BusinessReal estateReal Estate

Rent Liberalization: A New Balance to Be Found in Lebanon

by Walid Moussa
written by Walid Moussa

The recent publication of the law on the liberalization of non-residential rentals in the Official Gazette marks a crucial turning point in the evolution of Lebanon’s real estate sector. This change goes far beyond a technical adjustment — it sends a strong message in favor of redefining the relationship between landlords and tenants, based on fairness, economic vitality, and social stability.

For decades, the “old rent” regime was based on a 1963 law that froze rents for contracts signed before July 23, 1992, effectively paralyzing the market and depriving many landlords of the full use and value of their properties. The financial crisis and the collapse of the Lebanese Lira only worsened this reality. The new law, passed by parliament in December 2023, aims to correct this imbalance.

Although it took over a year for the law on commercial leases to come into effect, this rent liberalization now gives essential room to maneuver for investors and property owners. It also places responsibility on the state to oversee this transition with fair and effective mechanisms, preventing speculative abuse or negative social consequences.

Two Pillars

The goal is not to favor one group over another, but to establish a new balance, based on two fundamental pillars: the protection of everyone’s rights and the creation of an investment-friendly environment, without harming urban cohesion or deepening inequalities.

One of the most debated aspects of the new law is the determination of annual rent at eight percent of the market value of the property. In today’s economic conditions, that rate is considered high, especially for small businesses already struggling to survive. A more balanced rate closer to five percent might have better protected both investment returns and tenant sustainability.

But more important than the percentage is how the property’s market value is calculated. It is vital to rely on well-trained, independent professionals to avoid market distortion or manipulation.

Market Benefits

In the medium term, this reform could generate several positive effects. The expected increase in rental supply especially in Beirut could drive prices down and improve housing access for many families. Apartments previously locked under old lease contracts would return to the market for sale, often at more accessible prices, helping a new generation acquire property, even in older buildings. This would contribute to urban reintegration and slow the exodus to suburban areas.

Gradually vacated buildings would also free up urban land for development. This could lead to a decrease in land prices and allow more viable real estate projects particularly in underserved neighborhoods with limited new construction.

Another anticipated benefit is the restoration of heritage buildings. Previously neglected due to low profitability, these structures could now regain economic value, encouraging renovation and preservation. This would support the protection of Lebanon’s architectural heritage rich, but often forgotten urban landscape.

Urban and Fiscal Impact

More broadly, rent liberalization could improve the visual and structural quality of our cities. With more realistic rental returns, landlords would have the financial means to maintain their properties, resulting in a more attractive and functional urban environment.

There would also be positive economic and fiscal repercussions. As properties are revalued and new contracts reflect actual market prices, government tax revenues from property and rental income will increase. These additional funds could be reinvested into infrastructure, public services, and housing programs.

A Missed Opportunity Without a Vision

However, this reform will only succeed if it is accompanied by a clear national vision. It requires serious leadership, effective regulation, and a genuine political will to integrate this reform into a broader strategy for social and urban recovery.

One urgent priority is the creation of a Ministry of Housing, capable of planning and implementing policies that reflect both citizen needs and market realities.

Rent liberalization should not be seen as a threat, but as an opportunity: to modernize our laws, stimulate investment, revive our cities, and guarantee a basic right — the right to dignified housing in a structured and sustainable framework.

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Cut to Reality: Lebanese film makers driven by purpose

by Marie Murray
written by Marie Murray

Nadine Labaki, arguably Lebanon’s most renowned filmmaker, is currently working on writing and directing a new feature length film. Emblematic for Lebanon, it is her first since the 2018 release of Capernaum, which, according to its IMDB page, won 37 awards and received 55 nominations, including an Oscar nomination. For Labaki, the “against all odds” characterization of the film industry mirrors the tired praise of Lebanese resilience in the face of chronic crises. “I think we try so much to adapt to every situation that we are in and to live day by day, that we’ve never made any long-term plans … We don’t know how to do that. We don’t know how to see into the future, so we don’t know how to plan.” Labaki does sense that Lebanon’s post-war environment and new government might indicate positive changes and a rush of new energy for the film industry. But she is wary of trusting any promises of lasting stability. “We know the drill. We know it’s only a phase, a transition…We’re always on standby mode in this country.” The day after Labaki shared these thoughts, Israel bombed Beirut for the first time since the November 2024 ceasefire.

Doris Saba, the Executive Director of the non-profit Beirut Film Society (BFS), says that the organization was founded in 2006 as a student film competition at Notre Dame University. “We did the first cultural event directly after the war, so it was kind of our way to say, we are still here, we are resilient.” Then, like now, the message is the same: “We really don’t want war, we want to live…We want Lebanon to be on the map of cultural events and international events.” Saba joined BFS in 2017, the year it was officially registered as a non-profit. This year, Beirut Shorts International Film Festival, one of the events organized by BFS, became an Oscars qualifying film festival in three categories, meaning that if a film wins in one of these categories, it goes directly to be nominated in the Oscars. BFS is currently preparing another major event, Beirut International Women Festival, which will commence on April 27th and screen around 100 films.

Lebanon’s film industry is navigating a moment of quiet transformation. Despite systemic challenges—from scarce funding to inconsistent infrastructure—filmmakers are steadily producing work that is both technically ambitious and culturally grounded. Rather than relying on grand narratives of resilience, many are focusing on sharper, more intimate portrayals of life in Lebanon, often with limited resources but a clear sense of purpose. Operating in a tentatively post-war and crisis-hit local environment, while broader culture wars continue to suppress or sideline certain stories internationally, the work of these filmmakers is here to offer more than just entertainment. The result is a scene that, while fragmented, is marked by experimentation, collaboration, and a growing presence on the international film circuit.

Not just a craft—a conviction

Over the years, Labaki has honed a signature method of filming which involves long periods of research and gaining intimate knowledge of the subject matter, and then an abundance of patience in the filming process that allows untrained actors to develop enough trust to bring their own stories to life in the script. Whereas in most films the cameras and actors conform to the scene and screenplay, Labaki describes her method as more of “a dance, a choreography around the actors. We [the crew, cameras, etc.] adapt to them, not the other way around.” In typical filmmaking, life stops around the set which becomes the locus of action. “In this case,” says Labaki, “it’s the complete opposite. We try to be as invisible as possible.”

Without the backing of a robust film industry, Lebanese film makers need a tenacious team and an incredibly strong sense of purpose to propel them forward. Labaki notes how these two factors are inherently intertwined in her work. “When I am with my actors or my crew, it’s really about the honesty of whatever story we are telling. Why are we telling this story? Why is it important that this story is out there, or that people need to know about this specific story? The why is so important.”

Andrew Dawaf, an emerging yet prolific filmmaker with a resolute ambition to “make good films,” has seen Labaki’s film Capernaum “at least 15 times” and looks to her as a role model. He shares a similar sentiment and notes a difference between the films created in this region versus much of the work coming from film-saturated environments like Hollywood, for example, which he sees as overly polished. “I don’t feel hit by a truck when I watch a film that’s not Arab. I don’t feel that my heart is breaking.” While acknowledging that films of all genres have their place, as a viewer he often finds himself wondering “Are you interested in digging deep in the human heart to make people feel something? To change something? Do you have something to say or is it really becoming just popcorn?”

Currently, Dawaf has something to say and is working on writing and directing a short film that he has titled Mazmour Miyeh Wahde w Khamsin, or Psalm 151. There are only 150 psalms in the Bible. Reluctant to specify exactly what the film will be about, Dawaf says that while the message might be controversial for some, he believes that the goal is not to make people comfortable.

When asked about what work has been like over the past year, Dawaf says that his friends abroad can easily misjudge life in Lebanon, believing that people are either under constant bombs or else “living in lala land.” The reality, he says, is that “we live in a rollercoaster.” While there is an inundation of films and series screened from abroad, the reverse has never been true—most Arab films and series are enjoyed only by an Arab audience—and there is a paucity of knowledge on what life in Lebanon (and the region) is actually like. This gap in knowledge from abroad has long worked to the advantage of governments who wish to stir up public support for their agendas in the region. Since October 7th, 2023, the brutal wars in Palestine and Lebanon have escalated in parallel to a frenzy of culture wars and aggressive political narratives.

High stakes for truth tellers

Carol Mansour, Palestinian Lebanese founder of Film Forward, a production house that focuses on documentaries with a social justice bent, finds that the culture wars—especially around the topic of Palestine—have spurred a high-stakes atmosphere for Palestinian filmmakers who simply wish to share their reality.

As one example of culture wars in the current context, artists who express any sort of solidarity with Palestinians or criticism of Israel’s actions face punishing consequences in many European countries such as having their art removed from exhibitions, losing funding, and even being prohibited from entry to certain countries. On March 24th, Hamdan Ballal, an Oscar-winning director of No Other Land—a film that documents settler and IDF violence in the West Bank, all filmed before October 7th, 2023—was assaulted by a group of Israeli settlers and IDF soldiers outside his home in the Masafer Yatta area of the West Bank, and then detained overnight. Despite its accolades, the film is not being streamed in the United States. At the same time, prominent American universities such as Colombia, Harvard, Princeton, and University of Pennsylvania, are being handed ultimatums by the Trump administration to either crack down on student protests, install greater oversight of Middle Eastern studies departments, and shut down student bodies advocating for the protection of human rights in Palestine, among other demands, or face the loss of up to billions in federal funding.

Mansour’s latest film, State of Passion, documents the genocide in Gaza through the eyes of the surgeon, Dr. Ghassan Abu Sitta. While the past year was a dud for most filmmakers in Lebanon whose projects were stalled by the war, Mansour and her producing partner Muna Khalidi seized the opportunity to tell Abu Sitta’s story. They first travelled to meet him in Amman after he fled Gaza in November 2023, and later worked with him in Beirut. “We didn’t even think about the money,” she says. “We travelled, Muna and myself, … we just booked our flights, paid our tickets and started to film.” It was only afterwards that they began collecting the money to cover the film’s budget through crowd-sourcing efforts, which, Mansour says, came quickly because many people were eager to donate towards such a cause. Despite a bipolar environment for such films—many of which are applauded and suppressed in equal measure depending on the audience—Mansour says that State of Passion has been the most well-received film that she and Khalidi have made. It has since been shown in film festivals in the region and in Europe, with almost all screenings fully booked.

A revival of film tourism with a dose of education?

Saba of Beirut Film Society notes that the videos shared by content creators on social media became main sources of news during the war in Lebanon and Gaza. The viral sharing of videos served as a reverse education—instead of Western media and films flooding the region, there was more of a two-way flow. One tenet of BFS’ mission is to promote responsible filmmaking. Saba explains that this means “trying to make a certain impact, using our platforms and festivals to promote a positive language between people.”

It also includes economic impact and building a “film friendly Lebanon” that supports film-induced tourism. Saba cited the popular 2025 Lebanese Ramadan series Bil Dam, which brought in tourists to Batroun where much of it was filmed, as an example of what successful film tourism can look like if given a chance to thrive in coordination with municipalities. She says that compared to other countries, Lebanon is already a friendlier film environment in some ways. As one example, the processes for acquiring filming permits are far less bureaucratic. “Abroad you need around three to six months while here you can solve it in a phone call. So those negative factors are sometimes positive.”

Although Lebanese directors and producers often find themselves muscling through obstacles to pull their budgets together and crossing their fingers that war or protracted crises won’t sabotage their work, the filmmaking industry has enormous economic potential for the country. Beyond its cultural value, the industry has the capacity to generate jobs, attract regional investment, and position the country as a creative hub in the Middle East. Gulf countries are scrambling to capitalize on this potential in their own countries. A 2024 Arab News article by journalist Ziad Belbagi claims that the 2018 lifting of a 35-year cinema ban in Saudi Arabia and investment in the country’s film industry has generated nearly $1 billion in revenue with a 25 percent annual growth rate. According to a 2014 paper by academic Alia Younes published in Cinej Cinema Journal, the United Arab Emirates have also identified the film industry as a tool for both nation building and economic growth. 

But Lebanon’s creative and cultural offerings are very distinct from those of the Gulf.  For one, Lebanon has a longer history of cinema—and one that has never been flooded with government funding. Although censorship on religious and political grounds does occasionally limit which movies are allowed in theaters, the state has never co-opted the film industry as a means of promoting a national image. It is the filmmakers themselves who take on that role, whether intentionally or not. Lebanon’s history, socio-political diversity, varied geography, and the high interaction between its local and worldwide expat population all make it a viable hub for filmmaking, series production, and film tourism. Its potential is soaring—seemingly as high as the obstacles against it.

With or without better days

Individual filmmakers rely on the private sector and international sponsorship for funding. Labaki, Mansour, Dawaf, and Saba all said that funding for each project is different, but that private donors play a large role. In many cases, there is a leap of faith that must be made — films often begin production before all the necessary funding is guaranteed. The act of staying in Lebanon as a filmmaker is, as Labaki says, “a mission. Because nothing goes the way it should. And if you decide to be here, it’s because you have a purpose alongside an anger or frustration that you want to transform to something good.”

Saba says that BFS’ Beirut Shorts Film Festival took place during the height of the past year’s war when Beirut was under intense attack before the ceasefire. “We were in the cinemas, and we did it. Despite everything, we did it.” Saba says that although ensuring security for participants is critical, there is no sense in waiting for stability in the country. “Our core mission is to continue doing what we do despite everything,” she says, adding that turning crises into opportunities has become a central tenet of the organization.

The power of filmmaking is not only the power of storytelling, but the collaborative power of the industry to reach for something more. The final result is that the audience is also pulled in and the stories on the screen become a collective experience. Some might even call them a tool of nation-building – one that is unfettered by crises, political quagmire, or external aggression.

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Real Estate Retrospective

by Anthony Mills
written by Anthony Mills

Fuelled by the continued influx of Arab nationals and capital, Lebanon’s real estate sector continued to grow in 2004 by an estimated 20%. Solidere had an outstanding year, as the Beirut Central District experienced increased demand for property, while on the retail side, big is beautiful seemed to be the theme as ADMIC braced for the end-of-year launch of its Dora shopping mall, the biggest so far in Lebanon.

Overview 

Key indicators, such as cement sales and the number of construction permits, showed a healthy growth in the construction sector, while the number and value of property transactions increased significantly compared to 2003. Despite a rise in price, cement deliveries amounted to 1.23 million tons during the first half of 2004, an increase of 6.2% compared to the same period in 2003. It should be noted though that part of the increase was due to increased exports to Iraq. The Order of Architects and Engineers reports that construction permits grew from 4 million m2 during the first half of 2003 to 4.3 million m2 in the six months of 2004, which is similar to the tail end of the 90s reconstruction boom.

The geographical distribution of permits shows that Mount Lebanon maintained its 2003 lead as it accounted for 46.4% of the total, followed by the north of Lebanon with 20.2%, South Lebanon with 14.8% and Beirut which witnessed an increase of 4.5% to reach 12.8% of the total. According to Banque Audi data the number of property transaction during the first half of 2004 rose by 7.2% to 51,899 compared to the first half of 2003, while the value of property transactions grew by 27% over the same period to reach LL 1.7 billion. In the third quarter it slowed down to 22%, well above the 15% annual growth recorded in 2003, yet still a far cry from the 30% growth figure of 2002. Beirut maintained the lead in terms of value of properties sold, accounting for 35% of the total, followed by Baabda with 22%, Metn and Mount Lebanon with 15.8% and Kesrwan with 9.8%. The figures confirm that the market was dominated by high-end construction and property transaction, as the increase in the real estate market was largely driven by the Arab investors, who since the events of 9/11, continue to see Lebanon as an alternative home, holiday destination and place to invest.

Most players in the sector observed a relative slowdown by the end of 2004, which they attributed to the events surrounding the presidential elections and the attempted assassination of Marwan Hamade. The departure of Rafik Hariri as prime minister and the loss of his international clout were seen as less of a blow as many Lebanese are still optimistic that he will stage a comeback.

A 2004 report issued by Ramco Real Estate Advisers concluded that Gulf investors bought land worth some $680 million between 2000 and March 2004, noting: “taking into account the additional investment on project development the amount could easily more than double.

In that period a total of no less than 2.3 million m2 of land were sold in 109 major deals. The Arabs’ preferred destinations are the mountains, not too far from Beirut. With this in mind, 38% was bought in Baabda, 27% in Metn and 18% in Aley. Only 1% of all land deals concerned Beirut, which still represented the largest value for the Lebanese economy. Apart from the  controversial Sanine Zenith project, the $1.4 billion, 100 million m2 tourism extravaganza on Mount Sanine, boasting several tourist villages and 5 hotels, as well as 18 ski slopes and a golf course, the two largest purchases of land, 368,723 m2 and 123,492 m2 respectively, were concluded by Kuwaiti investment groups in the region of Qornayel.

Residential: Manhattan on the Mediterranean

Even though most construction permits and land sales centered around Baabda and Metn, the most eye-catching and valuable developments were taking place in Beirut, especially the ongoing seafront development facing the Beirut marina in the BCD. The $200 million Marina residential tower, which will be some 150 meters high, has been half built, while the foundations of the Beirut and Platinum Towers have been laid. Next to the trio, the slightly lower tower of the Four Seasons Hotel is being built. The four high rise buildings represent a total investment of some $600 million and will significantly change Beirut’s façade in the course of 2005 and 2006. With a price tag of $4,000 to $6,000 m/2 the towers’ highly luxurious apartments are arguably the most expensive property currently available in Lebanon. Some 80% of the apartments has already been sold and this seems to be trend for most of the high end residential developments in BCD, including the  Capital Gardens and Saifi II projects, which are due to be built in 2005.

Not surprisingly, Solidere had an excellent year in terms of land sales, helped by an initiative, which encouraged shareholders to sell their stock for a 15% discount on the land. More residential projects and two hotels are slated for the sea front, while the Abu Jamil area is to become a purely residential district. In spring 2004 it was also announced that the $200 million and 155-meter-high Landmark Building Riad el Solh would go ahead, adding to the BCD’s ever changing skyline. As a consequence demand for the price of land has increased, varying between $1,200 m2 inland to some $1,700 m2 on the seafront. Last but not least, after four years of delay and for a reportedly inflated price of some $12 million, Solidere announced that they are about to obtain the necessary permits needed to complete construction of the 100,000 m2 Souqs retail project by 2006.

Downtown Beirut, however, was not the only area to witness significant developments. Contrary to downtown, where 80% of investors and buyers are Gulf Arabs, Ashrafieh remains popular among the Lebanese. New, high-spec apartments are smaller, on average between 250 to 350 m2, and more reasonably priced, on average between $1,700 to $2,500 m2. The same is true for developments in areas such as Ain Mnreiseh, Hamra and Ramlet al Baida.

One of the fastest changing areas in Beirut is no doubt Gemaizeh (see box), while large areas behind the Phoenicia hotel, west of the Damascus road and along at Rue Spears have been cleared. No doubt, these current ghost towns are next in line to see some major developments throughout 2005 and 2006.

Retail: The rise of the mall

2004 was the year of the mall and 2005 will continue to be so. The $120 million ABC Ashrafieh, Lebanon’s first genuine mall opened in November 2003 and went into full gear last year. Apart from its size, the difference between ABC and existing malls, such as Verdun 730 and Dunes, is that the first truly offers a world of shopping, entertainment, food and beverages all under one roof.

Critics had doubted there would be sufficient demand for such a major development, but ABC has proved them wrong. Its 40,000m2 of retail space are fully occupied and shops, restaurants and cinema attract a constant flow of customers. In 2005 however, ABC will have to compete with BHV at Dora. About twice the size of ABC Ashrafieh, BHV is Lebanon’s first mega-mall with under its roof the country’s first Casino hypermarket, a grand department store, shops, boutiques, restaurants, café’s and a cinema. Most experts expect it to do well, seeing its excellent location between the two highways that form Beirut’s northern exit.

With rents of as much as $1,000 per m2 per year, ABC and BHV are among the hottest properties around as far as retail space is concerned. The downtown follows with rental prices varying between $800 and $1,200per m2 per year. Verdun has an average price of some $800 per m2 per year and, as a shopping district, continues to perform steadily. Prices in Hamra vary between $300 m/2 per year at both ends to some $600 for top locations in at the heart of Beirut’s only genuine high street. Following the completion of the restoration works in summer 2004, hopes remain high for Hamra to regain its leading position as shopping district. With its hotels, hospitals, banks, and universities, its history and character, the area has every potential.

In Chiah, the 50,000m2 Beirut Mall should open for business next year. In Sin el Fil, the 14,000m2 Metropolitan Mall is currently being constructed, while at Concorde square the 50,000m2 V5 Mall is planned. In comparison, the V5 will be no less than 20 times bigger than its Dunes counterpart on the other end of Verdun.

The future will tell if there is a demand in Lebanon for such a large quantity of added retail space and if there is still space for the traditional high street such as Hamra and to a lesser extent Verdun. Experts predict that shoppers may tire, after the initial excitement, of indoor shopping. One thing is certain, the increased supply of retail spaces will no doubt lead to a decrease in retail rents, which is an advantage for shopkeepers, and in the end for consumers as well.

Office: smart space sells

No major developments regarding office space took place in 2004. With an average rent of $300 per m2 per year, the BCD remains among the 30 most expensive business districts in the world, which is part of the reason that some 40% of office space in the downtown remains empty. The problem however is not only price-related. Most office space in the BCD does not meet modern international standards, but those that do, such as Atrium and the An Nahar buildings, are performing remarkably well, which is why the construction of Atrium II will begin in 2005.

Tourism: 

Last year, also saw the long awaited opening of the imposing Le Royale in Dbayeh and, following the success of the $10 million Eddé Sands beach resort in Byblos, business tycoon Roger Eddé has big plans for the ancient harbor city. Aiming to attract investment of nearly $5 billion over the next 10 years, Eddé envisions turning Byblos into the Cannes of the Middle East, with a luxury marina, hotels, restaurants spas and health clubs. Most importantly however, was the government’s official approval of the controversial Sanine Zenith project. The $1.4 billion project measures some 100 million m2 of BUA on which it is planned to build several tourist villages and hotels, as well as 18 ski slopes and a golf course.

Box: Gemaizeh

The area changing most rapidly is no doubt Gemaizeh. The old quarter bordering the downtown, which still has a flavor of old Beirut, threatens to become the next Monot, as a string of small cafés, bars, restaurants, boutiques and galleries have recently opened. The revolution began in 2001 with the renovation of the Ahwat Azaz (Glass Café) and French bakery/café Paul, which “made” the corner. In 2004, a dozen more commercial establishments opened and more are expected follow, transforming what used to be a shabby if charming, quarter into arguably the hippest quarter in town.

A handful of residential projects are also in the pipeline, especially on the strip of land bordering the downtown, but also well into the quarter. Following the success of Convivium I and II, developer Kareem Bassil is building a third halfway down the main street towards Electricité du Liban. Apart from its character, one of the main attractions of Gemaizeh was the relatively low prices. That is rapidly changing. The price of land has in some locations risen from less than $400 up to $800 per m2. The rent of retail space has in top locations tripled since the beginning of the year, while asking prices for residential property has increased by 50%, though it remains to be seen if these will be realized.

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Economy and Finance

by Nicholas Photiades
written by Nicholas Photiades

Riyadh Bank Posts 26% Growth in 2004 Profits

Riyadh Bank, the second largest Saudi bank, released its 2004 figures featuring a growth of 26% in net income to $533.3 million compared to $424.5 million in 2003. The bank attributed this rise in profits primarily to its increase in capital reaching $1.3 billion through distributing one free share for every four shares owned and $4.8 of annual profits per share. It is to note that Riyadh bank, 29%-owned by the government, has witnessed since 1997 a fast growth in profits due to the strategies and plans undertaken by the bank to develop its services and adapt to all the economic developments on both national and international scales.

NBK Records Net Profits of $515m in 2004

The National Bank of Kuwait (NBK), the country’s largest bank and the top-rated Arab bank, posted net profits of $515 million during 2004, compared to $412 million in 2003. NBK’s CEO explained that the growth in profits was achieved amid a strategy of diversification in the sources of income and prudent risk management besides taking advantage of growth opportunities presented by an improving operating environment. The bank’s total assets reached $19 billion at end 2004, while shareholders’ equity amounted to $2 billion. In turn, NBK’s return on equity (RoE) and return on assets (RoA) stood at 29.9% and 2.73% respectively, among the highest worldwide.

Country Profile: UAE

International rating agency, Moody’s Investors Service, upgraded the United Arab Emirates’ sovereign long-term foreign currency debt ratings to A1. The agency also raised the sovereign’s short-term foreign currency ceiling one grade to Prime-1 and currency issuer rating to A1 from A2. The outlook on these revised ratings was given as stable. The agency cited that the main reason behind this upgrade was UAE’s stellar economic performance in recent years in addition to the continued domestic political stability. Moody’s mentioned in its positive commentary that nominal GDP growth has averaged 11% since 1999 and consumer price inflation has remained very low. To a large extent, economic expansion has been driven by the oil sector, which generates about one third of GDP. However, the non-oil sector has also registered strong growth. The agency concluded that both the fiscal and current account positions remain in significant surplus.

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Bridging Lebanon’s Governance Gap: A Dual Perspective from Public and Corporate Reform

by Carmen Geha & Zeina Zeidan
written by Carmen Geha & Zeina Zeidan

Lebanon stands today not only at the edge of economic collapse but also at the center of a profound governance crisis. The financial meltdown that began in 2019 unveiled structural failures in public institutions—failures rooted in decades of opacity, fragmented authority, and weak accountability. Governance in Lebanon is neither inclusive nor effective; it does not serve the public interest, nor does it inspire confidence.

Rebuilding the country requires more than financial aid or technocratic fixes. It demands a fundamental rethinking of how decisions are made, who is at the table, and how institutions—both public and private—are held accountable. As governance experts from public and corporate spheres, we argue that Lebanon’s recovery depends on bridging these domains. The public sector can learn from corporate governance’s discipline and structure, while the private sector must embrace transparency, public service, and inclusion traditionally associated with democratic institutions.

Governance in a Complex Political Landscape

Lebanon’s sectarian power-sharing system complicates governance reform. Political deadlock and elite capture have stalled national strategies, and fragmented authority has weakened both horizontal and vertical accountability. Yet regional benchmarks show that progress is possible. Tunisia’s post-revolution decentralization law, Jordan’s SOE performance dashboards, and Morocco’s e-Gov portals for fiscal transparency offer instructive models. Lebanon must contextualize reform but also benchmark itself against regional peers to restore credibility and effectiveness.

Lebanon ranks 154 out of 180 countries on Transparency International’s 2023 Corruption Perceptions Index. The 2020 Beirut Port explosion and the financial collapse have revealed how lack of oversight, weak institutions, and impunity led to national tragedy. The World Bank’s 2021 Lebanon Economic Monitor described the crisis as one of the worst globally since the 19th century, citing over $70 billion in banking sector losses.

Transparency International Lebanon (TI-LB)’s work has demonstrated that localized integrity frameworks—such as municipal anti-corruption units in Zahle and Jbeil—can improve procurement oversight and rebuild citizen trust. These models should be institutionalized through legislation and scaled through national adoption.

Corporate Governance: Accountability and ESG reform

The collapse of Lebanon’s banking sector also reflects corporate governance failures: weak risk controls, opaque ownership, and conflicts of interest. The 2020 Alvarez & Marsal forensic audit of Banque du Liban revealed systemic breaches of financial governance and reporting standards.

According to a 2021 report from the Organization for Economic Cooperation and Development (OECD) on state-owned enterprises (SOEs) in the region, applying International Finance Corporation (IFC) guidelines on board independence, risk oversight, and stakeholder rights could improve governance across Lebanon’s 140 SOEs and family-owned businesses. Private sector actors must move beyond compliance toward transparent operations grounded in long-term value creation.

As ESG standards become global norms, Lebanese companies must embrace public governance values: inclusion, long-term planning, and civic legitimacy. The World Economic Forum’s Stakeholder Capitalism Metrics and the OECD’s Principles of Corporate Governance both emphasize accountability to a broader set of stakeholders.

Public governance tools—such as open budgeting, civic consultations, and whistleblower protection—can help companies build social capital and mitigate reputational risk.

UNDP’s 2023 report on gender equality in politics and decision making found that women occupy less than 5 percent of board positions in Lebanese listed companies⁵ and only 4.6 percent of ministerial posts. Recent 2025 studies by the Lebanese League for Women in Business (LLWB) confirm structural exclusion across sectors, despite overwhelming evidence that gender-diverse boards enhance decision-making quality and organizational resilience.

The IFC’s 2020 Lebanon Women on Boards report and TI-LB’s advocacy for gender-sensitive governance both call for legal quotas, mentorship pipelines, and transparent nomination processes.

Toward a Unified Governance Code for Lebanon

To bridge public and corporate reform, we propose a unified governance framework based on international best practices and local adaptation:
1. Transparency – Mandate real-time disclosure of financials and board decisions through centralized e-platforms.
2. Accountability – Create independent oversight bodies modeled after Jordan’s Audit Bureau and Morocco’s Court of Accounts.
3. Participation – Institutionalize participatory policymaking through municipal and sectoral councils.
4. Oversight – Require all SOEs and public agencies to adopt independent boards and annual audits.
5. Gender Inclusion – Enforce a minimum 30 percent gender quota in all governance bodies by 2026.

We recognize resistance from political elites, fragmented enforcement, and resource constraints. However, reform is possible through a phased approach:

– Phase 1 (0–6 months): Enact procurement transparency laws and appoint interim SOE boards.
– Phase 2 (6–12 months): Establish civic monitoring platforms with civil society partners and introduce gender inclusion laws.
– Phase 3 (12–24 months): Launch a governance academy in partnership with local universities and donor agencies.

This strategy draws on UNDP’s Governance Acceleration Framework and World Bank implementation sequencing models.

Lebanon’s recovery hinges on governance

There can be no recovery without governance reform. The private sector must be accountable, the public sector must be efficient, and all institutions must reflect Lebanon’s full diversity.

Our work through TI-LB, LLWB, and international partnerships shows that reform is not only necessary—it is feasible. With political will and civic engagement, Lebanon can rebuild on a foundation of trust, transparency, and inclusion.

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Corporate GovernanceCorporate Social ResponsibilityFinancial IndicatorsFinancial reality

Lebanon’s ESG and IFRS Compliance Gap: A Challenge or an Opportunity?

by Zeina Zeidan
written by Zeina Zeidan

As global financial markets prioritize transparency, sustainability, and corporate accountability, countries worldwide are integrating Environmental, Social, and Governance (ESG) standards into their financial regulations. The adoption of the International Financial Reporting Standards (IFRS) S1 and S2, developed by the International Accounting Standards Board by over 20 jurisdictions reflects a decisive shift towards structured sustainability disclosure frameworks.

In contrast, Lebanon remains an outlier. The country lacks a formal ESG regulatory framework based on IFRS sustainability reporting, and government driven ESG policies. This regulatory void risks further isolating Lebanon from international capital markets, making it increasingly difficult to attract foreign investment and sustainable financing.

Private sector initiatives, such as business sustainability and compliance consultancy firm Capital Concept[1]’s effort to engage 100 Lebanese companies in ESG integration, demonstrate growing awareness. Capital Concept has increased the value of their portfolio by 23 percent, from $27 billion to $34 billion, proving that corporations are eager to incorporate ESG compliance into their business models. However, voluntary efforts alone cannot replace structured regulatory frameworks. The question is no longer whether Lebanon should adopt ESG compliance—but rather how soon it must act to remain economically viable.

IFRS S1 and S2: A Paradigm Shift in Corporate Reporting

The IFRS S1 and S2 sustainability disclosure standards set a new benchmark for corporate transparency, placing ESG risks and opportunities on par with financial performance metrics. IFRS S1 requires companies to report all material sustainability risks and opportunities that may impact financial performance, including governance structures, climate risks, and supply chain dependencies. IFRS S2 focuses specifically on climate-related risks, requiring companies to disclose their exposure and their mitigation strategies in alignment with the Task Force on Climate-Related Financial Disclosures (TCFD) framework. With ESG-driven investments exceeding $30 trillion globally, non-compliant businesses risk diminished access to capital, weaker investor confidence, and regulatory scrutiny.

Lebanon’s ESG and Corporate Governance Deficit

Unlike many emerging economies, Lebanon does not enforce ESG disclosure requirements. The country remains reliant on voluntary reporting, with regulatory oversight limited to financial disclosure standards under IFRS.

Currently, Lebanese companies must adopt IFRS financial reporting, but sustainability disclosures remain discretionary. The Lebanese Corporate Governance Code, issued in 2006 as a voluntary framework by the Lebanese Transparency Association, in collaboration with the IFC and the Lebanese Institute of Directors, offers guidelines on governance practices but is not legally binding. A small number of corporations voluntarily publish ESG reports, primarily to meet investor expectations.

However, Lebanon still lacks ESG-specific regulations or mandates for climate risk disclosures. There are no financial incentives or policy mechanisms in place to encourage corporate sustainability initiatives. Furthermore, the country has not aligned with global ESG frameworks such as IFRS S1/S2 or the EU’s Corporate Sustainability Reporting Directive (CSRD).

The voluntary nature of ESG adoption has resulted in fragmented efforts, limiting Lebanon’s access to foreign investment and sustainable financing instruments.

The Investment Case for ESG in Lebanon

The combination of Lebanon’s economic crisis and governance deficiencies has significantly eroded investor confidence. Incorporating ESG standards can serve as a pivotal mechanism for restoring financial credibility and unlocking new funding avenues.

Institutional investors are increasingly embedding ESG risk assessment in capital allocation decisions. According to Bloomberg Intelligence, global ESG assets are projected to surpass $50 trillion by 2025, making up a third of total assets under management. However, in Lebanon, ESG adoption remains fragmented due to the absence of regulatory mandates. The Lebanon ESG Stewardship Program, which helped 100 companies integrate ESG practices, faced uncertainty following the suspension of USAID funding. Sustainable finance instruments, such as green bonds and ESG-linked credit facilities, are only accessible to companies with robust ESG disclosures. By adopting IFRS-aligned ESG standards, Lebanese companies can strengthen their competitiveness in global investment markets.

Non-compliance is no longer an administrative oversight—it is a fundamental risk to Lebanon’s economic future.

A Roadmap for ESG Integration in Lebanon

To mitigate financial isolation and enhance corporate accountability, Lebanon must adopt a structured ESG compliance strategy. This begins with the implementation of a regulatory framework mandating ESG disclosures in alignment with IFRS S1 and S2. Listed corporations, banks, and large enterprises should be required to publish sustainability reports detailing their risks, governance, and mitigation strategies.

Beyond regulation, incentives must be introduced to encourage corporate ESG adoption. Tax benefits and financial advantages should be granted to ESG-compliant businesses, while banks can introduce sustainability-linked loans to support green financing initiatives.

Lebanon must also align its ESG roadmap with global best practices, incorporating IFRS S1/S2, the UN Sustainable Development Goals (SDGs), and TCFD recommendations. By collaborating with regional partners, the country can ensure its ESG policies remain competitive and relevant to evolving international standards.

Conclusion: The Urgency of ESG Adoption

Despite considerable pushback from corporations on the adaptation of ESG standards, ranging from feasibility to regulatory complaints, the global business landscape is transitioning towards sustainability-driven financial models. Lebanon’s continued absence from this shift threatens its economic recovery and international investment standing.

ESG and IFRS sustainability standards are no longer optional—they are critical economic enablers. Lebanon’s government, financial regulators, and business community must recognize that failure to integrate these frameworks will further isolate the country from global markets.

As policymakers work towards economic stabilization, ESG integration must be embedded in Lebanon’s financial reform agenda. A fragmented approach is no longer sustainable. The choice is clear: Lebanon can either align with the future of corporate transparency or risk remaining an outlier in the evolving financial landscape.

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Outside the cigar lounge: Breaking barriers in Lebanon’s finance sector

by Sherine Najdi
written by Sherine Najdi

Gender quotas and inclusion requirements: are they just a window-dressing tool or a driver of real change?  For decades, the finance industry worldwide has been predominantly male, with Lebanon’s financial sector reflecting similar trends. Despite advancements, many women in Lebanon still find themselves excluded from the industry’s “cigar lounge”—the exclusive, informal arenas where pivotal decisions are sometimes made, networks are forged, and leadership roles are often assigned. Though women’s participation in Lebanese finance is increasing, their representation in leadership positions remains limited. While Lebanon’s financial crisis has been harsh on women, it also gave certain finance leaders the chance to note that compared to their male counterparts, women are often more resilient and reliable in times of crisis.

Slowly shifting statistics

While women constitute a significant portion of the banking workforce, leadership roles are still predominantly occupied by men. “Life has taken me from one thing to another. I initially joined as an employee, but over time, I carved out my own space. It wasn’t given to me—I had to fight for it,” says Hasmig Khoury, a Corporate Social Responsibility (CSR) Strategist and member of Lebanon’s Economic and Social Council. Khoury, who spent 15 years at Bank Audi setting up and leading the CSR unit, witnessed and contributed to the sector’s transformation. She emphasizes that leadership opportunities for women, while growing, are still not evenly distributed.

According to Nada Rizkallah, a senior executive and head of risk management at Credit Libanais, women in Lebanon’s banking sector once outnumbered men at 57 percent but were primarily concentrated in middle management or operational roles. “We were always present,” she noted, “but never truly in power.”

This phenomenon is not unique to Lebanon. According to a 2021 report on gender diversity in the financial services industry by Deloitte Global, an advisory and research firm, women hold 21 percent of board seats, 19 percent of C-suite roles, and a mere five percent of CEO positions within financial service institutions globally. In the United States, women occupy 21.2 percent of C-suite positions within the financial services sector, underscoring the global nature of this disparity.

In Lebanon, some women believe this is changing for the better. Maya El Kadi, Deputy CEO and Head of Investment Banking at BlomInvest, after spending 30 years at Blom bank, emphasized that her ascent to leadership was facilitated by strong mentorship. El Kadi’s career trajectory has been marked by many positive moments, and she reflected on how she has experienced a work culture that fosters gender equality. “I had a very good sponsor and mentor within the bank. Somebody I started working with, it’s a man, not a woman, but who really gave me a lot of opportunities. And in a way, this is why I try to replicate that with people I work with, but mostly with women,” she recounted.

Women have proved to be the drivers of systematic change, including in areas related to CSR. Numerous studies have shown that female-led companies have higher employee satisfaction, retention rates, and innovation. This contribution to a healthier culture in the workplace extends outward to areas of CSR. Women make sure that their corporations shift their priorities when it comes to making an impact on the community and the market. A 2024 study by the International Journal of Corporate Social Responsibility found that greater gender equality at the board level led to better CSR performance and workplaces that centered “compassion, kindness, helpfulness, empathy, interpersonal sensitivity, a willingness to nurture, and a greater concern for others’ well-being.”

Khoury’s key role in establishing CSR initiatives within Bank Audi demonstrates how women in leadership push for more sustainable and ethical business practices. “We rocked the boat in getting people on board with environmental and social impact.” Khoury indirectly touched on the systemic barriers women face in finance, particularly when trying to move beyond mid-management roles. “At first, CSR was just seen as a human resources thing, something on the side. However, once the leadership realized its real impact, I started reporting to the general management. That’s when the doors started opening.”This insight underscores how women’s leadership is often undermined until it proves indispensable, echoing the struggles of other women in finance. Moreover, El Kadi supports the idea that women leaders can shift perspectives and leadership strategies, “I think having more female leadership roles will bring a lot to the table. Any diversity does. And I think women, in that sense, look at things differently” she says.

Are informal spaces still a “boy’s club”?

Cultural and social norms continue to influence workplace dynamics in Lebanon. Deep-seated biases persist, even within institutions that profess gender neutrality. For example, gender-based unequal pay is usually justified with the notion that women do not need the same income since they are not the main breadwinners in the family, a reasoning that emerges from the deep-seated patriarchal culture that burdens men with provisional roles within the family structure. Thus, the gender wage gap in Lebanon is to the disadvantage of women—they earn 22 percent less than men—after controlling for factors such as education and job selection as mentioned in a 2022 report by the World Bank.

Furthermore, informal decision-making spaces—such as exclusive business dinners or closed-door boardroom discussions—often exclude women. “It’s not just about getting the job,” Rizkallah says, “It’s about the conversations that happen after hours, in places we are not invited to.” Khoury agrees with the idea of informal decision-making spaces and how corporate cultures can be exclusionary: “In banking, the real decisions aren’t made in boardrooms.” Globally, women remain underrepresented at top levels, struggling to attain equality in opportunities to ascend.

In terms of entrepreneurship, the World Bank report indicates that only 11 percent of women are self-employed entrepreneurs, compared to 25 percent of men​, and just 5 percent of small firms, 5 percent of medium-sized firms, and 25 percent of large firms in Lebanon are led by women. In addition, only 6 percent of firms managed by men have women among the owners, compared to 76 percent of female-led firms that also have female ownership​.

Moreover, Rizkallah reflected on the bias women face during recruitment and promotions, especially when it comes to marital status and motherhood: “You don’t know how many times I’ve been asked in interviews: ‘Are you married? Are you getting married?’ I even used to ask the same question.” This highlights how systemic gender discrimination continues to affect hiring and career advancement in Lebanon’s finance sector. Rizkallah then pointed out that over the course of her career, she found that it was her female employees—married and single alike—who proved to be more loyal to the company and who were more skilled at navigating crises.

Strategies for Survival: Playing the Game or Changing the Rules?

Women in Lebanon’s financial sector have developed various strategies to navigate workplace challenges. Some have leveraged their gender to their advantage, using diplomacy and negotiation skills to gain allies in male-dominated spaces.

Others, like El Kadi, advocate for a merit-based approach, believing that demonstrating competence is the best way to challenge stereotypes. “When you have women in leadership positions, you give role models to younger girls. You also give men the belief that they [the women] can do as well as they do, if not more” she says. Yet, even as women excel, the burden of continually proving themselves persists. Moreover, women tend to morph their behavior to fit the expectations in the workplace:” I don’t accept to see a woman crying at the workplace. It’s subtle, but if we want equality, we have to act like it.” Rizkallah says. This shows the need to adopt a persona stereotypically considered more “masculine,” shying away from any behavior that can be deemed as a weakness and aligning with stereotyped traits attributed to women. This instinct goes against evidence that women-led companies have healthier work cultures, indicating that bringing more care into work is good for companies.

El Kadi emphasizes the importance of moral encouragement by saying “If I want to give advice to girls in the workplace, I would tell them that you have to stand up for yourself. You have to know your value. Nobody will see your value better than you do.”   Although emotional intelligence and support roles often become an unpaid, gendered burden on women in the workplace, the negative “emotional” trait given to women now shows power. Having the emotional intelligence and capacity to see beyond short-term profit goals allowed for a more sustainable and people-centered approach in leadership positions.

Furthermore, women were given roles and responsibilities that were not at the top priority lists of company goals. As Khoury noted, “Even today, CSR is seen as ‘soft work’—and guess who gets assigned to the ‘soft’ stuff? Women,” she adds.This reinforces how women in finance are often pigeonholed into roles seen as non-essential, limiting their chances of rising to CEO or C-suite positions.

Crises as catalysts

Lebanon’s financial crisis has had a paradoxical effect on women’s roles in finance. With many men emigrating for better opportunities, more women have stepped into leadership roles out of necessity. “It wasn’t a gender revolution,” Rizkallah explained. “It was survival. Men left, and we had to step up. Moreover, the working women held the spotlight as they proved more efficient in handling crises.” Rizakallah goes on to say: “During the financial collapse, women showed more resilience. They were better at handling crises because they’ve always had to multitask and adapt.” However, this shift is not without challenges. The financial instability has also forced many women to leave the workforce, particularly those who could no longer afford domestic help or had to relocate with their families.

Khoury pointed out that systemic change is only possible through institutional reforms and commitment from leadership. “We need to stop treating women’s success stories as exceptions. They should be the norm,” she says. While it is valid for some women to get attention for their success stories, this attention should not be based on gender; countless women succeed every day, and it is no exception.

 Most women leaders agree with the gender quota, even though it might be seen as favoritism or forced, however, it is shown to allow top management to consider female professionals when it was not the case before.  This insight ties back to the article’s argument that gender equality in finance needs to be structurally enforced, not just left to individual resilience. When asked whether CSR in banking had died out post-crisis, Khoury states that: “[It is] not a graveyard, but a bench. We’ve been sidelined, but we’re not out.” This metaphor captures how women in finance are often the first to be sidelined during financial crises, even if they played a crucial role in stabilizing the sector.

Opening the doors for the next generation

While progress is evident, systemic change is needed to ensure that women in finance receive equal opportunities. Interviewees advocate for policy reforms, including mandatory gender quotas in boardrooms, equal pay enforcement, and greater work-life balance support. The inclusion of women in the workforce can yield several benefits for the Lebanese economy. For example, the World Bank report states that closing the gender gap in the workforce could increase Lebanon’s GDP by 9 percent, demonstrating the significant economic potential of empowering women in finance.

Education also plays a critical role in shifting mindsets. Several women highlighted the importance of addressing gender bias from an early age, noting how societal conditioning starts in childhood. It’s not just about finance; It’s about teaching assertiveness and raising girls to know they deserve a seat at the table—and boys to see them as equals. 

The finance sector in Lebanon remains a challenging landscape for women, yet the stories of those breaking barriers offer hope for the future, especially when compared to corporate culture in other Middle Eastern countries. However, structural and cultural barriers continue to hinder women’s full participation in Lebanon’s finance industry. While economic crises have pushed more women into leadership roles, they are often stepping in out of necessity rather than structural inclusion​. More proactive policies—such as gender quotas in corporate boards, legal enforcement of equal pay, and financial inclusion programs—are needed to create real, sustainable change in Lebanon’s financial sector. As El Kadi put it, “If they won’t let us into the cigar lounge, we’ll build our own space.”

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UncategorizedWomen's empowermentWomen's rightsWomen in the workplace

Burying the Lead: Obstacles for women in leadership and renegotiation of care work

by Marie Murray
written by Marie Murray

There is no question that having women in leadership positions boosts economic outputs. One 2014 study on women on boards from the Academy of Management found that “female board representation is positively related to accounting returns and that this relationship is more positive in countries with stronger shareholder protections.” Female leaders have also been shown to be more willing to make radical changes with minimized risk. The openness of female leaders to outside-the-box thinking might arise from the experience of operating inside a “box” that wasn’t built for them. Yet, corporations and institutions around the world still lag in capitalizing on this opportunity for growth.

Out of 146 countries in the 2024 Global Gender Gap report from the World Economic Forum (WEF), Lebanon ranked 133 overall and 111 on indicators of women’s economic participation, a number that reflects Lebanon’s “brain drain” phenomenon, wherein young professionals look for success outside the country. A 2016 Oxfam-commissioned AUB study on women in leadership in Lebanon, Jordan and the Kurdistan region of Iraq was conducted over seven months with 24 stakeholders from different regions in Lebanon. It found that “women linked the difficulty of having a leadership role in Lebanon to the dual roles of women (i.e. working within the home as well as in the public sphere), and the lack of community/familial support in a patriarchal society,” whereas men cited perceptions of women’s emotional nature as an inhibitor to leadership capabilities. This dual role in domestic and public work hints at the intersection between care work and leadership, which one might argue are two sides of the same coin: if women are to lead in the public sphere, more men must lead in the domestic sphere. However, despite the grim findings of selective reports, the extensive cataclysms that the country has endured in the past five years have thrown much into question, including assumptions that Lebanon must look outside itself for solutions to social woes. Here, three change-making leaders share their experiences and aspirations.

In Lebanon, the country’s multiple crises and upheavals might actually be helping to shift long-held norms. Deenah Fakhoury is the Executive Director of UN Global Compact Network, an organization with a mandate that, as she explains it, “works closely with the corporate sector to align them on best practices, on human rights, labor rights, environment and anti-corruption, and achieving SDGs (Sustainable Development Goals).” She explains that in the Lebanese context, they also work with the civil society sector, which has sometimes taken on the work of the public sector. Fakhoury says that although traditional gender norms prevail in Lebanon, “the fact that we have a financial crisis has led women to work, not because their husbands would like to see them work or their fathers, but because it is a financial need.” It is hard to find exact counts on how many women joined or left the labor force as a result of the financial crisis or the COVID-19 pandemic, though Lebanon’s ranking for women’s economic participation in the WEF’s 2018 Global Gender Gap report was 136 out of 149 countries. It has since moved up 25 places.

Caroline Fattal, chairperson of Fattal Group, a family-owned distribution company operating in MENA and France approaching its 130th anniversary, says that Lebanon is still in a transition phase, but that “wars, disability and crises” are changing the landscape. In families where the men “used to be the sole breadwinner and had that burden on them,” economic and social disruptions are, in some cases, pushing more women into taking on this role.

In rooms full of men

Both Fakhoury and Fattal have run into hurdles of their own. Fakhoury recalls hearing one of her bosses argue that she “doesn’t need the money as much as ‘Habib’ because ‘Habib’ is a man who has a family to provide for.“ Fakhoury adds, “I’m sure they don’t mean any harm, but it’s in so many minds that because you’re a woman, you don’t need financial independence. Someone will take care of you.” Fakhoury sees this mindset in the corporations she works with whenever she lays the issue of gender equality, the fifth SDG, on the table. Global Compact Network has a workshop for corporations called SDG Day, undertaken for the entire company from janitors and drivers to CEOs. SDG 5 is always the issue she saves for last, because, as she explains, “when we reach gender equality there is a big turmoil of discussions, and everything becomes disrupted.” This particular issue, she adds, is one that always stirs conflict amongst employees themselves, and not with the workshop trainers. But, she says, “we always reach a consensus” wherein the final resolution comes down to a question of “do you want others to be treated the same way you are treated? The moment you make [the issues] relevant to everyone as people, every time in every single company,” there is intense argumentation, but also an arrival at a final sense of accord.

The struggle to occupy a space that has long been dominated by men is something that Fattal says must be learned over time. Fattal, who received her first Forbes mention (of many) in 2014 when she was listed as one of the top 100 most powerful women in business in the Arab world, says that the recognition came as a surprise. When she first became a young board member of Fattal Group, Fattal recalls feelings of intimidation. “When I started and had to go to board meetings I was young, I was the only woman, I was surrounded by lawyers, the external auditors, much older people. And I felt sometimes sick, physically sick.” The problem for many women is not a capability gap, but a confidence gap. According to Fattal, “we need to normalize this for other women. Finding your voice and being confident to speak what you think and not listening to the voices in your head” is something that takes time.

Hasmig Dantziguian Khoury, a Corporate Social Responsibility (CSR) strategist who developed and led CSR at Bank Audi until the end of 2024, says that “if you’re in a boardroom, as a woman you will be more overlooked or undermined than a man would be. Women have to continuously prove themselves whereas men don’t.” To back up this claim, she cites a 2022 cross-industry study on gender bias quoted by Harvard Business Review that looked at workplace environments in four industries that had higher ratios of female to male employees. Even in these spaces, women were frequently interrupted by men, had to downplay their accomplishments, take care not to communicate with too much authority, and would sometimes be held accountable for problems outside their control. Discussing similar workplace biases, Fakhoury says that women have tools to respond to these types of situations that they’ve had to develop throughout their lives. “You navigate, you have that emotional intelligence to navigate around people and help them accept things that they usually wouldn’t…there’s a way to negotiate things that, in some instances, is very natural. It’s a survival mode sometimes.”

The domino effect of mentorship

For each of these women, mentorship has been impactful in supporting them in their roles and it is something they, in turn, offer to others. Fakhoury has been part of the Blessing Foundation, a women’s empowerment organization in Lebanon “where a woman leader mentors a girl at the beginning of her career.” Fakhoury posits that “the more mentors you have that can actually support other women, the more you will balance this gender gap.” Dantziguian Khoury is motivated by a personal mission to support other women however she can and to care for the environment, two issues which can be characterized by “a push and pull of cultural momentum.” In 2018 and 2019, she helped organize an event called Mind the Gap, which had thousands of attendees including the president at the time and numerous parliamentarians. The organizers made the strategic decision to invite only female speakers onto the stage in this event on closing the skill gap in the Lebanese labor force in an effort to reverse the norms.

Fattal, who in the beginning of her career would come across many articles about highly competitive behavior amongst women in leadership, a phenomenon derogatively dubbed Queen Bee syndrome, now sees an emphasis on and greater push for women supporting women. For her part, she ensured that 50 percent of the board members of Fattal Group are female, a change that the whole corporation supported. She also founded Stand for Women, an NGO that works with partners to provide training, tools, and microloans for female entrepreneurs and that purposefully emphasizes sisterhood. In Akkar, they began working with 40 women to give trainings on sewing and making mouneh, and then provided sewing machines and food processors. Following the Beirut port explosion, Stand for Women supported 300 women in returning to business, from flower shop workers and seamstresses to jewelry makers and restaurant owners. They are currently pairing embroidery workshops in Zahleh with trainings on gender-based violence.

Local initiatives such as Stand for Women arguably have greater impact than one-time trainings or limited projects sponsored by foreign funding. Fattal expressed the importance of keeping in consistent contact with each of the female-led enterprises from the initiation of the projects until the present. In this way, the women continue to receive support, mentorship, trainings, and a system of positive accountability.  “We are a small NGO but when we start with people, we follow with them. We don’t just give them the trainings and leave.” She adds that, “It’s not about changing the world. If I impact 50 women, I have achieved something.” Of course, Stand for Women has impacted far more women throughout the years.

The invisible elephant in the room

Cultural biases are not the only obstacles faced by women in leadership.  “Invisible labor,” a term coined in 1986 by sociologist Arlene Kaplan Daniels, is work that occurs both domestically and in the workplace, is undertaken predominantly by women and as such, goes un(der)paid and undervalued. In the workplace, this kind of labor might include event-planning, operational work, facilitation of positive relational dynamics, and minutes-taking. As an example, Fattal says that “when there’s a meeting and we have to order coffee, there’s a woman who presents herself to do that role and it’s expected that she’s the one to do this regardless of her seniority.”

But the other piece is, of course, that in order for women to excel in demanding roles, someone else needs to step in at home. A 2022 report by the UN Economic and Social Council for Women in Asia (ESCWA) found that 94 percent of unpaid childcare in Lebanon is undertaken by women. Oxfam’s 2020 report titled “Time to Care,” estimated that “the monetary value of women’s unpaid care work globally for women aged 15 and over is at least $10.8 trillion annually – three times the size of the world’s tech industry.” The same report found that women in rural communities and low-income countries “can spend up to 14 hours a day on unpaid care work, which is five times more than men spend in those same communities.”

When care work is invisible and unvalued, it often becomes exploitative. In Lebanon, gender equity at work does not always translate to greater gender equity at home. Instead, care work often falls on women working a second shift after arriving home, or is outsourced to female migrant domestic workers. Migrant domestic workers in Lebanon operate under an exploitative ‘kefala system’ and are excluded from Lebanese labor laws. These women can be subject to low wages, human trafficking, uncapped work hours, and can have their passports withheld and experience limited freedom of movement according to a 2021 report on domestic migrant workers in Lebanon by the International Organization for Migration.

Fakhoury believes that negotiations around greater parity cannot exclude anyone, and that the most convincing arguments come from asking people to put themselves in the shoes of others. “Lack of inclusivity is somehow a fear to lose your own status,” but change is possible when people are exposed to alternative options. When she works with corporations on SDG 5, for example, she always brings up men’s right to paternity leave, which, if enacted alongside a better maternity leave policy, might go far in helping men recognize the magnitude of domestic labor and take on a larger caregiving role. It can be argued that women make good leaders precisely because they have had lifelong opportunities to learn care work. If men want to become better leaders who do not shrug off care work in scenarios that lead to exploitation and vulnerability of women, they have much to learn by starting at home.

It begins with how boys and girls are raised, which Dantziguian Khoury believes is changing in “the next generation, Gen Z.”  For her part, she says “I have two young men who I’ve raised to do everything: cook, clean, do their own laundry,” adding that they would be willing to support a wife’s career by taking on more domestic labor themselves. Eve Rodsky’s book Fair Play, on renegotiating domestic labor, discusses how men can benefit from managing the conception, planning, and execution of household tasks that almost exclusively fall on women. For a task like children’s activities, for example, this would include researching the activity based on the child’s interests, signing the child up, communicating with instructors, and transportation. Fattal says that change “can only come with dialogue, and you see unfortunately in many parts of the world that we are going backwards and that would be a real pity.”

A matriarchy of care?

Progress towards greater gender equality might have its own flavor in Lebanese culture, which is sustained in large part by a sturdy familial structure and ethos of social interdependence. This structure has largely been built and led by women who, in the Arab context historically and currently, exhibit tremendous power, authority, and ownership over the sphere of family life, which extends out to spheres of education and networks of social support. An otherwise outdated and rather sexist 1977 comment piece by Reverend Kamal Farah on the Arab family made one observation which is still applicable in many ways, that “the Arab family is both patriarchal and matriarchal, at the same time. Although sociologists generally classify families as either dominated by father or mother, the Arab family has the peculiar distinction of fitting into both categories.”

Author Angela Garbes argues that the individualistic approach to family and society has been damaging for western cultures. In many ways, the lost cultural structure that she describes is one that is still robust in Lebanon. In Essential Labor: Mothering as Social Change, she writes, “The simple fact is that for centuries, throughout the world, we lived communally. Having individual families siloed off from one another … is a relatively recent social structure that we accept … A lack of shared responsibility and interconnectedness makes it difficult to find solutions for needs more easily addressed in community, such as childcare, meal preparation, and household maintenance. It leads to isolation and an every-family-for-themselves mentality. It leaves parents feeling common domestic strains as personal problems rather than structural ones.” But she seems to be arriving at a truth that is already woven through Arab culture when she observes that care work, “that energy and effort to maintain—ourselves, our loved ones, our community—has always felt substantial, true, visceral.” In reference to how care work becomes viewed as overly burdensome when it is undervalued or invisible in patriarchal systems, she comments, “I don’t believe care work has to wreck us. This labor can be shared, social, collective—and transformative.”

The work of negotiating for greater structural equity that allows for more women in leadership does not hinge on removing the familial and social power that women have, but instead in broadening the work of caregiving and invisible labor, ensuring that it does not go unvalued, that women do not shoulder it alone or disproportionately, and that they are protected by a supportive legal apparatus. The future of both ‘professional’ and domestic work need not adhere to patriarchal norms that value one and undermine the other. Rather, a matriarchal system that centers human wellbeing over profit is an alternative that already has its roots in Arab culture, and that, one must add, has enormous economic potential.

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Hospitality & TourismQ&AQ&ATourismTourismTourism and HospitalityTourism Lebanon

Bright, hospitable lights are blinking by comparison: A Q&A with Haitham Mattar

by Thomas Schellen
written by Thomas Schellen

Sustainable tourism is one important vertical under the United Nations Sustainable Development Goal (SDG) 8, for achieving decent work and economic growth. While the clock is ticking hazardously for all SDGs across all countries, the barriers are both regional-context specific and structurally high in Lebanon when the country aims at achieving the ninth sub-target of SDG 8, which is to “devise and implement policies to promote sustainable tourism that creates jobs and promotes local culture and products.” To discuss the sustainable tourism prospects of Lebanon, Executive sat down with Haitham Mattar, the managing director of hotel operator IHG Group (locally carrying the fame of the Intercontinental Phoenicia hotel) in the India, Middle East and Africa (IMEA) region. Mattar is a Lebanese hospitality sector executive who visited Beirut on the occasion of a new hotel brand’s arrival in the heart of the Beirut hotel district.

How are you going to reposition the property that you have opened last November, still during the latest war on Lebanon, and how difficult do you consider the Lebanese tourism market to be?

Like any market around the world, when you have stability and security [you have good operating conditions], and can add to that the natural assets of a destination. As you know, Lebanon is a destination that is very rich in history, culture, and gastronomy, with beautiful natural assets. Also, tourism is not something new to Lebanon.

Indeed, when you look here across the street you see the hotel Phoenicia which has been in relationship with Intercontinental starting over 60 years ago, correct?

We signed the relationship with the Phoenicia in 1961 and now we have added this Voco and very delighted to enter partnership with its owner Hani Sheet. He had a vision for this hotel [formerly Monroe hotel] which had a legacy and traded very well when it was open for many years but he wanted to take it a level up with an international brand.

Voco is a newish brand that is only seven years old but it has accelerated in growth. We have the largest Voco in the world in Saudi Arabia with 4500 keys in Makkah, and we recently opened a Voco in Jeddah with 750 keys. It is an up and coming brand that is liked not only by guests but also by investors, because it offers great returns on investment.

The short brand name with its appellative Latin word origin may enter the memory quickly. But how is the brand positioned in the order of IHG Group brands, vis a vis the Intercontinental and the Crown Plaza brands for example?

It is above Crown Plaza and just below the Intercontinental. It is a five-star brand but it is also young and at the border of a lifestyle hotel. It is not a full lifestyle brand but very close. It is informal. When compared with the Crown Plaza which focuses more on events and some groups, here [at the Voco] you have more individual travelers and families. You also might have small meetings and small groups, unlike the Crown Plaza. It is just below the Intercontinental which is our luxury brand.

I understand that the IHG Group has some 375,000 people in its workforce globally, and some 6,600 hotel properties under operation. How many hotels are based in the region that you oversee?

That is correct. 220 [hotels] and 33,000 employees are in my region, and we have four offices, in Dubai, Delhi, Riyadh, and an office in Johannesburg looking after Africa.

This means your region covers all of Africa, plus the Eastern Mediterranean, plus the Arabian peninsula, plus the Indian subcontinent?

India, Seychelles, Nepal, Sri Lanka, Bangladesh, and Pakistan are all in my region, and all of the Middle East and Africa. Those are 42 countries.

If I rank these 42 countries by business volume and by difficulty in terms of managing the market, where would Lebanon emerge?

Let us talk about the ease of doing business. Lebanon is one of the countries where the ease of doing business is somewhat challenging. If you do not have the right connections, it is difficult for you to get a license, especially if you are bringing people to work here from outside the country. But we have seen that in recent years the business environment has been improving very much. And yesterday I met his excellency, President Joseph Aoun of Lebanon. He is clear on his vision in terms of safety and security of the people of the country but also focused on driving the economy. He is also focusing on hospitality and tourism as being drivers of the economy. We talk about the ease of doing business and it is also a key priority for his new team and him to improve the processes of doing business and getting licenses and permits here in Lebanon. He was very optimistic, and we left the meeting feeling very optimistic about the discussion with him and also about the coming summer which he said would be great for tourism in Lebanon. We were very comfortable.

Over the past three decades, Lebanon was a market with two strong seasons, the summer and the year-end holiday seasons. Other times were much weaker and down seasons were difficult to manage. These circumstances were hard for many operators, on top of which there were extreme times in 2021, after one year when the hospitality sector was apparently the hardest hit by the Covid19 pandemic and lockdowns as well as the impacts of the Beirut Blast. The stabilization of this market was challenging even before the weakening of tourism by 32 percent now in 2024. That leads me to ask you how difficult this market is for strategic planning and development?

It is not difficult for strategic planning. In Lebanon you have long stretches of beaches and beautiful mountains, ski resorts, agri-tourism, culture and heritage, so there are great foundations. I do not see any difficulty per se, however, I will tell you what is required to avoid these dips in seasonality that you rightly mentioned. What you need [in tourism] is a 365-day business. You cannot run everywhere at 80 percent occupancy all of the time but if the city can run at 70 to 75 percent occupancy, this is very healthy. We have two busy quarters of the year. The rest of the year will need the efforts of the tourism ministry to thrive through activations and through events. This requires full collaboration between all ministers to make sure that you have the right infrastructure, not just roads and parking, so that participants have a pleasant experience when you have a conference of a reasonable size. Think about it: all of Lebanon has 6,000 hotel rooms, of which 2,000 plus are in Beirut.

What is the market share of IHG Group brands out of this total Lebanese hospitality market with an estimated direct tourism contribution to GDP in the 7 percent range between 2015 and 2020, according to UNWTO data?

We are the largest hotel operator in Lebanon. We have probably more than 50 percent of international brand hotel rooms. If you take the 6,000 rooms in Lebanon, [IHG Group brands] have at least 1,500 rooms.   

And IHG Group has already many years ago divested from hotel ownership into the operator-only model, so all of these hotel rooms are operated under the portfolio of brands, including now Voco, but you don’t have any ownership stakes in these hotels, is that right?

We don’t have any ownership anywhere in the world.

You mentioned your collaboration with investors. How long is the average contract duration under which you operate a property? And regionally, how many Voco hotels are today up and running and how many are in the pipeline?

The minimum is ten years and the average is about 15 years. That is the same also for the Voco brand. Under this brand, we have now 11 Voco hotels operating in the IMEA region and 15 in the development pipeline.

In Voco, you have a brand under expansion. What is your main selling point to investors?

The brand started out as a conversion brand. When a hotel that operates a certain brand is leaving, we come to the owner [of this real estate] with a very efficient conversion plan that allows the owner to save costs on their conversion and [align their property with the international brand]. We offer solutions with Voco to allow the owner to invest into the areas which are most guest-facing. We focus on the impacts on guest experience as a priority. We de-prioritize other areas and we plan [developing these areas] for a future time. So, for example we do a three to five year plan with the owner to convert to a new brand. Plus, [it is an attractive investment] because this brand is an informal brand that targets young business travelers and young families.

While there were a few years in the past twenty years which saw tourism blossom to the point of Beirut being added as destination of cruise liners, there were immediate downsides to the visitor boom, such as food price inflation in the downtown hospitality sector and aggressive hawkers of tourist trap restaurants lining Maarad Street in downtown. You are an expert on sustainable tourism. What would you recommend for ministries of Lebanon, such as the Ministry of Tourism or the Ministry of Economy and any other ministry with a stake in hospitality and economy,  for developing the tourism sector sustainably beyond the seven or eight percent contribution of tourism to GDP that were reported in the latter part of the 2010s? Where would you see the country going in sustainable tourism?

Lebanon is a country that has been deprived of energy for a very long time. I think we have seen a decline in energy supply since the time of the first civil war. Renewable energy will play a key role in Lebanon’s future. No investor wants to put money and continue to pay for diesel and generator. The emissions and the impact on the environment that these generators have, makes it a third world country. Renewable energy is very important for the country to focus on.

Also, when you look at sustainable tourism development, it’s anything that engages the community. When you see countries like Spain and Greece complain about over-tourism, one of the main reasons is that the residents of the country don’t feel the benefit from tourism. They feel that the tourists come and go but only occupy our buses, our streets, our restaurants, giving us traffic and inflation but do not give us benefits. If the communities are engaged and feel that they are being consulted and offered opportunities to contribute to the tourists, whether selling them goods or experiences, the communities and tourism will grow together.

Also, a big trend today is that people are looking for agri-tourism. Lebanon is a country that has a wealth of farms and orchards, whether it is oranges or peaches or apples, and people love to have that experience today. Lebanon must focus on these kinds of experiences that people are yearning for today. They take long trips and travel abroad in order to be able to walk through an orange field or a vineyard. We have vineyards and vineries that have been long established, so I would say the foundation for tourism is there. The biggest need for solution is one, for stability, and two, is for all ministers to come together as one and focus on driving tourism. Then that seven percent [of GDP from tourism] can easily become ten and twelve.

How can you drive tourism when the Ministry of Tourism has a budget that can cover only the salaries of its public servants and keep the lights on at the ministry and depends on the good will of the advertising industry when it comes to producing even a promotional video filled with long-held cliché images? Would you as the largest branded hotel room operator in the country be willing to invest into a promotion campaign for Lebanon as tourism destination?

All our hotels, here or around the world, pay what we call a marketing contribution. This marketing contribution allows us to market a hotel on our channels to our loyal members. We have 140 million loyal members. This is part of what we do to promote our hotels globally. Of course, when the war is there and there is no stability, there is nothing really to promote in Lebanon. We hold back on this. But we are ready to reactivate this [marketing effort] as soon as we feel what we felt today in meeting with the President [Joseph Aoun] who is giving us this confidence. We activate these promotions for our Lebanon hotels again through our hotels globally and through our loyal member and our rewards programs, our website and our applications. We reactivate our Lebanon events.

But that is only one part. You need the destination management and marketing. This is really critical, and unless the two are working together, [it will not function]. I cannot promote the destination; I can promote the hotels [of IHG Group] and the neighborhood but I need help from somebody to promote the destination. So, if the [Ministry of] Tourism has not enough budget, the Middle East Airlines has to come on board. I am sure that they want more capacity on their flights. So if you want to fill your airlift, you must promote the country, you must promote through the destinations and the routes. All together, the eco system can work together. You cannot promote tourism alone or the country. We all have to come together, hospitality, airlines, which are the lifeline of tourism. MEA has a great reputation and good planes, and decent service.

In the past few years, hotels and hospitality operators in Lebanon faced many unexpected financial troubles even in the face of insured business interruption events. Did you face difficulties of managing the cost of the Lebanon operation during recent years?

 Like any other hotel company, we have gone through ups and downs. The hospitality industry has gone through very challenging times, not only in Lebanon but across the world. If you recall the 2008 financial crises, it impacted the whole world and places like Dubai had a major share of impact and losses. But I always say that hospitality is too big to fail and very resilient. People by nature love to travel and by nature always want to reconnect. If you remember how it was said during the Covid [19 pandemic] that [travel] will never happen and we all will be on screens; group travel will never happen again, business travel is gone. But you see immediately after that we are creatures of habit and everybody goes back to their normal life. This is what makes us resilient.

When measured against the SDG 8, achieving sustainable tourism, the sector is globally faced with climate dangers as well as challenges related to migration, trade conflicts, political barriers, etcetera. Many of these barriers are not found in the Middle East region, however.  Is the biggest challenge for tourism in this region the reputation of countries in general terms?

I would say the biggest challenge is stability, all around, not just in Lebanon. Look, Syria is the cornerstone of the region. If anything happens positively in Syria, it will explode outwards, positively. If it is negative and it implodes internally, that still has a negative impact on the entire region. So how Syria will pan out and come to be a real democratic system, will impact the entire region.

This was actually my next question. To go beyond Lebanon, do you still operate the Intercontinental in Damascus?

Not for many years.

But you signed in 2024 for the Holiday Inn in Damascus?

We signed for the Holiday Inn near the central Souq Al Hamidiyeh but the site hasn’t opened yet because of the lack of stability. But I envision that in a democratic Syria, where safety and stability return to the country, [Syrian hospitality will shine as] another country that is very rich in culture, natural assets, and beaches, and that today lacks hotel properties. Even in Damascus you don’t have the [room capacity] and outside, like in the beach cities such as Latakia and historic cities such as Aleppo, there are no hotels.

In the past few decades, development of cross-border tourism in Lebanon was severely hampered by the fact that it was either very difficult or at times impossible to visit nearby countries and so people visiting Lebanon for leisure and cultural travel, were stuck here. Now, with Syria opening up from perspectives of both construction and business but also tourism and hospitality, would you see Lebanon as a base for people from international companies to stay at IHG properties in Beirut and commute to Damascus? Is your Syria development strategy related to the local market in Lebanon? What are you planning for the opening of Syria?

We do not have any plans for Syria yet. The plans will start when you have closure on where Syria is going in terms of governance and when we know for sure that there will be stability in Syria. That is what we wish for, hope for, and pray for. After that, we will seek opportunities in building hotels, as soon as these countries are classified as safe countries and safe business locations.

Some easing of EU sanctions on Syria have been recently announced, especially in areas of transport and energy, so this should be good for you, and I would assume that you have already some connections with investors.  

As soon as the sanctions are [lifted], we will probably be among the first to enter Syria. We have connections with investors and the brands that investors seek. I think everybody is waiting for things to happen. What I imagine is people coming to Lebanon and enjoying Lebanon’s offerings but then to be able to rent a car and drive through to Syria and have the same experience and stay in our hotels as by cross-selling between hotels in Lebanon, Syria, and Jordan. That could be wonderful. Stability is the key component for tourism. Tourism is a force of good.

So if we look to an optimistic scenario for Syria, how many Voco hotels would I be able to stay at in the Syrian countryside?

I don’t know, hopefully many. But the beauty of having our brands is that once we know that the opportunities are open for us in Syria, we will start a market strategy that allows us to study the entire country and see which of our brands fit where. Then we will seek investors’ interest where we want to go, whether it is a city hotel, budget hotel, or luxury brand, or a resort. In this we work with stakeholders on the ground but also with other investors, which could for example be investors from the [Arabian] Gulf who are interested to build hotels in Syria. 

What is the role of the conference and event business. How are F&B, the food and beverages and events business shaping up when compared with room rentals? Is the mix healthy?

It is more geared towards rooms, se we have more [accommodation] business than F&B because we still need the wedding business to come back and we also still need the catering, the big conferences and events. If you say F&B, it is all of food and beverage and especially banquets. This has not revived so much yet but this hotel [Voco] has done so far two conferences and so I can see that the small to medium event business is coming back. The large events business is still not back.

How can Beirut hotels again attract large conferences, perhaps near-future conferences focused on reconstruction in the Eastern Mediterranean countries, and important events on building a sustainable Syria or potent civil society? How can you help in pulling them into Lebanon instead of seeing events on Lebanon and Syria take place in Cyprus, Dubai, or a European city?

This also needs to be a collaboration between us and the government and the convention center. You need the expo center to be able to bid for some of these conferences, noting that the bidding process for some of these large conferences is such that they are booked already five or ten years in advance. They already go to destinations, so the sooner Lebanon starts to bid for these conference, the sooner we can secure some of them. Here I am talking about events that are city-wide, that fill our hotels as well as anybody else in the city. I see great opportunities and healthy competition for tourism in this city.

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GCC

Dubai Sour-Sweet Trading Dreams

by Executive Contributor
written by Executive Contributor

After years of planning, the Dubai Mercantile Exchange (DME) opened for trading on June 1 with its flagship Omani crude futures contract. It’s a collaborative effort bringing together Tatweer, a unit of Dubai-government-owned Dubai Holdings, the New York Mercantile Exchange (Nymex) and the Sultanate of Oman.

The DME’s mission statement and declared rationale is to bridge the gap between international pricing mechanisms for sweet, or low-sulfur, crude and the Gulf’s more sulfuric (sour) oil, especially for trade with Asian oil buyers.

The price of sour crude from the Middle East is currently set in reference to inappropriate benchmarks — futures contracts for very different products traded on the world leading commodities exchanges, Nymex and London-based Intercontinental Exchange (ICE).

The idea of establishing a platform for setting its own benchmarks, enhancing profits, and managing risk in the trade of Middle Eastern oil is not new, it has just never worked before.

Part of Dubai’s goal as financial center

This dream to host the oil futures benchmarking is tied to Dubai’s goal of claiming the role of financial center between East and West through the Dubai International Financial Centre (DIFC). At its inception in 2002, the DIFC was labeled as tool to boost the contribution of the financial industry to the emirate’s GDP from 11% in 2001 to about 20% in 2010. While the DME makes reference to this target in documents on its website, it did not state how large a role the exchange aspires to play in this mission.  

Being the center for sour crude futures trade could prove to be lucrative, given that the DME’s fees per trade are around $1. Brent (ICE) and West Texas Intermediate (Nymex), currently see daily volumes average around 150,000 trades.

The value of having a role in the futures contracts for Middle East oil was underscored by the ICE when it beat the DME to the punch by launching a similar contract on May 21 to directly compete with the DME. There is, however, a major difference in that the ICE sour crude contract is cash-settled whereas the DME’s contract is physically — actual barrels — settled and backed by the governments of regional oil producers. (Although only about 5% of physically-settled futures contracts result in the buyer actually taking the physical product).

High daily volumes are the backbone of a futures contract, which is essentially an agreement to buy a commodity later at a locked-in price. Therefore the 100 contracts, or lots, a trader buys on Monday at $68 each can be sold on Tuesday if the commodity’s price climbs.

Any futures exchange is, however, extremely volatile and contracts are traded quickly, often to maximize profit (as opposed to investors in the equities market who typically hold an investment for a longer period of time). Traders want to be able to get in and out of contracts at a moment’s notice.

This liquidity, however, is the element previous Middle East oil contracts have failed to grasp. Muted trader interest that kept liquidity low killed the first sour crude futures contract launched in Singapore in 1990. The flops that followed have either completely failed or traded in such low volumes they have not reached the status of a price benchmark.

A Nymex solo attempt at a sour crude contract, launched in 2000, only saw two days of trading but remained listed for a year. The DME partnership is Nymex’s fourth sortie into the sour crude futures arena, while the ICE is making its first dash into this market, although it did, however, acquire the International Petroleum Exchange in 2001, whose attempt at a Middle East crude futures contract had turned sour in 1991.

On the DME, contracts are traded for delivery two months in the future. In its first month of trading, 39,571 Oman crude oil futures contracts changed hands — the equivalent of nearly 40 million barrels. This was slightly lower than the rival contract launched by ICE, which saw over 50,000 futures contracts, equal to over 50 million barrels, trade in its first month.

In an attempt to avoid the plague of illiquidity that downed other contracts, the DME has instituted a market maker program. This common practice brings industry heavyweights (like traders and investment banks) to boost liquidity levels, offering cash incentives to increase daily trading volumes to the 20,000 mark, after which, according to the DME’s website, the program will tail off.

Still too early to tell

“The initial target figure mentioned by the DME was 20,000 lots per day and while volumes were reasonably promising to start with, liquidity has since declined to under 1,000 lots on some days,” commented Paul Young, executive oil pricing editor for Asia with the commodities pricing firm Platts. “But it’s still way too early to give an overall verdict on the success of the contract and the DME is launching new initiatives intended to improve liquidity.”

“The Asian market welcomes the DME as a more transparent benchmark for pricing purposes. I think liquidity level at this point remains an issue, but it is still early days for the exchange,” Victor Shum, a Singapore-based energy consultant with the firm Purvin and Gertz, told Executive. “I think the general sentiment seems to be, ‘Well, let’s take a wait and see attitude.’ I think the DME has the elements there to be successful. I think most traders would like to see rising liquidity.”

Gary King, DME’s chief executive office emphasized the contract’s innovative elements when giving his outlook on the contract’s future. “We decided to align ourselves with a Middle East oil producer,” King told Executive a few days before the June 1 launch. “No one’s ever done that before.”

King said market research revealed customers who wanted a physically delivered contract and not the traditional cash-settled contracts and the contract launched in May by ICE. This offers a direct link between the paper market of the futures contracts and the physical commodity. In a bid to meet what King described as market demand, the DME set out to find a producer to partner with for the physical delivery.

Oman announced before the contract’s launch that it would base the price of all of its crude on the DME contract price, starting this month. In late June, in a move apparently timed to offer one last burst of good PR before the launch, the Dubai government, which essentially has about a one-third stake in the bourse, made the same announcement regarding its oil contracts two days before trading began.

Government backing from producer nations for the contract will certainly help lend it credibility, but the exchange has only rallied two middle-weights — Oman and Dubai — in a region of heavy-weights, John Sfakianakis, chief economist with Saudi Arabia’s SABB bank, told Executive.

Oman has 5.5 billion barrels of oil, according to estimates from the U.S. government’s energy information agency. That’s the second lowest level of reserves of the six Gulf Cooperation Council countries behind Bahrain with less than one billion barrels.

The agency’s figures estimate the UAE has 97.8 billion barrels, but UAE government websites put Dubai’s share near 4 billion in 1991. Abu Dhabi sits on an estimated 94% of the nation’s reserves.

Some are being left out

“I’m a little bit skeptical because Abu Dhabi should be a natural participant in this,” said Sfakianakis said. The DME has approached other regional producers, but came back scant on direct commitments.

“We’ve talked to all of them, and I think the proof is as we go forward, the goal is to get the contract accepted as regional benchmark and overall the ultimate goal is to get it accepted as a global benchmark,” King said in an interview the day the exchange opened.

“I think what’s accepted is that it’s important to get first three contracts trading, demonstrate they trade in a robust fashion, that they’re liquid and that you get effective price discovery,” he added, referencing the two cash settled futures contracts that are spreads between the Oman crude price and the prices of WTI and Brent.

But what of Saudi Arabia, the 800-pound gorilla, which holds the second-largest oil reserves in the world? “At the moment you can safely say that Saudi Arabia is not involved,” Sfakianakis said.

An exchange of their own

Given the goals of other GCC nations to power up their own financial hubs, it is possible that bigger producers have not shown the urge to commit to the DME sour crude contract, because they would like to run a benchmarking exchange themselves .

One contender is Qatar’s IMEX, which has just appointed its first CEO. The exchange has been rumored to look longingly at sour crude contracts, in addition to jet fuel and liquefied natural gas futures. IMEX, just like DME, is not yet letting on what futures it plans to introduce in the coming months.

Competitive pressures notwithstanding, Dubai’s financial services sector is an undisputed pillar for the economies of both the emirate and the GCC, now and in future. The question is if it will be the Gulf’s sole central financial market place. According to numbers released in June by the Dubai Chamber of Commerce and Industry, finance in 2006 contributed to about 10% of the emirate’s rapidly expanding GDP — and thus would have to significantly outpace other growth sectors within Dubai if it really is to supply 20% of the emirate’s GDP in the next decade. 

The DME’s immediate concerns will be for developing its products and client base beyond the discounts it offered traders in the startup phase. Since early 2006, there’s been talk of a jet fuel futures contract, and King has said in interviews during the DME launch that this could be running by year’s end. He added that the exchange is keen on trading other commodities but was reluctant to give details.

“The market doesn’t take prisoners. We’re holding most of those ideas close to our chests at the moment,” he told Dow Jones on June 1.

Diversifying or bringing other producers on board or simply securing pricing agreements would be a boon for the nascent exchange, but is not an absolute make or break necessity. In the end, analysts argue the market is ready for change, but is there room in the market for two or more sour crude contracts?

“Not really,” says Michael Davies, senior analyst with the London-based futures brokerage firm Sucden. “At this early stage, there needs to be a focus on one.”

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