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Banking & Finance

Money matters bulletin

by Executive Editors November 30, 2010
written by Executive Editors

Regional stock market indices

Regional currency rates

Turkey offers infrastructure loan to Syria

Turkey extended a $247 million credit line to Syria in mid-October, to be spent on infrastructure projects that will be carried out by Turkish companies. The allocation ranks among the largest international commitments to Syria and will probably target the water network, the transport network, the electricity and the health systems, as these sectors remain in poor condition and are in massive need of funding. Syria’s Minister of Finance Mohammed el-Hussein stated that meeting the 6 percent annual increase in electricity demand alone would cost the country at least $9 billion. In addition, he said that infrastructure and international development cooperation were priorities for his ministry. However, critics have suggested that the agreement would benefit Turkey by boosting its exports without generating real investment for Syria.

Healthy deposits for Jordan’s banks

Jordan’s banking and financial system showed resilience to the global financial crisis thanks to tight regulations adopted by the Central Bank of Jordan (CBJ). The resulting solid performance of the banking sector led to a 4.5 percent rise in banks’ deposits that totaled $29 billion in the first half of 2010. In addition, all 15 local banks managed to post a profit in 2009, although their earnings declined by 27.5 percent from a year earlier. Faced with high levels of capital inflows, banks boosted their credit portfolio by 4.3 percent or $814 million in loans, lifting the total amount of credit facilities to $19.75 billion. Nonetheless, the Jordanian banks only focused on offering short-term loans; Deputy Chairman of the Jordan Chamber of Industry, Nazzal Armouti, stated that a financial institution offering loans with long maturities and reasonable interest rates is a basic need for the development of the industrial sector.

Dubai, Abu Dhabi housing vacancy to peak in 2012

The average vacancy of Dubai’s and Abu Dhabi’s housing markets is expected to rise by 10 percent in 2010 before it peaks at 12 percent in 2012, according to property consultancy Landmark Advisory. Apartment sale prices and rentals in Dubai continued to fall, with the average quarterly sale price down by 6.3 percent and the average quarterly rent price down by 5.8 percent. Residential sales volumes in Dubai plunged 30 percent in the third quarter of 2010 compared to the second quarter, pushing the rental volumes up by 25 percent. According to Landmark Advisory, this benefits Abu Dhabi companies through the availability of affordable and higher quality housing alternatives for staff working in Dubai. In addition, the consulting firm suggests that investors are holding off for opportunistic investments in the belief that prices will drop further. Its findings also showed that active construction of commercial office space in Dubai and Abu Dhabi that will almost double the existing supply.

November 30, 2010 0 comments
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Banking & Finance

For your information

by Executive Editors November 30, 2010
written by Executive Editors

Capital makes a venture

Middle East Venture Partners (MEVP), one of Lebanon’s few venture capital (VC) firms, made its first investments last month. As Executive reported in September MEVP has already closed its first fund, the Middle East Venture Fund, at $10 million, and has targeted a treasure chest of $20 million. The first of the young firm’s investments is in Pin-Pay, a platform that looks to transform mobile devices into payment tools. The second is iLevel, which claims to be Lebanon’s first “shopper marketing” agency. And the third is Multilane, a tech firm specializing in optical communication. Tarek Sadi, managing director at MEVP said: “We believe that the efforts of MEVP and other VCs in the region will give entrepreneurs more clarity into the benefits of institutional investors, galvanizing a deep ecosystem.” In other VC news, Berytech Fund, a competing VC firm, bought a 35 percent stake in technology start-up Dermandar last month. Dermandar works in digital image processing and is creating a tool to ease the production of panoramic photos. Dermandar is owned by Elie-Gregoire Khoury and Elias Khoury.  Berytech is reported to have funds of more than $6 million and tends to prefer tech companies. Though the value of the 35 percent stake has not been released, the fund’s investments usually range from $100,000 to $1.2 million.

Lebanese banks hold up in regional roundup

Seventeen Lebanese banks have made the Union of Arab Banks’ top 150 Arab Banks list. The banks on the list, published last month in Al-Iktissad Wal A’amal magazine, have been ranked based on their consolidated assets. Bank Audi Saradar, the first ranked among Lebanese banks, came in 26th place in the entire region. Bahraini banks had the largest showing on the list with 25 banks, followed by the UAE with 20, Lebanon with 17, Egypt with 15 and Saudi Arabia with 11.

Ranking of Lebanese banks among the top 150 Arab banks

Source: Credit Libanais Research, Al-Iktissad Wal A’amal

Soaking up Islamic liquidity

The United Arab Emirates will soon begin issuing Islamic certificates of deposit (CDs) in an effort to absorb excess liquidity, according to Afaq Khan, chief executive of Standard Chartered’s Islamic banking arm Saadiq. Khan told Maktoob Business that the CDs will be used as “a tool to absorb the excess liquidity in the Islamic money market.” The Islamic banking sector faces a lack of sharia-compliant tools to absorb excess liquidity, as CDs issued by the country’s central bank are not acceptable in Islamic law. Although 16 percent of the UAE’s banking assets are in Islamic finance accounts, the country currently has no liquidity management tools in place, while Pakistan — whose Islamic banking sector makes up 5 percent of assets — already has a local currency Islamic treasury, according to Khan. The move is the result of a liquidity management committee set up by the UAE central bank, which will also be considering an Islamic repurchase facility. The Islamic CDs will be offered up for auction daily and will work on a commodity-based murabaha plan, meaning that the profit will be based on the buying and selling of commodities and not interest. They will at first only be available to Islamic banks, but will eventually be available to conventional banks as well.

Insurance potential

Zurich Financial Services Group announced on October 11 that it would soon acquire a 99.98 percent stake in Compagnie Libanaise D’Assurances, a privately owned Lebanese insurance company with operations in the United Arab Emirates, Kuwait and Oman. Compagnie Libanaise D’Assurances posted gross written premiums of $49.1 million and a net income of $5.1 million at the end of 2009. Lebanon’s struggling insurance sector suffers from antiquated legislation and a lack of tax incentives to encourage the use of life insurance as a savings tool. Lebanese Minister of Economy and Trade Mohammad Safadi said that the insurance sector needs to take steps to ensure that informed human resources are available to Lebanon’s growing insurance market, at a conference in late September. He further said that regional cooperation and new legislation were on the way.

“Lebanese insurance companies are poised to grow if the economic free zone between Lebanon, Syria, Jordan and Turkey is formed. This will open a commercial and consumer market to 120 million inhabitants,” said Safadi. He continued: “We have complete confidence that the modernization of legislation and implementation of laws will provide protection for the holders of insurance policies and organize the work of all those who are involved in the insurance field.” Safadi also announced that his ministry would begin to publish insurance sector statistics to encourage transparency. Currently the only insurance statistics published in Lebanon are in Lebanon’s Al-Bayan magazine, which gets its information through an exclusivity agreement with the ministry.

Pumping the portfolio

The net investment portfolios of Lebanese financial institutions in foreign debt and private equity reached $5.3 billion as of March, according to Byblos Bank. This marks a 24.4 percent increase from the March 2009 figure, which was $4.2 billion. Of the $5.3 billion, 51.8 percent ($2.7 billion) is in equities; long-term debt securities constitute 45.3 percent ($2.4 billion) and short-term debt securities representing 2.9 percent, or $153.5 million.

Destination of equity investments

Destination of long-term debt investments

Source: Byblos Bank

HSBC Islamic bond issue

HSBC is in the final stages of launching its first Islamic bonds exchange traded fund (ETF). The fund is largely aimed at international investors who have been rushing to booming emerging market funds, primarily in Brazil, Russia, India and China. The Middle East has been largely left out of this rush, which totaled $49.4 billion in investments according to financial data provider EPFR Global. Desirable international investors have largely ignored the region due to ongoing debt struggles and caps on foreign participation.

Raya’s debt roll over

The Lebanese Finance Ministry will be refinancing $800 million in maturing Eurobonds this month and will seek to swap $3.48 billion in additional Eurobonds due to mature in 2011 for longer maturities. Finance Minister Raya Hassan announced the plan at a conference late last month, where she also stated that the ministry is studying the market to achieve the optimum results from future swaps. She said that rolling over all debt maturing this year, and most if not all debt maturing in the first quarter of 2011, is advantageous because of the low interest rates expected to continue through the first half of 2011. Hassan stated that she expects 5 percent GDP growth in 2011 and 7 percent in 2010. The budget deficit will increase to $3.5 billion next year from $3.4 billion in 2010, said the minister. The weighted interest rate on Lebanese Eurobonds was 7.34 percent at the end of July, according to Byblos Bank.

November 30, 2010 0 comments
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Feature

A sea of plenty?

by Executive Editors November 26, 2010
written by Executive Editors

Projections indicate that over the next 30 years, the outlook for the water situation in the Mediterranean zone — including the Levant — is dire. Over the past century or so, most of the area witnessed a clear trend involving a decline of up to 3 millimeters (mm) per year in annual precipitation.

And things are not set to get any better in the future: the International Center for Agricultural Research in the Dry Areas predicts a 10 percent drop in precipitation in the region during the next three decades compared to the average over the past 100 years. Moreover, most of the decline will take place during winter and spring, when decreases of up to 20 percent are expected, which means that the growth cycle of the vast majority of major field crops will be affected with potentially disastrous consequences.

At the same time, the mean annual temperature of the region is expected to increase by 0.5-1.5 degrees over the coming 30 years, with most of the change occurring in the summer (when it will be approximately one to two degrees hotter). The most affected areas will be Syria and Jordan, where 30 percent of the land will deteriorate from a steppe to a desert, while Lebanon and the West Bank will also witness substantial, if less drastic, change. This will lead to shorter growing periods, with much of the region experiencing reductions of up to 15 days and the decline in parts of Syria, the West Bank and Cyprus more pronounced. Only in some of the high mountain areas of Lebanon will the length of the growing period actually increase due to the rise in temperature, as this will reduce the number of days when cold weather limits growth.

Such trends will thus be highly significant for the economy in most of the Levant. Climate change — whatever its cause — means that more frequent and severe droughts can be expected in the near future, and that desertification is a greater threat than ever. Drought may not be preventable, but actions can be taken to adapt water demands and mitigate the impact.

Turkish temptation

The countries of the Levant may look west, where Turkey bathes in apparent aquatic abundance. But with a growing population and difficulty harnessing supply to its full potential, the Turkey of the future may have its own problems to solve.

For the last few decades the country has been touted as the lifeline and reservoir of the Fertile Crescent, that arc of relative greenery that stretches from the end of the Persian Gulf through Iraq and the Levant to the western tip of Egypt.

At first glance, Turkey would seem to be water-rich: it has some 120 natural lakes, the largest and deepest of which is Van, with a surface area of more than 3,700 kilometers square and a depth of over 100 meters. The Turks also have hundreds of large dam reservoirs, of which the biggest is the 817 square-kilometer lake behind the Ataturk Dam, one of the world’s largest projects of its kind. Moreover, the country is well endowed with rivers, many of which rise and empty into seas within Turkey’s borders, though others such as the Tigris, Euphrates and Orontes are shared with Arab neighbors.

All of this bounty is renewable thanks to extensive rain and snowfall. Turkey’s mountainous coastal regions receive abundant precipitation of up to 2,500 millimeters per year, though areas away from coastal fringes get less: 500 to 1,000 millimeters per year in the Marmara and Aegean regions and in the plateau of East Anatolia, while most of the central and southeastern zones receive only 350 to 500 millimeters annually. Snow falls all over Turkey, and is retained in high mountain areas —  in spring, the meltwater feeds rivers and ground water sources.

Climate change may make inroads into all this, but Turkey is in better shape than its southern neighbors. With such an abundance of water, sending some of the stuff to slake the thirst of a parched Levant may at first glance seem simple. In fact, well before growing regional drought and desertification became widely recognized, various schemes to pump Turkish water south were touted.

These included two pipeline projects for which preliminary feasibility studies were completed late in the late 1980s. The first was the ‘West Line,’ a 2,650 kilometer long route to transfer 3.5 million cubic meters daily from Turkish rivers to Syria and Jordan, and on to the Saudi cities of Tabuk, Yanbu, Medina, Mecca and Jeddah. It was to be matched by a ‘Gulf Line’ carrying 2.5 million cubic meters over 3,900 kilometers through Syria, Jordan, and Saudi Arabia to the Arab Gulf states. The projects never got off the ground.

In only two decades, Turkey could become a water-poor state

Thirst for efficiency

But the Turkey of today is not the same as that of the mid-20th century in terms of water supply and demand.

Countries are “water-poor” if annual available water volume per capita is less than 1,000 cubic meters, or “stressed” if the figure is between 1,000 and 2,000 cubic meters. According to this common international norm, Turkey is now water-stressed; the annual available volume of water has recently been approximately 1,500 cubic meters per capita, whereas in 1960, when the population was only 28 million, it was 4,000.

The official State Institute of Statistics has estimated that Turkey’s population will reach 100 million by 2030; so, all things remaining equal, the annual amount of water per capita available to the Turks will be about 1,000 cubic meters. In only two decades, Turkey could become a water-poor state. Under these conditions, it is more important than ever for the Turks to develop and allocate water resources efficiently before thought is given to sending it south to supply the parched Levant or Gulf regions.

Inside the country, a lot still has to be done to make the best use of water wealth; despite implementation of some ambitious plans to dam and otherwise better store and utilize water, Turkey in recent years has only been using 37 percent of the available exploitable potential of 112 billion cubic meters.

One problem is that distribution of precipitation in the country is uneven: water is not always in the right place at the right time to meet needs. For example, the average number of days on which it snows and the duration of cover vary considerably among regions, from less than one day a year in the Mediterranean zone to over 40 in Eastern Anatolia. The trouble here is Turkey’s settlement patterns are the opposite; people and industry tend to be located in the dryer Mediterranean region. Another issue is that rivers have irregular regimes and natural flows cannot always be diverted directly.

These problems could be addressed through massive new investments which would allow the country to make better use of its water, in which case it could conceivably export some of it to thirsty southern neighbors.

Otherwise, the water wealth of Turkey will continue to be underexploited, to the detriment of Turks and Arabs alike.

November 26, 2010 0 comments
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Feature

The specter of Solidarity

by Executive Editors November 26, 2010
written by Executive Editors

For the past four months, former workers have been staging a sit- in at the gates of the Future Pipe Industries (FPI) factory in Akkar, Lebanon’s underdeveloped northernmost region. FPI, a global manufacturer of fiberglass pipes announced in July that it would be closing the Akkar plant, citing adverse operating conditions.

But many of the factory’s 200 contracted workers, and up to 140 daily workers, are crying foul. They say that some of the employees, who are unionized, were so skilled that they were sent to some of FPI’s 10 other factories around the world to train others and that the company had just supplied the Akkar plant with new machines worth millions, suggesting that the factory was not losing money. The workers also claim to have been dismissed without proper consultation or compensation.

The more active members of the FPI union, having been left in a jobless limbo, are insisting that they will camp outside the factory, blocking the company from removing the machinery, until they have received adequate compensation or get their jobs back.

“I have six kids who are all in school, except one that works at General Security,” says Jamil Abou Chakra, 46, who had worked in the factory for 13 years. “We are willing to die or go to prison because we have nothing left.”

The unity of the former factory workers is far from absolute, however, as the company has actually hired a number of them as security guards to prevent the strikers from entering the factory.

Unions bygone

“Compared to [the union movement] before the war, you now have a miserable corpse of what it once was,” says Fawwaz Traboulsi, professor of politics and history at the American University of Beirut and the Lebanese American University, as well as the author of “A Modern History of Lebanon.”

Traboulsi was an activist in his day, mobilizing teachers and students and supporting the union movement in the 1960s and early 1970s when it was agile, energetic, increasingly powerful and largely independent.

Now, he speaks like a preacher who has lost his flock, obviously capable of passion and energy but no longer motivated to summon either. The unions he once championed are now husks of their former selves, weak, divided and in the thrall of sectarian political masters.

At the end of the 1975 to 1990 Lebanese Civil War, Traboulsi says that almost no one was interested in bolstering the trade union movement. Strong unions would slow reconstruction by demanding wage hikes and politically independent unions would be of no use to Lebanon’s sectarian leaders.

“[Former Prime Minister Rafiq] Hariri wanted docile trade unions, but more important than Hariri were the Baathists, the Syrian intelligence and the Syrian Socialist Nationalist Party (SSNP), as well as labor ministers, who interfered very strongly in the trade unions,” he explains.

First off, a strong union movement is hindered by regulatory infringements on what should be — according to the International Labor Organization (ILO) — inalienable rights.

ILO Convention 87, established in 1948, reads: “Workers and employers, without distinction whatsoever, shall have the right to establish and, subject only to the rules of the organization concerned, to join organizations of their own choosing without previous authorization.”

The Lebanese government has refused to ratify Convention 87 under the pretext that doing so will allow the trade unions to become a direct reflection of the sectarian divisions within the country. But many of those interviewed for this article agree that this is the case despite not ratifying the convention. 

“In our mind it is already divided like this,” says Walid Hamdan of the ILO’s Regional Office for Arab States. Refusing to comply with Convention 87 allows the Lebanese government to deny public employees, including teachers, the right to organize into unions as well as to require every new union, strike or protest to be approved by the labor minister. And with much of Lebanon’s large-scale industry destroyed in the war, new unions that were formed after 1991 became smaller and more localized than their pre-war equivalents. The unions then became an extension of the country’s sectarian system.  “The period where thousands of people thought that their interests could be served by resorting to the trade unions was a pre-war phenomenon. Now, sects take care of people’s interests,” says Traboulsi.

The unions are now husks of their former selves, weak, divided and in the thrall of sectarian political masters

Politics in Akkar

Political interference is also one of the complaints of the workers at FPI’s factory in Akkar.  The company was founded by Fouad Makhzoumi, leader of the fringe National Dialogue Party, which has no seats in parliament. Most of the workers had formerly been supporters of the Future Movement before, they claim, they were either “forced” or “encouraged” to join the National Dialogue Party. The assertion of being forced to switch political parties, however, means little to the ILO’s Hamdan, who sees the whole ordeal as a weakening of resolve on the workers’ behalf, rather than a grievance to be included in the complaints.

“This is where the problem is. From the beginning I shouldn’t align myself with anybody,” says Hamdan. “I’m an independent entity and my only concern is how to best defend the interests of my workers.” After the strike began, the men had hoped to turn to the ruling March 14 coalition for support as the Future movement currently holds sway in the region with a majority of Akkar’s parliamentary seats — that was before August 6, when Makhzoumi held a dinner in honor of Future Movement leader, Prime Minister Saad Hariri.

The FPI workers now find themselves in the difficult position of being without a political patriarch interested in maintaining their support.

Woes of the workplace

The strikers claim that the working conditions in the plant were hazardous, with fiberglass dust constantly in the air and no masks or aspirators provided, causing respiratory problems, eye infections and even cancer.

“The fiberglass, while we are grinding it, makes a cloud inside the factory and makes infections in the eyes,” said FPI union president, Abbas al-Badan, 53, who worked at the factory for 12 years. At FPI’s Egypt factory workers have also accused the company of workplace malpractice, presenting a report in August to the Egyptian Attorney General claiming that the unsafe use of toxic materials in the factory resulted in a worker’s death.

FPI has called all of the Akkar union’s accusations “calumnious.” When contacted by Executive, FPI’s head of communications said the company would not grant interview requests. A written company statement on the matter reads: “The company holds since 2004, the International Organization for Standardization 14001 accreditation for its compliance with the strongest environmental requirements and is subjected to continual audit in this connection twice per year.”

But the workers argue that, in the case of Lebanon, inspectors were bribed and the factory management was given advance warning of inspections, giving them the opportunity to temporarily improve working conditions. Despite the many grievances of FPI’s workers, the strike has resulted in little progress since it began in July, and union experts are pessimistic about its success. The protest’s removed location limits media attention and the organizers have struggled to arrange more visible events in Beirut. And despite their efforts, the workers have not been able to gather in such numbers as to make a strong and un-ignorable stand.

But as the workers sit at the factory’s gate, taking shifts and waiting for a wave of public support they can only hope is on its way, they beg the questions: why are they doing it alone? And, if conditions were as egregious as they say they were for 15 years, why are they only just now bringing up the subject?

Systematic fragmentation and politicization of the trade unions as a whole have weakened them almost to ineptitude

State of the unions

The FPI union in Akkar is just one example of how systematic fragmentation and politicization of the trade unions as a whole have weakened them almost to ineptitude.  The natural place for the Akkar protestors to look for support would be up the ladder of the union system to the confederation. Lebanon’s General Labor Confederation (GLC) is the parent organization of all of Lebanon’s 52 trade unions, but the oddly unfinished lobby in the confederation’s building is not the only thing giving the organization a derelict air. The GLC suffers from structural defects that make it ill-equipped to help small causes like the strike in Akkar. The confederation, for example, does not require its member unions and syndicates to pay dues. Some of the wealthier sub-organizations do contribute, but Ghassan Ghosn, president of the GLC, says that it is impossible for the smaller organizations to do so, as they struggle to fund even their own operations.

The GLC is largely funded by the government and is included in the Ministry of Finance’s budget, as is the case in most countries.

“When the union movement depends solely on government funding, that can be used as leverage to pressure them here and there,” says ILO’s Hamdan. “If [they] don’t have other sources of funding then [they] lose [their] independence.”

Ghosn says even with government money, the GLC’s funding is inadequate. The GLC did provide the Future Pipe union with a lawyer to help in their efforts, but funding for further legal counsel or efforts to generate awareness through paid media are nowhere to be found.

Ghosn claims, however, that further funding is unnecessary in the case of the FPI workers. “Their problem is not a question of money. Publicity does not need money. The newspaper and other media is free,” he said. “Even if they have a lot of money they will not be on the level of Makhzoumi.”

Outside of individual union activities, the GLC also lobbies on behalf of all workers in Lebanon. In March, Ghosn and representatives from the GLC met with the Minister of Labor in order to present grievances regarding just taxation, social security benefits, and the provision of electricity and water.

It is these general demands that most frustrate Hamdan: “If I were in the leadership of the [confederation] one of my major priorities would be to have the right of all workers to associate and organize. They make only shy demands.”

The yearly meeting between the GLC and the Ministry of Labor yielded little results and meetings continued throughout the summer. A general strike was planned for June but Ghosn called it off in when promised a ministerial committee dedicated to GLC issues. He also said the GLC did not want to interfere with the tourism season. After months without progress, Ghosn threatened again in September to call for a general strike if his concerns were not addressed.

This is effectively the only card he has to play, but it has nowhere near the punch it would have had prior to the civil war. No general strike since the war has drawn the thousands of workers they used to. When crowds do form, they usually don sectarian colors and flags — whatever the real reason for the protest. The clashes and street battles between government and opposition supporters in May 2008, after all, began with a labor strike. A general strike might then be perceived as more a threat of civil unrest than a protest.

No general strike since the war has drawn the thousands of workers they used to. When crowds do form, they usually don sectarian colors

Still waiting

Sitting under their tent on a smoldering summer day, the former workers of FPI in Akkar admit that they allowed the union to weaken and almost disappear before their dismissal. After years of letting management pick the union leader, of turning their heads when the factory was kept from working at full capacity on “surprise” inspection days, for accepting the hours, the conditions and the pay they now think was so unfair, they say they feel a shard of remorse and even shame.

At present, it is looking unlikely that the workers of Future Pipe will get what they want, as they have been effectively abandoned to their fate by the country’s union leaders and the Lebanese state.

“Whatever pretext is being used for throwing these people out I think they have the right to decent jobs and the right to discuss their own future,” says the ILO’S Hamdan. “Whenever there is some sort of summary dismissal, whatever pretext, whether economic or technical, it should be negotiated with the workers, which did not happen.” He sighs: “I am very supportive of their demands, but it’s not the commune of Paris.” 

November 26, 2010 0 comments
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Editorial

The road carnage must end

by Yasser Akkaoui November 26, 2010
written by Yasser Akkaoui

Last month the son of good friends of mine was killed, hit by a car as he crossed the street on the way to school – his life cut short at just 17 years of age. The same week he was killed I heard that at least another half dozen others were also killed in vehicle accidents. As a conservative estimate, almost 7,000 people have lost their lives on Lebanon’s roads since 2000, and thousands more injured.

Were the roads kept up properly, and even the most basic safety rules enforced by the authorities and adhered to by drivers, the vast majority of these individual tragedies could have been avoided. 

The human cost of this carnage is incalculable.

Where we can begin to quantify the loss, however, is in strain on the medical and insurance sectors, and the loss of economic productivity. Antiquated cars speeding down badly paved roads is also bad for the environment. On many levels, the malaise on our roadways impacts our lives.

It also helps steer away foreign investment and foreign human capital – who wants to move to a place where their family is threatened daily by a nation of irresponsible morons playing bumper tag?

And while foreigners can choose to stay away, most Lebanese have little choice but to remain here and run the gauntlet each and every day they venture out on our lawless roads.

In the same week as the fatalities were piling up, Lebanon’s Internal Security Forces General Directorate issued figures showing traffic fatalities had dropped somewhat compared to previous years. With fatalities still ludicrously high, however, this is no reason celebrate.

Ironically, it is only the fact that our roads are in such bad condition that the body count is not higher. Imagine the death toll if we had European-style highways on which Lebanese drivers could give full expression to their juvenile need for speed.

The government must act. Lebanon should not be a country where children have to risk so much just to cross the street, fearing drivers who, by and large, conform to no road regulations and who know that law enforcement agencies will do nothing to oblige them to. This must end.

How many people have to die before the state wakes up?

November 26, 2010 0 comments
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Society

Bags of style

by Emma Cosgrove November 3, 2010
written by Emma Cosgrove

Black ballistic cloth, the tough synthetic nylon beloved of luggage designers and flak jacket makers, doesn’t immediately bring to mind images of exotic destinations and the glamour of travel. More likely it recalls long layovers in airline lounges and sleepless nights on long haul flights — not the rich or playful image a luxury brand might prefer.

But for Tumi Chief Executive Officer Jerome Griffith, black ripstop nylon is better than all the calfskin leather and fine silk in the world.

“I said to the design group, ‘love black ballistic, it is what people know you for so be happy with it’,” said Griffith, sitting among a sea of dark shiny cloth in his new downtown boutique on Fakhry Bey Street in Beirut souks, which opened last month.

But while Tumi’s loyal aficionados may recognize the brand’s signature material, not everyone is familiar with this luxury luggage maker.

“Our biggest challenge is becoming more widely known. Even in our home market, the United States, we only have a 39 percent recognition rate which is relatively low. Now, if you’re a business class customer and a world class traveler, you know what Tumi is, but that’s not the average person,” said Griffith.

The brand attempts to make up for this by keeping the right company, with the new downtown boutique sitting alongside Louboutin and Lanvin stores, and guaranteeing that no one else can offer exactly the same product.

Outside of the latest anti-aging potions and a few luxury watch gizmos, the glamorous inhabitants of the downtown retail machine probably don’t spend much of their profits on research and development. But in the world of luxury travel goods, the lightest, most durable, most innovative products are the ones that often determine a brand’s prowess and success.

“We have over 100 patents on different inventions,” said Griffith. He pointed out zippers that fix themselves, and swivel handles for rolling suitcases. He also said that his research and development “guy” had finished new ergonomic backpack straps, which will surely be patent pending soon.

But this is not enough, which is why Griffith has managed to forgo the ubiquitous exclusivity contract with his boutique partners at the Chalhoub group in favor of exposing as many eyes to the brand as possible. Even before opening their store in downtown, Tumi already had a boutique in the airport, which Griffith described as “high volume” and a shop-in-shop at Aishti.
 

So, if Tumi gets their way, black ballistic nylon will be the fashion accessory for the well heeled and well wheeled at Beirut airport next summer. Between product innovations, strategically placed stores and eye-catching opening party celebrations involving guest spray-painting suitcases, they may just get their wish.

November 3, 2010 0 comments
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Society

Q&A with Angelo Gaja

by Caroline Anning November 3, 2010
written by Caroline Anning

Angelo Gaja’s family has been producing quality wines made from the unique Piedmontese Nebbiolo grape in the Barbaresco and Barolo areas of Piedmont, Italy, for four generations. More recently they have acquired two vineyards in Tuscany, expanding the family business to include more of Italy’s regional varieties as well as non-indigenous varieties such as Chardonnay. Executive met the master winemaker in Beirut as he visited Vintage Wine Cellar to talk old worlds and new markets.

E  Firstly, what’s your opinion on the current state of the international wine market?

We consider Europe to be the cradle of wine, but in the last 30 years there was an expansion of interest in many different countries — what we call the new world. Many producers in new countries — Chile and Argentina and Australia and so on — now compete with France in producing… wines made through international grape varieties… basically Cabernet, Merlot, Pinot noir and Chardonnay.

These countries initially started producing wines for [domestic consumption], but now they are producing wines for export. So today, even France is facing competition, Bordeaux is facing competition — but not the top Bordeaux, top Bordeaux is fantastic quality and is very strong…

And what about the [financial] crisis? In the last two years, we have seen, especially in the United States and England — which were mostly affected by the crisis — and partly in Europe, consumers wanting to drink less expensive wines.

On the other hand, in Asia, in Brazil, in Russia, where consumers are relatively new and they have new money, there is an interest in consuming high price wines and quality wines. So this year, Bordeaux is selling future Bordeaux and the main market is China.

E How does Italy stay competitive in comparison to the new world wine producers?

Italy is the largest producer of wine in the world in terms of volume, and has the second highest price per liter after France. France has a higher average price per liter, but Italy in terms of volume sells 40 percent more than France, so it’s a big difference.

Italy improved enormously in the last 30 years. I believe that this is due to different factors. First of all, in Italy there are 35,000 wineries, which is an enormous number, and the large majority are small wineries. This is a very important human factor — these people are able to take their suitcases and fly over the world to talk about their wines. This is very important in growing the culture of Italian wines [abroad].

The second factor is that Italy has the largest number of grape varieties in the world. This means we make wines with a different taste, with a different provenance, made in a different way, and this diversity is very important to match with different kinds of cuisine.

E You mentioned smaller wine producers taking their suitcases around the world to discover new markets – is that what you’re doing here in Lebanon? Do you see the Lebanese market as receptive to Italian wine?

My goal is to build a brand. It’s important that the wine is in many different markets, and it’s important to find good people that have the culture of selling such a wine, that are not pushing me to provide a huge quantity, because we can’t, but is proud of having a bottle of Gaja and is able to introduce it in a few restaurants, a few wine shops and to some special private customers.

E How do you think Lebanon could go about better promoting and selling its wines internationally?

I believe it’s the same for every area. First of all, it’s important to have producers with personality, with character, dedicated to wine. Then after, for these people to survive, they must understand that they cannot only sell their wines in the domestic market, they have to travel. This is what we Europeans did. So it is important to start travelling and to find in the free market, maybe in Asia or Europe or the US, customers who are interested. Because they exist absolutely.

 

November 3, 2010 0 comments
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Bibi’s iron wall

by Peter Speetjens November 3, 2010
written by Peter Speetjens

 

The dream of Eretz Yisrael (Greater Israel) is as alive as ever in the Jewish state. And to make that dream a reality, Prime Minister Benjamin “Bibi” Netanyahu has been using a time-honored Israeli negotiating strategy: appear reasonable, while making impossible demands to gain time in which to change facts on the ground.

Bibi’s latest demand — that the Palestinian Authority (PA) must recognize Israel as a Jewish homeland in exchange for reinstating a temporary freeze on Israeli settlement construction on land that is supposed to form the future Palestinian state — should be seen in that light.

The PA recognized Israel as a sovereign state as long ago as the 1993 Oslo Accords. To further define it now as a “Jewish state” would have compromised the status of the nearly two million Israeli Arabs, as well as the millions of Palestinian refugees around the region who demand their right of return be recognized. It was impossible for the PA to concede this, and the Israeli prime minister knew it.

Thus Bibi effectively halted the talks before they had even started. No doubt Zeév Jabotinsky, the godfather of rightwing Zionism and the Likud party would have been proud.  Born in 1880 in Odessa, Jabotinsky believed that the new Israel ought to cover both banks of the River Jordan. To achieve that goal, he introduced the concept of the “iron wall.”

Having analyzed relations between the Arabs and early Zionists, Jabotinsky wrote in 1923: “Every indigenous people will resist alien settlers as long as they see any hope of ridding themselves of the danger of foreign settlement. This is how Arabs will behave and go on behaving as long as they possess a gleam of hope that they can prevent ‘Palestine’ from becoming the Land of Israel.”

 According to him, the colonization process would only succeed if it continued regardless of the “the mood of the natives,” whereby settlement should take place under the protection of a force “that is not dependent on the local population, but behind an iron wall which they will be powerless to break down.”

Jabotinsky’s metaphorical wall of military and political might would crush Palestinian hopes to turn the tide and the “no, never” slogan of the Arab hardliners would make way for voices willing to compromise.

In 2000, Avi Shlaim, one of Israel’s leading new historians, borrowed Jabotinsky’s concept as a title for his book in which he analyzed the relations between Israel and the Arab world throughout the 20th century. According to him, both Israel’s Labor and Likud parties have adopted the iron wall approach in their dealings with the Arabs.

Shlaim slams the prevailing view in the West that Israel wants peace while the Arabs function as deal breakers. He offers one example after the other, in which the Syrians, Jordanians, Egyptians and Palestinians were in fact willing to compromise, yet Israel refused to talk business. This was as true for Ben Gurion in the early days of the Israeli state as for Menachem Begin in his dealings with the Palestinian Liberation Organization in the 1980s and Netanyahu today.

It is telling that the guru of the Israeli left, Ben Gurion, once wrote: “It’s not in order to establish peace that we need an agreement. Peace for us is a means. The goal is the complete and full realization of Zionism. Only after total despair on the part of the Arabs… may the Arabs possibly acquiesce in a Jewish Eretz Israel.”

By paying lip service to American demands to make concessions, while at the same time demanding the impossible from the Palestinians, Bibi keeps both the iron wall and the Israeli dream alive.

Almost as soon as the talks were halted, he approved the construction of more than 200 new housing units in East Jerusalem.

Ironically, the iron wall doctrine fits perfectly with the “Road Map for Peace” proposed by the United States, the European Union, Russia and the United Nations in 2002, which states that the final Israeli-Palestinian peace settlement will take into account ‘facts on the ground’ — even if that means there is de facto nothing left on which to build a Palestinian state.

PETER SPEETJENS

is a Beirut-based journalist

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ElBaradei’s boycott gamble

by Josh Wood November 3, 2010
written by Josh Wood

In Cairo’s Garbage City — as with many other places in Egypt — there is little optimism about the upcoming parliamentary and presidential elections. “We don’t know anybody. We only know Mubarak,” says Hani Shanouda, a 26 year-old member of Cairo’s 60,000-strong Coptic Christian garbage collecting community, the Zabbaleen. Like many others in this slum, Shanouda will most likely not be voting on either ballot.

In Egypt’s current situation it is increasingly difficult to discern between those who did not vote as a political statement and those who stayed away from the polls for other reasons. In 2005’s parliamentary elections, less than nine million Egyptians voted — representing almost a third of registered voters but only about 11 percent of Egypt’s population of 77.5 million at the time. The presidential elections that year saw only seven million go to the polls.

There are a number of reasons why Egyptians don’t vote. A lifetime of rigged elections and quasi-dictatorship makes voting seem inconsequential — Egypt’s young population means that, like Shanouda, the majority of Egyptians have never experienced a regime other than Mubarak’s and his National Democratic Party, which have ruled since 1981. Also, with 40 percent of the country living on less than $2 per day, simply putting food on the table often trumps political concerns.

A boycott of November 28th’s parliamentary polls  has been urged by Nobel Prize winner and former International Atomic Energy Agency chief Mohamed ElBaradei. He returned to Egypt with political ambitions earlier this year and says a poor show at the polls will expose the fraudulent nature of the country’s elections and spur democratic reform.

However, ElBaradei has been accused of being out of touch with Egypt’s masses. Calls for a boycott could give these accusations credence, showing that ElBaradei’s brand of opposition is more akin to the flash-in-the-pan, internet-based, intellectual-driven opposition groups composed of the upper and middle classes, such as the ‘April 6 Movement’ that caused a small stir in 2008.  While Western observers may applaud ElBaradei’s calls for a boycott as a brave step toward democracy, it could prove entirely detrimental to his movement and leave him on the outskirts of Egypt’s political arena.

Attempts by ElBaradei’s National Coalition for Change to get the country’s numerous opposition groups onto the same page have been hindered by the Muslim Brotherhood, who will field their own candidates in November’s elections. With the group still officially banned by the Egyptian government, Brotherhood candidates have run as independents in the past and currently hold 88 out of 454 seats in parliament, making the Islamist party the strongest officially-represented opposition movement in the country.

Unlike ElBaradei, the Brotherhood is more in touch with ordinary Egyptians and has built much of its support base through providing community services to those ignored by the state. While remaining cautious in the political realm the Brotherhood has still managed to make significant political gains, as evidenced by the number of seats it occupies in parliament.

For any opposition groups though, the election cycle — which starts this month — will be an uphill battle. The Egyptian government has already begun cracking down on dissenters, arresting many Brotherhood members in recent weeks. In October, the government announced that companies that send out mass text messages would require a license — a blow to the opposition, which relied heavily on SMS to mobilize supporters in a country where 60 million people have mobile phones. Despite calls for election monitors from Egyptian civil society actors, the United States and other international entities, it looks unlikely that any such measures will be taken.

Whatever the media hype, anti-Mubarak protests this year have been small and tame compared to the tens of thousands of demonstrators that ground Cairo to a standstill in years past. In this atmosphere, prospects for opposition gains remain slim, and thus it is unlikely that any real change will happen in Egypt soon.

Still, with next year’s presidential elections likely to be a wash (in 2005, Mubarak won a whopping 88.6 percent of a vote widely regarded as rigged), this month’s parliamentary elections are the best shot opposition groups have at making any real gains in the near future.

JOSH WOOD is a freelance journalist based in Beirut

November 3, 2010 0 comments
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Tea Party topography

by Michael Young November 3, 2010
written by Michael Young

This month’s mid-term elections in the United States will show us the direction the country will head in the coming two years and indicate the future shape of American foreign policy, particularly in the Middle East.

One factor determining electoral outcomes will be the fate of the disparate Tea Party movement, which has disturbed the Republican Party hierarchy and liberal-left America alike. And yet shorn of its more troublesome qualities, including its embrace of the opportunistic, demagogical former Republican vice presidential candidate Sarah Palin, the shift toward the religious right and its increasingly nativist reflexes, the Tea Party is somehow a healthy initiative. Many American voters are understandably worried about the potential tax burden imposed by the rescue package for the financial crisis of 2008, as well as the high cost of Obama’s healthcare policy.  

The Tea Party — a loose gathering of groups sharing a dissatisfaction with government as it is being run today — was named for the Boston Tea Party of 1773, when American colonists protested being taxed by a British parliament in which they were not represented. The mantra “no taxation without representation” has entered the American political lexicon and is at the heart of the democratic capitalist social contract. Congressional elections will show whether President Barack Obama passes that test.  

But where the Tea Party will be tested, and where it must pass its own test, is in the particulars of a capitalist culture. Will the movement be able to avoid the pull of its extremes and defend free minds and free markets? And what will this mean for the United States in the world?  

Populist and progressive movements have a venerable legacy in the US. The notion of reform, like the implicit mistrust of state power, is a recurring theme in American history, particularly in the late 19th and early 20th centuries, when the US was transformed from an agrarian society into an industrial-capitalist one. As Richard Hofstadter observed in ‘The Age of Reform,’ many of the demands of the American reform movement ended up being implemented even if the political parties that gave rise to such demands disappeared without a trace.

But there was always a nativist quality to these movements standing against what Americans have regarded as part of their national character: domestic inclusiveness and an urge to spread liberal values and freedom abroad. Likewise, the Tea Party movements have tended to look inwards. They have supported limiting immigration into the US; their fear of government over-expenditure has made them increasingly wary of costly foreign adventures, not least the wars in the broader Middle East; some polls suggest they are mistrustful of Obama’s engagement of Muslim countries; and on social issues Tea Party groups lean toward the conservative.  

The significant role played among Tea Party groups by Palin and other right-wing spokespersons, like the organizational power of the religious groups, means the movement is not likely to veer greatly from this path. However, to reduce everything to right-wing, left-wing terms is to over simplify. The Republican establishment has also been a target of the Tea Party. In that sense, the movement doubles as an anti-elite phenomenon.

America is unlikely to be overcome by the Tea Party, and the movement’s haphazard structure may ultimately prove to be its downfall, unless it can be reorganized behind a presidential campaign. This seems to be Palin’s aim. However, even if the movement were to concentrate on advancing legitimate demands for greater fiscal discipline, the outcome would be a more modest America abroad, both militarily and in the spread of liberal values.

 Oddly enough Hofstadter’s observations about American reform movements of the past may apply once again. Though the Tea Party is hostile to Barack Obama, the president appears to have largely accepted the fiscal restraint argument to justify cutting American foreign expenses, especially in Iraq and even Afghanistan, where he has sought mightily to avoid an open-ended conflict that would dramatically drain American resources. The US is changing, and not surprisingly, the Middle East is changing as a consequence.  

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

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