Comment

When peace is the target

by Nicholas Blanford
written by Nicholas Blanford

Two separate editorials on the same day in the Israeli press last month underlined the confusion that informs analysis on Syria’s intentions regarding the resumption of peace negotiations with Israel.

The right-wing Jerusalem Post castigated Syria for its “derisive” response to attempts by the Obama administration to engage with Damascus after the years of isolation under George W. Bush. A day after George Mitchell, the United States Middle East envoy, met with President Bashar al-Assad in Damascus to further hopes of a resumption of Israeli-Syrian accord, Russia confirmed it would honor its agreement to supply Syria with P-800 Yakhont anti-ship missiles. The Jerusalem Post surmised that the missiles would probably end up in Hezbollah’s hands, enabling it to fulfill General Secretary Hassan Nasrallah’s vow in May to target shipping along Israel’s entire coastline.

In fact, Hezbollah probably already has acquired anti-ship missiles larger than the Iranian Noor/C-802 system it used in 2006 to disable an Israeli warship off the Beirut coast. Iran produces a longer-range version of the Noor called the Raad, which could theoretically hit Israeli shipping off the coast of southern Israel from launch sites as far north of the border as Beirut.

The Jerusalem Post also noted that Assad “made it clear with whom his loyalties lie” when he met with Mahmoud Ahmadinejad as the Iranian president stopped briefly in Damascus a day after Mitchell’s visit.

“It has become abundantly clear that the Obama administration’s attempt to ‘engage’ Syria… has been a resounding failure,” the Post said. In contrast, the liberal Haaretz newspaper interpreted Ahmadinejad’s visit to Damascus as showing his “fear that Syria will weaken its strategic relationship with the Iranians.”

Haaretz blamed Israeli Prime Minister Benjamin Netanyahu for the lack of progress on the Syria-Israeli track and urged him to heed the advice of the Israeli military establishment, including Defense Minister Ehud Barak, and accept Assad’s offer to resume talks. The conflicting viewpoints of these two Israeli newspapers may have earned a smile of satisfaction in Damascus. The Syrian regime is a master at fence-straddling, turning what normally would be a tactical ploy into a permanent strategy. Playing all sides at once ensures a degree of relevance and a steady queue of regional and international envoys knocking on Assad’s door. Critics of Syria insist that the regime’s ambiguity disguises an insincerity over its commitment to a peace deal with Israel. Peace would alter the geo-strategic environment of the region and compel Syria to make some hard decisions, such as reconfiguring its relationship with Iran and, therefore, also with Hezbollah.

There may or may not be some truth in such analyses, but we will not know because successive Israeli governments in the past decade have shown almost no interest in forcing Damascus to make those hard choices by pursuing peace. The last meaningful negotiations between Syria and Israel were in early 2000. Even then, Barak, the prime minister at the time, who enjoyed a broad mandate to pursue peace and the active support of the Clinton administration, got cold feet and could not bring himself to offer what he knew Hafez al-Assad wanted — the return of the Israeli-occupied Golan Heights to Syria — fearing it would not be accepted in Israel. No successive Israeli prime minister has shown any genuine interest in resuming talks with Damascus. Why would they? The border with Syria has been quiet since 1973.

The US is incapable of compelling Israel to talk to the Syrians if the Israelis are not interested. Given Israel’s succession of frail government coalitions, no prime minister is willing to risk his job for the sake of peace with Syria. Israeli leaders already have to contend with an increasingly militaristic and violent settler movement in the West Bank, so why antagonize the settlers in the Golan Heights as well?

I was once told an anecdote that well illustrates Israel’s reluctance to change the status quo with Syria. During a meeting of the Israeli cabinet in 2004, then Foreign Minister Silvan Shalom recommended attacking Syria and changing the regime. Ariel Sharon, the then prime minister, shook his head and said that that was a very bad idea.

“If we did that one of two things would happen,” he said. “Either we get the Muslim Brotherhood running Damascus or we get a democracy, and then we would have to make peace with it.”

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The Delhi belly games

by Paul Cochrane
written by Paul Cochrane

 

Hosting a global sporting event can do wonders for a country’s image, proving it’s a sophisticated, advanced nation able to meet demanding international standards and put on a good show. Think of China hosting the 2008 Beijing Olympics or the World Cup in South Africa this year.

But if the organizers are floundering just weeks before an event starts and negative publicity starts kicking in, a country’s reputation can be dragged through the gutter. India’s mismanagement of the Commonwealth Games (CWG) in New Delhi last month is such a case.

Qatar, which is bidding for the 2020 Olympics and the 2022 World Cup, would do well to learn from India’s mistakes if it is not to fall into the same trap.

Whether a country likes it or not, dirty laundry will be aired as every minute detail of the event falls under the microscope of the global media.

India spent some $9 billion on the CWG. Stories abound in the press about corruption, the working conditions of the 100,000 construction workers, the estimated 1,000 work-related deaths, and the 400,000 Indians that had their homes demolished to make space for the venues.

Some of India’s largest construction companies have also had their names tarnished for flouting numerous work-related laws, among them the United Arab Emirates-India joint venture Emaar MGF. At the end of October India ordered the confiscation of the companies’ $41.3 million bank guarantee and brought legal action after “irregularities” and deficiencies were found in the CWG village.

Many Indians are embarrassed by the way the CWG has been handled, and rightfully so. A country cannot just paste over the cracks and hope no one notices. Ironically, India knows this only too well as it struggles to promote itself as an attractive investment and tourist destination. After all, India has spent millions of dollars on the very professionally done “Incredible India” ad campaign, but your potential tourist is invariably put off by the stereotype image of poverty and bad hygiene. It is perhaps no surprise then that India only receives a paltry 5 million foreign tourists a year; Egypt by comparison gets 13 million.

Indeed, security and hygiene were major concerns for CWG athletes, with several stars pulling out early and more threatening to do so in the week up to the event with facilities unfinished, a footbridge collapsing and a cobra found in an athlete’s room.  

Things did not go much better once the event started. On the second day there was a bomb scare hoax and then the infamous Delhi belly started setting in, particularly among swimmers, attributed to pools’ dubious water quality. English sprinter Mark Lewis-Francis chose not to bite on his (silver) medal on the podium, as is customary. “I don’t really want to bite it because I don’t want to get Delhi belly,” he told reporters.

India has not exactly helped itself either when trying to justify the sub-standard facilities at the Athletes’ Village, with an off-the-cuff remark by Organizing Committee General Secretary Lalit Bhanot causing much mirth: “Everyone has a different standard of hygiene. The rooms of the Games Village may be clean according to you and me, but they [the West] have some different standard of cleanliness.”

If Qatar gets either bid for the world’s biggest sporting events, it will be a colossal undertaking for Doha. Qatar certainly has oodles of cash to play with and could pull off a great show if the planning is right. Despite early doubts, the Gulf state pulled off the Doha Asian Games in 2006.

The Asian Games were very much a trial run for something bigger, and Qatar has embarked on an ambitious marketing campaign to convince the world it has what it takes. The Middle East has never hosted an event of such global proportions, which lends weight to Qatar’s bid. Where else in the region could pull this off, particularly taking into account security concerns? Only the UAE springs to mind; Bahrain has enough on its plate with Formula 1. If it learns from India’s mistakes, Qatar may just have a sporting chance.

PAUL COCHRANE is the Middle East

correspondent for International News Services

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Society

Executive Insight

by Mark Helou, Zeina Loutfi & Ramsay G. Najjar
written by Mark Helou, Zeina Loutfi & Ramsay G. Najjar

From the primitive sounds and onomatopoeias of our prehistoric ancestors to the profusion of messages conveyed by media channels, online networks and satellite televisions, language has always been, and remains, by far the most important tool of communication. 

Language brings people and nations together while channeling thoughts and ideas to fuel progress on all levels. Many theorists have even posited language as the source of human intelligence, suggesting that we do not speak because we are intelligent, but that we became intelligent precisely because of our ability to speak.

Either way, it is clear that languages all over the world are meant to accompany the progress of civilization and intelligent thinking, continuously evolving and changing in order to keep up with the times and remain a driver of progress and a vector of ideas.

Despite that, we still see language authorities spending much time and energy trying to ward off change through fighting influences and “infiltrations,” or what they deem as “contaminations” by other languages.

A pertinent example would be France, which has resorted to many ways to protect the “exception culturelle Française” against the perceived pervasion of English words. This went from forcing advertisers to include the translations of all English words on billboards and creating new French terms aimed at expressing concepts that originated in English, to overtly criticizing French politicians who dared to express themselves in English. Needless to say, these attempts have so far proven to be futile, as any Frenchman would most probably call his BlackBerry a ‘smartphone’ and not an ‘ordiphone’, be a fan of ‘culture mainstream’ and watch ‘live shows’ thanks to his ‘premium’ TV subscription. Although this situation is likely driving the old sages of L’Académie Française crazy, one cannot escape reality.

Evading evolution

When it comes to the Arabic language, the issue is much more complex but needs to be addressed if the language is to remain future-proof and help advance Arab civilization and its global role.

Being the language of the holy Koran, one can understand people’s reticence of and even outright opposition to touching the Arabic language. Much more than a language, Arabic has always been one of the most important elements binding the Arab world together in this immense geographic area, stretching from the Gulf to the Maghreb.

Its religious significance has rendered it an inherent part of the Arab identity — perhaps one of the few identity elements on which Arab nations still agree, reinforcing the chauvinistic attitudes aimed at “protecting” it against perceived threats from other languages. Yet, one can also argue that when God chose the Arabic language, he did not choose only Arabs to be Muslims, with hundreds of millions of non-Arabic speaking Muslims around the world. Shouldn’t the language of Islam be as open as Islam itself?

Why are we working so hard to petrify it and close it off to natural change? Why should words like ‘shayyick’ (to check), ‘etdawwash’ (take a shower), ‘gawgil’ (to “Google”) or the familiar ‘rimote’ be so frowned upon by purists and considered a threat to the very core of Arab identity and culture?

Going back to the example of other languages, we cannot but think that if the French or the English had “protected” their languages centuries ago, they would still be speaking Olde English and Vieux François.

As for the Arab world, one wonders about the prudence of erecting such barriers, especially when the ‘Golden Age’ of the Arabs coincided with our highest level of linguistic exchange with neighboring states and empires. Back then, Arabs integrated a myriad of Greek, Latin, Persian and Turkish words such as ‘astrolabe’, ‘burtuqal’, ‘jughrafya’, ‘sirwal’ and ‘baqdounis’, and reciprocally enriched other languages with words that are still used to this day, such as ‘alcohol’, ‘alchemy’, ‘algorithm’ and ‘gazelle’. This never once affected the sanctity of the Koran or the integrity of the Arabic language.

Unfortunately, this tradition of dynamic cross-fertilization and openness is clearly having a hard time nowadays, as seen in the schizophrenic linguistic behavior: on one hand, people regularly make use of foreign words such as ‘computer’, ‘email’, ‘cornflakes’ and ‘zen’ in their everyday life, while on the other, language authorities and institutions are investing tremendous resources and energy to literally create new Arabic words matching these new concepts. It is hard to believe that such efforts will succeed in our region when they are obviously failing in other parts of the world, including in such a linguistically chauvinist country as France. One cannot take the same actions and expect different results.

Missing the point

Instead of focusing on reinventing the wheel by trying to come up with purely Arabic words for innovated concepts and ideas, shouldn’t we instead focus those resources on trying to create new concepts and generate new ideas ourselves? The belief that preventing the use of foreign words constitutes a rampart for the Arab identity is an illusion, and only serves to deflect attention from the real problem, which obviously lies elsewhere.

Arab identity was less endangered by the fact that it did not have a homegrown word to describe ‘penicillin’ than by the fact that it did not invent it in the first place.

Besides the fact that the obstinate desire to reject the influence and assimilation of foreign languages and cultures constitutes the prelude for the establishment of a closed, static and self-centered civilization, such a sectarian attitude can lead to an unhealthy dichotomy between everyday language practices, which are spontaneously open to other influences, and a “theoretical” language that only exists in books and is therefore bound to fall victim to the lack of usage, much like what happened to the Latin language.

The flourishing of a civilization stems from its ability to efficiently and intelligently follow the course of time by continuously and spontaneously enriching itself with new elements while being able, in turn, to shed its light on other nations and societies. This give-and-take scheme also applies to languages, especially Arabic, which fortunately happens to be spoken in a key geopolitical area where numerous economic, social, cultural and political currents converge.

The rising potential and influence of Arab media and communication channels can become key to such a success, as they will help further anchor the Arabic language in this era, and could help slowly revive a modern Golden Age whereby this region would once again become an incubator of knowledge, creativity and ideas that it can communicate to the rest of the world.

 

 

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Shebaa still simmering

by Nicholas Blanford
written by Nicholas Blanford

 

In a recent conversation with a Hezbollah fighter, up popped the subject of the Shebaa Farms, that sparsely populated mountainside tucked into Lebanon’s southeast corner.

The fighter hinted that attacks against the Israeli troops manning a handful of outposts on the lofty peaks of the Farms could soon resume after a hiatus of more than four years. “We just have to deal with the internal front first,” he said, referring to the looming crisis over the Special Tribunal for Lebanon and the expected, possibly imminent, indictments against members of Hezbollah.

There was a time when the Shebaa Farms was viewed as a possible catalyst for a regional war between Hezbollah, Israel and Syria. Ironic, really, given that before Israel withdrew its forces from South Lebanon in May 2000, few Lebanese even knew where the Shebaa Farms lay.

The area was occupied in 1967 when Israel took the adjacent Golan Heights during the Six Day war. While Israeli forces pushed eastward deeper into Syrian territory, their land grab in the northern Golan was checked by the border with Lebanon. However, they discovered that there was some ambiguity over exactly where Syria ended and Lebanon began, thanks to the laxity with which the French mandatory authorities had delineated the joint border half a century earlier.

The Shebaa Farms consisted of some 14 farmsteads populated mainly by Lebanese residents of the eponymous village and its neighbor, Kfar Shuba. During the mild summer months, the villagers farmed the flatter reaches of the valley’s upper slopes. During the cold winter months, most of the farmsteads were abandoned as their occupants descended to warmer climes in the valleys below. The Israelis initially took over the farms on the lower slopes, but within five years had seized the rest of the mountainside to dislodge Palestinian guerrillas who had set up small bases there.

The Shebaa Farms generally remained forgotten except in the memories of a handful of aging farmers yearning for their upland pastures. But in spring 2000 as Israel prepared to end a 22-year occupation of Lebanon, Israel’s determination to keep control of the area provided a loophole for Hezbollah to justify retaining its weapons.

The Shebaa Farms campaign was launched 10 years ago last month, on October 7, 2000, when Hezbollah abducted three Israeli soldiers in a well-planned operation. Not a shot had been fired in anger since the Israeli troop withdrawal five months earlier. And for one Lebanese friend who had lived in the border district all his life, the resumption of hostilities could not have come soon enough.

“Habibi Nick, I am so happy, so happy,” he said, grabbing my shoulder, as explosions from Israeli shelling echoed across the hillside near Kfar Shuba. “For 30 years I have been listening to the sounds of war… the silence in the south over the past five months since the Israelis left has been driving me crazy!”

The kidnapping heralded a sporadic campaign of roadside bomb ambushes, anti-tank missiles attacks and mortar and rocket bombardments over the following six years. The attacks lacked the rigorous intensity of the final stages of Hezbollah’s resistance campaign in South Lebanon, when as many as 300 operations a month were recorded. But Hezbollah always acknowledged that the Shebaa Farms attacks were ‘reminder operations’, intended as an annoyance rather than a concerted effort to oust the Israelis through force of arms.

The Farms soon became an almost-legitimate theater of combat where Hezbollah and the Israeli army could vent steam without risking a broader escalation, such as the one that occurred when Hezbollah strayed from the Farms to kidnap two soldiers near Aitta Shaab in July 2006.

The 2006 war changed the reality in South Lebanon and for the past four years Israeli soldiers in the Shebaa Farms have enjoyed a quiet existence. Despite Hezbollah’s preoccupation with domestic political events since the end of the war, the fighters in the south remain completely focused on the confrontation with Israel and on preparations for the next war.

Whether Hezbollah does resume attacks in the Shebaa Farms remains to be seen. But if they do, it should bring a smile of relief to my war-happy friend in South Lebanon.

NICHOLAS BLANDFORD is the Beirut-based

correspondent for The Christian Science

Monitor and The Times of London

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Real Estate

Q&A Namir Cortas

by Rayya Salem
written by Rayya Salem

 

Four years from now, Beirut will have a new community adjacent to Saifi Village. District//S, a 50,000 square meter residential and retail development, will occupy a 13,200 square meter site and promises 22 five-story luxury buildings, with cafes and shops facing onto Italian-style courtyards. Executive sat down with Namir Cortas, chief executive officer of Saifi Modern sal, the Lebanese company that owns District//S, to find out more, while Anthony el-Khoury, CEO and co-founder of the property development firm Estates sal, joined the conversation to offer a sneak peak behind the curtains of District//S.

E Why did you decide to devote the plot to low-rise buildings instead of building high-rise towers like so many other developers have done in the Beirut Central District (BCD)?

NC: This project is in the BCD so already it has to fit with the general master plan. It was an obvious extension of Saifi village and therefore we, and the master planner, decided that the best use for this land would be a more contemporary interpretation of the same original urban directive. Also, the land allows for a district, as it eventually came to be called, because of its size and location.

This site links Saifi Village, Gemmayze and Martyr’s Square and is the gateway to the shopping and central area. The solution that we came up with is nothing revolutionary but essentially creates a city-like atmosphere through functional aspects as opposed to just building a high-rise or a tower. This is why we call it a city within a city. A city is about how people live, which is why we use this slogan: “architecture is inhabited culture.”

E  How did you finance the project?

NC: Like other developers, we use investors, financial backing from several banks and presales to finance it. We’ll tell you [the proportion] when it’s over!

E the architect, Graham Morrison of London-based Allies & Morrison Architects, likened the feel of the project to “simple Italian palazzos” whereby the mixture of courtyards and alleys with residences leads to “inside/outside living.”

Is this how you see it?

NC: A modern architectural language has been used to provide project specific solutions. The intent is to preserve traditional features like raised balconies, loggias, raised gardens, terraces [and] meandering alleys. These are all local features but they have not been repeated here in what I call a generic matter. They have been applied in ways that have been adapted to the project itself so that it would have sufficient harmony and patterns, but within such patterns, be varied enough.

It’s a form of contemporary Mediterranean architecture — I wouldn’t call it Western or European [architecture], it is beyond that. This is now a global world and it’s more interactive.

E How is District//S laid out?

NC: Practically every building has a raised garden on the first floor. And some buildings have a garden on top, as well as on different levels. The ground floor is all retail: above the retail spaces starts the residential areas. There are no offices in this project. There is a cultural center and a gallery to show off artisan’s work and hold exhibitions.

E  Around 30 percent of the project has been sold – are most buyers Lebanese?

NC: All of our initial customers were Lebanese. There has been, more recently, some interest from others. We sold to one European and one Gulf person recently. I think [the Lebanese] will remain the main buyers and users because they are more likely to understand it better.

The Lebanese expatriates who bought [in District//S] are the kind that are constantly here, even if their work is outside. The idea that [local] Lebanese can’t afford an apartment is untrue, even though there is a disparity. Indeed, some Lebanese have become rich because they own property.

AK: You have people who bought [apartments] who didn’t know what the [final] project will look like. They bought solely based on the story we told them.

E  What was the role of G, the sustainability consulting NGO, in the project?

NC: Hopefully we will have a green neighborhood. We do that through G by adhering to certain guidelines, which we will use to obtain a [Leadership in Energy and Environmental Design] certification.

E  Tell us how you went about planning the penthouses. What are some of their amenities?

NC: The guideline for the area [dictates] the height of the penthouses or “sky villas.” We chose to have [higher buildings] only in certain locations, generally around the corners, to use them sparingly and to lower the density of the project, and give them the additional amenity of an adjoining terrace on the roof of the adjacent building. Each one has a pool, and they enjoy an open terrace area. We have sold one penthouse recently. But we notice there is higher demand on smaller units.

E  Is this trend for smaller apartments here to stay?

NC: This is a general feature we will see more of, partly due to demographics: there are younger people buying. Prices have gone up not just for property, but for construction and power and fuel. So the running costs of the larger apartments have become… a consideration in people’s decisions.

E  What kind of retail tenants are you targeting?

NC: Interest has been coming from various parts [of the retail sector]. This will be an attractive, arty area. A little like Saifi Village, but more animated. We expect to have more cafes, more walking space, galleries, gift shops and boutiques. It’s helped by the fact that all the internal alleys and courtyards are pedestrian.  Car access will only be to the underground [parking] or the external pavements.

E  Once the units are occupied, how do you plan to control traffic in the vicinity?

NC: We have one double-ramp [whereby two lanes can exit and two lanes enter] and one single ramp. Obviously we have done all the traffic impact research. We have been generous in providing parking spaces and provided more than what is required to address the needs, [something that has] not been sufficiently addressed by other developments.

E  In terms of design, how flexible are the interiors for end-users?

NC: We worked on the design of the project with input from our marketing and sales people and direct input from actual or potential clients. As such, aided by the shape and size, we designed the flats from the inside and then added the facade. This makes it easier to have modular solutions and I believe it has helped us come up with more adequate layouts for the interior. For instance, people can buy two apartments on the same floor and merge them.

E  Tell us about the process that the architects went through, since it was their first time working in Lebanon?

AK:  The architects came and visited Beirut, we invited them on several occasions. They visited all of Beirut and the old Ottoman sites, even visiting cafes to understand the lifestyle… how people interact. We want to preserve the ideas of the old style and modernize and create continuity for our heritage. They redesigned several models, in fact they adjusted it four times, to make sure even the sunlight and wind circulates well. They were very precise about the angles of the street corners, the views from each unit, and making sure the horizontal and vertical lanes that run throughout the plot are unobstructed so there are no blocked views from alleyways.

E the architect also mentioned that none of the buildings are parallel, creating informal alleyways between them…

AK:  We want to keep people interested by having different widths of pedestrian walkways. At the plot entrance they are 4 to 5 meters wide and then open up to 8 meters wide creating “meandering alleys,” and thus none of the buildings are exactly parallel.

NC:  When you live in such proximity, vibrancy has to happen.

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Business

Change is in the airwaves

by Karim Sabbagh
written by Karim Sabbagh

Over the past decade, the telecom industry has helped to fuel the digital transformation of entire industries, economies and societies. But now the sector is entering a more challenging time following years of significant growth.

In order to stay ahead of the game, operators must build the next generation of high-speed fixed and mobile networks to keep up with customer demand; doing so will require massive investments. At the same time, they must invest in innovation and the development of new strategic capabilities. But operators are hindered in these efforts. Their traditional sources of revenues are becoming commoditized and many are struggling to find new unique services to catch the attention of their customers.

To meet all these demands, operators must strive to build leaner, more adaptive, modular and increasingly complex business models. And they must acquire the capabilities needed to ensure that these new business models can succeed, even as they continue to invest in next-generation fixed and mobile infrastructures.

Forward-looking business models must be based on a deep understanding of three overarching trends that are driving the industry into the future.

The first trend is customer ubiquity. Consumers and businesses demand constant and universal access to digital applications and content: The more bandwidth and services that operators provide, the more their customers will consume. This demand will put huge burdens on operators’ current fixed and mobile networks. Data already makes up the vast majority of network activity; much of it driven by video streaming on the web and it just keeps growing: video streaming in the United States has increased by a hefty 78 percent per year since 2005. The continuing rise of mobile ‘apps’ — the hundreds of thousands of services available on smartphones and other devices everywhere — will only intensify the phenomenon of customer ubiquity. Operators will lose ground to technology companies like Apple and Google unless they find a way to cash in on the mobile app business, which is expected to generate $40 billion in revenue by 2014.

The second trend is technology modularity, in which networks, services and applications are rapidly evolving and shifting away from vertical integration toward modular, open systems. Different networks (such as fixed, wireless and broadband) will serve end-users directly, delivering the required ubiquitous connectivity. Both applications and service offerings such as on-demand movies and gaming will likely be based on systems that will essentially be independent from the infrastructure through which they are accessed. This means that parts of the entire system can be built not just by operators but by a variety of non-industry rivals, as they try to gain a share of future revenues.

The third trend is industry innovation. Operators used to focus on protecting their core business — the development of large-scale networks — rather than experimenting with smaller initiatives. As a result, they have left themselves vulnerable to a vast array of competitors developing apps and services.

New models for a new industry

Once operators understand the implications of these three trends, they must select, design and build new business models — and the accompanying capabilities — to respond to and benefit from them. There are four distinct business models that will shape the future of telecom operators:

Network guarantors use their network assets to provide widely available and open infrastructure and timely, reliable, cost-efficient services. Their primary customers are companies operating under the business enabler model, which can take advantage of their infrastructure to offer more advanced services to their own customers. This model will require operators to be efficient in their planning, provisioning and operations, and to offer high levels of quality in terms of network reliability and service levels.

The business enabler is a “double-sided” business model. On one side, it provides end users with the broadband services they need. On the other, it helps application and service providers manage their own businesses, providing them with wholesale broadband, managed services, transaction and billing support, and platforms such as hosting and cloud computing. To make this model work, operators must cultivate their capabilities in partnership, offer flexible service customization, and aggregate their customer bases and service providers.

Experience creators capitalize on consumers’ thirst for new apps and services, as well as the needs of companies in any number of industries to digitize their businesses. They will provide consumers and business customers alike with the ubiquitous connectivity they demand — with targeted applications, fresh content and a distinctive experience — as well as the ability to create and distribute their own content. To do so, they must be extremely innovative in their products and services, as well as dedicated to serving different customer segments effectively.

Each of these three business models offers operators a way to compete in increasingly fragmented telecom markets. To extend the gains made in one market by replicating the model in other markets, there is a fourth business model that operators should consider — especially if they already have significant scale and scope, as well as operations beyond single markets or regions.

This model, the global multimarketer, offers a path for operators to make the leap to becoming truly global entities. Thanks to their inherent strengths in branding, efficiencies and reach, global operators are proving stronger than their local rivals. Successful global multimarketers are able to benefit from the cost savings available through sheer scale, as evidenced by the efficiency in capital expenditures that a select group of global operators have gained in some markets.

The only way operators can counter the numerous threats they face is by creating new business models that can effectively respond to the rapid changes overtaking the telecom industry. Operators that understand the need to move away from their traditional vertical organizations and to develop one or more of these business models must ultimately transform themselves into one or another of the modular organizations described above, with the ability to replicate their capabilities and business models across different markets and customer segments.

 But building those capabilities and business models will take time. The winners will be those operators that are first to understand the need to make this transformation, and then move fast.

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Real Estate

A lack of Grade A

by Rayya Salem
written by Rayya Salem

Though many of Beirut’s 130 downtown office buildings are in need of tenants, its Grade A office sector is suffering the opposite problem. Most of the Beirut Central District’s (BCD) premium offices are fully occupied and the supply is badly in need of restocking, as few developers have delved into that risky terrain in the last few years.‘Grade A’ typically refers to those offices in prized locations that feature top of the range interiors, facilities and services, and the shortage of quality supply was a factor helping Beirut earn the dubious honor of being fourth most expensive city in the Middle East and North Africa for office rent in Cushman & Wakefield’s February report.

Moving out

Office occupancy is at 75 percent in the BCD, the highest in a decade, according to Karim Makarem, director at Ramco real estate advisory. But most of the 100 to 250 square meter offices are unsuitable for multinationals and large firms, who typically look for 600 square meters of open floor space.

A source from Beirut’s Michael Dunn & Co. said that more than five multinationals have moved out of their Beirut offices in the last year. This was mainly because they were unable to find sufficient floor space serviced by the amenities they required with enough parking spaces for employees, forcing them to retreat to less costly suburbs such as Hazmieh, Sin El Fil and Mkalles.

Specific needs may also drive organizations to look outside the BCD: Abdullah Saleh, general manager of BrokersXP says a recent client, an Arab television station, needed an office with high ceilings and a good view for filming purposes. After viewing up to 15 premises in downtown, they opted for an office in Hazmieh on the outskirts of the city, where they found six-meter-high ceilings.

Bernard Mouchbahani, managing partner of corporate consultancy ProFinance expects areas such as Hazmieh and Sin El Fil to attract more commercial interest in the future and that Dbayeh will become a “middle class Solidere.”

But for firms like ServCorp, the world’s second largest provider of serviced offices, boasting a prestigious corporate address in downtown Beirut is a must. Barry Barakat, the firm’s general manager in the Middle East, says the country’s recent increase in construction activity and real estate prices convinced the management that demand for international services would pick up, and thus the company’s 95th branch was born in the BCD.

After settling into a 450 square meter office in downtown’s Louis Vuitton building last month, he told Executive: “In other cities, we would typically have a choice of three to five well known Grade A buildings to choose from. This was not the case in Beirut. [Compared to] the growth of Gulf Cooperation Council cities…the office sector in Lebanon has been somewhat stagnant.”

New supply

However, there is some hope on the horizon. The rate of construction for Grade A office buildings has picked up this year, after rents rose to a high of $400 per square meter annually from a market rate of $250 per square meter in 2009, according to Cushman & Wakefield’s 2010 second quarter report.

Brokers say the highest priced new constructions will be near the Starco and Bab Idriss areas of downtown. There, large firms are willing to shell out cash for what they consider to be Beirut’s prime office location: in downtown but comfortably distant from Parliament’s security upheavals and subsequent road closures.

Premium Projects is behind the upcoming eight-story Stratum office building near the Starco Center, designed by Australian architect Kevin Dash, who also designed the Bank Audi headquarters across the street. Ziad Karkaji, the group’s director of real estate, says that prices have doubled from around $3,500 to $6,750 per square meter in the sales-only project since they bought the 1,656 square meter plot in March of 2008. Some 90 percent of the grade A office building, to be completed by mid-2012, has been sold, he says, mostly to Lebanese companies who were operating in the Gulf and returned their headquarters to Lebanon after the financial crisis.

Stratum’s soon-to-be-neighbor, Developer Mouawad’s Palladium, is fully sold out. Marketer Foncia real estate consultants said the four office floors, ranging from 600 to 1,300 square meters in size, have all been leased to a single tenant. A representative from the Mikati-owned M1 group also confirmed their plan to complete a Grade A office building in three to four years on 25,000 square meters of built up area near the Starco building.

Ramco’s Makarem adds that there is a substitute to renting a downtown location: “Large, local companies come to us to look at alternatives such as buying land to develop their own office space or find other corporations [also] looking for large office space, so they can approach a developer together to get him to build what they want.”

Lebanese-Canadian Bank is building itself a nine-story $15 million high-tech headquarters on a 1,000 square meter plot in Martyr’s Square, while the Bank of Kuwait and the Arab World is erecting an 8-story, 10,000 square meter office on Foch Street, of which some 6,000 square meters will be rented out to tenants.

Parking

Although new construction will make Grade A office space more available, parking remains a major problem. “Even new office supply coming up is majorly lacking parking space. I know of some multinationals who want to move out because of this parking issue… it’s not enough for only the manager to have a parking spot,” says ProFinance’s Mouchbahani. 

Saleh of BrokersXP concedes that scant parking in downtown affects all categories of offices. “It costs $120 per car per month to park at Beirut souks and 55,000LL [$36] per month to park at [the Beirut International Exhibition and Leisure Center (BIEL)],” he said, adding: “Now they made free transport every 15 minutes from BIEL to downtown for all downtown employees, but of course top managers won’t take the bus.”

Even existing supply is not being fully used, as the 40 parking spaces under each of several downtown office buildings must remain car-free due to security rules enacted in 2006. 

The BCD municipality’s rules require only one parking space for every 60 square meters of retail space or 100 square meters of office space. International standards usually stipulate one spot per 15 square meters of gross leasable area, says Mouchbahani. Adding further pressure, he explains, is that the tenants of Grade A office buildings often try to economize on their investment by cramming their offices with workers, leaving a higher proportion without parking spaces.

The developer’s dilemma

According to Mouchbahani, part of the broader problem is that developers have shied away from building new offices because of their low yields, coupled with rising construction costs. “You need to rent it at $300 to $350 to make a 5 percent yield,” he says, suggesting they may be better off keeping their money in the bank earning interest. But these yields could be a smart investment, depending on the developer’s ability to finance the project and the expected capital appreciation.

Makarem says: “If you’re looking to develop property in downtown and not sell it, office space and their rentals would give higher yields than they would for residential. Yields for new offices vary between 5 and 6 percent, which is higher than residential property, which yields around 3 percent.”

Commenting on a recent trend whereby some developers chose to retain ownership of more than half of their office space, fearing inflation would chip away at their early profits, Mouchbahani believes prices in Solidere will remain stable for the next five years, following the continuous price rise since late 2008.

Demand and supply in this sector, or any other business sector, is heavily dependent on things we can’t depend on; though Beirut offers cheaper operating costs and higher-quality human capital compared to other Arab cities, both the political fluctuations and the lack of premium infrastructure hinders developers’ efforts.

Still, as ServCorp’s Barakat will tell you, Beirut is always a draw: “We have many Lebanese entrepreneurs expanding [their] business locations… as well as clients in our Jeddah, Kuwait, Doha and Dubai offices regularly asking us when we will open in Beirut.”

 

 

 

 

 

 

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Finance

Banking Special – The hard truth

by Emma Cosgrove
written by Emma Cosgrove

Hopefully your wealth management contracts and agreements are not the places where you skip the fine print, because if so, you could be getting hosed. Between initial charges, annual charges, transaction charges and performance charges, if you don’t pay close attention, your wealth management firm could be making close to the same amount of money from your portfolio as you are.

Even if you do read the fine print, banks are still making more than they disclose when selling third party funds, as the charges are not passed onto the client at cost. When a financial institution sells a product to a wealth management firm, the product comes with a certain charge, usually somewhere around 2 percent, which is split between the two. However, the wealth management firm will then agree with the seller to charge, for example, 3 percent and pocket the extra percentage. Essentially funds and products from third party providers are sometimes marked up twice from wholesale price.

Make sure they’re working for you

This creates an added incentive for wealth managers to sell specific products that bring in more revenue to the bank. Banks sell products and bankers essentially work on commission; they therefore inherently have split allegiances.

“Many wealth mangers focus on sales and marketing. They have a range of products and they spend their time convincing prospects and clients to buy them,” said Dory Hage, head of advisory and asset allocation at Banque Libano Francaise. “One of the most common mistakes that wealth mangers make is to sell a product that they don’t understand, driven by financial incentives.”

Also worth noting is that the volatility of today’s markets makes trades more frequent, meaning more transaction fees. Competition with online trading platforms has been pushing down bank fees, but transaction charges should still be monitored.  Keeping an eye on this figure is a necessary chore for any client with a discretionarily traded part of their portfolio. That said, trading should not be avoided for the sake of cutting costs.

And if you thought fees were bad, there is another threat to your earnings that is not contained in the fine print. This threat is institutional self-interest, and if you don’t watch closely, you can end up with a portfolio that suits your manager better than it suits you.

“In this universe there are thousands upon thousands of investments and the reality is that most bankers are more willing to push in-house funds, which are definitely not the best. The reason being that providing in-house funds, which the banking officer feels might do the trick, generates more fees for the bank rather than sending [funds] to a third party money manager,” said Nadim Haidar, senior private banker at FFA Private Bank. He continued: “All banks preach open architecture, but they rarely practice it because the bottom line is what counts. As a banker, you have to generate fees for the banks as a multiple to your salary.”

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Economics & Policy

Q&A with Sir Andrew Cahn

by Caroline Anning
written by Caroline Anning

 

Lebanon is Britain’s eighth largest trading partner in the Middle East, and exports from the United Kingdom to Lebanon in the first half of this year amounted to $348 million, while UK imports from Lebanon added up to $40 million. This is fairly small fish compared to Lebanon’s trade with other European countries, but Sir Andrew Cahn, chief executive of UK Trade & Investment — roughly equivalent to a minister of trade — is looking to change that. Executive sat down with him on his recent visit to Beirut to find out what the UK has to offer besides tea and Manchester United.

E  Britain is a relatively minor trade partner for Lebanon at the moment – do you have targets for how much you’d like to increase trade by?

I don’t think it’s helpful to have targets because I can’t pull levers to make targets work, the business communities are independent. But what I would say is that I think there’s scope for significant increase and we should work to that.

E  What are the sectors that you think that can be targeted?

Well, I met the minister for telecommunications, the minister for health and the president of the Council for Development and Reconstruction, and I was going to meet the minister for energy but it wasn’t possible. But I think that gives you a hint. Our largest volume export is pharmaceuticals, and they’re pretty significant for us, and the whole healthcare sector is one where Britain is world-leading — not just pharmaceuticals but medical devices and provision of healthcare.

In telecommunications, clearly we have leading companies, and I think the whole IT sector is one where Lebanon really does need to raise its game.

[As for] construction, I went with Solidere and saw their development and there was a lot of British involvement in that, but I would have thought that there’s much more scope for British involvement — not so much a construction company coming in and doing the building, but as architects, designers, quantity surveyors.

I also spent some of the afternoon at the port. British port people actually run the port of Beirut and rescued it from when it was nothing — it had almost stopped entirely — and now it’s about to double in size. That’s been a very successful joint project between British operators and the Lebanese government.

E  Do you do any work with the government to prepare the ground for British companies and services?

I certainly find myself saying to ministers you need to change your regulations or you need to change your laws. For example, Britain is world-leading in public-private partnerships; we invented it, we perfected it over the 1980s and 1990s. But…if you want public-private partnerships to be successful, you have to have the proper legislative background…in order to make it work.

E  Does the security situation give you have any concerns about promoting Lebanon as a business destination to British companies?

Nobody is pretending that Lebanon is quite the same as, say, Belgium, but on the other hand lots of people are doing business here, and the British should be doing more. I don’t have any hesitations in saying to British companies there is good business to be done in Lebanon…but they have to go in with their eyes open.

E  What can Britain offer Lebanon that other Western countries can’t?

London is often seen as the financial services center of the world and it is… but London is also the creative industries capital of the world. If you want to be in architecture or fashion, design or advertising, music or film, you want to go to London. And I think…the people of Beirut, are very fashion conscious, very design conscious, very chic and very international. I think Britain therefore has a lot to offer here, and I would hope we can offer more.

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Finance

Banking Special – Gold: To buy or not to buy

by Emma Cosgrove
written by Emma Cosgrove

Call it the gold rush or the gold bug, but one of the world’s oldest investments is making a name for itself as a safe haven in the financial storm. Part of investor portfolios since the dawn of our modern financial time, the precious metal was never the most exciting weapon in a hotshot investor’s arsenal, but current macroeconomic conditions have created a buzz around this previously pedestrian commodity. While gold is touted as a necessary base in any portfolio, current market conditions have shone a much more speculative light on the portfolio staple.

 

In September, famed market shaman and investor George Soros called gold “the only actual bull market.” Soros’ hedge fund, Soros Fund Management LLC, at the end of the second quarter was the third largest shareholder in SPDR Gold Trust, holding 5.24 million shares. On October 26 Soros’ share was worth $685.7 million and constituted 1.2 percent of the fund.

Also as of October 26, United States gold futures stood at $1,340 and spot gold just a few cents less than that. This represents a gain of 22 percent this year and a record-breaking streak of annual gains since 1920. 

A customizable commodity

The many ways to invest in gold can be customized to fit individual investor preferences and risk appetites. Buying physical gold is the most conservative option and is recommended as a hedge against any future financial or currency road bumps. Risk takers and market manipulators may also choose to invest in gold futures through exchange traded funds (ETFs) — such as Soros’ favorite APDR Gold Trust — which offer higher leverage and higher return but also present higher risk.

Many mangers are also advising clients to invest in mining or distribution outlets through equity investments as a middle ground. Soros’ fund also has $250 million in equity investments in gold and minerals mining.

The gains in gold have been caused by both massive quantitative easing in the United States and an erosion of trust in Western currencies. “As long as the US keeps on debasing its currency and the dollar is weakening, gold will keep going up,” said Mahmoud Ezzedine, head of private banking at Fidus.

 But some say that the gold rush may be coming to an end shortly. “When taxi drivers tell you that you can make a lot of money in gold, it only means the beginning of the end of this trend,” said Nael Raad, deputy general manager of Ahli Investment Group Lebanon.

Soros has stated that he will ride the gold wave for a bit longer before cashing in, but many local wealth managers say that the time for speculation is over, as the quick appreciation suggests that a correction is coming soon.

At this point it comes down to a hunch as to when what has gone up will inevitably come back down. Toufic Aouad, general manger of Audi Saradar Private Bank, predicts that gold will rise to $1,500 before it starts to drop, but is not necessarily recommending to buy.

 

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