’s Emirates airline placed an $11 billion order withAirbus for 32 double-decker A380s to be delivered by 2017, making it the mostexpensive commercial aircraft order ever.

June11: Al Jazeera, which wonexclusive regional rights to broadcast the 2010 World Cup from South Africa,came under fire for glitches during the opening game’s transmission. Subscribers, who paid up to $150 to watch thegames, were faced with blank screens, pixilated images and commentary in thewrong language for subsequent games. The station blamed sabotage and said thatsignals on Egypt’s Nilesat satellite operator and Saudi Arabsat were

deliberatelyjammed. June 2010

June13: Citing US government officialsand an internal Pentagon memo, the New York Times reported that the US had discovered nearly $1trillion in untapped minerals in Afghanistan, such as iron, copper, cobalt, gold and lithium, “enough tofundamentally alter the Afghan economy and perhaps the Afghan war itself.” TheAfghan mining minister later announced that mineral deposits could be worth upto $3 trillion, as the Afghan government launched an international biddingcampaign to attract investments.

June14: Abu Dhabi’s Criminal Courtsentenced an 18-year old woman who had accused six men, including one policeofficer, of gang raping her, to one year in prison for consensual sex. The plaintiff was not granted a lawyer. The policeofficer received a one-year sentence for extramarital sex and two defendantsreceived three-month sentences for being in the company of a female not relatedby blood, while two others were fined $1,361. One man was acquitted.

June17: As US crude oil prices roseto $77 per barrel, Arab Monetary Fundchief Jassim al-Mannai told reporters that growth in the Arab economies wouldreach at least an average of 4 percent this year due to higher oil prices, andthat the euro zone crisis’s impact on the region would be marginal.

June17: Dubai’s ruler Sheikh Mohammedbin Rashid al-Maktoum published a poem in the Al-Khaleej daily entitled “Gaza’s Iliad,” criticizing Israel’s blockade of Gaza and the attackon the aid flotilla, while urging Arab aid to the embattled strip.

June20: In the aftermath of a Hamasoperative’s assassination in January, Dubai’s police chief General DahiKhalfan Tamim told The National that the emirate needs to install security cameras “everywhere” and would invest an additional $136 million onsecurity technology this year. He added that residents of the emirate, whichalready boasts 25,000 security cameras, needn’t be concerned about theirprivacy, as such intrusions are against the law and not “accepted by ourreligion and tradition.”

June21: A few days after the UNSecurity Council slapped a fourth round of financial and military sanctions onIran for its controversial uraniumenrichment program, the UAE reportedly shut down 40 international and localcompanies for violating the UN sanctions, the daily Gulf News reported.

June21: Saudi Arabia’s official newsagency said that the kingdom was allocating $1.6 billion to build 6,000 homes for citizens displaced during the November 2009 toJanuary 2010 fighting between Yemeni rebels and the Saudi army along theirshared border. The funds would also cover educational facilities and healthinfrastructure in the southern Jazan province.

July2: Only 10 to 14 percent of the400,000 known HIV patients in the MENA region receive treatment due to stigma and discrimination, UNAIDS regionaldirector Hind Othman told Reuters. The number of reported HIV cases in theregion grew by 100,000 in the past two years according to UN statistics, thoughOthman cast doubt on the accuracy of those figures due to a lack of systematictesting for the virus.

July4: The UAE received approval fromthe European Commission to begin exporting camel milk to Europe beginning in 2011, following quality andsafety testing. The UN Food and Agriculture Organization estimated thepotential world market for camel’s milk at $10 billion, which is lower in fatand richer in iron and minerals than its bovine counterpart.

July13: Satish Khanna, general managerof Al Fajer Information and Services, which is staging the first GulfRail showand conference in Dubai in 2012, said that $170 billion worth of transportprojects are expected to be put in place in the Gulf region over the next 10 to15 years, with 85 percent ofinvestments made in the UAE, Qatar and Saudi Arabia.

July22: Following four days of powercuts, the UAE daily Gulf News reported that power had been restored in most of Sharjah. Industrial areas and the Al Wahda residential areawere the worst off with power gone for more than 70 hours, with the SharjahElectricity and Water Authority blaming technical faults. At least oneconstruction worker died from heat exhaustion, as hospitals reported four timesthe average number of heat-related illnesses.

July27: Abu Dhabi Ports Companyawarded a $280 million contract to ajoint venture between ED Zublin AG and Al Jaber Transport & GeneralContracting for the design and construction of its flagship offshore KhalifaPort and Industrial Zone project, set to commence operations in 2012. By 2030,the zone is set to span 420 square kilometers with a port container capacity of150 million 20-foot equivalent units and 35 million tons of general cargo. July 2010

July27: In an online poll by ArabianBusiness, more than 70percent of respondents said that additional protections for internationalinvestors would help inspire confidence in the region, a month after the UAE federal government introduceda scheme to offer Dubai investors and developers a ‘government guarantee’ incase of stalled or canceled projects that are already in the constructionphase.

July27: Sheikh Mohammed bin Rashidal-Maktoum, prime minister of the UAE and ruler of Dubai, approved a documenton “professional behavior principles and ethics” for employees of all ministries and federalauthorities, aimed at boosting the state’s reputation and developing a “spiritof responsibility with adherence to ethics while dealing with subordinates,colleagues or public.”

July27: According to a global survey byColliers International, of 145 business districts, Abu Dhabi’s daily privateparking rates for prime business areas are the highest in the world at $55 perday. Dubai ranked 13th at $40 perday, while Chennai in India was the lowest globally at a daily rate of $0.96.

July28: In its Global Economic WeeklyReport, Bank of America Merrill Lynch said the UAE’s economy would seesluggish growth of just 1 percent in 2010 and 2 percent in 2011, making it the worst performing economy in the GCCfor both years. Qatar’s predicted growth was highest in the region at 11.3percent for 2010 and 9.6 percent for 2011.

July30: On his first visit to Lebanonsince the assassination of Prime Minister Rafiq Hariri in 2005, SyrianPresident Bashar al-Assad joined Saudi King Abdullah and President MichelSleiman for a historic summit.Commentators said the meeting was a show of unity and support for Lebanesestability, amid fear of unrest over a possible indictment of Hezbollah membersby the international tribunal tasked with prosecuting Hariri’s assassins.

Aug1: According to a report by theUnited Nations’ Economic Commission for Western Asia, Kuwaitis and Emiratishave the highest average life expectancies in the region, at 77.6 years and 77.4 years, respectively. Thereport credited advanced health and education facilities for the ranking.

Aug3: A study by shoemaker RYN MiddleEast cited in Emirates Business showed that only 4 percent of Emiratis walkon a weekly basis, compared to theUK where the ratio is 10 times higher. Lack of physical exercise, blamed on theheat, contributes to some of the world’s highest obesity rates in the countriesof the GCC.

Aug3: In the biggest borderconfrontation since the 34-day 2006 war, three Lebanese soldiers, an Israelicolonel and a Lebanese journalist from the daily Al Akhbar were killed during border clashes between theLebanese Armed Forces and the Israeli army, after the latter cut trees near Adaysseh along the disputed Blue Line.After the media published photos showing Israeli personnel appearing to breachthe border fence, a UNIFIL investigation concluded that the trees were onIsrael’s side of the blue line.

Aug5: According to census figures, SaudiArabia’s expatriate population declined from 37 percent of the overallpopulation in 2004 to 31 percent in April 2010, though their actual numbers had risen by 37.7percent from 6.1 million in 2004 to 8.4 million this year. Workers from India,Pakistan, Bangladesh, Indonesia and the Philippines made up the vast majorityof expatriates.

Aug9: Figures from the DubaiStatistics Bureau showed a 10 percent rise in marriages between Emiratis andforeigners between 2007 and 2009 inDubai alone, with divorce rates among mixed-nationality couples only slightlyhigher than their Emirati counterparts. The cost of dowries demanded by thefamilies of Emirati women was encouraging men to marry foreigners, according toa spokesperson for the Ministry of Social Affairs. August 2010

Aug11: A YouGovSiraj survey showed thattwo in five residents of the UAE supported a governmental ban on BlackBerryservices, which had been scheduledto go into effect in October, with Western expatriates most resistant to theban. Saudi Arabia had also announced a ban on BlackBerry services deemed athreat to national security, but claimed that Canadian Blackberry makerResearch in Motion had agreed to fulfill regulatory requirements.

Aug15: Some 73 percent ofcounterfeit medicine seized at European borders was routed through the UAE, reported The National, quoting a report by the European CommissionTaxation and Customs Union, with the amount of fake medicine arriving via theUAE rising from 750,000 items in 2008 to almost 5.5 million items in 2009.

Aug22: According to UAE daily TheNational, Dubai opened a newcircuit within its court to deal with the huge volume of debtor cases overbounced checks. The circuit washearing more than 100 personal and commercial cases every week in itsafter-hours sessions, leading to calls for the government to overhaul laws thatmake it a criminal offense with jail time to bounce a check.

Aug30: According to a study by globaloffice solutions provider Regus, more than 50 percent of professionals inthe United Arab Emirates may quit their jobs after their annual summer leave due to low involvement by top management coupledwith a lack of promotions and company vision. Other factors contributing to theresignations included long commutes and bosses taking credit for the work ofemployees.

Aug31: Dubai’s Road and TransportAuthority delayed the opening of some of the remaining eight metro stations ofthe Red Line, due to be inauguratedin October, the Abu Dhabi daily The National reported. Director of RailOperations Ramadan Mohammed blamed disappointing passenger volume and the slowdevelopment of the communities around the stations, but didn’t specify which ofthe eight stations’ openings would be delayed.

Sept5: A report released by the UAE’sMinistry of Foreign Trade on commercial transactions between the Emirates andIndia, its largest trading partner, showed that the Gulf state now runs a tradesurplus. The UAE turned a trade deficit of $1.99 billion during the firstquarter of 2009 into a surplus of $599 million during the first three months of2010.

Sept6: Bahrain’s government decidedto reassert its control over the country’s mosques, after charging members of a Shiite opposition groupwith plotting to overthrow the Sunni government. Bahraini Crown Prince SalmanAl Khalifa said the measures were aimed at “regaining control of the pulpits sothey are not hostage to incompetent politicians or clerics who have lost theirway,” according to the official Bahrain News Agency.

Sept6: Lebanese Prime Minister SaadHariri told the pan-Arab daily As-Sharq al-Awsat that it was a ‘mistake’ to accuse Syria ofkilling his father, and that theclaim was a ‘political accusation.’ He said that “false” witnesses who “misleadinvestigations did harm to Syrian-Lebanese ties by politicizing the murder,”but tried to distance the tribunal from the earlier investigation. Hariri alsosaid that his visits to Syria feel like “going to a brotherly and friendlystate.”

Sept7: Seven years after signing acommon market agreement, the GCC shelved its latest plans to implement it after a meeting of GCC foreign ministers in Jeddah.“I do not want to say that there are hurdles facing the execution of theagreement but definitely there are differences of opinion among us,” KuwaitiFinance Minister Mustafa al-Shamali told the media after the meeting.

Sept8: Data released by theinternational housing research firm EuroCost International showed that Dubaihad dropped from the 12th most expensive city in the world in 2009 to 31st thisyear. The firm said that the cityexperienced “spectacular decreases” in the range of 30 and 50 percent dependingon the type of housing. September 2010

Sept11: Kuwait plans to build fournuclear reactors by 2022, with eachfacility producing 1,000 megawatts of electricity, according to a report by theofficial KUNA news agency. Secretary General of Kuwait’s National NuclearEnergy Committee Ahmad Bishara said that an initial analysis showed nuclearenergy was a viable option if oil prices remained above $45 to $50 a barrel.

Sept13: The Wall Street Journal reported that the US administration planned tosell $60 billion worth of sophisticated aircraft, weaponry and ballisticmissile defense systems to Saudi Arabia to “support Arab allies against Iran,” including 84 new F-15s, in amove that would create an estimated 75,000 jobs in the US.

Sept15: British Airways chief WillieWalsh told the European Aviation Club in Brussels that Europe had been tooslow in recognizing “the significant threat” posed by competitive MiddleEastern airlines and that it wasworrying to see European governments fund Dubai’s Emirates airline, which isthe biggest customer for Airbus’s A380 superjumbo, by “providing them withcheap access to capital.”

Sept15: Abu Dhabi’s government-ownedAdvanced Technology Investment Co will build the emirate’s first chipmanufacturing plant, investing some$7 billion in the endeavor, the Wall Street Journal reported, citing CEO Ibrahim Ajami. The plant willbe a 12-inch wafer production facility and will come online between 2014 and2015.

Sept19: Manama Municipal Councilmember Abdulmajeed al-Sebea’a accused the Bahraini police and tourismdepartment inspectors of encouraging prostitution to attract tourists during the Eid holidays, whichwas discouraging Gulf families from visiting the kingdom, the Gulf Daily Newsreported.

Sept23: Saudi Information and CultureMinistry spokesman Abdul Rahman al-Hazza told Al-Arabiya television stationthat Saudi websites and online media, including blogs and forums, would haveto register officially with the government to prevent libel and defamation,under a new electronic media law. The news sparked outrage from Saudi web users, leading Hazza to clarify thatonly online news sites would be “required” to register, while blogs would be“encouraged” to seek a governmentallicense.

Oct6: The US military presence inKuwait generates $6 billion annually for the state’s economy through logistics, supplies and other services, thelocal daily Al Watan reported, citing US Ambassador to Kuwait Deborah Jones.Kuwait’s exports to the US jumped 72 percent in the first seven months of 2010compared to the same period last year, while US exports to Kuwait rose 80percent during the same period, the ambassadorsaid.

Oct11: In what analysts were calling a‘bidding war’ between the neighboring countries, Iran announced that it hadovertaken Iraq in estimated oil reserves with 150.31 billion barrels ofreserves, a week after Iraq said ithad surpassed its neighbor with 143 billion barrels in proven reserves.

Oct13: On his first official statevisit to Lebanon, Iranian President Mahmoud Ahmadinejad was met by thousands ofsupporters who gathered alongBeirut’s airport road. During his two-day trip, Ahmadinejad met with PresidentMichel Sleiman and Prime Minister Saad Hariri, attended a rally near the borderwith Israel in southern Lebanon and reportedly received an assault riflecaptured from Israeli soldiers during the July 2006 war from Hezbollah leaderHassan Nasrallah.

Oct14: A Reuters poll of 16 economistsand investors estimated that Dubai’s debt stood at about $115 billion, despite its debt restructuring efforts over thelast year. All but one of the respondents predicted that Dubai would likelyfinance its debt obligations through asset sales, with port operator DP Worldtopping the list of likely sales.

Oct17: Ten workers at the privateKuwaiti Scope TV station were injured when a mob of 150 people, reportedly armedwith pistols and knives, stormed the station and assaulted employees over a talk show segment they deemed insultingto members of Kuwait’s ruling family. October 2010

Oct18: After the UAE abruptlycanceled an agreement allowing the Canadian military to use Camp Mirage nearDubai, Canada was reportedly “moving quickly” to find a new hub from which toresupply its troops stationed in Afghanistan. Canada had allegedly balked at a UAE request to give Emirati airlinesmore landing rights in cities such as Toronto, Calgary and Montreal. Shortlyafter, Canadian troops were told they had a month to clear out.

Oct18: The UAE’s Federal SupremeCourt ruled that a man has the right to beat his wife and children “provided he does not leave physical marks” and“abide[s] by the limits of this right,” the local daily The National reported.The court found that a man who had “slapped and kicked his daughter and slappedhis wife” had exceeded his rights under sharia law, because the beating was toosevere and the daughter, age 23, too old for such disciplinary measures.

Oct21: The UAE opened a naval baseon its eastern coast in the emirate of Fujairah to protect oil exports in the event that Iran closesthe Strait of Hormuz. Abu Dhabi was reportedly also building a massive oil exportand storage facility in Fujairah, as well as two oil and gas pipelines betweenthe emirates.

Oct23: In the largest classifiedmilitary leak in history, whistle-blowing website Wikileaks published400,000 secret US military logs detailing the torture of detainees in Iraqijails and the deaths of tens ofthousands of Iraqi civilians between 2004 and 2007. Wikileaks claimed the logsprove that approximately 15,000 more Iraqi civilians had died than previouslyestimated.

Oct28: Following the death of Ras AlKhaimah ruler Sheikh Saqr bin Mohammed al-Qassimi at age 92, the UAE’s FederalSupreme Council officially recognized his son Sheikh Saud bin Saqr al-Qassimias successor, despite a challenge bySaud’s older half-brother Sheikh Khaled, who had posted a video messagedeclaring himself the new emir on his website following their father’sdeath.

Nov4: A report released at the ArabForum for Environment and Development in Beirut warned of a looming regionalwater crisis, with Lebanon and theArab world facing “severe water scarcity” by 2015 and the region’s populationleft to subsist on 10 percent of the global average supply, if waste,mismanagement and pollution were not immediately addressed. Lebanon’s annualwater demand is expected to triple by 2050, the report noted.

Nov7: Etihad and Emirates airlinesstopped carrying cargo from Yemen after two packages containing explosives werefound aboard a US-bound Emiratesplane. The Yemeni branch of Al Qaeda claimed responsibility for the parcels,which were addressed to a synagogue in Chicago.

Nov8: Following disputes over landingrights in Canada for Emirati carriers, the closure of a Canadian military basein the UAE and threats to ban key services of the Canadian-owned BlackBerrymanufacturer Research in Motion, the UAE’s embassy in Ottawa announced that Canadiancitizens would require visas to enter the Emirates starting January 2, 2011.

Nov15: As part of its efforts to easecongestion and attract more religious tourism, Saudi Arabia marked the firstday of the hajj by unveiling a new 11 kilometer light-railway, dubbed the‘Mecca Metro,’ which will shuttle pilgrimsbetween holy sites. The railway is only open to Saudis and GCC citizens priorto becoming fully operational next year; the opening came a day after officialssigned a $7 billion deal to develop the nearby Jeddah airport.

Nov17: The UAE had the worst percapita record for greenhouse gas emissions, due largely to a sharp rise in desalination plants that run on fossilfuels, according to British consultancy firm Maplecroft’s ranking of 183countries. The ranking combined current and historic emissions, with the US thelargest cumulative emittersince 1900.November 2010

Nov23: After rights groups urged her toaddress the ‘systematic abuse’ of migrant workers in the UAE, IndianPresident Pratibha Patil inaugurated a counseling center for Indians working inDubai that includes a 24-hourhelpline and a shelter for runaway housemaids, the first of its kind outsideIndia.

Nov24: Dubai Pearl Chairman AbdulMajeed al-Fahim announced the developer was looking to sell some $6 billion inhospitality assets to raisefinancing for the 18.5 million square meter mixed-use project. Final completionof the Pearl project, which was restarted in March, was being postponed from2013 to the end of 2014, Fahim said.

Nov25: In her first visit to the UAE inmore than 30 years, British Queen Elizabeth II met with the UAE VicePresident and Prime Minister SheikhMohammed bin Rashed al-Maktoum to unveil the British design for the ZayedNational Museum, which is set to be built by 2014 on Saadiyat Island. BritishForeign Secretary William Hague reportedly also signed a number of agreementswith his Emirati counterpart, including one on civil nuclear cooperation.

Nov28: The first batch of some 250,000 secretUS diplomatic cables leaked to the press by the transnational whistle-blowingwebsite Wikileaks revealed that Gulf rulers, including the UAE’s leaders, hadencouraged the US to attack Iran toprevent it from obtaining nuclear weapons. In response, Emirati minister ofstate for Foreign Affairs Anwar Gargash dismissed the cables as revealing “anAmerican perspective.”

Nov28: A Gallup survey of young peoplein the region showed that the UAE was a more popular destination for immigrationamong women than men. One third ofyoung people polled want to migrate permanently to another country, and youngArabs are almost four times more likely to plan to start their own businessthan their European and North American counterparts, the survey revealed.

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Finance

Regional equity markets

by Executive Editors
written by Executive Editors

Beirut SE  

Current year high: 1,180.99                Current year low: 939.02

>  Review period:

Closed Nov 26 at 946.14 Points         47 Week Change: -15.2%

Beirut in November not only consistently beats international financial centers like London, New York, and Tokyo in terms of weather quality but in 2010 also proved again that the Beirut Stock Exchange is hardly swayed by global selling pressures — Irish debt or North Korean artillery assaults — that scared investors elsewhere. The BSE has its very own chimeras, the current one can be christened Special Tribunal for Lebanon (STL) phobia. This fear influenced the pattern of Lebanese share movements, making for a dull second half of 2010. Weakness in the share price of real estate stock Solidere, whose year-to-date drop of 22.5% contributed a large chunk to Lebanese index drops in 2010, seems to have no remedy until the STL storm has run its course or political waters calm by other means. Still an illiquid and bipolar market of banking and real estate, 2010 changed the BSE market cap profile notably in favor of banking. Top banking pair, Audi and BLOM, represented more than 50% of BSE market cap in November while the weight of Solidere was reduced to about 25% of the total.

Amman SE  

Current year high: 2,648.36                Current year low: 2,223.30

>  Review period:

Closed Nov 25 at 2373.24 Points       47 Week Change: -7%

The Amman Stock Exchange could breathe better toward the end of November after the harsh days of summer, given that the ASE benchmark index climbed 5.5% from September 1 through Nov 25. But the reprieve has not been enough to balance the losses Jordan’s bourse took in 2010 under pressure from diminished confidence and outflows of regional cash. Interim earnings reports were also none too reassuring. While Housing Bank for Trade and Finance and Arab Potash showed nine-month profit increases, three other ASE heavies — Arab Bank, Jordan Phosphate Mines and Jordan Telecom — reported net profit contractions in the same period. Losers on the ASE outnumbered gainers across the board in the year to date; this was reflected in the sector indices all coming home negative. Banking was the relative best, with a drop of 5%, followed by industry whose 7.9% loss narrowly trailed the general index. Services, however, gave up 10.5% while insurance took the deepest plunge with a 45.3% index fall.   

Abu Dhabi SE  

Current year high: 2,931.67                Current year low: 2,467.04

>  Review period:

Closed Nov 25 at 2,756.89 Points                  47 Week Change: 0.5%

Although the Abu Dhabi Securities Exchange showed gains in September and October, the autumnal improvements in the index positioned the ADX merely for a U-shaped performance. No heroic tales of rising from the troughs of wait-and-see and running with the bulls again. The sector index that stood as the bourse’s most tragic figure in 2010 was real estate, distinct in that it underperformed all other sectors from the beginning of the year and closed 47.5% down on November 25 when compared with January 1. Telecommunications and banking were the best performing sector indices, closing the review period up 8% and 6.5% respectively. Banks contributed many of the bright accents in the 2010 share performance picture, including Abu Dhabi Commercial Bank (49.3% up), Abu Dhabi Islamic Bank (25.8% up), and Union National Bank (14.1% up). ADX market-cap champion Etisalat closed the 47 weeks with a net share-price gain of 10.05%.    

Dubai FM  

Current year high: 1,889.99                Current year low: 1,461.80

>  Review period:

Closed Nov 25 at 1682.23 Points       47 Week Change: -6.7%

Its cityscape may have filled up with urban architectural dreams, but the specter of debt towered above even Dubai’s tallest construction feats in 2010. Volatility on the Dubai Financial Market was reported at 21.6%, five percentage points above that of Tadawul as the GCC’s second most volatile market. Insurance, real estate, and investment sector indices — respectively dropping 14.5%, 18.9% and 22.2% from the start of 2010 — underperformed the disappointing general index. But the DFM’s utilities index somehow underperformed the underperformers by another 30 percentage points. Market cap leader Emaar closed at $0.99 on November 25, clocking in about 5% lower from its last close in 2009. Developers Deyaar, cooling and utilities scrip Tabreed, and investment firm GGIC were stocks with primary listing on DFM that each shed more than 45% in value during the 2010 review period. Logistics firm Aramex could be noted as an exceptional gainer this year, closing the 47 weeks 45.7% higher.

Kuwait SE  

Current year high: 7,575.00                Current year low: 6,319.70

>  Review period:

Closed Nov 25 at 6928.00 Points       47 Week Change: -1.1% The story of the Kuwait Stock Exchange in 2010 was more consistent than that of the SSE, if only in the sense that the KSE benchmark index exhibited fewer changes in direction. The overall result, however, was not too different from that of TASI, even as the KSE slipped just into negative territory at the end of week 47. Best price performances included those of major companies; with banks Ahli United (cross listed, up 55%), Boubyan (52%), NBK (36%) and telecoms firm Zain (41%) all up, four of the 10 largest stocks by market cap were among the market’s leading gainers.  Seeing its index rise since midyear, banking was by far the best performing sector on the KSE with a year-to-date gain of 42.5% in the banking index by November 25. The real estate, investment and insurance indices were the underperformers, closing 15.9%, 12.6% and 9.8% lower respectively.   

Saudi Arabia SE  

Current year high: 6,929.40                Current year low: 5,760.33

>  Review period:

Closed Nov 27 at 6,298.89 Points      47 Week Change: 2.9%

The five trading weeks from October 24 through November 27 reinforced the narrative that, during 2010, up-trends were temporary on the Saudi Stock Exchange and long-term investors had little to fear but also little to gain. Sharply divergent performances of some sectors and companies stood against flattish moves of others. At the top, three new insurers tripled and quadrupled from their issue prices but a number of other insurers recorded significant share-price losses. Investment giant Kingdom Holding and insurance stalwart Tawuniya gained 65% and 51% respectively. Debutants of 2010, namely the aforementioned new insurers and Herfy Food Services (51% up), did well, but the biggest newcomer, Knowledge Economic City, was a disappointing 19.5% down by November 24. Of the SSE sector indices, banking ended 1.8% higher, closest to the benchmark. Energy and Petrochemicals were the best gainers, 13.4% and 12.4% higher. Negative index trends were most pronounced in media, down 30%.    

Muscat SM  

Current year high: 6,933.75                Current year low: 5,968.36

>  Review period:

Closed Nov 25 at 6,550.85 Points                  47 Week Change: 2.9%

The Muscat Securities Market suffered an incision similar to the Bahraini bourse in late spring but it did a tick or two better in the later months of 2010. This late surge was enough to position the MSM index in second place — albeit barely — among the four gainers in the GCC stock market universe. Poultry specialist A’Saffa Food should be giving its advisors bonuses this year, as its share price quadrupled from March to November, according to data compiled by Zawya. Overall, publicly traded companies in Oman showed far less spectacular share-price increases and the majority of firms found it hard to make headway in 2010. The MSM’s three sector indices for banking, services and industry all showed losses in the review period. When compared with the start of the year, the banking index retreated the most, at 12% down, and severely underperformed the MSM index.

Bahrain SE  

Current year high: 1,605.98                Current year low: 1,361.19

>  Review period:

Closed Nov 25 at 1,438.51 Points                  47 Week Change: -1.4%

The Bahrain Stock Exchange showed encouraging index trends in spring of 2010. However, the index retreated between late April and early July in a slide of almost 14%, and only partially recovered the lost ground at the end of November. Investors holding shares in Ahli United Bank since the start of 2010 could delight in the scrip’s 68% gain to the November 25 close. This was 30 percentage points better than the gain of the second-best price performer, Bahrain Duty Free. The market was dominated by losers, though. Gulf Finance House closed 55% down from January 1, while Nass Corp and Seef Properties, companies in the stressed construction and real estate sectors, also gave up more than 20% in share prices. Weaker still were three banks: Bahrain Islamic, ABC and Ithmaar fell 31%, 39% and 43%, respectively. Nonetheless, the banking index was the BSE’s positive exception, ending week 47 with a 23.3% gain for the year to date.     

Doha SM 

Current year high: 8,273.07                Current year low: 6,502.93

>  Review period:

Closed Nov 25 at 8,178.77 Points                  47 Week Change: 17.5%

Say what you will about Qatar’s uninspiring flat landscape, no GCC peer in 2010 came close to the peaks displayed on the Qatar Stock Exchange. Like its peers, the QSE benchmark index took a beating in late spring. However, the selling pressure turned and the index performed, on the year to date, more than 14 percentage points better than any other Gulf benchmark. All sector indices on the QSE ended the January through November period with gains. Insurance came out on top with a gain of 59%, followed by banking with 26.5%. Rises in the industrial and services indices were in the single digits, thus underperforming the general index. Major players in almost all core sectors, including QNB, Doha Bank, Qatar Navigation, Doha Insurance, Q-Tel and Industries Qatar, achieved double-digit share price gains. Notably, developers Ezdan (QSE market cap leader) and UDC failed to join the climbers in the second half of 2010.

Tunis SE 

Current year high: 5,681.39                Current year low: 4,077.39

>  Review period:

Closed Nov 26 at 5269.48 Points                   47 Week Change: 22.8%

The Tunis Stock Exchange was the region’s undisputed winner this year. Although the Tunindex had a losing month in October, its overall growth was above that of all other MENA exchanges covered. Top gainers included three out of four firms that underwent their initial public offerings in 2010, namely Tunis Re (up 55.1%) and Assurances Salim (up 47.3%) in the insurance sector and Carthage Cement (up 93.2%) in heavy materials. Servicom, a telecommunications infrastructure company, was an upward outlier with a 169.4% price gain. Poulina Group Holding, the manufacturing conglomerate that is the TSE leader in market capitalization, recorded a gain of 36.8% from start of 2010. Banque de Tunisie and Banque Internationale Arabe de Tunisie, numbers two and three by market cap, stayed on Poulina’s heels with respective share-price gains of 24.8% and 23.1%. The Tunisian bourse’s volatility over the 47 weeks was 10.4% and the price-to-earnings ratio climbed to 16.29x.

Casablanca SE  

Current year high: 12,457.59              Current year low: 9,997.56

>  Review period:

Closed Nov 26 at 12,115.95 Points   47 Week Change: 16%

The performance of the Casablanca Stock Exchange’s MASI matched that of Qatar’s QSE benchmark index at the end of week 47. However, where the QSE index rose from behind in the second half of the year, the MASI stayed closer to the year high it had reached at nearly 12,500 points in May. The CSE’s leading companies by market cap, Maroc Telecom and Attijariwafa Bank, advanced nicely and very nicely in the 47-week review period, with gains of 9.5% and 24.1% by the November 26 market close. The top industrial scrip by market cap, cement producer Lafarge, put even those gains into shadow, climbing 50.3%. Real estate stood out in that the largest listed companies displayed a mixed picture when compared with the benchmark index. Developers CGI and Addoha, which both showed significant fluctuations coming into 2010 and throughout the year, in the end closed with single-digit share price gains.

Egypt CASE  

Current year high: 7,603.04                Current year low: 5,850.00

>  Review period:

Closed Nov 25 at 6838.00 Points                   47 Week Change: 10.1%

The Egyptian Stock Exchange performed a program of two contrasting melodies in 2010. The first tune, played between January and end July, was contrapuntal, entailed strong volatilities and ended with hardly any net change versus the first close of the year. The four months from August through November, however, were much less polyphonic. The EGX 30 Index moved up in a succession of small steps that contained almost all the gains reflected in the November 25 close. Juhayna Food, the only EGX 2010 debutant gained 510% over the issue price and 42% from its June 15 close to November 25. One of Egypt’s higher flying heavies this year was Commercial International Bank whose 56.3% gain propelled it into the position of top bank by market cap and number three on the EGX overall. A year-to-date gain of 10.1% was enough for Orascom Construction to defend the place of market cap leader.

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Economics & Policy

Pipe Dreams?

by Executive Editors
written by Executive Editors

Politics and economics have always had an abusive relationship in Lebanon, with the latter habitually falling victim to the former’s unpredictable behavior. Like any odd couple, there are times when they get along, if only to fall back into a vicious cycle that consumes them both.

As 2010 began there was optimism in the air; the country had just emerged with a new government after Lebanon’s power brokers finished their long and drawn-out game of musical chairs over who would take which cabinet posts.

The new cabinet of “national unity” effectively meant, however, that basic national issues could not be decided upon without unanimous approval. Even without this inherent impediment to the kind of streamlined decision-making Lebanon desperately needed after years of (at best) ineffective government, results were going to take time. Many of the problems facing the country, from electricity shortages to water supply, require long-term solutions rather than quick fixes.

At the start of 2010, the cabinet approved a new ministerial statement that has since remained the only wide-ranging plan to address the country’s problems, with the stated goal: “to help all Lebanese benefit from economic growth in a proportional way that will allow all categories of society and all the Lebanese regions to profit.” The final part of the statement contains the priorities of each ministry, though most are vague enough to allow the ministers to evade accountability for tangible results.

While no one expected all elements of the ministerial statement to be fulfilled in the first year of operation, the pace of most reform in 2010 has been glacial.

“They didn’t do anything. Really, nothing happened,” says Jad Chaaban, acting president of the Lebanese Economic Association in November. “There are people who don’t want to rule with others on both sides. There are huge differences on how reform should be carried out and there is no real debate on these issues, from traffic, to electricity to water.”

The lack of action is even more unfortunate given that the new government was regarded by many as the first that could actually make some headway in terms of public policy, after previous post-Hariri assassination governments were plagued by political debacles that brought policy to a grinding halt.

Electricity

To be fair, some progress has been made this year, even if it was only at the planning level. Perhaps Lebanon’s most glaring policy deficiency is the abysmal state of the electricity sector, and in June the cabinet approved a comprehensive plan for an overhaul, which aims to provide 24-hour power throughout the country by 2015. It is not the country’s first electricity overhaul plan, though it may the most substantial to date.

Much of its success banks on the private sector, which will be asked to contribute $2.32 billion, or 58 percent of the total cost, to take part in the production and distribution of electricity, while the public sector will retain the infrastructure and control the transmission of electricity from plants to local districts. This collaboration, however, will require a Public Private Partnership (PPP) law to be passed by Lebanon’s parliament, which has barely managed to meet since being elected in June 2009, much less pass essential legislation.

“Clearly there is an interest from the private sector, given a proper PPP law that preserves the interests of the private parties involved, but the key aspect is a transparent, clear and implementable law that has to be very clear on how to solve issues between the private sector and the government,” says Nassib Ghobril, head of economic research and analysis at Byblos Bank.

With the draft law still swirling around parliament, and the latest draft viewed by Executive only referring to “the principles of transparency and equality among competitors,” rather than any mechanism for resolving conflicts, the Lebanese could be waiting some time for a resolution to their chronic energy problems. 

With the draft law still swirling around parliament the Lebanese could be waiting some time for a resolution to their chronic energy problems 

Water

Another sector that needs a substantial overhaul is water. A draft strategy is currently being compiled by the Ministry of Energy and Water, which is expected to be ready for submission to cabinet by the end of the year. A supply/demand forecast was completed and presented to domestic and international stakeholders in November, giving some idea of the amount of money that will need to be spent to close the gap in the coming 25 years. New storage alone, mostly in the form of dams and artificial lakes, will require around $2.65 billion in capital expenditures and then some $96 million each year in operating costs. Capital expenditures on transmission and distribution are projected to cost $875 million by the end of 2015, with associated operating costs at $249 million over the same period. New irrigation networks are expected to cost a further $1 billion over the next decade and beyond. Wastewater clocks in at another $1.6 billion by 2020.

“I am part of a large governmental block, so don’t talk to me about when to apply the law” – Charbel Nahas

Telecommunications

Lebanon’s government-owned telecoms sector is also in need of radical reform. Theoretically, the sector already has a framework that should be implemented in the form of Law 431, which calls for the creation of a corporatized, but not necessarily privatized, entity called Liban Telecom. Under the law, the telecom ministry’s assets would be transitioned to the company, which would be regulated by the existing Telecom Regulatory Authority that presently regulates around 5 percent of the market under its legal mandate. The liberalization of the sector is also called for in the ministerial statement, but when Executive asked Telecom Minister Charbel Nahas why no action has been taken on this front he replied: “I am part of a large governmental block, so don’t talk to me about when to apply the law.”

Nahas had also promised to publish his policy for the sector within one year of taking office in November 2009, but has failed to do so.

“The ministry’s policy is not a matter of a statement, it is a matter of practice,” said Nahas when asked when he expected to issue his policy for the sector.

Official policy or not, some progress may be in the works. The Ministry of Finance recently advanced $66.3 million to the Ministry of Telecoms to begin its proposed project to lay a new fiber-optic ‘backbone’ across the country. At the end of November, the telecom minister said the project would begin “within a few days or weeks.”

The project was awarded to Alcatel and the local civil engineering firm Consolidated Engineering and Trading, budgeted at $40 million; the telecom ministry has announced that the project should be ready by March 2012. According to Nahas, 4 to 6 percent of gross domestic product comes from the telecom sector surplus, adding that “it is the least of our duties to give back to the population and to the economy this very small part of this huge rent extortion that we inherited from the past period.”

Improved Internet access will require that the $45 million international IMEWE3 cable becomes operational. It was planned for March 2010, but Egypt has not opened up access on its end in Alexandria (where the cable connects to the rest of the world), due to reluctance on the part of the Egyptian security services, according to Riad Bahsoun, telecom expert at the International Telecommunications Union (ITU).

“We are now at a crossroads: to sustain high growth we must invest in infrastructure”

The debt

But perhaps the most pressing item on the government’s agenda is its largest source of expenditure: the public debt. It is projected to have cost the government $4 billion just to meet interest payments in 2010, with the principal reaching $50.85 billion, around one and a half times estimated economic output.

Finance Minister Raya Hassan admits that there is no foreseeable plan to reduce this principal in the absence of privatization of the telecoms sector, which she herself has said is undervalued on international markets.

Her debt strategy is to switch short-term debt for long-term debt now that Lebanon is enjoying better rates than it has before, and maintain a primary surplus as a “cushion” against debt obligations. “It’s a mixed blessing because even though the debt increase is going to be controlled, on the other side you are not going to have all the capital expenditures that would unleash the full potential of the Lebanese economy,” she says.

The lack of a government budget for the last half decade has created a situation where opening and closing accounts for the years ending 2005 and 2006 do not add up. The issue created a hubbub of accusations over mismanagement of public funds at the end of 2010.

“What they [the opposition] are trying to imply is that there are no accounts. That is totally untrue. There are accounts,” says Hassan. “What is lacking is the auditing. It’s not even auditing, it’s the control of the accounts by the Public Accounting Directorate (PAD),” she says, adding that, because public accounting laws are so old, the PAD has to cross-check around two million transactions a year with their supporting documents, which they are not able to do in any reasonable amount of time. “What we lack is a proper internal audit function — not a control function — and therefore at this point there should be a review of the laws themselves.”

Without modern laws or infrastructure spending on sectors such as telecom and electricity, Hassan and her ruling party’s platform — of relying on growth to spur jobs and keep the debt looking respectable as a decreasing proportion of GDP — look to be in serious danger of failing, especially as the economy has now started a natural downturn. “We are now at a crossroads; to sustain high growth we must invest in infrastructure,” says Mazen Soueid, head of research at BankMed, which is owned by the prime minister’s family. 

As Executive went to print in late November 2010, the cabinet had halted its weekly meetings because of political tensions over the Special Tribunal for Lebanon. Parliament had only managed to pass two piecemeal laws, one covering oil and gas exploration — without fleshing out the regulatory requirements or handling the touchy subject of a Sovereign Wealth Fund — and the other a reform of Palestinian refugee rights that maintains the ban on Palestinians owning property or being employed in some 30 professions.

All of this hardly encourages optimism. “Bottom line, I’m not happy with the way things are run as a tax payer,” says Chaaban. “We are still waiting for a push by those who are conscious of these issues to put them on the table.”

But are the country’s policy makers even aware of the gravity? “They don’t know and they don’t care,” concludes Chaaban. 

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Editorial

Good work but can do better

by Yasser Akkaoui
written by Yasser Akkaoui

Lebanon’s end-of-year report card shows it is the perennially underachieving student, full of promise but yet to live up to its full potential.

We end 2010 with a sense of achievement, uncertainty and hope. The achievements are there for all to see. Indeed, in early December, Merrill Lynch revised its forecast for Lebanon’s real GDP growth upwards to 8 percent in 2010 and 5.9 percent for 2011, from earlier forecasts of 6.5 percent and 5.1 percent for respectively.

These figures are even more remarkable when you consider that they have been achieved while the rest of the global economy was on its knees, a period when Lebanese growth went from strength to strength. For this, as usual, we have the private sector to thank, especially the banking, real estate and tourism industries.

But there is uncertainty. It is clear that when Lebanon suffers from acute political tension the idea of nation building and the economic development of other sectors, such as industry and agriculture, take a back seat. When people feel that their security — in all its many guises — is threatened, the thirst to create long-term growth initiatives dries up and people put their own wellbeing first. The Lebanese become survivalists.

It is the stop-start nature of life in Lebanon that is the virus in our economic software. The government, indeed the political class as a whole, must recognize that they can’t act out their regional drama in a vacuum. They must realize that the private sector, while it continues to carry the country as it has done for decades, is not immune to their bickering.

Finally, it is also with hope that we enter 2011. We hope that the state will create an environment in which the entrepreneur can focus on creating growth rather than one in which he is constantly looking over his shoulder, afraid that the country might collapse while his back is turned. We hope that the nation regains its long-lost self respect. Of course the challenges are many, but if they can be overcome then perhaps the raw energy that has come to define the Lebanese private sector will flourish.

All that leaves is to congratulate the many young entrepreneurs who have worked hard to take their businesses forward in 2010, creating jobs and bringing a sense of dynamism to the economy. It is they that Executive is proud to represent as a platform for their issues and concerns.

Wishing you all prosperous, but above all, a safe, healthy and happy 2011.

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Finance

Praying for peace

by Paul Cochrane
written by Paul Cochrane

 

Bankers and politicians alike delight in calling the banking sector immune — immune to the financial crisis, immune to political rumblings and knee jerks in public opinion. But the health of the banking sector and the health of Lebanon’s economy are incontrovertibly tied.

“The banking sector has a kind of immunity which keeps the industry aside from the political tensions. Nevertheless, any tensions in Lebanon have a direct effect on the economy and accordingly on the banks in general,” said George Abou Jaoude, chairman and general manager of Lebanese Canadian Bank.

It was business as usual for the first half of 2010 with prevailing trends of slowly falling dollarization in both deposits and lending for the first three quarters of the year. But increased political wrangling regarding the United Nations’ Special Tribunal for Lebanon, and inflammatory speeches by prominent leaders in Lebanon since the summer, have led some in the banking sector to predict that upset caused by political unrest will manifest itself in the final quarter of 2010 and the first quarter of 2011.

“I’m seeing it in terms of consumer confidence and I’m seeing people start to question holding their money in [Lebanese lira]… You can’t get away from the fact that domestic and regional politics do play a big part in the economic conditions of the country,” said Pik Yee Foong, chief executive officer of Standard Chartered Lebanon.

Other industry leaders acknowledged the possibility of a spike in deposit dollarization but were not concerned with the formation of a long-term trend.

“It’s not material. When people have more concern they feel more comfortable to keep their savings in [dollars]. The confidence in the local currency has improved so much because of the very important macro achievements of the last few years,” said Freddie Baz, chief financial officer at Bank Audi.

George Abou Jaoude, chairman and general manager of Lebanese Canadian Bank

Whether such an occurrence would change the funding dynamics of Lebanese banks is yet to be seen, but if such a shift becomes apparent, it will be a clear statement that some Lebanese depositors are willing to take the weak side of a 292 basis-point interest spread in favor of security. At the end of September the average weighted interest rate on deposits in Lebanese lira was 5.7 percent, while the corresponding dollar rate was 2.78 percent.

Saad Azhari, chairman and general manager of BLOM Bank, predicts that interest rates in the major Western economies will remain stagnant, hovering around zero, because “in all the major economies growth is expected to be lower in 2011 than in 2010.”

He also predicts that, if risk factors including local political dynamics remain at current conditions, Lira interest rates will exhibit similar behavior, still acknowledging the unpredictability of the local market. “I expect, or hope, to see no major escalation in events that could make it increase,” he said.

What comes in must go out

In addition to possible changes on the funding side, the distribution of bank lending is also a hot topic for 2011. For, in the banking sector there is a classic chicken and egg conundrum. Are the banks lending to the so-called “productive” sectors of the economy because they are growing? Or are these sectors growing because they receive financial support from banks?

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Finance

An issue of trust

by Thomas Schellen
written by Thomas Schellen

 

The Arab World’s 16 active stock markets’ combined market capitalization in the fourth quarter of 2010 amounted to substantially more than $900 billion, confirming that Middle East and North African (MENA) equity markets are an increasingly important force in regional economic development.

The performance was not all sunny, however. Market indices for member institutions of the Union of Arab Stock Exchanges (UASE) at the end of 2010 were visibly below their more optimistic days almost three years ago. Eagerness for listing companies has also dropped. New initial public offerings and trading debuts have been rare.

Although, or perhaps because, performance of Arab equities has been marred by the global financial crisis of 2008, the macroeconomic relevance of financial markets has become a topic demanding increasing attention.

Arab stock exchange operators have been feeling the need to do more than their bread-and-butter business of running trading rooms and electronic platforms and assuring smooth operations that comply with national regulations in each market.

Markets are to enter a “new era of collaboration and cooperation,” the chairman of the UASE, Suliman Alshahomy, said in October 2010 at the opening of the second UASE Annual Conference in Beirut.

The tenor of Arab stock market operators is a combination of needed improvements and regaining investor trust.

“Implementing principles of transparency of Arab markets is our main goal. We want to provide Arab investors with linking of all financial markets,” said Alshahomy.

The exchanges face a major challenge in restoring trust. According to UASE Secretary General Fadi Khalaf, “greed led us to a place where confidence in the market weakened.” Confidence may have been built over years, only to be lost in days, he added in a keynote speech to stock market operators and financial experts.

Still young at heart

The Arab stock exchanges are a young industry by the standards of the region’s financial sector, and even more so when compared with the 400-or-so-year history attributed to the business model of trading centers dedicated to the buying and selling of shares in something that is not physically present at the exchange.

Union of Arab Stock Exchanges member exchanges by year of establishment

Nominally, three Arab stock exchanges — in Egypt, Morocco and Lebanon — trace their incorporation back to the first half of the last century, with late 19th century commodities trading in Alexandria at the root of the region’s first bourse. The Kuwaiti and Tunisian exchanges date from the 1960s. The 11 others were decreed and went into operations between 1984 and 2009.

In the late 19th century, large-scale trading of Egyptian cotton export exploded, making for a furious start of bourse operations in the Middle East. The exchanges in Cairo and Alexandria boomed so much that the region’s first stock market crash in 1907 even played a role — by way of depleting British hard currency resources — in a financial confidence crisis in distant New York: the famous Knickerbocker Trust panic which ultimately led to the establishment of the Fed. 

However, the growth of Middle Eastern securities trading was stymied in the conflicts over the global political and social order that hit Arab economies in the 1950s. Until deep into the 1990s, the region’s bourses were impaired by inexperience, oil money that came too easy, ideological follies, anti-economical politics, wars and all the other Middle Eastern challenges of the 20th century.

Recent rough ride

Therefore, for all intents and purposes, it is fair to say that the industry of Arab bourse operators was only really formed in the last 20 years. It may be a surprise then that this young-but-important segment of financial market already needs a facelift. 

The need for instilling new confidence in the regional investor community is, naturally, related to the local impact of the 2008 crisis in global financial markets. Between summer 2008 and spring 2009, Arab investors saw the market value of their shares plummet at rates of more than 90 percent for some stocks and benchmark market indices in the region commonly lost 60 to 70 percent during the crisis. Of course, so did pretty much every investor community in most global markets.

With very few exceptions — one of them ironically an Arab bourse, the Tunis Stock Exchange — securities markets the world over dropped precipitously in the peak crisis period between September 2008 and March 2009, as institutional and individual investors alike were caught in the recession like the proverbial deer in the headlights.

But that was the past. By the third and fourth quarters in 2010, recovery ruled in virtually all stock markets. Herein lies the problem that has been confronting Arab bourse operators in 2010: the rate of recovery of the Arab markets’ averages was much slower than in peer emerging markets.

UASE Secretary General Fadi Khalaf, and UASE Chairman Suliman Alshahomy, at the UASE Annual Conference in Beirut

When compared with some developed and emerging markets in November 2010 —  26 months after the Lehman Brothers collapse heralded the financial crisis in world markets — a few numbers illustrate Arab investors’ lingering loss of confidence in their markets.

The Dow Jones Industrial Index, which crashed from nearly 12,000 points in mid-2008 to decade-lows in the 6,400 range by March 2009, had regained all ground by the fourth quarter of 2010, closing at mere 2 percent downward variation on November 15, 2010 when compared with July 1, 2008.

The United Kingdom’s FTSE 100 and Germany’s DAX, which each had dipped below 4,000 points in spring 2009, both quoted higher in mid-November 2010 than their respective levels in the summer of 2008. In Asia, where the Nikkei 225 was a laggard at about 25 percent down in the same comparison, the Hang Sang showed full recovery from 2008/2009 index losses in the third quarter of 2010.

In emerging markets, Standard & Poor’s BRIC 40 and Morgan Stanley’s MSCI Emerging Markets Index ascended in October 2010 for the first time above their values last recorded in July 2008. Looking at 2010’s top growth markets in stocks, the best gainers were all in emerging quarters. Exchanges in Indonesia, Chile, Argentina and Turkey not only added more than 40 percent to their indices in the 12 months ending October 2010, they each also scaled a new historic record in November 2010.

Of the four leading Arab exchanges by market capitalization, which accounted for approximately 70 percent of total market cap in MENA in autumn 2010, three benchmark indices — Saudi Arabia, Egypt and Qatar — were lower by 31 to 32 percent in November 2010 versus July 2008. The Kuwaiti bourse was even further behind, down 55 percent in its index over the same timeline.

The Middle East’s only exchange with a long track record that bucked the downtrend was the Tunis Stock Exchange; its Tunindex climbed 75 percent from July 1 2008 through November 15 2010.

Concentrated and diverse?

Besides the rebuilding of investor trust, the Arab exchanges face another challenge in taking their collaboration to the new levels envisioned by UASE for the coming decade. Experts and operators recognize that there are no strong merger prospects in the short term — save the possible exception of the two United Arab Emirates exchanges in Abu Dhabi and Dubai — and also know that regional securities markets will not be easy to align, given disparities between trading systems and regulatory standards.

According to a UASE survey of 14 member bourses, the sector has both a large diversity and a lot of concentration. The contradiction arises from the fact that market concentration is massive in terms of capitalization and even more so in terms of trade activity.

Tadawul, as the Saudi Stock Exchange (SSE) is best known, is the engine of all Arab shares trading. With 143 listed companies, the SSE hosts about 11 percent of the publicly traded firms in MENA — but these are larger companies and the market is more liquid than average in the region, accounting for up to 40 percent of market cap and even higher proportions of daily share movements by volume and value.

Traders crowd the floor at the Kuwait Stock Exchange

Responses by Arab market operators to the UASE survey put the total number of investors in Arab stock markets at more than nine million, with the totals ranging from nearly 3.6 million in Saudi Arabia to 5,500 on the young Damascene bourse.

According to the UASE survey, Tadawul in mid 2010 accounted for 40.5 percent of market capitalization and captured more than 60 percent of trading activity, a statistic which, due to a technical issue precluding the Kuwait Stock Exchange’s timely response to the survey, did not include data for the Kuwait bourse. By contrast, five of the small exchanges represented only 1.5 percent of the region’s market cap combined.

A different set of disparities exists in the operational realities of Arab bourses. The UASE study found that half of the exchanges enjoy independence in regard to market trading, clearing and regulatory processes.

However, while 38 percent of the bourses today are nominally operating as private sector entities — mostly joint stock companies along with two listed companies — government control is still the daily reality for at least 80 percent of Arab bourses.

The resultant picture is one where Arab exchanges are fragmented in operational and structural terms, with a variety of international partnerships, technological platforms and methodologies in place. Regulatory frameworks are most advanced in the Gulf Cooperation Council but operators there are last in terms of independence. The state-centric organization of exchanges limits the options for development. “If we want to be a hub, we should start by being a listed company on the exchange. If the exchange is a private sector company, it becomes an option to merge or create a new entity. It is not possible today to dream of merging,” UASE’s chairman, Alshahomy, told Executive.

The upside is that Arab stock exchanges are maturing in the challenges they face and have become increasingly aware of their role in nurturing and diversifying economic development. Tadawul Chairman Abdullah Alsuweilmy told the recent UASE Annual Conference: “We are entrusted with enhancing the economies we belong to. That is very important.”

Proposals and objectives of UASE

Transparency is the word of the year for Arab stock market executives. When asked by Executive what defines a healthy stock exchange, four out of five exchange chairmen included “transparency” in their answer. Likewise, transparency, together with good regulation, has ranked in 2010 in the top tier of desirable qualities in discussions of the World Federation of Exchanges, the global alliance of bourse operators.

Market executives from around the MENA region shared a wide range of proposals at the 2010 Annual UASE Conference, as did the team from the Libyan Stock Market, which carried out the UASE member survey and evaluation as part of the country’s one-year term in chairing the federation in 2010. (The Union’s chairmanship is due to rotate to Qatar in 2011).

UASE has two immediate projects on its agenda before embarking on further development initiatives, said Secretary General Khalaf: to commence publication of reports on the Arab markets and to work on a benchmark index for the region. Further steps could include the creation of exchange-traded funds (ETF) that track the new regional index. An Arab index could generally be expected to enhance professional investor attention to the region’s stocks. But index creation is more than an exercise in calculation skills. 

Exchange inventory

“We have to start somewhere, which is the benchmark index. There are thousands of indices but the indices that survive are those done with international institutions,” Khalaf said, giving clear indication that the UASE doesn’t want to go it alone in deploying a regional index but rather has engaged in discussions to implement a partnership with one of the big global names in index formulation.  While a home-brewed index could be launched fairly quickly, working with a major partner could drag out the launch time for up to two years, though Khalaf admitted “I hope it will be faster.” 

The UASE upgraded its stature in 2009 with the establishment of a full-time elected secretary general and the positioning of annual conferences as high-caliber events to offer a forum for contributions to and from all members. For organizational development, UASE targets some expansion of the primary membership base, from 16 full members in 2009 to 23 at end of 2010, comprising 16 exchanges and seven clearinghouses.  New members expected to join shortly include Sudan’s Khartoum Stock Exchange and the Algerian exchange, hitherto a stock market in name only as it seemed to be one of the world’s least active trading places in the past decade. Membership on an associate level includes 23 brokerages.

But with the regional count of active brokerages standing at 650 firms, according to the UASE survey, and the brokerage sectors from a dozen countries severely underrepresented or not represented at all in the UASE membership, the organization appears to have a large opportunity to expand its ranks among market intermediaries.     

Khalaf emphasized that the federation will not change the fundamentals of how its members operate. “We play the same role that all stock exchanges play in their economies. We are a federation that groups all those exchanges and will not create something that the local exchanges didn’t create already,” he said.

 

 

 

 

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