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Comment

The tale of two Ammans

by Peter Speetjens January 1, 2011
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

 

January 1, 2011 0 comments
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Year in Review – Middle East

by Executive Staff December 31, 2010
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.

December 31, 2010 0 comments
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Finance

Regional equity markets

by Executive Editors December 25, 2010
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.

December 25, 2010 0 comments
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Economics & Policy

Pipe Dreams?

by Executive Editors December 25, 2010
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. 

December 25, 2010 0 comments
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Editorial

Good work but can do better

by Yasser Akkaoui December 25, 2010
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.

December 25, 2010 0 comments
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Iran smiles through sanctions

by Gareth Smith December 3, 2010
written by Gareth Smith

 

As 2010 began, there was global speculation as to the future of the Islamic Republic of Iran. Mass demonstrations after the disputed 2009 presidential election raised hopes among opponents of the Ahmadinejad regime that a new revolution beckoned, and any momentum in the Obama administration for engagement over Tehran’s nuclear program was thwarted by outrage at the suppression of Iran’s opposition ‘Green Movement’. When 2011 opens, the resilience of the Iranian authorities — both in overcoming domestic unrest and in coping with a new wave of American, European, Asian and United Nations sanctions — may create a better atmosphere for engagement.

The challenge — reaching a compromise over Iran’s nuclear program — has barely changed in seven or eight years. Tehran’s bottom line is its “right” to nuclear technology, especially as a signatory of the Nuclear Non-Proliferation Treaty. But the world powers insist is that Iran accepts a limit on its uranium enrichment and allows intrusive inspections by the UN’s International Atomic Energy Agency. As is often the case, the devil is in the details, but without the will to reach an agreement, no details are discussed.

During the 2003 to 2006 talks between Iran and the European Union — a time I was based in Tehran — it was clear that some on the Western side recognized that Iran would have some level of domestic enrichment, and that the European Union demand for suspension was temporary.

It was just as clear that there were those on the Iranian side ready for limits on enrichment in return for recognition of Iran’s “rights.” According to what I was told by two regime insiders, a majority of the leadership accepted this, at least until late 2006. Throughout those years, Iran’s leaders were trying to understand the United States’ motivation, and this remained true when President Barack Obama was elected. Was Washington serious in wanting an agreement?

And here’s the problem — as Djavad Salehi-Isfahani, economics professor at Virginia Polytechnic Institute and State University, has pointed out, for the US “all policy making [over Iran]… is evaluated through the lens of regime change.” By this he means the assumption of policy-makers — and it’s true of “Iran experts” and journalists as well — is that the “problem” with Iran is its “regime.” Every aspect of Iran is seen this way, feeding a sense that the Islamic Republic is on the verge of collapse. This has long encouraged a view of the Iranian economy as a basket case.

But while Iran has failed, like many oil exporters, to finance enough productive investment, it has — for a developing country — been relatively successful in reducing poverty and building an infrastructure. Most Iran-watchers see the Ahmadinejad government’s plan to phase out in 2011 the subsidy of everyday items — from bread to gasoline and electricity — merely as a potential cause of more unrest that can hasten the demise of the Islamic Republic, or at least lead it to abandon the nuclear program.  The International Monetary Fund, however, backs the plan, applauding “a dual purpose” of generating more revenue and curbing waste. The fund recognizes that subsidies, at $100 billion annually, absorb resources that could go into investment. “There is something to be said for a populist president doing price reforms,” notes Salehi-Isfahani.

“Sanctions that bite,” to quote US Secretary of State Hillary Clinton, are the West’s means of choice to squeeze Iran. But the main losers are young Iranians, who are paying the cost through unemployment, as Salehi-Isfahani argues in a recent paper published jointly by the Dubai School of Government and the Kennedy School at Harvard.  Iran’s opposition argues that sanctions strengthen the government; if they are right, sanctions may make nuclear compromise more elusive. Furthermore, should the Ahmadinejad administration’s subsidy gamble be successful, it may achieve a better economic performance.

Although removing subsidies will increase prices, Iran has leeway: inflation fell from nearly 30 percent in late 2008 to 9.2 percent in the Iranian month of Mehr (23 September to 22 October). And while economic growth has been only 1.6 percent this year, the IMF projects 3 percent in 2011, only 0.2 percent behind the United Arab Emirates. Improving inflation, success over subsidies, maintaining the nuclear program and enhancing the country’s standing across the Islamic world would add up to a very happy 2011 for Iran’s leadership.

GARETH SMYTH is the former Tehran

correspondent for the Financial Times

 

 

December 3, 2010 0 comments
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Society

Cultural capital

by Rayya Salem December 3, 2010
written by Rayya Salem

 

Tourism Minister Fadi Abboud said in October that he expected 2010 to have been another bumper year for Lebanese tourism, predicting that revenues from the industry will hit nearly $8 billion by the end of the year, compared to $7.2 billion in 2009. After 2009’s record-setting revenues, expectations and hype were running on overdrive this year, and not without good reason: the first nine months of 2010 mark another record for Lebanon’s tourism industry, despite the slowdown during the normally booming month of August due to Ramadan.

According to the Ministry of Tourism, the number of tourists totaled some 1.694 million from January to September, compared to 1.439 million during the first nine months of 2009, a 17.8 percent increase. The World Travel and Tourism Council (WTTC) expects the real growth rate of the industry to be 11.3 percent by the end of 2010; last year, Lebanon’s tourism sector was the fastest growing of 165 countries. In terms of contribution to gross domestic product, travel and tourism’s share is expected to be 13.3 percent, compared to the 9.3 predicted in 2009. In December, the ministry said they expected a total of some 2.2 million visitors to arrive by the end of this year.

The distribution of visitors by region remained unchanged; about 42 percent came from Arab countries and nearly 25 percent came from Europe, followed by visitors from Asia and the Americas.

Since the opening of Beirut Souks and numerous high-end international boutiques this year (see retail section on page 196), retail and tourism are now, more than ever, mutually beneficial business generators. Global Blue, the organization that counts value added tax refunds, released figures showing the Beirut area attracted 82 percent of total spending by tourists in Lebanon, mostly on clothing and watches, with 23 percent of total tourist spending coming from Saudi Arabian wallets. It seems there was also an increase in visitors from Syria, as spending by Syrian tourists increased 40 percent in the first 10 months of the year.

The number of airport passengers, which includes departures and transits, increased 11.6 percent year-on-year in the first 10 months, according to figures from Rafiq Hariri International Airport.

Occupancy

Though occupancy rates averaged 68 percent in the first nine months of 2010, down 3 percent yearly, the average room rate in Beirut was $262, up six percent from last year, according to financial auditor Ernst & Young. The average revenue per available room (REVPAR) in Lebanon rose 11 percent this year to $136 by end of August 2010, according to Deloitte Middle East, the regional wing of the international accounting and consulting firm.

Tourists from Arab countries made up some 34% of all visitors to Lebanon

Minister Fadi Abboud told Executive in August that “the average stay is about nine days and the average [amount] spent is about $3,500,” adding that the country is unsuitable for “fish and chips” tourists with $500 a week or less to spend.

In addition to contributing a significant chunk to Lebanon’s GDP, tourism is a major employer, with 553,000 jobs — 38 percent of the workforce — directly or indirectly affiliated with the industry, according to the WTTC.  Meanwhile, bank loans to the sector reached $858 million by July 2010, an increase of 11.5 percent from a year ago, Marwan Barakat, head of research at Bank Audi, told The Financial Times.

Easy prey

Abboud claimed that efforts have been made to reform the industry and provide more rigid regulations to ensure that tourists are not subjected to price gouging.

Still, the same complaints about inconsistencies abound. For example, if an individual tourist comes from Europe they don’t have to pay for a visa, but if a tour group comes, each has to pay. Many tourists report being ripped off by fortune-seeking drivers, especially as they make their way from the airport to their hotels.  Meter-less taxis leave the tourist with no option but to pay whatever the driver demands, in many cases.

Tax-free tourist spending by nationality, 2010 (Jan-Sept) - Beirut, Lebanon

Similar complaints are heard about restaurants, salons and other service-oriented businesses, prompting the ministry to try and clamp down on the practice, though its efforts have been stunted by limited manpower and money. Experts agree there should also be basic information desks or even maps distributed to help tourists who wander Beirut by foot.

IDAL

In August, Abboud said the country had some $4 billion invested in the tourism industry. Some of this cash was steered by the Investment Development Authority in Lebanon (IDAL), a public investment promotion agency that aims to attract and facilitate investment in tourism and other core industries. One of the incentive programs IDAL offers investors — the ‘package deal contract’ — provides exemptions and tax reductions on investments that meet certain criteria, such as being more than $15 million (if in Beirut) or employing a workforce exceeding 200 people. To encourage investment projects in more rural areas such as Baalbek, the necessary investment is only $1 million to qualify for the package deal.

In 2010, IDAL gave four Beirut hotel projects package deals. Together, they represent more than $350 million in investment, mostly from Lebanese and Saudi Arabian investors.

However, Hawlo Tleiss, executive vice president of IDAL, says some administrational issues still exist. “It [Law 360, formed in 2001] is supposed to be a one-stop shop for investors, but in Lebanon, politically, it’s difficult to get the authority of the tourism [and other ministries]” to give investors the ‘package deal’ incentive.

The biggest obstacle to tourism investment remains security. Compared to other fields like industry and technology, tourism is more sensitive to even the suggestion of security upheavals and thus is more risky for investors. But security issues can’t blanket Lebanon’s true potential, and the world is catching on.

“Only last week we were in The New York Times, The Times of London, and the American Express travel magazine,” Minister Abboud told Executive in August. “In the last six months, Lebanon was probably mentioned in every decent publication in the world.”

In addition to accolades from magazines like Britain’s Tatler, which targets upscale consumers, the Lonely Planet travel guide rated Beirut third on its 2010 list of “The 10 greatest comeback cities,” behind Berlin and Ayacucho, Peru. The guide describes the city as a “world-famous cultural center,” favored by “fashionistas and partygoers.”

By mid-2012, the Phoenicia will have a whole new look due to major refurbishment that started this year, including the Eau de Vie restaurant

However, the party spirit of 2010 may have been dampened by a dent in spending, as some believe that the waves of the financial crisis have finally washed upon Lebanon’s shores.

The usual summer round of concerts, music festivals and international DJs saw a drop in attendance, despite being heavily promoted. The Virgin ticketing office reported total sales of around 400,000 tickets for major musical events and concerts last year, but 30 to 40 percent less in 2010 even though there were more events, according to Abdo Housseiny, partner and general manager. Housseiny said shows were only promoted in Lebanese media, missing out on potential visitors that he believes would come based on the summer schedule.

Industry issues & concerns

In contrast to previous years, efforts were made in 2010 to promote a more mature tourism sector. To spread tourism over 365 days a year and not depend on summer and holiday periods, more attention was focused on niches such as health tourism, eco-tourism and religious tourism. Several exhibitions and conferences were held to attract and diversify investment, with view to spreading the seeds over the whole country and not just Beirut, where 77 percent of tourists currently stay.

But Lebanon may be losing out in a regional marketing race, as neighbors — mainly Turkey, Jordan, Syria and Egypt — are spending heavily to promote themselves as destinations and are building up their tourism sectors at a faster rate.

“Istanbul and Cairo have done tremendous promotional work… but they are targeting more the economy market versus the luxury market, so we haven’t lost anything in the luxury market,” said Georg Weinlaender, general manager of the Phoenicia hotel.

Meanwhile, tourists from Turkey tripled when visa requirements were lifted this year, according to the ministry. The Phoenicia recently witnessed this phenomenon first-hand when a visiting group representing one of the largest beverage producers in Turkey was so numerous they had to split between three other hotels.

Number of hotels in Lebanon 2010

Corporate clients are big business for the nation’s premier hotels but Weinlaender said he fears inadequate conference facilities are restricting this market from its full potential.

Although the Beirut International Exhibition and Leisure Center (BIEL) has been busy with the increase in international congresses and exhibitions Beirut saw in 2010, Weinlaender said the city needs a bigger venue if the city is to keep pace as it moves up the meetings, incentives conferences and exhibitions (MICE) ladder.

“A convention center usually has to take up to 12,000 to 15,000 people,” says Weinlaender, but BIEL’s main conference center has a capacity to seat 9,000.

Although larger “city-wide congresses” have taken place —  such as the International Medical Congress organized out of the United States, which took place at the Phoenicia, Habtoor and other hotels — to attract more MICE business, Beirut needs a bigger meeting facility.

Operators and hotels

The lack of specific guidelines regulating the sector means that anyone can set up shop as a tour operator, leaving tourists facing wildly differing prices and levels of service. Unlike other countries, tour operators are also left in the cold in regards to foreign competition. 

“Hotels do not protect the local tour operator, while in other countries they do,” said Sandro Saadé, chief executive officer of Wild Discovery. “For example, if we call a hotel in Egypt, they refuse to work directly with us. We have to come through a local tour agent, and thus they [local firms] are protected by law.”

As only 3 percent of tourism emanates from tour packages, there is room for tour operators to have a larger role in attracting the new tourists. The ministry says it is keen on bringing in increased numbers from Germany, the United Kingdom and Russia specifically.

Though the positive spin on glitz and glamour is helpful to counteract the war-torn image of the past, Beirut’s expensive reputation is a double-edged sword. While there are three-star hotels outside the capital, there are not many in the city center.

“We can’t force tourists to go out of Beirut because we have to fill the hotels,” says Saadé. “Hotels outside of Beirut have to have a value-added and change their positioning. If they want to wait for tourists to come it won’t happen.”

December 3, 2010 0 comments
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Banking the Holocaust

by Peter Speetjens December 3, 2010
written by Peter Speetjens

 

Victims turned into villains on November 9 when the United States Federal Bureau of Investigation (FBI) announced it had arrested 17 people accused of issuing false claims and documents to obtain pensions and hardship allowances from the Conference on Jewish Material Claims against Germany, better known as the Jewish Claims Conference (JCC).

There are strong suspicions the $42.5 million fraud case is only the tip of the iceberg. Especially in the last two decades, the JCC has come under fierce criticism for greed, mismanagement and a lack of transparency, even within Israel and the Jewish establishment. Founded in 1951, the JCC represents Jewish victims of Nazi persecution and their heirs in negotiating for compensation and restitution from the German government “to secure… a small measure of justice.”

To date, Germany has paid some $60 billion, which the JCC administered and distributed not only among victims and heirs, as was originally intended, but also among a long list of Jewish organizations that deal with Holocaust victim care, commemoration and education. Many of these organizations are represented on the JCC Board of Directors. Following the FBI statement, the JCC went into spin mode with adverts and interviews to portray itself as a victim, which was the language adopted by most media and even the US prosecutor.

Yet, six of the accused actually worked for the JCC, including Semen Domnitser, who since 1999 headed two of its funds. He was jailed, but immediately freed on $250,000 bail pending trial. The actual victim is of course the German taxpayer.  Writing in Israeli daily Haaretz, Anschel Pfeffer defined the JCC as “the richest, most powerful and least answerable old-boys’ network in the Jewish world” and feared the scandal was unlikely to be a case of “a few bad apples.”

According to a former JCC director, the organization has amassed more than $1 billion in liquid assets, while the Jewish Chronicle criticized the $437,811 salary one JCC official received in 2004. Isi Leibler, a former chairman of the World Jewish Congress, accused the JCC of incompetence and cover-ups and called for an independent review board. Likewise, the Movement for Quality Government, an Israeli anti-corruption platform, calls for the JCC to be placed under supervision. The JCC’s creative accounting methods seem to have started after the fall of the Berlin Wall, when the organization saw a whole new world of options and possibilities to seek compensation for Jewish victims and their heirs living in countries of the former Soviet Union. The $42.5 million fraud mainly deals with such cases.

One case in particular has created bad blood both within and outside the Jewish community. In 1990, when the new democratic government of East Germany introduced a law to restitute property nationalized by the former communist regime, the JCC — even before the reunification of East and West Germany — ensured that this included the restitution of Jewish-opened property sold after 1933 or confiscated by the Nazis. What’s more, the JCC became the legal successor to all Jewish property that went unclaimed by the end of 1992, whereby it had the privilege to file “broad claims” in which such minor details as the property’s actual location and the owners’ names could be filled in at a later stage. German weekly Der Spiegel reported that some 240,000 claims were filed in East Berlin alone. In some cases, there were 10 claims for one property and in nearly all cases the JCC was one of the claimants. According to the JCC, the “real estate” fund brought in some $2.3 billion. The JCC is currently negotiating with other Eastern European countries over a similar settlement. Finally, the JCC administers the $1.5 billion of the curious Swiss Banks Settlement account, which some people have called the biggest case of legal blackmail in the history of mankind.

While the $42.5 million scandal may have opened the lid for more investigations concerning the JCC, some more fundamental questions come to mind. For example, if a Jewish victim of Nazi persecution is entitled to claim property he was forced to sell before fleeing in 1938, should a gypsy or homosexual holocaust survivor not be able to do the same? And, last but not least, what does this all mean for a Palestinian farmer who lost everything in 1948?

PETER SPEETJENS

is a Beirut-based journalist

December 3, 2010 0 comments
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A house of ineptitude

by Executive Staff December 3, 2010
written by Executive Staff

 

As the first decade of this century draws to a close, Lebanese public policy is face down in a stagnant swamp. Of more than 60 draft laws put before parliament since it was elected more than a year and a half ago, it has passed only two.

Despite this, headlines in 2010 heralded Lebanon’s renaissance, with storied statistics glorifying the banks and real estate developers for propping up the country’s soaring gross domestic product. But if times are so good, then why has it become so common to see people digging through trash bins for recyclables to sell? Why can so few wage-earning Beirutis afford a home in the city?  

It is because Lebanon’s economic growth has produced few new jobs and wealth accumulation has been limited to the already affluent, who also frequently happen to be members of parliament, ministers and their associated entourages with major stakes in banks and real estate companies. While a handful of MPs seem genuinely concerned for the nation’s welfare, most elected officials show little initiative to operate more than a semblance of a state — one functional enough for them to protect their interests, but not so functional as to provide the Lebanese with services independent of their patronage.

Even the exclusionary growth Lebanon has been experiencing is unsustainable, however, with global organizations — such as the International Monetary Fund — and prominent Lebanese economists sounding warnings. The intensity of wealth concentration in Lebanon is starving the wider free market of capital, while government deadlock on infrastructure reforms is hobbling our productive sectors: industry lacks reliable electricity, our archaic telecommunications network stunts the service sector and entrepreneurial innovation, while agriculture needs a clean, secure water supply. The sprinting GDP growth is slowing and without new investments in infrastructure to carry it, the economy will run out of road.  

A positive note over the past year is that an understanding seems to be building in government that something needs to be done; the Council of Ministers, Lebanon’s cabinet, approved an electricity reform plan and a blueprint to overhaul the water sector is in the works, as is a new fiber-optic network. On paper at least, these plans show promise.

The problem is the different branches of government are not performing their most basic functions: parliamentarians are not passing legislation and thus cabinet’s reform plans have not been made law; reams of legislation that was passed in years gone by remain unimplemented by the ministries, and the judiciary has been impotent in holding ministers to accountable for this.

The current excuse MPs, cabinet and the courts have for not doing their job is the confrontation between the government and the opposition over the United Nations’ Special Tribunal for Lebanon (STL), which has degraded political dialogue in the country to imbecilic chest thumping. The STL, however, for everything else it is, is also a scapegoat. The intransigence of Lebanon’s political and sectarian chiefs preceded the STL and will most likely survive its passing.

It is not the STL stopping the implementation of widely beneficial, desperately needed socio-economic reforms — our so-called leaders are doing that.

 

December 3, 2010 0 comments
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Economics & Policy

Q&A with Raya Hassan

by Sami Halabi December 3, 2010
written by Sami Halabi

 

Raya Hassan is Lebanon’s finance minister. Saddled with a debt  around one-and-a-half times the size of the country’s economic output, a gaping deficit and a lack of infrastructure, she is tasked with making a method out of the madness. In an exclusive interview Hassan sat down with Executive to discuss everything from her ministry’s performance to the economic priorities of the government.

E  The ministry’s strategy to reduce the debt-to-GDP ratio appears to have been successful, but we only have potentially unreliable national accounts figures for 2008 to go on. As such, how can we accurately assess the progress made in the last two years, or even make projections?

For 2010 we brought an expert from INSEE [French National Institute for Statistics and Economic Studies] to help us project a growth rate for 2010. On the basis of the 2008 data we extrapolated, we can then determine what the 2010 GDP would be. We also use that same base for a projection for 2011 and 2012. Of course, the projections in terms of real growth rates are reviewed each year based on the projected activities in the economy. It is not based on real surveys for the economy but it is as close as we can get in the absence of work that is [now] being done by the Central Administration for Statistics (CAS).

E  For the first time you have projected a decrease in the amount of debt servicing, but the principal continues to grow. With telecom privatization being discounted for a few years to come and other Paris III reforms tied up in parliament, how will you reduce the principal on the debt now that our rate of borrowing is getting better?

In terms of reduction in the stock of debt, I don’t think there is any action in the foreseeable future… because as you said there are no plans for imminent privatization of the telecom sector [which would create capital with which to make repayments]. Of course [the stock of debt] is important, but for us I think what is more important is how to reduce the flow and ensure that the debt is not increasing at an increasing rate. That is why we look at growth as an anchor for controlling debt-to-GDP and at ensuring that we have a primary surplus in the budget in order to ensure that, at least, as the years progress we have a restriction on the increase of the debt stock in a sort of controlled manner. It’s the best we can do, as the primary surplus creates a cushion to any increase in the stock of debt.

E  But that primary surplus comes from the lack of infrastructure spending. We are going to have a problem with growth if we don’t catch up with infrastructure, so the primary surplus is not necessarily a blessing.

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. The 8 percent growth rate that we project for 2010 is very good. However, in order to ensure the sustainability of this growth rate and to ensure that it is being translated developmentally on the ground, it is important for us to address the structural deficiencies in the economy. If the 2010 budget is ratified, all of these capital expenditures hopefully will be released and we will start to see some benefits coming out of it.

E  You have said that the current growth has not translated into jobs on the ground. Now that political tension is rising and there is a lag in policy making, have we lost this growth cycle?

There has not been as much job creation as we would have liked [and] I think the golden opportunity that we had in 2010 is now starting to fade away. What is good is that even with all the political upheavals we are still seeing some positive developments. I am a bit surprised frankly. However, 2010 would have been a golden opportunity to really capitalize on these positive developments and move forward in order to capture these good indicators and consolidate them. [The longer] this political environment persists, the less we will be able to do in the short term.

E  You seem to have abandoned a value-added tax (VAT) increase again for 2011 and are now saying you would re-examine exemptions. What is the current VAT strategy?

It’s not just [about] VAT. Our tax policy [aims to be] equitable, distributed and efficient. When I first took office this is what I [did] in terms of the assessment of the current tax structure. What we have concluded out of this study is that the tax policy is equitable, believe it or not, efficient and reflects the structure of the Lebanese economy. This economy is based on consumption and mostly on imports and not exports.

Now, if we are going to increase unproductive expenditures this is something that I will fight. But if the parliament approves and ratifies current expenditures that would put a dent on the primary surplus or the budget deficit then I will have no choice except to increase revenues.

E  By imposing new taxes?

New taxes, of course, because we are adamant that the budget deficit should be controlled and it should not increase, and we need to have a primary surplus, and we need to reduce the debt-to-GDP ratio. If there is going to be an uncontrollable increase in expenditures, the Ministry of Finance has no choice but to increase revenues. Growth will take care of some of it, but we have to look at other options.

 

E  You say that the tax structure reflects the Lebanese economy, but the economy is changing with real estate constituting an ever-greater proportion of GDP and the productive sector becoming less important. You have suggested an increase of 5 to 7 percent on the registration tax for properties over $500,000 and now say that you want a re-evaluation tax, but there are other real estate taxes that are much easier to apply.

I did suggest a tax on vacant real estate… because [vacant properties] are not taxed today. That is what I proposed in the 2010 budget but it was not approved within the parliamentary committee. For the 2011 budget I proposed a ‘quasi-capital gains tax’ [on real estate]. It’s not a capital gains tax per se because to be able to impose a capital gains tax you would have to have a complete database of the real value of real estate, and we don’t have that today. But in the absence of a complete valuation database, I am saying that we have to impose a 1 percent tax on revenue emanating from the sale of properties.

E  How much do you expect that to take in?

Some 200 to 300 billion [LL] ($133 million to $200 million). But this is not an optimal solution. What we are hoping to do is make this a transitory solution until either the valuation exercise is complete or we take a decision, and this will be discussed by the Council of Ministers. There is going to be a cut off point as of, say January 1, 2011, and afterwards we will capture the real value of the property, start to recognize any future transactions, and try to impose a capital gains tax.

E  Many of the MPs, if not most of them, have interests in real estate and some of the ministers as well. Is this the main problem with imposing real estate taxes?

[Sigh,] Look, we passed a 2 percent increase in the registration tax. There is [a possibility of] the tax on vacant property. There were going to be three tax measures that were going to be imposed on real estate. However, I think the concern was that in the advent of this slowdown in the economy, especially in the last two months, there is a fear that all three measures would really impact the real estate sector very hard. Whether we like it or not, the real estate sector is part of the growth pillar. I think this is where they are coming from. The fact that we passed at least one, and the fact that we are still going to discuss the 1 percent on revenue, I think would be fair for the time being.

E  In terms of salaries and related payments (the second largest expenditure item) the salary scale is not changing, the organizational structures proposed by the Office of the Minister of State for Administrative Reform (OMSAR) are not being implemented, the public bodies remain bloated bodies of patronage and the United Nations Development Programme (UNDP) is doing a lot of the work that the public sector should be doing…

Not a lot of the work; the policy work.

E  When does this stop and the transfer of capacity happen and we start cutting the edges?

I agree with you fully but the underlying factor is the political will to do it. This is not just up to the Ministry of Finance or OMSAR. We believe that the public sector could be much more productive. We think the public sector is bloated and needs to be reformed: the laws, the regulations and the capacities. However, that would mean that maybe we need to do some retrenchment in the numbers and need to look at the salary scales and look at training and this is a huge political decision. I think, and I discussed this with the Prime Minister, that the time is opportune to look at the salary scales and review them because the last time we reviewed them was more than 10 years ago. But, the review of the salary scale cannot be done independently…

E  It has to be changed along with the organizational structures of public administrations. But at the same time you are proposing to increase the number of security services significantly and this will mean more salaries and pensions. Frankly, the security services cannot fight Israel or fight battles in the streets. What is the point?

[Laughs] But, ok. You need them not just to maintain security within Lebanon but also you need them for traffic control, for ensuring the proper functioning of the state. For the army, we are trying, as much as we can, to get grants from abroad. This is a priority. Listen, if you don’t have security, you don’t have an economy.

E  But it is a political decision for them to come into Bourj Abi Haidar when there is a clash. This has nothing to do with if there are 20 or 100 troops.

But you are talking about the sovereignty of the state and the prestige of the state; you can’t have that if you don’t have a strong army and a strong internal security force that would allow you not to depend on non-Lebanese or non-official sources.

E You have already advanced the money for the fiber-optic broadband cables plan to the telecom industry to get the ball rolling. First of all, how much has been advanced and how did you do it without parliamentary approval?

It’s a treasury advance. And we are always attacked for treasury advances [by] the Ministry of Energy and the Ministry of Telecoms… We advanced the Ministry of Telecom around 100 billion [LL] [$66.7 million] to start the fiber-optic plan in the absence of a telecom sectoral plan. Now the fiber optics is a given and we have to do it, but how does this fall into an overall plan? We still don’t know.

This [issue] is the most detrimental in terms of the competitiveness of the Lebanese economy. We have been waiting now for more than a year, we have not even discussed any potential sectoral plan. Nothing. Not even a discussion. The TRA [Telecom Regulatory Authority] is crying. The whole economy is crying. This is where I think we are at our weakest. There should be something done very quickly. We could take years to come up with the perfect plan but that time is costing us huge amounts of economic growth. It’s going to be a huge detriment to the economy.

E  What is your forecast for 2011?

Well, that depends on what will happen in the next short period. If this political impasse persists then I think we are going to be seeing a tangible slowdown. In the last couple of months we have seen somewhat of a slowdown but this has been compensated by the very high growth we witnessed in the first six months of the year. If this persists then I’m going to be really concerned about the state of the economy in 2011.

December 3, 2010 0 comments
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Since its first edition emerged on the newsstands in 1999, Executive Magazine has been dedicated to providing its readers with the most up-to-date local and regional business news. Executive is a monthly business magazine that offers readers in-depth analyses on the Lebanese world of commerce, covering all the major sectors – from banking, finance, and insurance to technology, tourism, hospitality, media, and retail.

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